Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)

When he launched the Finance Bill last week, I was astonished that the Minister for Finance had the audacity to claim that the Government was trying to use the tax system to ensure those on low and middle incomes benefited from the economic boom. The evidence contradicts that claim absolutely. Under the Government's tenure, successive income tax cuts have benefited high income individuals more in real terms than those on low incomes. Meanwhile, tax expenditures have redistributed wealth regressively in favour of the already better off. This trend is reinforced in the Bill. If the Minister tried to use the tax system to ensure those on low and middle incomes benefited from the economic boom, he would eliminate unfair tax advantages for the better-off, review VAT charges which hit low income families hardest and increase the restrictions on the use of specified tax reliefs for high income individuals.

The Bill gives effect to the budget announcement of a cut of 1% in the top rate of income tax. Those on high incomes received the cumulative benefit of the increase in personal tax credits and the widening of the standard tax band. They are the beneficiaries of the 1% cut in the top rate. Contrary to the Minister's claims, those just below the average industrial wage of €30,000 per annum gained least per week from the budget. I pointed out during the debate on the budget that workers on such a wage gained €8 per week, compared with gains of at least twice as much per week for those earning above €35,000. High income individuals were granted the highest increases in weekly pay as a result of the budget. These are the facts.

The Government has attempted to justify the cut in the top rate of tax by linking it to the current buoyant tax take. It is true that more revenue than ever is flowing into the Exchequer, but from where is it coming? As the Central Bank notes in its most recent quarterly bulletin published last month, "a substantial factor in this has been the exceptionally large revenues derived from the property sector". The Government has become ever more dependent on consumption taxes, particularly VAT. The revenue generated from such taxes is far more open to fluctuation and contraction than that from other sources. The unpredictability of the amount of revenue generated from these taxes has contributed largely to the Government's poor ability to project tax take. The Central Bank report states:

While these have increased much more rapidly than forecast from one year to the next, it is clear that such strong increases in revenue from this source cannot continue indefinitely. It is prudent to provide for some perhaps significant easing in revenue from this source.

The Central Bank is looking ahead. The entirely wrong and imprudent thing to do in this context is to cut the top rate of income tax and narrow the tax base, thereby making the Government ever more dependent on taxes related to consumption and the property sector. It needs to be in a position to ensure it has the revenue to provide public services, to fund social protection and to address infrastructural deficiencies, especially when the current rate of consumption and construction slows down, as it certainly will.

As I have limited time in which to speak, I will focus on a small number of issues. I will discuss many others during the Committee Stage debate.

I would like to welcome a number of measures in the legislation. While Sinn Féin welcomes the decision to keep those on the minimum wage out of the tax net, it would have preferred it to apply in circumstances in which the minimum wage was increased to 60% of gross average industrial earnings. This has also been sought by the Irish Congress of Trade Unions. Sinn Féin welcomes the fact that those on the average industrial wage are to be kept within the standard tax band. In addition, I welcome the increase in mortgage interest relief. Sinn Féin had argued for such a measure in its pre-budget submission. As we are enduring high interest rates following the five European Central Bank tax hikes in 2006, more could and should be done under this heading.

Today's newspapers have reported that the State's emissions output has again accelerated. It is now heading for a level 25% higher than that of 1990 and 12% higher than the level set out in the Kyoto Protocol target. This further acceleration is apparently being driven by increases in emissions from the transport sector, which brings me to one of the most bizarre aspects of the budget. I refer to the need to introduce a higher rate of motor tax for vehicles which produce large emission levels, which should have been addressed in this legislation. I tabled a parliamentary question on the matter to the Minister, Deputy Cowen, but it was kicked to one of his colleagues for answer later this month. In his Budget Statement the Minister announced that the introduction of a high rate of motor tax for high emitting vehicles was to be delayed. It seems that it will not come into effect until this time next year, and then only in relation to vehicles registered after January 2008. Why did the Minister and his Government colleagues purposely give people a year's notice of this measure? It amounts to an incentive to purchase high emitting vehicles throughout this year, which is exactly what is happening. Sales of sports utility vehicles and similar vehicles soared in January, which is contrary to international trends in this regard. In many countries a clear slowdown in the sale of high emitting vehicles is evident as a consequence of the actions of governments.

Similarly, the Government announced that it would consider changing the rate of VRT in order that it would be based on the level of output of emissions. Such a change is not actually being introduced, however. For some inexplicable reason the Government has merely signalled that it will engage in a process of consultation in this regard. While I welcome any form of consultation on the part of the Government, I wonder about the merits of such a process in this instance. As other governments face the reality of climate change and move to implement measures to reduce emissions, the Government is long-fingering even these minor measures which would receive substantial support from the public. I have to say its approach is unacceptable.

I question a number of other aspects of the Bill. One of the more highly publicised aspects of the legislation is the proposed tourism investment scheme of property-based tax reliefs in the mid-Shannon corridor. As a Sinn Féin Deputy, I want the Shannon region to be developed to its highest potential in tourism. It is highly questionable whether the proposed scheme can go any way towards achieving that objective.

As the finance spokesman of my party, I have made clear on numerous occasions Sinn Féin's position that all tax exemption schemes should be ended, except when the economic and social value of such schemes outweighs their cost to the Exchequer. The Indecon review of property-based tax incentives, already mentioned in the debate, recommended that any "decision to introduce any new tax incentives should be informed by a formal assessment of the likely costs and benefits". I ask the Minister to tell the House whether a formal assessment of the likely costs and benefits has taken place in this case. What is the projected cost of the scheme? Indecon also recommended that "where there is justification for government incentives the option of direct public expenditure as an alternative to tax incentives should be considered". Was such an alternative considered? I urge the Minister to answer these extremely important questions.

We have been presented with no clear case for the introduction of the scheme for the mid-Shannon region. Does the Government have a vision of what is ultimately lying ahead for the region and other parts of the country? There must be a serious justification before new tax incentives can be introduced because such measures reduce the overall tax base and thereby impose higher tax burdens on average households which are not in a position to avail of many tax relief schemes. Such incentives provide many people, especially high income earners, with opportunities to avoid paying their fair share. While I wish the mid-Shannon region well, I need to get certain answers from the Minister. Why has the line been drawn 12 km either side of this great national resource?

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