Tom Parlon (Laois-Offaly, Progressive Democrats)

I am glad to have the opportunity to contribute to this debate and to raise a number of important issues that may assist the debate on taxation matters in this House. The Bill demonstrates the continued commitment of the Government to use the tax system to promote fairness so the benefits of strong economic growth can be enjoyed by all taxpayers, especially low and middle income earners. It also contains a number of important initiatives to support enterprise and maintain and grow our strong employment levels.

I welcome the income tax changes in sections 2 to 4 of the Bill which will increase the personal and PAYE credits to ensure that those on the minimum wage will stay out of the tax net in 2007, reduce the top rate of income tax by 1% to 41%, increase the standard rate bands to ensure that those earning the average industrial wage will not face a liability for the higher rate of tax in 2007, and increase the personal credits and bands to ensure that at least 80% of income earners will pay less than 20% of their income in income taxes in 2007.

I also welcome section 6 of the Bill confirming the budget day announcement doubling the ceilings on mortgage interest relief for first-time buyers from €4,000 to €8,000 in the case of a single person and €8,000 to €16,000 in the case of a married couple or a widowed person. This measure offers real tangible financial relief to house buyers trying to enter the property market for the first time.

With regard to tax changes which impact positively on particular sectors of the economy, I applaud in particular the new tax incentive scheme aimed at encouraging the development of tourism infrastructure in the mid-Shannon area covering a corridor of about 12 km on either side of the river stretching from approximately the bottom of Lough Derg to Lough Ree, which is dealt with in section 26. I also welcome the deductibility of VAT on conference-related accommodation expenses from 1 July 2007 to help Irish hotels compete more favourably on the global stage for conference business, dealt with in sections 76 and 81.

With regard to business, section 18 extends the business expansion and seed capital schemes for a further seven years until 31 December 2013 and increases significantly the company limit and investor limits under both schemes.

Section 42 confirms the budget day announcement that the corporation tax liability threshold for treatment as a small company will be increased from €50,000 to €150,000 and that new or start-up companies with a corporation tax liability of €150,000 or less for their first accounting period will not be required to pay preliminary tax in respect of that first accounting period. Section 87 confirms the budget increases to the VAT registration thresholds for small businesses from €27,500 to €35,000 in the case of services and from €55,000 to €70,000 in the case of goods.

With regard to the farming and bloodstock industry, the new tax arrangements for stallions allow their purchase price to be written off over four years. This represents a sensible approach to protecting what is an important sector of our economy. Farmers' flat-rate VAT addition will increase from 4.8% to 5.2% with effect from 1 January 2007. The 25% stock relief for farmers will be extended, as will the special incentive stock relief of 100% for certain young trained farmers for a further two years. Stamp duty relief for farm consolidation will be extended for a further two years to 30 June 2009 and the widening of the scope of the relief will include cases where only one farmer is consolidating his holding.

On the environment, I welcome section 46 which proposes to extend the qualifying period for the scheme of tax relief for corporate investment in certain renewable energy projects from 31 December 2006 to 31 December 2011.

I believe this Finance Bill builds on the solid achievements of recent years and supports the progress of our economy. It should be seen in the context of the past decade when taxes on work and enterprise have been reduced dramatically and there is record growth in the country. Nearly two out of every five earners, or 846,000 persons, will be outside the tax net in 2007 compared to one third, or 677,000 persons, in 2004 and one quarter, or 380,000 persons, in 1997. With regard to tax rates, when we came to office, we made a commitment to the people to reduce the marginal rate of income tax from the then 48% to 42%. In this year's budget we reduced the top rate of tax from 42% to 41%. Our public finances are now in excellent shape and unprecedented resources are being committed to health, education and social inclusion. The Finance Bill is a clear signal of the continued commitment to the sound macroeconomic and fiscal management that has been the hallmark of this Government.

See this speech in context