Seán Fleming (Laois-Offaly, Fianna Fail)

I welcome the opportunity to speak on the Finance Bill 2007, regarding which I will raise several issues. I know that many points will be discussed in far more detail in the next few weeks before the committee that I chair.

Wearing that hat, I would like to raise certain issues that we addressed in 2006, requesting that they be dealt with in the budget and the Finance Bill 2007. We are happy to see that they have been acted on; while they may seem minor to some people, they are very important to others. The first example was an issue discussed in the committee last year, namely, VAT on meals-on-wheels services where provided through a company on a contract basis. Hitherto, they have had to charge VAT, whereas none has been levied on voluntary equivalents because they are not trading businesses.

As a result of the anomaly coming to light last year that the elderly would now have to pay VAT on their meals on wheels, which is not what the Government wishes for them, it is being dealt with in this and other legislation involving the Department of Health and Children, which will have to approve registered contractors who will be able to avail themselves of the facility. I am pleased that the issue has been acknowledged and is being dealt with, having been aired in the broadcast media several times.

I am delighted by the speedy and comprehensive response in the budget and Finance Bill 2007 to another issue mentioned in the committee in recent months. Businesses in their first year of trading were having to pay preliminary tax on the normal dates applicable to other businesses. A change announced a few years ago was to take effect within the last few months. It meant that some companies would have to make a preliminary payment of 90% of the year's company tax before reaching the end of the first year's trading. It was a severe burden for small companies just getting off the ground, and the rule due to enter force has been acknowledged as excessively onerous for small businesses, which are the backbone of the economy. I am pleased that the matter is being dealt with and will work its way through the House as part of the Finance Bill 2007.

A third issue to emerge in committee may be impossible to deal with specifically in the Finance Bill, as it concerns taxation, although it may be discussed on Committee Stage. I do not know whether there will be an amendment from any committee member on the topic. I speak of the dispute between opticians and the Revenue Commissioners regarding the VAT that they were charging. Hitherto the Revenue had insisted that they charge VAT on the full price of supplying spectacles and contact lenses, including the costs of fitting and supplying the spectacles and lenses. The opticians took their case to the VAT Appeals Commissioners, who ruled in their favour, stating that they had been wrongly instructed by the Revenue over the years to charge VAT to customers for the provision of services as opposed to the product being supplied. The Revenue had insisted that the full 21% be levied on everything.

Over the years opticians were forced to pay the VAT to the Revenue, and now they are entitled to a massive refund amounting to perhaps €50 million. As a spectacle-wearer, I feel that the VAT should be refunded to the customers who paid it in the first place. I know that it is a matter between the opticians and the customers, and the former may argue that they absorbed the VAT in their own margins and paid it pending the VAT Appeals Commissioners' ruling. Pigs do not fly, and it would be nonsense to think that opticians or any other Irish businesspeople were paying VAT out of their own margins without charging it to customers. No one could make that argument with a straight face.

Perhaps our committee will have to invite a delegation from the opticians' representative body to address us as the VAT was paid by their customers. Every optician has a good record of clients and knows who paid the VAT. As chairman of the Committee on Finance and the Public Service, I urge them to put in place arrangements to refund VAT to the customers who paid it. If they do not do so, industry representatives will appear before the committee to explain to the public why they feel that they are entitled to that €50 million bonanza when it is not really theirs.

I also wish to address certain aspects of the Bill that will benefit my constituency of Laoighis-Offaly. One is section 96, which inserts a new section into the Stamp Duties Consolidation Act 1999 to provide for an exemption from stamp duty for acquisitions of land by an approved sporting body where it will be used for the sole purpose of promoting athletics or amateur sports. The exemption will apply to instruments executed on or after the date of passing of the Finance Bill 2007. That is a fantastic provision and I, as a constituency Deputy, have been lobbied on this by sports clubs moving grounds or which have had to purchase a permanent pitch because they never had one. It is no secret that Portlaoise GAA club will be one of the principal beneficiaries of this change because it recently sold its current site for approximately €14 million and is buying a new site for €6 million. The club is providing many extra facilities and developing pitches with it.

The new site would have attracted a stamp duty rate of 9%, equivalent to €540,000, and the club will save that amount as a result of this change in legislation. The legislation has not been changed only because the Minister is from Laoighis-Offaly; the issue has arisen right across the country. I know of clubs other than my own which will benefit in due course around the country. I ask the Minister to consider one aspect of the provision. Perhaps the exemption could have effect from the date of the Finance Bill's publication, or some such date. The Bill will probably be passed in the middle of March and I am worried that we will then have to wait for commencement orders for individual sections.

Although I am not very familiar with commencement dates, we could find them to be at the end of the year and some clubs could inadvertently be caught out. They might believe themselves safe to complete a transaction immediately because the provision was announced on budget day; indeed most people, including myself, would have assumed it was effective from budget day. Other provisions in the legislation are effective from 1 February, when the Bill was published. I do not know why this is being put on the long finger and I would appreciate if the issue was examined.

Section 97 is also relevant to many rural constituencies. I have concerns about the section, although the logic behind it is fair and reasonable. It provides:

. . . that the transfer of a site from a parent to a child is exempt from stamp duty if the purpose of the transfer is for the construction of the child's principal private residence and the market value of the site does not exceed €254,000. The change being made limits the size of the site to 0.4047 hectare (i.e. one acre) exclusive of the area of land on which the child's principal private residence is to be constructed. The change applies to instruments executed on or after 1 February 2007.

That means it comes into effect on the day the Bill was published. Why is a restriction on stamp duty effective from 1 February, but in an instance where stamp duty is abolished it is not effective until a much later date? The Bill has one section after another with two different dates for coming into effect. I do not follow the logic and we are dealing with stamp duty in both cases. I have a concern about the particular wording. I understand there were abuses, where parents were transferring four or five acres to their offspring, with some of the large tracts of lands transferred free from stamp duty being commercial activities. I realise this must be captured in legislation, but my concern lies with the restriction to one acre.

In counties such as Laois, it was a requirement up to recently in the county development plans that where percolation and other factors were not of a satisfactory standard to be accommodated on a small site, the applicant had to provide a two acre site for the house. This has been relaxed in recent months in certain cases but many local authorities can sometimes still require a two acre site for the construction of a house. This section does not take such a requirement into account.

The legislation stipulates that the one acre is in addition to the area of land on which the child's principal private residence is to be constructed and the amount of land on which the residence is to be constructed could be quite small in terms of square yards or square metres. Perhaps an amendment could be included to reflect that amount of land being required for the purpose of building a private residence. If a planning authority stipulates the size is half an acre, so be it, but there should be a provision should the stipulation be two acres. If such a requirement exists from local government, we should not pass legislation that conflicts with some planning laws being operated democratically by local authorities throughout the country. The matter is complicated because there are different rules for different areas.

From a small business perspective, I am pleased about the arrangements for the VAT filing frequency for small traders. In order to reduce the compliance cost for small VAT traders, the frequency of filing VAT 3 returns for small traders is being reduced. For cases where the annual VAT liability is less than €3,000 per annum, such traders will be obliged to fill in VAT 3 returns only twice a year, a great improvement from the current six times a year. Cases where the annual VAT liability is between €3,000 and €14,000 per annum will be obliged to complete three VAT forms in the course of the year, a very welcome development.

Many small businesses could not cope with the bimonthly VAT returns in their own right, and the normal practice was to bring in an accountant to do the VAT return. I am an accountant myself but so be it. Some accountants might have appreciated the business of making at least six visits per annum to small businesses but it was an undue burden. There are cases where small employers can make their PAYE return once a year instead of monthly. I am pleased that this is a step in the right direction.

I will move on to some improvements for ordinary individuals under income tax changes etc. In particular I wish to highlight reliefs from the 2007 budget. That budget doubled the ceiling on mortgage interest relief for first-time buyers from €4,000 for a single person to €8,000, a 100% increase. The ceiling is also being increased from €8,000 per year for a married couple or widowed person to €16,000 per annum. The support applies to those receiving mortgage interest relief in the first seven years of their mortgage. The Government estimates that approximately 125,000 first-time buyers will benefit directly from this.

This translates into a single person gaining up to €800 per annum, which would help first-time buyers already in their home, as well as potential first-time buyers, without inflating house prices further. We are considering ordinary people so I will give an example. A couple with a joint mortgage of up to €379,000 over 33 years, at an interest rate of 4.25%, will be able to claim mortgage interest relief on the full amount of the interest on the loan, gaining up to €1,600 per annum, or €133 per month in relief. That equates to €1,600 per annum in cash into such a couple's pocket because of the change. The ceiling on interest relief for non-first-time buyers is raised from €2,540 for a single person and €5,080 for a married couple to €3,000 for a single person and €6,000 for a married couple. That will also help.

I will move on to how these changes and the Finance Bill will affect individuals. The budget is helping to reward work and cut taxes. The entry point to people paying income tax has increased to €17,600 per annum, meaning the first €17,600 of income is tax-free for PAYE workers. I remind the House that this compares to a figure of less than €5,000 in 1997. This will ensure those on the minimum wage will be completely out of the tax net. The threshold at which the top rate of income tax is paid is also increasing by €2,000 to €34,000 for a single PAYE worker. The 20% standard income tax band will be widened by €2,000 per year to €34,000 for a single person and €43,000 for a married couple with one earner.

The rate at which a single worker pays the top rate of tax is now effectively double that of 1997. This ensures workers on average earnings will not pay tax at the higher tax rate and any workers earning €480 or less per week will also be exempt from the health levy, another form of taxation. This builds on income tax policies over the past ten years which have favoured the less-well off. Hundreds of thousands of people who have been less well-off have been completely removed from the income tax net, meaning a tremendous burden has been removed.

I now want to refer to some of the tax credits addressed in the Finance Bill. There has been a major increase in many tax credits all of which are to be welcomed. These increases are considerably above the rate of inflation and there are one or two I want to mention specifically.

I suggest, if it is possible, that the Minister table an amendment on Committee Stage, or at another stage when it is appropriate to do so, to the allowance to an incapacitated person for employing a carer. Up until now there has been a generous allowance, where one can pay €50,000 per annum to a person who is providing care for an elderly person. The elderly person, if he or she has the income, can pay a carer and get the full tax relief at the top tax rate of 41%, which almost reduces by half the net cost, or sons or daughters can come together to employ a person to look after an elderly relative. In this context, it is the word "employ" which concerns me. The people who are doing this must register as an employer for PAYE purposes. That is a little offputting and I would like to see whether it is possible to introduce a mechanism whereby they could pay this on a contract basis to a person who would be responsible for his or her own tax returns. I would have no difficulty with providing that the contracts and the PPS numbers must be given to the Revenue Commissioners in advance for approval, but it would be a tremendous benefit. The current law requires the incapacitated person to become a registered employer for PAYE purposes, and that is a little severe. It would be far better if they could be allowed to engage a person on a contract basis rather than employ him or her directly. I ask that the matter be highlighted.

Another matter on which I congratulate the Minister is the massive increase in the incapacitated child credit. Up until this year it was worth €300 for taxpayers. Parents with a child who is permanently incapacitated, either physically or mentally, can claim for the child maintaining himself or herself independently in the long term. The Minister has doubled the cash value of this to a family, from €300 to €600, a 100% increase. It seems like a small sum, but people who heard about it in the budget and came in to my clinic over the Christmas period were shocked because they had never heard about it previously and now they will to get €600 per annum, even though they had been looking after their incapacitated child. I advised them to ensure they applied for a refund for the previous four years as well and they were happy to do so.

All in all, there is much good news. I will conclude because my time is up but I could continue for another hour outlining the excellent improvements in the Finance Bill. I look forward to further detailed discussion on some of the finer points of this legislation when it comes before the Select Committee on Finance and the Public Service later in the month, and to the smooth passage of the legislation and the implementation of these measures as quickly as possible.

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