Thomas Byrne (Meath East, Fianna Fail)

I welcome the Finance Bill introduced by the Minister and I welcome the Minister of State from Cork East. He may give a different picture of Cork East later in the debate. This is the fourth Finance Bill introduced by the Minister, Deputy Cowen, and it demonstrates the consistent policy of the Government to make the tax system simpler, fairer and effective in lessening the burden on lower and middle income taxpayers. Simplicity should always be a goal with the tax system.

I was surprised last week when the Leader of the Opposition asked the Taoiseach for a stimulus package similar to that introduced by President Bush in America. The American stimulus package amounts to approximately 1% of GDP and the tax changes alone in this budget would be substantially in excess of 1% of GDP. I may be corrected on that but when one adds increased social welfare spending, the budget adds up to more than a stimulus package as we are still in a strong period of growth compared with the United States. We have continued to look after low and middle income earners, unlike President Bush, whom Deputy Kenny admires. President Bush's tax changes appear to have benefited higher earners.

There are some small provisions that may affect people. There is an increase in the specified rates for preferential home loans and other loans. Bank and financial services employees may have to pay for a small increase, which is probably fair enough because of the way interest rates have risen. I would have thought those changes could be done by ministerial order as interest rates change to help those people to have a consistent tax payment.

I welcome in particular the changes in the rent-a-room scheme. Many of my constituents have bought new houses in recent years. I have also done so and have had rent-a-room tenants. It is a great system where, subject to submitting tax returns, one can take income from rent tax free up to a limit, formerly of €7,620, which was increased in the Finance Bill to €10,000. That is a significant benefit because it was the position that if one earned €1 over the limit one could be taxed on the total. It encourages tax compliance because people can earn up to €10,000 per annum which is a substantial rent for a room or even two rooms. I welcome the increase because rents are going up, particularly in Dublin. People letting rooms in my constituency, Meath East, might not be at that threshold.

I welcome the increased allowance on trade union membership because it is equivalent to a tax credit of €70 per annum. We should encourage trade union membership because the unions have a long and valued history. They continue to be of value, particularly in explaining their rights to, and standing up for, foreign workers. Some seafarers were recently helped out in this way. It is good that the tax system recognises this benefit.

It is wise and sensible of the Minister to increase tax credits generally, for employees, one-parent families and home carers.

The transfer of a site to a child rarely gets publicity but has an impact especially in rural Ireland. A parent can transfer a site to a child, generally to build a house, without capital gains tax, or stamp duty and it is usually under the limit for capital acquisitions tax. The limit on the site used to be €254,000 which until recently would have been quite acceptable, certainly where I come from. In Dublin, however, if people were hiving off sites from city centre properties it might have been low but €500,000 is a good limit. The anomalies in this scheme have been rectified. It is important that the tax system helps children to build property on family land. The Minister for the Environment, Heritage and Local Government and the county councils should also encourage this practice.

People who transferred sites before these rules were brought in, when this party came into Government, may not have paid capital gains tax when they should have. It happens too that a bachelor uncle with no children may transfer sites to nieces or nephews and while there may be some relief from capital acquisitions tax there may be a capital gains tax liability. The Minister might consider this in future Finance Bills.

The increase in the VAT registration threshold for small and medium sized enterprises is a good move. Many people in my constituency work from home and while they are not yet millionaires they may be in the future. I know several stay at home fathers who run very small businesses and staying below the VAT exemption limits or registration thresholds has a significant impact on their business because they can make a certain amount of money without worrying about getting into the VAT net.

I am glad to see changes being introduced in the VAT regime for commercial property transactions. I do not claim to understand them all but never understood them before now. The same is true for many solicitors, tax practitioners and accountants. Nobody was ever willing to take responsibility for advising on VAT because they were afraid they would get sued if they were wrong. I have not studied the changes in depth but I hope they allow professionals to make their own judgments on VAT.

See this speech in context