Seán Fleming (Laois-Offaly, Fianna Fail)

This is termed as "patronage". I would hope elected public representatives engage more with public service bodies, be they national or local. I cannot understand the argument that there is something wrong with the democratic involvement of Ministers in activities in their Departments. I understand the criticism of Ministers not being involved in their Departments, not supporting policy initiative or not giving a lead on Cabinet decisions to be implemented by State agencies and Departments. However, when Ministers do participate in such processes, they are criticised as well. I do not buy into that line of argument.

Some of the measures being introduced in the Bill may not seem like good news but, on the other hand, people accept their necessity because of their understanding of the economic situation. Section 2 deals with the new income levies of 1% on income up to and including €100,100, 2% for income in excess of €100,100 but not greater than €250,120, and a charge of 3% thereafter. I do not understand the €120 element to the last threshold but I am sure there is a good reason for it.

The levy will apply to all income in a similar manner to the Tax Acts, but will be applied before granting relief for pension contributions or deductions for capital allowances. The levy has been a bone of contention among the farming community. I have endeavoured to explain the reasons for it at public meetings. I have also highlighted that all business expenses, whether they are for the local garage, shop, electrician or farmer, are all subject to the same income tax code. All operating expenses that lead to the costs of running a business can be deducted. The message went out that the levy was a turnover tax, 1% on gross income. These levies are not a turnover tax. Some farmers believed it would be 1% of their creamery or mart cheque until it was pointed out it will be 1% of their net income.

The only items excluded are pension contributions and capital taxes. I commend the Minister on introducing this by way of levy rather than increasing the tax bands. Had we gone down that road, people would have been able to offset pension contributions, capital allowances and investments in properties to reduce their taxable income, resulting in less of a gain for the Exchequer. The Minister's use of a levy is correct, effective, pragmatic and gets straight to the high earners who could have used taxable deductions as a shield against this.

I am pleased social welfare payments, those on the minimum wage and those entitled to a medical card will be exempt from the levy. People over 65 years with a gross income of less than €20,000 per annum, with a provision for double that amount for a married couple, will be exempt. Will the Minister clarify that the over 70s with an income of under €700 per week, or €36,400 per annum, €1,400 and €73,800 respectively for a married couple, and an entitlement to a medical card will also be exempted from the levy? I hope the medical card entitlement has been taken into account for the over 70s as well.

Income from deposit interest retention is not taken into account with the levy because it is caught by the DIRT regime, which has risen from 20% to 23%. It would have been unfair to include this in the income levy. I raise this because the system is in place for senior citizens to pay their DIRT through tax relief at source if they sign a specific form with their bank. If it is a joint bank account, it must be signed by husband and wife. Recently, I had a constituency case of an elderly woman in her 90s and her son in his 60s who had a joint account in both their names. They did not, however, qualify for the tax relief at source because they were not a married couple. Will an exemption be made in such cases where both parties are over the age requirement? I accept it could open up unusual anomalies but there cannot be too many people in this category.

The Bill's provision for a levy on second homes is a good measure. As there are so many people with second properties, holiday homes and rental properties, the minimum we should get from them is €200. I welcome the measure and, at the risk of being unpopular, I would not hesitate to increase that levy in the next few years. People, who in the good times, were able to obtain a second property for rental purposes can easily make a contribution like that, particularly when water rates are not payable. The argument will be made that it will be added to the rent of the tenant but not every second house is rented. It is a minimum charge and I am pleased to see it introduced.

I understand the health expenses relief measure and we must accept the reality. Up to now, a person on a high income on the higher rate of tax could get tax relief on medical expenses, through the Med 1 form, at the top tax rate. If one had medical expenses of thousands of euro over the course of a year, one could get 41% of it back. From looking at those forms over the past few years, I know that the amount of money that one can claim as medical expenses as an outpatient from private health insurers such as VHI is very restrictive. They allow paltry figures, such as €35 per consultant visit where the visit could cost €70, €80 or €150. This is a good tax rebate for those incurring medical bills directly, without going to the public hospital and adding to queues there. It is a good incentive and it is right that it be standardised. Those on the lower tax rate could not avail of the older measure. It is hitting many of us who have claimed it at the higher level but there is an issue of equity and fairness.

Another development regarding medical expenses relief is that the minimum amount has been reduced. There was always €250 that one could not claim. This was eliminated some years ago. Now, it is applied to the standard rate. This will help with the move whereby one can get tax relief at source. If consultants are operating through the larger hospitals, or GP practices or dentists properly registered for tax, it may be possible to get tax relief directly at source, as is happening with mortgage interest, the VHI and private health insurance. It is mooted to happen for trade union subscriptions. Maybe it has happened or is in the pipeline. It is only fair and equitable that those on the standard rate should not have to subsidise those who can get tax relief at the higher rate.

I welcome the provisions of section 13, which has been referred to by a previous speaker. This concerns the abolition of the residency rule. If a person left the country before midnight and was not here at the stroke of the bell like Cinderella, the day was not counted for being in the country. My view, although maybe my understanding is unclear, is that the system facilitated some people not having residency in any country. They were domiciled somewhere but if they split their time between three countries, they would never end up being over 183 days in any country. The could spend three or four months in each country, never amounting to six months in any one. They could legitimately say they were non-resident in any country. This will help us to ensure that people pay tax somewhere. Let us hope it is in Ireland but it might force them to pay tax elsewhere. The measure is long overdue. That people could avoid being resident here gave rise to a perception of inequity. I prefer people to pay the full tax rate in Ireland if they are earning income in Ireland and availing of services here, rather than making voluntary donations to particular causes they are keen on. I prefer the money to be paid in income tax to the Exchequer and to let the Government decide on spending priorities, not the individual taxpayer.

I refer to section 87, where some people can donate heritage items and paintings in lieu of tax. There is a cap on that and someone cannot pay a massive tax bill in this way because there is a limit to what the Government will accept. It is good that it has been limited to 80% of the value. If someone hands a painting worth €100,000 to the State, he or she will be allowed a tax credit of €80,000 from now on. That is fair enough because the person is getting a good deal by not having to write the cheque in the first place. It is only right that the person should forfeit some deduction and 20% is a reasonable amount.

In section 14, a significant deduction has been made to tax relief on pensions. This is only right in the interests of equity, many people shielded much income by having a large pension provision. This was not available to people on lower incomes. Section 15 deals with the farm pollution control relief. The Minister has extended it by a further two years to 31 December 2010. In the few seconds available to me, I might be bold enough to suggest he ask his ministerial colleague to extend the farm waste management scheme by a couple of months into 2009 because much work has not yet been completed. This would tie in neatly to allow the grant scheme to continue for a couple of months if tax relief was allowed on it for next year.

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