Joan Burton (Dublin West, Labour)

I move amendment No. 5:

In page 9, between lines 19 and 20, to insert the following:

2.—Marginal relief shall apply in respect of the income levy over €18,304 threshold and up to €25,000 in a manner to be prescribed by regulations made by the Minister for Finance under this section.".

I am very surprised at the Ceann Comhairle's decision to rule out of order the first amendments. Similar amendments to those have been allowed in previous years, to basically look at the impact on the taxation system of the various tax breaks and also in terms of having a taxpayers' advocate to ensure they get the refunds to which they are entitled.

The purpose of amendment No. 5 is to provide sliding or marginal relief in relation to the levy. This budget has proposed a very draconian income levy, which will apply to everybody with an income over €18,304. As it is a levy, anyone who earns less than that — just about on a level with the minimum wage — will be exempt. However, if someone earns €18,500, he or she will pay the full 1% on the whole of the income. For someone on an income just slightly above the minimum wage, it will mean that he or she will end up paying €185 a year to the Revenue Commissioners. This will be very difficult for employers, in terms of employment policy, because it means that someone on the minimum wage who gets a small piece of overtime or a little bonus for having done some extra work effectively will be pushed into having to pay the levy. What the Minister has done will act as a very severe incentive for hastening the return of the black economy in Ireland.

There are spiralling rates of unemployment at the moment with tens of thousands losing their jobs. The level of the levy is pitched very low and the fact that there is no sliding or marginal relief means that if, for example, somebody qualifies for overtime, there will be a major incentive for that to be dealt with under the counter. This is one way in which the return of the black economy will be heavily facilitated.

At present in Dublin and around the country, firms of accountants are suggesting to clients that they should split their income. If some of the income, for example, €17,900, is transferred to a wife, they will escape the levy completely. If they have income of €250,000 and were to split that among their family members in a family business, it will mean that the Minister's — and more importantly, the Taoiseach's — promise that people in the higher income echelons could not avoid the levy, and in fact would pay more, is set at nought. Tax experts and accountants are currently offering off-the-shelf schemes which allow income splitting for people in the upper echelons. The Minister and his officials know this. It is all over town that these arrangements are very easily made for the purpose of avoiding the higher rates of the levy. I will explain to the Minister how it is done.

If family members are employed in or are directors of a company, the income is split among them. People at the top levels, therefore, who are meant to pay 2% to 3% — the Minister was very proud of how progressive his legislation was — will have an easy avoidance mechanism. However, the Minister is not prepared to do anything for those at the bottom of the scale, the type of people who should be encouraged to go to work and not end up on social welfare or return to the black economy.

Since it took office, the Government has been seen to be all at sea. The Minister marched into the Dáil that day and said he was appealing to patriotism. Where is the patriotism in the very wealthy being able, and allowed, to split their income to avoid the higher rates of the levy — 2% and 3% — while people on lower incomes have no margin of relief? It would not cost the Minister very much to recover this lost income if he wanted to by simply applying the levy to those on the higher scale, while ensuring they had no avoidance mechanisms.

Later on, the Labour Party is offering him an opportunity in the Bill to secure and copperfasten anti-avoidance mechanisms. The Government seems bewildered, uncertain and unsure. However, when the levy comes out of the pay packets of those who will still have jobs at the end of January, they will be hit very hard. I do not know whether he quite appreciates the wave of reaction that will follow when employees see that levy taken out of their wage packets at the end of January and accumulating through February and March.

To be fair, there ought to be a marginal relief mechanism where somebody gets overtime or is paid a small bonus or facilitates his or her employer by working extra. I met a security guard in one of the shops in Blanchardstown town centre yesterday who earns €17,000 a year. He had a better job, which went, and now he is working as a security guard in one of the British chain stores, for which he is being paid the going rate. He will not be liable, technically, for this levy. On a zero hours contract, common in the retail trade, the worker usually has no choice if asked to do overtime.

Such a contract means that if an employer wants somebody to work 25 hours this week, because of another employee's absence through illness or whatever, he or she is obliged to accept the extra work. Normally, people are happy to accept the extra work because it does not worsen their overall financial position. However, if they accept the extra work, they get caught in a clear poverty trap where they are liable for the full rate if they go over the €18,304. This is an important and significant introduction of a new poverty and anti-employment trap. The Minister could easily address it, at little cost, by introducing some level of marginal relief.

See this speech in context