Kieran O'Donnell (Limerick East, Fine Gael)

I want to raise two points, following on from what Deputy Bruton has said. In terms of this income levy, it is anti-business in that we are trying to encourage people, particularly the self-employed, to invest in equipment, plant and so forth. This levy is applied on a gross rather than an after-capital allowance basis.

By way of observation, the Minister has introduced a composite rate, effective from the start of the year, in terms of applying the income levy. My understanding is that it was introduced as an anti-avoidance measure in terms of company directors and so forth taking bonuses prior to 1 May, in which case they would have been liable at the lower rate. The consequence of bringing in this composite rate rather than just applying it from 1 May, when the income levy rates were doubled, is that the self-employed will not be taking bonuses, which will be a loss of PAYE and PRSI to the Exchequer. In many cases they will defer the taking of bonuses probably for 18 months after the accounting year ends. Many of them will have December year-ends in terms of dividend payments. The key thing the economy needs at the moment is tax or cash flow. We are on our knees because there are not sufficient taxes coming in to sustain the level of services.

It would have made more economic sense in the current circumstances, from a cash flow viewpoint, to have made it effective from 1 May and to have encouraged people to take bonuses and salary amounts prior to that date. By 14 May, in the event, the PAYE that is so badly needed would have flowed into the Exchequer. I believe it was a short-term measure. At the moment the Exchequer needs cash flow, which it does not have.

Will the Minister say whether this was purely a drafting error? Was it something that happened and is he effectively explaining this composite rate in respect of something he did not mean to happen? Was it an inadvertent error?

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