Brian Lenihan Jnr (Dublin West, Fianna Fail)

This is why the credit guidelines were included in the NAMA legislation and this is why NAMA was set up to cleanse the banks' balance sheets of toxic loans. The IMF delegation agreed with this view and that point was made in the debate.

I refer to measures contained in the Bill. I welcome the support given by Deputies Bruton and Kennedy and the Minister of State, Deputy Roche, on the extension of mortgage interest relief for those who bought at the peak of the housing market. The extension of mortgage interest relief will help those who purchased in 2004 or later, and the transitional measures may, as Deputy Kennedy highlighted, act as a stimulus to those who wish to enter the housing market at this stage. The commitment to remove this relief altogether by 2018 will provide significant savings to the Exchequer. Deputies Crawford and Enright suggested mortgage interest relief is not available for individuals on low incomes. Mortgage interest relief is a tax relief of up to 25% on interest. It is applied at source, thereby reducing the total mortgage payment. It is available to all qualifying loans regardless of the income of the mortgage holders.

Deputy Burton referred to the budget speech, in which I indicated high earners must pay their fair share. The amendments to the restriction of reliefs measure announced in the budget and set out in this Bill will curtail severely the number of tax reliefs that can be used to reduce the income tax liability of those on high incomes. It will ensure that, in addition to PRSI and levies, those with high incomes and using reliefs will have an effective income tax rate of approximately 30%. I thank Deputy Moynihan for his support on this and other taxation issues in his contribution.

Deputies Bruton, Burton and O'Donnell all referred to the need for tax incentives for start-up companies. In particular, Deputy Burton referred to the need to help indigenous start-ups and in the Bill I have made provision for an extension of the tax exemption for new start-up companies introduced in budget 2009 to companies who commence to trade this year. The Commission on Taxation proposed to extend the measure to non-corporates until 2011. New start-ups that commence trading in 2010 may continue to avail of the exemption up to and including 2012.

Deputy O'Donnell made reference also to the research and development tax credit scheme and proposed that the credit should be allowed to be offset against PRSI. This proposal is not new and I am aware of other proposals to allow companies set off the tax credit against payroll tax liabilities. The suggestion has serious implications for the Exchequer in respect of the funding of pensions and social insurance payments in future. There are serious difficulties in acceding to such requests having regard to the implications for the social insurance fund into which contributions are paid. The research and development tax credit scheme has been improved in most budgets and Finance Acts since its introduction in 2004. Significant enhancements have been made to the scheme in budget 2009 and the Finance (No. 2) Act 2008. These and other changes have made the scheme one of the most competitive schemes of its type, a matter to which I point in response to Deputy Burton's assertion that Ireland's only competitive advantage is its 12.5% tax rate.

I am conscious there are reasons, other than cash-flow, certain companies and advisers wish to allow the tax credit to be offset against payroll costs but it should be possible to devise an accounting solution which will deal with the issues in this area.

I agree with Deputy Burton that Ireland's reputation is the key to our future success, both from a regulatory and a tax policy perspective. The Government has announced significant reform of regulatory structures. Legislation in this regard will be before the House this year.

Deputy Burton also referred to a front page article in the Sunday Business Post which alleged a tax loophole cost the Exchequer €400 million in lost revenue. Deputy Ardagh questioned whether the figures quoted in the story were correct. Unfortunately, the tax loss figure quoted in the story was highly inaccurate. The amount of artificial capital losses claimed was €409 million and the amount of capital gains tax potentially under threat was in the region of €85 million. Furthermore, contrary to that newspaper report, I point out that artificial losses are already being challenged by the Revenue under the general anti-avoidance provisions contained in the section 811 of the Taxes Consolidation Act 1997. Deputy Burton then questioned why something was not done before now about this matter. However, the Deputy should note that much has been done. While the UK introduced a broad based approach to tackling such aggressive avoidance in its Finance Act 2007, we already had the general anti-avoidance measure in place. Then, we took measures under the Finance (No. 2) Act 2008 to counter aggressive avoidance schemes which had come to light, involving the creation of artificial capital losses. Such schemes will continue to be under review. I am surprised the Deputy did not go the trouble of checking the facts on this matter for herself rather than relying on a highly inaccurate newspaper report.

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