Michael Noonan (Limerick City, Fine Gael)

This levy is running for four years. If we had full information we might be able to make them absorb it but there is an absence of information. However, this is the opening position for legislation because it will run for four years. Deputy Doherty asked if the ARFs were being capped why would we not also cap the levy. The ARFs, as they apply to small investors, are operating in a curious way and they are under pressure. I am informed that when it comes to the notional 5% assessment of drawdown, the insurance industry which provides these ARFs to small investors is making it an actual drawdown and the pension funds are pushing for the 5% to be withdrawn. The small investor is faced with a situation of an actual 5% drawdown every year on which marginal tax is paid at 52%. Over a number of years there is a fear that people who are pinning their income for their retirement on smaller ARFs will find their capital has disappeared over a short period of years. There is a distinction between the individual ARF for the small investor and the general pension fund that usually covers a group of people.

Deputy Catherine Murphy talked about a pensions time bomb and a necessary overhaul. I agree work has to be done in the pensions industry and some work is being undertaken by the Pensions Board. Deputy O'Dea and Deputy McGrath mentioned it as well. With the changing demographics there is an increasing number of elderly people in our communities. It is not as imbalanced as it is across continental Europe. We seem to be about 20 years behind its age profile. We still have a fairly balanced age profile across the age groups but there is a pensions issue which we must examine very carefully. The time limit on the levy is absolute and has been written into the Bill. When it is enacted, it will effectively be a sunset clause and will end at the end of 2014. It is not intended that we would resile from that.

Deputy Broughan referred to the levy being absorbed by the industry and I have given my views on that. He spoke about cost-benefit targets on a year-by-year basis. The household surveys produced by the CSO provide an annual estimation in a detailed way of employment trends and we have it to match it to. A year is too short a period to see the effect of any jobs initiative, especially an initiative such as this. Its primary intention, as I said on a number of occasions, was to build up confidence in one particular sector and reduce its cost base by bringing the VAT rate down from 13.5% to 9% in order that businesses would be encouraged to bring more people in, do more business and employ more people. It obviously has to be measured.

The Deputy also raised the issue of the travel tax. He was one of the first people in the House to oppose its introduction a number of years ago. If we enact the Bill today and it goes before the Seanad, it will be set at zero, subject to the order of the Minister. I want to give the Minister, Deputy Leo Varadkar, a negotiating position when talking to the airlines. If we do not make progress with the airlines in terms of the commitments we want them to make, I will not sign the order to reduce the tax to zero and it will stay as it is.

As we are reducing it to zero rather than striking it out as a tax, it remains in the tax code and, as a result, it can be reinstated very easily in a future finance Bill if the carriers do not play ball. I know they are currently in discussion with the Minister, Deputy Varadkar, and he has made some progress. He has some other initiatives as well and we will wait and see how it works out.

Deputy Healy's amendments seek to enshrine in law what many people would like to see happening, namely, that the industry rather than the funds would absorb the levy. I have given him my position on that. I do not want such a provision written into the Bill but I hope that funds would make a contribution.

In its advertising and promotional literature from last year and this year the industry referred to figures of 6% capital gains, which is an average rule of thumb in the industry. The 6% capital gains goes into the fund base. A levy of 0.6% if one is building in a figure of 6% capital gains over four years, leaving out all sorts of clawbacks in terms of income tax relief, seems to be totally within the competence of the industry to absorb without any particular effect on people in pension schemes.

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