Eoghan Murphy (Dublin South East, Fine Gael) | Oireachtas source

I move: "That the Bill be now read a Second Time."

I thank the Chief Whip and the Minister for Finance for facilitating this debate. I also thank the Chief Whip for making the taking of Second Stage debate on a Private Members' Bill possible through his reforms in this House. I thank the officials of the Department of Finance for their engagement in the drafting of the Bill.

Agreeing to pay a proportion of one's salary into a central fund in the form of tax is a cornerstone of the social contract. We agree to come together collectively and to select a few people to run things, and we pay over some of our earnings for those people to administer on behalf of all of us. It is a basic tenet of society. It follows, therefore, that we have a right to know how the Government is spending our taxes and the Government has a responsibility to tell us. It does that, and in more detail now than it ever has previously. However, I believe we can and should go further.

Whether people feel they should be paying more or less tax, we all insist that the tax we pay is spent efficiently and appropriately. We trust that it is. However, every time we hit another pothole in the road or hear of a government project running over budget, that trust is called into question. Some people will always complain about how their taxes are being spent because there will always be a difference of opinion about the policies the government of the day is pursuing. That is politics. Nevertheless, with all that has happened in recent years in Ireland, citizens are now rightly demanding more information from the Government and increased transparency and openness about how the country is being run. This is particularly true of the tax spend, as people's real income is reduced and new taxes and charges are introduced.

In Ireland we have seen an increasing tendency towards transparency in how people's taxes are spent, by making explicit the connection between what each of us pays individually and the benefits that society as a whole receives for this money and how. It is important to note the advances the Department of Public Expenditure and Reform has made in this regard. Last year saw the publication of a detailed medium-term Exchequer framework as well as a Revised Book of Estimates. More recently, we have seen greater transparency in the pay structures operating in the public sector. There are also new online projects under way, such as the Department of Public Expenditure and Reform's Databank and IrelandStat. All of these measures are welcome and indicate a positive trend under this Government towards greater transparency.

I introduced this Bill last March. It has three central components. The first element, if adopted, would see each taxpayer receive an annual statement detailing how much tax they paid in the previous year and how this contributes to Government spending priorities. The statement, which could either be delivered by post or made available online, would resemble an itemised receipt detailing the recipient's contribution in euro and cent to the different areas of government spending.

How would it look? For illustrative purposes, let us take the example of Ms Jane Duffy, a PAYE worker in the private sector who earns €42,000 a year and receives the basic tax credits and standard bands of tax. Jane Duffy's statement would detail her various income contributions - USC, PAYE, PRSI - and the total amount she paid in tax. At €42,000 salary, her contribution is €10,707.

Ms Duffy's contribution would then be broken down indicatively according to the percentage of Government expenditure spent on each Department. There is an example of Ms Duffy's statement online on my website, but I will highlight some points here. She would see, for example, that she had contributed €1,352 towards the education sector, that €465 of that amount had gone towards primary education and €237 towards third level. She might agree with the extra resources being devoted to primary education, but she might also wish that a greater amount of her more than €10,000 in taxes was going towards primary education. She might make this point to her local Deputy and she might even suggest where she felt she should be paying less tax.

She would see that €2,113 of her taxes had been spent on health, a significant amount, but only €76 of her taxes had been directed towards aid to developing countries. She might still consider this to be too high or she might consider this to be acceptable because she might like the statement that it makes about her and her priorities. She would see that law enforcement was costing her a relatively small amount at €338 and might wish that more money would be directed towards the Garda. This might be something she would remember at the general election when evaluating the different parties' election pledges. She would probably be concerned at the high contribution to social protection at €3,128, her largest contribution, but might be surprised to see that only €423 of this is going on jobseeker's allowance for all the people who are looking for work. She might wonder how the rest of it is spent, and her statement would go on to outline the various details of where her money is being spent to help other members of society. Ms Duffy would see that €1,055 of her hard-earned money was going on paying off just the interest on the national debt. This might make her more or less supportive of government policies to close the deficit as quickly as possible. She would finally have an answer to the rhetorical question: "What is the price of democracy?" For Jane Duffy it would be €13.

Imagine if everyone received this information on the same day every year. Imagine the debate that would take place in every workplace, home, pub and sports ground throughout the country. Imagine if every party contesting a general election was bound to submit its economic plans to such a formula in order that people could get a really meaningful idea of how its policies, if its members were elected, would change national priorities in terms of how their taxes were being spent. Consider how important this information could be to every debate that we have and for every person in society.

The second central component of the Bill is the provision of an online tax calculator to give that same breakdown I have just mentioned, but based on Ms Jane Duffy's own estimates as to the VAT and excise duty she had paid in the year. The breakdown returned would very much depend on her lifestyle and how she spent her income. I will not dwell on this element but, as I am sure others will point out, this could be just as significant relative to her taxes paid on income.

The third element is the introduction of an obligation on the part of each Department to publish on its website all items of expenditure it incurred in excess of €5,000. This would allow people to scrutinise their personal statements in greater depth. Some Departments have already introduced this policy at the €20,000 threshold and this provision would simply lower that amount.

Why would we provide such a statement to each taxpayer? As I said previously, people have a right to this information and we have a responsibility to provide it. Through greater transparency and open government we build trust. This is essential at present when there is a problem with trust among the electorate in terms of trusting their politicians and what they are doing with their money. Such a statement would clearly identify Government priorities to the individual, in euro and cent. This would mean a better informed electorate and country, and a better informed

If Jane Duffy thinks the contribution to education should be greater than her €450, where would she makes the cuts elsewhere? Would it be the €170 spent on the environment? It has to come from somewhere. Given the exceptional circumstances we find ourselves in as a nation, such information would dramatically show the individual the challenge facing the Government and could help in making the budgetary corrections we need to make in these difficult times. More than €1,000 of Jane Duffy's taxes go on servicing the national debt, paying off the interest on our debt this year alone.

The Bill is not finished. There are details to be worked out and I hope we have the opportunity with Members' support here and on Committee Stage. On the advice of the Department of Finance, there may be a problem with lowering the reporting threshold to €5,000, the third element of the Bill, and that provision may need to be revised and increased.

Though the statement would be indicative only, it may not be possible to use taxes paid in the previous year for calculating future contributions in the next year. Thus, we would have to amend the legislation so that we were using taxes paid in the previous year to break down contributions made that same year. We would be telling the recipient what they paid in taxes last year and how we spent it rather than the amount they paid in tax last year and how we might spend it next year. It is a small to change to make but important to note it at this stage.

It has been suggested the provision of such information may act as a negative incentive in so far as tax compliance is concerned. I do not agree. Tax compliance is a problem where people do not trust how their taxes are being spent. The initiative should restore confidence, if anything. I also do not like the principle behind the argument as it favours ignorance over information.

People have asked me about the administrative burden this may impose. This depends on how the statements are issued. Much of the work necessary is already under way or would require little additional effort. The Department of Public Expenditure and Reform is proceeding with making as much information available online as is possible. A simple mathematical formula based on information contained in the Revised Estimates can quickly break down the information for each person, as I have done for Ms Duffy. Doing this online, in the form of a tax calculator and a transparency statement for income taxes, would be relatively cheap and straightforward. We could have it up and running in months. If we were to issue a statement to each taxpayer, this would require more work.

My final point on the Bill concerns cost. If we do it all online, it would cost relatively little, that is, the price of building an online calculator tool on the Department's website. It would be a task suitable to most CoderDojo kids or our budding young scientists. However, issuing a statement by post to each taxpayer every year would require greater resources. Estimates in the UK, where Mr. Ben Gummer MP proposed a similar initiative that was accepted by their chancellor, had the administrative and postage cost per person at around 25p. The UK will introduce the measure in 2014. If we decide to issue a statement by post, we can learn from the UK and follow quickly after it. Doing it online, as a first phase, is relatively straightforward and should be pursued.

I favour issuing a statement by post to each person on the same day. The return in terms of transparency, and in being able to hold elected officials to account, is worth it. Let us think how this would empower people to hold their elected representatives to account. They could see Government priorities and how the Government is spending people's contributions to taxes. Someone like Jane Duffy might not mind contributing 20 cents out of her €10,000 in taxes because she will want to have this information to hand. The impact of everyone receiving the same statement on the same day, such as in the first week of January, could be incredibly important to our democracy and how we do business. In any case, on these final two points on method and cost, the matter is left open, whether for decision on Committee Stage, or, if the Bill is not amended, as a decision for the Minister. The minimalist option, of introducing the information online by way of a tax calculator returning a spreadsheet of information, would take a minimum amount of administrative work on a one-off basis at a very small cost.

The better the understanding, the greater the citizens' ability to make an informed choice about what they want from the Government. This is an issue we must continue to pursue. Open government is good government and we should not fear transparency. Greater transparency in public affairs delivers greater accountability and better performance. If we make Government spending more digestible and more accessible to the individual, it will generate greater buy-in from people and strengthen the social contract. We talk at times about the democratic deficit, about Government being at too far a remove from the people. Greater transparency on how taxes are spent is one way of improving this. I welcome all contributions to the debate and I thank the Members who have taken the time to be present and to debate the Second Stage of the Bill.

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