Wednesday, 6 November 2013
Finance (No. 2) Bill 2013: Second Stage (Resumed)
I propose to share time with Deputy John O'Mahony. I welcome the opportunity to speak on the Finance Bill. We can all celebrate that it is at least possible that this budget, tough as it is, may be the last tough budget. We also have to acknowledge that it is at least partly because of the tough budgets we have endured since 2008 that there are now signs of a pick-up in the economy and definite jobs growth. At the outset I acknowledge what has been achieved on the broad economic front because, inevitably, I will focus on aspects of the budget about which I have concerns.
The first issue is the single parent tax credit and I welcome the fact that the Minister has responded to concerns. It was an unintended consequence of change and I am glad there was a response. There would be no winners if the change was not made.
I refer to the change in the pension levy. There is a lack of appreciation of how onerous it is, in particular for those approaching retirement who suddenly find their income has taken a hit because of the collapse in the market. Their income is now depleted and their income in retirement will be so much less than they hoped, planned and saved for over 40 years. It also represents consumption forgone over that time. We cannot blame people for being concerned, stressed, annoyed and resentful of it. I am not speaking for the pensions industry but for those savers who could never hope to amass pensions like ours in the public service but who made major sacrifices over their lifetimes to save what they could. Increasing the levy and extending it is breaking faith with savers having given a firm commitment that it was to be a finite four-year levy when it was introduced. The Minister referred to issues with the industry but that has nothing to do with the savers, who have no control over what pension fund managers discussed and who have no leverage. They should not be punished for whatever happened between the Minister and the industry. I ask the Minister to reconsider this tax extension.
It is also being suggested that the levy on defined contribution pensions should be used to compensate defined benefit pension funds in deficit. I hope that is not being considered as it would be an absolute travesty of justice and fairness if those who make the personal sacrifice to save for their pensions should have to take the hit for others. As a country, we went to extraordinary lengths to protect savings people had with the banks and it seems to me savings for old age held in pension funds should be at least as worthy of protection.
A related issue is the penal tax on pension funds in excess of €2 million. I have no problem with the limit on tax relief because there is a limit to what taxpayers can do to encourage pension savers. I have had a number of irate pension savers contact me querying the exclusion from this tax of public sector pensions. There is no fund in the public sector but the point is being made that the same tax yield could be achieved if there was equity across all pensioners. Private pension defined contribution savers see themselves as an easy target and under attack. I ask the Minister to exempt the people who are in the heartbreaking situation where they are nearing retirement and the pension fund is being wound up. They get last dibs on whatever is left and it is usually precious little. Applying a levy to them is rubbing salt in their wounds and perhaps the Minister can examine that particular group.
I refer to the property tax, which will be a considerable aspect of and contribution to Government budgets from 2014.
I have to say how disappointed and even annoyed I was to hear that the promise of 80% retention of the tax collected by each local authority is to be postponed. I have always supported the principal of property tax, but it is no secret that I opposed the method of calculation which is based on the national spread of property values, not on the local cost of delivering services. This results in Dublin households paying not only more than anywhere else, but also more than necessary for their local services. Of all the countries at which I have looked, I cannot find any country where a similar method of calculating a local tax is used.
When the tax was introduced, to mollify the Dublin citizens the promise was made that 80% of taxes collected could be kept and spent locally, and that from 2015 local authorities could vary their charge, up or down, by 15% so that the overpayment could be returned to householders. We find now that the local authorities will not keep the 80% in 2014. This raises real concerns about what will happen in 2015 and whether the power to vary charges will ever really exist as no local authority can vary, up or down, what it does not get in the first place.
It has been suggested that the postponement of the 80% retention promise is due to setting up the water authority and the introduction of water charges which, I accept, will change the overall costs of local authorities, but I honestly do not see how it will impact on the relative disadvantage to Dublin of the local property tax. It is vital that the promise of 80% retention is kept, if not this year, certainly next year. We cannot break faith on an issue like this at a time like this when certainty is so important to householders. This tax gained some acceptability in Dublin by virtue of the promise that local authorities could return to householders some of the unnecessarily high tax they would pay.
In my local authority of Dún Laoghaire-Rathdown, in a full year householders will pay an estimated €52 million in local property tax, and yet they will receive back from local government a scant €27 million in services, if they receive what they got last year. If that is to be the case, the local authority can only vary the charge by reducing services. To reduce services will not sit well with householders who are paying over €52 million in property tax, particularly when they are put to the pin of their collar to do so and when we know already that properties in Dublin are rising in value and the householders, when properties are re-valued in 2016, if current trends continue, will pay between 30% and 40% more in property tax anyway.
I plead with the Minister to ensure, if not this year then next year, that the 80% retention promise is kept. The ability to reduce or increase the rate does not matter in local authorities where property values are low because 80% of the tax take will be such a small percentage of the local authority's budget and a 15% change will not impact on the local authority's budget. Also, if, where households are paying the lowest band rate of tax of €90, one changes that tax by 15%, it is only a difference of €13.50 per year which is not of any consequence. By golly, there would be a considerable consequence if one changed the rate by 15% in Dublin, where people are paying not only hundreds of euro but, in some cases, thousands of euro, and it will matter.
There are 34 local authorities and we are asking four of them to pay 40% of all the tax. It behoves us to be honest with them, to keep faith with them and to keep promises that we made. I stress the point, not only because of the inequality vis-à-visDublin householders but because our aspirations for meaningful and accountable local government cannot be realised if there is no connection between those who pay the tax and those who deliver the services. There will be no drive for efficiency or responsiveness from local authorities to citizens, for example, in Leitrim, Roscommon or Sligo, if it is Dublin householders who are to pay for their services.
If this tax is to endure, there must be a real advantage to householders who are paying the big money. I say real advantage because the potential to play with figures is enormous. The funding of local government is so arcane that it is important in keeping the promise to retain the 80% that there will not be giving with one hand and taking back with the other. I ask the Minister to ensure there is some possibility of returning some of the overpayment of tax to Dublin householders.
In the few seconds I have left, I will mention the current debate about the collection of the property tax. I am amazed at this because it was raised at the time, in fact, by myself by way of parliamentary question. It was clear as a pikestaff that the payment had to be made before or on 1 January. The reason given was that it was to facilitate deductions, but it was known in July last that 53% of householders did not opt to pay by deductions. That should have set alarm bells ringing about the need to get information out there to avoid pre-Christmas lump-sum payments. I welcome the fact the Revenue Commissioners are making it known how stage payments can be made, but the upset that it has caused highlights once again the importance of real and absolute clarity and honesty with the public when dealing with a tax of this magnitude.
I have not time to raise many of the issues, but I fully appreciate the difficulties facing the Minister for Finance in bringing the deficit to 4.8% of GDP and that doing so must hurt. Even with the hurt, there are welcome job-focused reliefs for the business community in the Bill. It is, in the end, only with jobs that we will see an end to high unemployment and that we can hope to see a return to better living standards and, I hope, lower taxes.