Tommy Broughan (Dublin North East, Independent) | Oireachtas source

I am glad to have the opportunity to make a brief contribution on the Finance Bill 2014. The Bill implements the majority of the taxation changes announced by the Minister for Finance, Deputy Michael Noonan, in his Budget Statement of 14 October. Today, Deputy Eoghan Murphy suggested a change in approach in how budgets were invigilated by this Parliament and spoke about the need for a stronger Parliament overall. His comments in this regard are reflective of the views I have long expressed in the House, on approximately 24 Finance Bills. This is the 24th time I have been asked to invigilate the debate on the Finance Bill.

I hope we will begin to receive more detailed budgetary information earlier in the year. Perhaps we might use the approach adopted by the Australian and Dutch Parliaments in order that Deputies can make an informed contribution to the debates on both the budget and the Finance Bill. While the Minister did provide outline costings for the new measures contained in budget 2015 which are instructive, there is still a disappointing and frustrating dearth of information on the macro position in regard to costings for many tax expenditures in this and earlier Bills.

Tax breaks have always played a prominent role in the Irish taxation system and the history of the State. For many years, colleagues in this House and I have demanded that tax expenditures be regarded simply as Government spending programmes and not effectively as a series of measures which are revenue neutral. Many studies, in particular the work of TASC by O'Connor, Staunton, Sweeney and O'Donnell in recent times, have shown that the costs and benefits of tax breaks are not uniform in their application across the people and households. The ESRI has noted, for example, that 80% of the benefit of pension tax reliefs goes to the top two deciles of income.

Tax expenditures are often anti-competitive, deadweight and less efficient than direct State spending. Most of all, the cost of tax breaks is difficult to determine and usually underestimated, even in the annual budget documents such as those presented with budget 2014. Nowhere in the budget papers and speeches of the past four years of the Government, for example, is there a full estimate of the current level of tax expenditures in this era of savage cutbacks and retrenchment. Right-wing journalists love to write about the budget revenue gap in regard to social programmes and public spending without ever mentioning the cumulative tax expenditures throughout each budget.

The OECD's 2009 economic survey of Ireland put the average EU level of tax breaks in the income tax system at 5.6% of total taxation, whereas the Irish level was placed at 18.3%, or three times greater, of total taxation. In addition, the benefits of many tax breaks accrue to the highest earners and these expenditures continue to provide a way whereby many high earners can dodge paying their appropriate share of income tax. The recent TASC report, A Defence of Taxation, refers to Revenue statistics from 2007 and 2010 which show that the total cost of tax breaks on income tax was €17.9 billion in 2007 and €17.7 billion in 2010. When one deducts the basic income tax credits for workers and employers which amounted to €8.9 billion in 2007 and €8 billion in 2010, we are left with tax breaks of €9 billion in 2007 and €9.6 billion in 2010, significantly more than the whole education budget.

Perhaps in his reply to the debate, the Minister might update us on the total cost of tax reliefs in 2013 and 2014 and the projected total costs of same in 2015. I note the Australian Treasury produces an annual tax expenditures statement which I presume includes a full cost-benefit analysis of each tax break. That is the type of issue Deputy Eoghan Murphy was rightly commending to the House. We should know what we spend on these tax reliefs and tax breaks which, as I said, by and large, benefit the more wealthy in society.

I note that there are again hugely significant tax expenditures in the agriculture sector in sections 43 and 44 of Chapter 6 of the Bill. These were estimated to cost at least €30 million in the Minister's Budget Statement. While these measures are said to be derived from the review of the Departments of Finance and Agriculture, Food and the Marine, they are still presented to Deputies in a very narrow manner, without guidelines on how the changes will affect the overall macro tax treatment of the sector. I also recall that last year the Ministers, Deputies Michael Noonan and Simon Coveney, overruled their departmental officials to introduce a €26 million tax break for inactive farmers.

The decision in section 27 to slash the 80% rate of income tax on windfall profits owing to certain planning decisions in regard to land is also not costed. The excuse given by the Ministers, Deputies Brendan Howlin and Michael Noonan, is that there had been absolutely no activity under the provisions of the principal Act, now amended by section 27. However, given that there were more homes built in 2009 alone than in the entire period since, it is no wonder the section did not come into use. Perhaps the developers were waiting for the Ministers to cut the windfall tax down to the capital gains tax rate of 33%. While the Minister, Deputy Michael Noonan, has said there will not be a return to the boom and bust policies of the past, the windfall tax provision was an important measure in actually addressing past boom and bust policies which got us into the mess of the economic crash. I note that Deputy Mick Wallace, for example, has made valuable contributions in debates in this House on his experience of how land is ruthlessly hoarded by developers and landowners and land banks could best be used to provide desperately needed housing and commercial and public infrastructure.

I note the Minister's fanfare about removing the double Irish which he clearly states has caused Ireland reputational damage. Deputy Michael Noonan has been Minister for Finance for four years and did not seem to believe there was any reputational damage throughout that period, although he does now. I read a report in today's edition of The Wall Street Journalwhich effectively stated the extension of research and development tax credits in section 23 and the changes to the capital allowances in section 35 would effectively create bigger loopholes in the tax system, thereby benefiting the same multinationals. Clearly, Dáil Éireann needs much more information on how a research and development or patent box tax expenditure will operate and what it will cost. In this instance, we can also observe how Mr. Cameron's similar patent box operates in the United Kingdom.

I made a submission to both the Minister, Deputy Michael Noonan, and the Minister, Deputy Brendan Howlin, in the run-up to budget 2015. Of course, the level of resources afforded to Independent Deputies makes it very difficult for us. I was sorry that I could only deliver my 20 page submission to the two Ministers four or five days before the budget. I note that some of the measures I proposed are actually contained in the budget and the Bill. However, would the Minister believe some of the measures I proposed to tackle high earners are noticeably absent? One of my principal recommendations was ending all cuts to public services. I welcome the decision by the Minister, Deputy Brendan Howlin, to finally stall the horrendous cuts across the major Departments of Social Protection, Health and Education and Skills. I also proposed a €5 a week increase in all social welfare benefits, including pensions.

One of the key measures which I welcome in the Bill is in Chapter 2 in regard to changes to the universal social charge. In my submission I recommended increasing the entry point at which a worker was liable for USC and also a cut to the middle rate of the charge. Therefore, I welcome the amendment of the threshold and recognise that this will be beneficial for workers on very low incomes. I also welcome the cuts to the lower rates of USC. They will assist all workers but will have particular benefits for those on lower incomes. I also note the inclusion of higher rates of USC for higher earners. However, these progressive changes are offset by the decision by the Ministers to cut the marginal rate of income tax by 1%, as contained in section 3 of the Bill. The Government's decision to cut the rate is regressive because it benefits higher earners most. Coupled with the increase in the threshold at which the marginal rate of income tax will be paid, also in section 3, this means that higher earners will benefit disproportionately from budget 2015. A much fairer approach would have been to increase the income tax credits available to all workers. I proposed in my submission increasing tax credits by €5 per week, at a cost of €332 million. I also proposed adding a third rate of income tax of 48% on incomes above €100,000 which, again, would be an equitable measure ensuring those who could most afford to contribute to the recovery of the nation would have the opportunity to do so.

I also renewed my call for solidarity taxes on wealth and an increase in the bank levy. I note that Deputy Peter Mathews has done some very thoughtful work and made thoughtful contributions on the way in which the financial services industry can, if one likes, pay reparations to the nation for the damage it did to us in the past six years and the suffering it has caused to the people.

In regard to Part 3, sections 58 to 63, inclusive, in preparing my submission I strongly considered a cut in VAT of at least 1%. I can understand the difficulties the officials have in trying to balance a budget, given the huge amount of funding that comes in through VAT. Clearly, however, consumption taxes, including VAT, excise and custom taxes, are extremely regressive. Citizens and families on low incomes pay a much higher portion of their income in VAT and other consumption taxes. I believe that, following the next general election, the group of Independents will have a very strong influence on the next Government and perhaps might even lead it. We will then have an opportunity to begin to address the great unfairness of VAT and other consumption taxes.

Earlier today I attended a meeting organised by Deputy Peadar Tóibín and our trade union colleagues to consider the very necessary changes to the relevant contracts tax, RCT, system, which is dealt with in section 15 of the Bill. As the Minister knows, in recent months I have raised issues with the RCT system and the manner in which it relates to construction workers. There is a situation where PAYE workers on State school contracts are being turned into subcontractors against their will and paid salaries below the minimum wage. It is an horrendous state of affairs. I hope to bring forward an amendment on the next Stage of the Finance Bill in conjunction with colleagues. Either something is wrong with the current RCT system rules or they are not being implemented by Revenue. Either way, we need some new ideas.

I note that in my Finance Bill papers I have a very nice "Dear Wolfgang" letter, submitted by the Minister for Finance. I wonder why he did not say "Dear Wolfgang and Sigmar," given that there is a sort of Noonan and Howlin outfit in Germany. Of course, Wolfgang visited his more or less Dublin Branch Office last week. I wonder why we did not receive a "Dear Michael" letter in return. Perhaps the Minister of State, Deputy Simon Harris, might raise that matter with the Minister as we have received only one side of the correspondence.

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