Éamon Ó Cuív (Galway West, Fianna Fail) | Oireachtas source

I was pleased to hear Deputy John Paul Phelan speak about the need to change the provisions on agricultural relief. A number of parts of the Bill, including the section dealing with stamp duty, makes reference to farmers spending 50% of their time on their farms. The vast majority of farmers in this country are producing suckler cows, dry stock or sheep. There are only 18,000 dairy farmers in the country, and even if that figure increased to 20,000 it would not be a significant number. A further 4,000 to 5,000 farmers are involved in tillage. It does not require 40 hours per week to farm suckler cows, dry stock or sheep. The worse the land, the more farmers would be simply passing the time if they were working that many hours. Requiring them to devote 50% of their time to farming will prevent a considerable number of family farms from being transferred to the next generation with the assistance of the reliefs.

I welcome that a consensus appears to be building in this House that whoever wrote that provision did not understand the situation. When one does not understand the consequences of one's actions, it is important that one listen to those who do understand them. It has been estimated that 30% of farmers currently earn off-farm income, but 60% of farmers had off-farm incomes when the economy was booming. The reality is that those who do not have an off-farm income would like such an income, because otherwise they are depending on payments such as farm assist. Please God, they will have an opportunity to work off their farms in the future.

I am disappointed that the relief that was sought in regard to compulsory investment in shares in dairy co-operatives, because of the expansion in milk production, was not given. I was a supporter of the business expansion scheme, BES, in the past because it provided equity for industry. As we know, it is hard enough at times for small businesses to access equity. If a business is depending on borrowed funds and the gearing ratio is wrong, it becomes much more vulnerable and liable to fail. In a time of massive expansion in the dairy industry and when markets internationally are very volatile and we are not sure what the future will bring, it is very important that dairy co-operatives are well geared and do not have a high borrowing ratio. They should be increasing their share capital rather than having to bring in private finance. The idea of their being farmer-owned is very attractive. Indeed, it is a positive that so much of our dairy industry remains farmer-owned. We must avoid a situation in which co-operatives seek to compensate for the share capital they do not have by going on the market and borrowing large amounts of money.

It is interesting to consider which businesses survived the downturn where one might say they should not have done. The timber industry is an extraordinary example of this. Five or six major mills in the county had to switch from making 70% of their sales in the home market to making 70% of their sales in the export market. We did not lose even one of these companies overboard. Logically, one would have to conclude that they were incredibly vulnerable because of the downturn in the construction industry. If any industry was going to go, one might well have figured the timber industry would be it. My understanding, however, is that these companies had very good gearing ratios, had not diversified outside of their core businesses and were therefore able to take the hit, ride out the difficulties and win new markets without going to the wall. Very few industries have taken such a hit without going under.

We need to build the same resilience into the dairy industry. When it comes to taking in shares, we must also ensure farmers are not hit with a double jeopardy and put in a position in which they have to borrow money to buy shares, improve their farms and put in extra capacity. We must avoid a situation in which farmers become over-borrowed. It is a major risk. I am very concerned that if people over-borrow and there is a downturn or price volatility, some will end up losing farms that have been in families for generations.

For many years I have made the case that for the ordinary citizen, there is nothing more frustrating than a massive tax form demanding information on multiple reliefs, representing a range of complications and twists and turns. The vast majority of PAYE workers do not fill an annual tax return because they are not obliged to do so. When my party was in government we got rid of many of the smaller reliefs. My view was that rather than reducing tax rates, it would be better to remove some of these small reliefs in the knowledge that many people were not availing of them. I used to have a slogan that the types of people who availed of these reliefs and sent in all the forms often did not need the money, while those who did need them were often the people who were afraid to fill the form. Some people simply have an antipathy to form-filling, while others are cautious when it comes to their dealings with the Revenue Commissioners. In some cases the policy is of "Out of sight, out of mind," and "Do not tickle it or it might bite back."

I have always maintained that what the ordinary punter wants - by "ordinary punter," I mean a person earning between €5,000 and €60,000, or €70,000 or €80,000 - is a very simple system whereby filling in a tax form does not require expert advice. We need to simplify what is there. We should give grants if we want to give money to people; the tax system should be simple and understandable in a way that enables people to work out how much they owe without having to seek expert advice. I am not talking about people with complicated accountancy issues, tax schemes and big money. I am talking about the average people we meet every day of the week. I see people trying to fill in tax forms who might have a farm income of €5,000 and a small PAYE income. Einstein would not be able to complete some of these forms. There are so many rules and regulations and this Bill is adding to the grief.

When the relief on refuse collection costs was in place, my understanding is that only 40% of people who had an eligibility for the relief actually claimed it. Now we are going down the route of a tax relief on water charges. It is not my intention to debate Irish Water and all of those issues this evening. My point is that I disagree fundamentally with such a relief as a method of reimbursing people for a charge. It is another crinkle in the system, and in order to avail of it, people will have to make a claim. Plenty of people have a paranoia about dealing with the Revenue Commissioners, even if they are totally tax-compliant. I have often dealt with people who filled out a tax form and discovered they were owed a lot of money. The relief on water charges is a bad idea.

Speaking more broadly, I would propose that in respect of all of those small reliefs listed on the back of tax form, applicants should be given two options. Option A, the simple option, would allow people to waive their right to claim all of them individually and instead receive a tax credit of €100 or €150. Option B would be to fill out the complicated form in order to claim all these bits and pieces of reliefs. I have no doubt that nine out of ten people will take the simple option of the tax credit. In the meantime, the forms are becoming incredibly complicated for ordinary people to fill out.

Some of these schemes and reliefs were introduced by my party in government but the intention was that they would be temporary measures. Certainly, we should have it as a medium-term goal to get back to a two-legged system, those legs being social insurance and income tax. Under the social insurance leg, everybody pays in at the same rate of 4%, 5% or whatever it is. I have made the case before that self-employed people should be brought into this by being covered for invalidity pension and so on. Everybody should pay in at a uniform rate that is easy to calculate, and the pay-out is the contributory pension, invalidity pension or whatever. The second leg should be income tax, full stop. We should absolutely have it as a long-term aim to get rid of the universal social charge. As it stands, we have made it incredibly difficult for people to calculate how much tax they should be paying. For the self-employed, no PRSI is payable on incomes below €5,000, and USC is not chargeable at below €10,032. For older people, the threshold is €36,000 for a couple and €18,000 for a single person. For younger people, various limits and permutations apply based on the various rules. If one asked everybody one met on the street, how many of them would be able to name all these thresholds and limits? People have a right to be able to calculate these sums without having to go to the Revenue On-line Service, ROS, for an answer which must be accepted at face value. People want to understand how the sum on the Revenue return was arrived at.

We must simplify the system. When we talk about better government and reform of government, it is often in reference to this House. The reality is that the vast majority of people in this country do not care how we operate this place. What they care about is that when they interact with the system, it is efficient, effective and understandable. Sometimes we spend more time in here talking about trivialities than the things that would actually make a practical difference in people's lives. One such change would be to facilitate people by helping them to access the system and find out what they are paying and how it is calculated.

I hope the Minister intends to review the proposal on a water charges relief in the coming week.

We have a clear policy on it. The Government should just put it out there into the ether and forget about it for the moment because it is such a mess. One solution is not to bring in a small tax relief. Asking people to pay €300 at the marginal rate of tax is ridiculous for the complication it will put into people’s lives. That money could be given out in a much simpler way.

What is the Minister for Finance’s vision of a tax system that will be fair, accessible and calculable for the ordinary people, most of whom lead fairly simple, regular lives? Has he got a vision of going from a three-tier system involving USC, with one set of rules, PAYE and self-employed income tax, with a second set of rules, and PRSI, with a third set of rules, back to a two-tier system?

I was shocked at the way the increase was done through a tax credit. The Government has perpetuated a measure we introduced, one with which I never agreed, namely individualisation. This was particularly cruel because at least in the good days there were good chances for families to have two incomes. The credit should have been doubled for people who are married. It should be remembered many families who were dependent on two incomes are now dependent on one.

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