Seán Sherlock (Cork East, Labour) | Oireachtas source

There are several specific points I wish to raise on the technical detail of the Bill but before I do so, I wish to address the rainy day fund. The Labour Party is at pains to understand the necessity for such a fund. We are wondering if it was conjured up to make Fianna Fáil look fiscally responsible and whether it is a Fianna Fáil tool or a Fine Gael tool and we seek more transparency and openness in that regard. While the fund may appear prudent, taking €1.5 billion from the Ireland Strategic Investment Fund is just a change on paper. It is not new money. We would like to know where the new fund will be invested and whether it is simply a bailout fund for the banks. The Labour Party has argued that the money should be invested in affordable housing and to bring about real social recovery. I had hoped the Minister would give greater detail about the rainy day fund, how it will come into being and whether it will specifically be dealt with in the context of the Bill.

In regard to action on climate change, Members are now well versed in the report of the Intergovernmental Panel on Climate Change, IPCC. I was hopeful that between the Minister's speech on budget day and the publication of the Bill, we would see some real and meaningful action on climate change. We cannot ignore the advice of the Climate Change Advisory Council regarding taxes on carbon and mitigating that in such a way as to ensure that those at risk of fuel poverty or dependent on the fuel allowance would benefit from certain allowances in that regard. We cannot continue to ignore climate change and we need some real policy interventions that result in drastic changes in human behaviour. That must start this year, particularly in the context of the IPCC report. I am pleased that members of the panel will soon address the Joint Committee on Climate Action because it is important that we hear from them regarding radical proposals that we would like to see coming from Government. My party and perhaps others in this House would support such measures if they were forthcoming or that the Government would take seriously certain interventions proposed by a committee or by Members of the House. We cannot afford to let another fiscal year go by without making some real interventions or policy changes on this issue.

On the universal social charge, USC, a worker on the living wage of €24,500 will gain a little more than €20 a year from the changes to USC but a person earning €70,500, or three times more, will gain €126, or six times the tax cut. This matter will be fully discussed on Committee Stage. Four out of five workers will gain nothing from the changes but the highest earners will gain up to €130 per year. When one combines the USC and income tax cuts, a person on €70,500 or three times the living wage of €24,500 will benefit from a level of tax reduction 14 times greater than will a person on the living wage. The squeezed middle has been completely ignored in that conundrum, so it was not really a budget for that grouping in that context.

It was a budget for those on higher incomes.

The cut in USC and the move with regard to income tax thresholds will cost approximately €284 million. Every Member in this House could have thought of very good ways to spend €284 million in terms of delivering better public services, not to mention much more economical steps we could have taken to deliver concrete benefits to the people who need it most. For example, free-of-charge school books at primary and secondary level would have cost €40 million while paying all public sector workers a living wage might have cost €39.3 million so we would argue that it was not a solid budgetary decision.

The home care tax credit is good for those with incomes but not all carers will benefit equally from a tax credit approach. Direct services, like respite care, would be fairer and arguably more useful for many carers. Section 8 rightly removes accommodation and healthcare from being treated as taxable benefits-in-kind for members of the Defence Forces. This is something we welcome. We would like a closer interrogation of that measure on Committee Stage.

Section 22 rightly removes the rent-a-room tax relief from short-term lettings such as Airbnb without affecting relief for student digs as well as regular lettings. We have a proposal to support microbreweries. We have put forward an amendment for the benefit of the Minister's officials that would amend section 78A of the Finance Act 2003, which involves relief for small breweries. Section 78A of the Finance Act 2003 would be amended in subsection (1)(a) by substituting "60,000 hectolitres" for "40,000 hectolitres". This would not increase the alcohol tax rebate such breweries can claim but it would allow them a greater output while still being classed as microbreweries. The EU permits up to 200,000 hl for microbreweries so we are well inside the limits by going from 40,000 hl to 60,000 hl.

Section 25 introduces the controlled foreign company rules, as required by the EU Council Directive 2016/1164 - ATAD. This is an example of how the EU is rightly moving to reduce aggressive tax avoidance practices across the Union. The ATAD, along with the OECD base erosion and profit shifting, BEPS, process, show how countries are coming to grips with tax avoidance by multinational companies. We openly acknowledge that Ireland is complying with these new rules and has co-operated with the OECD process as well and so it should. However, we must also think about what this means for Ireland in the medium term. Are we ready to replace our reliance on foreign direct investment with the next phase of our economic development? What is that phase and are we ready? I would argue that we are not. We should be giving this much more serious thought. I hoped there would be more measures in this Bill that would reflect a better industrial policy to allow for the fact that as other countries lower their rates to those of Ireland, it will have an knock-on effect on our competitiveness. The argument is whether the writing is on the wall for the corporation tax rate with regard to its competitiveness. There is no argument with the fact that it must be retained. The point I am making is whether we need to shift our industrial policy to reflect our reliance on foreign direct investment and whether we should more aggressively target new markets for exports. I am sure this is something to which the Minister will return.

Section 30 provides for a new exit tax that applies to people taking assets out of the jurisdiction and out of the EU. It is arguable that this new measure has not been adequately explained by the Government. It transposes Article 5 of the ATAD into Irish law. We had an exit tax for individuals that was charged at the capital gains tax rate of 33%. Apparently, this closed a certain tax loophole that was being exploited. This will now be superseded by the new tax, although there is still a measure to block the tax loophole. As I understand it, and, again, I seek clarification, the new tax will be levied at 12.5%, which is the corporation tax rate, rather than 33% but the rate of 33% will apply if the measure is used for tax avoidance purposes. How easy will it be to identify a tax avoidance purpose? This will be quite difficult. What is happening is that when assets are moved abroad, including intellectual property, we are taxing unrealised capital gains. Why not tax them at capital gains tax rates? Granted, there is no sale and, therefore, no realised capital gain, which poses cash flow issues, but the asset or wealth gain in monetary terms is the same as for a realised gain. It has just not been crystalised. Why tax it at a lower rate?

With regard to excise, the definition of a sugar-sweetened drink has been expanded. With regard to the added 50 cents on a pack of 20 cigarettes, the price of cigarettes is now typically between €12 and €13. This might not do much to deter committed smokers but it does help deter younger people from starting the habit. There is an argument for ramping it up further but it is regressive in respect of those on lower incomes who are addicted. The Healthy Ireland survey found that about 22% of Irish adults are smokers, 18% smoke on a daily basis and 4% smoke occasionally. This still translates to about 830,000 smokers in Ireland. It is quite a significant figure. The price of cigarettes is only one part of a broader campaign to help people quit smoking. We acknowledge the HSE's QUIT helpline, plain packets and warning labels on cigarettes but is the pricing mechanism actually working or has it reached its limit? Does it have a higher proportionate cost with regard to poorer people?

There is another angle to this that is slightly obtuse but I will put it on the record anyway. Will Brexit bring about the potential for smuggling? If the UK moves to a mechanism whereby it has control over its VAT rate and levies 0% VAT on cigarettes, will we see a return to the duty-free cigarette regime we saw in the past? If the Minister has time, could he address that and whether there is a plan for that scenario? We would like to hear more.

In respect of betting duty, our proposal to lower the costs on SME bookmakers aimed to ensure that betting duty is passed on to the consumer as only the larger firms can absorb the costs. Betting duty is currently 1% and is defined by Revenue as bets entered into by a bookmaker or remote bookmaker with persons in the State. In our alternative budget for 2019, we called for betting duty to increase by 2% to a new rate of 3% at a yield of €104 million according to Revenue's ready reckoner. The Government's budget calls for an increase in betting duty to 2% at a yield of €52 million. Betting duty was much higher in the past. It was up to 20% on turnover. Let us be clear about that; it was on turnover. The purpose of betting taxes is similar to that of excise on alcohol and tobacco, namely, a tax on "vice", a word I put in inverted commas, designed to lower the incentive for people to consume. Compared to other European countries, betting duty in Ireland is relatively low. In economic terms, taxes that are primarily designed to change behaviour rather than raise revenue-----

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