Dan Boyle (Cork South Central, Green Party)
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Question 98: To ask the Minister for Finance if the amendments contained in section 13 of the Finance Act 2002 were drafted in response to requests from Eircom ESOT for retrospective changes to the tax treatment of the income and capital gains from the preference share offering that the Valentia consortium issued to help secure the takeover of the company; and the estimate of the revenue forgone by the State from tax on income or capital gained from these Eircom preference shares due to the amendment. [5052/04]

Charlie McCreevy (Kildare North, Fianna Fail)
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Section 13 of Finance Act 2002 provides that the transfer and appropriation of securities other than ordinary shares to the beneficiaries of an employee share ownership trust, ESOT, or approved profit sharing scheme, APSS, in the circumstances of certain takeovers may take place in a manner which preserves the tax benefits to the participants. The point at which income tax is forgone is when the shares are passed into the ESOT, which in the case of Eircom took place in 1999, and does not arise from any amendments contained in section 13.

In June 2001, the tax advisers to the ESOT contacted officials in the Revenue Commissioners and my Department to discuss the tax implications for the Eircom ESOT of the proposed takeover of Eircom. Having considered the issues involved, I indicated in June 2001 that I was prepared to propose an amendment, which I duly did in the Finance Act 2002. This was made known in my response to a parliamentary question from the then Deputy and now Senator Derek McDowell on 14 November 2001 on this subject.

Had the change not been made, the ESOT would have had to distribute cash to the beneficiaries as the ESOT would not have been permitted to acquire the preference shares, giving rise to a claw-back of some of the income tax forgone in 1999. However, this revenue would only have arisen had the takeover proceeded.

The legislative changes simply provided the membership of the Eircom ESOT with a level playing field to choose to support whichever bid they wished to support. In the event, two takeovers were in a position to take immediate advantage of these legislative changes. The first was the takeover of the landline business of Eircom by the Valentia consortium and the second was the takeover of ACC Bank by Rabobank.

I have made numerous changes to the ESOT legislation to facilitate ESOTs in changing circumstances to ensure that they retain the benefits available to them. This is because, by their nature, ESOTs are tailor-made to each particular circumstance.

Dan Boyle (Cork South Central, Green Party)
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I take issue with the Minister for Finance, who seems to accept that it is in order for the State to involve itself, through changes in the tax code, in sweetening deals in the commercial sector between private entities. To what extent was the public interest served by these changes? It seems the only beneficiaries, apart from the individual shareholders, was the Valentia consortium which subsequently had the benefit of selling on a huge asset having been subsidised through two sales of Eircom. The treatment of shareholders within the ESOT must be contrasted with the 550,000 ordinary Eircom shareholders who were forced to sell their shares at a much-reduced price because of the mechanism the Minister introduced allowing the second sale to the Valentia consortium to proceed.

Charlie McCreevy (Kildare North, Fianna Fail)
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Every Finance Act since 1997 has included some changes to employee share ownership plans, all of which have been done at the request of the ESOTs which comprise the workers involved and their representatives. Even this year's Finance Bill contains a change to ESOP legislation to accommodate the employees of the former Irish National Petroleum Corporation. The change did not have the effect of favouring one consortium over the other as mentioned by the Deputy. Had I not made this change, I would have been accused of favouring the Denis O'Brien consortium. This change was requested by the Eircom ESOT to level the playing field.

I understand the Eircom ESOT was more inclined to vote for the Valentia consortium which favoured preference shares being offered. If it could not have done that, a tax liability would have been triggered for those represented by the ESOT. In no way would the ESOT have recommended that bid. If this change had not been made, it would have favoured the Denis O'Brien consortium and the Deputy can imagine the hullabaloo that would have caused.

This provision was contained in the Finance Bill 2002 as published and was covered in the explanatory memorandum. It was debated on Committee Stage and there was no secret about it. After the decision was made in June 2001, the Department of Finance received a request under the Freedom of Information Act, to which it decided to accede in September 2001. In September 2001, a third party objected to the release of information and there was an appeal to the Information Commissioner, on which the commissioner made a decision to release in September 2003. There was nothing underhand about this matter. The changes under section 13 of the Finance Act 2002 requested by representatives of the workers were to preserve the tax benefits of the existing ESOT. These changes were non-discriminatory and affected other takeovers such as the takeover of the ACC Bank by Rabobank.

Dan Boyle (Cork South Central, Green Party)
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The Minister has still not answered the question as to how the public interest or long-term communications policy was served. Why was this section discussed in private session on Committee Stage of the Finance Bill 2002? If the Minister was confident with this provision, why did the committee feel the need to go into private session? Was this decision the Minister's alone or did he consult the Taoiseach, Tánaiste or the then Minister for Public Enterprise?

Charlie McCreevy (Kildare North, Fianna Fail)
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On Committee Stage, that was done at the request of the former Deputy and now Senator Derek McDowell. It was done to explain the intricacies of the provision and specifically to explain that the matter was the subject of a request under the Freedom of Information Act, which had been appealed. The Deputy can ask Senator McDowell and others who were present to outline what I said about the amendment at the time. I said I could not believe I had become so socialist in my old age that I was giving in to all the requests affecting ESOTs. I took an opposite view to that which people are now trying to imply. There was noting secret or underhand about this.

Séamus Pattison (Carlow-Kilkenny, Labour)
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We must move on now.

Charlie McCreevy (Kildare North, Fianna Fail)
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This change was made to benefit the employees represented by the ESOT, and all the changes that have been made to legislation affecting ESOTs through the years since Deputy Quinn first introduced ESOT legislation in the Finance Act 1997 have all been done at the request of the workers to preserve the tax benefits for them alone. Nobody from Valentia or the other consortium made any contact — good, bad, or indifferent — with the Department of Finance or me. This was all dealt with between the advisers to the ESOT and the Department and the Revenue Commissioners.

Paul McGrath (Westmeath, Fine Gael)
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Question 99: To ask the Minister for Finance the timescale for the decisions on emissions trading and carbon tax; his plans to avoid adverse impacts on competitiveness and a maximum reduction in carbon emissions associated with these schemes; and his views on the approach of ring-fencing revenue from this tax for the purposes such as reducing employment taxes, compensating those on low incomes and promoting low emission technologies and practices. [5055/04]

Charlie McCreevy (Kildare North, Fianna Fail)
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As the Deputy will be aware, following my Budget Statement regarding carbon energy taxation last December, I published a carbon energy tax consultation paper prepared by my Department on 31 July last year. This consultation paper was designed to facilitate discussions on the introduction and design of the carbon energy tax while recognising that there are divergent views on the issue. Submissions in response to the paper were invited from interested parties to be received in my Department by 30 September 2003 but extra time was given where requested by organisations to complete their submissions. Some 117 submissions have been received by my Department in response to the carbon taxation consultation paper.

As one might expect, the views in the submissions are divided in terms of support for or concerns about the implications of such a tax. The submissions raise diverse concerns such as competitiveness, the impact on employment, the less well-off and rural areas, cross-Border aspects, the scope of the tax, the link with emissions trading, the role of negotiated agreements and alternative energy and the need for revenue recycling and how that should be applied. All relevant issues, therefore, including the effect of carbon energy tax on competitiveness, the question of ring-fencing revenues, the impact on those with low incomes and the promotion of more efficient technologies will be taken into account in the consideration of the proposal. As part of the consultation process, these submissions are now also available publicly on my Department's website.

Richard Bruton (Dublin North Central, Fine Gael)
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Is it the case that the Cabinet has already approved the emissions trading aspect of the carbon tax? Is it the case that under the approved system of emissions trading, those responsible for large amounts of carbon emissions will not need to alter their operations significantly over the coming years? Will it be the case, therefore, that small business will be obliged to pay the carbon tax while the larger operators will not?

Does the Minister agree that this carbon tax could raise up to €500 million, according to his own policy paper, and that this will be paid predominantly by poorer families? The typical family on the minimum wage spends 15% of its income on fuel — about €40 per week. If they are using peat and coal, the most polluting fuels, they face a €10 per week increase in fuel costs. What does the Minister propose to do about the implications for different types of business, as envisaged in his proposal, and the implications for families who are struggling to make ends meet?

Charlie McCreevy (Kildare North, Fianna Fail)
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The allocation of quotas for emissions trading is a matter for the Minister for the Environment, Heritage and Local Government, Deputy Cullen. On 5 February this year the Minister made announcements in this regard. It was envisaged in the consultation paper that those covered by emissions trading would not also be subject to the carbon energy tax.

Richard Bruton (Dublin North Central, Fine Gael)
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Precisely.

Charlie McCreevy (Kildare North, Fianna Fail)
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I am not saying that is what will happen, only that it is envisaged in the consultation paper. The matter of emissions trading has been raised recently by my colleague, the Minister for the Environment, Heritage and Local Government. He is doing this now because we are required under EU law to have our submissions on emissions trading with the Commission before 31 March this year. Other countries are doing the same thing; Ireland is the second country whose Government has made an announcement on this matter. As I said, it was envisaged in the consultation paper that those covered by emissions trading would not also be subject to the proposed carbon energy tax.

What will happen with the carbon energy tax depends on the assumptions one makes about the level of tax per tonne. I announced in the budget of December 2002 that we would consider the introduction of a carbon energy tax by the end of 2004. The consultation process in which we have engaged has resulted in a large number of submissions, which we recently published on the Department's website. Roughly 49% of the submissions are in favour of the tax while 51% are against, although some people are in the middle. I am glad the Deputy mentioned some of the reasons for caution in this regard. If he feels strongly about these matters he should speak to some of his colleagues in his own party — although not many — and his colleagues directly behind him. These are some of the considerations that must be borne in mind before the Government can make a decision. Those who take a simplistic view ignore some of the matters to which the Deputy has referred.

Richard Bruton (Dublin North Central, Fine Gael)
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Let us be honest: this is not a race at Cheltenham. We are not trying to forecast what might happen by considering percentages one way or the other.

Charlie McCreevy (Kildare North, Fianna Fail)
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This day next month.

Richard Bruton (Dublin North Central, Fine Gael)
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These decisions will intimately affect people's lives, whether one is poor or is in a business that will be affected. The Minister is saying he will effectively give large companies free trades. They will have coupons which cover 97% of their prospective uses. They will make virtually no adaptation to reduce energy emissions. Is he not proposing a carbon tax that will hit small business and ordinary households, forcing them to make all the reductions in carbon emissions?

I would like to hear the Minister take a view on this. Why does he not publish a White Paper so there can be a serious debate on the options the Government is considering adopting? The Minister is asking what the Labour Party thinks, what the Green Party thinks and what Fine Gael thinks. That is not what he was appointed to do. He is the Minister; he should be leading the way. He should issue proposals and allow people to react to them and tease out the issues before they are finally adopted.

Charlie McCreevy (Kildare North, Fianna Fail)
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The emissions trading regime has been agreed in Europe.

Richard Bruton (Dublin North Central, Fine Gael)
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The percentages are the Minister's.

Charlie McCreevy (Kildare North, Fianna Fail)
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Each country is obliged to provide a format for its own emissions trading regime. That is what my colleague the Minister, Deputy Cullen, announced just over a week ago. It was envisaged that those covered by the emissions trading regime would not be subject to carbon energy tax. The questions the Deputy raised about the carbon energy tax are all dealt with in the published document and referred to in the consultation process. They will be taken account of. If the Deputy wishes to read about this, the information is on the Department's website.

Richard Bruton (Dublin North Central, Fine Gael)
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I have seen it.

Charlie McCreevy (Kildare North, Fianna Fail)
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If he wants to make a submission I will gladly take it into account. No final decisions have been made in the matter of a carbon energy tax. It is a complicated issue. I am glad the Deputy raised some of these matters because we will be taking his concerns into account.

Richard Bruton (Dublin North Central, Fine Gael)
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Is the Minister opposed to the tax?