Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Irish taxation system mirrors the practice in other jurisdictions and since the amendment introduced in the last Finance Bill, it is similar to the arrangement that obtains in Britain. There is nothing unique about the tax arrangements that apply in Ireland for the taxation of people resident in the State. From a taxation point of view, the main factor is whether a person is resident or non-resident in the State for tax purposes. Deputy Burton mentioned the possibility that we could use citizenship instead of residence as a basis for taxation and Deputy Morgan has an amendment on the subject so we might postpone that issue until we are dealing with that amendment.

Whether or not an individual chooses to live here or abroad for whatever reason is a matter for that individual. The State cannot interfere with an individual's choice of where he might want to live. The right to travel outside the State is enshrined in the Constitution and there is free movement within the European Union. There is, however, a major distinction between an individual who is non-resident in Ireland for tax purposes who has a source of income liable to Irish tax and an individual who deliberately to become non-resident in Ireland for tax purposes.

At the Committee of Public Accounts, the Chairman of the Revenue Commissioners stated that in 2007, some 5,803 people declared themselves to be non-resident for tax purposes. That does not mean all those people are not making genuine returns to the Revenue Commissioners. In line with general taxation principles, such individuals have a liability to tax in Ireland only with respect to the Irish-sourced income and income derived from working here. The only reason they submit an Irish tax return is that they are paying tax in Ireland. Some 5,803 individuals pay tax in Ireland on their Irish income. One cannot infer from this that in some sense there are 5,803 individuals who should be paying tax in Ireland in respect of their income in the rest of the world. Non-residents, including Irish citizens who do not have Irish sources of income or income from working here, do not have to make an Irish return.

Non-residents with a liability for Irish tax generally fall into two categories. First, there are those who have lived here for some time and have emigrated but retained some property or investments in Ireland that give rise to a taxable income. Such individuals may or may not be Irish citizens. As well as Irish-born individuals, they include migrant workers who came here temporarily, perhaps on secondments, and who have since left but have retained Irish investments. Second, there are those who never lived here but who have invested in our economy or worked here for short periods. It is unlikely that such individuals are Irish citizens. There is nothing wrong or illegal about either of these circumstances. This is the general circumstance. They are taxed in the same way as they are taxed in any other jurisdiction. The fundamental issue is that somebody must have a primary basis for his or her taxation.

In respect of Deputy Burton's view that there is a particular category of persons who have exiled themselves from the Irish tax system, there seems to be an erroneous view that one can simply identify those who choose to live outside the State because of our tax system as being in that capacity. The former chairman of the Revenue Commissioners dealt with this in the Committee of Public Accounts in November 2004 and said there is no such thing as a Revenue list of Irish citizens who are tax exiles. Only non-residents with Irish-sourced income or income derived from working here have a liability to Irish tax. Non-residents, including Irish citizens and others who may have resided here at some stage, do not have to make an Irish tax return if they do not have such a liability.

The Deputy's amendment seeks a report that will identify the number, status, rights and liabilities of individuals who were previously tax resident in Ireland but who now live abroad purely as a result of the Irish tax system. That is the substance of what the Deputy is asking me to compile. This is a purely drafting point, but it would not be appropriate for me to submit the information. Ideally the Revenue Commissioners, who have possession of this sensitive information, should do that. It would be a function of the Revenue Commissioners, but they maintain that it is impossible to distinguish between those who have deliberately left the country because of the tax system from those who left the country for other reasons. Very many Irish citizens choose to live abroad for reasons other than the tax system, so it is not self-evident that those who emigrate do so simply as a result of the tax system. That is the fundamental point on the report.

Deputy Burton may be suggesting that a number of individuals display themselves in a prominent way in Irish life. I do not think the Deputy made this suggestion, but the suggestion may be that they are not in compliance with our tax code and do not live the requisite number of days outside the jurisdiction but are based in the jurisdiction because of the publicity they attract when they are here. I took that to be the tenor of the Deputy's contribution earlier today, that it is maintained that a number of individuals do not have a liability to tax on their overseas income here in Ireland, that these individuals have a certain prominence in this country, particularly in charitable giving, and that this prominence of itself means they have a tax liability, notwithstanding that they live more than half the year outside the jurisdiction.

I was surprised that Deputy Burton said some individuals have come to her and said they should be exempt from income tax notwithstanding that they live in Ireland, which is a very serious matter. The law is very clear on this. If one lives more than half the year in Ireland one is liable to taxation in Ireland on one's domestic and overseas income. If one lives less than half the year in Ireland one is not liable to pay tax on one's overseas income but may have certain liabilities to charge in Ireland. That is how one comes to the attention of the authorities. There is a logic to that position because one has to be living half the year somewhere.

It would be very difficult to make progress on this issue in a purely Irish context. The real abuse is not the proper relationship that exists between the tax system in Ireland and that in the United Kingdom and other neighbouring jurisdictions, but the facility with which individuals can purchase a tax residency in microstates or smaller jurisdictions further afield. There is an issue there which world leaders have been discussing in the context of closing down tax havens and money laundering centres. Our legislation is as robust as that in any other country and conforms with the legislation in the United Kingdom. This is important because that is the place of most frequent connection and intercourse between us and the outside world. The legal arrangements that apply here are very similar, if not identical, to those that obtain in the UK.

The earlier provision, which was introduced by an Administration of which Deputy Burton was a part, providing for the so called "Cinderella rule" that a person could maintain that he or she left the jurisdiction before midnight and, therefore, was not in Ireland for the day, was repealed in last year's financial legislation. That brings us into substantial harmony with that which applies in our nearest neighbour with which we have the most frequent contact. That is the domestic position on the issue.

It would not be proper for the Minister for Finance to compile this report, because it relates to sensitive tax information which I am not supposed to access. If there is to be this amendment it should be a function of the Revenue Commissioners, and they say they cannot do this because the concept the Deputy has introduced appears to be more for a political purpose than for a strict tax purpose which they administer under their care and management of the revenue.

Joan Burton (Dublin West, Labour)
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Although the Minister uses quite elegant language, the message remains the same, that people, many of whom are close to the ruling Fianna Fáil Party, have enjoyed extraordinary latitude in their tax affairs. In recent years in particular it has been open to many individuals disposing of interests in companies to go offshore for a period of time to avail of very substantial, legitimate - the Minister is at pains to confirm the legitimacy of these arrangements - avoidance of tax. The consequence is that we have two classes of Irish citizens - those who live, bring up their families and pay income tax in the country and those who, while they can avail of all the advantages of living in Ireland for a significant part of the year and identifying with Ireland, do not pay income tax here.

The Minister says he has no idea of the number of people involved. Many of them have been very successful in business and good luck to them. Many are very charitable through various projects. Nonetheless it is a fundamental rule in a republic that people in the republic contribute by way of taxation. Their children and grandchildren are Irish and most of them are very proud to describe themselves as Irish; they just have this point that they wish not to contribute in so far as possible through income tax or other taxes. The Minister will have been advised by his officials, if he does not personally know many such individuals, that they are a slap in the face to their fellow citizens who pay their fair income taxes. When the Minister is seeking more tax from ordinary workers, the situation on non-resident tax exiles remains difficult.

In the context of the collapse of the international financial system there may be moves to close down or reduce the activities of tax havens and such individuals across a range of jurisdictions. That is part of what has brought the international system down, but we are here to discuss the Irish system. I am disappointed the Minister is not more aware of how unfair the current position is in regard to these super wealthy individuals as compared to ordinary PAYE taxpayers.

Richard Bruton (Dublin North Central, Fine Gael)
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Unfortunately, I did not hear whether the Minister said the commission would consider this. I know other jurisdictions have considered, for example, having a minimum tax charge for people on a lower threshold of days or for people who spend a substantial amount of time in Ireland but fewer than the 183 days. They have talked about minimum contributions and people have looked at different ways to tap this. Is that being studied by the commission in order that we can see the full range of options in this territory?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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My understanding is the matter is under examination by the Commission on Taxation. I confirmed that to the House.

I do not facilitate tax avoidance nor have my predecessors who were of my political interest. Deputy Burton's suggestion in regard to this subject that the Fianna Fáil organisation as a whole, which includes individuals, myself and my predecessors, have facilitated tax avoidance is wrong. I reiterate what I said. An international arrangement is in operation here, not a local one, whereby if one lives less than half the year in a country, one does not pay tax on one's overseas income in that country. One always pays tax on the income one receives in Ireland.

That said, I canvas the idea this is connected to one's allegiance to the State and the Republic and that if one affirms allegiance to the Republic, one should be obliged to pay tax in it. I fail to see how one would establish that as a basis of taxation because, presumably, many persons would voluntarily withdraw their allegiance and go back to the assertion that they live half the year in the State if they are living abroad. Deputy Burton then came back with the idea that citizenship, as a concept, should be used. That will be discussed with the next amendment. If I may, I will pass on from that subject until we come to deal with the next amendment.

Brendan Howlin (Wexford, Labour)
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Amendment No. 5 in the name of Deputy Bruton arises out of Committee proceedings.

Richard Bruton (Dublin North Central, Fine Gael)
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I move amendment No. 5:

In page 6, line 6, after "income" to insert the following:

"except where the Minister by regulation sets out a schedule of allowable

deductions".

Essentially, this amendment is to deal with the very unsatisfactory nature of the levy system the Minister has put in place. I do not need to rehearse the arguments about the problems but will give a couple of examples of which I, and I am sure the Minister, is aware. This scheme results in a single person with a gross income of €36,400 being on a 51% marginal tax rate. It takes no account of whether that person has a mortgage, children or medical expenses. The Minister admitted that it is an emergency measure thrown very widely but not sustainable as a long-term feature of our tax code.

The Minister has given a firm commitment to amend his ways, or what did we learn in catechism?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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A firm purpose of amendment.

Richard Bruton (Dublin North Central, Fine Gael)
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A firm purpose of amendment. That is right.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Not at this point in time.

Richard Bruton (Dublin North Central, Fine Gael)
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Exactly. The Minister promised a firm purpose of amendment some day in the future like, I believe, St. Augustine. I am relying on the Minister to-----

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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He was not talking about money but about the other subject.

John O'Donoghue (Kerry South, Ceann Comhairle)
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In any event, Deputy Bruton can take the fifth amendment for now.

Richard Bruton (Dublin North Central, Fine Gael)
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The Minister accepts we will have to evolve this and my amendment allows him to make regulations. I did not have time to amend this provision but the Minister said, rightly, the House would like to see this placed by substantive resolution. If he was disposed to accept this amendment, he would make amendments by way of substantive motion before the House. There is a need to address this.

There are flaws in this for businesses also. They require capital allowances against investments legitimately made in their businesses. Our whole tax code has been built around the idea that one is allowed to invest in one's business to maintain and develop it and that should be recognised in the tax code. However, this levy does not allow that to happen.

I know the Minister has been in discussions but some features of the way this interacts have had unintended consequences - at least I imagine they are unintended. I understand that in the pension investment industry, some of the ways in which this will apply will give rise to significant distortions as between different products and different providers of products.

There seems to be scope to learn and to modify. While we may await the Finance Bill from year to year, there is a need for us to be able to identify those defects and to respond. I am disappointed we are not beginning to see ways from the Minister's Department and advisers.

The Minister has dramatically increased his dependence on this form of taxation between the two budgets. It has been signalled that he will raise another €2.5 billion in taxes in next year's budget.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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No.

Richard Bruton (Dublin North Central, Fine Gael)
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It is in the budget book.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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It is €1.75 billion at most.

Richard Bruton (Dublin North Central, Fine Gael)
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Perhaps I have forgotten. Whatever it is, it is in the book. If we are to see a continuing reliance on this form of taxation, we need to see some modification and role for the House in delivering it.

The book states €2.5 billion in a full year in taxation in 2010.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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That is the knock on from this year.

Richard Bruton (Dublin North Central, Fine Gael)
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No. It states additional annual measures to be delivered in 2010 will have a full year tax impact of €2.5 billion. In regard to spending, the full year impact will be €1.5 billion.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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That is the knock-on effect of the supplementary budget next year.

Richard Bruton (Dublin North Central, Fine Gael)
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No. This refers to additional annual measures to be delivered in 2010. The knock-on effect of this year is much greater than that. It is €3.5 billion in taxation.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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If the Deputy looks at page A.10 and the fourth paragraph, the speech itself-----

Richard Bruton (Dublin North Central, Fine Gael)
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When the Minister comes to explain that in the explanatory tables, it is made very clear that it will be €1.75 billion this year but that the full year implication of it is €2.5 billion.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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That is the following year.

Richard Bruton (Dublin North Central, Fine Gael)
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No. It is the full year impact in 2010 of what the Minister is raising.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am not trying to be difficult but the first year means 2010 in that context. The full year-----

Richard Bruton (Dublin North Central, Fine Gael)
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I do not want to be pedantic about this but if the Minister introduces a tax in February, he will not come back the following year and say that in 2011, he will vote for the carry over. He will say that is read into the level of tax.

The implication of the Minister's tax measures is €2.5 billion in extra tax ad infinitum. That is what he is doing. That is not the central point but I am illustrating that the Minister is going back to the well------

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I was only clarifying it. We are going back to the well.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Minister is going back to the well. There is a real danger that he will go back to this particular well again and there needs to be some modifications if it is to be a long-term feature. On Committee Stage, we debated some of its features, including minimum tax, how it applied to low incomes and unsatisfactory features. The longer term direction of merging this back into the tax code needs to emerge from the Minister. That is why I thought it important to again table this amendment. In terms of the levy on the life insurance industry, I understand there have been discussions with the Minister's Department since the issue was briefly considered on Committee Stage. What was the outcome of those discussions and will the Minister be able to deal with the industry's fears regarding the distortion of competition? It complained that the high compliance cost is also impacting on the industry. I have not been able to evaluate this but those concerns have been brought to our attention. I should like if the Minister could deal with those aspects.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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With regard to the amendment, the Deputy is aware why the income levy was introduced - to help deal with the exceptional economic circumstances we face. It is addressed by sharing that burden, based on the ability to pay. I am not going to re-enter the argument we had on Committee Stage about secondary legislation, as I do not accept this is an appropriate device to deal with a relief of this character. That said, on the merits of the proposal I accept, as I did on Committee Stage, that one cannot indefinitely increase levies and not provide for some form of tax relief.

However, the issue then becomes one which we will have to examine on receipt of the Commission on Taxation report, as to the relative importance in our income tax system of flat rate universal taxation on all income as against graduated income with reliefs incorporated. We have both models but one of the difficulties we have is that there are too many examples of the flat rate levy on all income. That has created inconsistencies within that system which have to be addressed. I believe, however, there will still be a place in our system for the taxation of income, a role for levies or other forms of collection which is applied universally on all income. We have that already with PRSI and the health levy and we have it here with the income levy. There have never been PRSI allowances, although sometimes amounts payable can be in excess of what the levy amounts to. In my view, there is no scope for that.

I will now deal with the other question raised by the Deputy on Committee Stage outlining issues regarding the new life insurance levy. I announced the levy in the supplementary budget of 7 April 2009. It has been set at 1% of the premium income of the insurance companies, payable to the Exchequer quarterly. The measures in the supplementary budget were formulated to raise substantial moneys, an overall €3 billion in a full year, inclusive of the 1% levy. Since the supplementary budget a number of issues have been raised by the life insurance industry. In response to some of those concerns I agreed to change the implementation date from 1 June to 1 August to give a longer lead in period for implementing the new levy. This change was contained in the Finance Bill, published on 7 May.

Kieran O'Donnell (Limerick East, Fine Gael)
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I want to raise two points, following on from what Deputy Bruton has said. In terms of this income levy, it is anti-business in that we are trying to encourage people, particularly the self-employed, to invest in equipment, plant and so forth. This levy is applied on a gross rather than an after-capital allowance basis.

By way of observation, the Minister has introduced a composite rate, effective from the start of the year, in terms of applying the income levy. My understanding is that it was introduced as an anti-avoidance measure in terms of company directors and so forth taking bonuses prior to 1 May, in which case they would have been liable at the lower rate. The consequence of bringing in this composite rate rather than just applying it from 1 May, when the income levy rates were doubled, is that the self-employed will not be taking bonuses, which will be a loss of PAYE and PRSI to the Exchequer. In many cases they will defer the taking of bonuses probably for 18 months after the accounting year ends. Many of them will have December year-ends in terms of dividend payments. The key thing the economy needs at the moment is tax or cash flow. We are on our knees because there are not sufficient taxes coming in to sustain the level of services.

It would have made more economic sense in the current circumstances, from a cash flow viewpoint, to have made it effective from 1 May and to have encouraged people to take bonuses and salary amounts prior to that date. By 14 May, in the event, the PAYE that is so badly needed would have flowed into the Exchequer. I believe it was a short-term measure. At the moment the Exchequer needs cash flow, which it does not have.

Will the Minister say whether this was purely a drafting error? Was it something that happened and is he effectively explaining this composite rate in respect of something he did not mean to happen? Was it an inadvertent error?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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We are on Report Stage, so it does not arise from the amendment, but I shall deal with the question.

John O'Donoghue (Kerry South, Ceann Comhairle)
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It does not, in fact.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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It does not because it has nothing to do with the amendment tabled by Deputy Bruton.

Kieran O'Donnell (Limerick East, Fine Gael)
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It is an interesting point, worthy of comment by the Minister.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The composite rates of income levy as set out in the section are the annual rates which are to apply to all individuals in respect of their income from all sources in the year. These rates ensure that all taxpayers are treated the same way in relation to their overall income for a year as a whole, for the purposes of the income levy. The composite rates have also prevented individuals who are in a position to control, when they draw down their income, from gaining any advantages from front-loading into the first four months of the year income which is normally taken in the later part of the year.

Kieran O'Donnell (Limerick East, Fine Gael)
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I would be encouraging them to do it.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Deputy O'Donnell, like a good accountant, is suggesting that we should have permitted the facility to front-load to exist.

Kieran O'Donnell (Limerick East, Fine Gael)
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No, I think-----

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The effect of this is to eliminate that possibility.

Richard Bruton (Dublin North Central, Fine Gael)
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I did not quite understand-----

Kieran O'Donnell (Limerick East, Fine Gael)
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Has the Minister ever heard the expression, "cash is king"? It is true.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I have.

Richard Bruton (Dublin North Central, Fine Gael)
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I did not understand the Minister's comments as regards the issues raised in respect of the application of the levy to life insurance. The central contention is that the levy will apply to pension investment business written by life insurers, but not other institutions - and that is one of the problems. Furthermore, because the levy is applying on pensions, it is hitting the consumer's investment and so is actually taking a lump out of what he or she is setting aside. It is not a levy on the service being provided by the company. It means that a whack is being taking out of the savings made by an individual rather just a levy on the value added of the insurance company, or the provider. There is some validity in those two points and I wonder whether the Minister and his advisers are sympathetic to this viewpoint even if it is not possible to address this year. It does appear that a reasonably argued case is being made, although I may be missing something. While this is a relatively simple initiative there may be unintended consequences that perhaps need to be considered.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I have considered carefully the various issues raised by the life insurance industry. Having regard to the need for additional tax revenue, the incidence of taxes being imposed across the economy and the need for all sectors to make a contribution towards solving our economic difficulties, I decided that the levy will be implemented as announced. In common with other taxation measures, however, the operation of a levy will be kept under review in advance of budget 2010.

Richard Bruton (Dublin North Central, Fine Gael)
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The Minister, then, sees something in the arguments the industry is making.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am prepared to keep the matter under review in the best interests of the industry and for that reason I gave a longer lead in period, as well.

John O'Donoghue (Kerry South, Ceann Comhairle)
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Amendment No. 6 is in the name of Deputy Morgan and arises out of Committee Stage proceedings.

Arthur Morgan (Louth, Sinn Fein)
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I move amendment No. 6:

In page 6, to delete lines 28 to 35 and substitute the following:

"(vii) excluding relevant emoluments of an individual who is resident in a territory with which arrangements have been made under section 826(1)(a)(i) in relation to affording relief from double taxation, where those emoluments are the subject of a notification issued under section 984(1) except in the case of individuals who hold an Irish passport and who now will pay all levies outlined in this bill.".

The purpose of this amendment is to try to continue the debate in respect of tax exiles. I cannot understand why it was not discussed in conjunction with amendment No. 4 in the name of Deputy Burton. I welcome the fact that this matter is being aired in the Dáil because, as far as I am aware, there is no definition with regard to what constitutes a tax exile. There seems to be a number of different loopholes through which people can apparently escape. One of the most celebrated cases in this regard appeared on the front pages of all the newspapers in the land a number of years ago. I refer here to Denis O'Brien's sale of Eircom and his subsequent construction of a substantial mansion in Portugal. On that occasion, Mr. O'Brien exercised an option to avoid paying very significant tax.

I understand Mr. O'Brien to be one of the examples of a tax exile. I readily accept that there are many others. I also accept that this is a complex area. When other Members and I raised this matter with the Minister on previous occasions, he cited double taxation as a factor. Double taxation must be also dealt with because we want the tax regime to be as fair as possible. The first principle of any report from the Commission on Taxation must be that fairness and reasonableness should apply across the board.

When we consider the area to which the amendment relates, it is apparent that substantial opportunities exist in the context of tightening the loopholes to which I refer in order to prevent a recurrence of the case I have just cited. It is not my place to defend the Minister's party but I must point out that Fianna Fáil was not in government when the individual who had just sold Eircom availed of a particular loophole.

There are other examples to which I could refer but I will not do so now. I am of the view that resolution is required in respect of dealing with people who can declare that they are moving abroad and can thereby avoid, if not evade, substantial tax liabilities. I am not referring to people moving to the Cayman Islands; rather I refer to their moving to other EU member states to avoid their duty to pay tax here. It a blow to hard-pressed working families, pensioners and welfare recipients who are losing their Christmas bonus to see people who avoid paying tax here developing trophy mansions such as that which was built in Portugal.

I hope the Commission on Taxation is examining this issue and will come forward with extensive proposals designed to tighten up the position. This matter is a bone of contention. Examples such as that to which I refer illustrate the need for the introduction of a fairer regime. What is suggested in the amendment could constitute one part of such a regime.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I note Deputy Morgan's comments and I assure him that the Commission on Taxation will deal this matter. We could assist the public by being factual in our assertions with regard to it. In that context, if one earns income in Ireland, one pays tax on it. If, however, one does not reside in Ireland, one does not pay tax on income one earns elsewhere. There is nothing unusual in that legal arrangement. It appears to be a feature of this debate for people to suggest that Ireland is somehow out of line or unusual in the context of the arrangements that are in place here. Those arrangements are almost identical to those which obtain in the United Kingdom.

If Deputy Morgan has evidence that a particular individual is living here more than half the year and is not paying the full tax on his or her income around the world, he can put the Revenue Commissioners in possession of that information in order that they might investigate the matter. Everyone is aware that the Revenue Commissioners have extensive access to information relating to particular taxpayers. It is open to the Deputy to do as he sees fit in respect of this matter.

It is useful to have a public debate on this issue. However, we must have a peg on which we might hang a particular person. We cannot simply say that because he or she was originally a citizen of this country and has now made a great deal of money through his or her business dealings across the globe, he or she must pay tax here on his or her entire income.

There are two countries which employ citizenship as a basis for taxation, namely, the United States and Eritrea. It is fair to ask why we could not use citizenship rather than residence as the basis of our taxation system. One reason is that attempting to link liability to income tax with citizenship is totally out of line with the normal practice in OECD countries - most of which are our neighbours - where tax liability is based on residence and not on citizenship. It is desirable, as a matter of general course, to have a similarity of treatment with one's neighbours in respect of an international matter of this nature.

A specific difficulty would arise in the Irish context if citizenship were to be employed as the basis of taxation because there is a very extensive access to citizenship in this country. As Deputies are aware, citizenship of Ireland is obtained by birth or descent or through marriage or naturalisation. These are the general categories that apply. The extensive access to Irish citizenship for those who do not live here is part of our history of migration to other parts of the world. Very few countries outside Ireland recognise the right to a grandchild to obtain citizenship. In addition, and as I am sure Deputy Morgan is well aware, we have always attributed citizenship throughout the territory of the island of Ireland on an equal basis. Were we to decide to impose taxation on the basis of citizenship - I do not wish to rake over old embers here - we would be obliged to send tax return forms to virtually every resident of Northern Ireland.

In his amendment, Deputy Morgan seeks to narrow the position by including a stipulation with regard to people relying on their Irish passports. A passport, which is issued by the Minister for Foreign Affairs, is only evidence of identification of citizenship. It does not represent a person's citizenship but it is a sign that he or she has committed himself or herself to being protected by the State. Ireland has an extremely large number of passport holders, namely, 4.3 million, which is more than the population of the State.

It is worth noting that under the nationality and citizenship legislation, the individual has a right of renunciation of citizenship. Any Irish citizen is free to apply to the Minister for Justice, Equality and Law Reform to renounce his or her citizenship. It is true that the Oireachtas could suspend that right in order that military conscription could take place. In general, however, there is a facility whereby citizens may apply to the Minister for Justice, Equality and Law Reform to renounce their citizenship and they must act in good faith in respect of this facility.

Even if one negotiates the practical hurdle of sending tax forms to everyone in Northern Ireland and then assesses the tax position of other Irish citizens living abroad, one is still left with the fact that a person can renounce his or her Irish citizenship. The reason the United States is able to base its taxation system on citizenship is that it is such a powerful country. We do not possess an equal level of power. I note that Eritrea has followed the US example but it is the only tax-collecting country to have done so. We base our system on residence because that is what our neighbours do. That is why people move back and forth.

As I informed Deputy Burton in respect of an earlier amendment, there are two areas in respect of which the concerns that exist might be addressed. The first is that the Revenue should police the provision that is already in place. I am satisfied that it does so. The second is whether greater international efforts can be made to outlaw, on a mutual basis, places which sell tax residencies at a discount, for a premium or whatever. There is no other solution because the facts of residence and non-residence are incontrovertible.

Constant reference is made to individuals who are prominent here in respect of this matter. I am not sure of the identities of these people but the implication is that they are very generous with particular charities or may be active in sporting life. There are a number of individuals who are Irish and who are prominent here but who maintain that they live abroad. If there is any evidence in the possession of Deputies that the people to whom I refer do not live abroad, it should be placed in the hands of the Revenue Commissioners.

Arthur Morgan (Louth, Sinn Fein)
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I accept that residency will remain the cornerstone of taxation policy. We referred to those who hold wonderful charity events and swan off around the globe and it reminds me of the old phrase from the tax marches of the 1980s, "Damn your charity, we want justice". That principle should apply here and we should try to achieve something just, reasonable and fair. I do not suggest that the amendment will solve the problem, nor did I expect the Minister to accept it because that has not been his habit with Opposition amendments. I am glad it has been tabled to allow us to tease the issue out. I look forward to the Commission on Taxation finding a considerably fairer regime than currently exists because by God we need one.

Joan Burton (Dublin West, Labour)
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After the Minister's long lecture, I want to point out that the world has been brought to the brink of financial ruin and this country has hundreds of thousands unemployed. The offshore tax havens and those who are legitimately and legally considered to be offshore for tax purposes have brought the current economic collapse and depression to this point, where the lives of so many individuals and families have been irreparably damaged. The reaction of the Minister is to give a long lecture of the kind he probably gave to his students on law and the Constitution. We are speaking in a political forum and, on behalf of the people we represent, we wish to see people paying tax fairly. We would also like to see reform of globalisation and to see the use of tax havens and tax dodging devices by companies and individuals restricted and limited. This would be in the interest of the financial health of everyone in the long run. I find it disappointing that the Minister, in his lofty, college lecturer way, suggests that he has a superior understanding. I hope he might have a superior understanding of the mass unemployment afflicting this country. It is deeply disappointing that the Minister washes his hands of the notion that he might be able to do something positive to bring a sense of fairness and reform to the tax system, given the challenges we face.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am sorry to inform Deputy Burton that the material I read is material from my Department. I never lectured in the law of citizenship. The material before me was prepared by the Department of Finance so there is no need to personalise this issue in respect of my past occupation. My current occupation is a Deputy and Minister for Finance. I am well aware of joblessness in this country but I do not believe in giving people false hopes and expectations about the reality of what tax can and cannot be collected in this country. According to my Department, the international arrangement is that if one does not live in this country, one does not pay income tax on overseas income. If Deputy Burton has evidence of individuals acting in breach of this law she is free to submit it to the Revenue Commissioners and do some public good. I do not accept that I am indifferent to the fate of the unemployed or the need for a fair taxation system.

This debate is important. The Commission on Taxation is examining the issue and if anything can be done to further secure matters, it will be done. We are working with the EU and the OECD in addressing the concerns of unfair international tax competition. The existence of tax havens, where persons can purchase a particular advantage, is one of the difficulties. One cannot devise a local solution to this problem. Deputy Burton can table amendments year after year but no amendment she has produced to date has been workable in terms of international obligations. The only solution to this issue is an international one, where the legitimate tax paying countries have a mutual arrangement to ensure that persons pay income tax. The idea that there is a wand to be waved to find the crock of gold is illusory.

Arthur Morgan (Louth, Sinn Fein)
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I had no expectation that this issue would be resolved in this emergency budget. However, I have a hope, if not an expectation, that it will be dealt with in the budget for 2010 later this year. That the Commission on Taxation is bringing forward recommendations on this area gives me some hope. On foot of that, I withdraw the amendment.

Richard Bruton (Dublin North Central, Fine Gael)
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I move amendment No. 7:

In page 6, line 41, to delete "€15,028" and substitute "€18,304".

This matter arose on Committee Stage. The Minister is proposing taxation with the levy below the minimum wage. While the Minister says that in times of crisis we must spread the burden, this is an arbitrary way of doing it. The Minister adverted to the major anomalies we are creating in the structure of these levies. The PRSI levy has an allowance of €127 a week, the health levy has a cut-off point of €500 a week and the Lenihan levy has new cut-off point of under €300 a week. There is no high principle being applied. We must come to some sort of consistency in the way we treat income at different levels. There must be fairness rather than step changes in the structure of the tax code that are driven by convenience on the day. The Minister will tell us he will wait for the Commission on Taxation and then have new insight. It seems that some of the insights are not rocket science. We are creating a patchwork quilt of impositions and these create real burdens for those caught within them. There must be a more consistent approach across the types of levy with some grading of burden that is fair in its impact.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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To accept Deputy Bruton's amendment would cost €25 million this year and €50 million in a full year. The income levy as currently structured is highly progressive. Those who can afford it pay the most while the most vulnerable are protected in so far as possible. The levy payment amounts to 1.11% of gross income of the individual. The multiplicity of levies has become a patchwork quilt and requires consolidation.

Question, "That the figures proposed to be deleted stand", put and declared carried.

John O'Donoghue (Kerry South, Ceann Comhairle)
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Amendment No. 8 arises from proceedings on Committee Stage. Amendment No. 9 is a technical alternative, therefore, amendments Nos. 8 and 9 may be discussed together by agreement.

Arthur Morgan (Louth, Sinn Fein)
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I move amendment No. 8:

In page 7, to delete lines 28 to 42 and in page 8, to delete lines 1 to 7.

This deals with one of the substantive issues in the supplementary budget, the income levy. This is a grossly unfair levy, applied even at rates below the minimum wage. This demonstrates its lack of fairness. The Minister does not have a comprehension of the difficulties of families living on low incomes and the struggle people endure daily. The threshold was just over €18,000 and as bad as that was, at least it met the threshold of the minimum wage. In coming below that level, a significant burden is placed on low income families.

I am sure the Minister will tell me that nobody in the public sector, for example, earns below the minimum wage but there are people in part-time employment or other less than full-time employment who earn less than the equivalent minimum wage for that reason. Those people on a very low income are being caught in the net, although they may be entitled to other social welfare benefits, such as the family income supplement, for example. They are still faced with this levy and are only one category of people.

This is unfair because of the pressure people are under at the moment. Many people have said to me lately that although they are afraid of losing their jobs, they would nearly be as well off on social welfare because of all the levies that have hit them. People's heads are down and they are genuinely depressed about the significant imposition placed on them through the emergency budgetary measures. Many are struggling to feed and clothe their children. People are arguing that the minimum wage is hampering our competitiveness but those people have no comprehension of the difficulty of daily living for certain families and their daily struggle to survive.

I have no expectation that the Minister will accept this amendment but it is important that we air this issue and represent in this House those people at the coal face of the effects of these levies.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Deputy Morgan's amendment in substance seeks to repeal something which was at the core of the supplementary budget. The Deputy has indicated he is opposed to the rates of change and he would continue the charge at the rates effective from 1 January 2009.

The levy was introduced to help deal with the exceptional economic circumstances where we as a nation saw a very substantial revenue shortfall for the State. It is worth noting the decline in the revenue income of the State from €48 billion in 2007 to €41.5 billion in 2008 to an amount projected before the budget of a little over €31 billion. That is a very dramatic reduction in tax receipts. I accept that there has been a decline in gross domestic product and an increase in joblessness but the decrease in taxation outpaced the relative decline in those other areas. The tax base of the State eroded dramatically and had to be strengthened in the national interest.

Arthur Morgan (Louth, Sinn Fein)
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Of course there has been a significant decrease in revenue because of the economic downturn. Our whole economic infrastructure could have been strengthened substantially if money from the Exchequer had been used properly and the income streams from the property and consumption boom had been reinvested in order to make our economy more competitive and less reliant on the construction sector by helping indigenous industry and our exporters. All those areas could and should have been enhanced in those years but this was not done to a substantial degree.

Our current position is the consequence and it is down to bad governance and a lack of vision. The Government had a significant income stream but staggered along unworried about where it was going because it seemed to think the boom would go on forever. There were voices arguing that the boom would not continue indefinitely and that the Government's actions were dangerous, as the over-reliance on construction and consumption would cause a crash, and whether it was to be a soft landing or otherwise was a matter of guesswork.

I suspect those of us who argued it would happen sooner rather than later were at least ahead of many officials in the Department of Finance who were getting all the predictions wrong. I do not know whether to blame the Minister or the Department for that but it is between them. The consequences being felt by those people out there who are subject to these levies are the same as they are struggling from day to day. Unfortunately, I do not hear any wisdom or words of foresight coming from the Government on these matters to try to put the matter right. Perhaps that is as worrying as anything else. As worried as I am, the people subject to these levies on very low incomes are feeling the sharpest end of the matter.

John O'Donoghue (Kerry South, Ceann Comhairle)
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Does Deputy Bruton wish to speak to amendment No. 9 as the amendments are being taken together?

Richard Bruton (Dublin North Central, Fine Gael)
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I know the Minister is not very well disposed to this amendment but it must be kept under consideration by his Department. Where people are required to make investments for compliance with environmental obligations that the State rightly applies, they should not find themselves paying tax on the money they set aside to meet those compliance obligations. That is what the Minister's provision does.

The Minister may say that his treatment of capital allowances generally is unsatisfactory but necessary for a crisis; people seeking to conform with compliance rules that the Minister continues to apply during a crisis should not find themselves taxed for doing so. The Minister might not be willing to accept the amendment this year but it is worthy of being kept to the fore and if I table it next year, perhaps the Minister would be in a position to accept it.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Deputy has in a sense postponed the amendment until next year so I will be brief in my reply. I will not take this as meaning that the Deputy agrees with the matter this year and I will not misinterpret it as such. The amendment seeks to grant special treatment to those individuals who invest in capital assets in order to satisfy environmental requirements of the sector in which they are trading. That is contrary to the general thrust of the policy underpinning the levy as it would place certain taxpayers in a preferred position over others. There is relief in the tax system for such capital investments allowing the investor to write off in full the relevant cost of the investment over a defined period against income tax.

Question, "That the words proposed to be deleted stand", put and declared carried.

Richard Bruton (Dublin North Central, Fine Gael)
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I move amendment No. 10:

In page 11, line 48, after "2009" to insert the following:

"unless it can be shown that the person had occupied the house as their principal private residence in the past 3 years".

The Minister has indicated that he would look at this issue and I accept that it may create considerable difficulty. In the current crisis we are seeing very ordinary people getting into difficulty with loan payments or they are having to rent out their homes. One case was brought to my attention - I am sure it is one of many - where, effectively, under the code if the Minister proceeds as intended, these individuals could not write the interest off against the rental income earned. The Minister indicated they could rent a room and have a tax relief available, which is some relief.

I can understand fully how the Minister would move to act as he is doing in respect of people with large rent books who have enjoyed the reliefs of section 23 and other roll-over reliefs where people could write indefinite amounts off against rental books, as had been the pattern. Smaller operators possibly may be caught up in this. Perhaps there is scope for the development at some point of a de minimis rule that would provide some relief for those affected. I was only trying to make a stab at it through this amendment and I would understand if the Minister claimed I have thrown the net too wide. Is there some way where the needs of people forced into renting out their homes due to financial difficulties could get some relief on this over time? It might need to be developed as an above-the-line measure instead of a tax relief.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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A similar amendment was tabled on Committee Stage. The effect would be to exclude from the new restriction the amount of interest that can be deducted when computing a person's taxable rental income on interest paid by individuals who had occupied a house as their principal private residence before the house was rented out for residential use.

The Deputy's concern relates to possible circumstances of hardship that might arise in the current economic climate where a person loses his or her job while still having a large mortgage repayment to meet. Individuals who find themselves in such circumstances may well seek to secure sources of income to keep up these repayments, including the possible renting out of a house. While individuals may have an option to help defray the cost of a mortgage repayment short of vacating their homes, such as the rent-a-room relief scheme, such options may not be available in all circumstances. Certain individuals who have lost their jobs may well decide to move back in with their parents or other family members so as to rent out their home.

The immediate financial benefit from such a course of action would be obvious as they move from having to fund the mortgage from their own resources to having it wholly or partly funded from rental income. In that regard, if the individual concerned is unemployed it is highly unlikely that the individual would be in the position of having to pay tax on net rental income on foot of a reduction in interest deductibility announced in the budget.

A single person getting the top rate of jobseeker's benefit, currently over €204 per week, would need to be in receipt of net rental income in excess of €7,676 a year before they would pay tax. This is because their personal and PAYE credits would act to absorb income tax chargeable on their combined social welfare and rental income up to €18,300.

In the case of a married couple with one earner who is unemployed, the position would be that they would need to be in receipt of net rental income of close to €10,000 before income tax would be payable. I believe it is unlikely that the letting of a property in Dublin city will give rise to net rental income of these amounts. For these reasons, I will not be accepting the amendment.

Richard Bruton (Dublin North Central, Fine Gael)
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Does the Minister believed that renting a property in Dublin city would not generate more than €7,000 a year?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I was referring to net rental income as distinct from gross of the expenses which the lessor has in respect of the letting.

Richard Bruton (Dublin North Central, Fine Gael)
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Is that including the 75% level at which interest repayments can be claimed against tax for residential rental properties?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Yes.

Richard Bruton (Dublin North Central, Fine Gael)
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I understood the Minister is going to reduce that from 75% to 50%.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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That has not been decided yet.

Richard Bruton (Dublin North Central, Fine Gael)
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I accept that for this year. However, for next year maybe this well-constructed explanation might not apply if the Minister drops from 75% to 50%.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I cannot hypothesise what will be contained in the next budget. Deputy Burton made a good stab at it earlier.

Richard Bruton (Dublin North Central, Fine Gael)
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The Minister signalled in his budget the direction of his thinking.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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We will see.

John O'Donoghue (Kerry South, Ceann Comhairle)
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Amendment No. 11 is out of order as it involves a potential charge on the people.

Richard Bruton (Dublin North Central, Fine Gael)
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I move amendment No. 12:

In page 17, between lines 40 and 41, to insert the following:

" "(1A) From the 21st of May 2009 any application for this relief shall be accompanied by an analysis conforming to guidelines set by the Revenue Commissioners demonstrating that the social benefits of the project exceed the social costs.".".

On Committee Stage, the Minister indicated in his reply to a similar amendment that he believed the Revenue Commissioners were not the best to develop guidelines to demonstrate the benefits and costs of different tax reliefs. In some cases, he is satisfied that the certification process is robust enough. In some other cases we have discussed, however, the process is not so robust. For example, the case for the extension of the hospital cover for private hospitals being developed on public hospital campuses is highly disputed. While it is politically disputed, the social and economic benefits to the community are also disputed.

Will the Minister examine the provisions contained in this amendment? The Minister's predecessor engaged consultants to compile a report on the costs and benefits of the property and building tax reliefs in the tax code. They found the costs to the taxpayer were twice the benefit they were to society. Effectively, tax relief schemes are being dreamed up without the same rigorous analysis that would be applied to spending programmes. There is no system of reporting back to the House on their impact and value. It becomes a soft way for Ministers for Finance to distribute largesse.

The Minister's predecessor said one lesson drawn from the consultants' report was that every further subsequent tax concession should have a cost-benefit examination and a sunset clause. As seen today with the hospitals scheme, the habit of extending sunset dates is creeping back. We need to draw a line in the sand to ensure there will be a clear approach to all tax relief schemes. I have my views on the non-desirability of private hospitals on public hospitals campuses. It is wrong, inappropriate and should not be supported by taxpayers' money. I do not know about the Shannon tourism scheme but I am sure the projects are estimable and the Minister has given us some assurances. There is also a new relief on intellectual property.

We need to have the discipline of attempting to indicate the costs and benefits, establishing guidelines on vetting each project and having an automatic reporting mechanism to the House. This would also ensure those seeking support from a Minister for a tax relief would know there are ground rules in place and that a scheme's social value and costs to the taxpayer should wash. While the Minister might quibble about this amendment in respect of the Shannon scheme which has a certification procedure, a clear structure for tax reliefs in general needs to be put in place.

Joan Burton (Dublin West, Labour)
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I support Deputy Bruton's amendment. Fianna Fáil is addicted to tax incentives for property development and construction because it feels their introduction was the goose that laid the golden egg, creating the boom years of the Celtic tiger. It should be obvious to the Minister that they destroyed the Celtic tiger. The Minister's predecessor was advised of that on many occasions and largely came around to agree with that viewpoint. Politically, however, he found himself unable or unwilling to do anything about it. Part of the public reaction to Fianna Fáil's misgovernment is due to that party's decision both to enjoy the boom, its political benefits and the votes it brought and to extend and blow up the bubble even higher through the use of a widening circle of tax breaks that ultimately caused the property boom to collapse in on itself.

As Mr. Dunlop, who is a former Fianna Fáil Government press secretary, was taken off to jail yesterday, I was struck by his encouragement of incredible levels of rezoning in County Dublin in particular, which in turn fed into an era of intense property and construction speculation. While that era was fed by the kind of corruption revealed at the planning tribunal and for which Mr. Dunlop was jailed yesterday, it also was fed by the intense development of tax breaks for property speculation and construction. Unfortunately, the subsequent collapse, which is costing hundreds of thousands of people their jobs, livelihoods and businesses, has been brought about by a fatal concoction of corruption within the planning process that was peculiarly associated with elements within Fianna Fáil and significant elements within the Fine Gael Party, albeit not all of them, on the old Dublin County Council, as well as with the incredible binge on tax exemption, tax avoidance and so on, absolutely all of which was legitimate.

The proposals contained in amendments Nos. 12 and 13 are modest, namely, to have a serious cost-benefit analysis on the lines acknowledged by the Minister's predecessor, the Taoiseach, Deputy Cowen, in 2005 and 2006, when he commissioned both an independent report and a report by his Department into the various schemes. In addition, from a political perspective, the now defunct Progressive Democrats negotiated as its price in government the continuance and expansion of the private co-location hospital scheme of development, which again was funded almost entirely through cheap credit and tax breaks from the taxpayer. The cheap credit has dried up and is no longer available and, consequently, in so far as such schemes remain extant, they depend on the generosity of the taxpayer through the tax break.

On economic grounds, the Minister ought to consider this amendment, which is a modest request to have a detailed cost-benefit analysis of such a tax break . Few Members share the vision of our hospital services that is implied by the co-location scheme. The Health Service Executive appears to be about to do away with almost all the smaller public hospitals-----

John O'Donoghue (Kerry South, Ceann Comhairle)
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I cannot allow the Deputy to go off discussing public hospitals now.

Joan Burton (Dublin West, Labour)
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-----and to concentrate-----

John O'Donoghue (Kerry South, Ceann Comhairle)
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The Deputy should concentrate on the amendment.

Joan Burton (Dublin West, Labour)
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----- because of the tax breaks, on the development of private hospitals that will have the most up to date cancer, analysis and radiography equipment, all of which will be funded by taxpayers through tax breaks. Public patients will queue up to access those facilities and the public hospital system will pay the private hospital operators-----

John O'Donoghue (Kerry South, Ceann Comhairle)
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The Deputy cannot go into the private or public hospital systems now.

Joan Burton (Dublin West, Labour)
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Moreover, the capital for all of this-----

John O'Donoghue (Kerry South, Ceann Comhairle)
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Deputy Burton cannot continue to ignore the Chair and she must stick with the amendment please.

Joan Burton (Dublin West, Labour)
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The bulk of the capital for this development now will be funded by tax breaks. These amendments only seek that such tax breaks be costed to ascertain their true value and cost.

In Ireland, tax expenditures through tax breaks are treated as though they were meaningless. Earlier, I noted that not alone is the marginal tax rate 41% but, in effect, it can be considerably higher for different propositions. The result in effect is that every time €1 million is invested in such schemes, the taxpayer hands back €400,000 or more to the schemes' promoters. These amendments merely propose that the Minister conduct a cost-benefit analysis before committing so much taxpayers' money.

As for the Shannon scheme, it would be interesting to know how many proposals are on the table. Although this was driven by private finance, I refer to the cost. At yesterday's meeting of the Joint Committee on Finance and the Public Service, members had a long discussion on how such private finance is no longer available and now more than ever, it makes sense to have a serious cost-benefit analysis of such schemes. While I understand the Commission on Taxation may be examining some of them, they have been incredibly costly to the Irish taxpayer. When a tax break is introduced, there should be a clear benefit, whereby the taxpayer pays over €410,000 per €1 million invested and there is some return to the public good on a defined and measurable basis, and not simply a system of tax breaks for the golden circle around Fianna Fáil. This has brought the country to ruin and it is not too late for the Minister to revisit such schemes.

Our banks are in disarray and as the Minister noted in yesterday's joint committee meeting, the developers of some of the schemes for which tax breaks have been awarded potentially are on the verge of liquidation and bankruptcy. However, the schemes still are being funded and the Minister seems unwilling in this regard. As his predecessor had come around to the view that it was correct to review the schemes, it seems extraordinary the Minister cannot acknowledge this and introduce genuine cost-benefit analysis of them.

In many cases, it would be better to close them down and to reintroduce for a limited period only those schemes that have a measurable effect, particularly in respect of job retention and employment creation. A back-to-basics approach should be adopted, as the current structure is a mess of rubbish that has cost Irish taxpayers dear. Moreover, they probably will continue to pay for up to 15 years more because many such schemes have an expiry lifetime that will continue for that long and one has no idea what value, if any, they will continue to provide.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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That was an extraordinary contribution and I must put certain matters on the record of the House. First, lest readers of the Official Report are misled, one should be clear that in this Finance Bill, the Government is terminating the hospital relief to which the Deputy referred. I do not discern a need for a social cost-benefit analysis on a relief that is being phased out and terminated in this Bill.

Joan Burton (Dublin West, Labour)
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It is a 15-year relief.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Deputy's remarks in this regard are entirely wide of the mark.

She then proceeded to speak of golden circles in the context of property reliefs generally. The most fatal relief of all was the seaside resort scheme and Deputy Burton was a Minister of State in the Government that introduced it. As I always understood it, the scheme was introduced at the behest of the then Minister for Tourism and Trade, Deputy Kenny, to provide tax breaks to those who built seaside holiday homes all around the Irish coastline. The effect of that scheme is still with me in my Department. It is the most long-lasting and probably the most wasteful scheme of all and it was introduced by a Government of which Deputy Burton was a member. Consequently, she should not make allegations about golden circles. She would not appreciate it were I to suggest that the then Government introduced this scheme because it was associated with individuals who were part of a golden circle.

Deputy Burton rightly acknowledged that my predecessor, the Taoiseach, has phased out many of these property allowances. However, she then proceeded to an extraordinary economic analysis that suggested the existence of these tax reliefs were a substantial contributory factor to our current economic difficulties, which they are not.

Joan Burton (Dublin West, Labour)
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They are. Absolutely.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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It troubles me when I hear such economic analysis from the Opposition benches.The Opposition is the alternative Government and the country is in a very serious position. If the Opposition has to take up the reins of power and it entertains such notions, I do not believe the country has much of a future.

The bubble in the property market was caused primarily by two factors, if one examines the factors of production. One was the availability of cheap credit from the time of our accession to the euro zone and the other was the very cheap labour which was available on the construction side in Ireland from 2004 onwards. The Deputy needs to study the economic statistics to see where our balance of payments deficits emerged before she makes conclusions such as that the existence of tax reliefs was responsible. The problem with the tax reliefs is that the relief the Deputy's party introduced when it was in Government was singularly the worst tax relief of all time in the construction industry. I am still having difficulties in the Department trying to phase that out because of the number of unsold houses existing throughout the country which are dependent on the expectation of a tax relief on their sale. Deputy Burton was part of a Government which took that decision. While we are on Report Stage and I will not engage in further political exchange, that is the reality.

The mid-Shannon scheme is the subject of this amendment, which was proposed by Deputy Bruton on Committee Stage. The amendment would require applications for tax relief in respect of projects under the mid-Shannon corridor tourism infrastructure investment scheme to be accompanied by a social cost-benefit analysis. Prior to the introduction of the scheme, my predecessor engaged Goodbody Economic Consultants to carry out an assessment of the costs and benefits of the proposed scheme. Their report in March 2006 stated there would be a net benefit from implementing the scheme. The report's recommendations were subsequently adopted when the scheme was introduced, which included, for example, limiting the scope and area of the scheme, time-limiting the scheme and establishing an independent certification body.

In view of the cost-benefit analysis already carried out on the scheme as a whole and the highly targeted and controlled nature of the certification process, I cannot see any case for introducing a requirement for an additional cost-benefit analysis on a project-by-project basis.

Richard Bruton (Dublin North Central, Fine Gael)
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I am disappointed the Minister tried to defend not having cost-benefit analysis by suggesting he believes the worst case of a tax relief dated back to a Government-----

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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A Government of which the Deputy was a member.

Richard Bruton (Dublin North Central, Fine Gael)
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Yes, I was a member of it. The evidence, if the Minister bothered to look at the work done by the eminent consultants, was that all of these tax reliefs, such as urban renewal reliefs, were found to be delivering poor value.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Urban reliefs went further back.

Richard Bruton (Dublin North Central, Fine Gael)
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What is even more disturbing is that the Minister, in having thrown out the political hare, then decides he will not accept the amendment so we will not have costs and benefits applied.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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We have had one already.

Richard Bruton (Dublin North Central, Fine Gael)
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He wants to see a situation where Ministers will in future have the incentive to bring in hare-brained ideas.

If the Minister wants to berate people for making mistakes in the past then, first, he cannot be as selective as he likes to be and, second, as the responsible Minister, he has to do something about it and correct this defect. It is a little rich for the Minister to make complaints about people who were around in the past and then happily sit on his hands to make sure nothing is ever done about it. I know the Minister is a great lawyer and he will deploy his immense brain to defend every position but, at the end of the day, we need some consistency. If he wants to end bad practices, he is being very selective in his belief that it was just about cheap credit. In any case, I hope he can see bad practices not just on this side of the House, but also the many mistakes made on his own side in respect of pumping up the property bubble.

I remember Ministers saying the property sector was based on sound economic fundamentals. When people argued with that, a prominent member of the Minister's party said that those who were complaining should commit suicide, they were so negative in their perception of how wonderful was our economic dream. People have woken up to the nightmare of-----

John O'Donoghue (Kerry South, Ceann Comhairle)
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The Deputy's time has concluded.

Richard Bruton (Dublin North Central, Fine Gael)
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I was just getting into my stride. I have been saved by the Ceann Comhairle again.

Richard Bruton (Dublin North Central, Fine Gael)
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I move amendment No. 13:

In page 17, between lines 48 and 49, to insert the following:

""(1A) From the 21st of May 2009 any application for this relief shall be accompanied by an analysis conforming to guidelines set by the Revenue Commissioners demonstrating that the social benefits of the project exceed the social costs.".".

It is the same point as in the last amendment but in respect of a different tax relief. A misunderstanding in the Minister's response is that my request is that a hospital seeking tax relief would have to pass guidelines of cost and benefit in respect of that individual application. The Minister was seeking to suggest we do not need this because he is now getting rid of this tax relief, although we will not be rid of it until 2013. The point I am making is that whether it is a hospital application in Beaumont or for any of the other hospitals, before our money is invested to the tune of whatever percentage of that project goes to fund it, we deserve to see a social benefit commensurate with the cost. This can be done in a non-political way but the Minister is taking the wrong direction, although there are many alternatives other than this for action within our health system. This is all that is requested. The Minister has not wriggled out of this by simply stating the purpose of the Bill is to withdraw this relief over time.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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In a sense, when Deputy Burton introduced the hospital question, I was discussing the previous amendment on the Shannon-----

Joan Burton (Dublin West, Labour)
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I thought both amendments were being taken together.

John O'Donoghue (Kerry South, Ceann Comhairle)
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I had told the Deputy but she was not listening.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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We were all at cross purposes. In any event, while the mid-Shannon issue is simply a matter of a time extension, the Deputy has proposed that applications for tax relief in respect of registered nursing homes, convalescent homes, mental health centres and private hospitals be accompanied by the analysis as well. The key recommendation of Indecon on all of this was that the costs and benefits of any new proposed tax incentives should be assessed prior to their introduction. My predecessor announced in budget 2006 that we would be implementing this recommendation as far as appropriate. The schemes of capital allowances for registered nursing homes, convalescent homes and private hospitals were introduced before the consultants carried out the 2005 review and made a recommendation. On the basis that they recommended that these schemes should be continued, it was concluded that the benefits outweighed the costs involved. I am now terminating these schemes and I do not see any point in requiring a cost-benefit analysis to be carried out at this late stage. Where it is considered appropriate, this kind of analysis should and will be carried out before the introduction of a new scheme and not when a scheme is already in operation and being would down.

Richard Bruton (Dublin North Central, Fine Gael)
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The Minister is suggesting that if planning applications are made to build the hospitals before a certain date, they will get this relief, so he is not closing this scheme off to projects that are in the pipeline. Taxpayers' money will be expended on these projects, which many regard as wrong-headed. The Minister as the gatekeeper for that taxpayers' money should insist that we have the right to see the evaluation and that the sponsors of such projects should be obliged to demonstrate the benefits to the Minister's satisfaction, according to rules on which the Revenue Commissioners will advise him and will set up.

We are in Opposition and must like it or lump it. While we do not like it, the Minister has an obligation to release this taxpayers' money into the ether to be availed of through these schemes. We have a right to see that the Minister has applied reasonable care in making sure society gets decent value for money. The Minister seems to be suggesting he will not apply reasonable care. As all of the schemes will be finished he intends that reasonable care will not be applied to any project that is underway. I do not accept the Minister's response.

Joan Burton (Dublin West, Labour)
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I am disappointed with the Minister's response. It is obvious that he is not prepared to allow the vast amounts of money the Department of Finance is committing to these projects, on behalf of taxpayers, to be examined. The valuation of these projects should be examined at this time for two reasons. The financial structure of the projects will remain changed for the foreseeable future. The cost of financing them has increased significantly. I will set out why I am worried about the lack of cost-benefit analysis. In every town and county in Ireland, there are people whose existing operations involve this kind of activity, which is based on tax breaks. Such people might have the potential to expand their operations involving this kind of activity further, or might have new ventures involving such activity in the pipeline. The failure of the HSE, which costs us approximately €15 billion or €16 billion per annum, to undertake an integrated cost-benefit analysis of these projects, which are heavily tax-funded, is unbelievable. I remind the House that the HSE's activities are being funded from the public's decreasing financial resources.

As I said earlier, the HSE's strategy involves reducing to 14 the number of acute facilities in this country. I accept that the HSE has not explicitly stated it is pursuing a strategy of having a smaller number of larger acute facilities. It is clear that such facilities will be the main engine of treatment for people in many counties who need to be cared for in a nursing environment. I refer to people who are recovering from operations, for example, or people who have long-term medical conditions that do not require much hospital-based treatment.

Throughout the country, people in local communities are worrying about the impact of HSE policy on their small and large local hospitals. This private initiative is a key counterpart of what the HSE is proposing. It seems incredible that the Minister is not prepared to conduct a thorough review of the implications of the initiative on Government policy. I appreciate that the Minister inherited the policy from his predecessor. This short-sighted and wrong policy was one of the Progressive Democrats' contributions to the development of overall Government policy. It is having a disastrous impact on the provision of health services in communities throughout the country.

We do not have enough time to debate the role of tax incentives in economic policy. I have always said there is a limited role for tax incentives. They should be clearly identified and strictly time-based. We have ended up with the worst of all possible worlds. I think the Minister is wrong, even at this late hour, not to provide for a thorough economic cost-benefit analysis of the tax breaks provided for health projects and the various exemptions provided for different kinds of health provision. One of the Minister's predecessors, Charlie McCreevy, said one year that he had got the idea for one of these initiatives from a doctor he had met briefly. The previous year, he had taken the advice of a physiotherapist who had suggested he should throw an old tax break at the physiotherapy sector. I am sure the Minister's officials remember the measures in question. It was a crazy way of making decisions.

While we are talking in a narrow sense about tax policy, it should be borne in mind that this provision will have a huge bearing on health policy. We spend more money on the health sector than on any other sector. The Minister has spoken about the impact of health and social spending in the broader context of the recent emergency budget. It is important to provide for a system of cost-benefit analysis if we are to ensure that our health system is fit for purpose, that we can afford the system and that the system provides for all the people in every community in the country. It is crazy that there is no imaging equipment in our local hospital in Blanchardstown. It was provided in a new private hospital, which is the subject of tax breaks, two and a half miles down the road. One gets caught in a traffic jam when one tries to get from one hospital to the other. Our local hospital in Blanchardstown must pay to ship patients to the private hospital down the road when routine modern imaging tests and other tests need to be performed. It spends up to €2 million a year on transporting people by taxi and ambulance to the private hospital. Nurses and ambulance personnel have to spend their time going from one hospital to the other. The private hospital charges the public hospital in Blanchardstown for the service. This is also happening in other parts of the country. While people are delighted to have access to any service at all, it is economically crazy to organise services in this manner. I do not understand why the Minister is not prepared to conduct a proper cost-benefit analysis of the system.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Government decided a number of years ago to proceed along the lines of the current basic cost-benefit analysis approach. I reiterate that the purpose of this section of the Bill is to terminate the relief. When tax reliefs are introduced, one of the great difficulties is that expectations are built up around them as investors make investment decisions, lands are purchased and buildings are constructed. Earlier, I cited the simple example of the seaside resort scheme. I do not wish to introduce a partisan note to the debate. In this context, all one can do is phase out a relief. There is little point in conducting a cost-benefit analysis of a relief that is being phased out. On the wider question of health policy, it is not the stated intention of the HSE to reduce the number of acute centres on a national basis. As I understand it, the HSE plans to reconfigure services so that patients are treated in the safest and best place.

Joan Burton (Dublin West, Labour)
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We know what "reconfiguring" means.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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There is no question of the closure of any acute centre that is currently in operation. On safety grounds and in the best interests of the patient, the HSE is concerned with ensuring that acute services are delivered in the most appropriate locations. That is the policy of the HSE in this regard. I should also mention that strict statutory conditions govern the hospital relief. Those conditions address the concerns that a cost-benefit analysis would raise. For example, hospitals that meet the statutory criteria receive annual certification over a 15-year period. The strict criteria for health sector facilities relate to the minimum number of beds, the proportion of beds that are used by the public and the provision of specific services. A policy has been worked out in the existing legislation.

Richard Bruton (Dublin North Central, Fine Gael)
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I move amendment No. 14:

In page 20, between lines 12 and 13, to insert the following:

"(a) by the insertion of a new subsection (1A) as follows:

"(1A) From the 1st of July 2009 when banks issue a statement of interest, they will show the amount deducted in Deposit Interest Retention Tax.".".

I tabled this amendment after being contacted by an individual who believes that bank statements of interest should contain a statement of the deduction of deposit interest retention tax. It is important that people who might be entitled to claim a refund should be aware of how much DIRT has been deducted. This proposal is also important in the interests of transparency. When one requests a certificate from the bank, the DIRT that has been deducted is, of course, shown on it. It seems reasonable to me that the deduction of DIRT should be shown on statements of interest as a standard provision. If one goes into a shop to buy a bar of chocolate, one will be able to tell how much VAT has been levied on it. This is not an unreasonable request.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The effect of the proposed amendment would be to compel banks, credit unions and other financial institutions to issue an annual statement showing the amount of deposit interest retention tax that has been deducted from the deposit interest paid to an account holder.

The current position is set out in section 262 of the Taxes Consolidation Act 1997, which requires financial institutions to issue a statement containing certain information on DIRT when asked to do so by an account holder. Institutions are required to set out the amount of interest paid, the amount of DIRT deducted from that payment, the net amount of interest paid and the date of that payment. The question of whether such a statement should be mandatory was considered by the Financial Regulator in 2006. The result of that office's examination led to the inclusion of a further provision in Chapter 3 of the consumer protection code.

The statement shall provide information on the tax deducted or inform consumers how they may obtain a certificate detailing the tax paid. The amendment, if implemented, would be likely to involve the issue of several million interest statements which would be a significant administrative imposition on the institutions, especially in cases where the account holder may not need or want the information. The existing requirement whereby such statements are issued on request strikes a more reasonable balance and ensures that a statement is issued only to those account holders who wish to have the information.

In many bank accounts the information can be gleaned from the statement furnished in respect of the two statutory deduction periods.

Richard Bruton (Dublin North Central, Fine Gael)
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What is the basis on which the Minister says this will create many million statements? Are there many million accounts for which no statement is issued from one end of the year to the other? I thought that the standard practice was to issue a statement at frequent intervals, at least annually, generally quarterly and more often monthly. We are not inventing some great administrative burden for banks. To provide one statement per account per year would not be very burdensome for banks. I receive a monthly statement for any account that I have. It may be different for the Minister. Maybe I am imposing some great burden that I never knew I was doing. I would have thought one statement a year per account would hardly be a huge burden on a financial institution.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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My difficulty with the amendment concerns the issuing of one separate statement a year.

Richard Bruton (Dublin North Central, Fine Gael)
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The information could be included in the existing statement. As long as it is shown, I do not seek a separate statement.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As I understand the position it is included in existing statements but the practice is to levy the DIRT on a bi-annual basis.

I apologise, I am generalising from my own account. It depends on when the interest is paid and that depends on the practice of the institution. Some institutions accumulate interest on a six-monthly basis, some annually. It varies between the institutions. The deduction is reflected on the statement of account when the deduction is made.

Joan Burton (Dublin West, Labour)
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The Minister should not make it more complicated.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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DIRT is an unpleasant tax.

Richard Bruton (Dublin North Central, Fine Gael)
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It is not shown on the statement.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The charge is annual but the actual collection is reflected in a statement at the time when the particular institution happens to give the interest on the account, whereas under Deputy Bruton's amendment there would have to be an annual statement of the actual amount of DIRT.

Joan Burton (Dublin West, Labour)
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On a point of clarification, Deputy Bruton is suggesting that when a bank credits interest that might be shown gross, as well as the net amount of the tax deducted and the net amount of interest because at the moment most people get interest credited net.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Deputy is right. Most accounts show interest net. I thank the Deputy for assisting me. That is true. One would have to make a further calculation of one's tax in that respect.

Joan Burton (Dublin West, Labour)
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One can gross it up oneself.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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There is no obligation on the institutions to provide such a general statement. It would be an additional statement for them. At present, one has to request a certificate to certify the actual amount paid for which the certificate is furnished.

Richard Bruton (Dublin North Central, Fine Gael)
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When a statement issues that shows the interest it would also show the DIRT deducted. That is the essence of the amendment. The Minister's reply, as I understand it, is that it could not be done because it would require millions of statements to be issued. My belief is that everyone gets at least one statement per year which shows the interest that has accrued to the account but, as Deputy Burton said, it shows that interest net. All the amendment proposes is that the statement, whenever it is issued, at whatever period, would show the gross, tax deduction and net amount.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I see the point but because of the paltry sums of interest I was accruing, I was able to calculate the sums due from the bank statements. One can, of course, obtain a certificate from the institution and I thank Deputy Burton for assisting me in correcting my error.

Joan Burton (Dublin West, Labour)
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It is only of interest to rich people to get a certificate.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Any person who is self-employed must submit one and technically PAYE workers do too. To address Deputy Bruton's issue, I will have someone examine whether it would be possible to oblige the institutions to list the DIRT as well as the interest deduction which is the net ratio.

Richard Bruton (Dublin North Central, Fine Gael)
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I move amendment No. 15:

In page 39, between lines 18 and 19, to insert the following:

"and where any application for this relief has been accompanied by an analysis conforming to guidelines set by the Revenue Commissioners that the investment of the specified intangible assets will add significantly to the value added in the investing company.".

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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This amendment would introduce a provision requiring all claims for relief under the intangible assets scheme to be accompanied by an analysis demonstrating that the investment in specified intangible assets made a significant value added contribution to the investing company. Section 13 provides an important new incentive aimed at supporting the development of the knowledge economy. On Committee Stage I outlined the nature of the relief and the reason for it. To qualify for relief under the scheme, a company must be carrying on a trade and as part of that trade actively managing, developing or exploiting specified intangible assets. The passive holding and licensing of assets will not qualify for relief.

The Revenue Commissioners have issued guidelines on what activities constitute trading for the purposes of the 5.5% corporation tax rate. The criteria outlined in these guidelines will be followed by the Revenue in determining what activities are eligible for relief under the new scheme for intangible assets. If the need arises, these guidelines will be refined or enhanced as appropriate for the purpose of the scheme. Revenue will keep the operation of the new scheme under review to ensure that only those activities which constitute genuine trading activity on the part of the company incurring the capital expenditure will benefit under the scheme.

As is normal practice, the scheme will operate on a self-assessment basis and companies claiming a relief will be requested as appropriate to demonstrate to the Revenue that they are carrying on a trading activity that meets all the requirements of the scheme. Companies claiming relief under the scheme will be required to submit such claims in their annual tax returns. This will enable the Revenue to assess particular claims made by companies to track the overall amount of relief claimed and to evaluate the impact of the scheme. As I indicated on Committee Stage, I am also asking the Revenue Commissioners to provide information on the scheme in their annual report.

Also on Committee Stage Deputy Burton asked about an amendment to the legislation to provide for employment retention or specific job creation as a requirement under the scheme. I can understand the Deputy's concern but there are problems with this approach. A requirement of this nature would have EU state aid implications. The scheme is structured as a general measure not constituting state aid as it would be open to any company to avail of it. By introducing discretionary employment tariffs under the scheme, it would no longer be regarded as a general measure. This would introduce uncertainty as to the status of the scheme from a state aid perspective.

I am confident that the scheme will attract substantial trading activity in high quality employment in this economy. There are sufficient safeguards in the scheme in terms of the requirements for trading and the ringfencing from other activities to ensure that it will operate in an effective manner. I do not consider that it will be appropriate to have a prior certification process for individual applications under the scheme and because I am satisfied that adequate arrangements will be put in place to monitor and evaluate claims for relief, I do not believe the amendment is required.

Richard Bruton (Dublin North Central, Fine Gael)
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The Minister rightly shows how the fact of the claim will be set out but not its benefit. The reason the taxpayer is asked to subsidise this is that it confers some benefit in terms of value added to the investing company, which is presumably additional to national wealth and therefore justifies our concession. The Minister's review of these tax schemes in the past would have revealed to him that there is often scepticism about the substantive nature of some of the claims for tax relief such as patent income and so on. Questions have been raised about that. Without going as far as Deputy Burton's suggestion, which would jeopardise the state aid status, there should still be a requirement on the company to state its believed benefit in terms of value added to the company.

The Revenue Commissioners, when reporting to us, would then at least report the substantive benefits being derived by companies from the relief. We would have a benchmark by which to judge whether the scheme is of enduring value. While there is scepticism regarding the relief for patent income and while the matter under discussion is in similar territory, we should endeavour to at least require companies to state a benefit, which could be assessed afterwards.

Joan Burton (Dublin West, Labour)
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The Minister's reply does not quite reflect the fact that the assessment of these types of schemes is changing. It has changed very dramatically since the recent speech by President Obama in the United States. I said on Committee Stage that it is potentially very valuable to Ireland if the intellectual property elements of investments, particularly by multinationals with other economic activities in Ireland, are located here. I recognise this but believe, in the context of the comments made in the United States following President Obama's statement that the US Administration will be scrutinising increasingly the real nature of US investments attracting favourable tax treatment in jurisdictions such as our own, that one key focus of US policy makers will be the real content of the overseas activity of American companies. I refer to US companies employing people in overseas locations and carrying out real economic activities such as traditional manufacturing or intellectual property development, including the design of software. Therefore, it makes sense that the Minister should consider the proposal that an economic cost-benefit analysis of schemes be undertaken. In particular, the employment benefits of schemes should be noted and documented.

I accept the Minister has been advised there have been problems regarding EU state aid definitions - he has a battery of advice available to him - but he should note that we are moving into a different stage of the debate. The world economy is suffering from an incredible crash and recession, part of which has been caused by offshore activity in tax havens. Ireland is not a tax haven in this sense from an American point of view and we distinguish ourselves very sharply from jurisdictions that have been identified by the US authorities as being of concern, including various islands in the Caribbean.

There is much sense in the Opposition's proposal to carry out cost-benefit analyses and document activities to ascertain whether they are real and not simply tax avoidance mechanisms. Being in the Republic of Ireland gives companies engaged in manufacturing or intellectual property development access to a Europe-wide market. Therefore, a presence here is very valuable to US-owned companies and the United States itself. That is what countries such as Ireland are offering the United States in return for investment and jobs, about which they are delighted. There is considerable merit in the Opposition's proposal to have cost-benefit analyses. Given the state of the global economy, particularly the Irish economy, and our unemployment level, the Minister should determine the employment retained or created as a consequence of tax benefits that apply to any measures introduced by him in future budgets.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I agree with much of what has been said but the best course of action is to refer the comments made by Deputies Burton and Bruton to the Revenue Commissioners so they can be used in the formulation of their administrative documentation on the scheme. There is no conflict of interest between the Revenue Commissioners and the US authorities in their philosophy on the scheme in question. The Revenue Commissioners wish to base the scheme on trading activity for the very obvious reason that intellectual property relief could otherwise be abused to the disadvantage of the Revenue if it did not have a genuine economic base. That is the same concern expressed by the US authorities. For this reason, it is not necessary to introduce an additional legislative requirement but I accept the point made by the Deputies opposite that, in this context, we must be very careful building our case to ensure our administrative documentation builds up a credible picture in terms of the implementation of the relief in question.

The point is well made that we are in a world that is very much changing in respect of all these matters. It is of great importance that Ireland make it clear it is not a tax shelter and that the nature of the reliefs and their implementation corresponds with the basic principle of our system, namely, that there must be genuine economic activity taking place here if a relief is to be availed of.

The Revenue Commissioners will be collating information on the amount of relief claimed, the number of companies claiming relief, the cost of the relief and the tax yield from companies claiming under the scheme. I will ask the Revenue Commissioners to take account of what is said here today to the effect that, in the implementation of the scheme, additional data should be assembled to show the genuine character of the activities benefiting from the reliefs offered.

Richard Bruton (Dublin North Central, Fine Gael)
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I welcome the Minister's statement that he will bring our concerns to the attention of the Revenue Commissioners. The House ought to see that in some shape or form. I will be content to withdraw my amendment if we can receive assurance from the Minister that not only will data be collected, but that the report will show us some element of benefit. I chose the phrase "value added" in that it is very flexible and could apply to profit, employment or other factors. It is not necessarily tied to a job count.

We need to have this information in the report and the Revenue Commissioners should not simply state there are 40 companies availing of a relief amounting to €50 million, for example. This conveys very little other than the activity, not the benefit. I ask that the Minister make some arrangement that the additional data he is collecting will be reported to the House so Members can have a meaningful understanding of what is happening. If he agrees to doing so, I will withdraw my amendment.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I will arrange for that.

Richard Bruton (Dublin North Central, Fine Gael)
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I move amendment No. 16:

In page 60, between lines 12 and 13, to insert the following:

"25.—Part 30 of the Principal Act is amended by inserting a new section:

785.—A person who reaches retirement under a Defined Contribution Pension Scheme shall from 1st March 2010 not be required to purchase an annuity unless they do not have an income equivalent to the Non-Contributory Old Age Pension prevailing at the time of retirement.".".

I did not get a chance to address this matter on the last occasion as I was not present. It continues to cause concern in that defined contributions are treated differently depending on whether they are made by PAYE employees or self-employed people. Self-employed people have considerable options in regard to how they handle the pension fund available to them when they reach retirement. However, PAYE workers, who cannot use the various funds available to the self-employed, find themselves forced to purchase annuities. Recently the Minister, in recognition of the difficulties arising in respect of some pension funds, sought to use the State's ability to give better value for money in terms of annuities.

There is a legal anomaly associated with the requirement to buy annuities. I am not sure of its purpose other than to ensure people will not blow the whole fund. I am not sure of its exact purpose, but it does seem to be an undue restraint on pension provision for ordinary workers compared to people who are self-employed. The provision is similar to the one I understand applies to the self-employed: they are free to operate these funds once they can show they at least have a non-contributory old-age pension to support them through the rest of their lives. If one shows one has a baseline level of support, one will not be required to buy these annuities, which are particularly bad value at the moment. I put this forward before and was told it was never an appropriate time to do this because we were about to see a great opus on pension reform. However, the years have gone by and the great opus has not landed on my desk. Thus, as an interim measure, there is nothing to be lost by implementing this change.

Joan Burton (Dublin West, Labour)
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It is regrettable that, although the Government has talked a lot about pension reform, it remains the case that pension products in Ireland cost considerably more than those in comparable jurisdictions. We have some of the highest service costs associated with pension products and many people have lost money recently because much of their pensions are invested in equities. At the moment they find the thought of buying an annuity very difficult. In Ireland, saving for a pension has become completely confused with trying to play the market. There is a need for a national pensions scheme which is about saving for pensions, probably with some relationship to the purchase of gilts, Government bonds and so on. Although market investment managers will say the market always beats any other index over the long term, in recent times that has proven not to be the case. This is a particular problem for people in their early 50s who have less than ten years to go to retirement. It is also a problem for many in the public service, who were heavily advised to purchase AVCs, although they obviously did not have to buy annuities with them.

We need comprehensive pensions. If people wish to play the stock market they can do so, but if they are saving for their retirement and wish to have an income to support them in their retirement, we must distinguish between these two activities. We should make provision for both, by all means, but really concentrate on the core need for people to save for pensions which will give them reasonable support in their retirement. That should be the key element of Government policy.

On a related point, private providers of services should not be allowed to charge excessively. In other jurisdictions the cost of such services is not so high. I do not want to reopen an earlier debate, but the Government has concentrated on providing tax reliefs as an incentive and, because the tax reliefs have been so generous, the costs charged by providers have been at the higher end of the scale according to any of the comparative surveys we have seen. Thus, the taxpayer pays for the tax breaks-----

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Speaking in the context of the pensions industry itself.

Joan Burton (Dublin West, Labour)
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Yes. The taxpayer pays for the tax breaks, but much of that is recovered by the various investment intermediaries because our costs are higher. From the point of view of cost-benefit analysis, selling pensions is a valuable service, but we need to keep the costs down. I will not go into the subject of the Financial Regulator, but our regulatory system has not been up to scratch in this regard.

Arthur Morgan (Louth, Sinn Fein)
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I concur with the previous speaker. Pensions are in turmoil and we all appreciate the difficulty this is causing for people, particularly those approaching retirement age.

Brendan Howlin (Wexford, Labour)
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I ask the Deputy to speak up.

Arthur Morgan (Louth, Sinn Fein)
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Tá brón orm. I do not know if what I have said already was captured. I ask the Minister when he expects an overhaul of the pension programme. When will it be put in place and when will people see it? Those who relied on the stock market for pension investment have been badly caught and there is no appetite to go back there. What is the Minister thinking about in terms of a pension regime and when will it be in place?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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With regard to Deputy Bruton's amendment, the deferral arrangements for annuity purchase, which I introduced late last year, are by definition temporary and can be revisited as necessary. The amendment was proposed on Committee Stage and I explained that the rules relating to the requirement for members of a defined contribution scheme to purchase annuities with their pension funds on retirement had already been relaxed by the Revenue Commissioners on a temporary basis. Under the arrangement, members of defined contribution schemes who retire between 4 December 2008 and the end of 2010 have an option on drawing their pension entitlements: they can opt to take their tax-free lump sum and purchase a retirement annuity immediately on retirement, or they can take the lump sum and defer the annuity purchase subject to agreement with the scheme trustee. If the conditions that gave rise to the deferral arrangement persist over an extended period, the issue of a further deferral may have to be revisited.

During the Committee Stage debate on this issue it was indicated that the purpose of the amendment was to secure for PAYE taxpayers, as Deputy Bruton said, the same option that is currently available to the self-employed and others, namely, to place the main benefits from their occupational schemes into approved retirement funds. There are arguments for and against such an extension; the argument is not one way. Changing the scope of the existing arrangements is one of the range of issues to be addressed by the Government in the context of the longer-term pensions policy framework currently being developed. The matter is before the Government, which is examining this issue. There are arguments for and against the options, which are set out in the Green Paper. Extending the ARF option to PAYE workers would create a level playing field and a simplification of all pension provision. However, unlike annuities purchased on retirement, the investment risk attaching to ARFs will continue indefinitely and, as longevity can only be estimated, the funds of many retired individuals could be depleted prior to death, resulting in demands for income support.

There are difficult issues to be addressed and the Government is considering them. As Deputy Burton pointed out, we are all learning that it is safer to invest in gilts than equities, which was the traditional rule that always applied to trustees. The Government needs to devise a framework that will at least provide the opportunity for individuals to invest in a safe supplement to the existing State pension, which has become increasingly universal. The State has provided for a generous State pension by international standards and for many incidental benefits which are not available in other jurisdictions. That is as it should be. The question is how we can supplement this in a tax-efficient manner.

I am interested in Deputy Burton's comments about the increased cost of administering pensions occasioned by tax reliefs. On the question of the Financial Regulator, the process for recruitment of a new regulator, in which we have engaged Sir Andrew Large, a former deputy governor of the Bank of England, is now under way.

Richard Bruton (Dublin North Central, Fine Gael)
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I am content to withdraw this amendment and look forward to the publication of a document which the Minister seems to indicate is quite imminent.

Richard Bruton (Dublin North Central, Fine Gael)
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I move amendment No. 17:

In page 60, between lines 12 and 13, to insert the following:

25.---Section 10C of the Principal Act is amended by the deletion of "2010" in B, and the substitution of "2012".".

This amendment arises from proceedings on Committee Stage. I understand this issue is still a cause for concern in some sectors of the tourism industry. The golfing sector has been particularly affected, I understand, by the implementation of some tax rules. I wonder whether the Minister has received representations to the effect that this is creating difficulties for the sector in the current economic climate and whether he feels some further deferral would be appropriate.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I understand the intention behind the amendment is to delay the introduction of the margin scheme for travel agents for a further two years until 1 January 2012. The margin scheme is provided for in the EU VAT directive and is currently applied in almost all member states. To date, the services provided by our tour operators and travel agents have been exempt from VAT in Ireland. Under the margin scheme, tour operators will account for VAT on the profit realised on the supply of a travel package. In addition, travel agents acting as intermediaries would be liable to VAT on their commission. Under the scheme both tour operators and travel agents will be entitled to deduct or recover VAT incurred on the overheads associated with delivering their services.

The requirement to introduce a margin scheme in Ireland arises from a decision of the appeal commissioners in 2007 which overturned our previous interpretation of the EU VAT directive in this area. From then, outbound tour operators, while remaining exempt from VAT, became entitled to deduct or recover VAT on their business inputs. There is an ongoing Exchequer cost of about €2 million per annum as a result and there is also now a disparity in terms of the VAT treatment in the sector in that some tour operators get deductibility for their inputs in Ireland without corresponding taxation anywhere in the European Union.

In the light of the decision it has become clear that to implement the directive correctly Ireland is obliged to introduce a margin scheme. The scheme regularises VAT treatment across the sector and will apply to tour operators established in Ireland. Under the scheme tour operators account for VAT in Ireland at the standard VAT rate on the profit margin realised on domestic and EU bound travel packages. The introduction of the margin scheme will bring Ireland into line with the majority of the other member states.

The decision to introduce the margin scheme on 1 January 2010 was well signalled and was no surprise to the travel trade. It could be argued that we should introduce the margin scheme well before that date given that the appeal commissioner's decision was made in 2007. Ample time has been given for preparation for the new arrangements. The main tour operator representative bodies are continuing to engage with the Revenue Commissioners in the development of the ground rules to ensure a smooth introduction of the scheme on 1 January next year.

To postpone the margin scheme for a further two years would mean a continuation of the current tax distortion between tour operators and a continuing drain on the Exchequer. Ireland would also become liable for contravention of an EU VAT directive and susceptible to infringement proceedings. The introduction of the scheme is expected to yield about €10 million per annum, mainly from the outbound sector. In the circumstances a deferral of the introduction cannot be accepted and, consequently, I cannot accept the amendment.

Richard Bruton (Dublin North Central, Fine Gael)
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That is a fairly robust defence of the Minister's position, so I have to accept it. Continuing representations are being made to Deputies, particularly by spokesmen in the tourism sector, that this is a cause of difficulty for the industry but the Minister has presented quite a number of reasons that I cannot refute.

John O'Donoghue (Kerry South, Ceann Comhairle)
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As this is a certified money Bill, in accordance with Article 22 of the Constitution, it will be sent to the Seanad.