Wednesday, 6 November 2013
Finance (No. 2) Bill 2013: Second Stage (Resumed)
Bhí mé ag rá roimh an sos go bhfuil géarghá fá choinne stimulus san eacnamaíocht áitiúil, go háirithe ó thaobh an earnáil tógála. Ba cheart go mbeadh an earnáil sin ábalta buntáiste a fháil ón stimulus sin. Chonaic muid an éifeacht a tháinig ón bhfógra a rinne an Rialtas i rith na míosa ó thaobh an earnáil tógála agus an ráta VAT. Tháinig titim ar an éileamh fá choinne an earnáil tógála ó chustaiméirí mar go raibh siad ag fanacht ar an dáta ar a dtiocfaidh an scéim seo i bhfeidhm. Tá sé fógraithe ag an Rialtas sa Bhille seo go bhfuil an dáta sin ag bogadh chun tosaigh. Cé go gcuirim fáilte roimhe sin, sílim gur cheart níos mó poiblíochta a dhéanamh fá dtaobh de seo sa dóigh is nach mbainfidh mí-éifeacht leis. Ní cheart go mbeadh míbhuntáiste amuigh ansin mar gheall go síleann daoine go fóill go dtiocfaidh an scéim seo i bhfeidhm ag tús na bliana úire.
Sinn Féin has consistently challenged the Government on the need for a proper stimulus package for the economy, specifically the construction industry which once employed many of those who are currently long-term unemployed. While no one could justifiably argue that the sector needs to return to the level of activity in which it once engaged, we can all agree that the current level of construction activity is at an abnormally low level. The construction industry would benefit from a stimulus. I hope it will play a part in keeping young and gifted citizens in this country helping to rebuild the economy and develop badly needed infrastructure, rather than building railway lines in Perth or mining for materials in the Australian Outback.
The immediate effect of the measures the Government announced for the construction sector last month was a sharp decline in demand as potential customers of construction services chose to wait until January for the new scheme to come into operation. I welcome the provision in the Bill to bring forward the date on which the scheme will commence. The Government has, however, a job of work to do in publicising the change in the scheme's commencement date. While those involved in construction will know the scheme is applicable from today onwards, most people are not aware of this. This information needs to filter out into the public arena.
This scheme is a drop in the ocean and cannot be considered to be a real stimulus. While Sinn Féin supports the principle of the scheme, we will examine it in detail and submit amendments to improve it. As I noted in an earlier contribution when the Minister for Finance, Deputy Noonan, was present, as good as the scheme may be, it also has a number of deficiencies. For example, it does not get to the heart of the problem of black market operators. The logic for introducing the scheme was to tackle black market operators by creating a level playing field to provide a boost for the construction industry. If that is the case, the legitimate question that arises is why the threshold for access to the scheme was set at €5,675. The economy is starved of disposable income. Regular credit union surveys indicate that almost 1 million households have €50 or less at the end of each month. The threshold is excessively high because only those who have cash in hand or are able to access cash through banks will be able to avail of the scheme. While the news that two banks have engaged with the scheme is welcome, we must dig behind the figures to find out what precisely this engagement entails.
Is it still only people who are cash rich or have good credit histories and are not in debt who can avail of this? A considerable number will be ruled out of the scheme as a result of the threshold.
Many people want to have minor works done on their houses such as installing new doors, replacing windows or boosting central heating systems. This type of work is done on a daily basis across the country. Subsequent to the announcement of the budget, I spoke to a number of friends and associates who worked in the construction industry. Many of them were from County Donegal but worked in Dublin. County Donegal was more dependent on the construction industry than any other county and we have suffered greatly as a result. I spoke to contractors and people who worked on sites and they told me that the majority of those who did jobs up to the value of €30,000 were already registered contractors. For €30,000, one can construct an extension with an additional bedroom and an en-suite bathroom. Registered contractors set a price for an entire project, from the roof to the foundations. Unregistered contractors are, for the most part, doing minors work such as installing decking, replacing doors or laying footpaths around a house. These unregistered contractors may or may not be able to do big jobs, but they depend on small jobs for their bread and butter. The playing field is not level in this regard. I will not set out the figure to which the threshold should be reduced because one would first need to investigate the revenue potential, but I suggest we should be considering a threshold of €1,500 in the context of the benefits of the scheme.
I am concerned that the Government is concentrating on unpredictable effects of tax measures, while failing to see the need for a proper and proportionate stimulus in the economy. The Minister for Finance has form in introducing tax measures that it is alleged will make us more competitive. I recall the fanfare when the Government introduced SARP, but two years later where are the jobs? What has SARP delivered other than a significant reduction in the amount of tax paid by a small minority of high earners? The next time somebody from the business tax lobby world comes to the Minister with a great idea for reducing the tax burden on high income individuals in profitable businesses, he should ask for proof of how the proposal would create jobs rather than blindly go along with the agenda. The Minister for Social Protection stated each person who availed of SARP had to prove he or she would bring 20 jobs to the country. That was the spin, whether right or wrong. It was a crazy idea in the first place because how could one measure the jobs created? We need more rounded and fact based taxation measures. I acknowledge that it is sometimes necessary to take a leap of faith, but it should always be done on the basis of gathering as much evidence as possible.
I am alarmed at the way in which the pensions proposal from last year has played out in this Finance Bill. Even industry experts appear confused as to what exactly the Minister plans to do with the standard fund threshold reduction. I am sure there is logic somewhere in this complicated measure, but it is difficult to find. I am especially alarmed by the Minister's indication that there is a hole amounting to €130 million in his figures. This relates to my previous point. If he is deciding to move from a position such as the one stated in the original pensions framework on reducing pension tax reliefs because the industry proposes something better, should he not have a full grasp of the numbers beforehand? The industry made a proposal to generate €250 million, but less than half of that money will appear because the Minister swallowed the proposal hook, line and sinker. The proposal was meant to generate €250 million in 2014, but it will, in fact, only raise €120 million at most. Standardising pension tax reliefs would have raised up to €400 million. This is a measure that was proposed by Sinn Féin and the previous Government and the Labour Party also advocated it. As Minister for Finance, there is a fine line between taking advice and having the policies written by outside influences.
This Bill is, unfortunately, full of clangers. In addition to the measure which will see mostly separated fathers paying up to an additional €2,490 in tax per year, DIRT has been increased by 8%. The Minister has indicated he will bring forward an amendment on Committee Stage in order that a parent who does not have a tax liability will be able to access the relief. That parent, usually a father, may only have custody of the child for three weeks in a year. However, a father who has custody for five months will not get tax relief because the mother has a tax liability, even where both are separated and one parent cares for the child more often than the other. There is blatant inequality in this measure. The reason the Minister is dancing on the head of the pin in bringing forward this amendment which is not fair to other separated parents is it is a stingy measure that should be reversed. The children who are in the middle will be most affected.
I recommended that DIRT be increased by 3%. There is room to bring the frequent rate up to the less frequent rate of 36% but to raise it to 41% at a time when the banks rely on deposits is excessive. Simultaneously, DIRT is being levied on special term accounts on which many credit unions rely. Unfortunately, the people do not move their bank accounts, as we saw in the debacle where normal banking services closed down for almost 1 million customers at Ulster Bank. If one is not getting a service, one should switch to a different bank. If people had sense, they would be putting their money in the post office, but I do not think we are prepared for that because they would be DIRT-free products. I strongly advise the Minister to reconsider the hike in DIRT.
I welcome the decision to retain the 9% VAT rate for the tourism and hospitality sectors in 2014. I congratulate the restaurant owners and others who successfully campaigned for its retention, for which we called in our alternative budget. However, there is an element of giving with one hand and taking away with the other when it comes to the hospitality sector. The extra 10 cent on beer and spirits is an unnecessary move at this time, in addition to the 50 cent hike on wine. We are all aware of the damaging effects of alcohol abuse, but this is just a revenue raising exercise.
I welcome the provision on taxing online betting. Sinn Féin would go further by placing a tax of 3% on betting in shops and 15% of gross income of online bookies. There is a need to bring forward the betting Bill. That Bill contains measures worth €20 million. What has stalled it in the past two years? It needs to be brought forward at the earliest opportunity in order that remote bookies and betting exchanges would be brought into the tax net.
I ask the Minister why the self-assessment date has been moved to before October. I recognise that the announcement of the budget has been moved to October and that it makes sense to have the full facts on taxation available in advance of compiling the budget.
However, I have already been contacted by businesses, entrepreneurs and the Irish Tax Institute, who say a move like this could have a serious impact on the cycle taxpayers in these sectors are used to. I urge caution if this is the road the Minister is going down and I advise him to consult widely before taking a decision of this magnitude. The Minister should tread carefully and should discuss the proposal beforehand.
Finance Bills are important. They provide an opportunity to stimulate the economy, to make the tax system distributive and to raise revenue where it should be raised. The Government's finance Bills do not necessarily tick those boxes and poor planning of measures is starting to become its stock in trade. Last year, the Government introduced the property tax. This week, we have seen how poorly planned it was. The property tax or family home tax is a crude revenue-raising exercise dressed up as something else. The property tax and the household charge before it were simply measures to plug the chasm in the public finances left by the continuing payments to bondholders. Not a penny from the 2013 take will go into local areas and people are already receiving demands for their 2014 payment. Labour Deputies who call for only an extension of the payment deadline have no idea of the hardship that is out there. An extension just kicks the can down the road for struggling families. Sinn Féin is committed to scrapping this property tax if elected to government. This would be a €500 million stimulus for homeowners who could, in turn, spend money in their local economies.
The most galling aspect of the local property tax is that some call it a wealth tax. A tax on the average family home is not a wealth tax. It is a dishonest and ridiculous statement to suggest it is. A wealth tax should target privileged individuals with net wealth. Sinn Féin has drafted detailed legislation on the matter but the rules of the House do not allow me to table such legislation.
The Government wants to label this as the last troika budget. Nobody wants to see the troika going home more than Sinn Féin does, but we also want to see the troika mindset gone and unfortunately, as the Bill shows, that seems a more distant prospect. There has been much speculation about whether Ireland needs a precautionary credit line when exiting the programme. The troika made it clear to us last week that we are not entering a golden age of Irish sovereignty. We are tied, whether we like it or not, to strict budgetary monitoring and supervision for the foreseeable future. This Government is not a champion of Irish economic sovereignty in the slightest.
Soon our banks will undergo stress tests. It is no coincidence that these tests are coming up at the same time that our international creditors are wary of letting the State return to the markets without a safety net. We are still weighed down by bank debt. Sixteen months ago, the Eurogroup spoke about separating banking and sovereign debt. It was a moment of hope for this small State, allowing us to think that much of our toxic banking debt latched to the State could be separated. However, that moment has passed and the Government failed to take the opportunity.
I hope some retrospective recapitalisation can happen, but the chances of that are becoming slimmer by the day. I ask the Minister to stand up for Irish interests. In the Finance Bill, I see no evidence that the Minister is so doing. It has been written for the troika rather than with the interests of the Irish people at heart.
I propose to share time with Deputy Finian McGrath. As the finance spokesperson for People Before Profit-United Left Alliance, it is a rather depressing task to have to respond to the Finance Bill, which is a classic case of the putting profit before people. It is consistent with an economic line of thinking that has continued since before the economic crash, which always put profit before people. It has had devastating consequences for the economy, the European economy and the wider global economy, for hundreds of millions of citizens across the world and most certainly for the majority of ordinary citizens in this country, including working people, young people, pensioners, the less well-off and the disabled. These are all the people who continue to be the victims of a set of policy priorities that always put the interests of bankers, corporations and the super-wealthy ahead of the needs of society as a whole and the majority of citizens. Sadly, the Bill continues in that vein.
The budget saw vicious attacks instigated against young people, pensioners, the sick and - disgracefully - the chronically ill. The other side of the coin was meted out in the so-called Social Welfare Bill, and the Finance Bill continues the policy of protecting and promoting the interests of the super-wealthy and big corporations at the expense of ordinary citizens. To cut a long story short, it is consistent with long-standing Fine Gael policy to hammer away at the social welfare state and replace it with a corporate welfare state. We will nurture, protect and insulate the wealthy and the corporations and pay for it with vicious, relentless attacks on ordinary citizens. All of this is justified by spin and claims by the Government to the effect that things are improving and that the people out there do not really understand that things are getting better, the economy is turning around, we now have growth and employment and, at the end of the path to recovery charted by the Government, we will exit the bailout.
I put it to the Minister of State that it is a fantasy and a mirage at best, if not completely dishonest Government spin designed to cover up the reality of what the Government is doing to ordinary people. It goes without saying that for huge numbers of people, whatever facts and figures may be quoted, the situation is not improving. Six hundred and sixty-six million euro will be taken from the already battered health budget, affecting the least well-off. Has the Minister of State or the media considered the coincidence of that figure, €666 million? It is the mythical number of the beast in the Bible. I am not religious, but we know what it says in the Bible: "Let him who has understanding calculate the number of the beast, for the number is that of a man; and his number is six hundred and sixty-six." It is said that it will bring death, pestilence and apocalypse. Sadly, this Government is deploying that number against our health service and it will bring death and pestilence to our already battered health service. That is not rhetoric; it was confirmed by the heads of the hospitals today, the consultants who said that the Government's policies and attacks on the health service are threatening needless suffering and even death for health service users.
Equally, the Government's claims about growth and employment are utterly bogus. The reality of the fall in the live register figures is explained by two things, one of which is 40,000 people leaving the country every year. They are mostly young, educated people who do not need the so-called incentive of having their social welfare payments attacked. It is very clear that they have energy and dynamism. Why, if they did not have those qualities, would they be leaving the country? How much more energetic and dynamic could one be than to leave the country when there is no prospect of work? The State is failing to provide employment and education opportunities for young people and is forcing them out of the State. That is why there has been a marginal decrease in the number of people on the live register. They are being forced out of the country by the Government's policy of austerity.
The other explanation for the fall in these figures is the massaging of the unemployment figures through the creation of bogus jobs and bogus schemes, such as JobBridge, the new Gateways project or the JobsPlus project. Frankly, all of these are a scandal because they are about creating essentially a pool of cheap labour bordering on slave labour which will certainly profit the big corporation which will get employees for virtually nothing. Those employees will in many cases earn less than the minimum wage for doing what should be real properly paid jobs. In the local authorities and in the retail sector, all these so-called internships are nothing more than free labour. Of course, that is something that Fine Gael would long have wanted, but it is utterly disgraceful that the Labour Party is a party to creating a pool of cheap labour to exploit the unemployed, particularly young people, to the benefit of the big corporations which are taking advantage of these schemes.
Then, of course, there are the fantastical claims about the exit from the bailout which we all are supposed to celebrate. I met the troika last week. The troika confirmed something that I have stated time and again in the Dáil, that we are jumping out of the frying pan of the troika programme into the fire of the fiscal treaty terms. We will be subject to exactly the same financial and economic discipline - the demands for austerity on us inside the formal programme - when we move outside the formal programme because as soon as we exit the programme, we must move from a 3% deficit down to a 0.5% deficit and reduce a €200 billion debt, mostly incurred because we have bailed out the banks, by one twentieth every year until we have paid off that massive debt. It will utterly devastate the economy trying to pay off €100 billion worth of debt that is not ours for the next 23 years, because that is the timeframe.
People need to understand what that means. It will involve €9 billion in interest next year, a sum the same size as the education budget. When the Government states it has no money to invest in jobs and we are bankrupt, what it forgets to tell people is it has enough money to pay €9 billion in interest to the bankers, bondholders and loan sharks in the financial markets and in the European Central Bank who helped bankrupt this country. That money, which will pour out, should be going into education, infrastructure and developing jobs, enterprise and industry that could get this country back on its feet. It is a scandal.
The Government continues to wheel out nonsense claims about the improved debt situation. People do not even have an idea how bad the debt situation is. It is bad enough that it is 120% of GDP. As we all will be aware, GDP is not a good measure of this economy and GNP, which excludes the profits of the big multinationals, is. On that score, Ireland's debt-to-GNP ratio is 150%, and that does not even take into account private debt, such as all the distress of mortgage debt. We are in a cycle of debt and yet the Government remains committed to paying off the debts of others at the expense of the economy and the Irish people for decades to come. This Bill merely continues on the same line of pursuing that failed policy.
Some of the latest victims in this Bill are one-parent families. The Taoiseach, on 2 October, stated that one commitment Fine Gael would stick to - one of the few - was not to increase basic income tax rates. What have they done? One-parent families will see at least a €1,600 a year increase in what they must pay, even after the so-called tweaking of this disgraceful attack on one-parent families. Make no mistake about it, this is an attack on the family; it is not only about the father or single parent who is not the primary carer. It is a 50% cut in the tax relief that is given to families if those families happen to be separated. That is what it means. In fact, the State now has an incentive for marriages to break up because if a couple stays together in a marriage and has children, it will receive €3,200 a year by way of a tax break but if a couple with children separates, half of that money will go. It is a direct attack on children and on families which, for whatever reason, happen to separate. It is disgraceful.
The new ceilings, of €1,000 and €500 per child, for the tax break on medical insurance is another disgraceful attack. It was justified as a so-called attack on what the Minister called "gold-plated" health insurance but, in reality, will affect 90% of those who are forced to take out private health insurance because the public health system is in pieces. I hurt my arm playing football last week and I had to go up to St. James's Hospital.
I walked into the accident and emergency department, which was like Vietnam. When I went to the desk and asked how long it would be before seeing a doctor, I was told it would be at least 12 to 14 hours. There were patients in accident and emergency in pain, bleeding, suffering etc. The 12 or 14 hour waiting time was mid-week, at a relatively quiet time. God knows what it is like at busy times at the weekend. That is the state of the health service. That is what the Government is doing. That is why people are forced to take out private health insurance, not because they want to pay exorbitant health premiums but because they are terrified of the state of the public health system which the Government will butcher further again this year when more people will be forced to depend solely on that public system. It is a scandal.
At the same time that the Minister is doing this, there is a number of sections - I do not even have time to go into the details of them but I will at Committee Stage - with more tax breaks for high earners, such as in section 16 for what are called "passive investors" in capital allowance tax breaks. There are more corporate tax breaks for the big corporations in the area of research and development.
There are more tax breaks for participating institutions - banks which happen to be in NAMA. They are going to get another bailout. Incredibly, in his speech, the Minister justifies this by saying we need to give them more tax breaks so we do not have to bail them out. This is a bailout. It is another bailout for the banks that we bailed out to the tune of €64 billion. The Minister now is going to give them tax breaks on the losses they have incurred. It is shocking.
Other breaks include capital gains tax incentives for investors in new assets and trading activities, and following last year, more tax breaks for those involved in speculation on the financial markets speculating in stocks and marketable securities. It is incredible when what we need is a financial transaction tax. The modest proposal of the European Commission is that we put 0.1% of a financial transaction tax on speculation in stocks, shares and derivatives which, the Commission estimates, would raise €500 million. The Government, worse than setting its face against doing that, gives them more tax breaks. It is extraordinary. It did so last year as well.
Just so that the public will be aware, the Minister has also further elaborated the new property tax breaks that it gave under the so-called real estate investment trust, REIT, system. When property tax breaks and incentives fuelled the bubble and encouraged the developers in a frenzy of greed that has wrecked this economy, is it not unbelievable that Fine Gael is doing it again by giving more tax breaks to these guys? Meanwhile, there are 110,000 families on the social housing waiting list. The Minister has put a full stop to the provision of affordable social housing, yet again prioritising the developers and big business and bidding be damned to the ordinary people who need an affordable roof over their head.
The gross irony of this situation is that for a very few months in 2008, when the economic crash hit this country and the global economy, there was a very short window when even people on the ideological spectrum of Fine Gael acknowledged that maybe there were some problems with the market and that maybe, even if we did not go as far as Karl Marx, we might at least look at John Maynard Keynes and a little bit of regulation of the markets. Instead, how long has it taken for Fine Gael to revert to type and let the market rip, regardless of the consequences for society and the economy?
Then we have the repeated mantras that those of us who criticise this present no alternative, when the Government knows that this is absolute nonsense and that we do it repeatedly in here. What we need when the market has failed, when there has been a 70% drop in investment - which is what is needed for this economy to restart - is for the State to step in. We need public investment. Éamon de Valera was not a socialist by any means but even he understood that an economy on its knees in the 1920s and 1930s needed the State to drive investment. That is why he created ESB, Bord Gáis and all of the public enterprises which helped to bring this economy out of Third World status and develop it as a modern economy. That is what we need. How can we do that-----
The Deputy will have his chance to speak.
We can do that by putting a modest bit of tax on wealth, on the profits of the corporations and on the very high earners and using that to finance a public investment programme in infrastructure, in public services and in strategic enterprises. Fine Gael claims there is no money for that. They say there is no pot of gold, that the rich do not have any money. I ask if those opposite have read the Central Bank quarterly statistical report. They should read it. The Central Bank is not a bastion of socialism or radical thinking. The statistics show that between 2011 and 2012, the amount of financial and other assets in this country increased by €16 billion, from €440 billion to €460 billion, which equates to a 3.6% increase in household assets-----
The Deputy will have his chance. He should read the Central Bank report which shows that the financial assets of some people in this society have grown considerably. We know that people who have lost their jobs do not have those assets; we know that public sector workers who lost 20% of their pay do not have that; we know that young people do not have it; we know it has not gone into our public services. Therefore, who has this money? It is an extra €16 billion, according to the Central Bank. The very wealthy have it. One need only see the rents going up all over the city. The developers and property owners who are still standing are buying up all the property at cheap prices and rents are going through the roof. They are making money out of other people's misery. Profits have increased virtually every year except for 2008, particularly for the big corporations, and yet the Government refuses to force them to pay a little bit of extra tax. In the questions I put to the Department of Finance prior to the budget I asked what would happen if we imposed a reasonably substantial increase in income taxes on those earning over €100,000 a year, with three new bands of €100,000, €150,000 and €200,000. The Department's reply was that it would yield €1.1 billion. Would it have been better to hit people earning over €100,000 a year with €1.1 billion of extra tax rather than to hammer the old, the sick, the young and the vulnerable? Of course it would. There are alternatives. Let us nail that lie and ask the Government why it chooses to protect the rich over the poor.
This important Bill deals specifically with income tax, corporation tax and capital gains tax, which are all essential and crucial for the economy and the future of the country. Tax will always be the engine room of any society. The key is to get the balance right so that revenue is raised in a fair and equitable manner. If the Government gets the balance wrong we will never get out of this economic mess. We have a duty in this current climate to support sensible measures that will create jobs and assist families in difficulty. We have a duty to support the local economy and small businesses to help kick-start economic activity.
Property tax bills for 2014 were sent out last week and this is a significant burden on families in the period before Christmas and a big blow to the local economy. In fact, it is economic madness. Such decisions have a dramatic and negative effect on local economies and on small businesses in particular. The Government needs to act with sensitivity with regard to these issues.
I refer to the single parent tax credit issue which is dealt with in the legislation. The 2011 census shows there are 215,000 separated families in the State and 76,800 claimants of the tax credit. The Minister for Finance in his Second Stage contribution referred to the provisions of section 7:
Since the announcement was made I have listened carefully to the views of Deputies and I will be bringing forward an amendment on Committee Stage which will allow the credit to be used by a non-primary carer in situations in which the primary carer has no tax liability.I hope the Minister will bring forward an amendment on Committee Stage to assist these families, because we have all been lobbied by these 76,800 families who have taken a major hit as a result of the provisions in this Bill. I refer to section 10 of the Bill, which provides for an exemption from income tax for the annual allowance intended to cover out-of-pocket expenses paid to reserve members of An Garda Síochána. This is a positive development because we need to support people who make an investment in the community.
I welcome the incentive for those wishing to start a business, which will provide an exemption from income tax up to a maximum of €40,000 a year for a period of two years to individuals who set up a qualifying unincorporated business. The individual must have been unemployed for a period of at least 15 months prior to establishing the business. The Minister has decided to reduce the qualifying period of unemployment to 12 months. This will give a leg-up to people who are unemployed.
My colleague Deputy Boyd Barrett has highlighted the negative aspects of some of the measures. We need to have an equitable taxation system. We need to stop hammering the disabled, the unemployed and those on social welfare and go after those who have the resources.
Policies are holding back the development of small business. I recently met an owner of a pub and restaurant who had to pay a commercial rates bill of €37,000, while some other business people had to pay up to €90,000 in commercial rates. At the same time these businesses have been forced to lay off five or six people from a total staff of 20 or 30 people. We need to consider how employers are prevented from taking on an extra four or five people. The Minister of State, Deputy Perry, has responsibility for small business. We have to stop screwing the small business person who wants to give employment in the local economy. Some wealthy corporations are getting around paying the 12.5% corporation tax rate through the use of schemes.
There are all kinds of schemes to get around it and they are not paying the full rate, which could yield another €4 billion or €5 billion for the purpose of assisting people. It is important to mention these points in the debate.
Section 50 which deals with a non-contentious issue will give effect to the increases in the tax rates for tobacco products from budget night which are estimated to raise €15.4 million in 2014. Smokers are taking another hit. Most smokers who see the amount of €15.4 million will just take the hit and get on with their lives. However, I advise the Minister to be very careful in dealing with the illegal cigarette trade. We all hear about the drugs gangs, the heroin gangs, the cocaine gangs and the shootings and killings all over the country, particularly in recent days in the capital city. The reality is that some of these gangs are involved in the illegal cigarette trade also. That is an issue that needs to be looked at very carefully in the context of section 50.
Section 51 will give effect to the increase in excise duty on alcohol products which came into operation on budget night and will bring in €148 million in 2014. There are ideas to generate revenue and bring in tax. My colleague, Deputy Richard Boyd Barrett, mentioned the financial transaction tax, an issue from which all of the major parties represented in the House have run a mile. We need to do this at national and international level because there is a huge pool of money that is not being brought in. Instead of cutting disability services at St. Michael's House or cutting the respite care grant, revenue could be generated to fund these services.
Section 47 which I support amends section 138 of the Finance Act 2001 which provides that persons suspected of committing an offence in dealing with unstamped tobacco must provide information for a Revenue officer or a member of the Garda Síochána. This is linked with what I mentioned earlier. When one examines the figures deeper, it is clear that tax revenues amounted to €29.24 billion at the end of October, €37 million or 0.1% above target. Net Voted expenditure amounted to €35.3 billion, €844 million or 2.3% below target. Income tax receipts were down by 3% on a monthly target of €1.36 billion. In the year to date income tax of €12.13 billion was collected compared to the expected figure of €12.25 billion.
The other elephant in the room is the issue of job creation. We need to focus both at a national and a European level on supplying, supporting and creating jobs. There are many people in the country who have resources.
Many people accept that this Finance Bill has been nicknamed the rugby players Bill. From now on Irish rugby players will have a stronger hand as the Bill will give them greater freedom to play for non-Irish clubs without a financial penalty. Under the current law, they have to spend the last years of their careers playing in Ireland to qualify for tax relief on their career earnings. The proposed new amendments will allow them to finish their careers anywhere in Europe, as well as in Iceland, Norway, Switzerland and Liechtenstein. There are breaks for professional rugby players. I do not begrudge rugby players a lump sum at the end of their playing careers, but I do regret the fact that the weak, the disabled and the unemployed are being hammered. In this Bill there are many sections that hammer them.
The Government decided to bring budget day forward from the first week in December to on or before 15 October. The Bill includes the measures announced on budget day and also contains details of a number of other changes, including many of a technical or administrative nature.
The Bill provides for changes to the research and development tax credit regime announced by the Minister on budget day. The research and development outsourcing limit will be increased from 10% to 15% of qualifying expenditure, while the annual limit applied to the alternative volume basis for relief will be increased from €200,000 to €300,000. Where it is established by Revenue that a company's research and development tax credit was deliberately false or overstated and the company surrendered part or all of the credit to a key employee, the tax forgone shall be recovered from the company rather than the employee.
Some 25 pro-business and pro-jobs measures were introduced in the budget. The retention of the 9% rate of VAT for the tourism and hospitality sectors will support the increased number of jobs created and the creation of new jobs and will, therefore, continue to apply to a range of services, including restaurants and catering, hotel accommodation, newspapers, hairdressing, admission to cinemas, theatres and museums.
A scheme of tax relief for home renovation work will be available for expenditure incurred between 25 October 2013 and 31 December 2015 on the repair, renovation or improvement of an individual's principal private residence in the State. Relief will be granted at a rate of 13.5% on qualifying expenditure up to a maximum of €30,000, excluding VAT. The minimum level of expenditure must be €5,000, excluding VAT. Relief will be granted by way of tax credit split over two years following the year in which the works are carried out. Restrictions apply where expenditure is grant-aided or met from insurance compensation. The contractor must be registered and tax compliant.
As an employment activation measure, the start-your-own business incentive will provide for an exemption from income tax up to a maximum of €40,000 per annum for a period of two years for individuals who set up a qualifying, unincorporated business, having been unemployed for a period of at least 15 months prior to establishing the business.
The range of qualifications required to become eligible for young trained farmers' relief is extended to include three additional qualifying courses. This will apply to the 100% rate of stock relief and the stamp duty relief for the purchase of agricultural properties. The Bill includes provisions to curtail the 50% rate of stock relief available to farmers in registered farm partnerships which was provided for in the Finance Act 2012. The changes are required to address the requirements for EU approval under state aid rules. Approval has been granted on the basis that the relief will be restricted, as provided for in the Bill, to an amount of €7,500 over a three year period.
The Bill includes a provision which exempts from tax the annual allowance of €1,000 paid to volunteer members of the Garda Reserve. Under the JobsPlus scheme, grants paid to employers participating in JobsPlus schemes on or after 1 July 2013, administered by the Department of Social Protection, will not be subject to tax. Also, the employment and investment incentive will be removed from the high earners restriction for a period of three years in order to stimulate investment in SMEs. The lump sum payment made by the Minister for Justice and Equality to survivors of the Magdalen laundries will be exempt from income tax, the universal social charge, capital gains tax and capital acquisitions tax.
The farmers' flat rate addition is being increased from 4.8% to 5% with effect from 1 January 2014. The flat rate scheme compensates unregistered farmers for VAT incurred on their farming inputs. The flat rate addition is reviewed annually in accordance with the EU VAT directive. The increase to 5% in 2014 continues to achieve full compensation for farmers.
I welcome the Bill. It is welcome that it is being dealt with in the same year as the budget. Many speakers will have contributed on specific issues and the Bill in general. However, I wish to raise a couple of key points which the Minister might take on board.
I welcome the home renovation incentive scheme. It is an issue on which I would have written to the Minister in July and I am delighted that such a measure is being taken on board. There are a few points in connection with section 5 on which I seek clarification. First, there is some concern about the scheme. I acknowledge the fact that the Minister has decided that it should take effect from the date of the budget. That is crucial for many small builders who are losing contracts. If an individual has a number of individual contractors doing the work and each is doing the work for less than the total of €5,675, will it be recovered cumulatively for the number of contractors involved or must the total for each contractor specifically be in excess of €5,675?
It is important that is said because people will decide to do the renovations themselves and to get their own builder, blocklayer and plasterer. While each one of those tradesmen might not reach the target figure individually it should be possible for the work to be accumulated and if the total is in excess of the amount stipulated then the work would be covered. I am concerned at the reference throughout the Bill to regulations. I prefer to have sight of the regulations before a Bill is enacted. In a number of cases it will be at the discretion of Revenue to decide whether a scheme is to its advantage. I plead with the Minister to ensure the regulations are as simple as possible because a scheme is more likely to be taken up if the procedures governing it are simple.
Will the Minister commit to having a review at the end of the year? The reason for the review would be to examine whether the purpose of the scheme has been achieved. The two parameters on which a scheme should be judged is, first, whether it has led to an increase in employment among small builders and, second, that we are tackling the black market. If there has been a failure to achieve success in those two areas then perhaps the Minister would consider raising the level at which the VAT return is given back. He could consider raising it as high as 25% of the overall cost. That type of incentive might discourage those in the black market from competing against the people we are trying to support.
The second issue relates to one I tabled as a parliamentary question. It concerns the fact that an individual must go to a doctor to get referred to a physiotherapist before he or she could make a claim for medical expenses for tax purposes. Physiotherapists would prefer that individuals could go directly to them and that the tax would be allowable to the individual. Currently, that is not the case. In the response to the parliamentary question it was indicated that the Minister would examine the issue in the Finance (No. 2) Bill 2013. Could the Minister take that point on board?
I welcome what the Minister said about the one-parent family tax credit where the main carer might not be in work in which case the credit would be lost. I welcome the fact that the credit will now be given to the earner if he or she is not the main carer.
My final point relates to sport. There is the potential for a sports drain as a result of what the EU legislation has forced upon us. The provision in section 15 could be tweaked. I merely make the suggestion that the relevant years could be extended to 12 rather than ten. I do not wish to force anyone to stay at home but it might discourage our sports stars from going overseas. The purpose of the section was to keep as many as possible of our sporting heroes within the country. I would welcome if the provision could be examined and tweaked as it might help the situation. I wish the Minister to take on board those points. I will write to him about them. Most speakers will refer to the Bill in general but I wished to focus on those four points which I hope the Minister will take on board.
I welcome the opportunity to speak. I wish to have it noted on the record of the House that the newfound interest of the Fianna Fáil and Sinn Féin parties in Dáil reform, which was reported this morning on Newstalk at 8 a.m., was shortlived because the Chamber is yet again empty of Opposition spokespersons.
For the first time since the economic collapse into which we were led by the previous Government, there is now a primary surplus in operation. In fairness to the Government, that has been one of the key measures in trying to prove that our departure from the bailout into which they so shamelessly led us can be achieved on 15 December this year. The commitment in that regard by the Minister for Finance, together with the Minister for Public Expenditure and Reform, the Taoiseach and the Tánaiste must be acknowledged. The real test is the fact that in the past 12 months, 36,000 jobs have been created, which is in stark contrast to the final three years of the previous Government’s term of office when 250,000 jobs were lost in the same period. That speaks for itself.
In terms of my constituency, I welcome sections 41 and 56 in particular. Section 41 relates to the extension of the tax credits for people retiring from farming. Section 56 concerns the retention of the 9% VAT rate which was so vociferously opposed in this House by the parties opposite. They railed against it and said it was a gimmick yet the Restaurants Association of Ireland and the Irish Hotels Federation and everyone else associated with the tourism industry welcomed it, worked with it and used it to their advantage. They also used The Gathering to good effect. It behoves the Opposition to acknowledge that was the right thing to do and to congratulate the Ministers for Finance and Transport, Tourism and Sport on the fact that so many more people are employed in tourism now than when parties in opposition so disastrously led us into an economic collapse.
Also in the tourism area, I welcome the abolition of the Fianna Fáil travel tax which was introduced in 2009 as a disincentive for people to visit this country. The manner in which the airlines, in particular Ryanair, have reacted to the abolition of the Fianna Fáil travel tax is a good thing. I would encourage other airlines servicing this country to do likewise, in particular the flag-carrier, Aer Lingus. Shannon Airport has benefited in my part of the world not only in terms of the 300,000 extra passengers that have been promised following the abolition of the tax, but also from the independence that has been given to the airport which has been driven by the presence of the Minister for Finance in the region. Let us imagine what could have been achieved had the current Minister for Finance been at Cabinet when there was so much money in the economy and some people were more interested in doing other things than delivering to the mid-west.
The home renovation initiative is a good idea. It will encourage people who have heretofore been outside the system to come on board. The Minister for Finance is keen to include various parts of the economy on a sector-by-sector basis. We have seen initiatives in the agriculture and tourism areas. I welcome the home renovation scheme, plus section 21 which deals with research and development tax credits. Deputy Boyd Barrett believes that is a bad idea but I think it is good having worked in a foreign direct investment company.
I am pleased the Minister is examining the single-parent tax credit. He has committed to address the matter on Committee Stage. In my constituency recently there was a significant announcement about the creation of jobs in a biomass company in the Port of Foynes. The intention is to blend biomass material with coal. I would encourage the Minister to consider an extension of the relief to indigenous biomass material produced in Ireland. Perhaps it cannot be addressed in this Bill but if there is proof that this incentive has been used to create jobs then it could be further extended.
One other noteworthy issue is the fact that in section 73 the Government has exempted from tax those who will receive compensation under the Magdalen laundries redress scheme. It is good that such people have been singled out. It is another legacy the Government was left by its predecessor and it deserves credit for it.
The Government and commentators state continuously that governments do not create jobs but they create the environment in which jobs can be created. The backdrop to the Government’s term was 250,000 people losing their jobs in three years and a shameless sell-out of our country’s sovereignty by the previous Government. The fact that we have created 36,000 jobs this year and that we are looking to 15 December to restore our economic and political sovereignty in this country again will for many undo the legacy of the previous Government, but we should never forget the situation into which it led this country. This Bill is part of the recovery process.
I also very much welcome the opportunity to speak on the Finance (No. 2) Bill 2013 and to offer some thoughts and views on the legislation before the House.
I commend the Minister for Finance and his Cabinet colleagues on the many innovative measures in the Bill aimed at harnessing economic growth and moving the country forward after years of reckless mismanagement, which my colleague Deputy O'Donovan outlined very articulately to House.
I welcome some specific elements of the Bill, one being the retention of the 9% VAT rate for the hospitality and tourism sector. That was really important in that it sent out a message that the Government is one that will reward success. The sector was in real trouble. It sought assistance from the Government and it received it. As a result, it created thousands upon thousands of jobs. In the most recent budget, the success has been rewarded with the continuation of the lower rate. This is making a huge difference in every town, village, café, restaurant and hairdresser on every main street, including in my constituency. I thank the Government for rewarding success and sending out a message that if one asks for assistance and makes it work, one's case will be looked upon positively by the Government.
Some of the measures in regard to entrepreneurs, most particularly the capital gains tax relief to encourage people to reinvest in productive training, is very welcome. Possibly the two most exciting measures in the Finance Bill are the home renovation incentive and the start your-own-business scheme. Both need to be seen together. People are now financially encouraged to carry out renovations, such as building a conservatory or patio, replacing the windows or doing up the primary residence, but there is also an incentive for those who have found themselves out of work for a significant period and who might have worked in the area of construction, including plumbers and electricians, to start their own businesses and benefit from the more favourable market. When the two schemes are put together, the outcome is really positive.
I very much welcome the abolition of the air travel tax. I welcome the fact that we are already seeing the benefit in terms of jobs and new routes into the country.
I look forward to examining more measures in the Bill on Committee Stage. I have previously raised the issue of development levies with Ministers. We need to consider a development levy holiday for a very specific type of development, such as one-off houses or houses to be built for a son or daughter. The development levy is crucifying those who propose such developments. As a result, the council is not receiving any money and the construction industry is being held back.
Deputy Richard Boyd Barrett seems to have completely missed the point. We do not want to recreate a property bubble or an economy that is completely dependent on people selling houses to one another. However, there is a role for the construction industry. We have gone from one extreme to the other, from a sector that is too large to one that is too small.
I am pleased the Minister of State responsible for small and medium enterprises is present. We must do a better job at promoting the schemes that are available to help businesses. The Minister of State is doing an excellent job travelling the country. I had the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, in my constituency recently meeting business leaders. Eighty-three businesses from Bray and Greystones were represented at the meeting. Their eyes were really opened to the various supports available to them. The people in question are really busy and they operate in a very difficult economic climate so we need to make the information accessible to them. The Minister of State is working on that. We are working on a one-stop shop, a website. I would welcome and encourage this.
I wrote to the Minister for Finance, Deputy Michael Noonan, about inheritance tax on 3 September. I asked him to examine the difficulty the tax poses for people with either a mental health issue or intellectual disability who inherit a property on the passing of their parents. I recently met a number of parents of adult children with either a mental health issue or an intellectual disability and noted they are extremely concerned that if they leave a property to their son or daughter, that son or daughter will not be in a position to pay the inheritance tax due to the fact that they will not be in employment or have an income other than a social welfare payment. The Minister, Deputy Noonan, said he would examine this in the context of the Finance Bill. I would very much appreciate it if I could receive the thoughts of the Department of Finance on the issue. It is an anomaly in our system.
I am very pleased the issue of the lone parent credit will be examined. We have various parenting units in this country and we need to explore the matter compassionately. I add my voice to the comment of Deputy Lawlor on physiotherapy. As we move towards promoting a model of primary care and preventive health measures, we do not need circumstances in which we impose additional costs whereby one has to go to one's doctor to pay €50 or €60 to be referred to a physiotherapist to pay the next €50 or €60 so one can get tax back. I very much commend to the House what I believe is a pro-jobs and pro-economic growth Finance Bill. I commend the Minister on putting it together.
This Bill is to give legal effect to what was a deeply unfair budget. It is important to recognise that the budget is all about setting revenue figures for next year. A key element in the tax revenue for 2014 will be the local property tax. It would be strange, in view of the controversy over the local property tax, if it were not discussed. It is not subject to particular mention in the legislation. One hopes the mistakes the Minister included in the local property tax legislation the first place will be corrected on Committee Stage of the Finance Bill. Corrections are much needed.
The issue of payment by debit and credit card has been well documented in recent days. Let me refer to the letter I received and which 1 million others received. Paragraph 2 states one can pay in full by debit card, credit card or cash or through an approved payment service provider. The first option listed by the Revenue Commissioners in its letter is debit card and the next is credit card. People talk about neither one nor the other being pushed but this is not the case as the authorities went out of their way deliberately to encourage payment by debit card. We all know that if one registers online, as the letter indicates, the payment will come out of one's account on the day. That is against what I believe to be the spirit of the legislation, but it is in line with the letter of the legislation as drafted by the Minister some time ago. We have proposed today an amendment to the legislation whereby, although the liability date may remain in November, no amount in respect of 2004 should be collected before 2014. The same applies to 2015 and subsequent years. We ask that the legislation be amended on that basis.
There is another troubling aspect that will now begin to emerge as people consider the details of the local property tax, now that it is in full swing and after people having got used to it and to the first half-yearly payment. The Revenue Commissioners' letter refers to the phased payment options and implies one may pay one's local property tax on a phased basis with effect from January 2014 using certain listed options. There are new ramifications for people going down that road that they may not be aware of them. It is incumbent on the Minister to tell people the full implications of what is involved in light of the legislation he passed. By availing of the phased payment option, there is a possibility of deduction at source from one's wages, salary or occupational pension. Also, one can pay by cash through one of the approved service payment providers. Very worryingly, this recommends the payment by direct debit. It states direct payments will start on 15 January 2014 and will continue on the 15th day of each month in equal instalments throughout the year. That is correct but it is only correct in so far as goes. The letter does not tell the full story in that it does not state that when one signs up to a direct debit contract, one is not agreeing to a set amount going out of one's bank account each month but to the withdrawal of an unspecified amount by the person withdrawing the money. We are all familiar with that. If people pay their electricity or telephone bills by direct debit, they will note their figures vary from month to month. If one makes mortgage repayments by direct debit, the figure can vary from time to time. Therefore, the institution seeking the money has the right to vary the amount taken from the account. That is the essence of direct debit and what separates direct debit from what people would have been used to under a standing order. One twelfth of the sum owed will be taken out each month during the course of the year.
There will be implications for those who opt for direct debit. Let me quote the booklet that the Office of the Revenue Commissioners issued last year. This issue has arisen before but people have not established a link with how it will cause further complications for people paying by direct debit. Page 6 of the booklet, which everyone in the country received last year, states, "The market value of your property on 1 May 2013 will form the basis of the calculation of the tax for 2013, 2014, 2015 and 2016 and will not be affected by any repairs or improvements made to your property". Everybody understood that once one sets one's property tax valuation, the payment would be fixed until the end of 2016. People believed that was the case but we all know now, having been through this for a few months, that the rate or multiplier applied to the house valuation can be increased by the local authority next September. Currently, the rate is 0.18% of the value of the house, but local authorities have the legal authority to increase that by 15% next September just by passing a motion. If the local authority puts a notice in the local newspapers that it intends to do as I describe and it passes a motion at the September meeting that comes into effect from 1 January 2015, a year or so away, it will have specific implications for people paying by direct debit.
The rate could change before the end of 2014, coming into effect on 1 January, and the amount at the new increased rate could be withdrawn from people's bank accounts by the Revenue Commissioners without their consent or knowledge. People would be happy to sign a direct debit mandate if they knew the amount was fixed until 2016, as they had expected, but the special provision that the Minister put into the legislation to allow a 15% increase to be passed by local councillors next September means that the monthly payment can be increased by 15%. The Revenue Commissioners do not have to revert to people and ask them to sign a new direct debit mandate because a direct debit means that the Revenue Commissioners decide what comes out of people's bank accounts. I am warning people who are signing up to the direct debit option to at least be aware that in 12 months' time the figure could be increased by 15% without their consent or knowledge. The Revenue Commissioners will take that money out of their accounts. That issue must be addressed.
I believe this will apply to all other deductions at source, whether those deductions are from salaries, occupational pensions, social welfare payments, or payments from the Department of Agriculture, Food and the Marine or other Government Departments. Page 7 of the booklet issued by the Revenue Commissioners last year reads: "If you choose a deduction at source option, Revenue will advise your employer, pension provider or the relevant Government Department of the amount to be deducted." Individuals will not tell their employers, pension providers or the relevant Government Department. People might think they are telling them by giving them the value of their house and expecting that to hold until 2016, but if councillors choose to increase the rate by 15%, the Revenue Commissioners will tell employers, Government Departments or banks to deduct 15% more and people will have no say in the matter. People should be aware of this.
The Revenue Commissioners have gone out of their way to encourage people to pay the LPT on a phased basis and spread the payments over a year. However, by getting people in on a phased payment basis, they have them locked in and then they can take 15% more the following year if they choose to do so. The full implications of this have not been explained to people. I ask the Minister for Finance to make this clear to people. The Revenue Commissioners did not make up these procedures. This is not just a communications issue, as some Ministers would have it. There is a substantive issue in the legislation because the dates are specified in the legislation and the items to which I have referred are contained in the Act. The legislation was rammed through this House last December. The Bill was guillotined with no time for adequate debate and amendments were not discussed properly. This is an example of what happens when legislation is rushed through. Having said that, I actually think this is the legislation the Minister for Finance wanted. The Minister got what he wanted but he did not tell the people of Ireland what he was doing at the time. They are now beginning to see what is involved here.
I ask the Minister to state clearly whether he was aware of the exact implications of this last December. I am sure he was aware because I am sure the officials in his Department understood fully how this would work out in time and I am sure they told him. I do not believe they withheld that information from him. Was the Minister aware of this issue last May before the payments went through for 1 July 2013? I assert categorically that the Minister did know, because I, like many other Deputies, got phone calls from people last May and I am sure the Minister did too. People had to register for the LPT by 27 May and those who opted to pay by debit or credit card in May had the money, which was not due until July, taken out of their accounts in May. Everybody in the House knows that that happened. People got over it because it was only a short period between May and July and it was still the same calendar year. The same time difference applies now, between 27 November and 1 January, but the due date is in a new calendar year. People are rightly feeling aggrieved that if they choose these payment methods, they will be paying next year's tax before the end of November this year.
We were told this time last year that the property tax was being introduced for half a year and that only a half-year payment would be due for 2013, but, in effect, some people are being caught for a year and a half's payment in the first year of operation of the tax. Next year they will be caught for a year's payment in advance again, and so on. This is the greatest con-job. The Minister pulled a fast one here. I know he is a clever and astute man. I believe he knew the full implications of what he was doing, and I am asking him to reverse this.
I will make one final point on this issue. I met old age pensioners in my clinic last Saturday who have already paid their property tax for 2014. I ask Deputies to think about their parents or grandparents who are in their 70s or 80s. When people of that generation get a bill, whether from the ESB, a phone company, an insurance company or any other service provider, the first thing many of them do is to go to the post office and pay it. Elderly people generally do not like leaving bills unpaid for days or weeks on end. That is their mentality and we will all be there some day. When they got the aforementioned letter from the Revenue Commissioners telling them that their LPT was due and how to go about paying it, many of them went out and paid it in their local post office last Thursday or Friday. The Minister has already received the money for a year and a half's local property tax from many elderly citizens. That is unfair and I believe the Minister knew that would happen. I hope, between now and Committee Stage, that the Minister will reflect on what I have said regarding the practicalities of the implementation of the legislation as drafted. I do not accept Ministers going around the place blaming the Revenue Commissioners for a communications issue. The Revenue Commissioners were given a job by this House. They do that job effectively and well and must be complimented for collecting over 90% of the property tax due. That high level of compliance was partly due to the range of payment options given to people. We all saw what happened with the household charge the previous year, with some people finding it difficult to make the payment, so limited were their options. Some of the options for paying the LPT have resulted in payments being taken far too soon so, effectively, the Minister has annulled a number of those payment options. I ask the Minister to reconsider the issue.
Turning to the Finance Bill before us today, I wish to refer to the home renovation incentive scheme as outlined in section 5. Essentially, this is a lot of fuss about nothing. There has been a big song and dance about this scheme, which runs from 25 October of this year. The scheme provides that people will get a tax credit - not tax back - in respect of the VAT paid on renovation works. If somebody spends €5,000 on home improvements, exclusive of VAT, he or she will attract a credit of €675. It must be stressed that the individual is not getting €675 back. In fact, the total amount of the credit being granted under this scheme is 13.5%, which represents getting the VAT back. Under the scheme, the person pays the full price, with the VAT to be paid up front, and then, over two years, he or she gets a tax credit for some of the VAT. It is a very small scheme which I dislike. Some method should have been used whereby all people are treated equally. As it currently stands, for a person on the 41% income tax rate the tax credit amounts to €276, but for a person on the 20% tax rate the tax credit is only worth €135, to be reclaimed over two years. It is hardly worth the bother. However, what is most unfair about this is that people on low incomes, in part-time jobs or low-paid jobs who are outside the tax net, as well as those on social welfare payments, are probably the ones whose homes are most in need of renovation or improvement, but they can get nothing back under this scheme. Only those who are paying income tax can claim the tax credit. I am sure there must be up to one third of the population of Ireland who are not in the tax net, and to exclude well over one million people from this scheme is unfair, unjust and regressive. I cannot understand why the Government would introduce a scheme that will be of most benefit to professionals and high earners who pay tax at 41%, while those on the minimum wage who are outside the tax net will not benefit from it at all. If the latter group of people want to get new windows or carry out basic improvements to their homes, they will get no benefit from this scheme. That is wrong, regressive and represents a tax credit for the rich and nothing for the poor.
To look at the figures more closely, if a person spends a larger amount of money - up to the €30,000 limit - that is worth €1,660 to a person on the 41% rate of tax over two years but only approximately €800 to a person who pays tax at the 20% rate.
Again, the 1 million on social welfare, low income or the minimum wage will not get a single thing out of this scheme. The Minister should examine this measure again. He should introduce a grant scheme for those on lower incomes who would be most deserving of this.
During the spin on budget day, the Minister claimed the reduction of tax relief on private medical insurance would only affect gold-plated policies. In fact, it will affect 90% of all health insurance policies. If the Minister had taken time to check the various prices on the insurers’ websites, he would have seen over 90% of families will be affected by this reduction of tax relief. Up to 1.5 million people are on private medical insurance, many of whom are receiving medical care in private hospitals while staying out of the public system. The public health system is under enough pressure as it is. If the incentive to join private medical insurance is withdrawn, the logical conclusion is that some will be forced to give up their private insurance and will be back in the public health system. We all know the difficulties with that system, so this was not a clever idea. I could understand if the relief reduction only affected higher level policies. However, 90% of all policies will be affected by this which is a poor decision.
I see the Minister’s intention with the removal of the one-parent family tax credit in that it might present an unfair advantage for some. Fianna Fáil, however, is opposing this because the Minister went about it the wrong way. It will discriminate against fathers particularly as the new single tax credit will only be available for child benefit which is typically claimed by the mother. This is unfair. In many cases of divorce or separation with parents living apart, there are extra costs trying to maintain two houses. In 94% of such cases, the father has the higher income and the credit helps pay for the children’s maintenance. This measure could lead to a reduction in maintenance payments. We are not opposed to the withdrawal of a tax credit where one parent is not contributing financially. It should only be available where there is a real and demonstrative case that the father is contributing to the support of his children. The Minister has not thought this through properly and he should reconsider it.
It is bizarre the Minister introduced the 0.6% pension levy in 2011, claiming it would lapse in three years. In fact, he has now increased it by 0.15% for the coming year. The levy will apply into 2015 as well. He gave all sorts of excuses why this is necessary. It is important people recognise many defined contribution schemes are in difficult financial positions. The State taking money out of those funds makes no sense when many of them are having severe problems continuing.
The Minister seems to be speaking from both sides of his mouth when it comes to the banks. On the one hand, he is loosening the rules on trading losses for banks. There was a 50% restriction on the amount of prior year trading losses of NAMA-participating institutions which could be offset against future profits. By loosening that, he is allowing them offset more of their previous losses against future profits so they pay less tax in the future. While this is an effort to help the banks financially, at the same time he has imposed a bank levy. That is a mutually inconsistent approach. Will the Minister agree to a White Paper on banking to ensure a consistent approach to this topic?
Despite the overwhelming constraints imposed on the Government, the Minister for Finance, Deputy Noonan, has thankfully been able to include several incentives and welcome initiatives that I hope will help stimulate our economy in this Finance Bill.
As part of the budget 2014 measures, the Government has announced 25 pro-business and pro-jobs initiatives which are set to cost more than €500 million. Under the Bill, the 9% VAT rate will be retained for the tourism industry. I warmly welcome this decision which is a measure that the industry had lobbied hard for in the run-up to the budget. I live near the village of Strandhill, County Sligo, a place most people would agree is one of the most beautiful parts of this island. This area has seen significant investment from local business people who provide magnificent food, entertainment and facilities for our visitors. I am glad we recognise this investment and will play our part in reducing the levels of taxation. This measure coupled with the reduction in the airport tax will bring more visitors and, hopefully, realise repeat business because the tourist visiting the north west will get value for money and not be ripped off.
The result of the reduction in the airport tax last week saw the opening by Ryanair of three new routes in and out of Ireland at Knock Airport, great news for the region I represent. Well done to the airline company’s chief executive officer, Mr. Michael O'Leary, for stepping up to the plate when asked. In particular, I thank the Minister for Transport, Tourism and Sport, Deputy Varadkar, and the Minister of State at the Department of Transport, Tourism and Sport, Deputy Ring, for their work and lobbying on behalf of this industry.
During the debate on Second Stage of the Local Government Bill 2013, my colleague Deputy Deasy made some important points on the issue of rates. The rates system was originally introduced during a different time. As Deputy Deasy stated, €3.7 billion is the estimated annual spend by people purchasing online goods. Of course, the majority of those same companies make no contribution to our local authority rates. I have received representations from a young business man, a publican based in a small town in County Leitrim, who has a rate demand more than three times those of his competitor publicans in his village because he has a petrol-diesel pump outside his door. We all know the profit margin on liquid fuel sales, yet the rates bill to provide this service is overwhelming him.
In times of economic turmoil, it is difficult to consider change but the rates collection and revenue accounts of both counties Sligo and Leitrim have shown a significant and consistent drop since 2009. Will the Ministers for Finance and the Environment, Community and Local Government commission a study by a competent organisation or Government agency to look again at the rates system? Should we, for example, consider a sales tax in each county similar to that in the United States where individual states have a sales tax and a local property tax set individually by the local council? I would welcome a genuine discussion and the formulation of a report that could be considered by the environment and finance committees in this House. It should examine all options and the systems employed in other countries. It could then make recommendations, debated by the Oireachtas committees, which would eventually evolve into legislation that would fundamentally change the rates system to provide a fair, equitable and effective revenue stream to help fund our local government sector.
In my previous career, I worked for the construction industry which every Member knows has suffered since our economic collapse in 2008. The Minister for Finance has also recognised this. Within his limited financial resources, he has set out several measures which will assist our domestic economy. He has brought forward the commencement date for the home renovation incentive to include works that commence from 25 October, providing relief at a rate of 13.5% on qualifying expenditure of a minimum of €5,000 before VAT and a maximum of €30,000. Those availing of the scheme will see the credit awarded in 2015 and 2016.
The Bill also puts in place the structure for the start-your-own-business incentive scheme, which coupled with the home renovation scheme, will give the opportunity for a young carpenter, plumber or electrician who has been unemployed to get back into the workforce with a real chance of a market for their trades. This scheme will grant a two-year exemption from income tax to people who set up their own businesses after receiving social welfare for 15 months or more, up to a limit of €40,000.
I encourage and challenge people formerly employed in construction to talk to their local partnership and social protection offices to get set up as there are real opportunities for these skilled people.
I welcome the decision not to increase the cost of diesel or petrol, which will keep the cost of running businesses down. I also welcome the decision not to increase motor tax, assisting the industry somewhat. I would have liked the Government to consider the swappage scheme proposed by SIMI, as this industry is still down by 8%, despite some positivity. The new system has brought some balance to the 12 month market. I encourage the Minister to consider SIMI's proposal on a swappage scheme for inclusion in next year's Finance Bill.
In a little over one month the country will take the momentous step of regaining its economic sovereignty. Exiting the bailout arrangement is possible because of the contribution made by every citizen in the past few years to restore the nation’s finances. However, we must not lose sight of the fact that State expenditure continues to exceed income. Regaining our economic sovereignty is not an excuse to go back to the old ways of irresponsible and reckless spending. The Opposition has attacked the budget for being unfair and not targeting those most able to contribute. However, the provisions contained in the Finance Bill expose the hollowness of this accusation. The increases in DIRT, exit taxes on payouts from investment funds and life assurance policies and the earlier changes to capital gains tax are among the measures that ensure those most able to contribute will do so.
There are a number of very positive provisions in the Bill. For example, the provision to consolidate the tax implications of the JobsPlus scheme is very welcome. JobsPlus is an enormously important programme which exemplifies how the Government and business can work together to tackle long-term unemployment. Another major positive is the home renovation incentive which is providing assistance for a sector under significant pressure as a result of the downturn.
Regarding sections 13 and 21, I wholeheartedly appreciate the amendment to ensure tax relief for expenditure on research and development is available only once a person or an organisation is fully tax compliant. However, we should examine the introduction of a more targeted relief for employees who register a patent. We are all aware of how vital innovation is for Irish companies and companies based here. New and better processes, components, products or services have a direct, positive impact on expansion and job creation. We should reward employees for being innovative by, for example, exempting from income tax the first €2,000 of any reward payment provided for that employee by the company. Any cost would be offset by the great likelihood of the company expanding when implementing the innovation. With such a measure the Government would be encouraging creativity in the business sector and helping in facilitating job creation.
One issue on which there has been a good deal of correspondence is the provision in section 7 concerning the one parent family tax credit. The move to replace it with a single person child carer credit arises from a recommendation made by the independent Commission on Taxation. Given the extraordinarily positive announcement in recent days on the plans to extend civil marriage and provide for legal recognition of Irish families in all their shapes and sizes, section 7 appears out of step. I appreciate that this measure is intended to inject equality into the tax treatment of cohabiting and non-cohabiting parents. However, in a genuine attempt to prevent exploitation of a tax relief by a small number of people, I fear this measure will cause hardship for responsible parents, particularly fathers. While I accept the need to reduce exemptions and other tax relief measures on account of the State’s financial position, it would be more equitable to continue with a shared, albeit reduced, tax credit for both responsible parents. Such an amendment would be in keeping with the Government’s desire, shared by most people, to give equal recognition and rights to all family types.
Another measure which I ask the Minister to reflect on and consider implementing is the reform of the Triple E accelerated capital allowance, ACA, tax incentive scheme. This is vital for indigenous companies such as Galway based C&F Tooling to increase their overseas business and thereby expand and create new jobs. The Triple E ACA tax incentive scheme is, however, dependent on an accreditation process which is time-consuming to the extent that it is a disincentive to customers placing orders for, in this case, new renewable energy products. The situation could easily be remedied if the Department of Finance were to introduce a new pre-accreditation certificate or letter which would outline that the tax relief would become available were the product in question to meet the assessment at the accreditation stage. The UK Government provided such a letter of confirmation regarding the available tax reliefs two years ago.
I ask the Minister to give strong consideration to these three measures, in particular, that I have raised, namely, the tax relief for employees receiving a monetary reward for being innovative and registering a patent, the retention of a reduced tax credit where both persons share parenting responsibilities and the creation of a pre-accreditation certificate or letter which would confirm the tax relief available to customers of Irish companies should their products achieve certain minimum standards.
I welcome the opportunity to contribute to the debate. I specifically want to mention the funding of mental health services, an issue which has been neglected for decades. While €20 million was allocated for the development of mental health services, there is concern that the promised €35 million did not accrue in the budget. In the last two budgets the Government contributed €35 million each year for the development of the services and the programme for Government guaranteed that the Government would ring-fence €35 million annually from the health budget to develop community mental health teams and services as outlined in A Vision for Change to ensure early access to more appropriate services for adults and children and improved integration with primary care services. While the €20 million is welcome, there is disappointment that the expected €35 million did not accrue in the budget.
The College of Psychiatry in Ireland points out that just over 5% of the overall health budget was spent on mental health services in 2013, down from 13% in the 1980s. Meanwhile, funding for mental health services overall has fallen from €937 million in 2006 to €733 million in 2013. The College of Psychiatry in Ireland notes that just over 5.2% of the overall health budget is spent on mental health services, a far lower figure than is recommended for a developed country. In 2006 the Government published a blueprint for mental health services, A Vision for Change. It recommended gradually building up the mental health budget to 8.24% of the entire health budget, but this has not happened. It is interesting to note that in the United Kingdom the mental health budget is 12% of the total health budget. The College of Psychiatry in Ireland has called on the Department of Health and the HSE to ensure mental health services receive the percentage of the health budget envisaged in A Vision for Change over a period of time, as promised. The president of the college, Dr. Anthony McCarthy, said:
How we treat the most vulnerable in our society is a measure of what kind of society we are, and when people are unwell they may not be in a position to advocate for their needs, and those entrusted with responsibility have a duty of care to ensure their voice is heard.The mental health association Grow also expressed concern about the funding allocated for mental health services in the budget. While there was some welcome for the Government's providing €20 million to support these vital services, Grow's CEO, Ms Michelle Kerrigan, criticised the fact that almost half of the funding promised in each of the last two budgets had not been allocated this year. She said:
This will have significant effects on community mental health developments and the services people could have and should have on their doorstep. Now more than ever there is a huge demand on community mental health services and [the budget] will see even more people being forced onto ever-lengthening waiting lists. It will result in more people turning to thoughts of suicide and self-harm, and will place greater pressure on voluntary organisations like Grow to step in and bridge the gap. It is going to put a huge strain on mental health services in this country.While we recognise that €35 million was allocated in the past two years, the low level of implementation of the programmes that were to be implemented was very frustrating. In 2012 the €35 million was primarily to be used to further strengthen the community mental health teams in adult and child mental health services, advance activities in suicide prevention and initiate the provision of psychological and counselling services for service users in institutional and community-based care.
Some 414 positions were approved for the community mental health services under that plan, but we are told that budgetary pressures within the HSE delayed the full utilisation of this funding in 2012. However, it was made available subsequently in an additional budget in 2013. Of the 414 posts approved in 2012, some 397 have been filled or are awaiting clearance. This is reasonably close to the target, but it is two years since the allocation of the moneys by the Minister for Finance. Some 477 posts were approved for last year's budget for mental health services, but by August this year, just 220 of these posts had been accepted, with a further 24 offered to candidates. This implies that nobody had been appointed up to August. I understand filling posts takes time, but I cannot understand why it takes so long.
In 2012, the first recruitment took place as late as October, despite the moneys having been allocated in the budget for that year. We all understand there is a procedure to be followed for recruitment and that some posts are difficult to fill. I know from discussions on the issues that it is difficult to recruit some professionals. These positions are to fill vacancies in the community based mental health services, so we are talking about psychiatrists, psychotherapists, occupational psychologists, family psychologists and a range of professionals. Of the 233 posts remaining to be filled for last year, 162 are at various stages in the recruitment process. Therefore, while funding was allocated in 2013, there are still a considerable number of posts where recruitment has not even started.
The national recruitment service creates national panels in anticipation of vacancies. It points out however that on occasion it is difficult to fill posts for various reasons, including availability of qualified candidates and geographical location. That is understandable, but my concern is the time lag that exists in regard to implementing recruitment provided for by the moneys allocated by the Minister. In addition, specific specialist staff are required to fill 91 of these posts. The national recruitment service and the mental health service tell us they are working to improve the process. On the issue of child and adolescent mental health services, there are currently 61 teams in place. The recommendation in A Vision for Change was 100 teams.
In 2012, some 150 of the 414 additional posts for mental health were allocated to community mental health services. The budget for the National Office for Suicide Prevention was increased from €4 million to €7.9 million in the past two years. Now, from a budget of €20 million, just €4 million has been allocated to the National Office for Suicide Prevention. I ask the HSE to look at improving funding to that office. In each of the old health board areas there are suicide liaison officers who deal with communities in difficult situations. These officers should be brought under the auspices of the National Office for Suicide Prevention to ensure co-ordination between all suicide prevention initiatives from the HSE. Gerry Raleigh has been director of the National Office for Suicide for the past 12 months and with him as director there is an excellent opportunity to co-ordinate all the activity of the HSE on suicide prevention and research.
There is only one word to describe the Finance Bill and the budget from which it stems, and that word is "insidious". The Minister tried to pull off some stunt on budget day, with efforts to spin and distract people from the worst of the Government's latest bout of brutal cuts. We said at the time that the devil would be in the detail. In the Social Welfare Bill and now in this Finance Bill, we see that detail.
On the night of the budget a tweet I saw really struck me. It was from a man who described himself as middle aged and well off. He said he was an architect and his wife was a solicitor, with a good income between them, and that they had not been hit by the budget. He said: "There is something wrong with that." In the budget, the Government, to protect higher incomes, did what it has done every year. It went after those on the periphery. It strikes me that the Minister purposely went after parents, at a particularly vulnerable time in their lives, be they separated fathers or pregnant women.
I wonder whether, between the taxing of maternity benefit last year, the successive cuts to child benefit, the under-funding of our maternity hospitals and now this cut to maternity benefit, the Government is committed to some kind of one child policy. I wonder if it is trying to turn the baby boom on its head, because it is making it incredibly expensive for people to have children. For those who think I am overstating the case, I would like to share with Members that only yesterday, my colleague, Deputy Pearse Doherty, received a reply to a parliamentary question from the Minister for Social Protection. She said in her response that maternity benefit on average in 2013 was paid to almost 22,000 women per week, but that in 2014 she expects it to be claimed by only 16,500 women per week. I am not joking. Either we must assume 5,500 fewer women will have babies next year because they cannot afford to have them under Government policies, or we are back to relying on emigration. Which is it Minister?
The Minister presented this Bill to us as though it is the answer to the jobs crisis. While I hope some measures will contribute to job creation, I cannot help but be sceptical. What we know is that when the Government has made a big song and dance about tax measures to create jobs in the past, for example SARP, it has not followed through and told us how many jobs it created.
I want to talk now about the substance of some of the measures in the Bill. The briefing note on the Department's website on the one-parent family tax credit points out that there was a flaw in this credit, in that it could be claimed by anyone even if he or she did not have a familial relationship with the child, provided the child stayed with them one night a year to be looked after. There is no doubt this was a flaw, but it should have been fixed by narrowing the definition. However, what the Minister did was abolish the credit. As a result, now mainly separated fathers - because the primary carer will be considered to be the parent in receipt of child benefit - have been hit with an extra tax of €2,490 a year. Even if the Minister moves to keep the extended tax band for these parents, they will still pay an additional €1,650 a year.
It might make sense to the Minister in his twisted logic that only the primary carer of the child has any expenses for that child, but I can tell him he is wrong on that score. Separated parents operate two households with two sets of expenses. This is a shocking tax hike on fathers. The Minister did not come into the Chamber on budget day and state every separated father in the State will pay an additional €2,500 in tax next year; he dressed it up as a name change for the tax credit. It is now apparent what he are doing, which I believe is shameful.
It is really astounding that after almost a year of consideration on how the standard fund threshold would be reduced, the Minister managed to include it in the Bill in such a way as to confuse even the experts in the field. Finance Bills are by definition difficult pieces of legislation, but when even the pension lobbyists are scratching their heads as they try to make head or tail of what the Minister is doing it must be a record. It is of concern that after promising the measure would raise €250 million in 2014 we are now told there is a €130 million hole in the budget and the standard fund threshold reduction will bring in only €120 million. I can only assume the pension levy which the Minister has hiked up and decided to keep going in some form will not be used for either job creation or pension crises but instead to fill this deficit in his figures. There are easier ways of approaching the tax treatment of pensions. They were contained in the national framework with which he agreed and which included a reduction in tax reliefs and pensions. He might consider revisiting this matter next year.
In recent years following budgets the Minister announced he was undertaking a review of various sectoral tax treatments. This year it is agricultural reliefs and last year it was research and development. When my party brought forward a Bill earlier this year calling for the equality proofing of budgets, he and his colleagues in the Labour Party voted it down. Equality proofing catches measures such as the one introduced for separated fathers. It ensures groups on the margin are not picked off or pitted against each other one by one. Anyone reading the Finance Bill or the Social Welfare Bill can see why the two Government parties are so set against equality proofing of budgets, but I continue to urge the Minister to make 2014 the year he commits to examining budgets and the Bills which follow them from an equality perspective, because it is badly needed.
I have heard a number of Government Deputies laud the fact that payments for the Magdalen laundry survivors will not attract any tax. All of us would have assumed this would be the case. I am very shocked to hear them highlight this as the big strength of the Finance Bill because as we speak not a single survivor has seen a single shilling by way of redress. In the time since the Taoiseach made the apology to the survivors and the redress scheme, such as it is, was agreed, two further survivors we know of have died and will never receive a single shilling, taxed or otherwise, by way of redress. I find it hard to listen to the compliments on the Finance Bill of Government Deputies commending the Minister on not taxing payments to women who, let us remember, were held against their will providing forced slave labour and who lived with stigma and trauma for decades afterwards. On the occasion of the reading of the Finance Bill I urge the Government to get the finger out, straighten out whatever difficulties there are between the various Departments, ensure the services these women deserve and ensure they get the very modest compensation envisaged by the State tax free and promptly. I hope in the course of the debate we will not hear another crowing Deputy from Fine Gael or the Labour Party on anything, but above all on the issue of compensation for the Magdalen women.
The word "austerity" has been used so much by the media, in this House, and by figures in financial and banking institutions that to many people it seems to have lost all meaning. Many ordinary people in the street hear about austerity, and to a large degree, lose interest in what is being said, as if it is something that does not apply to them but a mere political phrase and something technical about which they should not have to worry when, in reality, it affects them very deeply. What austerity means to ordinary Irish people in the street is doing without. For many it is more than that; it is poverty, which is often quite severe. It is the inability of a family to pay a bill in a given month, having to do without presents for a birthday or going months and months into arrears on a mortgage simply to be able to put food on the table or turn on the heating. It is about being unable to access key services one had relied on, whether local community services, the bus into town or being able to get in to contact with local gardaí. It means hardship and suffering and people looking at what is coming in and what is going out and deciding that maybe they would be better off making a life for themselves somewhere else. Specifically, austerity is the decision made in Government that this suffering is necessary, that there is no other way, that the burden cannot be picked up except by those at the bottom, and that those well-off bankers and speculators, who laughed at us to each other, cannot afford to take a hit. Austerity may have become a sanitised and technical term, but for what it truly means it ought to be an obscenity.
This is a deeply flawed Bill which not only fails to tackle the massive disparity between the wealthy and the not so wealthy in the State, but which furthermore punishes the least well off yet again. The most obvious example is the hit the single parent tax credit has taken, which will be very hard on separated parents. Many parents in this category have been in contact with me on foot of this They are angry and feel they have been targeted in a very cynical way. There seems to be a sense that in these situations the cost is borne by one parent, and that the other parent has nothing to do with the life of the child, and that they may never incur any cost due to having a child. Perhaps this is true in the occasional case, but in the vast majority of cases it is certainly not the reality. Children will spend weekends with the parent, who will contribute to their children's life financially, whether in terms of educational needs or sports, or, as Deputy Doherty mentioned, Christmas presents. This is a blunt approach which is regressive and entirely lacking in fairness.
The other big injustice to my mind, though it comes as no great surprise to me I am afraid, is that the Government has not abolished the family home tax. The recent controversy caused by the letters circulated by the Revenue Commissioners illustrate very clearly that people are very worried about their ability to pay the tax. Last year it was half a year's tax which had to be paid and next year it will be for a full year. Many families simply do not have the money to pay this tax - it simply is not there - and to find the money for it they will have to do without essentials. Even aside from the hardship, it has been demonstrated quite clearly, here in Ireland and across Europe, the more that is taken out of the real economy, the more local economies, retail and services suffer. The property tax is unnecessary. It is likely to cause severe hardship and will continue to prove a drag on the economic recovery of our high streets.
I will touch briefly on the aspects of the Bill, and of the budget generally, which affect my portfolio. There are some positive aspects to the Bill. I was happy to see the Minister bow to reason on the issue of the 9% VAT rate for the hospitality sector. I was vocal on the need for this, and worked with the campaigners who organised such an effective lobby. I pay tribute to them in this regard. However, while this is positive, I have criticised the Government for what is a very short-sighted approach to tourism spending, in particular in terms of promotional budgets.
Let us not be fooled. This was no tourism budget. To attract tourists to Ireland and heighten awareness of Ireland as a destination, marketing and promotion are essential. It is a competitive market, so we need to invest. We have very low market penetration in emerging markets such as China, India and Brazil, which should be central to the future industry. Tourism Ireland's target is to increase the number of Chinese visitors from 17,000 in 2012 to 50,000 per year in the next five years. How can that be achieved without investment in promotion?
The position is similar with sport. We were all delighted with the great performance of Jason Quigley and all the rest of our boxers in Almaty. However, Paddy Barnes, our two-time Olympic medalist has said that without more money, Irish boxing is going nowhere. He said:
It's the Sports Council's fault because they need to put money into the IABA in order for them to put boxing out there. It's the best sport in Ireland but with the budget we get, we can't even afford to send the girls away to the World Championships... We're training in a 1970s gym more or less and everything has to be modernised. The Sports Council promise this and that but we put in a proposal for €1.2 million and they only gave us €800,000... We need the money. Without the money, boxing is going to stay the same it as it is.The cutbacks to spending on sport will hit across all sports, such is the scale of the cutback to the Sports Council. They are not getting the support needed, which will result in less success, no doubt about it.
I have long been an advocate of protecting our heritage, and I have seen the value of protecting our built heritage in my own home town of Youghal. I am not sure if the Minister for Finance is familiar with that particular example, but the Minister for Arts, Heritage and the Gaeltacht will be, and it is an initiative I have been keen to support. I also recognise the considerable value of the Georgian heritage of Dublin and of our other main cities. It was truly an act of cultural vandalism that so many of our great Georgian terraces and mews in Dublin were demolished. However, we are not particularly clear yet as to how the Living Cities initiative will work in practice. More detail is needed. Indeed, as my colleague, Deputy Pearse Doherty, noted last night, it is peculiar that before the pilot which was announced last year is even begun, the initiative is being rolled out across other cities.
We have a very bad track record on property reliefs in this country and, while this relief is dressed up in the context of preservation and of heritage, I am yet to be convinced. It appears to be very broad. The document which accompanies the scheme states: "There will be a broad definition of 'refurbishment' and the types of activity that will be covered." We need to hear more about the type of work covered and the rationale for it, and I am open to hearing these arguments.
As well as mistaken approaches, there are many missed opportunities in this Bill. The most significant among them is the failure to introduce a wealth tax. The same public I spoke about earlier, which is exhausted and fatigued from hearing the word "austerity", should be asked what they think about a tax on wealth. They will not be long in telling the Government what they think about it. It registers with them because it just makes sense. It fits with their sense that those at the top, the wealthy, do not contribute their fair share. It is a widely held view. The need for a wealth tax is unanswerable.
It is not just us. It is SIPTU, many in the wider trade union movement and many economists. However, the Minister dismisses it and says it is unworkable and will raise nothing substantial. He has no evidential basis for this; he is simply worried about taking on the real vested interests in this country. That is the case for this Bill as a whole, and that is a case for the budget as a whole - more austerity and more hardship.
There is much to be positive about in this Bill. It is a Bill which, in my opinion, has job creation at its centre. I want to take this opportunity to identify some aspects of the Bill where improvements may be made to the efficacy of certain provisions contained therein. I would be hopeful the Minister for Finance will be positively disposed to accepting some of these propositions, many of which I argue are logical, cost-free and make sense.
The Living Cities initiative, to which Deputy McLellan referred, is an excellent and potentially very progressive scheme. I note the Bill covers Cork, Dublin, Galway and Kilkenny in terms of this element of the pilot phase. Originally, as I understand it, it also covered Limerick and Waterford. I am assuming the take-up was quite positive.
The Chair will forgive me for being shamelessly parochial for a moment but, given the Minister has included Kilkenny in the extended scheme, I do not believe there is any good reason that he cannot also include two even larger urban areas, namely, Drogheda, my own home town, and Dundalk. I do not believe any town in Ireland can claim to have been bypassed by the ravages of the recent economic collapse but no town in central Ireland can boast the equivalent historic and, arguably, the architectural merit of Drogheda, an ancient medieval city. I have been a long-standing advocate of the regeneration of the historic and commercial heart of Drogheda. Opportunities were missed in the good times to provide the kind of incentives we are now offering to encourage living urban spaces, living over the shop and so on. As the Minister acknowledges through this initiative, we need vibrant and sustainable town centres that do not close at 6 p.m. or 7 p.m. but remain dynamic, vibrant and family-friendly, 24 hours a day, seven days a week. I urge the Minister to make provision in the Bill for the inclusion of towns such as Drogheda and Dundalk, the two largest towns in the State.
There has been much debate in regard to the provision in the Bill in respect of the change to the single parent tax credit. I must admit to having some concerns in terms of how this will be applied and some of the damage that may be done. I note the Minister announced this morning that he will be making some changes on Committee Stage to elements of the provision, which will be helpful to some but, I would argue, will not be helpful to quite a large cohort of individuals who will be affected.
As a case in point, a situation which has been drawn to my own attention by a constituent, and which I have reflected on at some length, involves the following. The man is a separated father of a teenage child, with joint custody and guardianship rights, where the caring duties are shared evenly by both the mother and the father. His former wife is considered formally by the State to be the child's primary carer and she receives the child benefit payment, which is understandable. Under the current system they both enjoy a tax credit as parents whose relationship has ended and they both have the legal responsibilities that I outlined. Under the provision contained in the Bill, he will lose the tax credit while his ex-partner, who earns a multiple of his salary, will continue to receive a credit, even though the costs of parenting and rearing the child are in many ways shared equally by both parents.
This is a difficult situation for anybody to accept. It is my firm opinion that a better way should be found through the tax code to provide equal supports, in so far as is practicable, to both parents who have legally binding caring duties for their child or children. The House may be familiar with a proposal by One Family, a long-standing organisation working with those who are parenting alone. It has argued for the introduction of what it terms a shared child support credit. This could be considered with an associated adjustment to the tax band to reflect the equal cost and the parity of parenting under circumstances where the family and parents are subject to written child support agreements. This would be a much more sustainable and fairer way of reforming the system as it currently stands.
I am pleased, on foot of the Minister's statement this morning in his Second Stage speech, that he has accepted the logic of aligning the relief of the long-term unemployed with the 12-month eligibility period for the back to work enterprise allowance. This is a logical step. I am glad he will address this anomaly because I was wondering aloud as to why there was a three-month disparity in terms of those who could take up this relief for the long-term unemployed, so this is a very positive step.
As the House knows, some 20% of our long-term unemployed were formerly employed in the building sector.
The argument has been made that until such time as significant numbers of construction workers return to sustainable employment, we will continue to have a stark and distressing unemployment problem. We are, however, making serious inroads into addressing that matter.
The provision to allow for a VAT rebate in respect of home improvements is both eye-catching and practical and will ensure that construction workers return to employment. It will also incentivise people to spend moneys which they may have on deposit with their banks. This will assist in getting the economy to move further in the right direction. A key component of the Government's energy strategy and its jobs strategy is to promote and incentivise the retrofitting of homes and other properties. This will have the effect of getting people back to work and of ensuring that buildings are much more energy efficient. It would be short-sighted and would betray the notion of joined-up government if we failed to integrate energy efficiency measures into this package. We are all happy to provide some assistance to the construction industry and to ensure that those previously employed in that industry return to work. However, we must also be mindful of the need to incorporate requirements relating to energy efficiency into the Bill. To that end, the tax rebate should also involve a requirement to improve all-round energy efficiency in homes which benefit from the rebate. In this regard, I refer to projects involving the spending of €10,000 or more.
There should be an onus on homeowners to prove that work has been undertaken in order to improve the BER ratings of their properties. This is a matter on which the Bill is currently silent. We must ensure that the good work of the Minister for Communications, Energy and Natural Resources and his colleagues in government in respect of promoting energy efficiency is aligned with the intentions and actions of the Minister for Finance and his Department. While I accept that the Minister for Finance may be reluctant to be overly restrictive in terms of the application of the relief in the context of who may or may not qualify, there is a strong case for the inclusion of an obligation in this regard in the Bill for those who wish to take advantage of this very eye-catching and positive incentive.
I commend the Minister for Finance, Deputy Noonan, on the competent way in which he has negotiated on our behalf in Europe and I compliment him on his huge achievements in the context of regaining our credibility on the European stage. He and the Minister for Public Expenditure and Reform, Deputy Howlin, have skilfully crafted difficult budgets in order to reduce expenditure and meet troika targets, while simultaneously stimulating the economy through incentives designed to support businesses and create jobs. The introduction of the 9% VAT rate in the hospitality sector was a major success. I welcome the fact that this reduced rate of VAT has been retained. I commend the Irish Hotel Federation and the Restaurant Association of Ireland on their excellent lobbying campaign in the lead-up to the budget. This very effective campaign was similar to that engaged in by the IFA.
The home renovation incentive is very welcome for self-employed builders whose businesses were decimated in recent years. I am glad that work done from 25 October last onward will qualify for tax relief in 2015 and 2016. I know this measure is going to prove effective, particularly as a number of individuals have already made inquiries with my office regarding the works that will be covered under the scheme. This incentive will encourage people to spend and will ensure others return to work. It is in this way that our domestic economy will recover.
Earlier today the Minister for Finance reiterated the Government's commitment to our 12.5% corporation tax rate. While the latter is obviously a major incentive in the context of inward investment, reputation is also vital. The job the Government has done to restore our international reputation as a country in which it is safe to do business is paying huge dividends in the context of the number of international businesses that are locating here. How matters have changed in the past two years. Instead of listening to a constant stream of announcements relating to job losses on morning radio programmes, we now listen to good news regarding job creation. Proof of this lies in the fact that we are creating 3,000 jobs per month and that the numbers on the live register have fallen for 16 consecutive months. I want that trend to continue and I want to hear more good news about job creation, particularly in respect of the Cavan-Monaghan constituency I represent. I am committed to working hard with my colleagues in order to ensure this is achieved. There is a concern among those in rural areas that they could be forgotten, particularly as the majority of job announcements relate to our cities.
Under section 23, the exemption from deposit interest retention tax, DIRT, relating to credit union share accounts will be abolished from 1 January 2014. This means that the exemption applied to members of credit unions who opted not to pay DIRT will be removed. Credit unions currently maintain two types of share accounts, namely, special share accounts and regular share accounts. DIRT is deducted from dividends relating to the first of these but it is not deducted from the second. The categories of those who hold regular share accounts include members who hold DE1 tax exemptions, namely, those who are over 65 and whose total incomes are less than the relevant limit and those who are permanently incapacitated, those who are otherwise exempt from paying tax on foot of their income levels and those who are liable for tax and who declare their dividends by means of annual tax returns. A regular share account is, therefore, a good workable choice for credit union members who are not liable to pay income tax.
The proposed changes will mean that apart from DE1 tax exemptions, all regular share accounts will be liable for DIRT and this will be deducted at source. Credit union members who are going to be adversely affected by these changes will be those whose accounts are not liable for tax, particularly those of children. We are striving to instil in our children the value of saving regularly. Not only will what is proposed act as a disincentive for them, it will also impose - for a negligible return in terms of revenue - a huge administrative burden on the Exchequer and credit unions. Perhaps the Minister will consider extending the tax exemption system to take into account children up to the age of 18 or 21, if they are not in employment. He might also consider inserting a monetary limit after which DIRT would become payable on dividends paid by credit unions. In that context, I suggest that only those credit union members who earn dividends in excess of €50 per annum in respect of their regular share accounts should be liable for DIRT.
On the subject of credit unions, we are trying to stimulate spending in the economy. In that context, the Central Bank needs to re-examine its approach towards credit unions that have demonstrated their improved financial circumstances. Now would be a good time to review some of the restrictions that have been put in place. Many credit unions have made great progress in developing their business models. They have also made good progress in building up their reserves and provisions. Surely the Central Bank should revisit this matter and show some latitude by easing restrictions on credit unions and allowing them to lend reasonable amounts again. Many credit unions reach their lending limits for a particular month within the first week. I ask that the Minister raise this matter with the Central Bank.
I reiterate that I welcome the many positive measures included in the Finance Bill. I ask the Minister to examine the points I have made in respect of credit unions.
I welcome the opportunity to contribute to the debate on the Bill. Last week I led a delegation of backbenchers which met representatives of the troika. In that context, I was struck by the fact that there are two areas in which we still have significant room for improvement, namely, those which relate to competitiveness and labour activation. The Bill contains a number of labour activation measures. In the context of the start-your-own-business scheme, I welcome the fact that the Minister intends to reduce the qualifying period relating to jobseeker's benefit from 15 months to 12. However, I would like an exact definition to be provided in respect of what constitutes qualifying for jobseeker's benefit or allowance. The Bill contains reference to serial entrepreneurs in this regard. We must allow those who were previously self-employed to become self-employed again. The self-employed encounter difficulties in having themselves defined, for the purposes of claiming social welfare, as being unemployed when they are out of work. I accept that there is a difficulty in respect of people closing businesses and opening others but I am of the view that - in the context of the relevant exemption from income tax - we should make it as easy as possible for those who have been self-employed to prove that their businesses have closed. One of the great failures of society in Ireland and across Europe is that it is not sufficiently forgiving in respect of those whose businesses have gone to the wall.
I wish to refer to a matter which is quite dear to my heart.
Last year, the Fine Gael Party held a meeting to hear proposals from Members on job creation schemes. The home renovation scheme is similar to a scheme I proposed at the meeting, while others have also proposed similar schemes. While I will not claim my proposal was better than the scheme before the House, there are some differences between them.
The home renovation scheme has two objectives, namely, to create employment and reduce activity in the black economy. I have two suggestions in respect of the scheme, which I also propose to discuss formally at the Select Sub-Committee on Finance. The provisions of the Bill are not especially strong in cases where a contractor does not submit invoices. For example, if the contractor closes down or the company goes bust, the scheme offers a significant incentive for him or her to submit the invoices for the work covered by the scheme. This issue should be addressed. If the aim of the scheme is to reduce activity in the black economy, it would be preferable if customers were to provide the invoices for the works done. If a contractor did not want to pay VAT and was supplying invoices and dealing directly with the Revenue Commissioners, he or she would be able to ascertain the cases for which invoices would have to be shown and declared. If, however, the homeowner was able to collect a number of qualifying invoices over several years, before submitting a claim to Revenue for a VAT rebate as a tax credit, the contractor would not know which of the invoices being generated by his or her company would be used for the purposes of the scheme. One assumes, therefore, that a much great proportion of the invoices generated through the business would go through the books, as it were. I appreciate this approach could present difficulties in terms of paperwork. At any rate, invoices will have to be submitted by the contractor, homeowner or other person having the works done. The incentive to ensure paperwork is in order would be much greater in the case of the person who is benefiting from the scheme. Such a model would also lend itself to efforts to tackle the black economy. As I stated, the select sub-committee will have an opportunity to tease out the issue in greater detail.
Another issue is the number of contractors that may be included in an application. The text refers to "contractor". While I am aware that multiple invoices can be used, is it also possible to use multiple contractors? This returns me to my earlier question on what would be the position if one of a number of contractors being used as part of the scheme were to cease business.
All of us welcome the stateless company provision in section 38. I am a member of the Select Sub-Committee on Finance, which is examining the corporate tax rate and how it interacts internationally. This provision further enhances our reputation and does not present a threat to any of the companies located in this country. Contrary to an allegation made by a Sinn Féin Deputy, the Fine Gael Party has been advocating this type of approach. I welcome the measure as it copperfastens our corporate tax rate at its current highly competitive level. I look forward to discussing the legislation in greater detail at the Select Sub-committee on Finance.
I welcome the opportunity to contribute to the debate on this Bill to implement changes announced in the budget. The Minister's statement that growth is expected to be 2% in 2014 is unrealistic. Already this year, growth projections have been downgraded on a number of occasions, as they have been in every year in the lifetime of this Government. The projected growth rate of approximately 0.2% this year is effectively zero growth and the budget will not contribute to any improvement in the figure for next year.
I question the need to make the adjustments outlined by the Minister in his budget, including the expenditure cuts he announced. The Department of Finance estimated that a completely neutral budget, in other words, one without expenditure cutbacks, would reduce the deficit to 5.8% next year, based on a growth rate of 0.5%. This indicates that, with only a little work, we could have achieved the troika targets. Citizens would have been confident in the knowledge that they would not experience cuts, which would have achieved a bounce in consumer sentiment in 2014. It was possible, therefore, to meet our targets without the painful adjustments that have been introduced.
I propose to concentrate on two aspects of the Bill. Sections 5 and 6 provide for a home renovation incentive. While the scheme has been widely welcomed, it does not go far enough. After the budget, one commentator argued that the scheme would only benefit people who were in any case prepared to pay VAT and had budgeted for that purpose. I concur with the assessment that it will not have the desired impact on the black economy. Compliant contractors who include VAT in their invoices have many more compliance costs than contractors who are operating in the black economy. Health and safety, insurance and other compliance issues further increase their estimate costs as against those of non-compliant contractors.
Achieving the desired effect in terms of tackling the black economy would require the tax rebate to be set at 20%. I ask the Minister to consider making such a change at a later stage. The effect of such an increase in the rebate would far outweigh the measure's impact in terms of revenue foregone by the State, particularly when one considers that the tax credit is spread over two years after the expenditure is incurred.
On the single parent child carer credit, the Minister indicated that he intends to table an amendment on Committee Stage to allow the non-resident parent or parent who is not the primary carer to avail of the tax credit if the primary carer does not have a tax liability. This is a worthwhile proposal and I commend the Minister on his decision in this regard. I look forward to its implementation on Committee Stage. I have received a number or representations from couples where the primary carer lives in the Six Counties and the father lives in the South. This means the primary carer does not have a tax liability in the State. I presume the proposed change will apply to families in such circumstances and that the father resident in this jurisdiction would be able to retain the tax credit. The proposed amendment will go some way towards alleviating the concerns of many people about the measure provided for in the budget.
Persons who avail of the carer's tax credit are subject to a specific tax band. I understand the standard rate tax band for a person in receipt of the child carer credit is up to €36,800 but the upper limit would fall to €32,800 if the taxpayer were to lose the carer's tax credit. Will the Minister consider providing that parents who lose this tax credit will not have their tax band reduced? This would soften the blow to non-resident parents. I am not sure if such a change would require an amendment to the legislation or could be introduced by means of a direction issued by the Minister to the Revenue Commissioners.
That would soften the blow for many people because it would mean approximately €850 per year for those affected. That would allow them to continue paying maintenance for children who are with the primary carer.
In regard to the start your own business incentive scheme, the budget estimated that it would €1 million in tax expenditure over the next couple of years. I wonder how effective the scheme will be in encouraging people to start their own businesses, particularly in respect of allowing self-employed people to get to the point where they incur a tax liability.
The increase in DIRT is regressive because it targets both small and large savers. The Labour Party lauded this measure as part of the wealth taxes it introduced in the budget but this is not a wealth tax because it affects all savers. It should be possible to introduce a targeted DIRT increase for those who benefit significantly from savings.
I am still in shock at the contributions from certain Government backbenchers who claim this is a great budget and that the Minister grappled creatively with the issues in these difficult times. Supposedly we are all making sacrifices and are about to turn a corner. The reality is that the times have not been hard for all of us and the times will not be hard for those who again escaped the measures in this budget. I want to speak not only about what is contained in the budget but also the decisions that were not made. It is clear that the taxation elements of the budget reflect a strategic decision to ensure those who are wealthy remain wealthy and that the State does not play a role in income distribution. The budget has in fact been a mechanism for perpetuating inequality.
The Government could have considered several different measures that would have altered the situation for the better. It is conservatively estimated that a tiny tax of 1% on wealth over €1 million would generate between €300 million and €700 million, compared to the €400 million taken through the hated home tax. An increase of 1.5% in income tax for the top 10% would yield €400 million. The Government makes great virtue of the fact that corporation tax has remained untouched. I do not celebrate that. If we implemented the effective rate of corporate taxation, which is already among the lowest in Europe, we could generate an extra €2.3 billion per annum. If we raised it to the European average we could generate €7 billion. Cutting tax relief on pensions to the standard rate of 20%, as was recommended by Social Justice Ireland, could yield €500 million. The majority of beneficiaries of that tax relief are in the top 20% of earners. Implementing any or all of these measures would have allowed the Government to reverse some of the cuts of previous years and stimulate economic activity.
The only way this society and economy will recover is through job creation. The idea that job creation will come from this budget is laughable. We know the €500 million tax relief package is not going to work because we had the same thing last year. The targets proposed are always greater than what is delivered at the end of the day because of the need to rely on the private sector. We do not know how much activity would have taken place anyway. The home renovation scheme is a good example of that. The Government had to move the date forward because a considerable number of people cancelled orders with builders to reschedule the work for the new year. If we are to stimulate economic growth we need a State-led investment programme of public works. Instead of this, however, the budget introduces one law for ordinary people and another for everyone else. That was exposed in the property tax debacle of the past several weeks, in which respect the Government has lost the hearts and minds of the nation. It may have introduced legislation allowing it to take money from people's pay packets and pensions without their permission but it does not have the same enthusiasm for dealing with white collar crime.
The Minister made some changes to the section 851A of the Taxes Consolidation Act but I do not think he altered the provision inserted into section 77 of the Finance Act 2011, which I have raised in parliamentary questions and the Office of the Director of Corporate Enforcement has repeatedly highlighted in its annual reports. The office has made it clear that the aforementioned section the office prevents it from properly pursuing white collar criminals because they are not allowed to access the information they need from Revenue. The office has asked the Minister to introduce legislative changes to allow it to deal with white collar crime. From my reading of the measures proposed in this Bill, such amendments have not yet been prepared. That goes against open and transparency in taxation matters.
One of the most controversial aspects of this Finance Bill is the assault on separated families and, because of the way these issues work out, separated fathers in particular. A number of Deputies have raised this issue. I note that the Minister has rowed back a bit but it is not enough. He is still discriminating against separated people. When couples separate the costs are immense and they have to deal with emotional and financial difficulties in negotiating maintenance agreements and engaging in responsible parenting. The Minister is attacking them for that. There are many unanswered questions even with his concession. If the principal carer is not working and the allowance is claimed by the other parent, what happens if the principal carer returns to work? What happens where parents share child care on a 50:50 basis? What about families in dispute? There is no doubt that the provision will lead to an avalanche of court cases as people renegotiate or renege on maintenance orders because they cannot afford to undertake their responsibilities. It is socially regressive and I urge the Minister to abandon the proposal and stop discriminating against separated people.
I welcome the opportunity to comment on the measures announced in the budget which have left many people throughout our country in a far worse financial position. While there was welcome relief for some sectors of our society many other sectors, including the elderly and the young unemployed, will face a very difficult year in 2014.
Some of the measures contained in the Finance Bill have only recently emerged because they were hidden in the fine print. This in itself tells us that the real agenda of this Government has nothing to with public accountability. It does not even have the courage to be upfront with those very people the measures will target. I was almost amused, if it was not so serious, to hear the Minister for Finance say there is room for optimism for the remainder of the year. I wonder what planet Ministers are living on when they can come into this house and utter such patent nonsense given the context of the near total collapse of the health service even as we speak and the plans to proceed with savage and life threatening cuts to the capital budget of the HSE which are being urged on by the Minister for Public Expenditure and Reform.
It is equally telling that the Minister told us that the fact of 2014 being the first year in which we will seek to overachieve a general Government deficit of 4.8% of GDP means this will somehow cushion us from any possible external shocks. I wish the Minister was right. This is not just absurd wishful thinking but reminds me of the constantly repeated mantra we heard from those in the Department of Finance before the meltdown that Ireland was sufficiently well capitalised to withstand any crisis that may afflict us. There is certainly a worrying parallel here.
I would like to raise some concerns about the home renovation incentive scheme. I and many others lobbied for it and initially welcomed it but further analysis has shown it is insufficient in that it excludes families or homeowners without taxable incomes. It is a good start and it will be built on but that element is disappointing.
Despite the utterances of the Minister before the budget to the contrary, I welcome the continuation of the 9% VAT rate for the hospitality sector. That has proven to be a success and it is great that the Minister understands and accepts that. Compliments all round. There is also the question of why it will take two years to recover the complete tax gain in respect of the home renovation incentive scheme.
Like many other Deputies, I have been inundated with e-mails and calls from distressed parents, fathers in the main, who will suffer enormously because of the changes being introduced to the one-parent family tax credit as dealt with in section 7 of the Bill. It has rightly been pointed out that there is no such thing as a one-parent family, only a one-parent household. It is important not to lose sight of the point. The new single parent child carer payment replacing it is deeply punitive and targets separated and divorced fathers in a cruel and mean-spirited way. The Minister's speech this morning suggested he will re-examine this mean-spirited point. While I am glad that an amendment will be introduced on Committee Stage, this does not go far enough. I urgently call on the Minister to abandon this measure altogether because it is cruel and punitive.
Once again, the Minister did not tax wealth. It is incredible that the Labour Party in government instituted a budget that is regressive and hits the poorest the hardest. I understand it from the perspective of the Minister for Finance but not the Labour Party. Small businesses are also facing more pressure as a result of budget 2014. The Government is doubling the employers' liability for staff sick pay from three to six days. This amounts to a €22 million hit for small businesses. I run one of them and I am sure others are discussing the matter with the Minister. Meanwhile, there is only a token mention of the credit crunch affecting small businesses, with no targeted measures that will finally see viable SMEs getting the credit they need to stay in business and create jobs into the future. If all businesses were allowed to create one job, we would halve our unemployment situation. Millions of euro were promised by the banks to Brian Lenihan - God rest him - and the current Minister but the banks are not lending. On top of this, the Minister's well publicised build your business initiative, aimed at promoting initiatives at the Department of Jobs, Enterprise and Innovation, comes on the back of a 19% cut in the Department's promotional budget. There is also a significant reduction in support for the State job agencies. The IDA and Enterprise Ireland took a €15 million cut in the capital budget at the Department of Jobs, Enterprise and Innovation. Is this really what we mean we speak of the need for a dedicated focus on job creation? I think not.
The Professional Agricultural Contractors of Ireland lobbied the Minister last year for a rebate on carbon tax but he says he did not know in time. The Minister gave it to the road hauliers and extended it to the bus owners. I am very disappointed he did not examine this section of society, which is vital to agriculture and Food Harvest 2020. I do not know why the Department did not accept the following proposal. I know that the IFA lobbied against it. Every contractor who received a cheque should receive an invoice. It is not rocket science, it is quite simple and I hope the Minister will include it at some stage in the Bill. It is badly needed.
The cuts to farm schemes contained in successive budgets have contributed to a fall and the fodder and consequent financial crisis experienced in 2013 should alert the Minister to the requirement to fund fully the farm schemes on which so many families depend. We should know that as we only came out of the fodder crisis in June. Spending of €1.2 billion has been allocated for 2014, which is substantially down on the figure for last year. I refer to the closure of the REP, early retirement and the suckler cow schemes, although the Minister is doing something - very little - in the case of the latter. The same applies to the disadvantaged area scheme, which is a pity.
The meanest measure of all is to hit the telephone allowance, the pendant alarm and the bereavement grant of €850. Last year the Minister taxed the hearse and I foresaw that he would tax the shroud. This year, the Minister has taxed the corpses. Will they be left overground? It is the meanest measure. The Taoiseach and other Ministers said they do not know how many people have died for whom pensions are still being claimed. That is absurd because the HSE knows who is finished when a death certificate is signed. This is the meanest of all and I am very disappointed.
I propose to share time with Deputy John O'Mahony. I welcome the opportunity to speak on the Finance Bill. We can all celebrate that it is at least possible that this budget, tough as it is, may be the last tough budget. We also have to acknowledge that it is at least partly because of the tough budgets we have endured since 2008 that there are now signs of a pick-up in the economy and definite jobs growth. At the outset I acknowledge what has been achieved on the broad economic front because, inevitably, I will focus on aspects of the budget about which I have concerns.
The first issue is the single parent tax credit and I welcome the fact that the Minister has responded to concerns. It was an unintended consequence of change and I am glad there was a response. There would be no winners if the change was not made.
I refer to the change in the pension levy. There is a lack of appreciation of how onerous it is, in particular for those approaching retirement who suddenly find their income has taken a hit because of the collapse in the market. Their income is now depleted and their income in retirement will be so much less than they hoped, planned and saved for over 40 years. It also represents consumption forgone over that time. We cannot blame people for being concerned, stressed, annoyed and resentful of it. I am not speaking for the pensions industry but for those savers who could never hope to amass pensions like ours in the public service but who made major sacrifices over their lifetimes to save what they could. Increasing the levy and extending it is breaking faith with savers having given a firm commitment that it was to be a finite four-year levy when it was introduced. The Minister referred to issues with the industry but that has nothing to do with the savers, who have no control over what pension fund managers discussed and who have no leverage. They should not be punished for whatever happened between the Minister and the industry. I ask the Minister to reconsider this tax extension.
It is also being suggested that the levy on defined contribution pensions should be used to compensate defined benefit pension funds in deficit. I hope that is not being considered as it would be an absolute travesty of justice and fairness if those who make the personal sacrifice to save for their pensions should have to take the hit for others. As a country, we went to extraordinary lengths to protect savings people had with the banks and it seems to me savings for old age held in pension funds should be at least as worthy of protection.
A related issue is the penal tax on pension funds in excess of €2 million. I have no problem with the limit on tax relief because there is a limit to what taxpayers can do to encourage pension savers. I have had a number of irate pension savers contact me querying the exclusion from this tax of public sector pensions. There is no fund in the public sector but the point is being made that the same tax yield could be achieved if there was equity across all pensioners. Private pension defined contribution savers see themselves as an easy target and under attack. I ask the Minister to exempt the people who are in the heartbreaking situation where they are nearing retirement and the pension fund is being wound up. They get last dibs on whatever is left and it is usually precious little. Applying a levy to them is rubbing salt in their wounds and perhaps the Minister can examine that particular group.
I refer to the property tax, which will be a considerable aspect of and contribution to Government budgets from 2014.
I have to say how disappointed and even annoyed I was to hear that the promise of 80% retention of the tax collected by each local authority is to be postponed. I have always supported the principal of property tax, but it is no secret that I opposed the method of calculation which is based on the national spread of property values, not on the local cost of delivering services. This results in Dublin households paying not only more than anywhere else, but also more than necessary for their local services. Of all the countries at which I have looked, I cannot find any country where a similar method of calculating a local tax is used.
When the tax was introduced, to mollify the Dublin citizens the promise was made that 80% of taxes collected could be kept and spent locally, and that from 2015 local authorities could vary their charge, up or down, by 15% so that the overpayment could be returned to householders. We find now that the local authorities will not keep the 80% in 2014. This raises real concerns about what will happen in 2015 and whether the power to vary charges will ever really exist as no local authority can vary, up or down, what it does not get in the first place.
It has been suggested that the postponement of the 80% retention promise is due to setting up the water authority and the introduction of water charges which, I accept, will change the overall costs of local authorities, but I honestly do not see how it will impact on the relative disadvantage to Dublin of the local property tax. It is vital that the promise of 80% retention is kept, if not this year, certainly next year. We cannot break faith on an issue like this at a time like this when certainty is so important to householders. This tax gained some acceptability in Dublin by virtue of the promise that local authorities could return to householders some of the unnecessarily high tax they would pay.
In my local authority of Dún Laoghaire-Rathdown, in a full year householders will pay an estimated €52 million in local property tax, and yet they will receive back from local government a scant €27 million in services, if they receive what they got last year. If that is to be the case, the local authority can only vary the charge by reducing services. To reduce services will not sit well with householders who are paying over €52 million in property tax, particularly when they are put to the pin of their collar to do so and when we know already that properties in Dublin are rising in value and the householders, when properties are re-valued in 2016, if current trends continue, will pay between 30% and 40% more in property tax anyway.
I plead with the Minister to ensure, if not this year then next year, that the 80% retention promise is kept. The ability to reduce or increase the rate does not matter in local authorities where property values are low because 80% of the tax take will be such a small percentage of the local authority's budget and a 15% change will not impact on the local authority's budget. Also, if, where households are paying the lowest band rate of tax of €90, one changes that tax by 15%, it is only a difference of €13.50 per year which is not of any consequence. By golly, there would be a considerable consequence if one changed the rate by 15% in Dublin, where people are paying not only hundreds of euro but, in some cases, thousands of euro, and it will matter.
There are 34 local authorities and we are asking four of them to pay 40% of all the tax. It behoves us to be honest with them, to keep faith with them and to keep promises that we made. I stress the point, not only because of the inequality vis-à-visDublin householders but because our aspirations for meaningful and accountable local government cannot be realised if there is no connection between those who pay the tax and those who deliver the services. There will be no drive for efficiency or responsiveness from local authorities to citizens, for example, in Leitrim, Roscommon or Sligo, if it is Dublin householders who are to pay for their services.
If this tax is to endure, there must be a real advantage to householders who are paying the big money. I say real advantage because the potential to play with figures is enormous. The funding of local government is so arcane that it is important in keeping the promise to retain the 80% that there will not be giving with one hand and taking back with the other. I ask the Minister to ensure there is some possibility of returning some of the overpayment of tax to Dublin householders.
In the few seconds I have left, I will mention the current debate about the collection of the property tax. I am amazed at this because it was raised at the time, in fact, by myself by way of parliamentary question. It was clear as a pikestaff that the payment had to be made before or on 1 January. The reason given was that it was to facilitate deductions, but it was known in July last that 53% of householders did not opt to pay by deductions. That should have set alarm bells ringing about the need to get information out there to avoid pre-Christmas lump-sum payments. I welcome the fact the Revenue Commissioners are making it known how stage payments can be made, but the upset that it has caused highlights once again the importance of real and absolute clarity and honesty with the public when dealing with a tax of this magnitude.
I have not time to raise many of the issues, but I fully appreciate the difficulties facing the Minister for Finance in bringing the deficit to 4.8% of GDP and that doing so must hurt. Even with the hurt, there are welcome job-focused reliefs for the business community in the Bill. It is, in the end, only with jobs that we will see an end to high unemployment and that we can hope to see a return to better living standards and, I hope, lower taxes.
I welcome the opportunity to contribute on the Bill which implements the roll-out of the changes as a result of budget 2014.
I welcome the measures in the Bill that are pro-business, promote growth and are supportive of job creation, for example, the abolition of the air travel tax which had an immediate positive effect that saw one of the air carriers, Ryanair, rolling out a series of new flights at various airports around the country. Last week I attended the launch at Ireland West Airport Knock of the numbers of new flights which will bring 80,000 passengers into the region. Even if each of them only spends €100 while in the region, it will generate €8 million which would have a knock-on effect on tourism and jobs. The challenge is for other air carriers to respond as well. No doubt the abolition of the travel tax, together with the 9% VAT rate on the tourism sector, will generate further growth in tourism numbers where there were solid foundations laid down by the multitude of Gathering events this past year. The growth of tourism is something that spreads right throughout the country. The large cities, such as Dublin, get a significant amount of it, but the most scenic and tourist-orientated areas are rural areas. In that regard, there is an equal playing field.
One unwanted and negative result of a recession is the increase in the black economy. As well as losing millions of euro for the economy, it undermines and seriously impacts those business which fully comply with tax regulations and other charges. For that reason, I very much welcome the VAT rebate for homeowners who carry out renovations on their residence. This measure not only will act as an incentive to carry out renovations at a lower cost but will generate activity in the construction sector and re-employ workers in that area who lost their jobs when the crash came in 2008. It was important that this measure came into effect immediately and I welcome the Minister's immediate response when there was a problem or there was cancellation of some works until 1 January. As regards the shadow economy, this measure illustrates what can be done.
I welcome the extra powers that have been given to Revenue to combat the illicit trade in fuel and cigarettes and the unlicensed trade in alcohol products. I raised this issue on many occasions. I welcome ongoing measures, not as a penalty but because they will bring millions of euro into the economy, they will allow less severe budgets and they will also reward those who are living legitimately and paying all their taxes.
All of these measures to which I referred - the abolition of travel tax, retention of 9% VAT, the home renovation scheme and measures to combat the black economy - will have a beneficial effect. While I welcome all those measures, I have concerns about one issue in the budget relating to the tax relief on private health insurance, and I ask the Minister to look again at it.
This tax relief was always used to encourage people to take out private health insurance. More people taking out private health insurance means less pressure on the public health system, which is stretched to the limit. The Minister in his budget speech referred to gold-plated health insurance policies. However, with the tax relief restricted to first €1,000 per adult and €500 per child, the vast majority of policies will be affected.
I recently met a single person in his mid-30s who is paying €1,128 per year for a policy but who had to pay an excess because a procedure was not covered by the policy, and that excess of €128 was not covered in the tax rebate. This is not a gold-plated policy, yet it is affected by this measure. Another case is that of a 69-year-old woman whose Plan B policy with VHI costs €1,489. This is a basic, no-frills policy but she will lose some of her tax relief. I accept that the provision is aimed at those well-off people who can afford expensive policies, but some people are on the fringe and I ask that the Minister reconsider the provisions.
I very much welcome and endorse the many measures that are pro-business and will provide additional jobs in many sectors of the economy, such as tourism, agri-food and construction. I welcome the positive news about the recommencement of Garda recruitment. The ending of Garda recruitment by the previous Government a number of years ago signalled the crash of our economy. This announcement signals the recovery of that economy. I know a bit about the education sector as I worked in that area for many years. The preservation of the pupil-teacher ratio will be possible with the recruitment of 1,400 new teachers in 2014.
This country has travelled a long and difficult journey over recent years. Certain groups in society have endured much sacrifice and pain since 2008. The troika arrived in 2010 and under its oversight many difficult decisions and choices were necessary. I wish to compliment the inch-by-inch progress achieved by the Minister, his officials and the Government in bringing the country to a point, on 15 December, at which we will be able to exit the bailout programme. While there are still many challenges ahead, at least we will have more control over our own destiny. It is acknowledged in Europe and internationally that this country has stabilised and controlled its economy. In the two years remaining in its term of office, the Government will continue to focus on job creation and the measures necessary for growth and for getting people back to work. This will be the ultimate payback for the people who have had to suffer pain over recent years.
Deputy Denis Naughten is sharing his time with Deputies Lucinda Creighton, Róisín Shortall and Thomas P. Broughan. As there are only 15 minutes remaining, the final speaker will be the first to speak when the debate is resumed.
The issue on which the House should focus is not the Budget Statement of 15 October but rather the event that took place on 21 July in McHale Park in Castlebar. I do not think anyone could have envisaged a team of emigrants from the four corners of Ireland competing in the Connacht final. Successive governments have used emigration as the safety valve for recession. This is a fatally flawed policy because emigration is costing our economy €20,000 every minute in education alone. The emigration of almost 90,000 people in the last 12 months is a huge brain drain from our economy. It is costing the taxpayer €9.6 billion to educate those people so that they can leave this country. This is unsustainable. A figure of €9.6 billion is €800 million a year more than the total expenditure on the education system. Unless we start to bring hope back to the country and to the economy, more people will be leaving the country. The current economic strategy is all about cutting and taxing. We need to give people the opportunity to stand up against the burden of austerity. The vast majority want a hand up rather than a hand-out. They want to be able to ensure that their children can achieve their goals in life and they do not see that happening as a result of the current strategies. Over the years we have exported our skills across the world, particularly in the areas of health care and education. These skills are becoming more of a privilege than a right. It is imperative to establish a climate of hope.
I note the report of the chief inspector at the Department of Education and Skills, which should act as a warning about what is going wrong in the country. That template needs to be used across the public sector and in all Departments. We need to examine where we are doing things wrong and how improvements can be made. Each Department has its key output and impact indicators, but I ask what is being measured. What are our objectives? The difficulty is that everything is focused on short-term measures. Speakers have talked about 15 December, the date that will solve everything. At that stage we will lose the mudguard. We will be out in the economy and borrowing in the markets, which will impose significant restrictions on our economy.
The country needs a clear plan for where we want to be in ten years' time. We have 64,000 eight year olds in the country. In ten years' time they will be doing their leaving certificate. Will they have the opportunity to live and work in this country? Will they be able to afford to go to college in this country? These are key policy decisions that need to be made now. Each Department needs to set out its objectives in order to achieve what we want in ten years' time. Departments need to adopt a whole-of-government approach rather than dealing with issues in isolation. The example I like to use is the issue of school attendance. By connecting the Department of Education and Skills and the Department of Social Protection we could not only save €100 million but provide a real incentive for families from disadvantaged communities to ensure that those children attend school. The resources of the State would be focused on ensuring that those children attend school.
We do not want the crazy situation we have at the moment, where last September 1,500 children failed to turn up in secondary school having left primary school the previous June, to continue.
I echo and support the comments of Deputy Denis Naughten on the need for much more medium and long-term planning in terms of economic and financial planning. I also made this point on budget day. The idea that we come in here every single year to debate measures that have been already determined and decided by the economic management council, agreed by our partners in the European Union, without any debate in the parliament is not acceptable. I know the Minister is committed to a much more transparent and representative process for formulating budgets and I hope he will honour that commitment before the end of the lifetime of the Government.
An issue I wish to focus on in the Finance Bill is the removal of tax relief for more than 500,000 health insurance policyholders. That is the Department of Finance estimate but the industry estimate is much greater. While this provision was introduced via resolution on budget night it will be made permanent by section 8 of the Finance Bill. While it is recognised that savings have to be made in every Department - nobody disputes that - this decision makes no sense either from an economic point of view or from a social policy point of view. When we formulate a budget its purpose is to set out social policy and economic policy priorities. It is not simply to wield the axe and introduce a series of blunt instrument measures.
After the budget announcement took place I joined the Joint Committee on Health and Children. Of course I am not a member of that committee because I am not allowed to join any committees nor are any of my colleagues on the benches beside me. I participated in that committee and I took the opportunity to ask the Minister for Health whether there had been any consultation between himself and the Minister for Finance on the tax relief change. He said it was a matter for the Minister for Finance and not for him as Minister for Health. That is not credible for a number of reasons. It is not credible, first, that the Minister for Finance would introduce such a measure without consulting the Minister for Health - I do not believe the Minister for Finance, Deputy Noonan, would have done that - and, second, that the Minister for Health is not concerned that the measure will directly damage the programme for Government policy of rolling out universal health insurance.
The reality is that 45% of the people have health insurance and 47% have medical cards or general practitioner cards. There are just 360,000 people, that is the official figure, who have neither health insurance nor a medical or a free general practitioner card. This pool of people is growing rapidly and is suffering most. Through separate measures the Government is seeking the removal of medical cards to make savings of €160 million and at the same time indirectly causing an increase in people's health insurance premiums through the change in tax relief which further pushes people off both insurance and medical cards. We are increasing the cohort in the middle. One would have to question the logic or the vision behind this measure at a time when we are supposed to be moving towards a universal health insurance. It is a contradiction in terms. Once people realise how expensive their premiums will be as a result of this change, many will simply dump their policies and join the back of the queue in the over-burdened public health system. Since 2008, approximately 240,000 have opted out of private health insurance. That figure is growing. That means those additional people are obliged to further burden their public health system and the measure contained in the Bill will simply add to an overwhelming burden on the public health system at a time when resources are limited and are being cut back which, quite frankly, is madness.
In the US, which is currently implementing a very controversial universal health insurance plan, the law provided for tax credits for 17 million people to encourage them to take up private health insurance at a time when we are actively discouraging people and forcing them out of the private health insurance market. It simply does not make sense. As far as I am aware, there has not been an impact assessment of this decision and I urge the Minister to reconsider it and, perhaps, discuss it with the Minister for Health.
In last year's budget speech, when speaking about pensions, the Minister for Finance, Deputy Noonan, stated, "I want to clarify Government policy. Firstly, tax relief on pension contributions will only serve to subsidise pension schemes that deliver income up to €60,000 per annum. This will take effect from 1 January 2014. Secondly, the pension levy will not be renewed after 2014." Let us look at what is actually happening. Pension changes are being introduced but they fail to deliver on the €60,000 limit that was promised. In fact, tax relief will continue to be granted to allow funding of pensions significantly in excess of €60,000, in some cases up to €100,000. Among the people who will benefit from this largesse are the very Ministers and senior officials who drafted this change of legislation.
It would be bad enough if that was where it ended, but it is not. The Minister, in a written response to a recent parliamentary question from me, revealed that as a result of not fully implementing the €60,000 limit the tax savings would be €130 million short of his earlier projections. He had projected last year that €250 million would be saved by reducing tax relief on pensions. That projection has been changed to €120 million, a shortfall of €130 million. The Minister went on to say that because the assessed tax savings would have a considerably lower yield it necessitated the imposition of the additional 0.15% pension fund levy. This levy is expected to yield €135 million per annum. There is no doubt these two figures are directly linked. A taxation shortfall arose from not implementing the €60,000 pension tax limit and it is being directly plugged by introducing a new pension levy that will be indiscriminate in affecting all members of funded pension schemes and not just the better off.
We now have the obscene situation where some on pensions of up to €100,000 per annum will not be affected by the budget while those pensioners on, for example, €100 per week will be affected. They will lose income every year the pension levy remains. How on earth can that be fair?
The final insult is that the Ministers and senior officials who drafted the legislation will not only benefit by being allowed to accumulate extra pension arrangements but will not lose out as a result of the levy as they are in unfunded pension arrangements and, hence, will be unaffected by the levy. The idea of justice or the concept that we are all in this together disappears so far down into the distance that at this stage it is out of sight.
The other completely unfair measure is the treatment of separated parents. It is proposed to abolish the one parent family tax credit. This is paid to separated parents in place of a new tax credit as provided for in section 7 of the Bill. This new credit will be paid to only one parent. This has serious consequences for working parents and, in particular, fathers. The impact of this will mean that 4,000 people, including some on the minimum wage, will be brought into the tax net. An extra 5,500 parents will pay tax at the higher rate and, in total, 15,500 parents stand to pay extra income tax next year as a result of these changes.
Could one imagine the uproar if the Minister for Social Protection, Deputy Joan Burton, had announced a cut of €200 per month in child benefit? This measure will have the exact same impact. The current system is not perfect, but in scrapping the tax credit altogether we are throwing the baby out with the bathwater. It is entirely unfair. Despite all of the hot air last year about €500 million in wealth taxes and the big talk this year about ending gold-plated entitlements, what we have ended up with is another win for the golden circle of the Government at the expense of those who do not have a voice.