Wednesday, 5 November 2014
Finance Bill 2014: Second Stage (Resumed)
On the day when the unemployment figures are again showing an improvement and down to 11%, it is important to remember a few of the important points on the taxation measures included in the budget. The measures include the reduction in the top rate of tax from 41% to 40%, the increase in the standard tax rate band by €1,000, the USC rate cuts and the raising of the USC threshold to over €12,000, and the reduction in the pension levy from 0.75% to 0.15%, as well as its planned abolition in 2015. There is also certainty regarding the 12.5% corporation tax rate, which is very important in a constituency like mine, in which there are a number of multinational companies creating and providing employment.
There are a number of other positives not included in the Bill such as the decision not to increase the excise duty on alcohol. This is particularly important for the rural pub trade which mounted a strong campaign. We aware of the importance of rural pubs as focal points for rural communities. I also point to the decision to retain the 9% VAT rate for tourism which, again, is hugely important in parts of my constituency such as Galway city, Connemara, the Aran Islands and Inishbofin Island.
On the arts, section 5 of the Bill increases the threshold by €10,000 to €50,000, meaning that the first €50,000 in profits earned by artists will be exempt from income tax. This is an important measure for the arts and the creative sector and, again, hugely important in the constituency of Galway West.
Section 11 extends the home renovation incentive to include rental properties and is also hugely important. Some substandard properties are being provided for students and others and this incentive will allow landlords to invest and improve these facilities to make them safer and warmer. I welcome the incentive, given, in particular, the success of the previous incentive provided in the non-landlord and non-rental market.
I welcome the decision in section 24 to extend the employment investment incentive scheme to medium-sized companies. We know the importance of micro and medium-sized companies in terms of the employment they create and it is important to extend the incentives available to recognise these important companies.
I welcome the decision in section 34 to extend corporation tax relief until the end of 2015.
We need to reward entrepreneurship - people who establish new companies, create employment and take that risk. In respect of having a tax code in place that gives them a three-year corporation tax relief, I welcome the decision to extend that up to the end of 2015.
With regard to section 28, I welcome the extension of the Living City initiative. The expenditure has been limited to €1.6 million for companies and €400,000 for individuals so as to permit the commencement of the scheme as soon as possible. The limits mean that the initiative comes under a less complex EU state rule regulation. This initiative has already attracted attention in Galway from individuals seeking to restore and renovate homes in older parts of the city, and I certainly welcome that.
In respect of agricultural reliefs, I welcome the policy initiated by the Ministers for Finance and Agriculture, Food and the Marine in respect of the agricultural section of the tax regime for farmers. I welcome the initiatives relating to assistance in succession and farm transfer; in section 18, the targeting of agricultural relief from capital acquisitions tax to qualified or full-time farmers or those who wish to lease out land on a long-term basis; in section 44, transfers under the retirement relief and the extension of the eligible letting period of a qualifying asset to 25 years; and for transfers other than to a child under retirement relief, a one-off measure until the end of 2016 deeming conacre or short-term rented land lettings to be eligible. I also welcome section 69, which concerns the extension of stamp duty consanguinity relief to related persons on non-residential transfers to the end of 2017. We know the importance of encouraging land transfer and encouraging young people into farming as our primary industry. We know that next year, with the removal of milk quotas, there will be a significant rush to acquire blocks of land by dairy farmers, and they need to have security and certainty into the future. These initiatives and measures will allow them to secure plots of land on a long-term basis. People will be more willing to lease land long-term because it will be more tax-beneficial for them.
One issue I have concerns the definition in the Bill of an active farmer. I would support the cause of the Irish Farmers' Association and their belief that the definition of an active farmer should be amended. It states in the Bill that it relates to people who spend 50% of their time on the farm. There is a lot of off-farm employment, so I would ask that the definition of an active farmer be defined as an individual who is carrying out the trade of farming as set out in the section 655 of the Taxes Consolidation Act. I hope the Minister will look at that in amendments on Committee Stage.
When we talk about the budget that has just been introduced, it is important to understand where we have come from in the past three years. Anyone who came in here in 2011 and saw the figures that were in front us knows that there were even some people in this House who were looking for sovereign default. The issue of a possible collapse of the euro also arose. It looked as though, if the euro did not collapse, we would certainly be outside it, and if we managed to stay inside the eurozone, there would be a two-tier eurozone, with us in the second tier and the rest of Europe in the first tier. Fast-forward three years and we see a budget that is attempting to give something back. Perhaps we would always like to give an awful lot more back, but one certainly sees the transformation over a three-year period, which must be acknowledged and recognised. It has not been easy. There are very many people out there who over the past number of years and through no fault of their own saw their living standards decimated, with job losses, unemployment and emigration. If nothing else, the budget that was announced two and a half weeks ago must have been okay, because we are not talking about it any more. Two weeks have passed and there is no debate or conversation about the budget we have just had. Obviously, something very positive happened within it.
People often ask me what the budget means for them. They are trying to read through all the commentary. I always say the same thing to them. It is probably not as good as what we on this side say, while it is certainly not as bad as what those on the other side say. The truth probably lies somewhere in the middle. The fact is that this will give a little something back to everybody. If nothing else, it will hopefully create some confidence - confidence that the years of austerity are finally coming to an end. As someone who is relatively new to politics since being elected to Galway County Council in 2009 and to the House in 2011, I felt there was something different about sitting here two weeks ago listening to the details of a budget that did not involve cuts. That was somewhat different for a person who came into the House in this era of politics. We can finally start to talk about a different situation for our country, and it is something that is very welcome.
I would certainly agree with many of the key measures that have already been mentioned by Deputy Kyne. We have set out very clearly where we stand on corporation tax and have moved to allay the fears of other countries and jurisdictions. We still have a huge reliance on foreign direct investment and we need to encourage more of it. Coming from County Galway, like Deputy Kyne, I see the number of multinationals there. We need to make sure they understand the role they play in this country, the role they play in respect of Exchequer figures and the amount of money they contribute, but it is very welcome that we have set out very clearly what we are going to do in that area.
The retention of the 9% VAT rate in the tourism sector is very welcome. It is a very proactive move. I know it is linked to the pension levy, which was a real bugbear for many people. I welcome the fact that the Minister for Finance has moved to remove it over the next two years. I also welcome the reduction in income tax and the USC. I do not think I have ever known a tax that sticks in people's throats like the USC. I understand that it was introduced in an emergency budget in 2008 and that it raises quite a level of income for the Exchequer. However, I would like to see if we could come up with a way, over the next number of years, of improving growth figures while reducing the USC with the intention of removing it. It might be very aspirational but, hopefully, as the country continues to grow, it will happen. We must also be very cognisant of the fact that we still borrow money just to run the country on a daily basis. While we are moving in the right direction, we certainly have a long way to go.
One final issue I would like to address, which was also addressed by Deputy Kyne, concerns the issue of the active farmer. We need to see changes in how that it is framed within the Finance Bill. Between 50% and 60% of our farmers are part-time farmers. They need enough farm income to drive up their overall income. We have seen quite a level of investment in infrastructure over the past number of years, so the mantra from now on is "Work smart", not "Work hard". The amount of time farmers need to spend on their farms is not as great as it used to be, but I can assure the House that many of these farmers are as skilled and productive as any full-time farmer, and they should not be discriminated against for that reason. It must be recognised that any farmer out there who is thinking about transferring the farm to his or her son or daughter can still do that. The way it is framed in the Finance Bill needs to change, with amendments on Committee and Report Stages, because the way it is framed now actively discriminates against some young people who want to get into the industry. There is a bright future for agriculture, and the measures announced are very welcome, but let us not put a stumbling block in front of many people who want to help the future of this industry.
I welcome the opportunity to speak about the Finance Bill 2014. We must look at what the essence of this legislation is. I think we all know that it is to give statutory effect to the provisions announced by the Minister for Finance on budget day. That brings us back to the basic question of whether this is a good or a bad Finance Bill. That can only be judged on the basis of whether the budget announced a couple of weeks ago by the Ministers for Finance and Public Expenditure and Reform was a good or a bad budget, or a fair budget. It certainly failed the test of fairness. In a nutshell, it was a budget for the high earners, and those on lower incomes suffered. There are some people in Ireland who believe that is good. I do not think so.
Are the follow-through pieces of legislation - the Finance Bill and the Social Welfare Bill, which are based on an unfair budget that lacks a social conscience - good or bad Bills? Overall, the Finance Bill is bad legislation, and this House should reject it - and the Social Welfare Bill, when it arrives - because it is the legal implementation of an unfair budget. Many of the fine details in the Finance Bill, which I think is 120 pages long, are very good in their own right. There is a list of them, section by section, covering all the various areas of taxation in Ireland. Many of the individual proposals will not be debated because they are not too controversial and people will be happy enough that some specific measures are going through.
Be that as it may, we have a responsibility to assess the overall impact of the budget, the Finance Bill and the Social Welfare Bill. This budget fails the test of fairness. The previous speaker noted that claims on the Government side normally exaggerate the positive impact of a budget, Opposition claims are probably overly pessimistic and the truth is somewhere in between. The truth about this budget is simple. Households earning more than €70,000 are the winners but households with incomes of less than €40,000 per annum, or €800 per week, are losers. This budget and the Finance Bill can be condensed down to that sentence. That is the ethos behind the Bill and it is the reason why it should be rejected.
I have taken the impact of water charges into account in arriving at those figures. There may be some changes to the universal social charge and child benefit but, while these are all well and good we cannot ignore the water bills which are due to arrive early in the new year. I acknowledge the Government is in a state of flux and does not know its own mind on that issue. It is probably still looking at the opinion polls. In any event, one cannot divorce the impact of government decisions from people's daily lives. Like the local property tax introduced last year, water charges impact on people's daily lives. The Minister for Finance was forthright in arguing that the impact of water charges should not be lumped into the consideration of the effects of the budget. They are magically off the balance sheet, as if they are not real bills. I do not know where the Government got its fascination with keeping the accounts off balance sheet whenever it wants to do things that the State was able to do in the past. Even the homelessness issue is going to be dealt with off balance sheet. A special vehicle for social housing is to be created through a public private partnership. All of the key areas that a Government should be funding directly out of its capital expenditure and current budgets are now mysteriously going off balance sheet. This reflects the Government's preference to avoid dealing with issues directly and to have somebody else take responsibility.
However, the Taoiseach let the genie out of the bag in regard to mixing the two issues when he stated that if we do not proceed with water charges, the top rate of income tax will have to increase by 4%. He has thus clearly linked income tax to water charges. This gives the lie to what his own Ministers have said in previous weeks. They were bravely holding the line in their efforts to keep the two apart but the Taoiseach blew their cover. It is interesting that he referred to the top rate because it would impact on the people he looked after by lowering it, and who are probably his supporters. He wanted to put the fear of God into them. However, these are just funny, off balance sheet figures. The Department of the Environment, Community and Local Government produced an estimate of €533 million for Government expenditure on water services this year. As there is already income of €222 million from commercial sources, I do not know how we would require an increase of 4% in income tax. However, when people assess the impact of the budget, they will have to include the cost of water charges if they are to follow the Taoiseach's example.
The Minister, Deputy Noonan, referred to the provision of tax credits for up to €500 worth of water at 20%, which could be €100 in a year, and will be calculated in arrears on a monthly basis based on the payment cycle. It is possible that one will get a tax credit 24 months after paying a water bill. However, he forgot about all the people who are not in the tax net. Hundreds of thousands of people in employment will not benefit from the social welfare concessions announced by the Minister for Social Protection or from the income tax concessions announced by the Minister for Finance. These are ordinary people who were left out in the Government's rush. People who become unemployed will not benefit because they will not qualify for the free fuel allowance. It is necessary to be long-term unemployed to qualify for that allowance. The Minister is discriminating against people who lose their jobs. I will deal with that issue further when the Social Welfare Bill comes before the House.
This is a Finance Bill for high income earners. There is an income tax cut for those on the top rate and everybody else has been left behind or ignored. That suggests a lack of social conscience on the part of the Minister for Finance. Perhaps he believes that people will vote in the next election based on their pockets rather than their social conscience but I suspect, after the difficulties Ireland has encountered in the last several years, that there is a higher level of solidarity among the people. What upsets people is the preaching about the country picking up. As if it was not enough that they were not feeling any benefits in their pockets, they are now being told that others are benefiting.
It is a double insult to people who are no better off for them to be told that others are better off.
The health budget will get a mere 0.5% increase in its expenditure ceiling for each of the next three years. As those increases will not keep pace with demographic trends, they will result in real cuts. The Minister for Health has announced that with the introduction of medical cards for children under six years, parents will still have to pay a nominal fee to the doctor. It is not a free medical card if one must hand cash to the doctor to treat a sick child. The reason I want to address the health issue is because I unexpectedly spent more than two hours in the accident and emergency department in Naas General Hospital before I came to the Chamber. I was there with a person who is close to me. One could not get in the door of the department because of all the trolleys lined up in the corridor. This is why the Finance Bill is devoid of social conscience. It should deal with the issue of people on trolleys in accident and emergency department corridors. The phrase, "bed blockers", is often used. There are so many trolleys in Naas, they are blocking the door. These trolleys are occupied by young children and old people, males and females, with insufficient doctors available to treat them.
The Minister's answer to this is a tax cut for the wealthy. We will have trickle down economics and they will all be better next year. Can one imagine what signal that is sending out? I agree with Government Deputies that it is good to have resources available to make the choices which were not open to us in previous years but we should have used those resources to do something for the heath services, provide social housing or help the people who are sleeping on the streets less than 200 yards from this building.
When a country comes out of a recession, there are economic wounds which cause suffering for many families and individuals. However, there are also social wounds, which are twice as deep and twice as divisive. This budget actually serves to aggravate those social wounds. It might heal the economic wounds for some people on higher incomes, who will be a little better off, but it will exacerbate the social wounds. The budgets for this year and next should have seen the allocation of resources focused on healing some of those festering social wounds. It is not surprising that people are dissatisfied with all the political parties. As they see it, we are not looking after ordinary people. We all are aware of the view that, when it comes to politicians, it is essentially a case of "A plague on all their houses." This is not confined to my party or the Minister of State's party; it is across the board.
What is lacking in the budget is a social conscience. It may be the case that the Government intends to take a calculated gamble that people will vote not with their conscience but according to their pockets. Perhaps some will do so, but that is too clinical for me and it is not the way to go about rebuilding our society. People certainly do want to see planning for a recovery, not just minor tweaks here and there. Even though there are some good things in the budget, including a small increase in child benefit, it is really an example of old-style politics. There is no vision and no social conscience, simply gimmicks and a few bob given out here and there. The only thing that was not done was to increase the price of the pint, although cigarettes were hit.
Both of our parties engaged in this type of politics in the past. I hoped people had learned a little bit and would want something better from the Oireachtas than a few bob here and there.
Several colleagues opposite referred to agricultural relief. I hope the Minister will listen to what has been said on both sides of the House and by the Irish Farmers Association in this regard. Even before the IFA issued a press release, several farmers in my constituency were on to me about the issue. The Finance Bill is full of little nooks and crannies that will help foreign direct investment companies, investment schemes, share schemes, stamp duty schemes, dividend schemes and so on. Farming is our largest industry, but there is much less on offer here for it.
There is a problem with the definition of "active farmer". In my own parish and the neighbouring parish there are only a handful of people who are full-time farmers, deriving their entire household income from the land. One must be a dairy farmer on a fairly large scale to be able to do that. Certainly, it is not the norm. I accept that the Minister's intention is good here in that he wants to assist with the hand-over of farms and separate full-time farmers from hobby farmers. Unfortunately, however, the definition he uses is counterproductive. It suggests an individual with an off-farm source of income for which he works a 40-hour week would need to farm for another 40 hours in order to qualify as an active farmer. On the other hand, a farmer with no off-farm employment would have a lower time commitment to qualify, as his or her normal working time might be only 30 hours in some cases.
Teagasc has indicated that 43% of cattle-rearing farmers, often known as suckler farmers, have an off-farm source of income. In my local town of Mountrath, the marts now take place midweek and in the evening. After leaving this House on a Wednesday night at 9.30 p.m., I often drive through a Mountrath that is chock-a-block at 11.30 p.m. These are farmers with daytime jobs who must go to a mart that begins at 7.30 p.m. and runs until 12.30 a.m. or 1 a.m. After selling their cattle, they must be up at 7.30 a.m. for their day job before returning home to farm at night.
I am not sure how these things can best be measured, but the 40 hour restriction must go. What is happening in Mountrath is happening in towns in every county in Ireland. There are still Friday evening and Saturday marts, but some of the busiest are the evening marts. The definition of "active farmer" should be amended in light of what has been proposed by the IFA, which is in the spirit of what the Minister said he wanted to do. This issue affects farmers in a range of ways, including when it comes to stamp duty relief between family members. There is a big word for it, consanguinity, which does not mean much to most people but is well understood by legal practitioners. We want to make sure people are not caught out in that way. A farmer in his early 60s who came to see me explained how his son has a full-time job but also puts in a lot of hours on the farm. If the son wants to take over the farm, he will either have to give up his job to qualify for the relief or else keep his job and pay the top rate of capital acquisition tax. The problem is that the farm income is not large enough to support both the son and his family as well as his parents. I hope the Minister will make the change that the IFA has proposed.
In regard to forestry and clear felling income, there is an issue in that a lot of the income comes in at the very end of the period and can thereby shove people into the high income earner restriction. I submitted a parliamentary question some weeks ago which pointed out that when one sells land for any crop in Ireland, the whole thing is subject to capital gains tax, the exception being where when one sells land that is forestry, in which case the land is subject to capital gains tax, but the crop - namely, the trees - is deemed to be income. Forestry crops are treated differently from every other crop, with the former, because it is considered income under the tax code, subject to PRSI and the universal social charge. When one sells land with forestry which is near maturity, as some people have to do, a large chunk of it will be deemed to be income arriving in the one year and will be subject to PRSI, USC and income tax at the top rate.
There are many issues to discuss. Many of the details in the Bill are good, but my concern is that it is coming out of an unfair budget.
I will focus on measures in the Bill which relate to what is commonly referred to as the double Irish tax arrangement. I will also touch on the relevance of legislation which would introduce mandatory collective bargaining, and the impact of such legislation on what is in this Bill. The relationship between our tax code and corporations, particularly overseas companies, is changing rapidly. What has become clearer in recent weeks is that this is not a situation for which we opted voluntarily. The reasons behind the ending of the so-called double Irish regime have more to do with the OECD and the European Commission than any decision made by Cabinet.
In his introduction of the Bill last night, the Minister, Deputy Michael Noonan, said that the double Irish provision was damaging Ireland's reputation. That is fair enough, but I am less concerned about that than I am about the impact its removal will have on inward investment. The reality is that the OECD rules on base erosion and profit shifting are changing.
Sooner or later, Ireland would have had no choice but to bow to certain tax standards. Second, the European Commission has made it absolutely clear that in its opinion the loophole needed to end quickly by opening up an investigation into two specific rulings granted to Apple. Judging from the comments made several weeks ago by the Commissioner in charge of this, it has been going on for some time. This was not a case of Ireland needing to get rid of this tax avoidance scheme because it is the right course of action. This has been coming down the line for some time. We acted on this because, sooner or later, we would have been made to.
That is significant because there are other measures over which the Government has unilateral decision-making power. One of those issues directly relates to the companies affected by the ending of the double-Irish scheme in this Finance Bill, namely the inexplicable proposal to introduce mandatory collective bargaining legislation at a time of incredible uncertainty in inward investment and foreign direct investment. Some in government are genuinely concerned about the effect these measures will have on our attractiveness to foreign investment.
The week after the Budget Statement, it was announced that the rules governing the special tax incentive to attract foreign executives into Ireland were to be relaxed through the removal of the €500,000 cap for very highly paid executives working here, essentially making it a more attractive place in which to work. The day we end one tax avoidance scheme, we introduce a new tax incentive. This speaks volumes. At the same time, we are planning to introduce a disincentive for those same companies by introducing a provision that might not require mandatory union recognition but would allow unions without representation in the workplace automatically to take a case to the Labour Court. The Labour Court could then take a legally binding decision which could be enforced by the Circuit Court. If this provision is passed, then mark my words, with the environment in the country today, those unions will grab any such new power to justify their own existence. All it will take is one union and one dispute for the rest of them to jump on the bandwagon.
I get the impression some people in government have not considered the implications of this at all. Any mandatory collective bargaining legislation - in other words anything that might compound this country’s potential unattractiveness to foreign investment - should be reconsidered immediately. Why is the Government contemplating such mandatory collective bargaining legislation? I examined the law and regulations governing industrial relations. Even from a cursory look, it is clear there is no glaring deficit in this area, no obvious need for reform. There is also fairly widespread agreement on that point. There have been challenges in the Supreme Court and at the International Labour Organisation but at no point has the current system been found to provide insufficient protection for employees or unions.
The point is made we have a voluntarist system when it comes to industrial relations. If we were to bring in a system that would effectively oblige both employees and employers to negotiate via a third party, it would not help. It would only add strains to industrial relations across the country. The relationship between the employer and the employee is already covered extensively by EU and Irish legislation. If the Government persists with mandatory collective bargaining legislation, all that will happen is that those existing protections will become completely subservient. The suggestion is that a union will have the authority to negotiate changes in the terms upon which the employment relationship was founded in the first place. That is unwise, regressive and not positive.
The logic behind taking such a step, considering where we are economically and what else is proposed in the Finance Bill, is baffling. In Ireland as it stands, serious and strong protections are already in place when it comes to employees and the right to join a trade union. Those protections are bolstered by the Labour Court and the National Employment Rights Authority, NERA. Enforcing mandatory collective bargaining and de facto trade union recognition is unnecessary. It amounts to a step too far in practical terms considering where the country is at. An employer’s right to disassociate is worth protecting also.
Why was this considered in the first place? One union representative gave it away when he said we cannot let the centenary of the 1913 Lock-out pass without some movement on mandatory collective bargaining. In other words, this has more to do with a political ideology than it does with economic necessity. This country can no longer afford that kind of political thinking. Two weeks ago I said in the Chamber that this has more to do with the Labour Party’s political curriculum vitae and policy wish list than anything else, unfortunately. Governing on the basis of marking a commemoration to Jim Larkin is absurd. We no longer have the luxury to legislate for political whims.
Much space in today’s newspapers is devoted to predictions on the effect of ending the double-Irish tax avoidance scheme in this Finance Bill. The head of Twitter in Ireland said it will be no problem for its company or cause it any grief. The former head of Apple, John Sculley, said yesterday that Ireland needs to retain such measures, however, or else it risks losing its competitive edge. No one knows for sure what impact it will have on our competitiveness and attractiveness when it comes to foreign investment. For that reason, I do not believe the country is in a position to create additional reasons for a company not to locate here. That includes introducing new and unnecessary strains between employers and employees with mandatory collective bargaining measures. Any such legislation needs to be put on hold until we know the effect of this Bill’s proposed other measures on the economy and the companies on which we rely to keep it afloat.
For any parent who spends a Sunday night on Skype to their child in Australia or watches their unemployed youngster fiddling with a television remote control watching inane television programmes, and despite the other debates occurring in which a fair bit of self-interest is involved, the only issue in this Finance Bill - the only show in town - is job creation. The great moral responsibility on us as legislators is to create conditions where people can get work. This is the basis on which the Finance Bill should be evaluated.
When Fine Gael came into government with the Labour Party, 7,000 jobs a month were being lost. Thankfully, 5,000 jobs are created per month now. Unemployment is now down to 11% but it is still too high. However, it is heading for single figures by the end of our term. We have created 70,000 jobs in the last year with 100,000 in the coming year.
Our duty is to parse the Finance Bill and establish in what way will it contribute to further job creation or otherwise.
If one looks at the personal taxation measures, taking 80,000 people out of the USC increases their spending power and increases consumer confidence. By virtue of their low income status, which is not their fault, they will tend to spend on domestic, locally produced goods. That will have a hugely beneficial effect on the economy by generating a multiplier.
The top rate of tax is reduced from 41% to 40% which incentivises work and increases consumer spending. There is a €1,000 increase in the entry point for the standard rate band to €33,800. That is good in that it provides more discretionary spend, consumer confidence and the money is spent on domestic goods. In addition, one makes work attractive and creates jobs. The budget passes on personal taxation measures.
One of the Government's most successful budgetary measures is the 9% VAT rate on the tourism and hospitality sector, which has been maintained. It has proved to be effective and it is thus continuing. In addition, there will be 1,700 new jobs in education.
I will turn to the agriculture sector which is so relevant to the Cavan-Monaghan area that I represent. We have 5,279 farms in Cavan with approximately 15,000 people employed directly therein. The sector provides a farm income of €74 million a year to County Cavan. The agri-food sector in Cavan has always been strong and we have 20 large food and drink employers providing 1,860 local jobs. This is something we are proud of. It is my job, as a representative for Cavan, to do everything I can to support, protect and encourage this sector. That is why I am particularly pleased to see a range of measures in this legislation designed to enhance the agriculture sector and ensure that it evolves into a sector that is more efficient and productive.
Chapter 4, section 18, lists certain amendments to the tax treatment of farmers. I am particularly pleased to see the clause that deals with the income averaging tax regime and its extension to include farmers who generate income from other trades or professions. There is a provision that said income must come from on-farm diversification and I believe this to be incredibly important.
Chapter 6, section 44 deals with capital gains tax retirement relief for farmers. It states that land, which has been leased for up to 25 years, will now qualify for this relief. This will make it more attractive for older farmers to pass their land on to the next generation. This measure involves both job retention and creation.
The recent agri-tax review found that the number of farmers under 35 years of age fell by more than 50% between 2000 and 2010. Only 6.2% of all landowners were under the age of 35 years. That has job creation implications and it will change.
I also welcome the clause in this section which pertains to land-leasing to non-family members. Providing that this land is leased, under a conacre arrangement, for a minimum of five years or disposed of on or before 31 December 2016, the landowner can avail of capital gains tax retirement relief. That is all excellent news for farmers.
Deputy Seán Fleming was very selective in his understanding of the budget. He excluded all the personal taxation measures and the 80,000 people coming out of the USC. I think he is clever enough to read the budget properly, but he is reading it selectively. I agree with Deputy Fleming, however, about the amount of hours people work. I appeal to the Minister for Finance and my good friends the Minister of State, Deputy Simon Harris, to examine that issue. It is the case that farmers invariably work a lot outside the farm. In many instances they may give 35 hours both on and off the farm, thus working a 70 hour week. That situation needs to be examined.
The measures concerning capital gains tax exemption for farmers are all positive. In addition, the other agri-measures listed by the Minister all contribute to job creation.
A comprehensive package of corporation tax measures will ensure a strengthened flow of multinational investment and jobs. These measures will also ensure we are on course to support up to 50,000 new jobs in 2015.
The Bill makes a range of changes to tax incentives for start-ups and SMEs. These incentives will make it easier for new businesses to commence, for established businesses to attract further investment, and will ensure that we achieve our main objective of creating more jobs.
Chapter 4, section 23 of the Bill deals with research and development tax credits. It legislates for the removal of the base year restriction, for accounting periods commencing on or after 1 January 2015. Research and Development is an incredibly important part of Ireland's corporation tax regime and plays a large role in attracting foreign direct investment into the country. I applaud those developments.
I welcome the commitment to remove the base year restriction on this tax credit. It will allow companies to calculate and claim their research and development tax credits without restriction by reference to their research and development expenditure in 2003. This will be a favourable move for our more established foreign direct investors.
Chapter 4, section 24, deals with amendments to the employment and investment incentive. One amendment that I want to touch on briefly is the part of this section that deals with the rate of relief, under this scheme, becoming aligned with the revised income tax rates. This will start from 1 January 2015.
The employment and investment incentive allows individual investors to claim income tax relief on investments up to a maximum of €150,000 per year. This tax relief can be used for usual trading activities which, in turn, contributes to the creation and maintenance of employment. I note that nursing homes are now able to qualify for the scheme.
Commenting on the budget, IBEC said it was a budget for jobseekers and job creators. That is quite an endorsement. There are many more provisions which I do not have time to mention.
While I have great respect for the ability and commitment of my colleague, Deputy John Deasy, I do not share his view that mandatory collective bargaining is such a disincentive to foreign direct investment. I personally think that employers with good HR policies and corporate structures will not necessarily be frightened by this. The prevailing economic considerations and European law will still predominate. I do not think mandatory collective bargaining is frightening or such a disincentive. That is my personal view of it. I think it might well work favourably, although that has yet to be tested.
The budget's personal taxation measures and its research and development incentives mean the Finance Bill is completely targeted at creating the conditions for creating more jobs. That is how it should be. It is for that reason that I am an enthusiastic supporter of and advocate for the Finance Bill.
Some recent debates could provide a distraction from that but there is no greater mandate for this House than to focus on job creation every day. I know that as a teacher, a parent and a public representative.
I will not be taking all of that time. I will take about seven minutes.
Before the 2011 general election, Fine Gael and the Labour Party repeatedly promised a new era of politics, but this is clearly not the case. Not only did the Government carry on the mantle of Fianna Fáil and the Green Party's austerity agenda, but it did so unapologetically and with enthusiasm. They are now telling the public that they have led us into a recovery. This, too, is clearly not the case. This so-called recovery has not reached the cash-strapped pockets of citizens. Try telling a person sleeping on the street in the freezing cold that we are in recovery. Tell it to the person who goes without a mobility scooter because they are no longer provided.
The Government should tell it to one of the 9,500 children waiting to be assigned a social care worker, the person struggling to pay his or her mortgage, the woman living in a household in which there is domestic abuse and who nowhere to go or to one of the 704 elderly citizens lying in a hospital bed awaiting a home care package or a package under the fair deal scheme. The Government should tell it to Members in the Chamber who listen daily to the tales of poverty, fear, hunger, pain and loneliness. The people concerned are suffering because of successive budget cuts. Budget 2015 represents another wasted opportunity to truly make a difference to the lives of those who struggle most.
Last week a UNICEF report showed that child poverty levels had increased in Ireland by 10% since 2008, ranking it 37th out of 41 OECD countries. It equates to 130,000 children falling into poverty or 130,000 children who have not felt the benefits of this recovery about which the Government speaks so proudly. The report also stated people did not believe children in Ireland had the opportunity to learn and grow every day. Children, specifically those from lower income families, are paying a disproportionate price for the collapse of the banking system and the Government's subsequent unwavering commitment to austerity. In its alternative budget Sinn Féin outlined fully costed measures that the Government should have introduced to address the issue of rising poverty levels. Lower income families are in desperate need of a reprieve, but the Government has been unrelenting in budget 2015 in targeting them once again.
How can the Fine Gael and Labour Party Government stand over policies that decrease a child's chances to have a better future? The Government is creating a continuous cycle of poverty. Children who grow up in poverty are more likely to be impoverished adults who, as a result, will raise their children in the same conditions. That is unacceptable. Some 28.6% of Irish children are living in poverty. That is nothing to be proud of and no Minister or Deputy can spin that fact to suit his or her agenda. The Government has a duty and mandate to protect those who cannot protect themselves, but it has failed to do so. While child benefit is set to rise by €5 a month per child, this will only go some of the way to reverse the cruel cuts made to child benefit, despite the Labour Party's promises that protecting child benefit was a red line issue. Does it have red line issues anymore or has the line between it and Fine Gael disappeared completely?
How many families are struggling to put food on the table, send their children to school or provide a warm, stable home? Those who were asked to give most to fuel recovery have not seen a benefit. In fact, the Government rewarded higher earners. Sinn Féin's alternative budget showed how budget 2015 could have been much better for low and middle income earners. We have advocated consistently for investment rather than austerity. The Government chose to ignore us to try to discredit us, which is shameful. There is more to this than political point scoring.
The Government's budgetary measures since taking office have impacted badly on families and individuals all across the State. Communities have been wrecked, hollowed out by the effects of mass emigration. We have sent our young people abroad; even though they never contributed to its cause, they have been forced to bear the brunt of the recession. That was the Government's political decision. It chose to protect higher earners in successive budgets and has done so again in this one. It chose emigration over the creation of long-term, meaningful employment. We have lost a generation who fill jobs all across the world. Our young people are contributing to other economies, living lives in other communities and seeking better opportunities. The Government left them with no choice.
Last weekend we saw over 100,000 people marching on the streets across the State in opposition to water charges. As water is already being paid for, the new charge is merely a doubling up of the cost. The people have spoken on the issue. Sinn Féin demonstrated that the Government could end both the property tax and water charges and put €800 million into the economy and the pockets of struggling families. The water charge is essentially a tax on a resource that is, fundamentally, a human right. The Government failed to scrap these charges in the budget, despite the will of the people who had elected it. This is another missed opportunity, one that will cost the Government gravely when the people go from the streets to the ballot box.
Each one of us in the Chamber is elected on a platform of policies outlined during an election campaign. Political representation is about political choices. The political choices made by the Government have resulted in a less equal society. Sinn Féin's alternative budget sets out many ways by which we would make different choices, with fairer and more sustainable ways of meeting the State's deficit targets. In addition to scrapping property tax and water charges, Sinn Féin committed to exempting from the universal social charge the 296,000 low paid workers who earn between €193 and €337. We would introduce a third rate of income tax of 48% on incomes over €100,000, raising an additional €448 million, and reintroduce the second home charge at €400 per year, with other measures, including increases in betting tax. In total, the measures contained in our alternative budget would raise an additional €1.7 billion. Crucially, over €1 billion would be put back into the pockets of ordinary working people. This would reverse the growing inequality and poverty in society. It would also help local economies and save jobs.
I propose to share time with Deputies Sean Kenny and Brendan Ryan.
I welcome the opportunity to make a contribution to the debate on the Finance Bill which implements many of the measures announced in the budget. A number of measures must be welcomed. As someone who advocated strongly at all levels for a return of the Christmas bonus to social welfare recipients, I am glad that a start has been made in that regard. Some 25% of the money is to be returned this year and I hope a further 25% will be returned next year to assist people on fixed incomes at a time of year when they face significant additional demands and pressures. Likewise, the living alone allowance has not been increased for many years. Efforts must be made to increase it on a regular basis. People living alone must purchase everything; there is no sharing of costs and they find themselves in challenging situations. It is time to reward all citizens, including those on fixed incomes and those who work hard and were subject to unrelenting cutbacks and reductions in the past six years. They made extraordinary sacrifices to rescue the country and must see some of the benefits that will accrue in the coming years. I hope some of the tax adjustments and alleviating measures provided for in the Bill will be felt by these taxpayers when they start to receive their wage packets in January. It should be the commencement of a sustained restoration.
We need a fair, efficient, effective and competitive tax system that rewards enterprise and contributes to economic growth and job creation. The securing of a properly paid job is the best route out of poverty. Tackling the scourge of unemployment must remain the number one priority. While progress has been made, it is not uniform and in many areas of the country there are significant pockets of unemployed persons, especially in rural areas, who are not feeling the fruits of the recovery and must not be left out. Everyone is entitled to a fair shake.
The State agencies, including IDA Ireland, seem to focus on the major towns and cities. We cannot compel foreign enterprise owners or entrepreneurs to locate in an identified area. However, it seems that, unless there is a seat of learning, a college or third level education infrastructure of some description in a town, the chances of encouraging IDA Ireland companies to locate are remote. I appeal to IDA Ireland to redouble its efforts in Mullingar. We have the facilities, including an excellently appointed park of over 20 acres. We are glad to see a local entrepreneur building on it. It is important to continue to focus on this issue and I call on IDA Ireland to do so with greater vigour. In this context, I welcome the setting up of the Strategic Banking Corporation of Ireland. The idea was developed and promulgated by me on behalf of the Labour Party when I was its spokesperson on enterprise and employment. It focused on a strategic investment bank, which is a bigger idea, but the allocation of €800 million in funding for Irish SMEs will be used to provide tailored loans and innovative financial products for SMEs at favourable rates. These businesses have struggled to obtain the credit they need. Start-ups, in particular, have struggled in this regard. I hope there will be no blockages or obstacles in the distribution of the finance to worthy projects.
Will the funding be made available to financial institutions other than the pillar banks for distribution to applicants such as entrepreneurs and the people behind start-up companies?
There is currently an advertisement on television for AIB, a bank that needed one of the bigger State bailouts. In the advertisement, self-employed people in small businesses are described as brave. The bank is giving the impression that it is eager to lend to self-employed people, but the experience of many self-employed people is that whatever money is lent to them will come at a high interest rate and there may be a requirement for personal guarantees. If the bailed-out banks were lending to the self-employed and small businesses, the Government would not have needed to set up the Strategic Banking Corporation of Ireland. It is clear that repairing their balance sheets is more important to banks than lending for job creation. I know a business whose owners tried valiantly to get money from AIB but failed to do so.
Lip service is continuously paid to small and medium enterprises, SMEs, and the self-employed, which are responsible for 69% of the workforce. That is well and good, but action speaks louder than words, especially as the self-employed have been hammered in this budget. The universal social charge has been imposed at the top rate of 11% for self-employed people, while a person who is not self-employed is charged a top rate of 8%. This is a serious matter. Much of the budget discussion focused on taxation of multinational enterprises, but although these companies account for a large proportion of exports, they employ only a small share of our workforce; 99% of Irish-owned firms are SMEs and 69% of private-sector workers are employed by SMEs. Employment in SMEs has fallen much further since 2008 than the corresponding rate for multinationals.
Future economic growth depends on SMEs and our individual entrepreneurs, but despite a great deal of rhetoric about the importance of the self-employed and SMEs, some of the provisions of the budget are detrimental to the sector. There is no possible justification for the 11% USC rate to be imposed on the self-employed, particularly as they are not entitled to the same level of benefits as those people on lower rates. Given the outrage about the low levels of corporation tax paid by Apple and other multinational companies, it is worth noting that the 11% rate paid by a self-employed person earning more than €100,000 is approximately the same as the percentage of profits paid in tax by multinationals. Unlike the multinationals, however, the self-employed person faces a 40% marginal rate of income tax in addition to PRSI contributions. What is the justification for a marginal income tax rate of 55% for self-employed people? As a PAYE worker, I pay a marginal rate of 52%. It could be argued that, given the level of insecurity and risk that the self-employed have, they should pay a lower marginal rate than those people in secure employment. Some left-wing politicians and commentators seem to think all self-employed people are well off, when some take home little more than what they would earn on the minimum wage. The tax system has changed since the 1980s and 1990s, when the PAYE tax credit was introduced, and it is time for this to be made available to self-employed people.
Despite the rhetoric we constantly hear that Government policy should support the self-employed and people setting up small businesses, the income tax system discriminates shamefully against the self-employed. A self-employed worker with annual earnings of €15,000 - less than the average industrial wage, which we all want to rise above €30,000 - will next year pay 14.9% of his or her gross income in tax. If I worked in a job on that wage in the PAYE sector, I would have to pay 1.9% of my gross income in tax. The self-employed person will pay €2,235, which is almost eight times the €285 that I would pay if I earned that wage. The self-employed person would also be entitled to fewer benefits despite his or her larger tax contribution. After the collapse of the building industry in 2008, many self-employed building workers found themselves almost destitute. Despite having paid substantial amounts of income tax, they found that in some cases they were eligible only for strictly means-tested supplementary welfare allowances.
Far from being a path to riches, being self-employed or establishing a small business in Ireland is often a high-risk activity with little return. One of the most misleading figures quoted about Irish industry is that it is the most profitable in the European Union. When the multinationals are removed from the picture, Irish firms are among the least profitable in the European Union, as they are third from the bottom of the list, above only Lithuania and France. Employer PRSI is low in Ireland, but other business costs such as energy and professional services are among the highest in the European Union. I have always called for a mandatory social welfare system to be introduced for the sector, with self-employed people paying for it. They would not be afraid to do so.
The biggest social issue facing us as a people is the scarcity of housing, especially social housing. More than 100,000 of our citizens do not have access to housing, with many more living in substandard accommodation. This has come about because of a withdrawal from the construction of social housing by central Government, and I am glad to see a proposal to spend over €2.2 billion on public sector housing over the next three years. This will give much-needed employment, especially in rural areas, but these allocations should be unbundled so as to allow small, tax-compliant and efficient building contractors to get into a position to tender for smaller bundles of housing projects. The €2.2 billion figure is clearly inadequate, as it will provide approximately 10,000 new public housing units. That amount must be at least doubled in order to tackle the housing crisis. My colleague, Deputy Brendan Ryan, brought forward a very worthwhile document in this regard and we must implement its recommendations in order to tackle this crisis.
In my county of Westmeath, up to 3,000 households are now on the housing list, and this must be addressed by a sustained house-building programme. With rents increasing, the problem will get worse as more people seek social housing. The issue can no longer be put on the long finger. My colleague, the Minister for the Environment, Community and Local Government, Deputy Alan Kelly, clearly understands the matter, and I have every confidence in his ability and vision to tackle it wholeheartedly.
I welcome the commitment to end the pension levy next year. This will give some degree of certainty to people with a pension, who felt deeply aggrieved because of this imposition. There are a multitude of pension issues to be addressed, and whatever the shape or membership of any future Government, it will have to confront a related issue. Some of the loony-bin economic theories will not be of much use in this complex area. What will happen when the social insurance fund deficit, which is approximately €320 billion, has to be considered as part of the overall Government finances? This will happen in 2017 under EU rules.
It is important to recognise the role of agriculture and the efforts of the farming community to achieve the targets set out in Harvest 2020. The abolition of milk quotas next April will be an opportunity in this regard. I especially welcome the increase in the period of income averaging from three to five years from 2015, with a 50% increase in the amount of income that can be exempted for the purpose of qualifying long-term leases taken out after 1 January. The lower age threshold of 40 years has been removed in the eligibility requirements for the long-term leasing tax relief. I also endorse what was said about active farmers with regard to the taxation review. I urge the Minister of State to amend this.
I will make some brief comments on the Finance Bill which is the legislation that underpins the first budget that takes Ireland firmly from crash back to recovery. This recovery is clear from figures indicating GDP growth of 4.7% in 2014 and 3.9% in 2015. There will be 1.92 million people at work at end of 2014, an increase of 80,000 since the low point in 2012. An additional 48,000 jobs are forecast by end of 2015.
There are a number of positive aspects of the budget that I want to emphasise. In budget 2015, all the levers of the taxsystem, including taxthresholds, bands and rates, have been utilised to target reliefs squarely at low- and middle-income workers and households. With regard to single PAYE workers, for example, a person earning €25,000 will see a 4.6% reduction in his or her total tax bill, including income tax, USC and PRSI. A single person earning €45,000 will see a 3.9% reduction in the bill and a person on €70,000 will see his or her total tax bill reduced by 2.9%. Similarly, a married couple on one income of €25,000 in the PAYE sector will see a reduction of 8.4% in the total tax paid. A similar couple on €45,000 will see a 5% reduction, with a couple on €70,000 receiving a 3.1% reduction in the total tax bill. This is clearly a progressive package of tax measures. More tax is being paid by the highest income earners than at the lower end, and the bottom line is that reliefs have been targeted at low- and middle-income workers. This highlights the Government's commitment to ensuring that low- and middle-income earners and families are prioritised when it comes to feeling the benefit of the emerging recovery in their pockets.
In budget 2015 a relief from deposit interest retention tax, better known as DIRT, for first-time house buyers was announced, which is welcome. This applies to savings used by first-time house buyers towards the deposit on a house. This is to apply to houses bought between October 2014 and 31 December 2017. The refund of DIRT will be for up to four years prior to the purchase date and will apply to the amount of DIRT charged on deposits, up to the value of 20% of the purchase price. For example, if a house costs €200,000, a first-time buyer will be able to claim a refund of DIRT paid on the first €40,000 that he or she had on deposit up to the date of purchase. The refund will be for a period up to four years.
Therefore, if €40,000 was in an account that was to be used to pay a deposit on a house and that account paid 3% interest, that would mean deposit interest retention tax, DIRT, of about €1,600 over four years. Under this refund scheme that €1,600 would be refunded by Revenue to the first-time house buyer.
A total of €808 million is allocated for housing programmes, which is a huge investment and the first step towards serious and significant investment over the next number of years in social housing. I welcome this aspect of the budget in particular - it is of great importance given the housing crisis that is so evident and about which I am approached every day. Local authorities are to provide 946 housing units through direct building and acquisition and 440 housing units will be provided through voluntary housing bodies and co-operatives. Up to 150 new homes will be provided in the community for people with disabilities who are leaving institutional care and 400 new housing units will be provided for people with specific needs. Some €40.4 million will be provided for approximately 7,600 housing adaptation grants for older people and people with disabilities.
Some 1,000 vacant housing units will be refurbished and brought back into use in 2015 and an extra €3 million will be provided for regeneration and remedial works in disadvantaged communities. It is expected that 8,000 households will transfer from rent supplements to the new housing assistance payment and up to 2,000 new transfers are expected under the rental accommodation scheme. I welcome the extension of the home renovation incentive to include rental properties as it will result in better accommodation and living standards in the private rented sector.
Much attention has been paid to the soon to be abolished double-Irish tax scheme. I am glad to see that this scheme is being changed as I believe it did reputational damage to Ireland. It angered overseas governments because it allowed multinational companies to channel untaxed revenues to Irish subsidiary companies, which then paid the money to another company registered in Ireland that is tax resident elsewhere, usually a tax haven such as Bermuda. In short, it was a tax loophole and it needed to be closed.
The 12.5% corporation tax rate, which is a cornerstone of the Government's foreign direct investment strategy, will not change and I welcome this. I also welcome the social welfare improvements announced in budget 2015, such as the beginning of the restoration of the Christmas bonus paid to long-term social welfare recipients. They will receive a 25% bonus this Christmas. In 2015, some €1.97 billion will be paid out for the child benefit allowance with 613,000 families getting an extra €5 per child per month. The living alone allowance for 177,500 pensioners and people with disabilities will be increased to €9 per week.
I commend the Bill to the House. I see it as the beginning of the way forward for an Ireland in recovery.
With every budget the old maxim applies that the devil is in the detail and the detail of the budget is usually in the Finance Bill. In examining this Bill, it is clear that it does include measures that will begin to ease some of the burden for ordinary people. In the past few years the difficult economic adjustments undertaken through the Troika programme have taken billions of euro out of the economy through tax rises and spending cuts. This budget is the first without the Troika's hands on it and we have, albeit in a modest and responsible way, been able to provide some relief to hard-pressed families. I am encouraged by the content of this Bill with regards to income tax and the universal social charge, USC. Every person in the State who pays these charges will benefit from the changes in this Bill.
One criticism of successive budgets is that they have widened the gap between rich and poor and that the tax system has been regressive. This budget has begun to move the burden of distribution back in a more progressive direction and I very much welcome this. For example, after the implementation of this budget, the 1% of all earners in the State on over €200,000 will account for 21% of all taxes paid in 2015 - this is up from 19% in 2014. The 6% of all earners on over €100,000 will account for 44% of all taxes paid in 2015 - this is up from 42% in 2014. The 76% of all earners on under €50,000 will account for 20% of all taxes paid in 2015 - this is down from 21% in 2014. Also, the benefit of decreasing income tax for high earners is capped at €70,000.
The pension levy will be phased out by the end of 2015 and I know this will be welcomed by a lot of people, particularly retired older people. The introduction of the pension levy helped fund a VAT reduction in the hospitality sector and this helped instil buoyancy into our tourism market which, in turn, helped with the retention and creation of jobs in the tourism sector. As we are returning to growth, I welcome the fact that this levy is being phased out as this measure will benefit up to 750,000 people. Allied to this, a further 80,000 of the lowest earners in our economy will be removed from the USC and this will help many low earners, including part-time workers. When this budget was announced I received a call from a Labour Party supporter in university who supplements her studies with part-time work. She was grateful for the changes in the USC as it will help her meet the costs of attending college.
I am also happy that there has been no increase in the old reliable taxes on petrol and diesel. The cost of putting fuel into a car is very high and is prohibitive for some. I believe these duties need to be examined in future budgets with a view to making commuting more affordable. We need to make it more affordable for people to travel to and from work, to leave their children at school and to go shopping in our local towns and villages. I represent a large rural area in north County Dublin and transport to urban centres is a key concern as people need their cars in order to engage with the local economy. I think we need to look at reducing these duties in future budgets. Before the economic crash we had some of the cheapest motor fuel costs in Europe and, while our entire taxation system has had to change after the neglect of Fianna Fáil, we are now in a situation where up to 60% of the money we pay for motor fuel goes to the Exchequer. As the economy improves, I believe this should be re-examined with a view to reducing this burden on people.
I wish to say a word on the plight of road hauliers who see themselves at a competitive disadvantage relative to their counterparts in Northern Ireland and in mainland Britain - I have several in my constituency. Although I understand from the Minister for Transport, Tourism and Sport, Deputy Paschal Donohoe, that a working group is in place to look at the issue, there is disappointment that the pace of progress is slow and that the matter was not dealt with in the context of budget 2015.
I wish to speak about the need for further assistance for people in paying water charges. I know we are awaiting further clarification from the Cabinet regarding the charges and I am conscious of speaking on this when we do not have full clarity yet. However, I ask the Minister to examine the possibility of the inclusion in this Bill of a refundable tax credit in respect of water charges, as proposed by SIPTU and the Nevin Economic Research Institute. Perhaps this could be done on Committee stage. We need to ensure water charges are clear and, most important, affordable. The Irish Water debate has dominated the airwaves in the past few weeks and I understand many of the concerns people have. I welcome the initial intention to provide a water support payment and I look forward to further clarification from the Cabinet in the coming days and weeks.
This budget and Finance Bill, like the Government's three earlier budgets, yet again increases the regressive and unfair nature of the taxation system. Those who claim we have a progressive tax system do so on the basis of a sleight of hand - when they refer to the tax system they exclusively mean income tax, the universal social charge and pay related social insurance, PRSI. This allows them to claim that a small number of high earners pay the bulk of taxation and that working people on low incomes and people in receipt of social welfare benefits pay no taxes. This is completely untrue and those who consciously peddle such ideas are spreading an untruth.
Examination of indirect taxes and consumption taxes such as VAT which accounts for 20% of the State's total tax take, along with various charges and services that are actually taxes, shows that the wealthiest families in Ireland pay out some 28% of their incomes in taxes. Meanwhile, using the same measurement, the poorest families also pay out 28% of their total incomes in taxes. This Government continually uses false arguments and the deliberate distortion of figures to make the Irish tax system increasingly regressive and to justify tax cuts which, of course, means cuts in income tax.
If we examine the cuts in income tax made in the budget and how they affect people with different levels of income it is immediately apparent that they are regressive in nature. Total income tax cuts in the budget amounted to €688 million and if they had been evenly applied they would have meant a gain of €405 per year for working families. However, the cuts were not evenly applied. A single worker on the living wage of €23,247 per year gained €173 per week in the budget while a worker on €80,000 per year gained €747, five times as much, from the tax cut.
For the lower income worker, it immediately wipes out a benefit since the Government is trying to introduce the water tax. It's presumption is that it will get the water tax in, but I have a different presumption. For workers earning €15,000, the net change, after water charges, is minus €61, according to the numbers of the Commission for Energy Regulation, while for a worker earning €70,000, after the budget and water charges, the net income gain will be €570. That is the difference and how fair the Government's budget has been. Let us consider all of the figures, for example, those for working couples and those with children. The more a person earns the more or he or she will gain.
Another element in making the overall tax system regressive is the preoccupation with low corporate taxes. Low corporate taxes are supposed to incentivise investment, which means higher productivity, economic growth and job creation. The problem is that this is not backed up by the evidence. The OECD has seen a significant fall in corporation tax rates. In 1981 the OECD member average rate was 49%; in 2012 it was 34%, far above the Irish rate of 12.5%. With the exception of a number of years in the 1990s, the level of investment and growth was lower in the 32 year period since 1981 than in the previous 30 years. Low taxes on business are not proof in the worst economic crisis since the OECD was formed.
Let us consider the position Ireland. The pattern is similar. The 12.5% corporation tax rate was in place in 2003. According to the theory, it should have led to high investment, high growth and full employment. In the ten years since 2003 the reality is that we have the lowest growth rate in the history of the State, the lowest rate of investment, seen the biggest crash and the highest level of unemployment. We need a new model for the economy and society. We need to put people's interests before those of big business and the wealthy.
A point was made about how in the case of the fundamentals the devil was in the detail. The devil is in the detail when it comes to VAT and other cuts. Families are forced to pay the property tax, the household tax and the water tax that the Government intends to bring in. What happens in society in general and what has happened recently is that the wealthy have become wealthier. The richest 85 people in the world added a collective €668 million per day to their wealth in the past year according to the charity Oxfam. The study concluded that global inequality was firing out of control as the number of billionaires had doubled during the period of the economic crisis. In March 2009 there were 793 billionaires throughout the world, but as of March 2014 the number had rocketed to 1,645. That is the type of society in which we are living and the type of society in which the budget has been framed. It is the same in Ireland. According to the Irish rich list of the Sunday Independent, the 300 wealthiest individuals in the country were worth €57 billion in 2011; in 2014 they are worth €70.75 billion. That is the extent of the wealth they have gained during the period of austerity on the backs of ordinary people who in the past eight years have had to take the brunt of the €30 billion in cuts in their pockets. That is not fair; the budget is not fair and the Finance Bill is not fair.
These are the fundamentals that need to be addressed to apply real equality or have any move towards equality in people's pockets. We need a fair and progressive taxation system under which the wealthy pay their fair share. A mere 1% wealth tax on €70 billion would raise €7 billion. A financial transaction tax has been mentioned many times in the Dáil. If it was set at 0.1%, it would bring in €500 million. The Government has choices, but it has not made them. It has listened to the troika, the OECD and the ECB, but it has not listened to the people. Its priority is to protect the wealthy in society and it will continue to protect them in the coming period, rather than protecting the majority from the worst austerity and the when the opportunity comes,, give them some gain in their pockets. However, it has not done this; the budget does not do; neither does the Finance Bill. Ttherefore, I have to oppose it.
Last week, within ten days or two weeks of the budget being introduced, we saw a major rise in fares on the Luas, the DART and Iarnród Éireann trains. These fare rises were introduced at a time when the Dáil was in recess and while the row over Irish Water was raging. They may not seem relevant to the budget or the Finance Bill, but when we see a semi-State body acting in this arbitrary way, we must ask some questions. Why is CIE raising prices and public transport fares at this time? The company raised fares last year and has raised them far beyond the rate of inflation for many years. Inflation is simply a dot in the distance when we compare the rate with the rise in public transport fares. Why did the company raise fares? We could possibly understand fares being raised last year because the company had argued that fuel prices were rocketing and passenger numbers were going down. This year it raised them, despite the fact that fuel prices had been falling and passenger numbers were going up. When we try to find out from it or the regulator why this is happening, they say growth costs money and that because the company is seeking to grow capacity it costs more money and that the company has to expand. Either way, it seems this semi-State body is going to have a right to increases fares, whether it grows or shrinks. We must be a little puzzled by such an attitude and response.
I suppose the reason is that semi-State bodies work in a sphere of their own. In this case, CIE is fully owned by the State. They are monopolies, although not altogether in this case but very nearly. There are allowed to do virtually what they wish in terms of fares and are now acting as tax collectors for the State. I will explain what I mean in CIE's case. As everyone knows, it receives a large subvention from the State which, thank God, has gone down from approximately €300 million to €265 million. As it cannot make ends meet with a cut subvention, what does it do? It simply applies to the regulator to put up fares and it puts up fares in an outrageous way. Instead of receiving a subvention from the State, it crucifies the punter. That is really the same as paying tax by the backdoor.
The Government ought to examine the regulators not only in the case of CIE but in the case of many semi-State bodies, particularly State monopolies. It ought to examine the regulators - in CIE's case, the National Transport Authority gave the all-clear - to see what they are actually up to because I cannot recall a time, certainly in the case of transport costs, when the public was not such a easy target or soft victim. When people kick up about the behaviour of State monopolies - I am referring to the DAA, CIE, An Post and one or two others - the Government constantly maintains it has nothing to do with them and that it is simply a matter for the regulators, but the regulators simply provide a fig leaf. The National Transport Authority and the regulators for many of these bodies are simply acting in the interests of the Government; they are certainly not acting in the interests of the punter.
In that sense, those who relieve the Government of the burden of imposing extra taxes directly to increase the subvention - they are very large subventions - are acting in its interests. It is obvious that they are and quite obvious why. The structure of these agencies and semi-State bodies makes them, in effect, tools of the Government. The members of the board of the NTA and, I assume, the boards of other regulators are all Government appointees. It is the same story time and again about State institutions, that they are tools of the Government and filled with directors who are friends of the Government and meet the its wishes. Time and again what they are doing is imposing taxes by another name by increasing fares or charges elsewhere.
One of the most unpleasant experiences many of us must suffer is travelling through Dublin Airport, which is a semi-State monopoly and has all the signs of it. It is not just that parking in the short-term car park costs approximately €40 a day, which is absolutely outrageous, but there is no competition which means that one must pay it. However, the culture also permeates some of the stores that occupy this semi-State monopoly. Has anybody travelled through various parts of the airport and tried to obtain foreign exchange at inconvenient times of the day? The outlets are not open. They only open at times that are hugely profitable because the monopoly has given another firm a monopoly at the airport and the public service remit has gone out the window.
One of the things the Government could have done in the Finance Bill was set up some form of quick-fix inquiry to examine the semi-State bodies, find where there was waste and examine what was wrong with the culture. However, there is no quick-fix for it because the culture is sick, monopolistic and anti-consumer. In effect, it meets the Government's wishes and collects taxes by another name. The Labour Party loves quangos. It makes absolutely no bones about it; it has always been in love with them. Fine Gael wrote a wonderful document when it was in opposition about Ireland as the land of 1,000 quangos. In its input to the Government the quangos could have been a target for savings in public expenditure, not just CIE but Enterprise Ireland, An Post, the Dublin Airport Authority and so forth. Attack the culture, examine it and ask them to put their houses in order. However, there is no pressure on them to do so. Instead, Governments appoint top heavy boards of individuals who are not qualified to be there but damned well paid for it. This is an area of expenditure cuts which could be tackled each day but never is. It is taboo.
FÁS was a Fianna Fáil protectorate for many years and untouched. We could not debate it in the Seanad; for years we were refused debates on it. Now we know why. It was because it was working in a world of its own. Other semi-State bodies are unsupervised, almost unregulated and live in worlds of their own which have nothing to do with either the commercial or the consumer world. If the Government was serious about tackling the budget in a radical way, it would look at that area to see where it could make savings. It would find there was plenty of room for them. It would be politically difficult in certain cases, of course, but these are difficult times and if it wants these opportunities, it should take them.
I have a suggestion for the Government. It is welcome that the Bill apparently heralds the end of the pension levy. It was an absolutely deplorable innovation when it was introduced. The levy was straightforward daylight robbery of individuals' savings. It made significant differences not just to people's pension pots but also to the pensions they were receiving. In recognition of the fact that it now knows this was wrong, the Government should consider repaying some of the money to those from whom it stole it. It should look back, count the cost, admit it was wrong and state it will repay the money in order that people's pension pots will be intact. This was official theft. It was the same as taking money from somebody's deposit account, which I doubt any Government would contemplate.
I cannot understand how the Government, when it raided these pension pots and decided to target the pensions industry because there was so much money available in it, did not decide simultaneously that the way to raise money from the pensions industry was not to crucify pensioners, just as in raiding CIE it crucifies customers, but to go for the industry. I recall making this suggestion to the Taoiseach in the House three years ago. He agreed that I was right that the industry was full of very rich people living off the fat. He did not say this, but he acknowledged that there was scope for huge savings and taking money from those who were earning too much. It is an industry of parasites. It is full of fund managers who do absolutely no good for pensions. In fact, they lose money most of the time. There was much scope in that industry to take money out of pot from those who were milking it, as acknowledged by the Taoiseach at the time, instead of taking it from pensioners. A repayment should be made by the Government to those from whom it stole the money.
There is no denying the impact the financial crisis has had on Irish workers and families. We have slowly worked our way towards fiscal health as individuals, families and a nation. In the efforts to recover from the global financial crisis most of us were asked to shoulder a heavy burden. Many people recognise that burden as a reality in society. However, the self-employed, in particular, believe they are being asked to carry more than their share of responsibility. They are a critical component of the national economy. They take significant risks, often without a safety net. Their goal is to contribute to the economy and secure a living for themselves, their families and employees.
Budget 2015 is about building futures for families and creating jobs and the Government is doing so with gusto. However, many small business owners believe the new USC rate of 11% will put undue stress on their finances. Instead of expanding their operations, many business owners believe they will be forced to save costs wherever they can. I received a letter from a constituent who said: "I can understand imposing extra charges on people who earn more, but I think then, we should be given rights as well - and also incentives to take on more staff."
I recognise the strides we have made in rebuilding the economy and welcome and commend the many progressive steps taken in budget 2015. I simply ask the Minister to make clear the message that the Government is not unfairly taxing the self-employed. There is great confusion and thus annoyance about the universal social charge rate among the very people whom we encourage to meet the challenge of starting a business and taking risks. The self-employed are honest, hard-working people who want only fair results for their work. Yesterday's edition of The Irish Timesfeatured a helpful response from Mr. Brendan Loughane, an official in the Department of Finance, in which he stated:
To suggest the divide has widened as a result of changes introduced in Budget 2015 is simply not true ... The factual position is that a single PAYE worker and a single self-assessed worker earning €100,000 will see an increase of €747 in their net income in 2015, as a result of the Budget 2015 changes.This message needs to be communicated to the self-employed as they do not feel they are supported by the Government.
I propose to respond to suggestions made by Opposition Deputies that the Government introduce a wealth tax. It is easy for Deputies to shout out ill-thought out suggestions in the Chamber without considering the reality. As a Deputy for Dún Laoghaire, I can vouch that many families paid exorbitant prices for the modest three and four bedroom semidetached homes in which they live. These taxpayers cannot afford to pay a wealth tax. I remind certain Opposition loudmouths that while many of my constituents in Dún Laoghaire pay income tax, child care costs and property tax and support and will pay the water tax because they know water is not a free commodity, by God, they will not support a wealth tax on their homes.
I again commend the Minister for introducing a progressive budget which abolishes the 0.6% pension levy, retains the 9% VAT rate, does not increase excise duty on alcohol, extends BreastCheck and retains the pupil-teacher ratio. Yesterday, the European economic forecast published by the European Commission stated Ireland's growth rate would be the highest in the European Union both this year and next year. This achievement is a direct result of the difficult, wise and competent decisions made by the Minister and shouldered by the people. I am confident that the measures included in the Finance Bill will help to ensure continued growth and positive news for Ireland.
Much has been said in recent months and years about the Government's ability to deliver on the promises and commitments made before the general election. I intend to deal with these commitments in a general manner.
Looking back to where we were four years ago, the Government's central commitment to the electorate was that it would restore the economy and return people to work. All of the other commitments, while important in their own right, could not even be contemplated if, as a nation, we continued to be in a state of bankruptcy. Let us not forget that the country was bankrupt four years ago and most political commentators and Opposition parties and all Independent Members doubted whether the Government could deliver on its agenda. The facts are now clear and our central commitment and policy plan are being delivered. There is no doubt, however, that this enormous task has been painful for the Government and, in particular, the people.
Work to complete some of the tasks we set ourselves, for example, the introduction of water charges, is still in progress.As all Deputies are aware, water charges are proving to be a difficult issue. The Government has given a commitment to clarify and address concerns about the charges in the coming weeks.
Most targets have been successfully met through difficult Government decisions aimed at saving and raising money. The embargo on public sector recruitment, by necessity, remains largely in force. While the embargo was a difficult decision for the Government to implement, it has been even more difficult for the thousands of public servants who maintained services through difficult times.
The complete reform of local government resulted in the abolition of town councils and a reduction in the size of our regional administration to make it more appropriate and affordable for the country. In this context, I often question the accusations of cronyism that continue to be made, given that Fine Gael, the largest party in local government, reduced the number of its public representatives by one third in a ruthless but necessary measure.
The property tax has been introduced as a part of a necessary effort to broaden the tax net. Property taxes are generally regarded internationally, including by most observers and politicians, as a fair component of the tax structure. The exception are Ireland's left-wing politicians whose brand of social values appears to differ from that of their counterparts in the rest of Europe, the reason being that it confers political advantage.
The universal social charge which hit every employed and retired citizen very hard had to be imposed by the previous Administration as a result of its poor management of the economy. The budget shows that the economic growth we are experiencing will deliver small returns to people at an individual level and ease their fears of further austerity in the period ahead. The current level of economic growth also gives enormous hope for the future.
Despite serious difficulties during its term of office, the Government has maintained basic social welfare rates. No other country in Europe that experienced similar difficulties managed to achieve this outcome. With a growing economy, social welfare benefits can be improved gradually, as shown by the restoration of the Christmas bonus at 25% of its previous rate.
The policies pursued by the Government quickly restored confidence in Ireland among our European partners and the financial markets. The Minister for Finance, Deputy Michael Noonan, showed a steady and reliable hand in guiding the economy and renegotiating the agreement on the promissory notes, as well as our repayment schedule and interest rates. At the same time, he injected confidence into the economy, with the ultimate aim of creating jobs. His approach is working. As he stated, the number of people in employment has increased by more than 70,000. Furthermore, we have learned today that unemployment has fallen to 11% and the Government is on course to achieve its target of having 2 million people working in the economy by 2016.
Despite the general consensus that the Government would not achieve the fiscal targets set by the troika, forecasts suggest the deficit for 2014 will be 3.7% of GDP, well inside the original deficit target. While we all accept that our debt is still too high, the actions taken by the Government have created confidence in the economy in the financial markets. The Minister is reducing the taxation burden by refinancing our debt through new loans, with interest rates of well under 3%. Ireland's ten year sovereign bond yields have reached record lows and now trade at less than 2%.
Since taking office, the Government has provided vital supports for indigenous industry, including the jobs initiative for the tourism industry, tax reforms for small and medium-sized enterprises and measures such as the home renovation incentive for the construction industry. Its general handling of the economy and skilful approach to our corporation tax regime ensure foreign direct investment will remain a cornerstone of economic development in the future. The certainty the Government has provided on this issue will ensure this investment will continue to increase.
As I stated, the core commitment we gave at the general election was to restore confidence in the economy and return people to work. The Government is dedicated to continuing to set the economy on a sustainable growth pattern. Now that the economy is doing well, political pundits and Opposition parties are honing in on other issues. They should remember that, in addition to economic success, the Government has delivered complete reform of local government. Our commitment to let the people decide on the future of the Seanad was honourable. The restrictions in the Freedom of Information Act have been reversed. Appointment to State boards will be made on the basis of recommendations made by a Civil Service commission. Most importantly, a quota regime has been introduced to ensure more women will stand for election and, I hope, be elected in the future. I commend the Bill to the House.
I propose to discuss two revenue issues, the first of which is the practices of petrol stretching and diesel laundering. Hundreds of people in County Mayo alone can no longer use their cars because their engines have been severely damaged by these practices. The scale of the problem which has also been reported in other parts of the country is alarming. Additional resources and a joined-up effort are required to nail the criminals who are lining their pockets at the expense of people who do not have insurance cover for the damage being done to their cars, are unable to return their vehicles to a garage and live in areas with no public transport to speak of.
People have been left in a dreadful position.
I listened to "Today with Sean O'Rourke" on which a journalist did not hold back. He named who, through his investigations, was responsible for this. All roads led to offshoots of the Provisional IRA. It was something else to hear what he had to say. It is using the money to buy properties in England, the USA and Ireland. It is estimated that a laundering operation in Monaghan has resulted in a loss of up to €10 million in taxes and excise duties to the State. We were told the conglomerate had a stake in 140 filling stations around the country, including supermarkets.
We need a massive operation to deal with the issue. We need the Army, the Customs service and the Garda because the Exchequer, as well as the ordinary person who has nowhere to turn and the legitimate trader, are losing out. Every time this fuel is sold at filling stations legitimate traders are losing out on business, not to mention their reputations, as people do not know where to turn. I have attended meetings in my county at which people asked me where they should go to buy petrol. That is shocking to say about consumer confidence in this day and age.
Given that there is a lot of information available, the issue has to be tackled and the operations shut down. I would like to think the ill-gotten gains, filling stations, tankers and profits would all be confiscated and a fund established for those who are out of pocket because of this activity. Those involved should be subject to the full rigour of the criminal justice system and put where they should be. It seems that some gangs are operating above the law, which is not good enough for ordinary law-abiding citizens who are at a loss and for whom the State can provide no solutions. The first step has to be law enforcement. Those involved should be named and shamed in order that people will know which filling stations are involved. They are filling up their tanks innocently and coming out with damaged vehicles. I understand it takes only one fill to damage a car.
I have raised the issue of NAMA, transparency, accountability, the treatment of developers and, above all, value for money for taxpayers on numerous occasions with the Minister in the House, at committee meetings and during Fine Gael Parliamentary Party meetings. Representatives of NAMA appeared before the Joint Committee on Finance, Public Expenditure and Reform on 22 October. I was present and said what I had to say. After the meeting I received threatening correspondence which was anonymous, as all cowards send such correspondence. Subsequent to the meeting I tabled parliamentary questions. I am well aware that the Minister does not prepare the replies. I asked about the Michael O'Flynn loan sales, an issue which was discussed by NAMA. The response I received was one of the most pitiful I had seen and the staff have something to answer for. They could only give me information based on what NAMA had stated at the committee. It did not need to be repeated to me.
On a point of order, I tabled the parliamentary questions and the ones I received back with an answer had been doctored. The questions were not the ones I had submitted. Nobody contacted me to ask if they could be changed or tell me there was a problem.
A question is addressed to the Minister, not the Department. If the Deputy has a problem, I suggest she go and see the Minister. She should not make charges in the Chamber that involve officials who are not here to defend themselves.
I have brought the matter to your attention. I referred to a case in which loans had been sold to an underbidder, rather than the highest bidder. In the interests of achieving the best value for taxpayers' money I cannot obtain confirmation of what the small difference was or that the taxpayer received value for money, other than what NAMA stated at the committee meeting. There does not seem to be any transparency or accountability. NAMA seems to be stating the highest bidder in this case, a globally trading hedge fund which I understand has at least $23 billion in assets, did not have the funds to go through with the purchase, which I cannot believe, and that a short-listing process took place. There are many questions to be answered and explanations are required. Mr. Flynn said after the court case in which NAMA had been ruled against and Mr. Justice Cregan delivered a fairly damming judgment in the matter that dealing with NAMA was like dealing with the establishment in North Korea. There are serious questions to be answered and it seems that if I table parliamentary questions, I will not get answers, about which I am disappointed.
Anything I am saying is factual and I have the information here. To tell the truth, after I raised the issue at the committee, I accumulated quite a bit of correspondence from people around the country who told me how they had been treated by NAMA and received telephone calls from people in very distressed state. I cannot adjudicate on all of these cases, but there are questions to be answered by NAMA.
I want to raise a number of issues, the most important of which is petrol stretching. I raised this issue two weeks ago in a parliamentary question to the Minister for Finance who told me in his response that the figures from the Revenue Commissioners showed that 26 cases of petrol stretching had been reported to them from counties Mayo, Leitrim, Roscommon and Galway between July and October. They told local media that 25 cases in County Longford alone had been reported to them, but I am aware of a garage in my county which has two vehicles a day coming in in which the engines have seized. That is the reality of what is happening across the west. A welcome announcement was made today that the Garda and Revenue Commissioners would come together in County Mayo to see if they could tackle this issue. This is not an issue in County Mayo, it also affects counties Roscommon, Longford, Galway and Leitrim, all of which face significant problems. The Minister pointed out to me that the Revenue Commissioners had a dedicated section on its website on which one could report such incidents. One reason they are not being reported is that one would want to have a PhD in IT to figure out how to report the matter on the website. We need to be far more proactive in encouraging people to come forward and report such crimes.
The Minister also said motorists should take care about where they sourced their petrol. The impression is being given that people are buying yellow pack petrol and should know better. In fact, the garages of which I am aware that are selling this fuel are not selling it at the going rate and, in some case, are more expensive. I know of a couple in my constituency, both of whom are on the minimum wage and who have three small children.
One of them has an eight year old car, while the other has a ten year old car. They need their cars to travel to and from work each day. They have third party insurance because they cannot afford to pay for comprehensive insurance. They are facing a bill of €10,000 because both cars have had dodgy petrol put in and both engines have seized up. Christmas has been cancelled for that family, probably for a couple of years. They will not be able to recover from this blow. That is what is happening on the ground.
The penalties in place are inadequate. On summary conviction, the maximum fine is €5,000 or up to 12 months in jail. The Revenue figures for the second quarter of this year for convictions show that 65 firms and individuals were convicted for fuel offences. The average fine imposed on conviction for illicit fuel offences is just €2,900. People are making far more on a daily basis from fuel stretching than the penalties in place. I urge the Minister of State to separate the two offences - that of supplying stretched petrol and other fuel and that of using it. The mandatory penalty on conviction for those supplying these fuels should be a minimum fine of €5,000 and 12 months in prison. This is the maximum penalty that can be imposed at District Court level. This penalty should be imposed on the individuals involved because they are causing immense financial hardship throughout my part of the country. People's vehicles are being completely destroyed and they do not have the money to pay to have them repaired. Two vehicles a day are coming in for repair to a particular garage every day.
Another issue I wish to raise is the crisis in the agriculture sector, in which we have had protests by farmers about the price of beef. I will try to explain the issue in simple terms for those outside the agricultural community. Farmers receive approximately €600 less per head of cattle today than they did 26 years ago. This includes the single farm payment they receive. Nobody can survive in such a situation. The various sectors of agriculture have good and bad years, but the beef sector has bad and very bad years. For many beef farmers, it is not about Harvest 2020 but about survival 2015 and whether they will be able to remain in farming and beef production at the end of next year.
There are bigger issues about the specifications required by the factories and the price differentials between here and the United Kingdom. In general there are fluctuations from year to year in commodity prices, whether it be milk, beef or sheep. The globalisation of food production and the increased unpredictably of weather events mean that this problem will continue. I suggest we try to introduce an additional incentive to assist farmers with their cash flow. We should allow them to put a limited amount of their profits in a good year aside in a dedicated bank account. This amount would be deducted from their farm profits and only taxed when withdrawn from the dedicated bank account in a difficult year. What I am suggesting is an emergency fund that farmers would set aside in a good year and access in a poor year. This fund would not be penalised in the good year and could be taxed in the normal way in the poor year. For example, last year there was a fodder crisis and farmers were unable to get fodder at any price. Many farmers had to borrow money or through the co-op to pay for fodder. If they had the type of rainy day account I suggest, they could have accessed these and used these funds. This would help to even out the highs and the lows we see in commodity prices and the even greater highs and lows expected in the future. I urge the Minister to consider this suggestion on Committee Stage.
I wish to raise an issue that infuriates everyone, namely, the golden pensions received by senior executives in semi-State companies, senior officials in Departments and some senior Ministers, particularly by those who managed the economy in the run-up to the financial crisis. All of them have now left their positions and cannot be held accountable unless they come forward voluntarily to answer questions. Every one of them is collecting a gold plated pension. I propose that we introduce a clawback clause for all State pensions and that where people are grossly incompetent in their jobs, a clause in their pension contract would ensure they could be held accountable where it hurt them - their pockets - and a deduction could be made from their pensions for gross incompetence. The difficulty in regard to many of these individuals is that there is a big rush to retire when they are found out and once they have retired they are no longer accountable. In many cases, it is only after their retirement that the full scale of the financial mismanagement and waste of public funds comes to light. Some of them see the writing on the wall before they are caught and once out, they end up with a full pension. We need to put some provisions in place to ensure there is a clawback clause because consistently rewarding public sector bosses who have screwed up on the job they were contracted to do is one of the main reasons the country is being administered appallingly. I will be told we cannot introduce a clawback clause retrospectively. However, we were able to do it in the Financial Emergency Measures in the Public Interest Act that was passed by this House and which undermined the constitutional property rights of citizens. It needs to be done in regard to this issue. I am aware that the Minister of State has an interest in the issue of disability services. Currently, the Department is clawing back money spent in the intellectual disability sector between July and October. A letter sent in October indicated this money would be clawed back. If moneys provided for intellectually disabled people can be clawed back, surely we can claw back moneys from the fat cats who undermined the country, the economy and society and who are drawing down pensions today.
I am glad to have the opportunity to make a brief contribution on the Finance Bill 2014. The Bill implements the majority of the taxation changes announced by the Minister for Finance, Deputy Michael Noonan, in his Budget Statement of 14 October. Today, Deputy Eoghan Murphy suggested a change in approach in how budgets were invigilated by this Parliament and spoke about the need for a stronger Parliament overall. His comments in this regard are reflective of the views I have long expressed in the House, on approximately 24 Finance Bills. This is the 24th time I have been asked to invigilate the debate on the Finance Bill.
I hope we will begin to receive more detailed budgetary information earlier in the year. Perhaps we might use the approach adopted by the Australian and Dutch Parliaments in order that Deputies can make an informed contribution to the debates on both the budget and the Finance Bill. While the Minister did provide outline costings for the new measures contained in budget 2015 which are instructive, there is still a disappointing and frustrating dearth of information on the macro position in regard to costings for many tax expenditures in this and earlier Bills.
Tax breaks have always played a prominent role in the Irish taxation system and the history of the State. For many years, colleagues in this House and I have demanded that tax expenditures be regarded simply as Government spending programmes and not effectively as a series of measures which are revenue neutral. Many studies, in particular the work of TASC by O'Connor, Staunton, Sweeney and O'Donnell in recent times, have shown that the costs and benefits of tax breaks are not uniform in their application across the people and households. The ESRI has noted, for example, that 80% of the benefit of pension tax reliefs goes to the top two deciles of income.
Tax expenditures are often anti-competitive, deadweight and less efficient than direct State spending. Most of all, the cost of tax breaks is difficult to determine and usually underestimated, even in the annual budget documents such as those presented with budget 2014. Nowhere in the budget papers and speeches of the past four years of the Government, for example, is there a full estimate of the current level of tax expenditures in this era of savage cutbacks and retrenchment. Right-wing journalists love to write about the budget revenue gap in regard to social programmes and public spending without ever mentioning the cumulative tax expenditures throughout each budget.
The OECD's 2009 economic survey of Ireland put the average EU level of tax breaks in the income tax system at 5.6% of total taxation, whereas the Irish level was placed at 18.3%, or three times greater, of total taxation. In addition, the benefits of many tax breaks accrue to the highest earners and these expenditures continue to provide a way whereby many high earners can dodge paying their appropriate share of income tax. The recent TASC report, A Defence of Taxation, refers to Revenue statistics from 2007 and 2010 which show that the total cost of tax breaks on income tax was €17.9 billion in 2007 and €17.7 billion in 2010. When one deducts the basic income tax credits for workers and employers which amounted to €8.9 billion in 2007 and €8 billion in 2010, we are left with tax breaks of €9 billion in 2007 and €9.6 billion in 2010, significantly more than the whole education budget.
Perhaps in his reply to the debate, the Minister might update us on the total cost of tax reliefs in 2013 and 2014 and the projected total costs of same in 2015. I note the Australian Treasury produces an annual tax expenditures statement which I presume includes a full cost-benefit analysis of each tax break. That is the type of issue Deputy Eoghan Murphy was rightly commending to the House. We should know what we spend on these tax reliefs and tax breaks which, as I said, by and large, benefit the more wealthy in society.
I note that there are again hugely significant tax expenditures in the agriculture sector in sections 43 and 44 of Chapter 6 of the Bill. These were estimated to cost at least €30 million in the Minister's Budget Statement. While these measures are said to be derived from the review of the Departments of Finance and Agriculture, Food and the Marine, they are still presented to Deputies in a very narrow manner, without guidelines on how the changes will affect the overall macro tax treatment of the sector. I also recall that last year the Ministers, Deputies Michael Noonan and Simon Coveney, overruled their departmental officials to introduce a €26 million tax break for inactive farmers.
The decision in section 27 to slash the 80% rate of income tax on windfall profits owing to certain planning decisions in regard to land is also not costed. The excuse given by the Ministers, Deputies Brendan Howlin and Michael Noonan, is that there had been absolutely no activity under the provisions of the principal Act, now amended by section 27. However, given that there were more homes built in 2009 alone than in the entire period since, it is no wonder the section did not come into use. Perhaps the developers were waiting for the Ministers to cut the windfall tax down to the capital gains tax rate of 33%. While the Minister, Deputy Michael Noonan, has said there will not be a return to the boom and bust policies of the past, the windfall tax provision was an important measure in actually addressing past boom and bust policies which got us into the mess of the economic crash. I note that Deputy Mick Wallace, for example, has made valuable contributions in debates in this House on his experience of how land is ruthlessly hoarded by developers and landowners and land banks could best be used to provide desperately needed housing and commercial and public infrastructure.
I note the Minister's fanfare about removing the double Irish which he clearly states has caused Ireland reputational damage. Deputy Michael Noonan has been Minister for Finance for four years and did not seem to believe there was any reputational damage throughout that period, although he does now. I read a report in today's edition of The Wall Street Journalwhich effectively stated the extension of research and development tax credits in section 23 and the changes to the capital allowances in section 35 would effectively create bigger loopholes in the tax system, thereby benefiting the same multinationals. Clearly, Dáil Éireann needs much more information on how a research and development or patent box tax expenditure will operate and what it will cost. In this instance, we can also observe how Mr. Cameron's similar patent box operates in the United Kingdom.
I made a submission to both the Minister, Deputy Michael Noonan, and the Minister, Deputy Brendan Howlin, in the run-up to budget 2015. Of course, the level of resources afforded to Independent Deputies makes it very difficult for us. I was sorry that I could only deliver my 20 page submission to the two Ministers four or five days before the budget. I note that some of the measures I proposed are actually contained in the budget and the Bill. However, would the Minister believe some of the measures I proposed to tackle high earners are noticeably absent? One of my principal recommendations was ending all cuts to public services. I welcome the decision by the Minister, Deputy Brendan Howlin, to finally stall the horrendous cuts across the major Departments of Social Protection, Health and Education and Skills. I also proposed a €5 a week increase in all social welfare benefits, including pensions.
One of the key measures which I welcome in the Bill is in Chapter 2 in regard to changes to the universal social charge. In my submission I recommended increasing the entry point at which a worker was liable for USC and also a cut to the middle rate of the charge. Therefore, I welcome the amendment of the threshold and recognise that this will be beneficial for workers on very low incomes. I also welcome the cuts to the lower rates of USC. They will assist all workers but will have particular benefits for those on lower incomes. I also note the inclusion of higher rates of USC for higher earners. However, these progressive changes are offset by the decision by the Ministers to cut the marginal rate of income tax by 1%, as contained in section 3 of the Bill. The Government's decision to cut the rate is regressive because it benefits higher earners most. Coupled with the increase in the threshold at which the marginal rate of income tax will be paid, also in section 3, this means that higher earners will benefit disproportionately from budget 2015. A much fairer approach would have been to increase the income tax credits available to all workers. I proposed in my submission increasing tax credits by €5 per week, at a cost of €332 million. I also proposed adding a third rate of income tax of 48% on incomes above €100,000 which, again, would be an equitable measure ensuring those who could most afford to contribute to the recovery of the nation would have the opportunity to do so.
I also renewed my call for solidarity taxes on wealth and an increase in the bank levy. I note that Deputy Peter Mathews has done some very thoughtful work and made thoughtful contributions on the way in which the financial services industry can, if one likes, pay reparations to the nation for the damage it did to us in the past six years and the suffering it has caused to the people.
In regard to Part 3, sections 58 to 63, inclusive, in preparing my submission I strongly considered a cut in VAT of at least 1%. I can understand the difficulties the officials have in trying to balance a budget, given the huge amount of funding that comes in through VAT. Clearly, however, consumption taxes, including VAT, excise and custom taxes, are extremely regressive. Citizens and families on low incomes pay a much higher portion of their income in VAT and other consumption taxes. I believe that, following the next general election, the group of Independents will have a very strong influence on the next Government and perhaps might even lead it. We will then have an opportunity to begin to address the great unfairness of VAT and other consumption taxes.
Earlier today I attended a meeting organised by Deputy Peadar Tóibín and our trade union colleagues to consider the very necessary changes to the relevant contracts tax, RCT, system, which is dealt with in section 15 of the Bill. As the Minister knows, in recent months I have raised issues with the RCT system and the manner in which it relates to construction workers. There is a situation where PAYE workers on State school contracts are being turned into subcontractors against their will and paid salaries below the minimum wage. It is an horrendous state of affairs. I hope to bring forward an amendment on the next Stage of the Finance Bill in conjunction with colleagues. Either something is wrong with the current RCT system rules or they are not being implemented by Revenue. Either way, we need some new ideas.
I note that in my Finance Bill papers I have a very nice "Dear Wolfgang" letter, submitted by the Minister for Finance. I wonder why he did not say "Dear Wolfgang and Sigmar," given that there is a sort of Noonan and Howlin outfit in Germany. Of course, Wolfgang visited his more or less Dublin Branch Office last week. I wonder why we did not receive a "Dear Michael" letter in return. Perhaps the Minister of State, Deputy Simon Harris, might raise that matter with the Minister as we have received only one side of the correspondence.
It is not long since I was canvassing in an estate in my town and visited two houses side by side. The cost of one which had been purchased at the height of the boom was €720,000, while the other had been purchased after the depression began for €350,000. I believe this identifies the crisis at the heart of the housing programme, planning and all of the issues related to the cost of housing and particularly the windfall profit tax which is being done away with in the Finance Bill. I have concerns about this and note the points made by Deputy Thomas P. Broughan.
I accept that it is included in the legislation and, obviously, is going to happen, but the key aspect is regulating the price of building land. This issue was raised a long time ago. I think Deputies Peter Mathews and Thomas P. Broughan might remember the Kenny report when we were just four or five years of age. Do the Deputies remember it?
One day I went looking for it; it is a lovely small book running to only about 20 pages. Needless to say, it also included a minority report, but it contained a lot of common sense. If we are to make sure people are not ripped off, we must address this issue. I appreciate that land is not being released and that there are different issues around Dublin, but, at the end of the day, particularly for poorer households and the taxpayer who will be paying for local authority housing, public works and public buildings into the future, we need to look again at this issue, about which I have concerns.
I welcome the continuation of the living city initiative, but there is a problem with it. It includes Dublin city, Cork, Limerick, Galway and - hey presto - Kilkenny. Whatever for? Deputy John Paul Phelan is sitting beside me. How did Kilkenny get in?
No, it is a fact. Drogheda is the largest town in the country, with a population approaching 40,000 citizens. The heart of Drogheda, Dundalk and many of our cities and towns was devastated - businesses were closed and there was no rates income; nothing. At the centre, they are ghost towns. However, what do we have on the outskirts owing to the planning policy of other Governments are huge shopping centres that have broken the heart of towns. This is a core issue. The living city initiative is an excellent one and I support it fully, but I regret very much that in a reply to my recent parliamentary question it was stated there was no intention to extend it in the budget. I would like to lay down a marker - it ought to be extended, which would make a lot of sense, as one could bring back to life the core of our towns and cities, many of which are denuded of people at night. We want to see commercial activity and enterprise. Extending the living city initiative and looking again at new initiatives to include urban renewal would make a lot of sense. It is much cheaper to provide new apartments and so on where commercial buildings are extant and can be improved.
I welcome the extension in the budget of section 28 tax relief where anybody who owns a private house or those who own residential properties and flats can avail of it. One of the key issues about which people complain is the fact that the quality of apartments to be let in the market is not up to scratch and does not meet basic requirements for modern living. This initiative will certainly help and is most definitely a move in the right direction.
I wish to raise a very important issue. It concerns encouraging enterprise and businesses to start up. There is a 10,000 sq. ft. property in my constituency in Drogheda which is empty. The previous business has closed and all of the charges have been paid. The planning fees have also been paid and the car parking is right. Somebody wants to move in and start up a business, but what are they faced with? First, they have to meet planning fees of almost €4,000, have a fire certificate at a cost of €2,697, meet a disability access certificate application fee of €800 and, let us not forget, the change of use fee of €23,752. That is an absolute disgrace and the issue needs to be addressed in every single urban area. We are killing enterprise and ensuring places that are denuded of commercial activity will never reopen. Young people want to get going and start off, but how are they going to do it? They cannot and will not do so. We are not tackling this core issue that needs to be addressed. We talk a lot about enterprise and there is no doubt that the number of jobs around the country are increasing and that the unemployment rate which was 15.3% when we took office is now 11% and falling. That is a fantastic achievement on the part of the Government which has been brought about by having the right policies and the drive and energy of the Administration. It is most welcome, but economic recovery has not trickled down sufficiently to ordinary people. It is a little like what they are saying in Great Britain, the United States and Ireland. Yes, we are improving and creating more jobs, but we do not have enough of them. There are too many barriers in our way.
I suggest to the Minister and the Department, if they are listening, that we tackle this issue. Let us scrap these damn fees. Let us open a new window of opportunity in a 12 month trial. For the next 12 months let us cut the fees to damn all for anybody who wants to open a new business. What would be the benefit to the local authority? I rang a local authority official whom I will not name about this issue. Local authority officials are decent people. They asked me what they would do for money, but there will be no one in this place. Why are so many shops empty? Why are people afraid to start a business? The reason is they cannot afford the charges. There is a premises at the very centre of my town that has been empty. A new business wants to move in, but guess what it needs to do so? It needs to pay a change of use fee. It must also pay huge planning fees. It must pay €30,000 to open up. This premises is right in the heart of my town and could be buzzing with people, creating employment and generating income for the local authority, but it is now empty and will remain so, unless we can find a way to deal with the issue. This lies at the heart of our commercial and economic recovery.
I will hand over to Deputy John Paul Phelan, the fellow from Kilkenny who people say is a good hurler. I welcome all of the significant changes that have been made and all of the good things included in the Bill, but we need to open our eyes a little more and tackle these issues in order that we have an open door policy and a welcome mat for anybody who wants to set up a business. We should tell them that we want them, that we are prepared to cut their costs, including their planning costs, down to zero. Let us give it a go and see what would happens because the local authority would be getting rates. It would have an income, people would be working and our towns would be alive. They would no longer be dead. Let us wake up and smell the coffee.
I thank Deputy Fergus O'Dowd for his compliments, but my hurling days are behind me at this stage.
I will correct my earlier interruptions. I would have no difficulty if Drogheda was to be included in the living city initiative, although it would have to be renamed the living town initiative. Seeing as it is called the living city initiative, it is only appropriate that all cities are included in it. It is a very good initiative. Deputy Fergus O'Dowd is not the best at mathematics and I think he used to be a teacher. With a population of over 25,000, Kilkenny has far more than one quarter of Drogheda's population.
The Deputy is spot on in terms of the value of the initiative and that it should be extended to large towns such as Drogheda. Dundalk is another large town in his constituency which I am sure could also benefit.
I echo the sentiments expressed by the Deputy in respect of the costs faced by businesses and people who are thinking of starting a business in facilities that are already exist. There are countless numbers of premises that are closed on high streets and other streets in towns and cities across the country. The planning charges and the development contributions required are so large in many cases that they are putting people off. I believe the Deputy is correct in suggesting that the Government needs to look at this. I know it has been done in other places on the Continent. I did a bit of research about it a while ago. It was even done, perhaps not successfully, in parts of the United States, although small-town America probably died many years ago. Efforts were made to revive those towns. There is no doubt, when one observes this city, the main roads leading out of it and its immediate hinterland, as well as Cork and Galway, that conditions have improved visibly over the last three or four years. Such improvements are not visible in much of the rest of the country. People are not necessarily feeling the improvement in their own pockets and they will not believe it until they see it happening. This should not be taken as undermining the good work that the Government has done. The purpose of the Finance Bill is to give legislative effect to the budget announcements. For that reason, I am fully supportive of it. However, I wish to address some specific issues arising from the Bill.
There is merit in Deputy Naughten's suggestions regarding public service pensions for those who have been less than good in the delivery of services, whether as politicians or senior civil servants who were in powerful positions during the period leading up to our economic collapse. Last week the Minister for Public Expenditure and Reform announced a list of reforms for the public service. A system of clawbacks from those who presided over the collapse would act as an incentive for those who currently occupy such positions to ensure it does not happen again.
The issue of petrol stretching and diesel laundering was mentioned by several speakers. There was a significant discovery of a diesel laundering plant in the Border region yesterday. I am part of a group of members of the British-Irish Parliamentary Association preparing a report on this issue. We have had several meetings with Ministers on both sides of the Border and with the acting Garda Commissioner. There is considerable anecdotal evidence along the Border about such activity, including the presence of tankers, many of which are unmarked, moving around where they should not be at all times of the day or night. I realise that officials in the customs division are put to the pin of their collars. Various agencies have a hand in regulating farms, and if a farmer seeks to carry out any sort of development it will not be long before the county council finds out, but some of these plants appear to operate with impunity in certain Border regions. I do not understand why there has not been a more comprehensive crackdown on these facilities. Some of those who have come before our group have suggested that a blind eye is being turned on the basis that it is preferable for some of the elements involved in this business to be laundering fuel than to be killing people. That is not acceptable.
I have been trying to get answers to my questions about the budgetary measures on the transfer of land to young farmers. These are welcome measures, because there have been significant problems in this regard since the cessation of the early retirement scheme. It has emerged following the announcement in the budget that the measures will apply only to full-time farmers. That is not acceptable. If the son or daughter of a farmer owning a 50-acre farm needs another job to make a living, why should he or she be penalised? I am led to believe that the difficulty in this area is coming from the Department of Finance rather than the Department of Agriculture, Food and the Marine. I urge the Minister for Finance to consider amending these measures to include all young farmers who are qualified regardless of whether they may be inheriting a large or a small farm. It is probably more inequitable for people farming small holdings who might hold an off-farm job out of necessity.
I welcome that the private sector pension levy will be removed in 2016. It was introduced for the specific purpose of allowing the VAT rate for the hospitality sector to be reduced. One of the most spectacular measures this Government has introduced was the reduction of the VAT rate for the hospitality sector, which led directly to the creation of thousands of jobs in towns and villages across the country. The pension levy was controversial, to say the least, but now it is being removed. A similar question arises in respect of the public service pension levy, which affects a considerable number of people who retired from the public service on the basis of the pension they expected. They understand that the levy was introduced in response to the emergency facing the country three or four years ago but they want an indication from the Government that it will be phased out over time. Their expectation of an income that could provide a decent standard of living during their retirement years should be met.
I was pleased to hear Deputy John Paul Phelan speak about the need to change the provisions on agricultural relief. A number of parts of the Bill, including the section dealing with stamp duty, makes reference to farmers spending 50% of their time on their farms. The vast majority of farmers in this country are producing suckler cows, dry stock or sheep. There are only 18,000 dairy farmers in the country, and even if that figure increased to 20,000 it would not be a significant number. A further 4,000 to 5,000 farmers are involved in tillage. It does not require 40 hours per week to farm suckler cows, dry stock or sheep. The worse the land, the more farmers would be simply passing the time if they were working that many hours. Requiring them to devote 50% of their time to farming will prevent a considerable number of family farms from being transferred to the next generation with the assistance of the reliefs.
I welcome that a consensus appears to be building in this House that whoever wrote that provision did not understand the situation. When one does not understand the consequences of one's actions, it is important that one listen to those who do understand them. It has been estimated that 30% of farmers currently earn off-farm income, but 60% of farmers had off-farm incomes when the economy was booming. The reality is that those who do not have an off-farm income would like such an income, because otherwise they are depending on payments such as farm assist. Please God, they will have an opportunity to work off their farms in the future.
I am disappointed that the relief that was sought in regard to compulsory investment in shares in dairy co-operatives, because of the expansion in milk production, was not given. I was a supporter of the business expansion scheme, BES, in the past because it provided equity for industry. As we know, it is hard enough at times for small businesses to access equity. If a business is depending on borrowed funds and the gearing ratio is wrong, it becomes much more vulnerable and liable to fail. In a time of massive expansion in the dairy industry and when markets internationally are very volatile and we are not sure what the future will bring, it is very important that dairy co-operatives are well geared and do not have a high borrowing ratio. They should be increasing their share capital rather than having to bring in private finance. The idea of their being farmer-owned is very attractive. Indeed, it is a positive that so much of our dairy industry remains farmer-owned. We must avoid a situation in which co-operatives seek to compensate for the share capital they do not have by going on the market and borrowing large amounts of money.
It is interesting to consider which businesses survived the downturn where one might say they should not have done. The timber industry is an extraordinary example of this. Five or six major mills in the county had to switch from making 70% of their sales in the home market to making 70% of their sales in the export market. We did not lose even one of these companies overboard. Logically, one would have to conclude that they were incredibly vulnerable because of the downturn in the construction industry. If any industry was going to go, one might well have figured the timber industry would be it. My understanding, however, is that these companies had very good gearing ratios, had not diversified outside of their core businesses and were therefore able to take the hit, ride out the difficulties and win new markets without going to the wall. Very few industries have taken such a hit without going under.
We need to build the same resilience into the dairy industry. When it comes to taking in shares, we must also ensure farmers are not hit with a double jeopardy and put in a position in which they have to borrow money to buy shares, improve their farms and put in extra capacity. We must avoid a situation in which farmers become over-borrowed. It is a major risk. I am very concerned that if people over-borrow and there is a downturn or price volatility, some will end up losing farms that have been in families for generations.
For many years I have made the case that for the ordinary citizen, there is nothing more frustrating than a massive tax form demanding information on multiple reliefs, representing a range of complications and twists and turns. The vast majority of PAYE workers do not fill an annual tax return because they are not obliged to do so. When my party was in government we got rid of many of the smaller reliefs. My view was that rather than reducing tax rates, it would be better to remove some of these small reliefs in the knowledge that many people were not availing of them. I used to have a slogan that the types of people who availed of these reliefs and sent in all the forms often did not need the money, while those who did need them were often the people who were afraid to fill the form. Some people simply have an antipathy to form-filling, while others are cautious when it comes to their dealings with the Revenue Commissioners. In some cases the policy is of "Out of sight, out of mind," and "Do not tickle it or it might bite back."
I have always maintained that what the ordinary punter wants - by "ordinary punter," I mean a person earning between €5,000 and €60,000, or €70,000 or €80,000 - is a very simple system whereby filling in a tax form does not require expert advice. We need to simplify what is there. We should give grants if we want to give money to people; the tax system should be simple and understandable in a way that enables people to work out how much they owe without having to seek expert advice. I am not talking about people with complicated accountancy issues, tax schemes and big money. I am talking about the average people we meet every day of the week. I see people trying to fill in tax forms who might have a farm income of €5,000 and a small PAYE income. Einstein would not be able to complete some of these forms. There are so many rules and regulations and this Bill is adding to the grief.
When the relief on refuse collection costs was in place, my understanding is that only 40% of people who had an eligibility for the relief actually claimed it. Now we are going down the route of a tax relief on water charges. It is not my intention to debate Irish Water and all of those issues this evening. My point is that I disagree fundamentally with such a relief as a method of reimbursing people for a charge. It is another crinkle in the system, and in order to avail of it, people will have to make a claim. Plenty of people have a paranoia about dealing with the Revenue Commissioners, even if they are totally tax-compliant. I have often dealt with people who filled out a tax form and discovered they were owed a lot of money. The relief on water charges is a bad idea.
Speaking more broadly, I would propose that in respect of all of those small reliefs listed on the back of tax form, applicants should be given two options. Option A, the simple option, would allow people to waive their right to claim all of them individually and instead receive a tax credit of €100 or €150. Option B would be to fill out the complicated form in order to claim all these bits and pieces of reliefs. I have no doubt that nine out of ten people will take the simple option of the tax credit. In the meantime, the forms are becoming incredibly complicated for ordinary people to fill out.
Some of these schemes and reliefs were introduced by my party in government but the intention was that they would be temporary measures. Certainly, we should have it as a medium-term goal to get back to a two-legged system, those legs being social insurance and income tax. Under the social insurance leg, everybody pays in at the same rate of 4%, 5% or whatever it is. I have made the case before that self-employed people should be brought into this by being covered for invalidity pension and so on. Everybody should pay in at a uniform rate that is easy to calculate, and the pay-out is the contributory pension, invalidity pension or whatever. The second leg should be income tax, full stop. We should absolutely have it as a long-term aim to get rid of the universal social charge. As it stands, we have made it incredibly difficult for people to calculate how much tax they should be paying. For the self-employed, no PRSI is payable on incomes below €5,000, and USC is not chargeable at below €10,032. For older people, the threshold is €36,000 for a couple and €18,000 for a single person. For younger people, various limits and permutations apply based on the various rules. If one asked everybody one met on the street, how many of them would be able to name all these thresholds and limits? People have a right to be able to calculate these sums without having to go to the Revenue On-line Service, ROS, for an answer which must be accepted at face value. People want to understand how the sum on the Revenue return was arrived at.
We must simplify the system. When we talk about better government and reform of government, it is often in reference to this House. The reality is that the vast majority of people in this country do not care how we operate this place. What they care about is that when they interact with the system, it is efficient, effective and understandable. Sometimes we spend more time in here talking about trivialities than the things that would actually make a practical difference in people's lives. One such change would be to facilitate people by helping them to access the system and find out what they are paying and how it is calculated.
I hope the Minister intends to review the proposal on a water charges relief in the coming week.
We have a clear policy on it. The Government should just put it out there into the ether and forget about it for the moment because it is such a mess. One solution is not to bring in a small tax relief. Asking people to pay €300 at the marginal rate of tax is ridiculous for the complication it will put into people’s lives. That money could be given out in a much simpler way.
What is the Minister for Finance’s vision of a tax system that will be fair, accessible and calculable for the ordinary people, most of whom lead fairly simple, regular lives? Has he got a vision of going from a three-tier system involving USC, with one set of rules, PAYE and self-employed income tax, with a second set of rules, and PRSI, with a third set of rules, back to a two-tier system?
I was shocked at the way the increase was done through a tax credit. The Government has perpetuated a measure we introduced, one with which I never agreed, namely individualisation. This was particularly cruel because at least in the good days there were good chances for families to have two incomes. The credit should have been doubled for people who are married. It should be remembered many families who were dependent on two incomes are now dependent on one.
I thank Deputy Ó Cuív for facilitating me by allowing me to speak before Private Members’ business. If a week is a long time in politics, a year is certainly a longer time. This time last year, when we debated the Finance Bill 2013, the projected adjustment to take place this year was put at €2 billion. It was to be achieved through taxation-raising measures, public expenditure reductions and so forth. Twelve months later, we find ourselves in a remarkable place where, for the first time in seven years, we have a recovery budget and are beginning to put money back into people’s pockets. In this budget we saw an increase in spending in a careful and targeted way, taxes cut for low- and middle-income workers and meaningful measures that will boost growth and continue the recovery that is under way.
What do we mean by recovery, however? I understand the frustration of those who have continued to work during the difficult years we have endured since the country’s financial collapse. They have worked but have seen their household incomes diminish during that period. While they hear claims that unemployment is dropping by 1,000 a month and that we are back in the bond markets at rates better than before 2004, along with other positive financial indicators, they do not feel these improvements in their pockets. Recovery really only kicks in when people actually feel it across the private and public sectors. The Government’s job is to ensure that as economic recovery continues, it is felt by all.
In times of financial difficulty, Governments introduce emergency budgets, usually to take money out of people’s pockets. As the recovery proceeds, the Government should consider the introduction of a mini-budget between now and next October to put money back into people’s pockets. Before the budget the Oireachtas Joint Committee on Finance, Public Expenditure and Reform heard several presentations from various agencies, including IBEC, stating that the budget deficit correction actually only needed to be €400 million, but they were not taken seriously. They indicated that money could actually be returned to people. I believe serious consideration needs to be given by the Administration to these proposals.
There is a criticism that the budget was unfair, with an imbalance in benefits between low-paid and high-paid workers. Those who have made this claim have done so either disingenuously or in a selective manner. A person with a child dependant earning around the €12,000 mark, which just comes into the USC area, will also now qualify for family income supplement, another State support. This person will get 60% of the difference between €250 and €504 made up. This will come to another €160 a week that they are actually getting. If one adds this to €250, then one is earning, net, what a salary of €23,000 would bring in. It is disingenuous for people to criticise the changes to the €12,000 USC entry level while not looking at the other ancillary supports and benefits introduced by the Department of Social Protection. We will see an extension of this type of thinking through the work the Tánaiste and Minister for Social Protection is doing on the family assist programme.
At the heart of the financial crisis and meltdown was an unsustainable housing market. As we move towards recovery, we must aim for a normal and sustainable housing market that ensures people can afford to buy homes. Despite the financial crisis and the house price crash, Ireland will continue to be a home-purchasing nation. We must ensure those on average wages can get access to the housing market and can afford to buy homes. Much consideration must be given to the recent announcement by the Governor of the Central Bank, Professor Patrick Honohan, on loan-to-value, LTV, ratios and the requirement of a 20% deposit for a house. There were the obvious knee-jerk reactions in some quarters, which must be resisted. We should have learned from the past. We now have a regulator who represents the opposite of light-touch regulation and whom we must listen to. It also presents an opportunity to examine a new way of having a housing market that favours home purchasers over buy-to-let and corporate investors. Ultimately, the Government must choose; one cannot have a housing market in which the Government is neutral. The difficulty with the 80:20 LTV ratio is that it favours investors. First-time buyers, the very people who sustain a housing market and were locked out of the previous market, which led to its collapse, will have problems meeting an 80:20 ratio requirement as they tend to have high risks. We need to examine new lending practices or a new type of financial product geared towards favouring homeowners. This has been done in other jurisdictions, most notably Canada, which did not have a housing crash. I would like to see the Department of Finance, along with the banks and Financial Regulator, examine a new type of approach to house purchases, one targeted at first-time buyers and which is sustainable and will keep property inflation in line with wages.
Ireland is on the road to recovery, there is no question about that. People need to feel that recovery in their pockets. Despite the biggest economic crash this country has ever faced, we continue to be a home-purchasing nation. For a litmus test of this recovery being real, genuine, long-term, sustainable and - to quote the Minister, Deputy Noonan - to show that we are taking a road less travelled, we need to design a mortgage product to ensure that home-owners are at the preferential end of the housing market.