Martin Mansergh (Fianna Fail)

——which is unlikely to be part of a Government, proposes as policy an increase in all sorts of taxes. However, there is a large measure of consensus that we are pursuing the correct policies.

It is entirely misleading to suggest that 50% or more of taxpayers pay at the high rate because those who are exempt from tax are of course excluded from the figures. The budget booklet last year stated that approximately 669,000 people were exempt from tax, or 35%, a further 31% paid tax at the standard rate and approximately 632,000, or 33%, paid at the higher rate. While these figures may alter at year end, it will not be by much.

It is desirable, and it is the policy of the Government parties, that the proportion of those on the higher rate of tax should be reduced. However, we faced some potential financial difficulties over the past couple of years and the tax rates and bands took some of the strain. We should not apologise for this. The alternatives were that we would borrow or raise the headline rates of tax. Again, I have not heard other parties explicitly put forward alternatives in this regard.

The debate is not confined to parties in this or the other House. For example, the Irish Congress of Trade Unions issued a document suggesting that corporation tax should be significantly raised. Part of its argument was based on the fact that Great Britain attracts significant investment. My answer to this is to point to the case of Northern Ireland, which does not get much investment. Account must be taken of population, geography, etc.

Ireland is a peripheral part of Europe. While the greater London area may well get inward investment with a corporation tax rate of 30%, it does not follow that Ireland would have the same result or experience. In a recent interview, Ireland's largest inward investor, Intel, made clear how much importance it attaches to maintaining the 12.5% corporation tax rate. Any future Government would be wise to pay attention to that fact. I note the leader of the Labour Party said that it is not his party's intention to change that tax rate.

There has been much media coverage and debate, even on the Order of Business, about various tax reliefs and incentives. These fall into three categories. There are ones where many people benefit such as exemptions from capital gains tax for one's home, tax on child benefit, SSIAs and so on. The second category covers high risk incentives including reliefs for business expansion schemes, artists, the film industry and stallions. There are also construction industry related incentives, due to be phased out by 1 July 2006.

Concerns about the tax system are often expressed on the Order of Business. At today's meeting of the Joint Committee on Finance and the Public Service, the chairman of the Revenue Commissioners, Mr. Frank Daly, made many illuminating and clarifying points on the tax system. He informed the committee that there are no indications at this time that Irish domiciled persons who claim non-residence are unable to demonstrate they were outside the State for the requisite 183 days. He continued that awareness of the Revenue Commissioners' general interest and audit programme in this area, together with the financial consequences of non-compliance, motivates these individuals to keep their residence patterns within the rules.

Regarding the case of the 11 individuals with gross incomes exceeding €1 million but who had no net tax liability, Mr. Daly pointed out that they pay no tax due primarily through extensive use of property-based capital allowances. Members will agree that there should be no change in the situation where those are phased out. We now have a buoyant and booming construction sector. However, Mr. Daly pointed out that section 23 relief was introduced in 1981 when the construction industry was in great difficulty. Mr. Daly also pointed to the increase in the effective tax rate of higher earners since 1994.

Let us consider the Fine Gael Party's amendment. One only has to look at the taxation tables to see how the tax burden for people at all income levels has been reduced.