Tom Parlon (Laois-Offaly, Progressive Democrats)

That does not stand up. The data indicates that in 2004 Ireland had the lowest average tax rate among EU member states surveyed and the third lowest in the OECD for a single person on the average industrial wage. Furthermore, for the average industrial worker who is married with two children, with a carer in the home, Ireland has the lowest average tax rate in the entire OECD when cash transfers are taken into account.

As regards the point the Senator made about the yields from indirect taxation, VAT rates have not increased significantly since the Government took office. The standard rate is still 21%. The increased yield reflects the state of the economy and the massive increases in consumer spending as a result. Cars are a case in point. Despite the high taxation, there is not a house in the country that does not have two, three or even more cars in the yard.

I agree with Senators Mansergh and Ryan that the taxation regime, both in regard to personal income tax and business tax, played a significant role in the success of the economy in recent years, and it will continue to be significant. Having a low income tax wedge is vitally important to employment. Low costs make it easier for companies to take on additional employees, which is an important element of Ireland's competitive edge.

A number of Senators raised the issue of tax relief on child care. It is important to recognise what the Government has already done in this regard. Over the past number of years, the Government considered carefully the whole area of child care and will continue to do so. The Government decided that as a matter of policy child benefit will be the main instrument through which support will be provided for parents with children. The Government has increased child benefit by substantial amounts since coming into office in 1997. Since 1997, overall expenditure on child benefit has increased by 279%. This compares with an increase in the consumer price index over that period of just 31%.

One of the key drivers of costs in respect of child care has been the limited number of formal child care places available. In addition, the delivery of quality child care is of necessity expensive because it is a labour intensive service which is frequently required by parents for ten or more hours per day. The equal opportunities child care programme funds capital development for increased places, supports staffing costs for facilities, targets disadvantaged areas and improves child care quality.

The capital envelope for the planned programme of continued investment in child care facilities over the next five years, from 2005 to 2009, will be €313 million and this is expected to create approximately 17,000 places, which represents some 3,400 places per annum for each of the next five years. The EOCP allocation for 2005 provides €83.4 million, of which €43.8 million is current and €39.6 million will be provided in capital funding.

I was recently in Portarlington and Claragh which have received €1.4 million and €1.1 million, respectively, in grants for community child care, which will certainly provide a substantial service in those areas.

In effect, this all constitutes new spending since 1997. Prior to that, the only equivalent provision was a pilot scheme which ran from 1994 until 1997 at a total cost of €1.6 million. The Government has also undertaken measures to favour the supply of child care by providing 100% capital allowances available in year one for expenditure on the construction, refurbishment or extension of child care premises which meet the required standards of the Child Care Act 1991. There is also relief from benefit in kind taxation for free or subsidised child care provided by employers. Taken together, these represent substantial measures to assist with the cost of child care.

Senator Ormonde referred to a number of provisions including the exemption from taxation of foster care payments. This welcome measure will help to underpin a very important element of the strategy for children in the care of the State where the policy is to provide such children with a family experience in so far as is possible.

Senator John Paul Phelan made a point with regard to changes in stamp duty rates for first-time buyers of second-hand houses leading to an increase in house prices. The new exemption threshold of €317,500 is above what a first-time buyer pays for a second-hand house anywhere in the State.