Derek McDowell (Labour)

The Labour Party was party to the decision to set the corporation tax rate at 12.5%. It is true to say that some of us might have liked to see it at 15% or 17.5% and there was a debate in the Government at the time. The debate was settled and it is over. There will be no proposal from the Labour Party to increase the 12.5% rate of corporation tax.

I dispute the history of capital gains tax as written by the Progressive Democrats and Fianna Fáil. It is true to say that stockbroking revenues had already started to increase by a considerable amount before the reduction in 1998. It is also true to say that the number of people paying CGT in any given year has not increased as substantially as revenue. In other words, we are still getting only a relatively small minority of people paying CGT, but each individual files returns for much more. We must look into the issue to find out whether there is a migration of income tax into CGT, which can then be paid at a lower rate. I know that the Department of Finance is concerned about that and it should be. If something is a genuine capital gain, then well and good. However, there is no doubt that there are people who are hiding income and making it look like a capital gain so that they can reduce the rate of tax. I do not know what conclusion Deputy Burton will make when she looks at it, but we will let the Government parties know long before the next general election. The next election, as far as we are concerned, will not be about tax. The next general election will be about how we have used the tax. It will not be about whether we have €40 billion to €44 billion to spend in any given year, but about how it is used and what we can get for it.

It was somewhat depressing to read the economic commentators of the various stockbroking companies in The Irish Times today. They were again complaining that the Minister had €2 billion to give away and suggested various ways in which this could be given back to taxpayers, such as tax reliefs, social welfare benefits and so on. That is fine in so far as it goes, but we never seem to be capable of raising our eyes a bit. We should say that there are certain things we want to achieve, such as having a wider provision of medical cards. When will we hear these stockbroker types tell us that we can now afford to do this due to economic growth and because of increased tax revenues? Everything is debated in terms of money which the Minister can give back. I find that very frustrating in the way it determines the argument.

I do not take a deeply ideological view about tax reliefs and exemptions. One must be pragmatic and examine what these breaks are looking to achieve and decide whether they are achieving that. Nonetheless, there is now a consensus that we cannot allow a certain small percentage of high earners to pay no tax at all. That may be dealt with by limiting the scope of individual reliefs or the amount that can be claimed in respect of individual reliefs, or it may be dealt with by the American alternative minimum tax system. I do not have a strong view on that. It may have to be done with a mixture of both.

In 1998, the then Minister for Finance limited to £25,000 the capital allowances that could be written off against non-rental income. That was an important start, although there are still people who are claiming capital allowances which predate that measure. I suspect that we will need an underpinning provision that a minimum rate of tax will be payable. It must be a simple system and the minimum rate must be just that and not a maximum rate. The basic principle is extremely important and it is one of fairness. It must underpin the taxation system, because if it is not a generally accepted principle then people will cheat and will not pay their fair share of tax, or any tax at all.

I do not have any difficulty with the Fine Gael amendment to the motion, nor does the Labour Party. It is worth emphasising a couple of points that are made in the amendment. The Minister deserves to be commended in taking the minimum wage out of the tax net. It is important that that remains the case and as the minimum wage increases, the minimum tax credit and the exemption limits should also increase. It was always absurd that we would decide by law that it was unacceptable for people to be earning less than a certain amount, yet take some of that away from them. It took the Government seven or eight years to correct that position and it would be unacceptable if it now turned its back on that achievement before the next election.

Where does individualisation stand in the Government's tax priorities? The Labour Party and I opposed it at the time, but I must confess that my views migrated a bit and I no longer oppose it. However, we are now left with a hybrid system which is pretty senseless. I urge the Minister to finish off the job and to individualise tax completely, while individualising the social welfare system at the same time, where we still continue to treat dependants as just that, rather than as individuals in their own right.

I wish to come back to the point I made earlier. There is, by and large, agreement on where we stand in terms of income tax, corporation tax and capital gains tax. Whether or not the Progressive Democrats like it, the next election will not be fought on these issues. It will be fought on the basis of what we do with the €45 billion in tax revenues we have. On that issue, this Government is extremely vulnerable and will lose very badly.