Brendan Ryan (Labour)

I am an engineer and, therefore, something of a scientist. I am sceptical as to whether science knows any laws of nature. All we have are the best approximations of what currently is known and many of those will be revised. Newton's laws are crude approximations of Einstein's E=mc2. We spend our lives relearning and rewriting. If it is not true in the physical sciences, it is most surely not true in the so-called science of economics. As somebody said to me, economics is related to science in the way astrology is related to astronomy. One is an abuse of the term, the other is something real.

The point I make is that economics is not something which can be picked. There are people, most notably in the IMF and the World Bank, who seem to believe there are universal prescriptions which one can apply everywhere. Over and over they have been shown to be wrong. It took a number of years for the World Economic Forum at Davos to begin to accept that one could not measure competitiveness by the level of public expenditure. It used to classify any country with a high level of public expenditure as being inherently uncompetitive until it discovered that some countries with high levels of public expenditure, such as Denmark, Finland, Sweden and others, were extraordinarily competitive. It accepts, therefore, there were different ways and its reports refer to good and bad public expenditure. Given the wasteful nature of the Government and the number of times it has got the timing and costs of projects, etc., wrong, perhaps it ought to accept it is on the wrong side of the argument regarding public expenditure and competitiveness. We will not hold our breath. Perhaps the Government will get it right this time on transport, as it makes a second attempt to do what it tried five years ago. One can only hope the Government will.

I am glad my colleague, Senator McDowell, mentioned capital gains tax. I do not know whether there is an optimum rate of CGT or whether there is a universally applicable rate. Varying rates of CGT could be charged in different circumstances to achieve different objectives in terms of revenue and incentive. The notion of a standard flat rate, therefore, is questionable while a standard low rate is even more questionable. Senator McDowell also raised the issue of income being declared as a capital gain because it can be taxed at a lower rate than, for example, the income of someone on the minimum wage, which is not right.

The graph of capital gains tax returns over a number of years highlights that revenue does not correlate with the CGT rate. It correlates with economic activity and other factors but CGT revenue increases and decreases. I examined this because a colleague on the Independent benches stated the greatest argument for the low rate was the increase in revenue. However, the figures indicate that it is a simplistic analysis to say the return on CGT is entirely a product of the rate at which it is set.

The amendment refers to Irish citizens who claim non-resident tax status. The US has taken the correct view whereby if one holds an Irish passport, one is taxable in Ireland. The State should not allow its citizens to be taxed twice. If one pays higher taxes in the country in which one lives, that should be recognised so that people are not taxed on the double. The notion that one can hold a passport without being obliged to pay tax is questionable. As a first step, the Minister should amend the law to ensure it is up to people claiming non-resident status to prove they are not resident rather than it being up to the State to prove they are resident. In other words, the burden of proof should lie with the person who is non-resident to satisfy the Revenue Commissioners that he or she does not reside in the State.

It is good that there is cross-party consensus that everybody in the State should pay a minimum rate of tax and that nobody should be able to use a combination of schemes, exemptions and incentives to avoid paying income tax. I am glad there is also an aspiration that people on the minimum wage should not pay income tax. It is a pity they were the last priority in the Government parties stage by stage reduction in income taxes. They commenced with the well off and concluded with a concession to those on the minimum wage. People earning €6.50 or €7 an hour were the last to receive a generous change in their income tax status whereas those on much larger incomes such as myself and most Members of the House benefited initially. That is a peculiar set of priorities for people who are strong on the rhetoric of equity and social justice.