Brian Hayes (Fine Gael)

I thank Senator Mansergh for his very useful advice. Everyone knows that average taxpayers saw their tax bills rise after the last general election. The reason for this rise in the first two budgets after the general election was the Government's failure to index the tax bands. It failed to do this because for an 18-month period before the last general election, there was a giveaway involving a ratcheting up of current expenditure, which had to be paid for and which was paid for in the first 24 months after the last general election.

In his first budget, the Minister took action regarding the indexation of tax bands but it was the largest single increase in tax after the last general election. As someone who did not favour tax individualisation, I was heartened when the Government initially introduced the home carer's tax credit. It introduced this measure as a compensation mechanism to help single-income couples who decide that one spouse should look after the children at home. Why has there been no increase in the home carer's tax credit in the five consecutive budgets since its introduction by the former Minister for Finance, Charlie McCreevy? There has been no increase in this tax credit for five years. Why has there been no increase in this benefit when we are supposedly serious about recognising some families who choose to have only one income?

While many workers gain financially through overtime payments, much of this money is taken back because the additional income is taxed at the top tax rate of 42%. ICTU introduced a proposal a few years ago to tax overtime payments at a rate between 20% and 42% as a means of cushioning additional payments received by less well-off workers throughout the year. This proposal was endorsed at the time by Fine Gael's finance spokesperson and I would like to see a debate on it. There is a considerable jump between 20% and 42%. It is not considerable for a person earning over €70,000 a year but it is for someone on a much lower income. If we are serious about having a fair and equitable tax system for working families and individuals, we must realise that the existing jump between 20% and 42% is far too significant and might well be overcome by the introduction of a third rate that is between 20% and 42%.

I agree with colleagues who argued that it is absurd that very wealthy people with Irish passports pay no tax, although I accept that the number of such individuals is quite small. At the minimum, we need a basic level of tax which every citizen pays. It is wrong that people can shelter and hide their income as a means of not paying tax. I ask the Minister not to carry out further examinations but to take decisive action in the next budget to ensure that people with very substantial incomes cannot offset their income against tax. From the figures cited this evening, it appears that the Minister will have somewhere between €1.5 billion and €2 billion to hand out on budget day.

There is a large degree of consensus on capital and income taxation. The issue has largely been put to bed because of the resources the State has at its disposal. When Fine Gael was last in Government, it had less resources to offset against reductions in tax than the Government which followed Fine Gael's economic platform after the 1997 general election. The success of the economy is based on trying to reduce taxation, thereby increasing the amount of revenue available on the capital side and for other worthwhile projects. Despite the efforts of our friends on the opposite side of the House, the focus in the next general election will on competence and how much has been wasted over the past nine years by a Government that has been unable to deal with all the demands our modern economy presents rather than on tax.