John Paul Phelan (Fine Gael)

I welcome the Minister and his officials to the House to discuss this Bill. He has provided an exhaustive report of the different sections of the Bill and I welcome many of them. I especially welcome the effort made by the Minister to close a number of loopholes which existed in the tax system and which allowed for potential abuse through tax avoidance. I broadly welcome his actions on pension provision and he has made a step in the right direction in this respect.

At the outset, the Minister spoke about the extension of the film tax relief. I was a member of the Joint Committee on Arts, Sport and Tourism when I first entered the House. The Minister for Finance's immediate predecessor seemed to be steering the Government towards getting rid of the relief, but the current Minister seems to be steering in the opposite direction. Can he enlighten us on the thinking behind that reversal? I agree with him and the improvements in the film tax relief scheme are to be welcomed.

Extremely wealthy people in this country have avoided paying any tax and I welcome the Government's efforts to tackle them. I take a measure of satisfaction from that announcement in the budget, as it was highlighted extensively by the Labour Party and the Fine Gael Party that this anomaly should not be allowed to continue. I am glad the Minister has started a process that will ensure such people will effectively have to pay a 20% rate of tax in the future.

There are aspects of the Bill about which I have reservations. After the 2002 general election, the Government announced that it would begin to remove the remaining property-based tax incentive schemes. This was to happen by 2004, but that was extended to 2006 and it now appears that some of the schemes will be extended further to 2008. I have no problem with the economic theory behind incentive schemes. They were developed for a specific purpose and they often achieved their objectives. However, for the past six or seven years these schemes have been part of the problem rather than part of the solution. At the moment, they are fuelling huge increases in property values across the country. The Government seems to be prevaricating again and is extending some of these reliefs until 2008. A recent report into these schemes on behalf of the Department informed us that €1.6 billion had been foregone to the Exchequer as a result of these property-based schemes, which is a significant amount of money. Following that report, it is clear that action needs to be taken rather than ensuring that these schemes are extended into the future. The problems they are currently causing need to be neutralised and the schemes should be removed completely and as quickly as possible.

Following the publication of the report into the property-based tax schemes, the Minister stated that cost-benefit analyses should be carried out on schemes before they are introduced. Such analyses should be conducted into the schemes for private hospitals and nursing homes. Those schemes serve a purpose and I am not opposed to them on principle, but it is quite apparent that some of those hospitals and nursing homes are not managed in accordance with public health policy. It would be useful to have a cost-benefit analysis of how those schemes are progressing. As I said, I have no political hang-up or objection to tax-based incentive schemes. In future, we must examine other areas of the economy that might benefit from them. It is clear that we have 300,000 people directly involved in construction, currently producing approximately 80,000 housing units per annum. Most people would agree that such a rate is unsustainable. However, if something happened to the construction industry tomorrow, it might have very serious consequences for the rest of the economy, and the Government should consider other areas. We have a serious problem providing transport infrastructure, and the Minister and his officials might usefully examine tax-incentive schemes for road, rail and other types of infrastructure. Anyone who becomes redundant in the property sector could be redeployed in infrastructural projects.

At every opportunity, I have brought up capital gains tax and roll-over relief with the Minister for Finance, Deputy Cowen, and the Minister of State, Deputy Parlon, and I wish to raise them again. It is at the very least inequitable that an unwilling seller of land to the National Roads Authority for road infrastructure should be subject to the full rate of capital gains tax. I recently spoke to a farmer in Kilkenny through whose farm the new Waterford-Dublin route is going. He is losing 20 to 30 acres and his home, but he will be subject to the full rate of capital gains tax, although he is a completely unwilling seller. He will have to find land to replace what he is losing as a result of the road. Since it is being built through his area, all his neighbours will be in the same position, with a knock-on effect seen in the cost of land there. A few years ago, the Government introduced a scheme of roll-over relief that would have addressed the situation where someone is involved in farming or otherwise self-employed. I urge the Minister to act as soon as possible to review the U-turn of a few years ago as it is quite unfair.

In his remarks, the Minister mentioned his initiatives on biofuels. I welcome the budget announcements in the area, but the Government is setting itself the rather miserable target that 2% of the market should be provided by biofuels by 2008. He mentioned a significant impact on the environment but it will not have any impact as the market for fuel is expanding every year and by that date it will certainly be larger than at present. Any 2% of such a market will have a negligible effect.

Perhaps the Minister will be able to address this in his answer, although it is not directly related to the Finance Bill. On the Order of Business, points were raised regarding social partnership. I agree with other speakers on its importance in developing the economy over the last few years. It may have been overstated, but it has been very valuable. I would like to see several issues addressed in the ongoing discussions.

Senator Mansergh and others mentioned outsourcing, and I am not particularly hung up about whether it should be used for driver testing. However, we must ensure in the new partnership deal, if one comes about, that vital Government services can be outsourced. Driver testing was given as an example, and it is a good one. If a backlog emerges in any sector that could be addressed by employing contractors from outside, it should be resolved by contracting out the difficulty in question. That should be addressed regarding social partnership.

I raised the issue of community employment schemes. At present, anyone on such a scheme who is aged over 50 has a three-year cap, after which he or she must leave. In the context of social partnership, I ask that this be reviewed. Community employment schemes provide vital services in rural and urban communities up and down the country, and the harsh reality is that anyone over 50 who is unemployed will find it extremely difficult to re-enter the employment market. The current cap should be removed, and I urge the Minister to do so as soon as possible.

Another issue to which the Minister did not refer but that constantly arises is competitiveness. Our competitiveness has been seriously eroded in the last five or six years in particular, and the Government has played a major role in doing so. Since 2002, there has been an 86% increase in Government charges. Public utility costs have increased by 40%. Gas and electricity charges have gone up much more than in any of our European neighbours. Regarding gas and electricity in particular, we have established a series of regulators, but what are they doing to get a straight answer on why we are seeing such spiralling costs in the economy? I do not believe they are doing enough.

A rather startling statistic is that last year's export performance was the worst since 1974. Not many people commented on it during discussion of the Finance Bill in the other House, and the Minister did not refer to it in his remarks here. It is the third year in a row that we have seen a significant fall in exports, and that is a clear indicator of our problems with competitiveness. Perhaps it might be useful to discuss that at some stage.

There are also serious issues regarding telecommunications and the knock-on effect on competitiveness of our broadband problems. Like other Senators, I have raised it at various intervals regarding the economic outlook. At a time when it looks like Eircom will soon find itself in the hands of an Australian company, there are serious difficulties, particularly in rural areas, with the roll-out of broadband. Large swathes of the country still have no coverage, and we are far and away the worst among European colleagues when it comes to broadband coverage. That will be extremely detrimental to future growth prospects, particularly in regional centres. I ask that the Minister and the Government ensure that something be done to bring greater competition to the market and give rural and provincial areas some level of broadband service.

I welcome many provisions in the Bill, particularly the Minister's efforts to close loopholes. However, significant errors have been made, especially in further extending property-based tax reliefs. I ask the Minister to revisit that as soon as possible.