Brian Cowen (Laois-Offaly, Fianna Fail)

The consideration raised by Senator McDowell in his last point is a real issue. I can see both sides of the argument. At the end of the day I want to achieve an objective where, through the specified reliefs provision, we do not have high income individuals who pay no tax. There is a wider confidence issue here in terms of equity in the tax system that we need to keep to the fore in our minds. That means that if one is a high earner, regardless of how genuine or philanthropic one is, to what extent does it assist the standing of our tax system if people who have made profits and have remuneration should not make any contribution in taxes? As a public representative for the past 22 years it would be difficult to find many in my constituency who would believe that is a principle worth shedding. Therefore, everybody in our society who has a taxable income should pay tax. In our taxation system, there are, quite rightly, tax incentives in respect of certain public policy initiatives which can be availed of and which promote certain levels of activities in certain areas of the economy which we have decided on, and voted upon democratically, even if at times we disagree on either their extent or their appropriateness. It is all legitimate and in accordance with the compliance culture being promoted. One then gets to the point of saying we must keep those principles. One may ask about the people who want to make donations. How can one argue against it? I have no problem if people want to use up some of their 50% remaining income that will attract specified relief; they can do so. As has been stated by Senator McDowell they can roll it over a number of years.

If one takes up all the reliefs available and one has a further good idea, which is to provide a donation to, for example, our august institution down the road, which Senator Henry would greatly support, is the Senator saying that should supersede the principle I am trying to establish, whereby every citizen who has an income would pay income tax, if the outcome is that the size of the donation is such that it would reduce the tax liability to nil? There is an argument for saying one should make that exception. What I want to establish is the first principle I have enunciated, that one would pay tax if one has a taxable income. No matter how clever one is, one will not get away with not paying tax. Everyone must be seen to make a contribution, allowing for the fact that one should also rightly avail of tax reliefs. As I said here yesterday, the great majority of our tax incentives and tax reliefs are availed of by the majority of taxpayers and the amounts are there for everyone to see. More than 85% of total tax reliefs are availed of by ordinary taxpayers. Mortgage interest relief, medical expense relief and so on are, quite rightly, availed of by hard-pressed working families. We have to be careful to ensure there is not an undermining of all the good compliance work being done and all the excellent tax administration that is taking place by a headline issue which offends people's common sense that some very wealthy people do not pay anything while everyone earning more than €14,200 or €14,400, the minimum wage, is in the tax net. It is very hard to explain that to ordinary people and even to extraordinary people.

My view is that one must abide by the principle that everyone must pay tax every year to the tax man. After that the choice is open to those who have the wherewithal to consider using the tax reliefs that are available, including donation relief which is not excluded. The points that have been raised here are about residents of this country who use up their reliefs in respect of every area of relief that is available but now wish to make a donation relief. That is the issue. That is a far narrower contention than the idea that there are many who have been deprived of making significant donations. I do not belittle the genuineness of those who have wealth who make substantial donations. Yes, they obtain a relief for it. Given the size of the donations concerned perhaps it helps direct that level of income into that area. One can make the argument for and against the issue. I do not believe it is motivated simply by the provision of tax relief. We should not differentiate between those who donated €100 out of their wage packet of €400 when they saw the tsunami disaster on St. Stephen's Day 2005 as against €100,000 donated by a person who can claim donation relief thereafter. When one gets into that area one is undermining the whole purpose of the exercise. In trying to be fair to everybody I have proposed a solution which does not meet every situation but meets the great majority of situations, consistent with the principles one is trying to enunciate and establish in the taxation system generally.

The principal donors to the universities are currently non-resident and for that reason the new section should not impact on the philanthropic activity of these individuals. That is not to say there is not a philanthropic culture in its infancy here even if for obvious reasons we have not had a culture of much wealth here in the past. Some people have approached me about this issue, not on their own behalf, and have asked, given the levels of wealth that have been established, if there a philanthropic mechanism we can devise that will ensure that people who have created much wealth will have a view as to what is the responsible inheritance to leave to their children. A significant amount thereafter could be directed towards the public good if we can find a mechanism that would encourage that to happen in a more systemic way than simply an ad hoc individual approach. That is a public policy issue that is now coming to the fore and requires much careful consideration. It is an issue I did not move on in this budget for various reasons because I have not formulated a view on how one might try to proceed along those lines in a way that is not misinterpreted or misunderstood. It is something, however, to which we should all give contemplation because there is a great deal of wealth in the country and it may be the case that in future years we will miss opportunities to direct much of that wealth towards public causes we would all support and which would benefit society. That is something that would not have been on our radar screens in the past. It is a question of examining the comparative models elsewhere with a view to determining whether there is a place for it in our system.

I make that more general point in an effort to outline the context in which this discussion is taking place but having listened to the views of the contributors to the debate in the other House, we had to come up with a unanimous view as to whether one should include or exclude it. That is a better approach when one is introducing the changes I am bringing forward to establish in the public mind the principle in the system in the first instance. We can then decide how it is working out. I am not closing off the prospect of trying to accommodate genuine situations in the future but it is better not to send mixed messages. We should allow people to see what one is trying to do from year to year and not try to do everything in the one year.