Feargal Quinn (Independent)

I welcome the Minister and his officials to the House. When I come to look at a Bill, I often find it is better to look at the Minister's speech on it, especially the last few lines. Towards the end of his speech on the Bill, the Minister said when referring to the national debt as among the lowest in Europe: "I have a responsibility to secure and build on the progress which has been made." He also said we were running a healthy budget surplus, our economy was strong and unemployment was low. I believe the economy is in good hands. My only fear is that there may be a degree of complacency or cockiness, not necessarily in the Minister but in the country as a whole. On that basis, I worry there is a danger there may be competition and so-called auctioneering in the area of the economy.

The Minister said: "Ireland's overall economic and budgetary position is now the envy of Europe." He is incorrect to confine it to Europe. It is the envy of the world. Yesterday, I received an invitation to visit Central America next month to speak about the Irish economy because somebody had heard me speak on the success of the Irish economy when I was in Brazil and Argentina in November. I had to do some work to prepare for my speech in November and examined the cause of the success of our economy. There were five main reasons for it: improved education since the 1960s, the identification of high-tech or sunrise industries, entry to the European Union, partnership and the decision to go for a low corporate tax to encourage investment in Ireland. This has been very successful and we are the envy not just of Europe but of the rest of the world.

I look at all legislation carefully, particularly Finance Bills, to ensure there is nothing in them that will damage our economy. Looking at the Bill in this light, I support the Minister's proposals in general. However, I would encourage him to concentrate on some areas, one of which was touched on by Senator Mansergh, namely, bio-fuels. When I was in Brazil, I was interested to see every petrol station advertise not just petrol but also what they call alcol, which is ethanol. Alcol is available in every petrol station there. I have a daughter who wants to drive a bio-fuel car, but she has difficulty in doing so because of difficulty with the availability of bio-fuels. I am not sure what the Minister can do to improve the situation and encourage the availability of bio-fuels in this country. CIE and Bus Éireann use bio-fuels to a large extent, but it is not easily available. I would like to see an improvement in this area.

I would like to focus on a specific area of this long and complex Bill, namely, taxation or the effective discouragement of charitable donations. For many years there were few wealthy people in Ireland and, therefore, taxation of charitable donations was not an area of contention. In recent years, however, we have an increasing number of well-off people but we have not done enough to encourage them to reinvest in the country. I was talking to somebody on the board of a university in this country who was trying to raise funds and finding difficulty in doing so. This person visited one of the schools in Harvard which had raised $400 million in one year from successful and wealthy graduates, but the Irish university to which he was attached had only managed to raise €12,000 by similar means.

There are opportunities now that did not previously exist. The challenge did not exist previously because we did not have significant numbers of wealthy Irish people 20 years ago. Now there are and they are generous and anxious to contribute to the economy that has helped them become wealthy. They are anxious to create foundations or make generous contributions. However, we have not recognised this. Take, for example, the legislation introduced in 2006 to ensure high income earners pay tax. The legislation introduced conditions which would ensure they would not get away without paying some tax. However, the sweeping powers introduced by the Minister may have included some provisions that should not have been included. Legal advice I received on tax issues affecting charities states:

A general cap on claims for certain tax allowances and reliefs by high-income individuals was introduced in the Finance Act, 2006 (now section 485C and Schedule 25B TCA 1997) with effect from 2007. This unexpectedly included the s.848A donation scheme within its scope. The restriction will operate by limiting the amount of relief available in respect of tax allowances and reliefs by the higher of 50% of the person's income before the reliefs or €250,000. It is extremely surprising that the Department of Finance would categorise a donation to charity as subject to the restriction for tax reliefs in the same category as that of commercial allowances and reliefs (such as property, capital allowances schemes, patent royalties, film and BES reliefs and exempt distributions).

The Minister introduced restrictions to ensure that the reliefs enabling those wealthy people to avoid paying tax included in that list donations to charity which are of no benefit to the donor. That was probably an error. I can understand how it slipped in but I ask the Minister to give serious consideration to changing that provision.

Charities must be registered for two years to be eligible in this scheme. This is understandable because people need to be able to check up on a charitable organisation to which they wish to donate. When an event such as the tsunami occurs, however, it is difficult to set up a scheme. Will the Minister consider another way to overcome that problem?

I am advised that "charitable donations should allow a credit against all taxes, not just income tax". The 1997 scheme "allows donors of heritage property to the State to credit the value against any tax including income tax". It might be possible to do something in that area.

Another point made to me, and previously to the Minister, refers to value added tax, VAT, on charities. For many years that was not in the Minister's hands because the European Commission did not permit the exclusion of charities. The Commission changed its regulations approximately two years ago, to permit some exceptions to that ruling. I met people from a charitable institution in Denmark who explained how they responded, which they did very quickly. Their institution does not pay VAT on certain of their expenditures. When one contributes to a charity some of the money will cover VAT on everything it spends. In Denmark, however, when one contributes €100 the whole sum goes to the charity because it will not be spent on VAT. The figures in Ireland would not be outrageously difficult for the Minister to handle but a scheme similar to that introduced in Denmark would be of great benefit.

I would like the Minister to pay particular attention to the way Ireland persists in discriminating against foreign charities for taxation purposes. It is in the public interest to encourage philanthropy to the maximum possible extent, so that at least some of the profits that the Celtic tiger has created are used for the benefit of mankind worldwide. I acknowledge the existing tax concessions in regard to charitable donations, which are very right and proper, but which unfortunately apply only to charities established here in Ireland.

No tax relief is allowable for any donations made to a charity that is not established in this country. This reminds me of the time when we were setting up the George Mitchell Scholarships in honour of the American Senator who did so much to bring about the Good Friday Agreement in 1998. The scheme passed through the Dáil and came to this House where it was to pass quickly. I noticed one line in it to the effect that the money intended to encourage American students to study in Ireland, although it was not limited to Americans, was to be spent in the State. I suggested to the then Minister for Education and Science, Deputy Martin, that this could not be right because if somebody was coming to study peace he or she should go North to do so. The Minister, however, had advice from the Attorney General to say that was tricky and the money should be spent only in the State. I put down an amendment to suggest that it should not be limited to the State, which the Minister accepted. Thank God he did because many of those who have come to Ireland from the United States have the opportunity to study in the North which they could not do had that minor technical point remained. They come every year and I have met several of them.