Feargal Quinn (Independent)

I welcome the Minister, Deputy O'Dea, to the House. Senators are given the opportunity on the day of the budget to debate it within minutes of it being delivered. I spoke in that debate on two previous occasions. Last year I spoke like a school examiner when I awarded the Minister marks for the budget and he earned a pass with the comment, "Could do better". This year he earned an honour, admittedly a low honour rather than a high honour, because I appreciate the sort of points made today by Senator MacSharry when he referred to investment in infrastructure and the concept of the business-friendly environment which the Minister is attempting to develop.

I met the Secretary of the US Department of Commerce last year. The words used by the Secretary were that his responsibility was not to create jobs but to create the environment so that the market could create the jobs. This is how a business-friendly environment is created and better regulation plays a large part. This is the reason I gave the Minister a low honours.

I wish to focus my attention on a matter which is not covered in this Finance Bill but which I believe should be. I hope that in briefly raising the issue now, I will encourage the Minister and his officials to think of it for next year's Bill. I am not expecting a reaction today.

One of the positive sides of the Celtic tiger period was that it created a massive upsurge in the amount of personal wealth held by individuals. Not everybody thinks it is necessarily a good thing, but the reality we have to deal with is that this wealth was created during that time and the issue therefore arises of how best to encourage these new high-worth individuals to share their wealth with the rest of the community.

The principal task of the Department and the Minister has been to avoid the anomalies which arise from the operation of tax incentives. Until recently, it was possible for some very wealthy individuals to avoid paying tax altogether if they invested enough in certain property investments. It is clear that over the years the Government decided it wanted to encourage people to invest in car parks, nursing homes and various other schemes. This worked very well. However, Deputy Joan Burton of the Labour Party severely criticised the fact that some very wealthy individuals paid only very little tax or none at all. The Minister reacted by a provision in the Finance Bill 2006 which introduced a cap on the amount of tax that could be clawed back in this way. This ensures that no matter how much a person invests in property, he or she may still be required to pay a certain minimum amount of tax. This was a good solution, and I think it was widely supported by all sides and by the public in general.

Unfortunately, the law of unintended consequences came into play in the operation of the measure; at least I hope that was what happened and that it was unintended. I will work on the basis that it was unintended. The cap on spending allowed against tax applied not only to investments by the taxpayer, but to all spending, including donations to charity. By including charitable donations under the cap, the Act failed to make a fundamental distinction between investing money for one's own later profit and giving money away for the greater good of others. I argue that there is a world of difference between the two and that it is in fact in the interest of the State to encourage people to give away their money in support of good causes. However, by applying the cap to charitable donations, the State is actively discouraging people from giving away their money and is therefore preventing a great deal of good that would otherwise be done, and at no cost to the State.

I am not suggesting that the role of philanthropy is simply to take on burdens that would otherwise fall to the State, but in practice this often happens. I refer to one obvious and dramatic example, the many millions that were poured into providing new university buildings in the 1980s and 1990s by that remarkable man, Mr. Chuck Feeney. This allowed our third-level system to develop at a pace that the State simply was unable to provide. Mr. Chuck Feeney was unaffected by the Irish tax regime one way or the other, but the same cannot be said for our indigenous wealthy who are now in a position to succeed him, but this cap puts a very effective block in their way. I believe this was unintentional. This approach puts Ireland in a unique position. In the UK, for instance, all charitable donations are simply exempt from tax. The British Government clearly recognises the value of philanthropy to the country and seeks to encourage it. In the United States not only are all charitable donations totally exempt from tax, but a whole raft of other incentives is also in place to encourage individual giving.

Two weeks ago, the American ambassador, Mr. Foley, hosted a day which he called A Dialogue on Philanthropy. In his opening remarks he stated, "We are here to explore what we can take from the American with philanthropy as Ireland builds its own philanthropic model". An ambassador must never appear to interfere in the affairs of his host nation but in this case the American ambassador stated this was a system he believed could be of value to Ireland. He gave examples and those of us in attendance met many people who were fund-raisers for American institutions such as universities, hospitals and others. It was clear that the American system encourages a high level of philanthropy. The provision in the Finance Bill 2006 has put a block on such a system here.

By maintaining this cap on charitable donations we are shooting ourselves in the foot. I believe we fell into this situation accidentally, as the by-product of a very proper anti-tax avoidance device, but knowing the consequences, this provision should be revisited. There is an urgent need to unlock among Ireland's new rich the spirit of generosity that people in general have demonstrated so clearly and consistently on many occasions over the years. The Government should help, not hinder, that process.

There was no real wealth in Ireland 20 years ago. It was brought about by the Celtic tiger and by successive Governments doing the right thing. We now have a situation in which there are wealthy people and we have seen what a number of them have done, very generously. By imposing that cap on two years ago, I believe we have closed the door and made it less effective. I urge the Minister to take that into account. I do not expect action on it today, but I believe it should be considered for next year.