Seanad debates

Friday, 19 December 2008

Finance (No. 2) Bill 2008 (Certified Money Bill): Second Stage

 

12:00 pm

Photo of Pearse DohertyPearse Doherty (Sinn Fein)

This Finance Bill represents depressing evidence of a Government continuing to sleep-walk through a crisis that is not just threatening the banking system or the construction sector but is also slowly bleeding dry the small businesses that employ most workers and which are the heart of the economy. Even worse is that the hundreds of thousands of working families whose efforts drove this economy through the Celtic tiger years have all but been abandoned in this Bill. They have been condemned to endure higher taxes and more stealth charges, all to fund the policies of failure.

The Government has failed on income tax, VAT, the tax exile status, reforming tax relief and tackling tax fraud. It has failed to protect the vulnerable and most important in terms of ensuring economic growth. It is penalising rather than rewarding working families. There is nothing in this Bill to incentivise or stimulate enterprise.

I belong to one of the few parties in this House which were regularly castigated in years past for pointing up the structural flaws in the economy. There was a brief moment in September to October when it seemed that the Minister for Finance finally grasped the seriousness of the economic crisis threatening the economy and he scheduled an early budget for 2009. Ten weeks on, however, it is clear this was simply a public relations stunt devoid of any substance and lacking any direction to drive the economy forward over the next three years.

Sinn Féin had proposed increasing the PAYE tax credit by 5% so that those on low incomes would get some respite from the higher energy costs, mortgages and food prices they have endured over the past year. This Bill leaves the personal credits unchanged and only widens the 20% tax band marginally. It does nothing to help families deal with increased costs of living in an economy where inflation is more than 4% and with double digit increases in electricity and energy process already being levied on households this year. Many families face new transport charges for school buses, higher hospital charges, a new VHI levy and increasing university registration fees. When all these charges are added up along with the increases in taxes for low and middle income families, even at a conservative estimate hard-working families will see their income reduced by up to €1,500 in 2009.

Not only has the Minister done nothing to restore the purchasing power of Irish families, his proposal to increase VAT to 21.5% is another regressive step and will hit Irish families unfairly. With Border towns in the Twenty-six Counties being emptied of shoppers, the 2.5% cut in VAT announced by the British Chancellor of the Exchequer will exacerbate an already gaping imbalance between the two economies. The Minister for Finance is actively encouraging shoppers to leave his tax jurisdiction. It is more the economics of "Fianna Fawlty Towers" than the financial stability he promises us.

The 1% income levy on workers who earn more than €18,305 is unwarranted and will damage low income families. The levy should apply only on incomes in excess of €38,000 and Sinn Féin believes the 3% levy should apply on incomes in excess of €200,100. Our proposal to remove the PRSI ceiling would have had the double effect of raising much needed tax revenue while cushioning those on low and middle incomes from the worst effects of the increase.

While Sinn Féin welcomes the ending of the Cinderella clause for tax exiles, it questions the Minister's claim that tougher restrictions cannot be placed on Irish tax exiles because of double taxation agreements. Are we really to believe the Minister cannot act? He can raise taxes on a whim, he can write a blank cheque for banking, but he cannot act on a handful of supposed Irish citizens who do not want to pay tax here but demand to enjoy the benefits of Irish citizenship.

The Government stood by in recent years as billions of euro poured out of the economy into property investments in Britain and Europe. Forfás estimated in 2006 that the economy had become a net investor outside of Ireland since 2004 when Irish citizens invested €12.7 billion outside the economy. In 2006 Irish investors spent almost €8 billion on commercial property in Europe. Now, after the horse has bolted yet again, the Government arrives with half-hearted measures.

Another suspect measure is the proposal on changes to research and development tax credits. IBEC described the changes as disappointing and there are questions about the whole research and development strategy being adopted by the Government. It has to make sense in the boardroom and on the workplace floor. What is being proposed does not make sense and much more serious action needs to be taken. The Minister either believes in empowering the knowledge economy or he does not — there can be no halfway house.

When the budget was unveiled Sinn Féin said we could rebuild the economy but that would mean taking bold decisions. There is no evidence of that in this Bill. Where is the investment in infrastructure that will create jobs and build competitiveness? How will we help those who have lost their jobs get back into the workforce as quickly as possible and ensure they are supported properly while that happens? When will we end the era of tax breaks for the rich while PAYE workers struggle to survive? Time and again, the Government gets the small things wrong, such as the failure to tackle the flooding of the Irish market with cheap imports. It has not dealt with contentious issues such as sell-by-dates or the incorrect guaranteed Irish labelling.

Small businesses are being starved of capital with overdrafts cut while new businesses cannot get seed capital or start-up loans. The Bill, however, gives even more tax breaks to the private health service but cannot find a tax incentive or funding initiative for small business or retraining redundant workers. How is that possible? The Minister proposes that struggling businesses declare their corporation tax earlier. A four-year process of claiming research and development tax credits has been telescoped into four weeks. The Minister is more concerned with short-term cashflow than he is with long-term company strength.

The economy is in danger of a serious meltdown and this Bill does not reflect the gravity of that situation. What will it take to get the coalition Government to wake up? For now we have a Minister for Finance asleep at the wheel.

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