Marc MacSharry (Fianna Fail)

I join others in welcoming the Minister. As Members are no doubt aware, the finance Bill provides for implementation of the measures announced in the budget. I am glad to have an opportunity to make some points on it.

What has occurred in recent years was unimaginable in terms of the economic downturn, the decisions that have had to be made in recent budgets and the economic measures the Government has had to introduce. Many of the measures taken in the past 18 months have not been easy. Some very painful measures have had to be introduced which have affected every household in the land. In normal trading conditions one might not set out to introduce the measures that have had to be introduced and many of those included in the Bill are no different. Public sector pay and social welfare payments account for two thirds of Government spending and serious measures have had to be taken to deal with them.

A major component is the cost of interest payable in servicing the national debt. A common measure of debt servicing costs is the ratio of interest paid to tax revenue collected. Last year debt interest accounted for 8.5% of tax revenue, which is set to increase this year. Our main aim, therefore, is to ensure we keep to the targets set by the European Commission to reduce our debt to 3% of GDP by 2014.

As outlined by others, a budget adjustment of €8 billion has been made in the past two years. As difficult as the public sector pay cuts have been to swallow, it does not deduct from the necessity of taking such measures in what are incredible economic times. Consumer prices have fallen by approximately 6% in the past year and, as the Minister outlined, are set to continue to fall. We must take account of this when commenting on the pay cuts. All Members of the Oireachtas have had to do their bit also, which has been painful. No one would wish for these circumstances but that does not change the reality that the cuts were necessary.

As the Minister said, the evidence from international organisations such as the International Monetary Fund, the European Commission and the OECD suggests consolidation, driven by cuts in expenditure, is more successful in reducing budget deficits than consolidation based on tax increases. We cannot tax our way out of the current economic difficulties, although the Minister has indicated we will have to consider broadening the tax base in future budgets. The measures taken by us have been welcomed internationally, as well as being used as an example in countries such as Greece, Spain and Portugal which find themselves in a more difficult economic position.

In terms of the budget, as outlined by the Minister and other Members in the various economic debates we have had in the House, our objective is to restore stability to the public finances, regain our competitiveness and, in so doing, rehabilitate and renew the banking sector. The aim of the budget and the Bill is to bring forward measures to save some €4 billion. The Bill is divided into two sections dealing with taxation, including income tax, the income levy, corporation tax and capital gains tax, and customs and excise, including the carbon tax, VAT, stamp duties, capital acquisitions, etc. The Minister outlined much of the detail in that regard.

During our debate on the budget prior to Christmas we discussed various new measures such as the car scrappage scheme, the introduction of a carbon tax, the domicile levy of €200,000 payable by Irish-domiciled individuals who are Irish citizens, a measure which is to be welcomed, the decrease in excise duty and the reduction in the VAT rate. In that regard, I note the United Kingdom, in its budget being announced, has not adjusted its VAT rate. The Border counties, a matter about which I have been in contact with the Minister, have been seriously hit. Now that the anticipated change in the VAT rate that may have helped has not materialised, I ask him to examine the tangible suggestion I made in the House that would examine subvention by central government of the commercial rates payable by the retail sector in the Border counties. While it would cost money, it would be doable and might assist retailers in pricing themselves into the market in what is a very difficult operating environment, given current VAT rates, the 30% differential in the minimum wage, currency exchanges, etc. It is something that could be done. With assistance of others, I am compiling research on the actual cost but believe it is something we could do to help struggling retailers in that part of the country who are trying very hard to maintain employment. It will be hard to maintain employment in those areas. I have paid tribute here in the past to some of the initiatives taken by trade unions and businesses throughout the Border counties, in particular in Sligo where they have joined forces to promote a campaign entitled "Fair Dealers" which is pressuring retailers to come up with value for money options for consumers struggling on tighter budgets to find value for money. This campaign is being backed by the trade union movement which, in turn, is doing all it can to promote shopping local. I believe central Government could provide tangible assistance in this regard. It is not conceivable that we will have a different VAT rate for the Border counties or that we could permit them to pay a lower minimum wage, which I would not support, but it would be tangible to consider this type of direct subvention which would assist retailers in pricing themselves into the market. This could perhaps assist them in paying their phone bills, insurance fees for the year or contribute towards employment of a part-time employee. Perhaps the Minister will consider that proposal.

Other measures of interest and referred to in detail by the Minister include extension of the mortgage interest relief scheme. I welcome in particular the extension of this scheme to assist homeowners. It is imperative that in the current climate we do all we can to assist homeowners, thousands of whom are facing the prospect of losing their homes owing to mortgage payment arrears. There exists also the possibility of future commercially driven interest rate increases, which have already begun to take effect, and rises in European Central Bank rates. Members will be aware that I am a founder of the Prevention of the Family Home Repossession Group which had the pleasure of meeting yesterday with the Minister. I know from that meeting that the Minister is fully committed to ensuring every possible protection is afforded to homeowners, including possible statutory protection which I know on the advice of the expert group and having considered all the options, the Minister is not against. I am confident that as a result of the work of that group and many others, and given the Minister's commitment, that the maximum possible support will be given to families facing the prospect of difficulty in meeting payments owing to interest rate rises which may be imminent and to the changed economic environment in which people are losing their jobs. Providing that security, through maximising the potential for people to remain in their homes, is to be welcomed. I thank the Minister for his commitment in this regard and for taking the time to meet with the Prevention of the Family Home Repossession group and for acknowledging and listening to its views.

The Finance Bill 2010 also brings forward a number of new measures which the Minister has already described in some detail. I would like to touch on a few of those measures. I welcome in particular the innovative approach taken by the Minister and departmental officials in this Bill to the development of Islamic Finance, which, as the Minister stated, is the fastest growing sector of the financial services industry throughout the world. When one considers what the development of the Financial Services Centre did for Ireland in a different decade, moves like this can perhaps help to ensure we provide the correct template to allow that industry flourish in this country as we look to the future.

In accordance with the European Court of Justice ruling of July, Ireland must broaden its VAT regime to cover public bodies, including local authorities engaged in activities such as landfill, recycling and waste collection, an issue which the Minister referred to in some detail. The Minister has indicated the possible introduction of a property tax. While this is again very unpalatable, I would welcome it. I recall that in 1977, more than 30 years ago, at a time when my father was Minister of State - the Minister's father, the late Deputy Brian Lenihan senior, was Minister at that time - domestic rates were abolished, which with the benefit of hindsight was not a good move. It may have been popular and welcomed by many families struggling at that time to meet those costs but I do not believe, in terms of the cost base of our nation and our regions' ability to develop on their own steam and local authorities' ability to fund their own capital projects and services, that it was a good decision. In the context of broadening the VAT take for local authorities and services which they provide I welcome the debate on property tax and local government funding. This issue must be examined. If one could wave a wand and nip back to 1977 one might perhaps adjust that measure.

The increase in fines for those in breach of customs and excise law, in particular to curb the increasing amount of tobacco smuggling, is a welcome initiative. The Revenue Commissioners have been given more powers to investigate and compel freight companies and shipping agents to work with investigators in tracking down smuggled goods. The range of provisions in the Bill that will assist innovation, research and development must also be welcomed. I welcome also that the tax charge on foreign dividends paid out of trading profits from countries with which we do not have a tax treaty will be reduced from 25% to 12.5%. The Bill also introduces a remittance scheme which allows executives earning more than €100,000 of overseas companies in the Republic to receive their salaries outside the country and to pay tax only on the money they remit. The extension of the remittance scheme under this Finance Bill will improve Ireland's ability to attract highly skilled, value-added, individuals capable of acting as magnets to attract economic activity. The scheme will now cover EU and European Economic Area, EEA, nationals while the condition that persons covered by the scheme must remain in Ireland for a minimum of three years is to be reduced to one year, another welcome measure. These types of innovative measures must always be flexible and agile enough to implement as needed to assist the economy.

The Bill's provisions are aimed at bringing clarity with regard to the tax treatment applying to foreign funds managed from Ireland under the recent EU directive, including Undertakings for Collective Investments in Transferable Securities, as referred to by the Minister, and an extension of stamp duty to accommodate mergers of investment undertakings. Where shares in a company are transferred and the transferee procures either directly or indirectly for any debt of the company, or any related company, to be repaid, this debt will now be regarded as consideration for the transfer and stamp duty shall be payable accordingly. Small to medium sized enterprise business ventures are also encouraged in the Bill, with tax exemptions being made during the first three years of the company's existence and the application process being extended through 2010. One wonders if the first three years of profitability rather than the first three years of existence should apply given few companies enjoy the benefit of profitability in their first three years of operation. This is an issue which could be discussed further on Committee Stage.

The windfall tax has been mentioned. I note this provision is being amended in section 25 of the Finance Bill 2010 and that is relates to the NAMA legislation. I acknowledge I will have ample opportunity to speak about that issue on Committee Stage. I believe, having reflected on the matter, that the 80% windfall tax would have been great 15 or 20 years ago before we began rezoning land. I probably lobbied for some of that rezoning at the time. With the benefit of hindsight, I am not sure if this windfall tax is focussed. We do not need further rezoning as commercial green belt or agricultural land. I am concerned about brown field sites where formerly industrial or commercial activity took place. This tax could perhaps be applied in respect of rezoning this type of land for, say residential purposes, if appropriate, within towns and cities. There is no demand for such a measure at the moment; I am only looking to the future. I am not sure whether application of the windfall tax in this regard is appropriate now but will give an example of where it could be applied. Under Part V of planning and development laws 20% of all developments are required to be social and affordable homes. This would have been great had we been dealing with a blank canvass. However, that was not the case. In Sligo, Cork and Limerick, where the average social housing mix is in excess of 30% - nationally the figure is 15% - nobody is living in the towns. It is conceivable at least that as we seek to rejuvenate and obtain a better social mix of housing in areas such as Limerick, Sligo and Cork that we could consider zoning former brown field sites, industrial or retail in nature, for residential purposes. I do not believe it is appropriate in that context that we would have an 80% tax. As I stated earlier, there is no demand for this tax now but there will be before too long and we must be cognisant of that.

The provisions in Budget 2010 and this Bill are, as the Minister stated, about getting our economy back on track. I welcome the extensive work done by the Minister to date in this regard. Irrespective of health, the Minister has been inspirational. I referred earlier to a meeting yesterday between the Minister and a delegation seeking support for people struggling to meet mortgage repayments. The Minister was at that meeting bursting with enthusiasm. All he has done during the past number of years, as unpalatable as have been many of those measures for families throughout the country, is a great credit to him. It has provided leadership and confidence to many in the international markets and certainly to me. I agree with the Minister's assessment that it is time for us to be confident in our own ability to ensure we will come out of the other end. This will turn. The appropriate action has been taken to position us correctly to ensure we can capitalise on that when it does. Of course there are risks from international factors that are out of our control, such as whether there might be a double-dip recession in America when the stimulus runs out at the end of the year. Senator Walsh, who has done research over there in recent weeks, told me that economists over there expect 3% growth this year but when the stimulus runs out, there might be a double-dip recession at the end of that. These are matters out of our control. We can only focus on what we can control. What the Government has been doing in a variety of measures in stabilising the public finances, rehabilitating the banking sector and in trying to regain our competitiveness is starting to show dividends. The Minister has indicated that in his contribution. I wish him well in the future.

The international media are acknowledging our progress in a major way. In the bond auctions Ireland is performing exceptionally well on a regular basis now. David Schnautz, a bond analyst with Commerz Bank stated: "We still favour Irish bonds in the peripheral space from a value perspective especially as Ireland is on the right track to fix its problems". That indicates the kind of commentary in support of that. The former Minister for Finance, Mr. Alan Dukes, who knows all about tough times, has come out in support of Government measures, as has Dr. Garret FitzGerald, a man with credibility, despite what certain members of the Fine Gael Front Bench might think. I will not go as far as to say that the family seems to be at war again. It is to be hoped that is not the case.

Both Fine Gael and Labour agree that the public finances must be adjusted by €4 billion but all that divides us is how that should be achieved. Let us focus on the positives and be confident in our ability to come out of this, capitalise on the good work that has been done so far and put our weight behind the Minister, Deputy Brian Lenihan, and the Government in ensuring we are best positioned to capitalise on the upturn when it comes, as it inevitably will come.