John Gilroy (Labour)

The Finance (No. 2) Bill 2011 is welcome in the main. All Members are satisfied that the air travel tax has been suspended. In a country that relies so heavily on tourist numbers, the aforementioned tax introduced by the previous Administration was rather regressive and ill-conceived and its abolition has the potential to give Ireland a tremendous boost. In conjunction with this initiative, I further welcome the proposal to reduce the rate of VAT charged on certain tourism-related goods and services to 9%, which also has the potential to act as a good stimulus.

However, section 4 provides for a levy on pension schemes and that measure certainly is more challenging. Clearly, no one likes paying more taxes, charges or levies but I remind Members that these measures, unpopular as they are, are necessary due to the mismanagement and what some might even call the incompetence of the previous Administration. I share Senator Michael D'Arcy's hope that Members can have a reasonable debate on this issue and in some measure avoid a replication of last week's debate in the other House during which at times some Opposition spokespersons were in danger of exhausting the entire lexicon of negative adjectives in their rush to denounce this measure.

A 0.6% stamp duty on post-retirement products such as annuities, retirement benefit schemes and personal retirement savings funds for four years clearly is an unpopular move and will be so perceived. It is a position to which the Government has moved reluctantly and which in normal times it would not consider. However, these are not normal times and when 440,000 people are on the live register, something must be done urgently. The 0.6% levy will generate €470 million per annum and some relief may be had from the fact that it is time-bounded to 2014. Under the circumstances, a charge of 0 .6% is not excessive and Members will recall that most pension funds received considerable tax relief in the past and remain extremely tax efficient instruments at present. Like my colleague, Senator Zappone, I understand the managers of pension funds charge as much as 1.5% per annum in management fees and must rank among the most highly remunerated people in Ireland. I wonder idly whether one could find a way to facilitate these high earners to display their undoubted sense of solidarity with their clients by contributing a portion of that 1.5% fee to offset the full impact of the necessary 0.6% charge.

One element of the Bill that caused me some concern is that some of the available post-retirement products appear to escape from this proposal. I refer in particular to approved retirement funds, ARFs, in which it is thought some of the highest earners have placed their pensions. Members undoubtedly will hear some famous and perhaps infamous names being tossed about the Chamber today in the same manner as in the Dáil last week. It seems quite inequitable to me and I am glad the Minister for Finance appeared to indicate last week that he was prepared to revisit the issue in a finance Bill later this year. He would be correct and I urge him to so do. I suggest this could be achieved in one of several ways. While a 0.6% charge could be imposed on ARFs, this would be administratively cumbersome. One also could consider raising the effective tax rate from the existing rate of 5% to a level that would reflect the value of 0.6% above a certain threshold.

No Government wishes to impose additional charges but the present Administration finds itself in that bind. While the Opposition will focus its attention on some elements of the Bill, will simplify the argument and will disagree in the most harsh terms, I hope it will be sufficiently magnanimous to recognise the Government is acting in good faith in extremely difficult circumstances.