Aideen Hayden (Labour) | Oireachtas source

It is a pleasure for me to stand here a number of years after becoming spokesperson on finance in very different circumstances from those which I experienced when I first stood here three years ago. I take on board Senator Zappone's points about the ambitious targets set by the Government for reducing the deficit etc. It is also important to acknowledge the courage and leadership shown by the Government. Last year we were told by the Fiscal Advisory Council and others that we would have to take €3.2 billion from the economy but instead we took out €2.5 billion. This year we were told we would have to take out €2.2 billion but we did not take anything out and instead put €500 million back into the economy. The vindication of the strategy is that when we took office, we were losing 7,000 jobs per month but we are now gaining 5,000 per month. We are looking at the prospect of an additional €1.1 billion in additional tax income.

In terms of our international reputation it is worth noting what other people have been saying about Ireland abroad. For example The Wall Street Journal has said there are now strong signs of domestic demand picking up after years of suffering from austerity measures that began in 2008. It goes on to speak positively about the rate of growth in the Irish economy and the fall in the level of debt. There was a point at which we were in danger of taking too much money out of the economy and damaging its fragile recovery. We have been cautious on the one hand and courageous on the other in maintaining a position that was moving towards growth.
I wish to echo one or two points made by other Senators but in no particular order. One is a concern that 11% is being levied on self-employed persons in respect of the universal social charge, while those who are not self-employed are charged a top rate of 8%. Just looking at international commentary about Ireland, Foreign Policy, for example, notes that Ireland's central challenge is the sustained lack of indigenous economic growth, due in large part to the unwillingness of banks to support risk-taking and to lend money to small and medium-sized businesses. It cites our medium-term economic strategy 2014-2020 which encourages specific measures to promote entrepreneurial culture and encourages indigenous enterprises to grow to scale. I echo colleagues' sentiments on this. One cannot do one thing on the one hand and something else on the other. I ask that we revisit the issue of the level of universal social charge being levied on the self-employed who may have left steady jobs to take up opportunities to be entrepreneurial.
I turn to more general comments. Unlike Senator Feargal Quinn, I welcome the direction the Government has taken in the area of indirect taxation in recent years. In respect of capital acquisitions tax and capital gains tax I consider that having lower rates of tax on unearned income is unfair to lower income workers who, for the sake of argument, pay the top rate of tax for working a couple of extra hours in a factory or a supermarket. I see no logical reason whatsoever lower rates of tax should be charged on unearned income. For the record, in my area of personal expertise in the housing market, I personally charged the former Minister for Finance, Mr. Charlie McCreevy, when he reduced the capital gains tax rate from 40% to 20%, with stoking up a property bubble in a scenario where it was entirely unnecessary.
In respect of the overall taxation measures in the budget, I very much welcome the lowering of the universal social charge on low-income workers. I hope this is the start of a strategy to remove more people from universal social charge which, I believe, is an unfair tax on people who should not and cannot pay it.
I welcome the reduction in the rate of income tax down to 40%. The reason I welcome it, which may be surprising for a Labour Party member and social democrat, is that we have to move away from relying on PAYE as the main form of taxation. It is unfair on people on low incomes and we need to move towards indirect taxation, including property taxation. I would have liked if we had had the opportunity to do that at a time when the economy was booming, such as in 2004, 2005 or 2006, instead of having to do it at a time when the country is on its knees. If we are to have more indirect taxation we will have to lower the rate of tax on earned income.
I welcome some of the measures to deal with the issue of homelessness and housing supply. I welcome the increase in the limits on the rent-a-room scheme and the change that allows the home renovation incentive to be extended to rented housing. I spoke directly to the Minister for Finance, Deputy Michael Noonan, on this issue. One in five families is living in rented accommodation. Many are experiencing fuel poverty. Landlords have no incentive to improve properties and I think this measure will help. I welcome measures to encourage charitable giving from a tax perspective and the changes to the famous double Irish mechanism, which has destroyed our reputation internationally. Measures had to be taken to address it.
I wish to record my concerns about section 81 which relates to capital acquisitions tax. What it seeks to do is anti-family. It relates to persons between 18 and 25 years of age. Those who are receiving full time education or instruction at a university are exempt from this provision. However, if one happens to have a 23 year old person living at home who is not in education, and if one's income exceeds a small amount of money, he or she will get no relief from the provisions of social protection. In other words, that person will have nothing with which to maintain himself or herself so that he or she is obliged to move out of home or to live with parents. The section provides that a person in that position, so far as I understand it, whose support from a parent exceeds €3,000 per year is, in effect, receiving a gift from a parent which should go towards the €225,000 relief they get upon one's death. The sum of €3,000 is not mentioned in this section but I understand from the Minister's officials that it is in another part of the legislation. Apart from the fact that no parent sits down with a calculator to calculate the level of support given to a child, it is illogical to think that at the end of my life, my child will produce a balance sheet showing the money I paid in, and the money paid out where they care for me in my old age and take it off the bottom line. More invidious to this is that a person over 25 years of age is in exactly the same position. We are in a scenario where children are living at home with their parents for much longer periods and if they are not going to be supported by the State, who will support them?
I understand this change to the legislation was introduced on foot of a case where a parent gave his or her child a credit card who spent €150,000 on it in two years. That is bad law. It is bad law to change an overall provision for a ridiculous exception. This measure is not clear, it is not transparent, it is not enforceable and it is anti-family. The vast majority of parents feel a responsibility for their child and will support him or her to the best of their abilities. A sum of €3,000 would go nowhere towards paying for somebody studying for a masters degree or to support them if they wanted to try to establish their own business. We need to be realistic about this. This particular section is a piece of nonsense.