Simon Harris (Wicklow, Fine Gael) | Oireachtas source

The UK started in the exact same way as we are doing. Unfortunately, we must remain within the fiscal rules. If we put more into one area, we have to take it away from another. It is about getting that balance right. The relief will be kept under review and subject, among other factors, to the economic recovery continuing, we see significant scope for further enhancing it into the future. Moreover, on foot of issues raised with him regarding aspects of the relief as set out in the Bill, the Minister put forward amendments as the legislation went through the Dáil which further broaden the scope of the relief and ensure it will operate as it was intended to do.

As well as changes to the CGT entrepreneurial relief, the budget included other tax measures to improve the environment for business, including the earned income tax credit, for which organisations such as the Irish Small and Medium Enterprises Association have been campaigning since the 1980s. We have an opportunity now to ensure there is tax equalisation for the self-employed in this country by 2018.

My colleague, Senator Sheahan, rightly referred to the focus in the budget on the benefits for the coping classes and low and middle-income earners. The Department of Social Protection has conducted a social impact analysis of the budget package, including both tax and expenditure measures. This analysis shows that while 98% of households benefit from the budget, the gains for individuals in the lowest two fifths of the income distribution are the greatest, while the smallest gain is experienced by those in the top one fifth. In fact, it was shown that households with children, particularly those headed by working lone parents, are the greatest beneficiaries of budget 2016.

The Senator indicated his preference that the free telephone allowance be restored. In addition to the cuts to the three lowest rates of universal social charge, budget 2016 preserves the exemption from the higher rates of USC for medical card holders and persons aged over 70 whose income does not exceed €60,000. This measure, in addition to the age tax credit and age exemptions, limits the exposure of older individuals to higher rates of USC and income tax. Budget 2016 also provides for the first increase in State pension in several years and the partial restoration of the Christmas bonus, both of which are of much higher value to recipients than the restoration of the telephone allowance. That was the basis on which the decision was taken. All of these measures will support the net incomes of our older population.

Senator Sheahan also referred to the eligibility criteria for the disabled drivers and passengers scheme, an issue about which I feel strongly. Although constrained by expenditure limits, the Minister has said he will consider and reflect on the Senator's contribution in this regard.

I thank Senator Hayden for her welcome for the USC changes, the extension of the home renovation scheme and the inclusion of landlords in that incentive. Those measures are important if we are to have high-quality rental accommodation. The scheme has proved very successful and we hope it will continue to incentivise both home owners and landlords to employ legitimate contractors to carry out works on their homes and properties. I thank Senator Hayden for her support for the knowledge development box, in particular the additional benefit for the Irish economy these measures will seek to incentivise.

Senator Barrett likewise welcomed the knowledge development box, particularly the focus it will bring to substance. That is the important thing. We want people to come to this country and we want our own companies to do their research and development and carry out their copyright and patenting here in Ireland. If we can ensure the knowledge development box is absolutely linked to substance, we can only benefit in terms of jobs and investment and also in terms of ensuring our economy is well positioned for a fast-changing and innovative economic environment.

The Senator also raised concerns in regard to the extension of the home renovation scheme. To clarify, this is not seen as a property relief but rather as very much a modest tax credit that is designed to encourage home owners and landlords to employ legitimate contractors to carry out works on their homes and properties. The incentive is designed to provide a boost to the tax-compliant construction sector. Next year, 2016, will be the final year of the incentive.

Senator Quinn had wise words about not forgetting the shoe box. Every political party should probably have those words framed and placed in members' offices. Certainly, it is a mantra by which this Government is living. We do not accept that the increase in Exchequer returns in regard to corporation tax amounts to a gift to put in a shoe box. The chairman of the Revenue Commissioners advised the Minister by way of a letter dated 20 November that he expects all bar €300 million of those returns to be recurring. In addition, while we have made some supplementary budgetary decisions in regard to the health service, schools and roads, of the overwhelming amount of additional tax revenue that has been taken in this year - above €3 billion on profile - most of it will go to paying down debt. It is never attractive or exciting to talk about paying down debt but it does help to future-proof our economy from any external shocks that might arise.

The Senator's point regarding online trading is very important. The local enterprise offices run an online trading voucher scheme which offers incentives to business to set up an online presence.

I will reflect further on the concerns expressed by Senators Mary O'Brien and Quinn in respect of the employment and investment incentive. We can provide a briefing with officials on this element of the Bill in advance of Committee Stage if Senators would find it useful.

Senator Reilly entered the Oireachtas as its youngest Member and I as the youngest Member of the Dáil. While I admire the work she does, I do not accept several of the points she raised. First, the Fiscal Advisory Council did not describe the budget as lacking in prudence. Although it expressed a view on the supplementary expenditure for 2015, it did, in fact, describe the 2016 budget as prudent. While one overenthusiastic journalist put it to a member of the council during a radio interview that the council had criticised the budget, the council member clarified that it had both criticised and praised the budget. I become rather frustrated when the debate around economic and fiscal policy is reduced to a question of tax cuts versus public spending. In fact, if we go about it in the right way, we can do both. In budget 2015, for example, the Government reduced the two lower rates of USC, reduced the marginal rate of tax and increased the entry point into tax. In other words, we decreased rather than increased taxes and the result was that we took in more tax, which, in turn, enabled us to provide for extra spending in the important areas Senator Reilly highlighted. The argument about tax cannot be dumbed down to a type of Robin Hood scenario. It is about more than redistribution. The latter is important but it is also about economic stimulus. If we use tax as a policy to create economic growth, it can do much more in an economy than just redistribute.

I fully agree that there are many challenges remaining to be addressed, including housing, health and so on. The Senator can list them off, as can I. She sees them in her constituency and I see them in mine. The question in the forthcoming election will be about who has the plan to fix them and I look forward to debating that question with her. We need to be careful when talking about progressive versus regressive budgets. For example, the ESRI described the 2010 budget as progressive even though it was the budget that introduced the USC and cut all social welfare payments, including the blind pension and disability pension. I would not have described it as terribly progressive. We must be careful about the terms we use because they sometimes can suggest a level of social fairness that does not tally with the economic realities. The OECD has a very different outlook on our progressive tax system and some of the reports to which the Senator referred do not take into consideration the issue of social transfers. When they are taken into account, alongside our taxation system, we can see that Ireland has a very progressive system.

The idea that most people who are working are not earning a decent salary does not tally with the fact that average earnings have increased somewhat this year. We have, moreover, increased the minimum wage. Ultimately, however, it is by reducing the tax burden that we will put more money in people's pockets. The Senator's party has a different view, which I respect. She is probably proud I do not agree with it. Policies like having a marginal tax rate that is 19% higher than the corresponding rate in Britain and Northern Ireland would clearly lead to highly mobile individuals and companies deciding to relocate to those jurisdictions. Having a capital gains tax on business that is 10% higher in this State than up the road in Belfast does not make much sense. Ironically, it amounts to partitionist economics. However, we will debate these issues more fully next year.

I commend the Finance Bill to the House and look forward to discussing the provisions in more detail and hearing the recommendations of the Seanad on Committee Stage.