Fergal Browne (Fine Gael)
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I move recommendation No. 1:

In page 7, before section 2, to insert the following new section:

2.—The Principal Act is amended by inserting the following section after section 468:

468A—(1) In this section—

"the consumer price index number" means the All Items Consumer Price Index Number compiled by the Central Statistics Office;

"The consumer price index number relevant to any year of assessment" means the consumer price index number at mid-September before the commencement of that year expressed on the basis that the consumer price index at mid-September 2002, was 100.

(2) For the purpose of computing the amount of any tax credit or allowance in sections 461, 461A, 462, 462A, 463, 464, 465, 466, 466A, 467 and 468 to a person, each sum referred to as a tax credit or allowance shall be adjusted by the higher of either—

(a) such sum as shall be prescribed by law, or

(b) such sum as to which it shall be adjusted by multiplying it by the figure (in this section referred to as "the multiplier").

(3) (a) The Revenue Commissioners shall make regulations specifying the multiplier and shall make corresponding regulations in each subsequent year of assessment.

(b) The multiplier, in the year of assessment 2004, or any subsequent year of assessment, shall be quotient, rounded up to 3 decimal places, obtainable by dividing the consumer price index relevant to the year of assessment by the consumer price index number relevant to the immediately preceding year of assessment.'.".

I welcome the Minister for Finance, Deputy McCreevy, and his officials back to the House. This recommendation seeks the automatic indexation of tax credits. This is currently not the case and the Fine Gael Party believes it should be.

Martin Mansergh (Fianna Fail)
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I welcome the Minister for Finance and his officials.

I beg leave to doubt whether the Fine Gael Party actually believes tax credits should be indexed. Whenever it is in Government again, I doubt it will implement such a practice. It is essential for the Minister for Finance to have a degree of flexibility. At times, it may be possible for him to do much more than indexing. At others, it may be appropriate not to index at all and to concentrate, as in this year, on the minimum wage when resources are limited. This recommendation would be contrary to all principles of good public finance management. It is essential that the Minister's hands are not tied. No Fine Gael Minister for Finance would wish to have his or her hands tied in such a manner.

Charlie McCreevy (Kildare North, Fianna Fail)
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Senator Mansergh must have taken my speaking notes. However, I will outline why I cannot accept Senator Browne's recommendation.

The purpose of this recommendation is the indexation of certain tax credits. Such a move could be costly for the Exchequer depending on the indexation factors in the given year. For example, taking the September figure of 2.9%, representing the fairly modest rate of growth in the CPI for 2003 over 2002, the full cost of indexing the release would be €80 million in a full year and €56 million for 2004. Clearly, the mandatory earmarked tax expenditure at such a scale will severely limit the Government's flexibility in determining budgetary priorities having regard to the economic realities in any given year. No Minister for Finance would wish to be so constrained.

It is important the Government retains the maximum flexibility as to the size of the personal income tax package, as against other priorities, for the composition of the budget proposals for any particular year. For example, in this year's budget, the income tax package amounted to a full year cost of €287 million of which €282 million was used to ensure that 90% of the increased minimum wage continues to be exempt from taxation. On the other hand, it was necessary to allocate resources equivalent to a full year cost of €630 million for social welfare purposes. The tax expenditure was predetermined to the extent that to accept this recommendation it would be more difficult, if not impossible, to target limited resources, as was done this year. Senator Browne may wish to note, however, that the indexation of credits alone to the consumer price index in budget 2004 would have delivered significantly less of a budget tax package in 2004 than was actually spent. From the figures already quoted, the difference would be nearly €207 million in full year terms.

The overriding aims of the Government's budgetary and economic policy as set out in An Agreed Programme for Government are clear. The Government is committed to sustaining economic growth, strengthening and maintaining the competitive position of the economy while maintaining full employment. Responsible fiscal policies are central to the achievement of these aims. It is not clear that locking the Exchequer into an annual indexation of tax credits would be consistent with this approach. The Government already has policy priorities in place over its present term of office with regard to personal taxation, including the achievement that all those on the national minimum wage are removed from the tax net and ensuring that 80% of all earners pay tax only at the standard rate. However, the achievement of these aims is subject to the overarching requirement of sound economic and fiscal policies and keeping public finances in order. I cannot, therefore, accept this recommendation.

Derek McDowell (Labour)
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In recent years, the phrase "stealth taxes" has been much in vogue. I am sure the Minister will agree that it is a much used and abused term, not least by elements of the Opposition. Most of what are termed "stealth taxes" are actually user charges. Some I agree with, while others I do not, depending on the importance of the particular service being provided.

However, the failure to increase tax credit is a classic and genuine stealth tax. We should be looking for an element of transparency. There is merit in the notion that there should be an automatic increase as per inflation for standard credits. This would then put the onus on the Minister for Finance in each year's Finance Bill to deliver. This would allow a measure of clarity in what the Minister is doing. I know from previous experience, the Minister, or any of his predecessors, is not much given to that.

Since the Minister digressed in his response, I wish to ask about the overall area of income tax. The end of February Exchequer returns show, as the Minister is aware, a substantial increase in income tax returns over and above that which was anticipated at budget time. Can the Minister inform us if this indicates greater buoyancy than he had anticipated or are there seasonal factors at play?

Charlie McCreevy (Kildare North, Fianna Fail)
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The end of February figures as regards capital gains tax are higher than their profile. Senator McDowell will be aware that in 2003 I introduced and published profiled expenditure targets from the various Departments regarding votive expenditure. I also decided to publish estimates from the Revenue Commissioners of profiled taxation receipts for the year. I will explain my main reason for publishing the expenditure profiles. Senator McDowell will recall the 2002 general election.

Derek McDowell (Labour)
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I am trying my best to forget it.

Charlie McCreevy (Kildare North, Fianna Fail)
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I can understand that. The Senator will recall the hullabaloo that followed that election, when some eminent commentators went off half-cocked in respect of the expenditure out-turn for 2002. I have spent a great deal of time in the Department of Finance and I have discussed other Departments with my colleagues. It is obvious to me that few people understand all the intricate aspects of the Government's accounts and expenditure. Some eminent writers on the subject do not seem to understand it too well. A Department cannot spend more than the amount that is devolved to it by means of the annual Vote.

The expenditure figures for the early part of 2002 were high, but I consistently said that the out-turn would be in line with the initial projection. We said that the increase in the Revised Estimates Volume would be approximately 14.4%. The year-on-year increase in expenditure in the early part of the year was well in excess of 14.4% but, lo and behold, the out-turn at the end of the year was approximately 13.9%, slightly less than what was in the REV. There was less hysteria in 2003 because many commentators' fingers were badly burned, in terms of public credibility, in 2002. They were proved to have been wrong. I do not have much difficulty with the Opposition making accusations and political charges, although it does not excite me too much. As a politician, I understand why Opposition politicians have to engage in such tactics. However, other people who should have gone to the trouble of getting their figures right did not go about their business as madly in 2003.

One gets the wrong impression if one takes one month with the next. If one examines the total expenditure figure to the end of February, which was mentioned by Senator McDowell, one will find that it is just 1% higher than the year-on-year increase for the previous year. The overall REV out-turn shows that there has been an increase of 7% in net voted expenditure for 2004 as a whole. The year-on-year increase until the end of February is just 1%, however.

I am familiar with the figures for 1999 because I read them in response to a parliamentary question yesterday. In most years, the figures at the end of February are considerably in excess of the out-turn for the year as a whole although they were much smaller in one instance. Some commentators have argued that the recent figures for the end of February demonstrate that it is obvious that the Government will not engage in as much capital spending, etc. Although I might like it if that were the case, it is untrue. I am almost sure, at the end of March, that the Departments will spend their allocations this year. As always, my difficulty will be to ensure, like any sensible manager should, that Departments' expenditure is not in excess of their allocations. If one bases one's estimates on the increase of 1% in the expenditure figures to the end of February, one might extrapolate that we will be under expenditure at the end of the year. That will not be the case, unfortunately, as a consequence of certain timing issues.

I published the profiles mainly to stop the nonsense that took place in 2002. We published on the website the predicted cumulative expenditure of the Departments, based on their best guesses, for each month. Some of the Departments' best estimations for their monthly profiles last year were not great, but we hope they will be better this year. The overall expenditure figures for 2003 turned out at the end of the year as we had predicted. My main reason for publishing the profile figures was to get away from the unadulterated nonsense that was written about spending in most of 2002.

I also decided to publish the Revenue Commissioners' estimates of their likely monthly receipts for 2003 and 2004. In previous years, the year-on-year figures, compared with the previous year, were given at the end of each monthly statement or in the quarterly Exchequer returns at which my officials give a press conference. Such documents usually mention that some elements of Exchequer receipts are above profile and others are below profile. I decided this year to publish the Revenue Commissioners' profiles.

As Senator McDowell is aware, estimates of taxation are different. I can control expenditure, but I am not in a position to know how much money will come in. The estimations of all tax receipts are based on the Revenue Commissioners' best guess-estimates, which in turn are based on the strength of the economy, employment levels and other factors.

The Senator is correct to state that to the end of February, tax receipts have increased on 2003. Most of that relates to capital gains tax, however. Capital gains tax is above profile for two reasons. Estimates of capital gains tax are the most difficult to predict because, by their nature, they are based on once-off transactions. Capital gains tax was usually paid on one date each year until I made a change in the Finance Act 2003. It is difficult to estimate the capital gains tax figure for those two reasons. In the 2003 Act, I changed the capital gains tax payment dates to bring them into line with the self-employed income tax payment dates. It is all now paid on 31 October. Capital gains tax was previously paid a year in arrears. I received a large amount of money in 2003 from capital gains tax because, in effect, I received two years' capital gains tax in one year.

Another change I made in the Finance Act 2003 meant that deals done in the last three months of the year were treated on the basis of a current year assessment. I introduced a measure to ensure that taxes from deals done in the last three months of the year, which could not be paid by 31 October, had to be paid by 31 January. Therefore, the tax receipt figures to the end of February include the extra capital gains tax payments made by 31 January, under the terms of the measure that I brought into effect last year. The capital gains tax figures to the end of February are approximately €200 million greater than those expected by the Revenue Commissioners. The next big payment of capital gains tax will be received by the Exchequer on 31 October next, in line with the normal payment system on that date. Revenue from capital gains tax is above profile.

Interestingly, the income tax and VAT figures to the end of February are slightly below the Revenue Commissioners' profile. I emphasise that the decrease is slight and not something about which we should be alarmed. As income tax and VAT receipts are better indicators of the level of economic activity, we should take greater notice of them. Having said that, it would not be correct to make any assumptions based on the Revenue Commissioners' figures for the first two months of the year. Equally, the figures for the first quarter, which will be published in approximately ten days' time, are not a suitable basis for any projections. It will be necessary to wait until much later in the year before I will be prepared to say, for example, that there will be a downturn in taxation.

I have endeavoured to explain the relevance of the figures for the end of February. Capital gains tax is above profile for the reasons I have outlined. The two other main taxes that I have mentioned, income tax and VAT, as well as excise taxes, are slightly below the Revenue Commissioners' profile at the end of February. I am sorry for having spoken at such great length.

Martin Mansergh (Fianna Fail)
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The Minister is to be complimented on his decision to increase the transparency of the public finances. There is an obvious public interest in that regard, because there may be an effect on confidence if commentators get it wrong or are too gloomy. Equally, it is not desirable that such people should be too optimistic. I accept the qualifications made by the Minister. Unfortunately, I do not have the budget booklet in front of me. As I said on budget night, I am confident that he will achieve and over-achieve his revenue targets. Far from being an indictment of the Minister and his Department, that is good news for everybody because it shows that the public finances are very sound.

I do not agree that Senator Browne's amendment should be written into legislation, as it would show that the Minister is deviating. One of the first aspects of the changes in income tax that commentators examine on budget day is their impact, if any, on indexation. I do not accept there is any mystery or stealth involved. Commentators home in on this and inform the public straight away if there is a change equivalent to the rate of inflation. If it is written into the legislation, however, this effectively establishes a norm and henceforth, if the Minister makes any changes he is deviating from the norm or reneging on a commitment. All sorts of political charges are made if the Minister does less than the norm even though it may be in the public interest.

The issue being debated is whether we should make a formal benchmark of indexation. I do not believe we should. Although it was a matter of wages or social welfare rather than taxation, the Italians, when their economy was pretty ropey, had a system of exact indexation — whose name sounded quite Rossini-esque, la scala mobile — which crucified the economy. I do not believe we should go down that route, although I accept that, other things being equal, we would like to see tax credits at least increasing in line with inflation. If one takes the last seven or eight years together, we have succeeded in doing much more than that. I have no doubt that if the public finances are healthy, in further budgets the Minister will make up for any lost ground.

Fergal Browne (Fine Gael)
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I accept all that has been said, but the bottom line is worth repeating. In 1999, the personal tax credit under the then equivalent tax code amounted to €1,000. By 2001 the Minister had succeeded in reducing this figure to €814. In 2002 it was doubled to €1,520. For the last two years there has been no change. These are the facts.

Charlie McCreevy (Kildare North, Fianna Fail)
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For the reasons I have outlined, I do not adhere to the principle that we should automatically index bands and allowances. The suggestion has been put forward over the years, but no Minister for Finance of any political persuasion would go along with it. Senator Mansergh has also referred to the reasons for this.

In reply to Senator McDowell's question about the figures for the year, we hope that the offshore accounts investigation will bring in some one-off payments during the year. During the last month the banks issued letters to thousands of customers and it is to be hoped this will bring in additional moneys. Senator Mansergh alluded to the hope, which I share, that we will achieve our Revenue targets this year. I also intend to keep to our spending targets, as in previous years.

Fergal Browne (Fine Gael)
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I move recommendation No. 2:

In page 7, before section 2, to insert the following new section:

"2.—With effect from the end of 2004, and annually thereafter, the Revenue Commissioners shall lay before the Houses of the Oireachtas a Report detailing in respect of any relief, other than an amount however described which is excluded in the calculation of tax by a body corporate, partnership, or individual if calculating tax—

(a) an estimate of the number who availed of the relief and of the range of the value of benefit;

(b) an estimate of the total cost of the relief to the Exchequer on a geographical breakdown by tax districts; and

(c) a statement of the social and economic benefits of the relief.".

This recommendation provides that annual reports be given to the Oireachtas to justify tax breaks in specific areas such as the bloodstock industry and section 23 and property tax breaks. It is important that we review such tax breaks every year. To be fair I must point out that Fine Gael brought in the tax breaks for urban renewal back in 1986. Former Deputy Fergus O'Brien was involved in that area.

The economic conditions in 1986 were very different to those which prevail now. Unfortunately, the housing situation has become worse. We must question the wisdom of policy decisions which ensured that a quarter of all new housing units built last year were second homes, while there are 50,000 families on local authority housing lists. The recommendation is clear. It provides for closer scrutiny and explanation of tax relief schemes on a yearly basis.

Derek McDowell (Labour)
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There is significant merit in the recommendation being made by Senator Browne and the Fine Gael Party. I can anticipate some of the Minister's response. I know he has altered the nature of the tax form so that people must at least declare income even if it is not subject to tax.

It is important that we assess the amount of tax that has been foregone because of these tax breaks, but it is perhaps even more important that we assess the benefit that is being derived from them. We will deal in later sections with specific breaks for those who build student accommodation, holiday homes and so on. Perhaps when we get that far we can try to investigate their actual benefit. As a general principle, however, the notion that we should make an annual assessment of the effects and cost of the tax breaks is useful.

Charlie McCreevy (Kildare North, Fianna Fail)
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This recommendation proposes to insert a new section into the Bill. The purpose of the new section is to require the Revenue Commissioners to make an annual report to the Houses of the Oireachtas giving in respect of each tax relief — apart from tax reliefs deducted by persons calculating their incomes for tax purposes — details of the numbers availing of the relief, the range of the value of the benefit to those availing of the relief, the total cost of the relief to the Exchequer, a geographical breakdown by tax district and a statement of the social and economic benefits of the relief.

The Revenue Commissioners already publish an annual statistical report which includes some information about the cost of tax reliefs. Copies of this report are sent to the Oireachtas Library. Table IT6 of the annual statistical report gives the cost of tax allowances and reliefs. This table does not currently give any indication of the numbers availing of the relief, geographical breakdown or the range of the value of the benefit.

I am informed that the Revenue Commissioners, to the extent that information is available in respect of particular reliefs, will examine the possibility of including such details in future statistical reports. In the matter of the range of the value of the benefit of each relief, while such a level of detail may be difficult to achieve in many instances, the Revenue Commissioners will investigate the possibilities. In this regard, the measures I am taking in section 86 of the Bill to require taxpayers to include additional information on tax returns in respect of certain specified reliefs should enhance the range and detail of the information available to the commissioners. This in turn will allow the Revenue Commissioners to consider ways in which it can increase the amount of detail on the take-up and cost of tax reliefs to be reported in its statistical report.

I do not believe it would be a good use of resources to create a statutory compulsion to have a case by case breakdown by tax district of the numbers availing of reliefs and exemptions. The cost and the resources expended in preparing this information for every relief and exemption would be disproportionate to the value of the information obtained from such an exercise. We need to consider the appropriateness of the information required from taxpayers and strike a balance between seeking improved data to assist in the costing and evaluation of tax relief schemes and the compliance burden imposed on taxpayers.

Finally, as regards the provision of a statement by the Revenue Commissioners on the social and economic benefit of each tax relief covered by the report, I do not think the commissioners are equipped or qualified to make any such judgment. The role of the Revenue Commissioners is to collect the taxes and duties imposed by the Oireachtas fairly and impartially and to administer the tax code by providing the best possible service to the compliant taxpayer and pursuing all forms of tax evasion. We will shortly be able to see more relevant statistics on this matter as a result of the changes I introduced in this Bill and further work carried out by the Revenue Commissioners. It is the job of Government and the Minister to decide on the appropriateness or otherwise of a particular relief or incentive and make decisions on that basis. That is the democratic process. Thus, I cannot accept the recommendation proposed by the Senator.

Fergal Browne (Fine Gael)
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I stick to my original point. It is worth noting that the urban and town renewal schemes will have cost the Exchequer €0.75 billion in lost taxes by July 2006. When this is coupled with the fact that 130,000 people are now on the waiting list for social housing, it must be asked why reviews of tax reliefs are not undertaken. The tax relief was initially introduced to encourage regeneration and it was very successful. It has now unfortunately pushed house prices up by an average of €100,000 and housing has become even less affordable for the ordinary person. There is now the scenario where some people can afford to have five or six properties but others cannot afford to buy their first one. This issue should be examined again.

Derek McDowell (Labour)
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I wonder what the real position is and to what extent the Revenue knows the number of taxpayers availing of particular reliefs. Even more pointedly, I wonder to what extent the Minister knows. I ask the Minister if he has statistics which he can consider each year in the context of the Finance Bill. Is he aware of the number of individuals or companies who are availing of a particular relief? It is surely a vital piece of information when it comes to assessing the worthwhile nature of a relief.

I find the history of this a little puzzling. I remember being told a few years ago by the Minister that Revenue did not compile these figures and it can only make a stab at the amount of tax being foregone. As the Minister rightly pointed out, last year or the year before last, Revenue produced estimates but it is not clear where the estimates came from because they are not accompanied by any backup statistics in terms of the number of people availing of the reliefs to allow one to make a realistic assessment of what the statistics mean exactly. Has the mechanism changed and does the Minister have all the information available to him, even though it is not published?

Martin Mansergh (Fianna Fail)
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Many of these reliefs are considered by the tax strategy group and the group's papers are published after the budget.

Derek McDowell (Labour)
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I do not think they have been this year, unless I am mistaken. Have the TSG papers been published?

Martin Mansergh (Fianna Fail)
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The strategy group's papers are normally published after the budget.

Charlie McCreevy (Kildare North, Fianna Fail)
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We publish them after the Finance Bill.

Martin Mansergh (Fianna Fail)
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After the Finance Bill, I beg the Senator's pardon.

Derek McDowell (Labour)
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They used to be published after the budget and before the Finance Bill. I remember well because I spent many a night having a good look at them.

Charlie McCreevy (Kildare North, Fianna Fail)
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The Senator is certainly one of the few people who read them. I have often quoted the Senator to his colleagues when he often stated that he loved reading the tax strategy group documents because then he knew what the Minister was not going to do.

Derek McDowell (Labour)
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It was particularly helpful in the context of the Finance Bill. I wonder if there has been a change of policy in the Department of Finance.

Charlie McCreevy (Kildare North, Fianna Fail)
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I do not intend that there would be. Anyone who wants the tax strategy group's papers may have them. They are more comprehensive post the publication of the Finance Bill. There may be matters referred to in the lead up to the budget which do not take effect until after the Finance Bill and they then become part of the deliberative process. The only reason for their publication after the Finance Bill is to get the overall picture. I will make inquiries for the Senator. They will be published very shortly.

Martin Mansergh (Fianna Fail)
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The Minister is correct. I always thought of the tax strategy group as a kind of clearing house and I mean that quite literally; it cleared a number of things out of the way as non-runners.

The urban renewal scheme was introduced in 1985 by the Fine Gael-Labour Government and the seaside resorts scheme, about which I have distinctly more mixed feelings, was also introduced in 1985——

Derek McDowell (Labour)
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It was not one of our good ideas.

Martin Mansergh (Fianna Fail)
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——at the behest of the current leader of Fine Gael and much to the benefit of the Leas-Chathaoirleach's county.

Charlie McCreevy (Kildare North, Fianna Fail)
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Well known seaside resorts such as Clonakilty, Westport and Achill.

Paddy Burke (Fine Gael)
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Senator Mansergh without interruption.

Charlie McCreevy (Kildare North, Fianna Fail)
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It ended up with 15 although it started off with six. The additional nine were introduced on Report Stage, I believe. I know there were an additional seven or eight.

Martin Mansergh (Fianna Fail)
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We are trying to raise pleasant visions of home in the mind of the Leas-Chathaoirleach.

The Minister has replied very positively to this recommendation. My understanding is that he is interested in collecting more objective information about how certain reliefs operate. I notice Senator Browne could not resist flogging a live horse regarding stallion fees.I would be surprised if that does not show that abolishing it would cost the Exchequer as opposed to bringing in revenue to the Exchequer. On average, most people do not actually make money from investing in and breeding horses. I know that some do and a few do spectacularly well. We must decide if we want to see our equestrian industry going lock, stock and barrel to Kentucky or Australia. If so, we can take that decision although it is something that has worked very well.

It is true that a few people have become very wealthy as a result but it must be judged, as this recommendation states, on the economic and social benefit it provides. It employs thousands of people, especially in the Minister's constituency of Kildare and my own shadow constituency of South Tipperary. It is over-emphasised in political and media debates and is an easy populist point to make, but it does not make any sense. The late Deputy Joe Bermingham and the late Deputy Michael Ferris of the Labour Party examined the matter very carefully and recommended that it should not be changed. I do not think that regularly brandishing that as a kind of symbol that one is attached to core socialist values, equity, a just society and all the rest washes.

Charlie McCreevy (Kildare North, Fianna Fail)
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The question of compiling or collating statistical information regarding the cost of these reliefs has been on my mind for some time. Section 86 of the Bill makes changes in this regard to allow the compilation of extra statistics on the person's income tax return.

This has a history attached to it and much of it is to do with the efficiency, new methodology and changes in practice adopted by the Revenue Commissioners over the past 20 years, which are all for the better. The changes are being made from the old system to the new system. Those of us who remember the old system will testify that it was very labour-intensive with lots of writing to the Revenue Commissioners, lots of questions for them to return and lots of replies. We spent years doing this as did the accountancy practices before we came to the self-assessment system for the year 1988-9.

Over the years the Revenue Commissioners have developed the desk audit principle in that one sends in returns. The Revenue Commissioners nowadays do not wish to have any forms sent to them. They do not need to see accounts, letters or receipts. It is becoming more like that.

Form 11 is very large, containing approximately 20 pages. In order to be more efficient, there are group figures for capital allowances in various areas. For example, most of these questions relating to capital allowances such as urban and rural renewal and seaside resorts are grouped together. This is more efficient but the consequence is that one cannot identify the number of capital allowances going to the various areas of seaside resorts, multi-storey carparks or whatever.

I have been thinking about this for some time. There have been tremendous benefits in the manner in which the Revenue Commissioners have changed their methodology. The capture of relevant information at the same time is the goal without clogging up the system, thus making it more difficult for the compliant taxpayer. In section 86 of the Finance Bill 2004, as passed by the Dáil, there is now a provision under which the forms will be redesigned to capture more information.

As I stated yesterday, the P35 form to be submitted in February 2005 will capture the information regarding occupational pension schemes for employers and the amount they have contributed. There are also other changes. Senator McDowell is correct in this regard. Some information used over the years is exact. For example, it is very easy to do it now on mortgage interest relief because the change is made at source. One does not have to put it on one's form as the Revenue deals with one's mortgage provider. The same system applies to medical insurance relief. Therefore, one can find out the exact costs. Some of the other reliefs such as the capital allowance type relief have not been captured but will be in the future. To get exactitude in terms of the losses, one would have to go through every single tax case which claimed them, find out information from the individual's files and write to him or her.

Some surveys are carried out by tax offices, for example, on the seaside resorts relief and so on but it is not totally exact. The new information will allow this to be captured in an exact form. Some of the costs of the reliefs are exact and some are not. On the survey carried out on the top 400 individual earners, each file would have been gone through to see what allowances those people claimed and how they reduced their tax. That would be an exact figure. One cannot extrapolate from that that all taxpayers are using all those particular breaks. Hopefully the new method of capturing information on the forms will make it much easier to do so.

Senators raised the issue of lost taxes. To be fair to Senator McDowell, he gave a fair commentary on this issue last evening. A balance must be struck at all times. The Senator asked about the loss of tax revenue to the Exchequer and the economic activity a particular tax incentive will give. It has to be accepted by all, including those who write regularly on this subject, including politicians, that tax breaks-incentivised capital allowances will always be used more by high earners. Irrespective of whether reliefs are to the film industry, multi-storey car parks seaside resorts or urban renewal schemes, they will be used in the main by high earners who pay tax at the rate of 42%.

Irrespective of the confused debate on the matter, no one doubts that arising from the benefits of relief for the film industry where there is a competitive market, gains are made in terms of economic activity. There is considerable evidence that much of that relief is being abused. Even if all the abuse were eliminated, the cost of that tax relief would be gained by high income earners. Some Members in the Lower House wanted to have it both ways, which is not unusual for politicians on all sides for generations. It is high income earners who will benefit from these reliefs. One has to weigh up whether the benefit of the relief outweighs the tax loss. One can put any figure one wishes on the amount lost on the seaside resorts relief or multi-storey car parks given the caveat I have entered about the exactitude of the figures. One has to weigh up whether the money would have come to the Exchequer through those income tax earners. On the other hand, one must weigh up the activity that would have been lost if that relief had not existed. For example, in the construction industry, thousands of additional employees were taken on because of the relief and many spin-off jobs came about as a result of those people being in employment. Many of those would have been unemployed and, as such, would have been drawing assistance or benefits from the State, and that also has to be factored in. One can add up the amount of extra VAT that would be earned, the PAYE, income tax and corporation tax those people would save. One side must be weighed against the other. It is important that everybody understands the parameters involved.

I have introduced as many, if not more, focused income tax incentives, some of which have been a roaring success, than any other Minister for Finance. One that has not been a success is the park and ride tax incentive scheme. Nobody disagreed with that scheme when I introduced it. Even though Senator McDowell was an Opposition spokesperson, I do not think he opposed that particular relief.

Derek McDowell (Labour)
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I was sceptical about it.

Charlie McCreevy (Kildare North, Fianna Fail)
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The Senator was proved right. To encourage park and ride facilities I improved the scheme the following year to make it more attractive. Up to today, one person has expressed an interest in this area, but we do not know whether that person is going ahead with it. That is one scheme that has not been a success. While Senator McDowell was sceptical about it, most people would have thought that relief was a good idea. There are other reliefs that would be availed of by everybody. For example, the rural renewal scheme in the upper Shannon area — Leitrim, most of Sligo, all of County Longford, and large parts of Roscommon and Cavan — has been a tremendous success in recent years. The seaside resort renewal scheme was introduced by Deputy Ruairí Quinn, the then Minister for Finance. I was Minister for Tourism until December 1994 and the budget was introduced in January 1995. We had been working on that scheme from the previous year and the idea came from my Department. Senator Mansergh has raised doubts about this. When Deputy Quinn introduced it in the budget there were six locations. By the time the Bill reached Report Stage there were 15 or 16 locations because of understandable pressure from various backbenchers to include other places.

I do not wish to deal in detail with stallion relief as I have dealt with this on many occasions. In the Finance Bill 2003, I introduced a provision that allows us to capture information in this area. Until then, it was not possible to capture that information because it was an exempt income. For some reason, successive Governments, including Governments of which Senator Browne's party was a member, opposed any change. I agree with Senator Mansergh who has some experience in this particular business. People will be surprised at the end result. Perhaps one should look at the accounts of the Irish National Stud which is an efficiently run organisation to get some idea of this area of activity. It is like many things in Irish life, including political life, one can get a cheap headline by knocking something like this. It is the kind of bar-stool, non-analytical politics many people favour. We have done better than any other country and are a world leader in the area of horse breeding. We should think long and hard before making any change in that area.

In the 1980s the Commission on Taxation published a five volume report which recommended the abolition of almost every relief under the sun, except one. The only one it favoured keeping was the stallion relief.

Paddy Burke (Fine Gael)
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I may have allowed too much latitude. The amendment is about whether certain statistical information should be furnished by the Revenue Commissioners. I remind Senators that this debate will conclude at 5 p.m.

Fergal Browne (Fine Gael)
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To clarify, I was asking about reviewing tax reliefs and never suggested that this be abolished. I would not do so coming from Carlow where we had two very successful horses, Hardy Eustace and Rule Supreme, trained by Des Hughes in the Minister's constituency.

Paddy Burke (Fine Gael)
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The Deputy is straying from the amendment.

Fergal Browne (Fine Gael)
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I am a member of a horse syndicate and I know about making losses.

Paddy Burke (Fine Gael)
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The Senator has declared his interest.

Derek McDowell (Labour)
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I have no interest in the horse industry, good, bad or indifferent but one thing I am sure of is that the Minister, despite what he has said about reviewing, assessing and collecting information on numbers and so on, has not the remotest intention of interfering with it. This will allow us to flog that particular horse for another couple of years at least. I suppose it suits all concerned. I agree with almost everything the Minister has said in terms of how one goes about assessing these matters. There are some things, and this is where we would disagree, which the State has a responsibility to provide. Park and ride is a facility that should be provided by local authorities. I would say the same about child care. We should not leave these up to the vagaries of tax incentives and so on. I agree with the general thrust of the Minister's comments. He is in a position where he is turning his back on all of these reliefs which, in theory, he is meant to abolish, notwithstanding the extension this year.

Charlie McCreevy (Kildare North, Fianna Fail)
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I will abolish them.

Derek McDowell (Labour)
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The Minister is making the case for them. In some cases the Minister says they make sense and then says he will abolish them.

Charlie McCreevy (Kildare North, Fianna Fail)
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When a taxation or expenditure scheme has run its course, one must be prepared to do away with it, although that is not always easy to do. For example, we all remember the hullabaloo when I finally abolished the house renewal grant, although it should have been done away with at least ten years earlier.

Paddy Burke (Fine Gael)
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We are discussing the merits of publishing statistical information.

Martin Mansergh (Fianna Fail)
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If most of the construction property related reliefs are kept going indefinitely, they cease to have any effect. If they are meant to have a certain stimulating effect, they should be time-limited. The Minister has extended the time limits as long as they should be.

Fergal Browne (Fine Gael)
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I move recommendation No. 3:

In page 7, between lines 28 and 29, to insert the following subsection:

"(2) Section 472 of the Principal Act is amended in subsection (4)-

(a) by inserting 'or proves that he or she is a home-carer' after 'purposes referred to in that section', and

(b) by inserting the following paragraph after paragraph (b):

'(c) in the case of a home-carer, a credit of the amount referred to in paragraph (a) will be provided against the income of the employed spouse.'.".

The recommendation seeks to introduce a provision whereby the value of the home carer's allowance would be linked to the PAYE allowance. The home carer's allowance was introduced by the Minister when he introduced his proposals on individualisation. There was a widespread belief on the Government backbenches as well as elsewhere in the House that we needed to acknowledge those who chose to stay at home and that the home carer's allowance was an appropriate way of doing so. In the intervening period, although the benefits of individualisation have substantially increased and run now to several thousand euros for those on top pay, no effort has been made to increase the home carer's benefit.

Derek McDowell (Labour)
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I am not a fan of the home carer's credit. However, I would be very interested to know the statistical background as to how many taxpayers actually claim the credit. The Minister will remember there was much hullabaloo at the introduction of individualisation and the subsequent introduction of this credit.

Charlie McCreevy (Kildare North, Fianna Fail)
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Senator Browne should know that this area was a specialist subject of Senator McDowell's when he was in the other House. The recommendation seeks to amend section 472 of the Taxes Consolidation Act 1997 to extend the employee or PAYE tax credit to home carers, with the credit to be given to the working spouse. Under section 466A of the Taxes Consolidation Act 1997, the home carer's tax credit is granted to married couples where one spouse remains in the home to care for a dependent person. We considered an identical proposal in the other House which attempted to link the value of the home carer's credit to the employee tax credit, as does Senator Browne's recommendation. Presumably, the home carers in question are those currently within the ambit of section 466A. To extend the employee tax credit as proposed in the recommendation would be to depart from the essential purpose of the credit which is to take account of the position of employees as compared to the self-employed. Widening the availability of the employee tax credit in this way would cost some €82 million in 2004 and €118 million in a full year.

As I indicated in my Budget Statement last December and as I repeated in the other House, the resources available for tax reductions this year are limited. I therefore made only limited changes in the area of personal taxation and these will cost an estimated €287 million in a full year. The increase I made in the employee tax credit was to ensure that income tax was not payable on 90% of the minimum wage. Over 39,000 persons were removed from the tax net. Apart from this and the increase in the income tax exemption limits for those aged 65 and over, there were no increases in the generality of the personal tax credits or in the standard rate band — the budgetary position would not have allowed it. I am, therefore, not in a position to accept the recommendation.

In regard to the statistical question raised by Senator McDowell, 140,000 persons claimed home carer's credit.

Derek McDowell (Labour)
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I wish to ask the Minister some general questions on income tax and, in particular, on the credits. I want to explore whether it is still his intention to remove the minimum wage from the income tax net. As I said, this is the most important remaining tax priority and something on which the Minister should have moved last year and should certainly move this year, even if it means having to compensate in other parts of the tax or income tax codes. I will not labour the argument as the Minister is familiar with it but I invite him to state whether it is still his intention to do this in the one budget which remains to him as part of Sustaining Progress.

Charlie McCreevy (Kildare North, Fianna Fail)
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As explained in the programme for Government, it was and still is the intention of the Government to exempt the minimum wage over a term in office, as was also acknowledged in the Sustaining Progress document.

Derek McDowell (Labour)
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I understand that Sustaining Progress has one more budget to run. Is there a specific commitment to do this in next year's budget? Must we wait for another three years, if the Government lasts that long?

Charlie McCreevy (Kildare North, Fianna Fail)
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I referred to this matter when dealing with amendments in the other House and referred to the Government's clear policy in regard to exempting those on the minimum wage from taxation. An Agreed Programme for Government set out the achievement of this objective as a priority over the next five years but this is subject to the overarching requirement for sound economic and fiscal policies and keeping the public finances in order. The Sustaining Progress agreement endorsed this approach and provides that "to the extent that there is any scope for personal tax reductions, progress will continue to be made over the three budgets contained within the life time of this agreement towards removing those on the minimum wage from the tax net". This is entirely consistent with the Government's broader economic strategy of sustaining economic growth, strengthening and maintaining the competitive position of the economy and sustaining employment.

Derek McDowell (Labour)
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That is clear.

Martin Mansergh (Fianna Fail)
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If we have reached 90% this year, it is politically inconceivable that the Minister for Finance would not wish to complete that process as soon as possible.

Fergal Browne (Fine Gael)
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I move recommendation No. 4:

In page 8, before section 4, to insert the following new section:

"4.—(1) Chapter 1 of Part 15 of the Principal Act is amended by inserting the following section after section 480A:

'480B.—(1) In this section—

"the Act of 1999" means the Irish Sports Council Act 1999;

"amateur sportsperson" means a sportsperson that receives no salaries, fees, wages, bonuses or perquisites as a direct consequence of their participation in an approved sport;

"approved sport" means a sport specified in Appendix 23B;

"the Council" means the Irish Sports Council;

"carded athlete" means an athlete in receipt of funding through the Council carding scheme in the relevant year;

"doping in sport" has the same meaning as set out in section 2 of the Act of 1999;

"high performance amateur sportsperson" means an amateur sportsperson properly affiliated with one of the sports bodies specified in Appendix 23B, that competes at a level that is subject to any measures taken by the Council, in fulfilling its obligations under section 6(1)(d) of the Act of 1999, to combat doping in sport;

"qualifying sportsperson" means a high performance amateur sportsperson that meets the criteria set down by the Council in conjunction with each sports body and not registered with the Council as a carded athlete;

"the sports body" means the relevant body that governs the conduct of each approved sport.

(2) Notwithstanding any other provision of the Income Tax Acts, this section applies where in the year of assessment 2004 or any subsequent year of assessment an amateur sportsperson who is resident in the State for that year of assessment proves to the satisfaction of the Revenue Commissioners that he or she has in that year of assessment been a qualifying sportsperson.

(3) Where this section applies, a qualifying sportsperson shall, on the making of a claim in accordance with subsection (6), be entitled to a tax credit (to be known as the "qualifying sportsperson tax credit" of €2,000).

(4) Relief from income tax under this section shall in all cases be given by means of a tax credit.

(5) Where any relief has been given to a qualifying sportsperson under this section and he or she is not entitled to that relief, as the case may be, that relief shall be withdrawn by whatever means is deemed appropriate by the Revenue Commissioners (including an adjustment to that person's tax credits or the making of an assessment to income tax under Case IV of Schedule D for the year of assessment for which that relief was given).

(6) Any claim for relief under this section-

(a) shall be made in such form as the Revenue Commissioners may from time to time provide, and

(b) shall contain such information and be accompanied by such statement in writing as may be indicated in the said form as the Revenue Commissioners may reasonably require for the purposes of this section.

(7) If a qualifying sportsperson qualifies for the relief under subsection (3) in relation to more than one approved sport, either at the same time or at different times in a year of assessment, he or she shall be treated, for the purpose of the relief under this section, as if he or she qualifies for that relief in respect of one approved sport only in that year of assessment.'.".

My colleague, Deputy Jimmy Deenihan, who put forward this amendment in the Dáil, has seven all-Ireland medals. The Minister for Finance knows how hard it has been to survive in his position for seven years, but to win seven All-Ireland medals is even tougher.

Paddy Burke (Fine Gael)
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Deputy Deenihan has five All-Ireland medals.

Fergal Browne (Fine Gael)
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The recommendation put forward by Deputy Deenihan was rejected in the other House. It applies not only to Gaelic footballers but also to other sportspeople such as cyclists, boxers, rowers and other elite athletes not benefiting from the provision made in the Finance Bill 2002 under which professional sportspeople were rightly granted a major income tax break. This, however, should apply equally to all other elite athletes. Former Taoiseach Charles Haughey, when Minister for Finance, granted a major tax concession to artists which has been successful, although I would argue some aspects of it should be reviewed. Nonetheless, it has encouraged a number of writers and scriptwriters to stay in Ireland to develop the arts. Last year, that measure cost some €37 million. The recommendation proposed for sportspeople would only cost some €9 million and would affect 5,000 to 6,000 athletes across the spectrum of sports. It should be reconsidered.

When I met recently with the Gaelic Players Association in Buswells Hotel, I was amazed by the number of Fianna Fáil Deputies and Senators present, agreeing with the players, throwing their arms around them and posing for photographs. Those Deputies then ran to the Dáil to vote against the amendment. I hope their Seanad colleagues do not do likewise. I am aware that we cannot change a financial Bill in the Chamber today and can only make recommendations. However, when this comes to a vote, I hope Fianna Fáil Senators will look into their consciences, if they have any, and vote with their hearts. This would ensure that sportspeople who give great enjoyment during the year — I realise the Minister is a big sports fan — would get some tax credit to offset the yearly expenses they incur in providing entertainment for us.

Paddy Burke (Fine Gael)
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I support Senator Browne. I listened with interest to the Minister's list of tax shelter schemes such as the seaside resort and urban renewal schemes and he pointed out that those at the high end of the economic spectrum availed of those breaks. Those on lower incomes could avail of the tax break recommended here. Great credit is due to those who train from one end of the year in hurling, football and other sports. They give great entertainment to the nation and far beyond. One need only spend the day of an all-Ireland final in Australia, America or England to see the enthusiasm for the game among people who left Ireland years ago.

Senator Browne made a case for this small concession being made available to people who slog through the winter months and spend late nights away from their families. They must also travel long distances. In a county like Mayo, which is very large, some players must make a round trip of 120 or 130 miles four or five nights a week to train to play for their county. They give huge entertainment to people all over the world.

Fergal Browne (Fine Gael)
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Not much chance of an all-Ireland medal.

Paddy Burke (Fine Gael)
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Those might have eluded us for a number of years but we might be in the shake-up this year. The Minister should consider this worthy proposal. Anyone could stand behind the recommendation.

Derek McDowell (Labour)
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I was never a fan of the original tax break in the Finance Bill 2002 which provides a potentially very break for people who are, generally speaking, well off in the first place. I understand the argument that their careers are relatively short but I am not sure there is any huge benefit to the public in encouraging them to stay resident in Ireland. We always suspected, with some justification, that the Minister had his eye on the kind of sportsman who is numerous in the horseracing industry in his county.

I was never a fan of the measure but nevertheless the precedent is there in the 2002 Act and the Minister has opened a Pandora's box. Having treated elite sportspeople in a particular way he was inevitably going to be subjected to pressure to extend the tax break to amateur sportspeople, with GAA players the most obvious example.

I endorse what has been said by Fine Gael colleagues about the increasing amount of effort GAA players must put in, such as the amount of time they must take off work and the income clearly foregone by those efforts. The pressures on GAA players are increasing all the time and they want to be valued. They want it expressed in a monetary way and the Minister is coming under pressure to do so. It may be that what we should be saying explicitly to the GAA — perhaps this is what the Minister is trying to do in a less explicit fashion — is that it should be looking at some way of remunerating players and that it should be honest and up front about it. There may be merit in that approach and I would welcome much greater debate on this than has occurred heretofore.

I quibble with some of the specific terms of the recommendation but the general principle, that we send a message to those playing GAA games and other sports that they are valued and perform a useful role in society which we all appreciated, has serious merit and should be examined by the Minister.

Fine Gael speakers pointed to the blatant hypocrisy of Fianna Fáil Deputies embracing GAA players and voting down the proposals they had devised. Unless I am mistaken some of the Minister's colleagues in the Dáil seem to be under the impression even now that he is giving the matter some thought, that he is well disposed towards it and that perhaps next year or the year after he will do something about it. Perhaps they need some clarity. The Minister's inclination towards clarity comes to the fore on such occasions. Perhaps he will help Members here and in the Dáil by stating his views clearly because unless I am completely misreading his indications, the Minister has no intention of doing anything about this.

Martin Mansergh (Fianna Fail)
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There is undoubtedly a lot of sympathy among my colleagues for this idea. It is not hypocrisy to express support or sympathy for what is prima facie a good idea and then, if reasons are given as to why the idea does not stand up in that particular form, accepting those reasons. All of us find ourselves in that position.

Without anticipating the Minister's reply, the measure he introduced in 2002 was a good idea. The application of that measure or an equivalent to GAA players may require further thought and this proposal is a stimulus to that. As Senator McDowell hinted, it is also a question of how particular sports organise themselves, so thinking may be needed on all sides.

Ulick Burke (Fine Gael)
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I support the amendment on the basis that it is time some recognition was given to those who have given a lifetime of commitment to our national games. The commitment that GAA players must give to their sports is very serious and their livelihood often comes second, with family life coming last. There must be some recognition for that. We are not asking for anything on a par with professionals in other codes but it is important that commitment to the national games is recognised. When such players of outstanding ability give a display that is below par they are highlighted and often ridiculed.

How many players of all ages have lost an eye to hurling? I remember a famous Kilkenny player who lost his sight in a match. He had to bear that himself and insurance was not taken into account, though no insurance could ever compensate him for the loss of his sight. His whole life was changed as a result.

We are asking for recognition, not compensation — recognition of the commitment and dedication that these people have given. They have broken bones which may result in arthritis in later life. The Minister has uniquely recognised the importance of sport and has given breaks to certain other sportspeople. He should give serious consideration to some degree of recognition by accepting this recommendation.

Charlie McCreevy (Kildare North, Fianna Fail)
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This amendment proposes a scheme of annual tax credits for elite amateur sports persons who are resident in the State. The tax credit of €2,000 would be used against the person's non-sport income since, being amateurs, they do not have income arising directly from the sport itself. This proposal for a tax credit for elite amateur sports persons has been promoted by the Gaelic Players Association whose members are not paid in respect of their direct participation in Gaelic games. In effect, it means that the taxpayer should subsidise certain amateur sports persons when their own organisations are unwilling to do so. This is the nub of the matter.

This matter has been discussed at great length on both Committee and Report Stages in the Lower House. I have made my views very clear in those debates and I welcome the opportunity to restate them before this House. As regards the GAA in particular, I should emphasise that this Government has made substantial sums of money available to the GAA at national and local level for the development of facilities which provide the appropriate arenas in which these great national games are played. The GAA has also been exempt from income tax for the past 75 years, since 1928. That special relief should not be overlooked by those seeking additional tax concessions.

In the past two years alone this one organisation has been allocated no less than €68 million in Exchequer funding, including €1.5 million a year of current funding for the governing body. I am not just talking about the Government funding for Croke Park, in respect of which I took more than my fair share of criticism, but for a whole range of GAA facilities the length and breadth of the country that have been built with assistance from the sports capital programme administered by my colleague, the Minister for Arts, Sport and Tourism. The record shows that no Government has ever been as generous to Irish sport as the current Administration.

I am fully conscious and appreciative of the efforts of GAA players at the top level. As a lifelong supporter of Gaelic games, I am well aware of the pleasure and benefits followers derive from the efforts of players wearing club and county colours. In my view, it should be a matter of pride to put on a county jersey and not a matter of monetary calculation. Many amateurs in all walks of life have been honoured to represent their country many times at their own expense.

I have previously said that over the years the needs of players were often neglected and it is shameful that only in recent times have players' concerns been heard. The GPA is to be complimented for its role in that regard. However, the provision of a new tax credit for each player, as recognition of the efforts of the GAA players, is an entirely different matter. The GPA's argument seems to be that because the GAA refuses to pay the players for participation in the games or even to reimburse them adequately for legitimate expenses incurred directly as a result of the players' involvement in games and training sessions, the Government — that is, the taxpayer — should pick up the bill. It is not an argument with which I can agree under any circumstances.

I noted with interest official comments reported recently in the media from the GAA in support of the GPA's submission. It is ironic that while the GAA regards the GPA as some form of maverick group with suspect motives that it has kept at arm's length, it has no problem in issuing edicts of support for this same group when it appears that the Government could be the solution to the thorny question of pay for play. The GPA problem is a GAA problem. It is not my intention that individual players should now be given generous tax exemptions to compensate for the difficulties of the GAA on this issue. The resolution of the problem of player compensation is a matter for the GPA and the GAA, not for the GPA and the Government.

The proposed tax credit of €2,000 per annum per sports person is more than the total tax credit available to a non-PAYE single person, which stands at €1,520. The PAYE tax credit itself of €1,040 is almost half of what the GPA proposes be granted to a select group of players. A tax credit of €2,000 is the equivalent of exempting €10,000 of income from tax for a standard rate taxpayer.

Bearing in mind that there is already State funding for sports organisations and sports people, if it was ever considered desirable to grant €2,000 per annum to all elite sports persons, a direct grant mechanism would be a fairer and more appropriate measure. A tax credit would not benefit many elite athletes who, due to the levels of commitment and time demands of their respective training regimes, are often not in a position to hold down full-time employment.

The GPA has claimed there is discrimination in the treatment of the players it represents. Two years ago, I introduced a scheme of tax relief for certain professional and semi-professional sports persons which was given by way of a repayment of tax which could be claimed in the year in which the sports person retired from active participation in the sport. The relief relates solely to direct sports income and not from sponsorship or other income. However, the position of GAA players vis-À-vis professional sports persons who can avail of the retirement relief is quite different. In general, specific allowances or credits in the tax system are put in place to compensate taxpayers for necessary expenses incurred in the process of earning an income and not for expenses incurred while undertaking a voluntary activity.

Furthermore, the introduction of this credit would set an unwelcome precedent and other voluntary workers may well demand a similar credit on equally supportable grounds. If these players were to get a special tax credit to acknowledge their expenses relating to their activity and their contribution to the community, it would be nearly impossible not to extend this to other categories of individuals who give of their time and incur expenses in a wide variety of community, youth and other voluntary work. Many of the organisations to which they contribute are less likely to be able to meet the expenses of these individuals than the GAA can.

It is my experience that when reliefs are given in one area there tends to be pressure to extend them to what are arguably equally deserving categories elsewhere and for this reason I am not prepared to use the tax system to provide this support. In the circumstances I cannot accept this recommendation.

Fergal Browne (Fine Gael)
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I do not accept the Minister's comments. First, I do not believe it is a generous tax break — it is only a moderate one. If we had no other tax relief schemes, I would agree fully with the Minister, but we do. For example, U2 can claim tax relief, although it is one of the wealthiest bands in the world, if not the wealthiest. Likewise, the bloodstock industry can claim tax relief. The property tax break in section 50 suits people with five or six properties who can offset their tax liability against rental income.

As Senator Ulick Burke has pointed out, these people are out playing their sports, yet the amount of criticism being levelled at them is unreal. If professional footballers have a bad day they, at least, earn a nice big salary but those playing GAA club or inter-county games have no such comeback, yet they are criticised more than their professional counterparts.

We often talk about getting more people involved in sports. Recently, I saw a report in the Irish Independent that a quarter of Irish teenagers are obese. We are trying to encourage them to play sports but the difficulty is that people are not as active as they used to be. The proposed tax relief would be a way of encouraging people to engage in sport. The Minister pointed out the need for balance in tax relief, weighing up what one gives and what is taken back. It could be argued that those who avail of this tax credit might stay in sport longer and since they would be healthier, the State would incur fewer medical costs later on. As the Minister said, such a balance is required.

Derek McDowell (Labour)
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There is some merit in what Senator Browne is saying. The principle is well established in the tax code that a tax credit which derives from a particular income or activity can, nonetheless, be set against income arising from a different activity. By any stretch of the imagination, therefore, it would not be a new principle to establish such a relief.

The Minister raised the matter of GAA funding which is an interesting issue and one on which I would not seriously disagree with him. Perhaps he can help me on one or two points, however. As I understand it, there is still money outstanding to the GAA, which was promised to the association in consideration of its support for the national stadium in Abbotstown. Given the Government's decision not to proceed with the national stadium, is that money clearly off the table now?

Has the Minister received any proposal from the GAA for the completion of the renovated Hill 16? I appreciate that the Minister's county does not have the opportunity to visit Croke Park very often, but he will appreciate that those of us who support the premier county of Dublin and the city clubs like to go to Croke Park regularly.

Martin Mansergh (Fianna Fail)
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I remind the Senator that Tipperary is the premier county.

Derek McDowell (Labour)
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Many Dublin GAA fans lament the passing of Hill 16 but they are delighted that the planning authority has decided to allow it to be reconstructed as a terrace. I would be interested to know if there has been a specific proposal from the GAA to fund Hill 16, whether the Minister is considering this and whether he is favourably disposed towards it.

Charlie McCreevy (Kildare North, Fianna Fail)
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Senator Browne raised a number of tax reliefs, each of which relates to people making their living from that particular activity. He mentioned reliefs for artists, the bloodstock industry and others which are related to income. The recommendation is not related to a person's income.

Derek McDowell (Labour)
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But the capital allowances are not.

Charlie McCreevy (Kildare North, Fianna Fail)
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By definition, an amateur sportsperson does not derive an income from that activity. Capital allowances are brought in to incentivise various activities to which reference was made earlier. I brought in the most far reaching change in my first Finance Act by ring fencing the reliefs. There was more pressure on me to change that proposal than many others, which had a higher profile.

The recommendation proposes tax relief against the income of sportspersons from their jobs. Many thousands of people are involved in voluntary activity outside the sporting arena. They do tremendous work and are role models in their communities. They give up a great deal of time at great expense. How could I justifiably say those people should not be recognised in terms of special tax credit against their work income if I granted it to elite amateur sportspersons? It is not a small relief. The personal tax credit for 2004 was only €1,520. The proposed extra tax relief under this recommendation is €2,000, which equates to €10,000 in income for a standard rate taxpayer and is, therefore, a substantial relief.

Aside from the quantum of the relief, I cannot go along with the principle it is proposed to establish. I have been clear in both Houses about this matter and Members should read what I said. This is not something I will enter in the tax code. The change in 2002 for professional sportspersons, which has been alluded to, relates to their income from their professional activities, whether they are jockeys, rugby players or boxers, and the relief is given at the end of their sporting lives so that they will have something at the end. Most of their careers are short. They can pick their best ten years going back to the 1990-91 tax year and re-calculate their tax liability under the new provision. They cannot write off their tax liabilities. They pay their tax liability similar to everybody else annually but, at the end of their sporting lives, their liability is re-calculated. It has been beneficial, even in the recent past.

My belief regarding publicity is that if people have an image of somebody, there is no point trying to kill it. I have seldom tried to correct the record in this regard. However, some of the professional jockeys to whom Senator McDowell referred live in County Kildare, but the majority live in a different constituency to mine, Kildare South. I have represented a semi-Dublin constituency following the last two general elections. I hate killing a good story. I would kill my image as a right winger altogether if I keep going on with some of this stuff. I do not want to do that because what would certain organisations, trade unionists and commentators in certain newspapers do if I lost that particular image?

I do not accept Senator Browne's recommendation and I have outlined why I cannot do so. I recognise more than most the effort put in by amateur sportspersons to their sports, particularly intercounty GAA players. They train as hard as professional athletes and harder in some circumstances. A player's job would want to be a reasonably cushy number to be able to put up with the training hurling and football intercounty panels undergo. Only two teams will win the All-Ireland championships but the other counties put in as big an effort and they never get recognition for it.

Martin Mansergh (Fianna Fail)
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There is also camogie.

Charlie McCreevy (Kildare North, Fianna Fail)
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I am not in a position to include amateur sportspersons in the tax code and nobody should be in any doubt about my position in this regard.

Derek McDowell (Labour)
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What about Hill 16?

Charlie McCreevy (Kildare North, Fianna Fail)
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The Senator referred to both Abbotstown and Hill 16. The Government made a commitment in the context of the proposed national stadium at Abbotstown to give moneys to the GAA over a period of time. I honoured that over various years until it was no longer possible to proceed with the Abbotstown proposal. I, therefore, do not owe the GAA any money and I told the association that directly at face to face meetings a considerable time ago. There is no money outstanding to the GAA. The agreement was made in the context of the construction of a national stadium at Abbotstown and the GAA was to do certain things in that regard. The agreement is no longer in vogue and, therefore, I do not owe the GAA, on behalf of the taxpayer, any money. I made that clear to the GAA in face to face meetings with the association's previous president and his officials a long time ago.

With regard to the redevelopment of Hill 16, an application for funding would be made to the Minister for Arts, Sports and Tourism and not the Minister for Finance. I will check whether an application in this regard has been made but no moneys have been dedicated to it.

Derek McDowell (Labour)
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Would the Minister be well disposed towards such an application?

Charlie McCreevy (Kildare North, Fianna Fail)
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The Government parties have been more than generous to the GAA during their two terms in office. I recall the barrage of criticism from politically correct Ireland following my first budget when I allocated £20 million to the GAA over six years. We went ahead and most people now think it was money well spent. I outlined the amounts the Government and its predecessor have given the GAA. However, the moneys allocated through sports lottery funding each year is not recognised. The bulk of the funding goes to the GAA for good reason. The organisation makes the best applications, it has much of the work done and it has significant funding in place itself. We have responded in kind and will continue to do so.

I do not owe GAA headquarters any money as a result of that agreement years ago. The Government will examine applications from the GAA for funding in the future but that is a matter for another day. No money is owed to the GAA.

Recommendation put.

Fergal Browne (Fine Gael)
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I move recommendation No. 5:

5. In page 8, before section 7, to insert the following new section:

7.—Section 819 of the Principal Act is amended—

(a) by inserting a new subsection (2A) and (2B):

'(2A) Notwithstanding the provisions of this section an individual who is an Irish citizen shall be deemed for all purposes to be resident in the State for a year of assessment unless such individual shall prove to the satisfaction of the Revenue Commissioners that such individual is not resident in the State within the meaning of this section.

(2B) The Revenue Commissioners shall prescribe such returns and information an individual who is an Irish citizen shall deliver to prove to the satisfaction of the Revenue Commissioners that such individual should be treated as not resident in the State for the purpose of this section.',

(b) in subsection (4) by deleting the words 'at the end of the day' and the substitution of the words 'at any time during a day',

(c) by inserting the following subsection after subsection (5):

'(5) For the purposes of this section, an individual who is an Irish citizen, who would under the provisions of this section be not resident in the State for a year of assessment, shall be deemed to be resident in the State for the year of assessment unless such individual proves to the satisfaction of the Revenue Commissioners that such Irish citizen is resident in another State where such individual is liable for the payment of tax on worldwide income and capital gains made by such individual in the year of assessment.'.".

This recommendation seeks to end the tax-free status of Irish millionaires who live abroad. Currently, if such a person spends 183 days and nights of a year abroad, he or she is exempted from tax. Fine Gael is not happy with that and considers it necessary to tighten and reform the provisions in this regard. There is broad consensus on the issue on this side of the House.

I find it nauseating to see these so-called "great Irish people" who have probably paid less tax over the course of their lives than I have in my short working career. When they present a cheque for €100 to some charity, they make the front pages of every newspaper and are portrayed as fantastic Irish people. At the same time, the ordinary Irish worker who pays the normal PAYE rates is crucified. While we must, unfortunately, provide for the tax status in question, it is time to update and reform it. Fine Gael calls for that reform today.

Derek McDowell (Labour)
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I wholeheartedly agree with Senator Browne on this recommendation, which I support strongly. There is nothing in the tax code which more disturbs and annoys ordinary taxpayers than what they see as an abuse of the residency rules. People who are manifestly Irish and who made their fortunes in the first instance in Ireland now live abroad purely for tax purposes. In essence, they are tax exiles. Frequently, they visit the country and leave before midnight, in which case they need not count that particular day as part of their residency for tax purposes. While I do not expect the Minister to accept the recommendation before us, he would send a useful and powerful signal if he were to indicate that he is unhappy with a clear abuse and intends to review the residency rules.

The recommendation moved by Fine Gael suggests residency for tax purposes should be based on citizenship. It is a useful starting point, though it may be a little too simplistic. No doubt, there are people who are Irish citizens who have not been here during the course of the year and who do not derive income in Ireland. I acknowledge that the section as recommended allows for that possibility. Citizenship is a good starting point. There should be an onus on people who are clearly Irish citizens to demonstrate why they should not contribute to the maintenance of public services here.

Mary White (Fianna Fail)
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I support Senator McDowell though I will, of course, vote with the Government. The Minister should examine this issue. I find it obnoxious to see these people who make fortunes here. When their children are due to be born, they have them born outside the country. As Senator McDowell said, the average person in the street is conscious of the need to examine the issue. These people must be very unpatriotic to have made their fortunes out of us and yet not wish to live here. It would be a positive political decision to revise the provisions though I am not in a position to suggest how that could be done.

It is an important issue for the rest of the citizens of Ireland. When Senator Browne began to speak and used the word "nauseating", I wondered why he did so in this context. Having heard what he had to say, I agree with him. I find it irritating to see the headlines when these people come to and leave the country. Many of them have made their money through State businesses. The less said, the better which is why I should sit down before I say too much. They have earned money from public contracts.

Martin Mansergh (Fianna Fail)
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I agree broadly with the sentiments of my colleagues. Any judgment must be pragmatic to maximise the public good for individuals in this country. There is a person I will not name, as to do so would be to contravene the rules of the House, who is much criticised, particularly on the Order of Business. To give Members a clue to his identity, he runs a successful airline company. To be fair, that person is tax resident in this country and has even had his photograph taken with a cheque detailing the several million euro he pays. I accept the points made by Senators White and others. Certain people seem to expect enormous praise for particular donations and benefactions they make, whereas they would make a better contribution if they were to remain resident here and, like the gentleman I mentioned, maintained a herd of pedigree cattle to occupy their leisure.

It is thanks to the Minister, in particular, and some of his predecessors that the tax system is no longer as onerous and penal as it could once have been represented. There are people who have made out of public assets vast, windfall fortunes before disappearing to some Mediterranean clime. I agree that it sticks in people's craws. We have a fine country and the tax system is not so onerous. If people are very rich, they can keep a large amount of their wealth to spend here. A caveat is that among that class of individuals, there are some who engage in substantial economic activity in other countries. Given their substantial investments and businesses abroad, they may need to live and work in several different countries. They are in a slightly different category to persons who made their fortunes here before leaving for some other clime simply to avoid paying tax. It is not the patriotic thing to do.

While I am glad the matter is being discussed and aired here, like Senator McDowell, I expect the Minister will not be able to accept the recommendation in its current form. It does no harm to move this recommendation to allow us all to register what we think of the vast majority of our fellow citizens feel on this subject.

Charlie McCreevy (Kildare North, Fianna Fail)
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This recommendation is concerned with our current residency rules which were introduced in the Finance Act 1994 following detailed consideration by my Department and the Revenue Commissioners. They replace the previous unsatisfactory approach which was based primarily on case law and Revenue practice and reflected the development of the income tax system in the United Kingdom from its introduction in 1799. Interestingly, last April the British Treasury published a background paper entitled "Reviewing the residence of domicile rules as they affect the taxation of individuals". In this paper, it acknowledged that Britain's current rules on determining residence of domicile, developed over the past 200 years, are complex, poorly understood and do not reflect the reality of today's integrated world. The British rules are effectively the rules we would now have if we did not take the initiative we did in 1994.

The essence of this recommendation is twofold. First, it proposes that every Irish citizen be treated as tax resident in the State unless he or she can prove to the satisfaction of the Revenue Commissioners that he or she is being taxed in that year in another jurisdiction. Second, it proposes that the question of an Irish citizen being present in the State for any day be asked on the basis of whether the individual was present in the State at any time during that day. The current regime only asks whether a person is present in the State at the end of that day.

A Fianna Fáil-Labour Government introduced the changes in 1994. The then Fine Gael spokesperson, Ivan Yates, pointed out on Committee Stage of the 1994 Finance Bill that the provisions, as they were then drafted, would render a person who stayed overnight in the State present here for two days rather than one. Hence the rule was changed to account only a presence at the end of a day. This was consistent with Revenue practice prior to the introduction of the 1994 rules.

The 183-day rule is the common rule among other jurisdictions. However, it is not applied in the same way in every jurisdiction. For example, Britain ignores the days of arrival and departure, regardless of the number of visits in a tax year. If one arrived in Britain on a Monday and left on a Wednesday, one would only have been deemed resident for one day. Indeed, were one to arrive on a Monday and leave on a Tuesday, one would not be deemed resident for any day. In Denmark, an individual is deemed resident if he or she has lived there for six consecutive months.

Senator Browne's recommendation seems to force an obligation on all Irish citizens, regardless of where they reside, to convince the Revenue Commissioners that they are not liable for tax in Ireland. Even if such an approach were administratively feasible, I cannot see how it would be of assistance in keeping Ireland competitive in the global economy.

The USA is unique among OECD countries in basing its tax residence on citizenship and not on where a person lives. Several OECD countries apply the same basic residency tests as we apply in this State, namely, the number of days spent in the State in the tax year. Ireland's approach to this is not unusual.

The change brought about after long discussions within the Fianna Fáil and Labour Party coalition Government in 1994 put this complex area on a much better footing. As I have pointed out on previous occasions, the rules on residency and domicile were complex and based on a mixture of administrative practice and other arrangements. The 1994 decision put this on a legislative basis and has worked well. All countries I know have this income tax residency rule, except the United States, which has a citizenship rule.

This recommendation is another example of the bar stool approach to economics. While one can get a cheer by proposing this, it is not based on any sense of reality. We live in a global economy and people are entitled to live in whatever jurisdiction best suits them. There is nothing unusual about the Irish case. Our residency rules are in line, and in some cases more stringent, than tests applied in other countries. As I have said in the Dáil, changing this is not on my agenda.

Mary White (Fianna Fail)
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Am I correct in interpreting the Minister as saying he will not look at this in the future?

Charlie McCreevy (Kildare North, Fianna Fail)
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It is not on my agenda to change this.

Mary White (Fianna Fail)
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Everyone changes one's mind and no matter how clever one is, there is nothing wrong with doing so. When I read about these people I wonder what is wrong with the country that, having made such riches, they want to leave. Why cannot they live here? Why are they so greedy that they are not prepared to pay taxes? I would hate to leave my country to live in Spain or elsewhere. I cannot understand the state of mind of someone who would do this for tax purposes. It is blatant greed and sets a bad example.

I do not think the Minister should say that he will not change this. He might consider it. Were we to collect more taxes from such people we would be able to help the small section of our society that is disadvantaged. Only about 4% of the population is not doing well. I think of Travellers and dysfunctional people who cannot work. The money raised under this could be used to help them.

Charlie McCreevy (Kildare North, Fianna Fail)
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This matter was considered long and hard by Fianna Fáil and the Labour Party. The rules we announced in the Finance Act 1994 have been in operation for ten years and that is not a long period. It has allowed certitude in this matter and I do not have proposals to change them.

Martin Mansergh (Fianna Fail)
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I thank the Minister for his reply. As I indicated in my contribution, I did not expect that changing this would be on the Minister's agenda. I accept this as a pragmatic judgment. There is no harm in expressing the widespread feelings held by the public about such persons. Many people find their decision regrettable.

If tax liability were linked to citizenship then, unfortunately, there would be many renunciations of Irish citizenship. I am not sure that we necessarily want to force — in their eyes — our wealthiest people to renounce their Irish citizenship.

Fergal Browne (Fine Gael)
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Senator Mansergh made a valid point of the current economic conditions vis-À-vis those that pertained years ago. At one time, people paid tax at a rate of 65%. It sounds daft and I cannot even imagine it now. The economic conditions have changed and everything should be up for review. It is unfair that people can claim tax exile status and masquerade as great and patriotic Irishmen and women. While the gentleman Senator Mansergh referred to has many faults——

Mary White (Fianna Fail)
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He lives here.

Fergal Browne (Fine Gael)
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——at least he lives here and pays taxes and this must be greatly admired.

David Norris (Independent)
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A balance must be struck. After all, people establish industries here, promote business and can then be cheese-paring about their personal taxes. As the law stands, it is their privilege to do so. It is suggested that this should be examined.

I listened to what the Minister said with interest. I also listened to someone I admire, the singer George Michael, when he was interviewed on "Parkinson" recently. He said something unusual for a person with a great deal of money and international celebrity. He said that he felt there was disproportion in western life and that some people, including him, had too much money. He said that he feels he has enough money and for this reason, he will make his music available to the public for free download via the Internet. This seems to be a decent approach to life and I certainly welcome it.

I do not know where a ceiling should be placed, it may be €20 million, €40 million or €200 million. I read a list containing the names of Irish people who have made huge amounts of money, and more power to them. Some of them were billionaires. At that point, money becomes meaningless. After all, one can only eat so much. I do my best. I eat like a pig. I enjoy life and indulge myself as much as possible, but there are limits to the physical human capacity to enjoy wealth. It is rather obscene and distortive that some people have so much money. When Mr. Parkinson asked George Michael what he would say about going back to the old days — a notion mentioned by other Senators — when there were tax rates of 60%, 70% or 80% for the super-rich in England, George Michael said he thought that was fair. So do I.

Martin Mansergh (Fianna Fail)
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It would be economically stupid.

David Norris (Independent)
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Am I economically stupid? That will come as no great surprise to the Irish people. They can survive that shock.

Martin Mansergh (Fianna Fail)
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I said it would be economically stupid.

David Norris (Independent)
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To apply those rates? Yes, possibly, but at least the answer indicated that George Michael was prepared to pay such rates. He was very decent about the issue. There is something obscene about these enormous amounts of money. There is a distortion. This morning we debated the issue concerning widows, for example, and yesterday we heard the Minister for Finance say quite aptly in the Dáil that some of the fees which barristers received over three days amounted to more than a widow received in an entire year. How much more do these people get from investments? They use every loophole to avoid paying their taxes. That is a pity.

When I graduated from Trinity College, I used to have lunch with some friends, one of whom was a red-hot roaring republican. He could not wait to tell us how he fiddled his tax. This man loved Ireland so much that he could not wait to defraud it. There is such a thing as patriotism. It is a pity that people choose to wriggle in every way possible to avoid paying tax and that tax is used by the Minister for Finance and by our colleagues to support people who are less able to support and defend themselves. It is dreadfully mean-minded.

Fergal Browne (Fine Gael)
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I move recommendation No. 7:

In page 13, subsection (1)(b), line 41, to delete "used.'," and substitute the following:

(5G) Subsection (1) shall not apply to expenses incurred by the body corporate in or in connection with a medical examination for a director or employee where the director is not a proprietary director and/or the employee is not a relative, as defined by section 433(3)(a), of a proprietary director of the body corporate.',".

Regarding section 8, the Minister obviously made substantial changes to the benefit in kind in the last budget. We ask that medical examinations be exempt from benefit in kind. As the Minister said, there is a need for balance in this area. It is in everyone's interests that people be medically checked. This might apply more to the male than the female population, as men generally tend not to visit the doctor until obliged to do so. I would not like to see any obstacle put in their way. We should be encouraging people to have regular check-ups, and ensure they do not incur tax penalties when doing so.

Derek McDowell (Labour)
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It makes perfect sense that we should encourage people — particularly men, as Dr. Henry knows because of her profession — to undergo medical examination regularly. Such examinations are provided by larger companies in particular. That is useful, and should not be subject to benefit in kind.

I am interested in the Minister's reflections on how this provision is working out. Most of us support it in principle but are not sure how it works in practice. The details of the amendments being introduced by the Minister in this year's Bill tend to suggest that it is at least unravelling at the edges, in so far as we are now making exceptions for mobile phones, computers and so on.

All of us support the notion that if one is getting a large or significant portion of one's income by means of benefit in kind, then one should pay tax on it. There are however many fringe benefits which are not of great material benefit and which are clearly not an abuse in the sense of being deliberately provided in order to avoid paying people money. A sensible, pragmatic approach is called for. Otherwise, we run the risk of bringing the system into disrepute and very likely tying up the Revenue Commissioners in a great deal of detail with which they would prefer not to be involved.

Charlie McCreevy (Kildare North, Fianna Fail)
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This recommendation would require that all medical examinations undertaken by employees and directors other than proprietary directors or connected persons, paid for by a company, would not be subject to the new provisions regarding benefit in kind. The cost of providing medical check-ups which employees are obliged by their employers to undergo is not regarded as a taxable benefit, and is not liable to PAYE or PRSI. However, routine medical check-ups, paid for but not required by the employer, are treated as giving rise to a taxable benefit, and I do not plan to change this arrangement.

Regarding the application of PAYE and PRSI to benefits in January, this initiative is designed to ensure that on grounds of equity, employer remuneration in whatever form provided is treated similarly for tax, PRSI and levy purposes. The Senator's recommendation would in effect mean that employees who benefit from medical check-ups that are paid for by their employer, which are not required as part of their employment, are treated more favourably than those who pay for their own medical check-ups. In the circumstances, I cannot accept the recommendation.

Senator McDowell asked a question regarding BIKs and the new situation regarding how we apply tax in the particular areas. In December 2002, I announced that the new arrangement would be implemented from 1 January 2004 in order to allow time for employers and everyone else to get their affairs in order. In the latter quarter of 2003, after much consultation with the various bodies, I announced the publication of the details and regulations. Changes in this year's Bill reflect the consultations undertaken then, and I am not aware of any significant difficulties so far this year. From the time I published the methodology of computing last year, I made one significant change regarding vans in private usage. The other changes regarding the personal use of mobile phones and computers were in the changed regulations which I published.

The purpose here is to avoid employers remunerating their employees and escaping PRSI and PAYE. Some of the changes put the payment of tax on a different basis so that it is now deducted through the PAYE system. Some benefits in kind used to be paid by employees in arrears. For tax reasons, many employers were remunerating their employees by means of a method which would escape PRSI and PAYE. That is not fair to the generality of employees who do not have the wherewithal to use such methods. It is simpler to put everyone on an equal footing.

We left some significant items outside the PRSI net, namely share options. Attempting to include them was becoming so complicated that I abandoned hope. It is not currently a major issue, because share options last year were not the major consideration they were in previous times. I have tried to ensure that everyone pays PAYE and PRSI on the same basis. At the time of the budget in December 2003 I estimated that a figure of €83 million might be the benefit to the Exchequer of particular changes. We can assess that after 2004 to see if we got more or less than that figure.

Derek McDowell (Labour)
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This is a somewhat tortuous area that has caused difficulties over a number of years. The Minister will be aware that the main unions involved in the construction industry have made representations over time as to how the RCT system works. The Revenue Commissioners undertook a significant survey on how it was working and were looking to track down abuses and stamp them out. I presume that the establishment of this register is a further measure in that regard.

Will the Minister inform the House what the current state of play is and to what extent the Revenue Commissioners have been successful, or otherwise, in reducing the measure of the abuse of the RCT system?

Charlie McCreevy (Kildare North, Fianna Fail)
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This section governs relevant contracts tax, generally referred to as RCT. It is a tax that principal contractors are obliged to deduct from payments made to certain sub-contractors in the construction, meat processing and forestry industries.

There are three aspects to the amended section. The first relates to the setting up and maintenance by Revenue of a register of principal contractors and the creation of a formal registration procedure for new principal contractors. At present, the role of principal contractors in the operation of the RCT system requires them to deduct the relevant contracts tax from a certified sub-contractor and to remit it to the Collector General on a monthly basis. The relationship between principal contractors and the Revenue Commissioners is, therefore, fiduciary in nature just like employers' relationships in operating the PAYE system and registered persons to the operations of VAT in the business system. Employers and VAT registered persons are required to formally register with the Revenue Commissioners in respect of each of these functions. This straightforward registration process establishes the fiduciary relationship between Revenue and those persons with regard to those taxes.

However, no similar arrangement exists between the principal contractors involved in the operation of the RCT system. This section, therefore, includes an enabling provision in the primary legislation dealing with the making of RCT regulations which will allow the Revenue Commissioners to set up and maintain a register of all principal contractors and to where new contractors must formally register with them in that capacity. The enabling rule for the register will have effect from the date of passing of the Finance Bill while details of the form, the requirements to be met in the registration procedure and any time limits applying will be set out in new income tax relevant contracts that are collated later this year. Apart from this approach, registration will also help in establishing the bona fides of persons contacting Revenue as principal contractors regarding various aspects of the RCT system.

The second proposal in this section deals with the renewal of certificates of authorisation. This issue concerns the Revenue Commissioners' entitlement to renew certificates of authorisation, C2s as they are commonly called. These certificates, when produced to a principal contractor, allow the contractor to apply to Revenue for a relevant payment card in respect of the sub-contractor. The relevant payments card permits the principal contractor to pay the sub-contractor without deduction of tax. At present, primary legislation governing RCT provides that the Revenue Commissioners shall issue a certificate of authorisation on application to them in that regard by a person if certain requirements for permits are met. However, in order to smooth the transition of the RCT system and reduce compliant costs on the sub-contractors involved, the Revenue Commissioners will be able to renew C2s subject to a compliance check without the need for the sub-contractor to make a fresh application. Strictly speaking, current legislation does not support this administrative arrangement, except that it puts beyond doubt wherever there is entitlement in an appropriate case to renew C2 in this manner. It will bring the legislation into line with administrative practice. Confirmation by Revenue of this type of the new C2 will have effect from 1 January 2004.

The third issue in this section concerns technical cross-referencing. The Finance Act 1999 amended the RCT legislation and provided the right of appeal to the Revenue Commissioners where certificates of authorisation were cancelled. At that time, a cross-reference to the new provisions in section 17A and section 531 of the Taxes Consolidation Act 1997 was inadvertently omitted from subsection (20) of that section which provided for the Revenue Commissioners to nominate an officer to act on their behalf at an appeal. It has now been corrected and is deemed to apply with respect to 1999, 2000 and subsequent years of assessment. The commencement date is amended.

Senator McDowell asked how successful the Revenue Commissioners have been in ensuring compliance in the relevant contractors tax area. This is an area of taxation which has bedevilled Administrations for the past 30 years. The Finance Act 1970 introduced the sub-contractors' C2 system. Many changes have been made over the years in almost every Finance Act with attempts to tighten up the scheme. This section is a provision to tighten it further. In the past number of years the investigations carried out by the Revenue Commissioners and the Department of Social and Family Affairs, through their joint investigative teams on site, have been successful. In the construction sector, this is the one area where there has been tax evasion over the years. However, in my professional and political opinion, this has been dramatically tightened up over the past seven years. One can never say that one can eliminate tax evasion in PAYE, PRSI levies and construction tax. However, tremendous changes have been made in recent years.

Pat Moylan (Fianna Fail)
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Many companies are concerned about individuals with C2s and payment cards. Can the Minister check that some people have received C2s and payments cards with post-dated cheques and cheques on account? It is not right that many sub-contractors, who were fly-by-night operators, could produce C2s to be paid, while not paying their own dues.

Charlie McCreevy (Kildare North, Fianna Fail)
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I will have this matter checked out for the Senator. However, it is my understanding that the issuing of C2 certificates is tightly controlled. It would be a fair feat for an individual to obtain a C2 certificate as the Revenue have tightened it up over the years.

Derek McDowell (Labour)
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I am surprised that there is not already some register of principal contractors in place, simply on an administrative basis.

Charlie McCreevy (Kildare North, Fianna Fail)
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I will check that for the Senator. I understand that Revenue has a register for administrative purposes. This section will provide for a formal procedure for registering new applicants for principal contractors.

Derek McDowell (Labour)
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I am at a loss to understand the alterations proposed in this section that deals with nursing homes. It reduces the qualifying number of residential units from 20 to ten.

Charlie McCreevy (Kildare North, Fianna Fail)
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There may have been some misunderstanding on Committee Stage in the Dáil of this proposal. Some years ago I brought in a particular relief for nursing homes. It was then put to me that nursing home complexes could be seen as residential units which I brought in as a qualifying criteria. It is the reduction in the number of residential units from 20 to ten that is involved.

Derek McDowell (Labour)
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I take it the Minister is speaking of sheltered housing and the like.

Charlie McCreevy (Kildare North, Fianna Fail)
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Yes, such areas of activity.

Derek McDowell (Labour)
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Does this section deal with nursing homes at all?

Charlie McCreevy (Kildare North, Fianna Fail)
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Except in the nursing homes' tax relief — it was an add-on in a previous Finance Bill that one could have residential units as part of an overall nursing homes complex. The number was 20 and it was to be reduced to ten.

Derek McDowell (Labour)
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Is that to encourage further take-up?

Charlie McCreevy (Kildare North, Fianna Fail)
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Yes. It will satisfy those who have put forward the idea of residential nursing homes. It is one thing to provide for nursing homes as units on their own, but it is far better to provide nursing home units and sheltered accommodation. I made that addition to it in, I think, the second year. I think it relates to the fact that residential units are part of nursing homes. The Senator is right, in one sense, to state that it does not relate strictly to the nursing homes tax relief, but it is in that section of the Bill.

Derek McDowell (Labour)
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I want to explore the effectiveness and the level of take-up of some of the capital allowances schemes. I believe sections 26 and 27 refer equally to the schemes. Specifically, the Minister is extending the availability before terminating some of the schemes. I want to use the opportunity provided by this debate to explore the take-up of some of the schemes. Some of the schemes, such as the living over the shop scheme, the student accommodation scheme and the park and ride scheme, which we discussed earlier, have not been used to a great degree. I would be interested to hear the Minister's comments on the take-up of the schemes.

Charlie McCreevy (Kildare North, Fianna Fail)
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As I said earlier, we are aware of just one possible park and ride development, despite the scheme's attractiveness.

Derek McDowell (Labour)
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Is that the proposed scheme in south County Dublin? I refer to a proposed development in Dún Laoghaire.

Charlie McCreevy (Kildare North, Fianna Fail)
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I am not sure, but I think the Deputy is correct. It should be borne in mind that the living over the shop scheme is a regurgitation of a previous scheme, which may have been introduced by Deputy Quinn. As there was practically no take-up of the former scheme, it was eventually abandoned. When I became Minister for Finance, the Department of the Environment, Heritage and Local Government said that if further changes were made to the previous scheme, it might be more successful. We made more changes at the behest of the Department, but we understand that there has been a very poor take-up.

Derek McDowell (Labour)
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It has not worked.

Charlie McCreevy (Kildare North, Fianna Fail)
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It has not worked, even though changes were made. The student accommodation scheme has been well utilised in the various university cities and towns, including one in my constituency.

Mary White (Fianna Fail)
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Yes.

Charlie McCreevy (Kildare North, Fianna Fail)
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There has been a big take-up of the scheme, which was introduced in section 50 of a previous Act. The take-up of the park and ride scheme has been almost non-existent, the take-up of the living over the shop scheme has been very poor, even though it is being rejigged for the second time, and the take-up of the student accommodation scheme has been substantial.

Derek McDowell (Labour)
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We could usefully examine this section, which provides for tax relief for research and development.

Charlie McCreevy (Kildare North, Fianna Fail)
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The Senator mentioned this matter in his contribution on Second Stage. Under the original Bill, as published, one's incremental expenditure on research and development had to be at least €50,000. I reduced that figure to €0 on Report Stage in the Dáil.

Derek McDowell (Labour)
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I understand that.

Charlie McCreevy (Kildare North, Fianna Fail)
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I meant to correct the Senator when he referred to €50,000 on Second Stage.

Derek McDowell (Labour)
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It is a pity that the change was made, because we should seek to encourage a significant measure of additional research and development. It may not be worthwhile to get involved in the administrative hassle of dealing with relatively small amounts of research and development, which give quite little additional benefit. I welcome the scheme, generally speaking, and I wish it well. I share the concerns expressed by my colleague in the other House, Deputy Burton, about the building aspect of the scheme. Some effort should be made to——

Charlie McCreevy (Kildare North, Fianna Fail)
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With respect to Senator McDowell's colleague, she totally misunderstood and misinterpreted the building aspect of the scheme.

Derek McDowell (Labour)
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Perhaps I share the misunderstanding. I understand that buildings——

Charlie McCreevy (Kildare North, Fianna Fail)
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I explained the matter to her in my reply, but she continued to speak about it.

Mary White (Fianna Fail)
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That is the way she is; that is her personality.

Derek McDowell (Labour)
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My understanding of the section is that buildings that are constructed for the particular purpose of research and development are liable for the relief. The Minister is aware that it is a generous relief. I understand that it is basically a double relief, in a sense. There is nothing wrong, in principle, with giving tax relief on such buildings, but it would be worrying if a significant measure of the relief being claimed under this section were to be claimed in respect of buildings that may not necessarily be used for research and development in the future.

Charlie McCreevy (Kildare North, Fianna Fail)
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That is not the intention.

Derek McDowell (Labour)
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I appreciate that it is not the intention. Is it open to being used in such a way?

Charlie McCreevy (Kildare North, Fianna Fail)
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It will not be like that. I can send the Senator detailed notes on the matter.

Derek McDowell (Labour)
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Perhaps a summary would be useful.

Charlie McCreevy (Kildare North, Fianna Fail)
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Section 33 gives effect to the budget announcement to introduce a tax credit for research and development by providing for a credit of 20% of incremental expenditure by a group of companies on research and development. Expenditure on buildings is not considered in the calculation of incremental expenditure, as a credit for such expenditure is dealt with separately. Expenditure that is not on buildings, but is incurred in a relevant period by the members of a group of companies, is aggregated. The group's expenditure on research and development in that period is compared with its expenditure in the same area in a base period. A tax credit equal to 20% of the increase in expenditure is given to the group and can be allocated to companies that are members of the group in any manner they wish. The amount allocated to a company can be offset against corporation tax payable by the company in accounting periods falling into the relevant period. Any part of the credit that cannot be set off in that manner in an accounting period is carried forward to be offset against corporation tax payable in the subsequent period. Unused amounts of credit can be carried forward indefinitely.

Last year, 2003, is taken as the base period for 2004, 2005 and 2006. The level of research and development expenditure in 2004 will be compared to the level of such expenditure in 2003. The additional expenditure will qualify for the credit. Similarly, research and development expenditure in 2005 will be compared with such expenditure in 2003. The same approach will be applied in 2006. The approach will give a good incentive to companies to get started on research and development. For later years, the base period will be the corresponding period ending three years earlier.

On Report Stage in the Dáil, I removed the rule that stated that one had to spend a minimum of €50,000 on research and development in order to qualify for the tax credit. Therefore, the credit will apply equally to large and small companies. To qualify for a credit, the research and development work must be carried out by the company in an EEA country. The expenditure must qualify for a tax deduction under Irish law and, in the case of companies that are Irish resident, must not qualify for a deduction under the law of another territory. The credit applies to in-house company expenditure. Payments by a company to a university or third level institute in the EEA to carry out research and development will qualify for the credit, subject to a maximum of 5% of the research and development work being carried out by the company.

The section contains a basic definition of "research and development". The definition covers the full range of research and development activities, from basic research and applied research to experimental development. It requires a systematic, investigative or experimental approach to be taken in a field of science or technology. The section also provides that the Minister for Enterprise, Trade and Employment, in consultation with the Minister for Finance, may make regulations providing that certain categories of activities are, and certain categories are not, research and development activities.

A credit of 20% of the expenditure is allowed in the case of expenditure on a building or structure. The credit is set against corporation tax payable over a period of four years — the year in which the expenditure is incurred and the following three years. If the building concerned is sold or starts to be used for purposes other than the conduct of research and development activities, no further credits are allowed in respect of it and any credit already given is withdrawn. A claimant must be a qualified company.

Derek McDowell (Labour)
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Does that mean that it is clawed back?

Charlie McCreevy (Kildare North, Fianna Fail)
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Yes. If one stops engaging in research and development——

Derek McDowell (Labour)
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Is the money stopped, or is it clawed back? Will the tax that was not paid be recovered?

Charlie McCreevy (Kildare North, Fianna Fail)
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The buildings have been considered under separate sections for a number of reasons. Expenditure on building a laboratory would constitute research and development, so it would have to be allowed. The relief would be distorted, however, if such expenditure was considered with the research and development activity. One would be able to claim it all back in one year, for example. One will be able to claim it over four years. The construction costs will be considered separately from the other research and development activities to prevent the problems about which Senator McDowell's colleague was worried. The company may decide, after a few years, to turn the research and development facility into a dance hall, although I cannot imagine why it would.

Mary O'Rourke (Fianna Fail)
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It might be converted for the country and western set.

Charlie McCreevy (Kildare North, Fianna Fail)
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The original relief would be clawed back in such circumstances. A claimant must be a qualified company — a company that carries out research and development activities itself. A lessor that incurs expenditure on the construction of a building and rents it to a research and development company will not qualify for the credit on the construction costs. Therefore, the scheme cannot be regarded as a property based tax relief open to investors. The Bill provides for a general regime where the credit is available to any company engaging in qualifying research and development on a self-assessment basis. This is the normal basis for the tax treatment of companies. I reassure Senator McDowell that the purpose of this section is to prevent any possibility of other forms of tax incentivised property being built. The Bill is not intended to provide for such development.

Rory Kiely (Fianna Fail)
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On the Order of Business it was decided that all Stages of the Finance Bill would conclude not later than 5 p.m. As it is now 5 p.m. I am required to put the following question: "That section 33 is agreed; and, in respect of each of the sections and Schedules not disposed of, that the section or Schedule as appropriate is hereby agreed to in committee; that the Title is hereby agreed to in committee and that the Bill is accordingly reported to the House; that Fourth Stage is hereby completed; that the Bill is hereby received for final consideration and passed; and that the Bill is hereby returned to the Dáil."