Caít Keane (Fine Gael)
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Before we commence, I welcome the Minister of State at the Department of Finance, Deputy Simon Harris. I remind Senators that a Senator may speak only once on Report Stage, except for the proposer of a recommendation who may reply to the discussion on the recommendation. On Report Stage, each recommendation must be seconded.

Darragh O'Brien (Fianna Fail)
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I move recommendation No. 1:

In page 10, between lines 6 and 7, to insert the following:“(b) in section 531AM(1)(b) to insert the following after paragraph (viii)—

“(ix) where an individual is charged to income tax under section 112 in respect of a contribution to a PRSA (within the meaning of
Chapter 2A of Part 30) by virtue of section 118(5), the amount of the contribution to the PRSA,”,”.

Feargal Quinn (Independent)
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I second the recommendation.

I welcome the Minister of State to the House again. He must be getting very fond of us.

I thank him for his detailed response on my Committee Stage recommendation on PRSAs, personal retirement savings accounts, and USC, universal social charge. I have read its great technical detail but it does not detract from the very fundamental principle that, in the eyes of an employee, there is no real difference between a PRSA and a defined contribution occupational pension which is funded by his or her employer. Why should they be treated differently from a USC perspective? I do not understand that.

One of the Minister of State’s main points is that PRSAs are not benefit-limited but occupational pension schemes are, which is why the USC is applied to an employer. There is no logic to that decision, for three reasons. First, the comparison for PRSAs is with defined contribution occupational pension scheme arrangements. As they are both contribution-based arrangements, they should therefore be subject to the same tax rules. Second, since 1 January 2014, an overarching limit of €2 million is in place on the total value of retirement benefits that any individual can take from all sources, including PRSAs, before a penal tax charge is applied at retirement. Accordingly, PRSAs cannot provide unlimited retirement benefits, as they are subject to the same €2 million limit as any other retirement arrangements. Last, if the USC anomaly - the word also used by Senator Darragh O’Brien - were to be remedied, there are existing tax avoidance provisions in tax legislation - section 118B of the Taxes Consolidation Act 1997 - which would prevent an employee from foregoing remuneration to allow a large contribution to be made by an employer to a PRSA.

It is incumbent on the Minister of State to reflect on the strength of the case I made on Committee Stage and today on the need to equalise the USC treatment of pension contributions. I have looked back over the Finance Bills that came before the House in the past five years. It will come as no surprise to colleagues that not one recommendation has ever been accepted. I did not go back earlier than 2009, so maybe it goes back much longer. It is through that lens I view the debate and the Minister of State’s position in respect of other worthwhile recommendations discussed in the House yesterday on Committee Stage. I really believe this recommendation is worthy of attention.

Aideen Hayden (Labour)
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I took Senator Zappone’s point about the real difficulties for women in the workplace, as well as their entry and exit patterns due to family circumstances. Obviously, the imposition of USC on an employer’s contribution to a PRSA is important in this respect.

I cannot pretend I entirely understood the Minister of State’s technical rejoinder to the recommendation yesterday, but I did get the gist of it. Leaving that aside, I was more persuaded by the fact the Minister of State had committed to a comprehensive review of the overall pension scenario. There are other issues attaching to pensions; it is not restricted to the PRSA issue. I would like this debate to be broadened more to encompass the entire manner in which people provide for themselves into old age. I have referred before to the Irish people’s penchant for acquiring property into old age, the treatment of investment properties and the imposition of USC on gross income even though a loss could have been made on a property.

The Minister of State must bear in mind the wider issues of age and aging, going beyond the simple issue of pension products that need to be taken into account in any tax review as to how people provide for themselves in old age.

Simon Harris (Wicklow, Fine Gael)
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The discussion we had on this on Committee Stage was highly technical, but it was important to put that detail on the record of the House. Senators’ concerns about this aspect of private pension provision will be brought to the Minister’s attention directly.

In yesterday's debate, I explained the background and rationale for the differential treatment of employer contributions to PRSAs and to occupational pension schemes when it comes to USC. I agree with Senator Darragh O’Brien that there is not much to be achieved by going back over it today. However, what I found particularly interesting yesterday was discussions around the lack of private sector pension provision among a large proportion of the workforce, and particularly the difficulties faced by those on low incomes, those who choose to take breaks in their careers to care for children, mainly women, and those who work part-time.

In recognition of these problems, the Government has decided to agree a roadmap and a timeline for the introduction of a new universal supplementary pension savings scheme in 2015. As I indicated to Senators yesterday, this is a Government priority. While I cannot be more specific on the timeline, I do expect progress on it over the coming weeks. The nature of any incentives, including tax incentives, that will encourage and sustain supplementary pension savings among those who do not currently save for their retirement will be a critical aspect of the work that needs to be carried out in designing the new scheme, as will the removal of any perceived impediments to pension saving.

Some Senators made the point that the USC treatment of employer contributions to PRSAs is one such impediment. That is why the Minister considers that it would be more appropriate to examine all of the issues affecting the take-up of PRSAs together so they can be dealt with in the round as part of the work committed to by the Government next year.

We should of course not forget that provision for private pensions is ultimately dependent on the income of individuals and their capacity to forego an element of that income. In this regard, the social welfare system provides pensions based on PRSI contributions and based on means tests for those individuals who do not have sufficient contributions. To purchase an annuity that would provide for a similar level of income to the contributory State pension would require a pension pot of at least €250,000.

The Minister for Finance and his Department are cognisant of the issue at play. However, pending the considerable review set to take place in the area of private pension provision next year, the Minister cannot accept the recommendation at this time.

Darragh O'Brien (Fianna Fail)
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While I appreciate the Minister’s response, we are pretty close enough to being on the same page. The best way to ensure the Minister does examine this issue carefully is to accept the recommendation. Accordingly, I will be pressing it.

Darragh O'Brien (Fianna Fail)
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I move recommendation No. 2:

In page 11, between lines 18 and 19, to insert the following:
"3. The Minister shall, within 3 months of the enactment of this Act, bring forward a report on the costs and benefits of the home carer's tax credit.".

Fidelma Healy Eames (Fine Gael)
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I second the recommendation.

Simon Harris (Wicklow, Fine Gael)
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I thank Senator Darragh O'Brien for moving this recommendation because it gives me an opportunity to respond to the situation relating to the home carer's tax credit. The system of individualisation has been in the tax code since 1999 and is obviously an integral part of the overall system. When first announced, the stated purpose of individualisation was essentially to ease the burden on single persons, who make up 65% of the workforce; to take workers on the average industrial wage out of the higher rate of tax; and more generally, to facilitate a reduction in the numbers paying tax at the higher rate. Prior to this, a second spouse faced the marginal rate of tax on the first euro, or punt as it was then, earned.

In tandem with individualisation, a home carer allowance was introduced to compensate couples where one spouse stays at home to care for children or other qualifying individuals.

Darragh O'Brien (Fianna Fail)
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I am sorry but I cannot hear the Minister of State. There is too much noise.

Caít Keane (Fine Gael)
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Could we have quiet in the Chamber?

Simon Harris (Wicklow, Fine Gael)
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As I was saying, in tandem with individualisation, a home carer allowance was introduced to compensate couples where one spouse stays at home to care for children or other qualifying individuals. Individualisation was progressed to some extent in later years but was never completed. The result is that we now have a hybrid system with the standard rate band being partially transferable between spouses - €9,000 being the gap between single and married one-earner bands. To complete or reverse individualisation would cost in the region of €800 million.

The Commission on Taxation recommended that no change be made to the current system. It concluded that the current system represents a balance between acknowledging the choices families make in caring for children and taking account of the need to encourage labour market participation. The commission said that the home carer's tax credit was integral to the current hybrid system of individualisation and that "it would not be realistic to contemplate its withdrawal while the current arrangements in relation to the tax bands continue to exist or in circumstances where band individualisation is completed".

Senators may be aware that on budget day, the Minister's Department published a number of policy documents, including the report on tax expenditures which included new guidelines for best practice in respect of the evaluation of tax expenditures. The report describes the purpose and main features of tax expenditure in an Irish context. In particular, it outlines the limited circumstances where tax expenditures should be used as an alternative to direct Exchequer funding. The report also discussed recent tax expenditure evaluations carried out in Ireland in the past few years. The guidelines are informed by international best practice in this area and work carried out in other countries. It is available on the budget website and the guidelines have been circulated to all Secretaries General in all relevant Departments.

Given the recent reviews carried out by the Commission on Taxation, the Minister does not believe that a full cost-benefit analysis on the home carer's tax credit is warranted at this time. However, the Senator may be interested to know that the Revenue Commissioners estimate that the home carer's tax credit costs €63.2 million and was availed of by 84,400 in 2012, which are the latest figures available, and that the credit is currently worth €810 per annum to qualifying families.

Darragh O'Brien (Fianna Fail)
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I thank the Minister of State for his response. I will withdraw the recommendation.

Fidelma Healy Eames (Fine Gael)
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I move recommendation No. 3:

In page 11, between lines 18 and 19, to insert the following:
"3. That within 3 months of the passing of this Bill, the Minister will lay a report before the Houses setting out options for taxation changes that would allow for a significant increase in income thresholds (currently €32,800) at the top rate of tax.".

Darragh O'Brien (Fianna Fail)
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I second the recommendation.

Fidelma Healy Eames (Fine Gael)
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This recommendation provides that within three months of the passing of this Bill, the Minister will lay a report before the Houses setting out options for taxation changes that would allow for a significant increase in income thresholds at the top rate of tax. The current income threshold is €32,800 and it kicks in at 41%. I fully accept that once this Bill is passed, the threshold will be €33,800 at 40% and I accept that this is improvement. The Minister spoke very eloquently, as I hope the rest of us did yesterday, about the burden of tax on people. I am fairly stunned by some of the figures I worked up to see how we compare. I will repeat some of the figures I mentioned yesterday. At the moment, we compare very poorly with other countries such as our nearest neighbour, the UK. In the UK, one would need to earn over £150,000 to go on to the top rate of tax. This is five times the figure in Ireland. In France, the figure at €70,000 is more than double the figure here. France would be considered a fairly socially equitable country that favours income redistribution and fairness.

Paul Bradford (Independent)
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And strikes.

Fidelma Healy Eames (Fine Gael)
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OK. The House knows what I mean - giving people their say. In Germany, which is the country we seem encouraged to look up to so much and which riles people in this country due to the fact that we bailed out its banking system, the top tax rate only kicks in at €225,000. That is seven times the figure here. I asked myself what would be fair here so I looked at the average industrial wage. Correct me if I am wrong but according to the CSO, the average industrial wage in February was €43,101. Our high rate of tax kicks in at €10,000 less than the average industrial wage in this country. All I am asking the Minister of State to do is, and I am asking both sides of the House to join with me on this, ask the Minister to carry out a calculation for us. I am asking the Minister to figure out and come back to us within three months with a report laying out the cost to the State of significantly increasing the income threshold at which the top rate of tax would kick in.

The Minister can work out the meaning of "significant" from his point of view but I am asking him to determine what the cost to the State would be if the top tax rate kicked in at the average industrial wage. What would happen if we could increase the income thresholds significantly? It would first reduce the tax burden by taking more people out of the top rate and putting them on the standard rate. The Minister spoke about that also. For the people on over the average industrial wage it would reduce the amount of income that would be charged at the 40% rate. Given that they pay the universal social charge, USC, PRSI, etc., on top of that, never mind all the stealth taxes such as property tax, the septic tank charge and, soon, water charges, they are paying a good deal in taxes.

Does the Minister know that in terms of our incentive as a nation for labour force participation, Ireland is 132nd out of 144 countries. Why work? Nobody is incentivised to work when the top rate of tax kicks in at €32,000. One could not rear a family on that. One certainly could not buy a house on it.

I am sure the Minister will say he thought it was a sensible idea when he spoke with the Minister, Deputy Noonan, to accept this and prepare that report. He might not say that but even if Senator Paul Bradford or myself had never proposed it, he should implement it because he needs to figure out how to take the people of the nation out of the quagmire in which they are burdened. I accept fully that we must have a tax debate in which we would examine how we fund our nation, including the provision of services, put money back into people's pockets and grow the economy.

In the report I am asking the Minister to include I want to know the definition of a significant increase, the cost of that and whether there would be a knock-on effect on services. What would be the cost if we increased that threshold to the average industrial wage? I also want the Minister to do a cost benefit analysis on how it could kick start the economy. That is the area the Government is not good at assessing. If we put more money back into people's pockets, what impact might that have on the entire economy, not just on Galway city or the capital but on rural economies up and down the country where, thankfully, a good few people are working. What impact might that have on attracting our talent back to this country? There is a difference between talent and skills. We all know skills are needed but talent is creativity and once talented young people are mobile, and one is largely mobile when one is single, does not have children or when one has a partner who is prepared to go with one, one will source out the economies that can offer good tax rates and good opportunities.

The eldest daughter of a neighbour of mine is 26. She is a primary teacher and she has a boyfriend who is 26 or 27. One of them had got a post in the United Kingdom. The other was interviewing - one is a primary teacher and the other a secondary teacher - but they said that they were a couple and unless they got the deal they wanted they would not stay in the country. They got the deal they wanted and will work within 15 minutes of each other's location. The point I am making is that they are mobile. We need that talent here. Why do we not have those fine young people educating our children?

One of my children is losing an after-school teacher because she is emigrating. I am concluding.

Caít Keane (Fine Gael)
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This is Report Stage, not Second Stage.

Fidelma Healy Eames (Fine Gael)
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I know but it is an amendment that has been tabled. The Minister should not dismiss it because Senator Bradford and myself are no longer in Fine Gael or on the Government side.

Darragh O'Brien (Fianna Fail)
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That would never happen.

Fidelma Healy Eames (Fine Gael)
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Accept it because it needs to be done. Accept it because it is the right thing to do, and give me a reason not to push it to a vote.

Simon Harris (Wicklow, Fine Gael)
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I would be delighted to do that because while I agree with much of the Senator's analysis of the economic situation, I do not agree that we should be legislating in the Finance Bill to put in a series of reports. I want to be supportive of many of the points the Senator is raising, and I will be in a moment, but in terms of the reason I am not accepting the amendment, and I have taken this approach, as has the Minister, Deputy Noonan, throughout the debates on the Finance Bill in both Houses, I do not believe the Finance Bill should contain commitments to a series of reports, particularly where the information being sought in the reports is already available by way of attending the finance committee, raising it on the Adjournment, by way of parliamentary question in the other House and by ready reckoner on the Revenue website.

I am not being dismissive of the point the Senator makes because it is valid and one on which we agree. I hope it does not damage her credentials if we can agree on this point because I do not believe this is a party political issue. The burden on work is too high. We discussed that extensively yesterday. That is why this Finance Bill tries, and I appreciate the Senator has acknowledged it, to reduce the burden. It tries to higher the point, albeit modestly by €1,000, at which one enters the marginal rate and it also tries to reduce the marginal rate. I also outlined yesterday some of the things it does relating to the USC at the lower income end of the scale, and we have a good deal more to do.

I will give the Senator my official answer because her points merit it. She is aware that budget 2015 reduces the tax bill for everybody currently paying income tax and-or the USC. The focus is on reducing the marginal rate of tax from 52% to 51% for everyone earning between €32,800 and €70,000, while maintaining the highly progressive nature of the Irish income tax system. The extension of the standard rate band by €1,000 provided for in the Bill is an integral part of this tax reduction package. It is the Government's stated position that this is the first stage in a three-year plan to reduce the tax burden on the Irish people that will be implemented across subsequent budgets if there is the fiscal space, which we believe there will be, to allow us to do so.

I would draw Senator Healy Eames's attention to the Tax Ready Reckoner as published by the Revenue Commissioners on their website. This contains estimates of the likely cost of changes to income tax and USC rates, credits and bands. For example, an increase in the standard rate band of €2,000 would cost in the region of €421 million in a full year. I assure the Senator that this is something Government has to do in advance of every budget in terms of deciding what we can afford to do and what would benefit the economy and our people in doing it. That is happening but in terms of citizens, Members of the Oireachtas and all of us modelling the cost of a change, the ready reckoner on the Revenue's website provides us with the information on the cost of changing a band, a rate or a credit.

Using the ready reckoner it is possible to model numerous changes to the tax system and calculate the resulting costs and yields. However, in considering options for a budgetary tax package it is necessary to take account of all parts of the package, along with expenditure proposals. That was part of the discussion we had yesterday, and Senator Hayden intervened on this point as well. Obviously, when we are considering the cost of giving back on tax and the benefit to the economy we must weight that with the cost of providing public service. That is the balancing act for every government the world over because there will always be limited resources.

There is limited value in further analysing individual measures in isolation so for the reasons I have given, the Minister does not see the need to produce a report. He certainly does not see the need to legislate to produce the report in the Finance Bill, and he cannot accept the recommendation. However, I would reiterate, as would the Minister for Finance if he were here because he has already publicly done so on many occasions, that it is the outlined position of both parties in the Government to look at that real tax wedge, which I agree with Senator Healy Eames is currently a disincentive to work. It is certainly a disincentive to work harder, to being promoted and to moving from part-time to full-time work. I outlined some scenarios yesterday where I had come across that as being a real disincentive. I hope the measures in this Finance Bill will act as an incentive in the sense of sending a message to the young people the Senator spoke of, my own generation, that we are moving onto a trajectory where we are trying to reduce labour taxes. That is something I want to see through, and I hope it is something the Senator can support.

I am sorry, but I cannot accept the recommendation. I accept the spirit of what the Senator said, the concept behind reducing taxes on work and the acknowledgement that the high tax burden is costing us talent in the country. It is something we have to recognise.

Fidelma Healy Eames (Fine Gael)
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I accept what the Minister of State is saying about the spirit of the proposal, which is good. It is, however, something of an excuse to say we do not use the Finance Bill as a reason to prepare reports. I published the Ministers and Secretaries (Amendment) Bill 2014. It is on the Order Paper, but it has not been accepted for discussion because I am not part of a group. Senator Paul Bradford and I are at a disadvantage in the House for that reason. We cannot secure time to have the Bill debated. I spoke to many people during the construction of the Bill, including a senior counsel who had a lot of experience in drafting financial Bills. One of the requirements under the Bill would be that two reports be laid before the Houses. One would lay out, mid-year, the financial balance sheet. It is great, yet unbelievable, that the Minister of State can say all of the information is on the Revenue Commissioners' website and that there is a ready reckoner, but I would like the information to be provided here. He knows what my recommendation is and that it refers to the top rate of tax. It would have been nice if he had been able to me what the cost would be in the case of a figure €1,000 at the top rate. He referred to the standard tax rate, but my recommendation refers to the top rate. Such taxpayers are in the squeezed middle and they are being choked. They should definitely be taxed at the standard rate which kicks in at a figure of €32,000 a year. This is ridiculous. I wish I could outline the mortgage one could afford to repay or that one could not afford to spend more than €100 a week on food.

The recommendation is minor. I appreciate that the information is available, but it should be shared in the House and included in the Official Report. I was a member of one of the Government parties when it was elected. We had stood for reform and said we would do things differently and have an open mind. When I was on the other side of the House, we did not have this. I am now in opposition because we did not keep our promises. Let us have an open mind about doing things better. To be fair to the Minister of State, he is probably knocking his head against a block wall with regard to suggestions he may wish to take on board. Just because something was not done in a certain way does not mean things should not change and be done better. Therefore, I am disappointed. Would it not be great if, before St. Patrick's Day, we could say a new report had been laid before the Houses and that a debate would be held on it? We will not hear about the budget again until next September, even though we should have a debate in March and another in June. The practice could be changed.

Caít Keane (Fine Gael)
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Is the recommendation being pressed?

Fidelma Healy Eames (Fine Gael)
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I am not withdrawing it, but I would like to-----

Simon Harris (Wicklow, Fine Gael)
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I do not wish to have a debate on reform and everything else because we have to get through the Finance Bill by 2 p.m. I could provide statistics until the cows came home. I was responding to the substance and principle of the recommendation. The Senator wants the House to legislate within the Finance Bill for the preparation of a report and it is my responsibility to respond to her recommendation. I have responded by telling her that I do not believe the Finance Bill should provide for the preparation of a list of reports. There are other ways to do this in the Oireachtas. Could we do our business better? I am sure we could, but that is a different discussion. Perhaps I was not clear. There is a report available, with a ready reckoner, on the Revenue Commissioners' website. The document is public. I am not giving the House any information that is not available to any member of the public. The report is detailed and goes through every possible variation in respect of bands and costs.

Fidelma Healy Eames (Fine Gael)
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What would the cost be in respect of a figure of €1,000 at the top rate of tax?

Simon Harris (Wicklow, Fine Gael)
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A one percentage point decrease in income tax rates-----

Fidelma Healy Eames (Fine Gael)
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What about the income threshold?

Simon Harris (Wicklow, Fine Gael)
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At the 41% rate, the cost would be €164 million in 2015 and €234 million in a full year. An increase of €1,000 in the standard rate band would cost €160 million in the first year and €21 million in a full year. I am more than happy to provide the House with information that it is possible to give.

I am not in disagreement with the Senator. I disagree with the idea of accepting the recommendation. We can provide the information by other means. The ordering of business is a matter for the House, but I am more than happy to discuss any of these issues in detail. The spirit of what the Senator is saying, from a policy point of view, is closely aligned with what we are trying to do in the budget and what we want to build on in future budgets.

Paddy Burke (Fine Gael)
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Amendment No. 4 is out of order.

Darragh O'Brien (Fianna Fail)
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I move amendment No. 5:

In page 16, between lines 38 and 39, to insert the following:“Personal Allowances and reliefs
12. Section 462B of the Principal Act is amended by inserting the following new subsection (2A) after subsection (2):

“(2A) Where the primary carer has insufficient income to avail in full of the single person childcare credit the other parent may avail of the full or unused amount of the credit, on condition that the other parent has met any court ordered maintenance payments.”.”.

It is welcome that many changes have been made in that regard. This one makes sense in my view and the Government should strongly consider making it. I am interested to hear the Minister of State's response before I go any further. I note that Senator Power is seconding the recommendation.

Averil Power (Fianna Fail)
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I second the recommendation. When the change to the lone-parent credit was being discussed in the House initially, we outlined many of these arguments and I do not want to go over them again. Where parents are sharing responsibility, they need to run two separate households. Even if a father or mother has a child for just the weekend rather than the rest of the week, he or she still needs sufficient bedroom space, accommodation and food to look after and entertain the child. It is simply not the case that the cost only falls on one parent and can be evenly spread. There is an additional cost on both and we should amend the legislation accordingly. I hope the Minister of State will consider the recommendation favourably.

Simon Harris (Wicklow, Fine Gael)
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I thank Senators Darragh O'Brien and Averil Power for the recommendation. It is an issue that was discussed extensively in the Dáil where the Senators' colleague, Deputy Michael McGrath, raised it. We had a lengthy debate on Report Stage in the Dáil also. The bottom line is that this is an issue which the Minister for Finance has asked the Office of the Attorney General to consider. I will outline why we have arrived at that point.

Deputy Michael McGrath clarified in the Dáil that his amendment in that House was based on the consent of the primary carer to the transfer of the unused amount of the credit. I am assuming that is the basis for the Senators' recommendation also. The recommendation appears to envisage a number of changes to the current system, the first of which is that the entitlement of the secondary claimant would be linked to compliance with a court's maintenance order. The second is that a parent will have some preference over other possible secondary claimants such as grandparents. The third is that part of the credit rather than the whole credit could be transferred. It is not clear whether the Senators envisage that the current requirement that a child reside with the secondary claimant for at least 100 days in the year would continue.

Linking the transfer of the credit or part thereof to parentage or court ordered maintenance payments could raise constitutional concerns. From a practical point of view, it is difficult to see how it would be administered. Disputes about whether maintenance was paid or not would then give rise to disputes about whether the tax credit was due or not. It is not clear whether the recommendation of the Senators would give a parent with whom a child resides for only a minimal period of the year preference over, for example, a grandparent with whom the child might reside for more than 100 days of the year. While the Minister does not propose to accept the recommendation at this time, he has asked his officials to seek the advice of the Office of the Attorney General in this matter.

As regards relinquishing a portion of the credit, the Minister has instructed his officials to work with the Revenue Commissioners to investigate the administrative, operational and data protection issues involved. It is worth noting that relinquishment of a portion of the credit is likely to give rise to significant difficulties in some situations, for example, where a primary claimant has children with more than one partner. There are also likely budgetary implications to be considered. Once the relevant information from the Revenue Commissioners and the Office of the Attorney General has been gathered and assessed, the Minister undertakes to consider the matter further.

Darragh O'Brien (Fianna Fail)
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I thank the Minister of State for his comprehensive response. I watched the debate in the Dáil. However, if the Minister of State were to let the recommendation go through as opposed to amending the Bill, it would precisely demonstrate the purpose of the Seanad. It would show that the Government and Oireachtas are serious about tackling the issue.

While I appreciate what the Minister of State has said in response, in most cases the proposal would be very straightforward to implement. The Minister of State has dealt with issues relating to a minority of cases where matters can be more complex. If the changes were introduced, they would deal with the vast majority of people in these situations. I appreciate the matter is with the Attorney General, but by passing the recommendation rather than kicking the matter down the road, the Seanad could show that the Government and Oireachtas believe this matter should be addressed. In the circumstances, I will put the recommendation notwithstanding that I appreciate the detailed response and the reasoning behind it.

Paddy Burke (Fine Gael)
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We move on to recommendation No. 6 in the names of Senators Quinn and Zappone.

Feargal Quinn (Independent)
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In page 27, to delete lines 18 to 38 and substitute the following:

“ ‘Constituent University’ means a university specified in column 2 of the Second Schedule of the Universities Act 1997;
‘Trinity College’ means the College of the Holy and Undivided Trinity of Queen Elizabeth near Dublin established by charter dated the 3rd day of March, 1592, and shall be held to include the University of Dublin save where the context otherwise requires in accordance with the charters and letters patent relating to Trinity College;
‘the University of Dublin’ means the university established by the charters and letters patent incorporating Trinity College and which said university is further provided for by the letters patent of the 24th day of July, 1857;
‘Constituent University/Trinity College/the University of Dublin scheme’ means, as the case may be—

(I) the National University of Ireland, Galway (Closed) Pension Scheme 2010 (Joint Pension Scheme), or
(II) the National University of Ireland, Galway Pension Scheme 2005 (Model Scheme), or
(III) the University College Cork (Closed) Pension Scheme 2010 (Joint Pension Scheme), or
(IV) the University College Cork Pension Scheme 2005 (Model Scheme), or
(V) the University College Dublin (Closed) Pension Scheme 2010 (Joint Pension Scheme), or
(VI) the University College Dublin Pension Scheme 2005 (Model Scheme), or
(VII) the Trinity College or the University of Dublin (Closed) Pension Scheme 2010 (Joint Pension Scheme), or
(VIII) the Trinity College or the University of Dublin Pension Scheme 2005 (Model Scheme);

‘qualifying period’ means the period beginning on 1 July 2008 and ending on 31 December 2018;
‘relevant period’ means the period beginning on 14 July 2003 and ending on 30 June 2008;
‘relevant year’ means any year which falls wholly or partially within the relevant period;
‘specified employee’ means an individual who was a fixed-term employee of a Constituent University or Trinity College or the University of Dublin during the relevant period under a contract of employment which is governed by the Protection of Employees (Fixed-Term Work) Act 2003.
(ii) This paragraph applies to a contribution, which is not an ordinary annual contribution, paid or borne by a specified employee under the Constituent University/Trinity College/the University of Dublin scheme during the qualifying period in respect of a relevant year, other than such a contribution which is---”.

Paul Bradford (Independent)
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I second the amendment.

Simon Harris (Wicklow, Fine Gael)
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Senator Quinn and I had a good exchange on this yesterday. I understand the purpose of what he is trying to do and I tried to alleviate any concerns that there would be other such employees or former employees of universities other than NUI Galway. Certainly, the Revenue Commissioners have made exploratory inquiries with all other relevant universities and they have found no other employee or former employee in this category, and Senator Quinn said he was not aware of any either. My commitment on behalf of the Minister for Finance is that, if such appeared or arose, it would be dealt with. The policy intent of Government in this regard is to rectify a wrong. We do not see any other similar wrong but, should one arise, we will be happy to consider it and address it. That is why I cannot accept the recommendation.

Feargal Quinn (Independent)
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On that basis, I am happy to withdraw the recommendation.

Paddy Burke (Fine Gael)
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Recommendations Nos. 7 and 8 are ruled out of order as they involve a potential charge on the people. Recommendation No. 9 is ruled out of order as it does not arise from committee proceedings. I understand Senator Darragh O'Brien does not intend to move recommendations Nos. 10 and 11.

Darragh O'Brien (Fianna Fail)
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I move recommendation No. 12:

In page 87, between lines 18 and 19, to insert the following:
“Excise duty fee on off-licence retailers
59.Within 6 months of the enactment of this Act, the Minister shall bring forward a report on a revised scale of rates of excise duties imposed on off-licence retailers for the sale of intoxicating liquor, such scale to be graduated based on size of retail space such that the duty imposed on small independent retailers would be less than that imposed on large retailers.”.

I am not going to labour the point. Perhaps if the Minister has a response on it, we can see where we go from there.

Mary White (Fianna Fail)
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I second the recommendation.

Simon Harris (Wicklow, Fine Gael)
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I thank Senator O'Brien and Senator White for the recommendation. Although I am sure people are aware of the current rates and structures of the alcohol licensing regime, the Minister for Finance is eager that we briefly outline the current licensing system and the steps the Government proposes to take to tackle the misuse of alcohol, and that this be put on the record of the Seanad.

The rate of duty on off-licences is currently set at €500 per licence for a beer, wine or spirits off-licence. A typical off-licence premises offering the full range of alcoholic beverages for sale pays €1,500 per annum. Pubs have a graduated licence duty fee structure, based on turnover, ranging from €250 to €3,805, organised into 6 bands. Over 75% of pubs fall within the two lowest bands and pay excise duty of €505 or less.

On foot of the steering group report on a national substance misuse strategy, the Government announced in October 2013 that it would introduce a public health (alcohol) Bill to tackle alcohol misuse. The Government has approved an extensive package of measures to deal with alcohol misuse to be incorporated into the Bill, including provision for minimum unit pricing, which I believe is the most appropriate measure to tackle the problem of the availability of low-priced alcohol.

Although I welcome the Senator's recommendation, as does the Minister for Finance, we believe it is unduly restrictive in terms of the remit of the report it proposes. It would confine the scope of the proposed report to examining the possibility of retailers' off-licence duty being graduated on the basis of retail space only. However, the Minister for Finance does believe there is merit in conducting a broader examination of the alcohol licensing regime, taking account of both the off-trade and the on-trade. To that end, he has asked his officials to bring forward options for his consideration in the context of next year's budget and finance Bill.

I will incorporate the spirit of what Senator O'Brien wishes to achieve in that.

Darragh O'Brien (Fianna Fail)
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I thank the Minister of State for his response. I withdraw the recommendation on that basis. Is there any chance of a note of the Minister of State's response?

Simon Harris (Wicklow, Fine Gael)
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Yes.

Darragh O'Brien (Fianna Fail)
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I move recommendation No. 13:

In page 95, between lines 28 and 29, to insert the following:"(c) in paragraph 11 of Part 1 by inserting a new subparagraph (1A) as follows—

"(1A) The supply of nicotine replacement therapies.".".

Michael Mullins (Fine Gael)
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Congratulations.

Catherine Noone (Fine Gael)
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Well done.

Darragh O'Brien (Fianna Fail)
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One month now.

The real thing is that there are therapies that do work. I do not see why duties should be charged on them if, effectively, they are health products. I am aware that there are issues with categorisation, within the EU in particular, and with making sure these products are safe. The Minister of State may have a view on this. I will see where we can take it from there.

Feargal Quinn (Independent)
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I second the amendment.

Simon Harris (Wicklow, Fine Gael)
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I thank Senator O'Brien. This is trickier than it seems at first because of the factors the Senator has outlined with respect to EU law. Nicotine replacement patches are subject to the 23% standard rate of VAT, while other nicotine products such as nicotine inhalers, tablets and chewing gum are categorised as oral medicines and thereby qualify for the zero rate of VAT. Nicotine replacement patches cannot be considered an oral medicine and as such do not qualify for the zero rate of VAT.

When considering the VAT system and the VAT treatment of any product or service, the VAT rating of goods and services is governed by the requirements of the EU VAT directive, with which Irish VAT law must comply. The application of the zero rate of VAT to medicines is a historical derogation from the normal VAT system, and the zero rate can apply only in restrictive circumstances. Under EU rules, Ireland can continue to apply the zero rate of VAT to certain items to which it was applied on 1 January 1991 for clearly defined social reasons and for the benefit of the final consumer. Oral medicines, including nicotine tablets and chewing gum, meet these criteria and continue to be liable at the zero rate. Nicotine replacement patches have not been liable at the zero rate from 1991, and so cannot now be made liable at the zero rate. Therefore, I cannot accept the recommendation.

Darragh O'Brien (Fianna Fail)
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I will withdraw the recommendation.

Paddy Burke (Fine Gael)
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Recommendations Nos. 15 to 19, inclusive, are related and may be discussed together. Is that agreed? Agreed.

Darragh O'Brien (Fianna Fail)
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I move recommendation No. 15:

In page 134, between lines 1 and 2, to insert the following:"Amendment of Finance (Local Property Tax) Act 2012
100. The Finance (Local Property Tax) Act 2012 is amended by replacing section 13 with the following—

"13.(1) In this Act the date by reference to which the chargeable value of a relevant residential property is to be established is referred to as the valuation date.
(2) The valuation date in relation to a relevant residential property shall be 1 May 2013.
(3) The Minister may, by order, alter the valuation date referred to in subsection (2).".".

Mary White (Fianna Fail)
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I second the recommendation.

Aideen Hayden (Labour)
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I have a fair degree of sympathy for a number of the issues raised by Senator O'Brien.

I would like to highlight a couple of issues relating to the tax treatment of rented properties, which issues I also highlighted earlier in the context of the debate about the universal social charge. Many Members will be aware that I am very much in favour of rent regulation to protect tenants from unfair rent increases. I am also against unfair tax treatment of landlords because this destabilises the entire rental sector. An issue arises in the owners of rented properties not being treated like any other business in that they are not allowed to write-off costs which, if they were involved in a different business, they would be.

I would like to make two particular points. First, on the local property tax, ultimately it is neither fish nor fowl in that it is not in reality a local tax or a property tax. There is a need for clarification on this issue. Amounts paid for local services should be, if paid for by a landlord, tax deductible. There should also be clarity on who exactly, in the landlord-tenant relationship, is liable for the provision of services.

Another issue is that of management fees in the case of apartments. If we accept that the local property tax is for the provision of services, there needs to be recognition of the fact that people living in apartment blocks already pay for many of the services to be provided for others living close to them in other forms of housing such as a three bedroom semi-detached house. There is an element of unfairness in the way this is structured in that it does not take into account the fact that 78% of the properties built in Dublin between 2002 and 2007 were apartment developments. We have never really come to terms with how we treat apartment living. It is something of which we will have to be cognisant.

I am asking two things of the Minister of State. First, the recent DKM-ESRI report on the rented sector recommended a number of changes to the tax treatment of landlords and the rented property sector. This recommendation needs to be acted on and the whole issue of the tax treatment of the rented sector needs to be addressed in the context of an overall review of the sector generally. Second, we need to revisit the legislation on apartment developments and management costs in the context of their tax treatment.

Simon Harris (Wicklow, Fine Gael)
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I thank Senator Darragh O'Brien for this series of recommendations.

Recommendation No. 15 seeks to give broad discretion to the Minister on when properties should be revalued for LPT purposes. As the local property tax is a new tax, the Government wishes to provide certainty for homeowners. For this reason, valuation periods of three years were introduced, with the exception of the first valuation period which covers three and a half years. In addition to providing certainty, this also eases the administrative burden on the homeowner in that it is not necessary to have a house revalued each year.

Senators may be aware that with certain exceptions under the LPT legislation where a property is not a relevant residential property on a valuation date, in other words, not liable for LPT, it will not be a relevant resident property until the next valuation date. In the interests of equity for compliant LPT payers, it is important to have regular valuation dates in order that newly built properties are brought into the LPT net. It also provides certainty for those homeowners on when they will become liable for LPT.

In the absence of further valuation dates, new properties built after 1 May 2013 would not be liable for LPT and would not have a valuation for LPT purposes. Should these properties be brought into the scope of LPT using a different valuation date, it would be inequitable to those homeowners that their LPT liabilities would be assessed using a later valuation date when compared to those on the property register.

While the Minister is conscious of the concerns of homeowners in relation to increasing property prices and the affect this will have on their LPT liabilities, particularly in urban areas, the recommendation, in his view, would not be the most appropriate way to address these concerns. The next valuation date is 1 November 2016. In advance of this date, the Minister and his officials will be examining LPT and any impact on LPT liabilities owing to increasing property prices. However, any such consideration at this stage would be premature. For the reasons outlined, the Minister does not propose to accept recommendation No. 15.

Recommendations Nos. 16 and 17 deal with LPT deductions for landlords. Chapter 4 of Part 8 of the Taxes Consolidation Act 1997 provides for the charging to tax under Case V of Schedule D of income arising on rent from property in the State. The income chargeable under Case V in respect of such a property is computed by making the deductions for expenditure authorised by section 97(2) of the Taxes Consolidation Act from the gross rent. These deductions include, for example, expenditure on rates, maintenance, repairs and interest on a loan used to purchase, improve or repair the rental property. Recommendation No. 16 seeks to add to these allowable deductions by proposing a new deduction for local property tax paid on rental property. Senators are probably aware that the Thornhill group have suggested there seems to be an argument for allowing at least a portion of LPT paid on a rental property to be deductible for tax purposes, in the same way as commercial rates are so deductible. However, having regard to the pressures on the public finances and the need to bridge the gap between expenditure and revenue, the report also suggested consideration be given to the phasing in of deductibility over a period of years. This approach was accepted in principle by the Government.

As stated by the Minister in his 2015 Budget Statement 2015, both the taxation and expenditure sides of the budget are designed to support and broaden the economic recovery that the country is experiencing. As such, available resources have been carefully targeted at initiatives that will build consumer confidence, support jobs and strengthen demand in the domestic economy. In this context, the Minister considers that this is not an opportune time for him to introduce a deduction for local property tax paid on rental property.

Recommendation No. 17 would require the Minister to issue report within six months of the enactment of this legislation detailing how and when he would introduce a deduction for local property tax paid for the purpose of computing taxable rental income. The question of when such a deduction should to be introduced and the extent of any such deduction would be best considered as part of the budgetary and Finance Bill process rather than through the issuance of a report on the matter in the manner suggested in the recommendation. On this basis, the Minister cannot accept the recommendations. However, the principle of deductibility based on the Thornhill group report is accepted by the Government.

Recommendations Nos. 18 and 19 deal with LPT relief in respect of management fees. The introduction of a local property tax is part of a broader approach to the taxation of property. The aim is to replace some of the revenue from transaction based taxes which have proved to be an unstable source of Government revenue with an annual recurring property tax which international experience has shown to be a stable source of funding. The Government decided that LPT should be centred on the principles of equity, transparency and simplicity and that a universal liability should apply to all owners of residential property, with a limited number of exemptions. Limiting the exemptions available allows the rate to be kept at a minimum for those liable persons who do not qualify for an exemption. Properties in managed estates to which such fees apply would have been purchased by the owners in the knowledge that they would be taking on the commitment to partake in and fund the management of the estate and that it was the intention that many such estates would not be taken in charge by local authorities, nor, in many cases, would it be appropriate for the local authorities to do so. Management fees in these estates provide for refuse collection, the maintenance of common areas and a sinking fund for certain repairs to buildings, depending on circumstances. It is fair to say many of these costs are borne by homeowners and other households. It is important to make the distinction that many of the services covered by management fees are ones for which people not paying management fees also have to pay. I accept that is not the case in respect of all services, but it is in some of them.

Revenue from the local property tax accrues to local authorities and supports the provision of local services. Local authorities provide a broad range of services in the public realm which benefit the wider community. The proper functioning of these services is important for the well-being of every community and household. I accept that the Senator has acknowledged that local property taxes stretch further than estates and cover fire and emergency services, road maintenance, cleaning, street lighting, spatial and development planning and other similar services, regulatory and inspection functions, business support services, libraries, parks, recreational and cultural and public amenities. The benefits of these services obviously accrue to all members of society.

Recommendation No. 19 would require the Minister to issue a report within six months of the enactment of this legislation detailing how and when he would introduce a provision whereby liable persons who are obliged to pay an annual management fee to a management company in respect of private housing or apartment complexes would be eligible to deduct part of the cost of such management fees from their local annual property tax. For the reasons outlined, I cannot accept the recommendation.

Senator Aideen Hayden referred to the DKM study. She may have been referring to its work as part of the PRTB's recently published study of rent stability. This is an issue on which Government is actively working. I will ensure somebody reverts to the Senator on these matters.

Darragh O'Brien (Fianna Fail)
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I thank the Minister of State for his response. While I do not disagree with much of what he said, nobody could argue that people, if not paying on the double, are not paying extra.

Yes, people bought houses and apartments realising that they had entered into a contract to pay management fees, but when they did that there was no local property tax. In addition, there was and continues to be a shortage of family houses so for many people, effectively, the only places they could live were apartments and smaller houses in managed estates. There should be some type of acknowledgement and relief given to those who pay management fees.

I will withdraw recommendations Nos. 16 and 17 but I will press recommendation No. 18. I appreciate the Minister's response. I am glad that he is looking at phasing in some type of deduction for rental income in respect of the local property tax. It is sensible. The money is not available to do it now but there is an agreement in principle that it would be done. Regarding the valuation date, a Minister should be given the power to vary that from time to time. It could happen the other way, God forbid, and there could be another global crisis or crash. There are various things outside our control but the Minister should be given the leeway to be able to vary that, and the purpose of recommendation No. 15 is to permit it.

That is all I wish to say on those points, but I will press some of the recommendations.

Darragh O'Brien (Fianna Fail)
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I move Recommendation No. 18:

In page134, between lines 1 and 2, to insert the following:
“Amendment of Finance (Local Property Tax) Act 2012100. The Finance (Local Property Tax) Act 2012 is amended by inserting the following after section 17—

“17A.Liable persons who are obliged to pay an annual management fee to a management company in respect of private housing or apartment complexes shall be eligible to deduct from his or her annual local property tax liability—

(a) one third of the amount of such management fee paid, or
(b) €350,
whichever is greater”.”.

Thomas Byrne (Fianna Fail)
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I second the recommendation.