Seanad debates

Thursday, 10 December 2015

Finance Bill 2015: Committee Stage (Resumed)

 

NEW SECTIONS

10:30 am

Photo of David CullinaneDavid Cullinane (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I move recommendation No. 8:

In page 96, between lines 4 and 5, to insert the following:

“69. The Minister shall, within nine months from the passing of this Act, prepare and lay before Dáil Éireann a report on the possibility of establishing a sovereign wealth fund financed by non-cyclical Corporation Tax payments and taxes returned following rulings by the ECJ.”.

This amendment is all the more relevant given the spike in corporation tax returns we have seen this year, some of which is still unexplained or somewhat unexplained. The Minister has said he believes the spike in the returns is sustainable. We will see if that is the case.

We are trying to provoke a discussion on this issue as it has been suggested to me and many others that setting up this type of fund might be the safest way to lock in any windfalls or temporary bonuses from the State which we might enjoy because of the fluid situation in global taxation. We also know that multinationals are rational actors which will arrange their business in a way which benefits them most. That is fair enough. Despite what some might think, sentiment is not a major player in their tax affairs. We know that as rules change, they will change. They will try to stay one step ahead of all of us and of states. There is also a strong opinion, which looks increasingly credible, that the BEPS process is benefitting Ireland. That is ironic given our head in the sand attitude to corporation tax.

Sinn Féin and Deputy Pearse Doherty have been raising this issue of whether corporations were even paying an effective corporation tax or pay enough corporation tax. As a result of the European inquiries into Apple and much controversy and discussion about whether multinationals were paying their fair share of corporation tax, it would seem to some that there is some link to what has happened this year in terms of the spike in corporation tax.

The idea in the amendment is to examine the benefits of setting up a wealth fund which would be funded by these receipts as well as any repayments due to the State if, for example, the judgment in the Apple case was to lead to a windfall payment.This idea has some merit in that it attempts to make sure any windfall or temporary benefit which the State might enjoy would not be squandered. The fiscal compact and various other EU rules mean that if the State takes in extra income of that scale, it will not impact massively on the fiscal space because of the debt-to-GDP ratio rules and so on. However, there is merit in the approach suggested and at least examining the possibility of it happening, as proposed in the amendment.

Photo of Michael NoonanMichael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank the Senator for his comments. I advise him that there are no active cases in the European court that would result in any additional tax being paid to the Irish Exchequer. The issue at the heart of the recommendation is the application and use of non-cyclical tax receipts. Ireland is bound by EU fiscal rules and from 2016 our compliance will be assessed under the preventive arm of the Stability and Growth Pact. The expenditure benchmark will, therefore, provide the anchor for fiscal policy in the medium term. In practical terms, this means that from 2016 onwards, there will be a fixed amount of expenditure or fiscal space available in the annual budget. This fiscal space will be derived by reference to the potential growth rate of the economy which is independent of tax performance. This means that future Government expenditure will be decoupled from cyclical or windfall tax revenues so as to ensure increases in public expenditure will be sustainably financed and safeguarded from dependence on cyclical revenues.

In terms of extra tax payments which have been received by the Exchequer, the public finances are improving, with a broad and growing tax base providing stable funding for vital public services. The reformed budgetary framework and fiscal rules are designed to protect the public finances and ensure the mistakes of the past will not be repeated. Underpinning recent budgetary policy, for example, has been projected 15% growth in taxes and PRSI between 2014 and 2016, while in the corresponding period expenditure is forecast to grow by just 4%. This favourable differential has facilitated the Government’s successful focus on deficit reduction.

Regarding our strong corporation tax performance in 2015 and the forecasts for 2016, a reversion to more normal levels of growth in corporation tax receipts is prudently assumed for next year. Under the new fiscal regime, non-cyclical receipts cannot be utilised for public expenditure purposes, although they can be applied to reduce the national debt which remains the biggest internal risk to the economy.

Taking account of cash and liquid assets, including those held by the NTMA and the Ireland Strategic Investment Fund, our net debt position will be 80% of GDP by the end of the year. This debt level, while sustainable, is too high. Debt reduction is a critical goal as building our fiscal capacity or ability to borrow is the best way to mitigate the risks from unforeseen events.

To address the suggestion of the establishment of a sovereign wealth fund, I remind the Senator that the State already has the Ireland Strategic Investment Fund, ISIF, which is available for investment in commercial projects that also yield an economic return to the State. The fund has assumed the resources of the National Pensions Reserve Fund, NPRF, and will invest them in accordance with its mandate of promoting economic activity and employment within the State. We are already beginning to see that the ISIF is having a positive impact on the economy. Its first economic impact report from July advised that by the end of 2014, 79 Irish companies and projects with a combined annual turnover of €472 million were benefiting from ISIF investment. Furthermore, approximately 8,362 jobs were supported directly and indirectly by ISIF investments. At 30 September 2015, the ISIF had some €7.472 billion available for investment and will continue to leverage its resources by seeking co-investors. It can be expected to more than double the funds available to support economic activity and employment in the State. It is my view that the fund has enough resources to fulfil its mandate at the current time.

On the basis that we have the ISIF and given my explanation of EU fiscal rules, it is clear that there is not a sufficient case for seeking a report along the lines suggested by the Senator. Therefore, I am not accepting his recommendation.

To return to the issue of additional corporation tax receipts which came in strongly this year, the Revenue Commissioners advise that they were due to increased economic activity. Economic activity has increased substantially this year. The Central Statistics Office figures published this morning indicate that the economy was growing at 7% for the first nine months of the year. Obviously, an economy growing at a rate of 7% is generating a lot of tax. In nominal terms, the economy is growing at a rate of almost 11%. That is what drives the size of GDP and, to an extent, the buoyancy of tax receipts. The other point to make is that the take from corporation tax is exaggerated. Of all the taxes we have collected in the first 11 months of the year, corporation tax, even at an enhanced level, represents only 15% of the total tax take. It is by no means the tax on which we are depending to fund expenditure programmes or tax reductions. That said, it is very important and I am glad that there is an extra take coming in.

As well as the explanation from the Revenue Commissioners that there is increased economic activity, quantitative easing has brought down the value of the euro. A lot of orders in FDI companies are denominated in US dollars; there is, therefore, a value advantage from quantitative easing which has helped Ireland more than other countries. If the companies concerned are making more money, they pay more tax.

The statistics published this morning are very interesting. They show an enormous level of investment in research and development. When I started amending the corporation tax regime, I got rid of the so-called "double Irish" which was a residential rather than a tax law. I was hoping some of the FDI companies operating here would bring their intellectual property onshore and there is evidence from this morning's statistics, with the huge increase in investment in research and development, that a lot of it is being brought onshore. If it does come onshore, of course, it will be liable to Irish tax. We attempted to close a loophole that was causing us reputational damage and one of the consequences seems to be an additional tax take as foreign companies, instead of having intellectual property on a Caribbean island, are headquartering in Ireland and basing their intellectual property here too. Apart from the tax take, it also puts deeper roots under FDI companies because once serious research and development are conducted in Ireland, the base is more stable than previously.

We are looking at a good picture and I do not think we are going to be hit by some unexpected issue which will cause corporation taxes to fall away. The Revenue Commissioners have advised that they can include all of the extra taxes in the base for next year, with the exception of around €300 million, which relates to repayments due to some companies. They are not suggesting to me there is any reason to be doubtful about the flow of corporation tax next year. Of course, the increased flow above that forecast has continued for the past three months of the year, which means that the figure included in the 2016 Estimates on budget day has been exceeded already by the returns from corporation tax, but we are not going to change the figure. This means that in the national accounts for 2016 we are actually showing a reduction in the yield from corporation tax on the figure for 2015. I did not do this deliberately.This was the way the numbers ran because we never know in October how the year will end up. It means that there is a tax buffer built in for the next Government. If the same amount of tax comes in from the corporate side next year, there will be approximately €525 million not assigned. If there is any falling away, there will be a buffer which makes it easier to make ends meet. We are in a good position. The figures for this morning show 7% growth for the first nine months of this year. That will probably come back a little bit for technical reasons. In the last quarter of last year, there was very strong growth and because the base from which we will compare the last quarter of this year is so strong, we may come back to 6.5% or 6.6% for the year. The budget figure was 6.2% and I am confident of not only reaching but exceeding that. Many things are going well and we can only hope they continue.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I do not doubt the importance of foreign direct investment or that much of the investment in recent years has been bedded down with research and development, which is very important and will make it more sustainable. I do not doubt anything the Minister has said about the figures he has presented, even in respect of growth, although many experts would say that our growth levels in respect of gross domestic product, GDP, or gross national product, GNP, are always a bit skewed because of the very high levels of foreign direct investment. While the Minister says the Revenue Commissioners say it is sustainable and the spike has come because of the growth in the economy, the Irish Fiscal Advisory Council is not exactly saying that. Different views are being expressed.

While I support foreign direct investment and what it means for the economy, we are entitled to ask questions about its sustainability because of what happened in the past, when we built our public finances around unsustainable tax receipts from construction or consumption or whatever it was. People do not want to make the same mistakes again. I am not suggesting that is what the Government is doing but questions can be asked about it. I accept we have an investment fund set up by the Government but the recommendation is concerned with the potential of unexpected receipts, where they come from, whether they are one-off or long term or more sustainable. The perception, whether true or not, is that multinational companies determine how much tax they pay. There are many ways they can classify their corporation tax and so on. People will ask what is the real agenda, is it really down to growth or are there other issues at play here. The Minister spoke about the changes he made in the double Irish. I welcome them too. Is it possible to make any link between all of those issues and the spotlight put on this State in respect of corporation tax payments and the spike this year? It is a reasonable question.

If the Minister is not willing to consider establishing a sovereign wealth fund, is he saying that if the corporation tax was to increase further, there would be a possibility that some of that money could be used in the investment fund? The difficulty is that we will work off the same figures as the Minister, in terms of the fiscal space over the next five years. If there is a big jump next year in corporation tax, it will not alter the fiscal space very much. That will determine how this State spends its money. It is important, given that the economy is recovering and that so much investment was taken out of it in recent years, to reinvest in it. The investment fund was set up for that purpose but the money has to come from somewhere. If the Minister will not consider establishing a sovereign wealth fund because he already has an investment fund, is it possible that some of the corporation tax yield will be put into that investment fund?

Photo of Michael NoonanMichael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The debate the Senator has initiated is very important and I am not criticising him in any way for asking the questions. That is what we should do in the Dáil and Seanad. That is why I am giving him as much information as I can, well beyond my briefing notes. Approximately €7 billion will be collected in corporation tax this year. That is approximately €3 billion more than estimated. Of that €3 billion, we spent approximately €1 billion additional at the end of 2015 in Supplementary Estimates, a big chunk of it for health. We also did county roads and replaced 30 or 40 Dublin Bus buses because the fleet was a bit clapped out. There was stuff for the Garda and so on. It was well within our capacity to pay for it and it was well within the expenditure benchmark. That left another €2 billion. We cut the deficit with that. Our obligation under the European rules was to get the deficit under 3% at the end of this year. On budget day, I said we would go down to 2.1%. We used some of the corporation tax that had come in at that stage to get down to 2.1%. We used other taxes as well. Now with the strong flow continuing to the end of the year, it looks as if the deficit will come in at 1.6% or 1.7%. That has consequences for next year.

Rather than putting money in some kind of investment fund, the priority is first of all to balance the budget and then get money to reduce the debt. That can be done directly or indirectly. As soon as we have a balanced budget and are running the country on what we collect in taxes, if additional funds come in, it opens up the possibility of investment and improving services. There is no doubt that after seven years of recession, there is economic and social depletion of infrastructural assets. The next phase of growth will have to be driven by investment. The private sector is investing very heavily and that is shown in this morning’s figures but the State has a role as well to invest in economic and social infrastructure.

Assume we balance the budget by 2018, in 2020 and 2021, we will have a lot of leeway and additional income, which we can use. My priority would be to improve the services but also to invest because if we do that we will keep the growth phase going. I do not disagree with the Senator. Putting in the fund might be an option in three years’ time. If there is a lot of excess tax at that stage, it might be a good idea to go back to the kind of pension reserve fund that the former Minister, Mr. McCreevy, brought in. It is too soon to do it now because if we are borrowing money on average at 3.5% or 4%, we would not get that return from an investment fund. If we take it off our borrowings, we will get the money in. That is the way I figure it out but everything has to be adjusted as new information comes in and as the annual cycle of budgets comes along.

Recommendation put and declared lost.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I move recommendation No. 9:

In page 96, between lines 4 and 5, to insert the following:“69.The Minister shall, within nine months from the passing of this Act, prepare and lay before Dáil Éireann a report on options available for the introduction of a comprehensive asset tax otherwise known as a wealth tax, the report shall include options for the collation of data necessary for the assessment of such a tax, definitions of categories of wealth to be included in such a tax, proposals for the assessment and collection of the proposed tax and estimates of potential revenue raised at various rates of taxation.”.

I am sure the Minister has debated this issue several times in the Dáil with Deputy Doherty and many members of Sinn Féin. Every year when we present the Minister with his pre-Christmas present of our alternative budget, we include the hope that he might consider a wealth tax at some point.

Photo of Michael NoonanMichael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Sinn Féin skipped one year. It got nervous and pulled back. There was no wealth tax proposal two years ago.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

We have had it in every year. Sometimes the civil servants might not give the Minister full information. We have proposed a wealth tax every year for the past five years.However, because the Government and the Department are unable to calculate how much would be raised from a wealth tax, we took the prudent step of saying we could not speculate about how much money would be raised. We could not say with any credibility that X amount would be raised which could be used for day to day spending. We said this because the Government was unable to cost the measure. The Minister and the media rightly state that when one brings forward budget proposals, they should be costed. For that reason, this was a separate measure in our proposed budget and any money raised would be ring-fenced for job creation measures and investment of the type mentioned by the Minister.

The recommendation proposes:

The Minister shall, within nine months from the passing of this Act, prepare and lay before Dáil Éireann a report on options available for the introduction of a comprehensive asset tax otherwise known as a wealth tax, the report shall include options for the collation of data necessary for the assessment of such a tax, definitions of categories of wealth to be included in such a tax, proposals for the assessment and collection of the proposed tax and estimates of potential revenue raised at various rates of taxation.

The Minister has spoken in this House on several occasions about broadening the tax base and introduced new taxes, including the local property tax and water charges. He may not see these as taxes, but some people certainly do, in particular the local property tax. In general, therefore, the Government does not seem to have a difficulty with introducing new taxes, but there is a reluctance to even consider the possibility of introducing a wealth tax. There is a reluctance to consider what it would look like or how money would be raised from it. The Minister has indicated several times how much he believes such a tax would generate and I am aware he has views on its sustainability. Numerous reports have been produced in this context. I produced a report yesterday for the Joint Committee on Jobs, Enterprise and Innovation on low pay and the living wage and I am aware of and familiar with the data underpinning that report. I am sure the Minister is also aware of the data produced by EUROSTAT, the OECD and the CSO, as well as the figures from all of the reputable data gathering agencies in the State, elsewhere in Europe and globally. The data show that market and income inequality is very high in the State. When we include social transfers, the position is better, but income inequality is certainly a problem. The top 20% of income earners own 73% of the State's wealth, while the bottom 20% own 0.2%. This is shocking by any standard and demonstrates the real divide in the country. The figures also show that the combined wealth of the top 5% is almost double that of middle income earners in their entirety. Revenue data show that the top 1% of income earners had an average annual income of €373,300, whereas the bottom 90% earned approximately €27,000 annually. I am not speaking in ideological terms of left or right politics or rich versus poor, but these issues are now being examined globally. They were on the agenda for the World Economic Forum which looked at the concentration of wealth in the hands of a small number of people. We are not immune to this.

As a matter of fairness and sustainability, we need to look at the possibility of introducing a wealth tax. For the life of me, I cannot understand why the Government is so opposed to the principle of a wealth tax. Despite a political party including the possible introduction of a wealth tax in its manifesto and alternative budget every year, the Government, its agencies and the Department oppose such a tax to the extent that they have not even seen fit to cost the proposal. After five years in government and after all the nonsense Fine Gael has thrown at Sinn Féin for proposing the introduction of a wealth tax, I find it incredible that the Minister and the Department have not had the manners to cost the measure. We are entitled to the information and the State should be obliged to provide it for the political system in order that we can work out the proposals and policies we propose should be put in place. I hope the Minister recognises that we include it in our alternative budget every year which we try to have costed. We can disagree on these issues, but we cannot do so on a wealth tax if the Minister will not provide the information. No political party could undertake the work on its own and it would not be credible. It needs to be done by the Department. As the recommendation is clear on what we are calling for, I will repeat it. It reads:

The Minister shall, within nine months from the passing of this Act, prepare and lay before Dáil Éireann a report on options available for the introduction of a comprehensive asset tax otherwise known as a wealth tax, the report shall include options for the collation of data necessary for the assessment of such a tax, definitions of categories of wealth to be included in such a tax, proposals for the assessment and collection of the proposed tax and estimates of potential revenue raised at various rates of taxation.

Is that too much to ask for? The Minister tells us each year that one of the reasons we cannot have such a tax relates to the assessment and collation of data. Let us, therefore, try to find them. If we had definitions of categories of wealth to be included, we could make the arguments for their inclusion.

On the proposals for the collection of such a tax, the Government has no difficulty with the methods for the collection of fines, water charges and local property tax, but it seems to have a difficulty with the possible introduction of a wealth tax. Why is not possible for the Department to even produce a report that would put the options on the table in order that we could have a reasonable and constructive debate on the issue? This recommendation is important. It is wrong that the Government has not done this up to now and that it has not been able to cost our proposal. We have work on it, but our work has just been dismissed as Sinn Féin's proposal. What we are trying to achieve is to ensure we at least would have the data, methods and a model that had been examined by the Department. That seems to be a reasonable request on the part of Sinn Féin.

Photo of Michael NoonanMichael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank the Senator for his contribution, but I do not propose to accept the recommendation. The Government has no plans to introduce a wealth tax, although all taxes and potential taxation options are, of course, constantly reviewed. Wealth can be taxed in a variety of ways, some of which are already in place in Ireland. Capital gains tax, CGT, and capital acquisitions tax, CAT, for example, are taxes on wealth that are levied on an individual or a company on the disposal of an asset in the case of CGT or the acquisition of an asset through gift or inheritance in the case of CAT. Deposit interest retention tax, DIRT, is charged at a rate of 41%, with limited exemptions, on interest earned on deposit accounts. The local property tax which was introduced in 2013 is a tax based on the market value of residential properties and an asset tax along the lines for which the Senator is arguing.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

No, that is not what we are arguing for.

Photo of Michael NoonanMichael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Sinn Féin wants to abolish it. Even if the tax was on a house worth €10 million, Sinn Féin wants to have it abolished. Its position is illogical.

The domicile levy introduced in budget 2010 also constitutes a wealth tax. It is aimed at high wealth individuals with a substantial connection to Ireland, regardless of whether they are tax resident, to ensure they make a tax contribution to the country in a year of at least €200,000.

In order to estimate the potential revenue from a wealth tax, it would, first, be necessary to identify the wealth held by individuals. I am informed by the Revenue Commissioners that they have no statistical basis for compiling estimates of the revenue to be raised from a potential wealth tax. Although an individual's assets and liabilities are declared to Revenue in a number of specific circumstances, for example, after a death, this information is not a complete measure of financial assets in the State, nor is it recorded in a manner that would allow an analysis of the implications of an overarching wealth based tax.

Comprehensive data for household wealth in Ireland, including assets and liabilities, were published for the first time earlier this year by the CSO. The data have been collected across the entire eurozone according to a standardised methodology. The data indicate that the level of wealth inequality in Ireland in 2013, as measured by the Gini co-efficient, was lower than the eurozone average.The results also show that wealth is less concentrated at the top of the distribution in Ireland than the eurozone average. Central Bank analysis of the data also indicated that while wealth and inequality has increased since 2011, it is actually lower than in 2006, the earliest period from which data is available. Part of the research programme agreed between my Department and the ESRI covering macroeconomic and taxation issues, includes a research project involving detailed analysis of wealth distribution and taxation. It is intended that this research, based on the Household Finance and Consumption Survey, published this year by the CSO, will commence shortly.

A number of issues highlighted in the recommendation, including estimating the potential tax base and yieldable tax in Ireland also feature as part of the research work planned for the project. The data gathered by the CSO as part of the Household Finance and Consumption Survey was not collected for the purpose of calculating the potential yield from a wealth tax but for the purpose of collecting general information on the financial situation and behaviour of households. My Department will monitor and consider any additional information and data that comes to light and will continue to examine potential taxation sources. However, as I said earlier, I do not propose to accept the recommendation.

I can assure the Senator that is not a matter of good or bad manners that we cannot calculate the yield from his proposals for a wealth tax; the data is not available in Revenue and the Senator's proposals are unclear. Part of the proposal is to abolish the local property tax. The greatest amount of wealth held by normal families in this country is in the family home yet the Senator refuses to tax it at all and wants to abolish the local property tax completely. Senator Cullinane's first statement is to move back from his principle of taxing assets. He does not say he will abolish the wealth tax on houses valued up to €1 million, he wants to abolish it simpliciter. The Senator has no problem in exempting the houses in certain well-known leafy suburb of south Dublin - which are again selling at €5 million and €6 million - from the property tax. I do not understand the ideological purity that drives Senator Cullinane into that position.

The second proposal from the Senator exempts all agricultural land. I am not sure if he will or will not exempt stock so it is difficult to assess what could be collected from the agriculture sector. The Senator's proposal may tax the cows for all I know, but he certainly does not seem to have a specific inclusion. The Senator's proposal would exempt the farmhouse and the land but he has not exempted the farmyard. Being a Waterford man he probably comes from dairy country like myself and of course the wealth of many farms is in that half acre of the farm.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I also recognise manure when I see it.

Photo of Michael NoonanMichael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The wealth is in the farmyard, it includes such things as the milking parlour, the machinery and tractors.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I know where they are.

Photo of Michael NoonanMichael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Will Senator Cullinane inform the House whether he is taxing it or not? His proposal as published would imply that he is not exempting it, so therefore he is taxing it.

There is also a proposal to tax money on all deposits in excess of €1 million. I do not know many people who have €1 million on deposit, but even those who have it now will be gone at the press of an electronic button the day the proposal is up for Second Stage in the Dáil. It is very hard to estimate the yield when one knows the money will not be there. It would be like Mother Hubbard getting to the cupboard to find it bare; there will be no yield.

Senator Cullinane does not make it clear if he would tax the financial services centre or not. There is a huge industry, in Dublin in particular, in the management of billions, if not trillions, of euro in money and liquid assets. Does the Senator want to put a wealth tax on that industry without being quite sure of what he is at? Does he think he would have the legislation through the Dáil before those companies would move to London or Luxembourg?

It is not a question of good or bad manners. There is a strong record of the Department of Finance bending over backwards to facilitate the costing of proposals, but it is impossible for the Department of Finance to cost these proposals because of the lack of revenue data and the lack of clarity in them. The Senator should go ahead and we can have the debate in the election.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I suppose what the House has just got from the Minister is a classic straw man argument and I am surprised at it, or maybe I should not be surprised. Yes we did, and do, support the scrapping of the local property tax which we see as a family home tax. For the Minister to suggest that a property tax is a full wealth tax is to stretch-----

Photo of Michael NoonanMichael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

It is an asset.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I will get to that. For the Minister to suggest that a property tax, or a tax on a person's home, is the only way to tax wealth really shows the ideological divide

Photo of Michael NoonanMichael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I did not say that.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

The Minister inferred it when he criticised the proposal.

Photo of John GilroyJohn Gilroy (Labour)
Link to this: Individually | In context | Oireachtas source

I gave four examples of wealth tax.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

If Senator Gilroy wants to come in he can express a wish to speak and I am sure the Chairman will allow him to do so.

When the abolition of the local property tax was proposed we called for the reinstatement of the second home tax to ensure that properties being used for commercial purposes would be subject to a property tax. The Minister also misrepresented Sinn Féin's position on a wealth tax which is that family homes, or any home, over €1 million would be subject to a wealth tax. The Minister could at least read what is proposed. He is taking Sinn Féin's proposal and reducing it to whether we would tax cows or farm sheds.

Photo of Michael NoonanMichael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Those are the questions that people are going to ask.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

That is the level of response this House gets from the Minister on this issue. I am flattered that should the Department examine the possibility of a wealth tax it would only do so on the basis of work done by Deputy Pearse Doherty, a document I am sure the Minister has read, and which Deputy Doherty has brought forward to the Dáil. I remind the Minister that I am not asking him to accept this proposal based on what Sinn Féin is proposing and, if he leaves Sinn Féin's proposals outside the door, I will read to the Minister what is proposed. Like any Bill or legislative measure brought forward by Government or the Opposition there may be flaws, questions, concerns or issues but they get examined. We are calling for a report on the options so all of the concerns about cows, farm sheds and all of that nonsense raised by the Minister would and could be looked at.

The proposal seeks a report on options available for the introduction of a comprehensive asset tax and that it shall include options for the collation of data. The Minister has said it is impossible to collect the data from the information we have provided but he should get the data from his own information, from how he and his Department would categorise wealth, not using Sinn Féin's categorisation. The report would also include definitions of categories of wealth to be included in such legislation. This would cite all the definitions which the Minister had said would be problematic. We could then examine the definitions to see if they were to be included. The proposed collection method could also be examined. All of these topics would then become a matter for debate.

The Minister has simply acted the maggot with Sinn Féin's proposals and has not taken the substance of the recommendation or done the work required. I believe the people are entitled to have this analysis done if they call for it and are earnestly trying to get information. There is a duty on the Department to provide the information. The Minster should not look at this recommendation solely in the context of what Sinn Féin is putting forward. There are other organisations and people, including TASC, the Nevin Economic Research Institute and the trade unions who have also called for a wealth tax and they may have different opinions and classifications and different ways of doing it.

We are looking for a report on the options. The Minister cannot say that it is not possible. It is not possible because the Minister does not have the political will to do it. It has not been done because the will is not there to do it. Yes, we will have that debate in the election, but it should not come down to elections. It is wrong that the Minister has just brought this back to the election, that it will only be decided at election time and that we do not even have the ability to have options on the table. I will not press the recommendation as I will look to resubmit it on Report Stage. It is worthy of more consideration from the Minister and maybe he might reflect, come back to the House on Report Stage and we will have the debate again.

Photo of Michael NoonanMichael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I already said in my answer that the Department of Finance has an arrangement with the ESRI to do a full survey of what would be described as wealth. For the first time, the Department is taking steps to have the kind of base the Senator is talking about. We are not doing it for the purposes of introducing a wealth tax. It is useful information to know the distribution of income and wealth across households. It is the kind of data that modern economies have. We are moving into that space. The work is about to commence and the ESRI has already been commissioned to do it.

On the other issues, as I said before, in the absence of a database and in the absence of clarity on Sinn Féin's own proposals, it is not a question of bad manners; if we could cost it, we would do so.

Photo of Pat O'NeillPat O'Neill (Fine Gael)
Link to this: Individually | In context | Oireachtas source

Is the recommendation being withdrawn?

Photo of David CullinaneDavid Cullinane (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Yes, on the basis that I will resubmit it on Report Stage.

Recommendation, by leave, withdrawn.

Photo of Pat O'NeillPat O'Neill (Fine Gael)
Link to this: Individually | In context | Oireachtas source

Recommendations Nos. 10 and 11 are related and may be discussed together.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I move recommendation No. 10:

In page 96, between lines 4 and 5, to insert the following:

“69. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on options for the abolition of the Local Property Tax.”.

These recommendations logically follow and I am sure the Minister will be very pleased with them as well. Amendment No. 10 states: "The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on options for the abolition of the Local Property Tax.”. Amendment No. 11 states: "The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on options on extending the exemptions from the Local Property Tax to residents in buildings unsafe because of fire safety regulations or other structural issues.".

We have discussed a property tax Bill in the past and have just discussed a related tax. One national newspaper has stated that the local property tax is now on life support and that the next Government will have to make a quick decision on whether to retrieve it or kill it off. This amendment has the effect of preparing a report on options for how any future government minded to scrap the property tax might do so.

One of the dangers identified by the Thornhill report in respect of the property tax was that the later re-evaluations are left and the harder it is do them the bigger the jump will be. Dr. Don Thornhill said that unless the tax was put on a fair basis it will either wither away or face legal challenges. The Minister of State, Deputy Harris, said that issues relating to the implementation of other recommendations in the Thornhill report will be a matter for the consideration of the incoming Government.

Will the Minister outline the view of the Government? How does he envisage the property tax progressing post 2019, if indeed his party is returned to government after the next election? What is his view of the continuation of the tax? Notwithstanding the other debates we have had on the tax, I emphasise the unfairness of it in that it is not linked to ability to pay. A wealth tax such as we were proposing would be income linked as well. Somebody could own a property worth between €400,000 and €500,000 but might not have any steady income. There are many unfair elements to the property tax brought in by the current Government. The recommendations speak for themselves and I look forward to the Minister's response.

Photo of Michael NoonanMichael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The local property tax, LPT, is designed to provide a more sustainable system of funding for local government and place the provision of local services on a sounder financial footing. It will lead to greater transparency and accountability at a local level and it is certain that the stronger democratic relationship and clearer lines of accountability created can only have a beneficial impact on service provision from the perspective of the service user. The level of income forecast to be collected by the LPT in 2015 is in the region of €440 million. Under the terms of the Stability and Growth Pact, Ireland may not introduce discretionary revenue reductions unless they are matched by other revenue increases or expenditure reductions. This means that the Government must consider carefully any tax changes as any reductions will have to be offset elsewhere.

The Finance (Local Property Tax) Act 2012, as amended, provides that any property that is in use as, or that is suitable for use as, a dwelling house is liable to the local property tax. Therefore, the condition of a property is not relevant where the property is actually occupied as a dwelling house. Where a property is not occupied and is in such bad condition that it is not suitable for occupation as a dwelling house, it is not liable to the LPT. I am advised by the Revenue Commissioners that it is not possible to provide a prescriptive set of criteria that a property must meet to be treated as not suitable for occupation as a dwelling house.

As the LPT is a self-assessment tax it is up to a property owner to assess whether a property is liable or not, and to assess the chargeable value of the property where it is liable. In cases where the property owner assesses a property as non-liable due to its being unsuitable for use as a dwelling or assesses a property at a reduced value because of fire safety or other structural issues, Revenue will consider the facts and circumstances of the particular case. The LPT operates on a self-assessment basis and it is a matter for the property owner, in the first instance, to calculate the tax due based on his or her assessment of the market value of the property. When making an assessment, issues such as serious defects relating to building and fire safety regulations would be one of the factors that a property owner should take into account in valuing the property.

In the circumstances, I do not propose to accept these recommendations. The passage the Senator quoted from a newspaper is strange. The collection rate on the property tax is 97%. It is very hard to say that a tax collected at 97% of assessed value is on life support. It seems to me to be one of the stronger taxes.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I will withdraw the recommendation with the view to resubmitting it on Report Stage.

Recommendation, by leave, withdrawn.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I move recommendation No. 11:

In page 96, between lines 4 and 5, to insert the following:

“69. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on options on extending the exemptions from the Local Property Tax to residents in buildings unsafe because of fire safety regulations or other structural issues.”.

I will withdraw the recommendation with the view to resubmitting it on Report Stage.

Recommendation, by leave, withdrawn.

Recommendation No. 12 not moved.

Sections 69 to 85, inclusive, agreed to.

Photo of Pat O'NeillPat O'Neill (Fine Gael)
Link to this: Individually | In context | Oireachtas source

Recommendation No. 13 in the name of Senator David Cullinane is out of order.

Recommendation No. 13 not moved.

Sections 86 to 90, inclusive, agreed to.

Schedule agreed to.

Title agreed to.

Bill reported without recommendation.

Photo of Pat O'NeillPat O'Neill (Fine Gael)
Link to this: Individually | In context | Oireachtas source

When is it proposed to take Report Stage?

Report Stage ordered for Friday, 11 December 2015.

Sitting suspended at 1.55 p.m. and resumed at 2.20 p.m.