Finance Bill, 1983: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

I hope that when we reach the Committee Stage the debate will be properly structured so that everybody will have an opportunity to discuss the entire Bill, having made a minute inspection of it. On previous Finanace Bills we only reached the second and third parts of the Bill. The opportunity should be given to debate the whole Bill and I hope there will be co-operation between the Whips in this matter.

I spoke on some sections of the Bill yesterday and I now wish to deal with the sections relating to the residential property taxes. I am not against the principle of taxation on residences in general or on dwelling houses because such taxes will help to offset the cost of services of one type or another which are provided for different houses, such as roads, water supplies, sewage, which are absolutely necessary. The more income a person has the greater the amount of rates he should pay.

Section 88 (4) reads:

The market value of any property for the purposes of subsection (3) or section 94 (2) shall be ascertained by the inspector in such manner and by such means as he thinks fit and he may authorise a person to inspect any property....

I believe this section is very loosely drafted and could lead to a serious invasion of privacy. I am very concerned that a person's privacy may be invaded. I accept the principles of this Bill but I ask the Minister and the Cabinet to look closely at this section.

If a garda believes there is stolen property in a house and he wishes to search it, he must obtain a search warrant. In this section there is no reference to how the house will be inspected.

A good point.

This section should be closely examined because in this country a person's private residence has always been treated with the utmost respect. This section as drafted, could lead to a person's home being violated. I am very concerned about this. I realise the Government do not intend that to happen, and I would like the Minister to reassure me that it will not happen. From reading the section I believe the Revenue Commissioners will be allowed to inspect the house. Subsection (5) reads:

Where the inspector requires a valuation to be made by a person named by him, the costs of such valuation shall be defrayed by the Commissioners.

The earlier section uses the words "... by the inspector in such manner and by such means as he thinks fit". I am very concerned about this and would like the Minister and the Government to examine it very closely because it could have the most serious implications for democracy as we know it. If the Revenue Commissioners are allowed entry to a private house to inspect it, we will be giving them new powers and I will be very concerned if that happens.

Will the Revenue Commissioners be allowed enter the front door to inspect a person's private residence? Once inside, what next? We are talking about a person with a house valued £65,000, earning an income of £20,000 or more but the principle is the same, it does not matter how humble the house. I ask the Minister to give careful scrutiny to the wording of this section. If the Revenue Commissioners are given the power to enter a private residence I believe that will be going further than was ever intended. This would be breaking new ground which most people would find totally unacceptable. It would lead to demonstrations and protests because most people would not wish to see such powers granted to the Revenue Commissioners.

Fianna Fáil in opposition, decided very recklessly to abolish rates without understanding the consequences.

That is not true. An unemployed person would have to pay an unfair tax by way of rates.

An effort will have to be made to restore sanity to the situation. The people will have to pay for essential services and this Government are making an effort to rectify that reckless blunder made by Fianna Fáil.

It was not a reckless blunder. An unemployed man had to pay high rates each year.

We have to introduce the residential property tax, water and refuse charges and so on. In my view, the collection of these taxes will lead to enormous administrative costs for the local authorities and the Revenue Commissioners. There is a very big overlap in the methods of collecting taxes. This leads only to an increase in numbers in the Revenue Commissioners' office, which is unwise and unhelpful, as it will add to the burden on the PAYE and PRSI sector.

The PLV system had many faults and failings, but it was a simpler and somewhat more equitable system than the one proposed. At some stage this whole situation will need to be re-examined.

These sections deal with residential property. This is a self-assessment tax and if a person does not make a return he or she becomes liable for quite sizeable interest. Take the example of a father having a sizeable mortgage on his house who dies and leaves that house to a son and two daughters, perhaps two out of three working. Their aggregate income is then taken into account. If one is a teacher and another a civil servant, their aggregate incomes will bring them over the £20,000 limit. These people would thus be liable for residential property tax, while still having to pay a mortgage on the house and all other expenses.

And rates on top of that.

This tax needs examination. It will lead to quite serious legal problems and many legal decisions will have to be made on cases involving it. It will be a legal minefield for administration and will open up vast new horizons for people in the accountancy and the estate agency fields.

It would take an army of civil servants to collect this tax, which is unhealthy for a democracy such as ours under present circumstances. The more civil servants are established, the greater will be the burden on the PAYE and PRSI sector. The money collected may be large or small, but anything which may increase rather than decrease the burden on the taxpayers would not be satisfactory. One of the redeeming features of this Bill is that the present exemption limit of £65,000 will be index-linked each year, as provided by section 90, as also will the income limit.

There are a number of other items which I will touch on briefly. One of the main reasons for the serious unrest amongst the PAYE and PRSI sector has been the vast amount of uncollected PAYE and PRSI payments. We are all aware of firms, private individuals and companies who have not made their returns. Everyone in the House knows them. A number of RTE radio and television programmes highlighted a number of companies who were making these deductions, who went into liquidation and then set up new companies. This led to justified anger. With regard to the different levies and increases in PAYE and PRSI, there has never been a genuine, determined effort by the Revenue Commissioners to collect these due amounts from the firms. These firms got into arrears a couple of years ago and got accommodation from the Revenue Commissioners, who to a large extent are understanding and helpful and I am not criticising them for that because I admire their efforts in that direction. Having been in arrears, they make an arrangement to pay these PAYE and PRSI deductions as they are made and if the Revenue Commissioners fail to ensure that these companies meet their commitments, they are failing in their duty.

There should be far more field officers in the Revenue Commissioners' Office to visit these firms and ascertain whether the employees are still with them and that all deductions from pay are being forwarded to their office. If the firms are in default, the workers concerned should be informed that the deductions from their wages are not being sent in to the Revenue Commissioners and, in conjunction with their union, should ensure that no further deductions are stopped by that firm but that the amount liable is collected direct by the Revenue Commissioners. In the past, rate collectors called to collect bad debts and made sure that these were paid. There would have been far fewer protests because there would have been a far greater amount of money available to spend in the running of the services if the Revenue Commissioners had the necessary field officers to make these collections.

A responsibility is laid on the shoulders of the Revenue Commissioners and on the Department of Finance to see that this money is collected. The unions should also play a more active role in ensuring that the returns are made immediately. This would help to ease the burden on all taxpayers, in reducing the amount that each would have to pay. The whole business of fly-by-night companies forming, taking the assets and starting anew would have been avoided.

With regard to the proposal to bring an additional estimated 90,000 farmers into the tax net, this was promised also by the Opposition under Deputy Haughey as reported in The Irish Press of Saturday, November 6 1982:

Mr. Haughey promised also that the income tax code would be extended to farmers as a whole. The Government believed that the farming community should make a much greater contribution by way of income tax, now that rates have been removed.

That was an article by Michael Mills in The Irish Press of Saturday, 6 November 1982. While the completion of returns and so on will cause a lot of difficulties for farmers in the long run, for the sake of equity and everything else, it will be of benefit to everybody, that these people pay their tax on normal returns the same as everybody else. There will be a certain number of farmers who will be liable to tax under the £40 valuation limit but a certain number of others who will not be.

I might quote from the Minister's introductory remarks at column 416 of the Official Report of Thursday, 5 May 1983 when he said:

Farmers who have not been liable for income tax up to now will be required to fill in details of their business and personal circumstances in a farm profile form with a view to the identification of those who would have a taxable income.

He said, at column 417:

I consider that the profile fully meets the Government commitment to a system which will deal simply and fairly with the large number of small farmers newly liable for income tax.

I would hope that those forms would be as simplified as is humanly possible. I would hope also that the period over which a farmer would have to go back would be no more than one or perhaps two years. In this respect I have noted with concern some reports that some of the farm profile forms would require farmers to go back over a period of five to ten years. It would be impossible for farmers to give details of buildings, purchase of machinery and so on five or ten years ago. If that were to be the case it would place additional work on the Revenue Commissioners which would be totally unnecessary.

The Minister is to be commended for reducing the VAT rate on room sales in hotels from 23 per cent to 18 per cent. The Irish Hotels' Federation have acknowledged that this is a concession they were seeking and for which they are grateful. We are all aware that our hotel and tourist industry is encountering enormous difficulties because of the cost factor here.

This Bill deals with the different rates of VAT and with increases in excise duties and so on. In recent years I have spoken at length about the problems confronting vintners, people such as Irish Distillers, Guinness and so on, and the duties imposed on beers and spirits. Many surveys have been undertaken showing that our cost factors vis-à-vis those in Northern Ireland and Britain were much higher. Indeed we do not need any survey to tell us that. When one visits Northern Ireland or Britain and buys one drink in a bar one realises immediately that our cost factor is about 40 per cent higher. This is something everybody in the tourist industry is aware of and is the reason also that so much smuggling goes on. This is something to which I drew attention about two years ago. We must endeavour to create a competitive climate here so that tourists coming to this country will find it some way attractive rather than the position obtaining at present with our cost factors very much in excess of those in Northern Ireland, Britain or many continental countries. Therefore that section of the Bill dealing with the reduced VAT rate on rooms in hotels is to be welcomed.

Also in his introductory remarks on this Bill, as reported in the Official Report of 5 May 1983 the Minister said:

The changes in legislation will be supplemented by administrative improvements.

I suggest a number of administrative improvements the Minister might consider. First, it is essential to cut down on needless bodies and authorities. We in this House must give the leadership in this direction. I spoke here last evening about the proposals for Bord Poist and Bord Telecom and said it was lunacy to consider their continuance. I would ask the Minister for Finance to give them the chop because I do not think they are desirable or necessary particularly when one sees the cost of accommodating ten people, £1 million.

There is then the proposal to introduce charges for water, sewerage and planning permissions. An Bord Pleanála costs the State money and has become completely politicised. I see little future for that body and do not feel its continuance is necessary either. Indeed I might recommend to the Minister for Finance also to forget about the appointment of an ombudsman. We have, I would hope, a diligent Parliament fully representing our people.

When we talk about the collection of taxes it should be remembered that generally taxes are collected for running expenses and that, as a democracy, we who represent the people must carry out our duties properly. There are proposals, albeit distant proposals, for having a Garda authority. It is my honest opinion that there is no necessity for a Garda authority here.

With all due respect to the Deputy, I might remind him that he has wandered somewhat from the Finance Bill. He will appreciate that we are dealing mainly with taxation.

The collection of taxes is always unpopular. I was advocating that the Minister should effect savings here and there in the collection of those taxes and in this respect it is necessary to advance some positive suggestions as to how he might do so.

Discussion of expenditure is not permitted on this Bill, except by passing reference only.

Then I shall just make passing references. I believe that the cost of establishing a Garda authority would be excessive and I do not consider it necessary. There are many other proposals which could be proved to be unnecessary also. The different State boards and bodies should be scrutinised to ascertain whether savings could be effected there. For example, there is the situation in regard to office block accommodation. We must undertake detailed examinations of all of those to ascertain where savings can be effected. It must be remembered that PAYE workers realise that these bodies cost them money and the fewer of them that exist the better.

I might make one further suggestion and I do so with the greatest respect for the office and its various officeholders — indeed it is enshrined in our Constitution — that is, whether or not the people might be asked in a referendum about the necessity for maintaining the office of President. It is something that should be considered in great depth bearing in mind the importance and prestige of that office and its cost. Candidates are not——

The Deputy has definitely departed from the Bill.

I accept that but I would question this particular office. It is so important that it might be desirable to ask the people by way of referendum whether or not the office should be maintained. The Minister has a very difficult task. I have tried to be constructive in what I have said. I have been critical to some degree but I commend him for the effort he is making and the expertise he has demonstrated. He has a most onerous task and I wish him every success in it. The sad thing about Ministers for Finance is that nobody seems to see any particular merit in what a Minister does. The present Minister has only been in office for a short time. I wish him well.

On a point of order, because this debate has been curtailed due to questions is there any possibility of extra time being allocated?

The position is that the debate must conclude at 6.15 p.m. No extra time can be allotted. The only solution would be for speakers to shorten their contributions.

I should like to make some remarks about the Bill in general and its purpose. The purpose is to implement the provisions in the budget and any other provisions the Minister may have considered necessary since the budget, and so in the Bill we should find a control aspect and a planning aspect. The Bill is dominated by the control aspect. Like the bird it has to fly on one wing but birds do not fly on one wing and, on that basis, the Bill is unbalanced and weak from the point of view of planning. The Taoiseach this morning highlighted the fact that one cannot plan at this stage. I shall come back to that later.

The emphasis in the Bill is on control and that brings me to what the function of the Department is and what the function of the Bill is as representing the principal instruments of the Department. Traditionally, the Department of Finance was the keeper of the nation's purse and this is where control comes in. It was the treasurer. Any club or group needs a good treasurer. We all subscribe to that. You must have a good treasurer and the Minister for Finance shows himself to be dealing effectively with the bookkeeping and the treasury aspect. Now the traditional position of the Department of Finance suited the non-interventionists. It suited the social Darwinists, the people who believe in the survival of the fittest. It also suited the proponents of that philosophy, those who for many years said: "Live horse and you will get grass". We saw many of them over the years welcoming Bills like this, Bills dominated by controls and with no development arm to them. I know the Minister will argue that, if we do enough control for long enough, we can then get on with the development and control will ultimately contribute to development. Control is, of course, a component of development but it is not the dynamic and it is the dynamic that is lacking in this Bill. This kind of approach in the past was accompanied by massive unemployment, low wages, extensive poverty. This poverty was officially condoned by the nation's bookkeepers as an unfortunate concomitant of prudent bookkeeping. We have seen a great deal of this kind of approach to our financial affairs over the years. In this Bill that aspect is emphasised and one has to ask oneself if this is not really the politics of depression, on the one hand, and despair on the other. One takes one's pick as to which is involved here.

We came then to what was known as the Lemass era. We came to the First Programme for Economic Expansion in 1959. The old mould of the simple treasury role of Finance was broken. The then Secretary, Mr. Ken Whittaker, of the Department of Finance, participated fully in this development within the Department and the Department took on a dual role of bookkeeping, on the one hand, and development, on the other.


Let us get on now with the job here. You had in that period real leadership. It was a very stimulating period. Then we had our present leader, Deputy Haughey, who gave us The Way Forward. That again showed the development approach of our party to this whole question of finance. This is crucial to what is happening at present because in our approach — this was laid down clearly in The Way Forward— we were setting targets in the budget and in the Finance Bill. They were targets for employment and those targets were set out clearly. They started in 1983 with new jobs created, 28,000, 500 jobs lost, 27,500, and, therefore, a net change in employment of plus 1,000; running on to 1984 plus 12,000 therefore a net change in employment of plus 12,000; 1985 plus 20,000; 1986, plus 25,000 and 1987 plus 34,000. These were firm targets in the production and development in which some of the leading economists had participated. These were set out firmly as part of the economic strategy and which would be part of this Bill were we presenting the Bill.

This, of course, has to be carried in the context of our average annual labour force increase of 17,000 which takes a great deal of the shine off the new figures but that is the reality we have to face, a reality which demonstrates the size of the task. In contrast to that, and again not contained in this Bill, is the fact that here this morning we had the Taoiseach saying their policies were diametrically opposed to what the employment situation requires. In that he was saying something in which we know he believes. It is in the policy in this Bill. It is in everything that is being done and that is that for the first couple of years they plan to concentrate on the control aspect and on the book-keeping and therefore the steps taken are in many respects diametrically opposed though I have conceded already that some of those will help the situation in relation to controls.

Here we have a situation in which we are presented with a Bill totally lacking in a dynamic commitment to job creation. We were at least prepared to put down a commitment and stand over it. There could, of course, be difficulty in reaching the targets but, if one is going for a target, one gets somewhere. If you have no target, inevitably you will have massive unemployment and that is one of the things which comes out in this Bill. It is regrettable that, for whatever reason, the Minister for Finance is leading his Department into a retreat back to the pre-Lemass situation and shedding responsibility for risk-taking and development. At this point in time industry needs incentives to export and development as distinct from what are regarded as concessions, industry needs positive dynamic and constructive incentives to develop and to export. Our future lies in the vigorous promotion of both private and public export industries.

In what year did the late Mr. Lemass run a current budget deficit? He never heard of one, but if there had been any such suggestion he would have condemned it out of hand.

Deputy Kelly tends to blow a gasket for very little reason. Perhaps he would contain himself. He should face the position now instead of repeatedly looking backwards. In The Way Forward we outlined our targets and commitments for the years 1983 to 1987. Our plans envisaged a rapid rise in exports, especially of manufactured goods. This would be based on the more efficient use of existing resources, improvement in cost competitiveness and an increased capacity of the economy to export as a result of new investment, both foreign and domestic, private and public. That was the kind of approach we were taking. I concede to the Minister for Finance that in some aspects of this Bill he is doing the same thing in terms of trying to improve cost competitiveness. However, the fact that he is not investing is particularly distressing.

Taking the basic strategy of the Bill, we would have broadly similar objectives in relation to borrowing targets and the overall situation on bookkeeping, but the approach differs considerably. In the first instance this Bill is based on increases on taxation, both direct and indirect. There is no need to list those increases. They are well known by now. They are based on a reduction in capital borrowing of £263 million. As soon as this was mentioned by the Coalition it was clear to any sensible person that it was the beginning of a doomsday situation so far as employment was concerned. Once a Government begin to dismantle capital investment and to create disincentives for management generally, for industry and for business, they are putting off the day when we will be able to provide even reasonable amounts of employment for our young people.

The Minister has reduced the long-term investment programme and as a result we are now faced with great pressure in the area of wages and of inflation because by increasing the direct and indirect taxes there will be an immediate effect on inflation and in terms of pressure on wages. The Fianna Fáil approach included similar targets: reducing public expenditure but using methods different from those being used by the Government, introducing certain charges in certain places, but again with differences in approach. Our plan was based on long-term investment, on the creation of jobs in the private sector and in capital expenditure for this purpose with a very strong export orientation. We were committed to fighting the closure of factories, a matter that is very much in question now in terms of whether the Government are really committed in an underlying way in this regard especially having regard to what the Taoiseach said today about having to accept unemployment and having to keep the books right until some future time when we might be able to do more about unemployment. It is our contention that if a company have any possibility of long-term viability we should allow Fóir Teoranta to move in and give every assistance.

The result of the measures being taken in this Bill will be increases in unit costs. Our imports will increase and more factories will close. Redundancies are increasing. Our exports will drop. This Bill sets no target in the areas of production or of jobs. It provides no yardstick by which we can test the performance of the Government in the coming year other than by way of the bookkeeping objectives that have been set. The only objective in the Bill, therefore, is the countering of tax evasion and the tidying up of the books, both of which measures we would agree with, but the basic lack in the Bill is that of a dynamic approach.

When we consider some of the individual aspects of the Bill we find that the additional 1 per cent levy is particularly obnoxious especially after we, Fine Gael and Labour included, had gone to the electorate saying that there would not be an increase in PRSI. The Government insist on saying still that there is no increase in PRSI, that all that is involved is a raising of the ceiling, but added to the PRSI is the extra 1 per cent. So far as the worker is concerned, that 1 per cent levy included here will add to the 5.5 per cent simple PRSI the 1 per cent health charge, the 1 per cent youth employment levy and now the 1 per cent income levy, making a total of 8.5 per cent on incomes up to £13,000 with three of the percentage points going on to total income.

This section of the Bill is unfair and unjust. Its impact will be particularly severe on those who are the heavy PRSI payers. Consequently, we are opposing the provision.

The youth employment levy is estimated to bring in £80 million this year. That is a very substantial sum which is more or less in line with the original predictions. It would be particularly valuable if it were going into training plus job creation, but here again the weakness is that the money is going into the replacement of finance that was being put towards training. I would be the first to acknowledge the extreme value of the work done by AnCO and by the various training bodies and work experience groups. For many of the young people concerned the training is only a stop gap operation to carry them through some period of time; but unless some of the money is also diverted to real job creation also there is nothing at the end of the line for those young people.

In addition the income levy is to yield £47 million, giving a total of £127 million this year. I appeal to the Minister to commit some of this extra resource to the creation of jobs. It is being said around the country that the only post being created as a result of this money is the job of the chief of the youth employment agency. There are some more people, district officers and so on, to be appointed within that agency but some of the money should go towards the creation of jobs for young people.

There are various other aspects of the present situation that are disturbing. For example, £73 million has been cut from the construction industry. Obviously that will hit employment straight away. The borrowing of £100 million by way of subsidisation in respect of the restocking of farms was a measure that would have been included in this Bill if we had remained in office.

Fianna Fáil had their chance to agree to that but did not do so.

The Minister knows it was one of our objectives at the time of our leaving office.

Why, then, was it not included in the Fianna Fáil Government's Estimates?

I am just wondering why the Minister did not go ahead with that borrowing having regard to his interest in agriculture. I was suspicious at that time that the Government intended to devalue our currency. I suspected that was the reason for their not being prepared to allow the farmers to take on that £100 million in respect of which the Government would have been taking the exchange risk. We did have devaluation subsequently.

Why did the Fianna Fáil Government not provide for that borrowing last autumn?

Perhaps the Minister would introduce that scheme. We find, too, that there is a reduction of £1 million in respect of Córas Tráchtála. Again, this indicates a lack of development strategy and of a commitment to exports. Perhaps the most disturbing aspect of this Bill is that it contains no incentives to investors or to management to get up and help us to get out of the difficulties we are in. There are no incentives for production or for the creation of new jobs. If anything the opposite is the case. Investors are being frightened. Business people are quite scared about the things they are seeing. They are being told that things are bad and going to get worse. I have learned from people involved in the accountancy world that increasing numbers of people in management are considering getting out. If that happens we will be left with mediocrity. I know that some of the most committed people are among the best people there but we cannot afford to lose good management and we should be encouraging them to stay and put the best into this country.

I find the Taoiseach's recent statements particularly depressing. Former Coalitions adopted this tactic of telling people that something bad was coming so they could claim credit for predicting it. We only want to see people putting their shoulders to the wheel and if the Government are prepared to do that they will have our support. The philosphy which the Taoiseach is expressing of things bad and getting worse is no good to anybody. There is no incentive in this Bill to develop indigenous industries. There is no stimulus for small service industries.

One aspect of the Bill about which there has been a great deal of comment is the one relating to residential property tax. The last speaker talked about the importance of bringing back some form of rates. Through this the Government are now introducing two kinds of rates. This in effect is what is being done at present. There is the rates on services and this residential property tax. It is right and reasonable to pay something for services. In County Dublin, for instance, a water charge is paid whereas in the city it is not. It is only equitable that there should be a similar charge there. That is a very small charge. The theory of the residential tax makes some sense. In theory it is supposed to apply only to the largest houses and to people who have the highest incomes. In these difficult times it makes sense, in theory, to seek some assistance from the people who are in this strong position.

When it comes to the practice of it, it is quite clearly bad. There are many defects and many anomalies and I hope the Minister will amend it on Committee Stage. The tax is to apply on incomes above £20,000. That is all right, but it includes the income of the husband and wife, the children's income the granny's income, the invalid sister's and the mentally handicapped persons income, and the income of anybody else who happens to be there. It includes the garden, and as a person who spent some time in horticultural research I am sad to see gardens being taxed. We need more of them rather than fewer. They add to the general environment physiologically apart from the beauty aspect. Will the granny flat be included? The approach of the Department of Health recently has been to get people to look after their elderly with consequent benefit to the Minster for Finance because the charges for homes and hospitals are reduced. This tax is in direct opposition to that. It will force such people out in many cases. I hope the Minister will alter that. As regards the children's income I think it is a scandalous provision. It really worries me to thing that there are people who want to get at the children in their homes and to force them out of their homes. Take a family with two or three children with incomes who are hoping to get married in the not too distant future. They will be forced to go on to the property market and to look for a flat. Young people today have sufficient dignity to clear out and not be a burden on anybody. I am sure it was not the Minister's own intention but he should never have agreed to allow the children's incomes to be included. We also want to see the grandparents excluded. They should not be put in that most invidious situation. An invalid sister, for example, who is being looked after will be put in a very difficult situation if she has an income. This is a particularly nasty provision.

Once you get to the £20,000, apart from some marginal relief, there is not really an upper limit. You may find decent people who happen to live in a fairly sizeable house and because everybody else wanted to come and live in their area and because the property in that area went up in value they now have a high valuation. That house is their home and they want to stay in it. They may not be far above the income level. This is the aggregate gross income and when you come to look at the net take home pay it is a different thing. The youth employment levy is based on gross income, the new 1 per cent is based on gross income, but they are deducted from one's net income so certain categories of people are put under considerable strain. I appeal to the Minister to exclude children, the granny and the grandad, the dependant relative and the handicapped person. I would ask him to exclude the granny flat because it is something we should be encouraging.

I would ask the Minister to look at the question of making allowances for mortgages, especially mortgages on the principal residence, as some people are in difficulties in that respect. I would like the Minister to give an undertaking that the income level or the house value would not be reduced.

It is to be indexed.

I appreciate that the Bill says it is to be indexed, but I would like the Minister on behalf of the Government to give a clear indication. People outside of this House would like the Minister to re-emphasise the intention here because the Bill could change with a new Government or in new circumstances.

A person on PAYE earning £25,500, minus deductions for PAYE, PRSI, VHI and so on, in net terms is taking home £12,000 or £13,000 a year. It is from this figure that the State will be deducting as far as PAYE payers are concerned. This scheme is wide open to legitimate avoidance not by PAYE people who are on fixed incomes but by self-employed and professional people. A civil servant earning about £17,000 per annum with a son or a daughter working and earning about £6,000 will be pushed over the limit of £20,000; but a self-employed person could decide to work a day less per week so as to reduce the income in real terms as it would not be worth working extra. Perhaps that is a good thing, since somebody else might do some of the business, but in relation to this section there would be a loss of money to the Exchequer. That is a simple thing to do in a flexible situation. In that situation the Minister loses the amount of tax that would be paid by someone who could have earned £25,000 and he also loses the money which he had hoped to get by virtue of this section. This means that this measure will bear severely on the PAYE payer only. I know that the Minister's intention is good, but under the section as it stands this could happen. People on fixed incomes will be caught and the people on variable incomes will not be caught. Indeed, the last speaker said that accountants were already working to avoid this section. Perhaps that is what is really behind this situation. Perhaps the Minister had to give a sop to the Labour Party and that that is why he has introduced a system which will give a sop to the Labour Party and offer the self-employed a way out.


I have given some Members of the Coalition credit for being smart.

This Bill also contains a number of petty measures one of which relates to the exemption on deposit interest. I have had elderly people with as little as £1,000 on deposit come to me for an explanation of this. Having brought up their children they are now enjoying a little endowment, when they suddenly read that the Minister will reduce the £70 to £50 or the overall £150 to £120. They are disturbed about this and it takes a fair bit of explaining. But at the end of the day they are bitterly disappointed that even the little interest allowance they were getting on their post office or bank deposit is being pulled back by this Government. That is a scandalous situation. Some years ago I suggested that the Department of Finance might take some advice from the Japanese whose approach is to encourage people, to give them more interest freedom, but to give it for money invested in State or selected investments. We must spend money to make money. Anyone in business would say that one should advertise when business is going well but when things are going badly it is even more important to advertise. This Bill does not provide for advertising. This measure indicates that. For the Minister to hunt little people with their little savings is scandalous. I do not understand the reason behind it and it is objectionable. There should be an incentive.

The second petty thing in this Bill relates to the allowance for the year of marriage. There was always a rush before April to get married so as to avail of the full year's benefit. The Minister is doing away with this now. The huge rush is gone now. This was obviously a small help to people in the first year of their marriage. Why take away the small props that people have at that time?

Another petty thing was cutting the PRSI allowance from £312 to £286. When that was originally introduced I regarded it as being the equivalent of the pension content of the PRSI contribution. Of the PRSI contribution of 5.5 per cent an amount is allocated for unemployment, for sickness and for pension purposes. With regard to the amount for pension purposes a worker was given an annual allowance in tax terms amounting to approximately £312 or £314. That meant that there was equity in the sense that the person who was paying the full rate of PRSI was getting an allowance for the amount of his contribution that was going for pension purposes. All others get an allowance on the amount that goes for pension purposes. I viewed that as an improvement in terms of equity and I was disappointed when I discovered that it was being reduced without reference to what its equivalent was. That means that if things are bad in another year it could be reduced further and that amount of equity taken away. That was a petty move.

I expected to see a provision in the Bill providing for a payment for low income families, as promised in the budget. Hopefully, it will be introduced at some stage. However, the Bill proposes to remove the double week payment in September and December for low income families on social welfare. That scheme cost £4 million in 1982 and would have cost more this year. It is my view that if a measure which was promised in the budget is not contained in the Finance Bill we are entitled to comment on it. Presumably, the Minister will indicate when it is proposed to introduce that payment.

In the budget the Minister announced an increase for passports, a reasonable thing to do to collect money to offset some of the other charges. However, I have discovered that elderly people and those who are handicapped who go to Lourdes on organised tours or with voluntary agencies now find that instead of having to find £10 for a passport they must pay £30 per head. I have made representations about that but the Passport Office informed me that there was not anything they could do about it. The Minister should look at the possibility of leaving the charge for passports for such people at £10. Such a move would be welcome.

The Finance Bill is about the reality of the strategies and policies being implemented by the Coalition, not about their promises, pre-election or otherwise.

Standing Orders provide that the Deputy should address himself to the question of taxation. I have allowed the Deputy some latitude but he has wandered into the area of social welfare.

I do not think I said very much about social welfare. Five months ago the Coalition made a number of promises. They promised that the proportion of tax derived from PAYE on wages and salaries would be reduced, but that has not been carried out. In fact, the proportion of tax has been increased. They promised that there would be a reduction of the PRSI on gross income below £120 per week, but that has not been kept, and since the budget more is being paid than before. The Coalition also promised that the indirect tax increases would be minimised in order to help reduce inflation, but that did not happen. We are all aware that indirect taxes were increased by at least 4 per cent this year. We were told that tax credits would be substituted for tax allowances, but that proposal has been dropped quietly. Perhaps the Minister will explain the reason the Government have not kept those promises. We were told also that the Government would maintain the living standards of social welfare beneficiaries, but that has not been done. The National Development Corporation, which was promised, has not been set up yet.

On the question of tax evasion and avoidance, Deputy Enright sounded a note that most Deputies are concerned about, the extent to which measures may be used to invade the privacy of the home of an individual. I share Deputy Enright's view. I am concerned that the Minister ensures that reasonable controls are exercised on the invasion of anyone's privacy. I am sure that matter will be debated at length on Committee Stage. With regard to the question of tax evasion and avoidance, there is a duty on the Government to effectively administer this area. There are potential savings to be made there and there is also the question of equity and fair play. The duty is on the Government, and the Revenue Commissioners, to deal with that matter. We support the efforts to achieve the potential savings, but I must warn against over-reaction in this direction because there is a danger that the cure might become worse than the disease. We must ensure that there is not an undue preoccupation with administrative controls.

For the first time in recent years the Finance Bill does not provide increases for social welfare beneficiaries from 1 April. This year those increases will be effective from the end of June or the beginning of July. There has been a systematic reduction of old age pensions and pensions for widows and the handicapped. There has also been the loss of the double week.

I am slow to interrupt the Deputy in what is a very interesting and effective contribution but I must keep him to the subject under discussion, taxation.

The Minister made a general reference to social welfare. I hope the Chair will not mind if I mention that children's allowances are being devalued. In fact, the Minister for Health stated recently that he has proposed that children's allowances should be taxed. That is an aspect of social welfare he obviously will be attempting to bring under the scope of the Bill. Not only have the Government not increased those allowances but now we have a proposal from a Cabinet member that they should be taxed. There is a relationship between these.

The Bill as a whole misses the point in relation to planning and development. It is strong on control and on book-keeping. As an instrument of economic policy it has failed. If managers followed the lead given by the Minister for Finance there would be no hope, no investment and a prolonged recession.

The budget and Finance Bill set the targets and the climate for the year. We used to say in the House some time ago that it was important to build in a three year element and to look forward. There is no question of development this year because the Bill sets no targets for growth and development. Performance cannot be measured in these terms. This Finance Bill will not lead to a systematic reduction of those in genuine need. It will not create jobs, which are our greatest need. That was emphasised by the Taoiseach this morning. It will not attract investment, encourage enterprise or exports although it will go some way towards dealing with tax evasion and avoidance.

The fact that the Government are totally preoccupied with book-keeping in the Bill and have increased taxation under a smokescreen of tackling evasion to the exclusion of development, shows clearly their inability to lead us out of the present depression. Predicting more unemployment and hardship, as the Taoiseach is doing, is a poor excuse for leadership, courage and for a practical sense of direction. There is no sense of direction but rather a full stop as far as economic development is concerned. It is no wonder that managers and investors whose assets are reasonably fluid are considering pulling out. Their only hope and that of the unemployed is that this Government will pass and, and in the interests of the country, the sooner it does the better.

There are two clear and essential elements necessary in a budget and a Finance Bill. One directive has to apply itself to the question of dealing with receipts and payments which will accrue to the State during the coming year but the other, no less important, must be directed towards the economic progress and well-being of the country during the years ahead. I agree with the criticisms of the budget as brought into print in the Finance Bill in that there is a major failing to give a prognosis of the economic development of the country in the years ahead.

We are at a time of crisis and at a stage when our unemployment is at an all time high. Industries are falling by the wayside day by day and those industries which we were led to assume were the lifeblood of the country are dissipating and falling away before our eyes. It has been put to us that the budgetary measures in the Bill are an introductory measure to control the economic situation, but my fear is that when the time comes when control ends — if it ever does — and we look to an upturn, what will there be left to turn up? Those industries will have gone and there will be no bringing them back. Factories will have closed down and skills will have been lost.

The Bill, as the budget, attracted great criticism on the grounds that it does not embody equity in taxation. That is a reasonable criticism in many respects. I know it was put together at relatively short notice and the parameters were fixed. From the point of view of equity in taxation it leaves a great deal unsaid, particularly in the area of capital taxation. Fianna Fáil may make noises about equity and what should or should not be done. They never refer to the fact that they abolished the wealth tax when they came into office. This was the first step towards equity in taxation which was brought in by a Coalition Government. There is great hesitation on the part of Fianna Fáil speakers to refer to that. One can never forget the cheers that went up when the abolition of this key element in capital taxation was announced.

We are faced with almost 200,000 people unemployed. The taxation base has narrowed to an extent we never had before. Instead of those people producing and contributing to the taxes of the State, thereby easing the burden across the board, they through no wish of their own are in the reverse situation and are a burden on the State in the sense that provision must be made for them in taxation to pay out massive sums in social welfare payments. These must be raised under this Bill.

There are many factors which have brought about this situation. I shall concentrate on one aspect which was a major factor in bringing about this intolerable burden of taxation on the working population, as shown in the rebellion, upsurge and disquiet exhibited in the tax marches and protests which have taken place and which will be the ongoing position. We have been practising the notion of free trade. The idea of taking any steps to protect our vulnerable industries is not accepted by any Minister. This matter is frequently raised in the House. It was raised noisily today. The purpose of my contributing to the Bill is to advocate, as an item of policy, that we should initiate a selective, limited, temporary policy of protection for certain of our vulnerable industries. When this matter is raised Ministers say it would be dangerous and a serious step to take, that we are an exporting nation and rely on exports to a very large extent. The implication is that free trade is practised by everyone else. The big fallacy in that argument is that that implication is completely removed from the truth. I do not say that on my own say so. I refer to an investigation and report which was carried out on this subject in great depth by a committee of the Council of Europe in Strasbourg. The document concerned is No. 5052 of the Council of Europe Parliamentary Assembly published on 19 April 1983 and adopted by the plenary session. On page 1 it states:

Despite appeals by OECD and GATT the international trading system is becoming less liberal and more protectionist.

On page 2, paragraph 5 it states:

Sectoral and bilateral arrangements are becoming increasingly prominent features of the international trading system and the GATT rules are frequently ignored.

At page 11, paragraph 35, it is stated that most countries continue to resort to protectionist measures. These apply to more and more industrial sectors and taken an ever wider variety of forms. For instance, these measures are so numerous and varied that only a small number are mentioned in this paragraph. They include administrative harassment, health regulations, industrial standards, legal obstacles and economic and commercial sanctions. In a recent survey the GATT secretariat identified more than 600 non-tariff measures. The conclusion is that public opinion has very little idea of the extent to which protectionism is inherent in the present day trading systems.

It seems to me that in suggesting that public opinion has little idea of it, unfortunately I suggest that some of our Ministers also have very little idea of that fact. We in this country are the prime observers of the rules among the industrial countries, if we can include ourselves in that category. We are the ones who are observing the rules, at tremendous cost to ourselves in terms of employment and in failing to provide opportunities for our young people. The Council of Europe, which represents 21 countries, recognises the fact, as reported, at paragraph 9 of the report, that protective customs measures may be necessary in some cases to cope with serious unemployment and balance of payments problems.

I appeal for a review of our policy regarding the free trade which we accord to our imports and which has thrown many of our vital industries to the wolves. Some people are protesting at that. We saw what happened in regard to the import of potatoes yesterday. That is very much the thin end of the wedge. Not only the Council of Europe has recognised the fact that protectionism in the world is now rampant. The CII also produced a report, on 29 March last, confirming the fact that there is an increasing trend towards protectionism in some EEC countries. This is widespread throughout the free world — we do not have to remark on the Eastern European countries.

What is the effect of it all? The employment rate, our capacity to produce and to manufacture are being thrown to the wolves and being abandoned. I will point to one industry, but that case could be applied in equal force to virtually all our industries.

Take the case of manufactured fertilisers. I have the index of the last report of the CSO, published on 4 May 1983. It shows that during March last we imported £16 million worth of manufactured fertilisers. I discussed recently the situation with the senior executive of a firm that manufacture fertilisers and he told me that his factory has worked on a regular basis for many years past to a set procedure, two months every year. They make all the fertilisers they can sell during the entire year and at the end of the two months they automatically close down. And we are importing up to £60 million worth per month. Those workers are being provided for in this Finance Bill: the taxation is being raised in this Bill to provide for those people for ten months in this financial year. That is another thin end of the wedge.

The same thing happened in regard to Ranks in Limerick; we had it in Telectron and we had it in Clondalkin. This is the time when we have to look after our own position as every country in the free trading world is doing. There was a very ancient saying in the Ethics of the Fathers, many thousands of years ago, "If we are not for ourselves who will be for us?". If not now, when? To whom are we going to look to see about employment for our young people, for the preservation of our industries in preparation for the good times that we are told are coming? Will the EEC Commission do it for us? I see no indication that they will. Will the AT & T do it? Will the Dunlop Tyre Company of Britain do it?

We have been the observers of these laws too long and now is the time to review that situation and to have a look at what our trading partners are doing in this field. And when the Minister in a reply here said that we dare not do that because of the effect it would have, my answer is that they are doing those things to us already: it already has happened. The riposte, the retaliation, is not that they will retaliate on us: this is our retaliation. We must stand on our own feet henceforth if we are to have an economic future.

In discussing the Finance Bill it is necessary at the outset to take in context the economic situation which the country faces and which the Minister for Finance has had to face up to — a situation which he inherited and which had been inherited previously by this Government in June 1981. Unfortunately the situation we inherited last November was worse. It is important to consider the overall approach of the Government to the financial difficulties, the economic problems, which are besetting the country. We have to consider the amount of money that is owed to outside concerns and we have to discuss the high unemployment figures.

All these problems have to be faced up to. The existence of the problems must be acknowledged and faced up to in the coming months and years. The Finance Bill provides for high taxation levels which unavoidably had to be introduced. There was no other option open to the Minister for Finance in relation to achieving the objects which he set out when he introduced the budget. There had to be an effort to reduce foreign borrowing, to reinstate our competitiveness and to ensure that the less well off people in our society would be protected.

In dealing with several aspects of the Bill before us, we hope that when the situation will improve certain measures will be looked at again with a view to finding taxes elsewhere, or to look hopefully at the possibility that less tax will have to be imposed so that the burden will be lightened on certain sections of society. There has been much talk about tax evasion and about bringing equity into our tax system. Part of this talk has been exaggerated because though tax evasion has gone on, is going on and no doubt will go on despite the measures in this Bill, it is important to look at ways to reduce the overall tax burden which many people have to face each week. Much of their wages are taken up in the various tax measures, where so much money has to be collected to keep the country going, to provide essential services and make sure that the less well off in our society are looked after.

There has been a great deal of talk about the proposed residential property tax. Every tax will be unpopular to a certain extent. Every penny collected by way of tax is necessary to make sure that this country remains viable, that our debt is reduced and that our competitiveness is maintained. I hope the residential property tax collected will benefit the areas in which it is collected. In my constituency of Dún Laoghaire a number of people will be affected by this tax. Dún Laoghaire Corporation and Dublin County Council are in severe financial difficulties and I hope the Minister will give serious consideration to my suggestion that the money collected by way of residential property tax will be used to the benefit of that area. A percentage of that money should be spent improving roads, local conditions and ensuring that the local authority can provide the necessary services.

I am concerned about the powers given to inspectors under section 94 if they are not satisfied with the assessments made. Under this Bill if an inspector is not satisfied with an assessment he can make another assessment. He has power of entry into a private residence and he can assess the value of the house. This is an infringement of the rights of privacy of a householder. I hope the Minister will tell us in what circumstances this right will be availed of by the inspectors. In regard to valuations, whose valuation will be taken into account? Depending on the climate of the time and other circumstances, various valuations will be given by auctioneering firms and estate agents. It is important that the Minister say which valuation will be used. This Bill provides that 75 per cent of the tax will have to be paid if a person appeals an assessment. I hope this too can be gone into more fully.

I welcome section 78 in which the Minister recognises the problems being faced by the tourist industry. He recognises the contribution the tourist industry makes to the economy and the need to attract visitors. I am glad to see the VAT rate for accommodation has been reduced. This has been acknowledged by the hotel federation as very important. In these difficult times we must attract as much money into the country as possible. If we charge tourists less for accommodation they would spend more on entertainment. When they are presented with their hotel bills at the end of their stay they would see accommodation was not too expensive and they would be encouraged to return and tell their friends about their holiday.

I welcome section 29 which provides for the continuation of a scheme to encourage firms taking on extra employees. I do not know how many people benefited from this scheme last year but anything that can be done to encourage firms to take on extra staff at a time when many people are unemployed, despite having undergone various training courses and acquiring skills, is to be encouraged. It will be interesting to hear how many people benefited from this scheme and how many firms employed extra staff.

There has been a great deal of talk about tax evasion and tax problems. The penalties which have been introduced should be used where necessary. It is important that we look at this matter from the point of view of improving the present situation when people wish to get information from the Revenue Commissioners and talk to their tax inspectors. The Minister said administrative changes willl be introduced and I will be interested to hear any definite proposals he has in this regard. The public should be able to get information more easily than they do up to now. It should be possible for them to visit their tax inspector and have their case dealt with sympathetically. If they are willing to pay their fair share of tax, they should not be inundated with numerous forms. For small businessmen who have to make VAT returns regularly special arrangements should be made because they are assisting the Revenue Commissioners to collect taxes and this procedure should be made as simple as possible.

The small savers should be encouraged. They have been affected by the reduction in the interest-free allowance. If things improve — and hopefully they will from next year on — the Minister could increase this amount again. The introduction of this measure shows the magnitude of the problem and the amount of tax needed to be collected. Every penny collected under this Bill is needed to provide the many services needed to keep this country running.

When looking at the Finance Bill before the House it is important to remember the overall strategy of the Government in reducing the need for borrowing, in maintaining competitiveness and in making sure that the many who depend on the various welfare allowances are looked after. I hope that the Minister will take up some of the matters mentioned by me.

I understand that Deputy Lynch wishes to contribute. It is unfortunate that this debate was curtailed due to an extra large number of Private Notice Questions being taken yesterday and today. However, I hope that sufficient time will be given on Committee Stage to discuss some of the sections which might need slight modification and will certainly need clarification by the Minister.

By agreement, the Minister will be replying at 6.15 p.m.

On 9 February, the Minister in his Budget Statement set out the aims which he wished to achieve. They were: reduction in borrowing, improvement in our competitiveness and minimising the effects of the recession on the less well-off members of our community. In his recent Finance speech he added the countering of tax evasion and the improving of tax collection.

The question to be answered is: does this Bill achieve the fulfilment of those aims? I believe that it does not. The main thrust of the Bill is to increase taxation receipts by various methods such as no increase in personal allowances, a lame duck residential property tax, advance corporation tax, penal VAT rates, farm taxation, tax charged on illegal profits and the tightening up of the appeals procedure.

The Bill singularly fails to provide any incentive or encouragement to bring about balance and continual economic development which is essential for the future of this country, essential in reducing the unemployment level which would, in turn, provide more funds for the Exchequer. As the tax paid shrinks, which it does every day, the amount of revenue available from income tax also shrinks. It is clear to everybody from the closures day after day that the tax base is shrinking at an alarming rate, despite the figures published last month regarding the unemployment level. Those figures are already out of date.

Nowadays, employees and all workers are being savagely taxed. Even though they are, the targets set out in the budget will not be achieved. The only option then open to the Minister, if he wishes to reduce borrowing, will be a reduction in spending on public services. That decision would defeat his third aim which is to minimise the effect of the recession on the lower paid workers. Unless the Labour members of the Government partnership get their way, those who will be hurt most will be the ordinary working people.

Much has been made of the reduction in the hotel VAT rate from 23 per cent to 18 per cent. This reduction is laudable because it is very necessary. However, no comments were made on other items, one with which I disagree wholeheartedly being the reduction in the threshold for registration under section 68. The threshold for deep sea fishermen is reduced from £15,000 to £12,000, for businesses consisting of not less than 90 per cent of sale of taxable goods, from £30,000 to £25,000 and for general trades and professional businesses from £15,000 to £12,000. From my experience I am aware that people in those categories have been clinging to their livelihoods by the skin of their teeth and this change is a body blow to many of them. I fear that many will go out of business because, although the increase in VAT might not be so considerable, there is extra time needed in preparing VAT returns. No matter how small a business, there is a vast amount of paper work to be done and if people have to concentrate on paper work that will take away from their producing income. The benefit accruing to the Exchequer from the reduction of these thresholds will be very small and this was a retrograde step.

Putting VAT on coal, peat and other solid fuel substances and also gas and oil could not by any stretch of the imagination be described as helpful to the less well-off members of our community. Much furore was made by the present Government regarding payment of VAT at point of entry, when introduced by the last Government. Having examined the small print, I fail to find any repeal legislation and perhaps the Minister would look into the possibility of getting rid of this imposition. I never agreed with taxation at the point of entry.

The Deputy is a year too late, I am afraid.

The Minister can start next year.

Such VAT changes and increased VAT charges on farmers, the majority of whom are not as wealthy as some reporters would have us believe, have had a detrimental effect on businesses and on the cost of running households since their imposition. Together with the high rate of PRSI, they have helped to deflate the economy. Add to that the non-increase in personal allowances and the narrowing of the tax bands and we are assured of a continued reduction in consumption for the present.

Especially hit are the young married couples by the taking away of the allowance for the year of marriage. This is indicative of the lack of "cop-on" of the present Government, because not only does that affect the married couples but also shops such as those selling furniture and other household items. Most young married couples, on getting the tax free refund, use that money in purchasing furniture and other household fittings. I ask the Minister to reconsider replacing that allowance.

I welcome the introduction of sections 3 and 4 dealing with the payment to separated couples. The residential property tax is a plausible sop to the socialist partners in Government. Significantly, there are enough loopholes left in it for Fine Gael's rich friends and backers to escape what could have been a ticklish problem for them.

Has the Deputy proposals to close the gaps?

This is an unfair task in that it aggregates the income of the whole household. In many cases the father and mother may be retired and have four or five sons living with them. Those children would be liable to that tax even though they may never at any stage gain any benefit from that house.

The tax appeals procedures have been abused over the years by some people in order not to pay tax. There were also some people who did not abuse the system purposely but who for many reasons did not make returns. Undoubtedly, it was necessary to have those procedures improved. I might pose this question to the Minister: what would be the course of action open to a person making a late appeal if he did not have the money to pay the tax assessed plus interest? That person might be experiencing cash flow difficulties. If he did not have the money to pay that tax would his appeal be upheld? For example, would he have to sell his business when it might turn out at the end of the day that he did not owe any tax? In that event he might then have a few shillings but no business. Furthermore, with regard to tax appeals I do not agree with the provision that appeals be held in open court in the Supreme Court. This could affect many firms with regard to trade secrets and so on. For example, if another competitor was able to come in and listen to proceedings it might not be of benefit to the appellant.

Taxation is to be extended now to every member of the farming community. Previously farmers submitted a form of simplified accounts which the taxman would not accept. I hope the new type of accounts to be furnished will be acceptable to the taxman so that the farmer will not be told to get another accountant.

With regard to the notion of taxation of illegal profits what should be done is that all profits from such illegal activities should be confiscated and penalties imposed on those carrying out those illegal activities. The very idea of putting such a provision in legislation seems to suggest an acceptance and blessing of such illegal activities.

Having studied the Bill and its implications I believe the Minister has failed to attain the goal he set out to attain. Because of the failure to improve our competitiveness to date, as was conceded this morning by the Taoiseach, and the deflation of our economy caused by the budgetary measures, the targets for taxation receipts cannot be achieved. Therefore, unless there is effected a further reduction in public service expenditure, borrowing will have to be increased. Also the VAT increases, low social welfare increases, reduced disposable incomes, because of no increases given in personal allowances and the narrowing of the tax bands have worsened the lot of the less well-off members of our community. The Central Bank guideline for credit for 1982 was 14 per cent, of which 6 per cent only was taken up. This is indicative of the fact that consumption went down and continues to do so. From that follows a fall in tax receipts. Indeed, all of the foregoing point to a falling-off in tax receipts. This reduction, coupled with increased repayments on our foreign borrowings due to the realignment within the EMS and the strengthening of the dollar, makes it clear for those who wish to see it that borrowing will not be reduced. Increased taxes, PRSI levies and dubious-tax evasion and appeals provisions, together with advanced corporation tax, will not help in any way but rather will reduce the competitiveness of all businesses. By no stretch of the imagination have the less well-off members of our community been helped by the budget nor by the social welfare provisions, penal VAT rates on fuel and so on. Indeed, the methods of improving tax collection by way of appeals legislation are extremely dubious and I doubt if they will be successful.

This Bill has failed miserably to grasp the nettle of making our tax system more fair and equitable. Cosmetic operations have been applied but, as is the case with much of what we hear from the far side of the House, when the time for action arrives it is shirked. This Bill and the budget fail miserably to attain the goals set out. Especially, they fail to do anything to solve the greatest problem obtaining in our society today, that is, unemployment.

I might take up the last point made by Deputy M. Ahern. There is a great deal of irony in hearing a Member of his party say with such conviction that his impression is that, when the time comes for action, it is shirked. He had spent the previous 15 minutes taking issue in one way or another with the action now being taken by this Government, action which is rendered more difficult and severe by the very fact that it was not taken three years ago when the leader of his party had identified correctly, as many of us then believed then, the kind of action that was required. To say at the end of a contribution such as Deputy Ahern's that action is being shirked illustrates to me that, unfortunately, some of this debate has been conducted on the basis of opposition for opposition's sake. I do not think it is very constructive, nor do I think it is very helpful either to this House or to the general public to approach the debate in that context.

Obviously, the debate on the Finance Bill is a difficult one. In all of the years that I have been interested in one way or another in Finance Bills I cannot remember any year when a Finance Bill passed through this House without being criticised more or less severely by Deputies on all sides of the House on account of various of its provisions. Of course, it is in the nature of a Bill like this that that kind of debate should take place because we are here dealing with the measures required to implement the tax changes announced in the budget. We tend to concentrate on tax measures when talking about the Finance Bill and not to look at the other side of the equation, which is the expenditure side.

A certain amount of the criticism, I might say the unreality, of some of the comments made about this year's Finance Bill derive directly from the fact that it gives people the excuse to talk about taxation without looking at expenditure. It is a pity that it should be so because we have suffered here for many years and are now paying the price for the fact that we conducted so many of our economic debates without taking the two sides of the equation into account. In many ways we are now up against the argument and have no option but to take the two sides into account. There are many people in our community and indeed in this House who are finding it a very difficult process with which to come to grips. But we must get to grips with it because until we do we will be replicating situations, year after year, in which the very criticisms made during this debate of tax measures will become more and more part of our daily round and a more obtrusive part of the State's activity in the financial area generally.

The debate has ranged very widely over matters raised in the Bill and indeed, in spite of your best efforts, a Leas-Cheann Comhairle, over a number of matters not contained in the Bill. In the time remaining for this debate I shall have to be somewhat selective in dealing with matters that have been raised.

I must say that the Bill as it stands, and for some of the reasons I have outlined, has been represented by a number of Deputies, in particular by Deputies O'Kennedy and Woods, as being concerned only with the tax evasion problems. This is a total misrepresentation of the Bill. The very fact that Deputies O'Kennedy and Woods spent a great deal of time talking about features of it other than the tax evasion measures makes my point for me.

Tax evasion is, of course, a central part of the concern underlining this Bill, but to represent a Bill of this magnitude as a purely anti-evasion Bill is a caricature of what the Bill really is. I would be as concerned — and I have said this on a number of occasions — as any Member about our present high level of taxation and I would in general agree with Deputies who pointed to the problems caused on productive activity and employment by our high level of taxation. If we are really concerned about the high level of taxation and with the remedies, then we have to look at the other side of the equation. Anti-evasion measures will make some improvements in terms of tax revenue and tax equity but they will not do anything to deal with the other side of the equation.

Anti-evasion measures will help to bring in more revenue by extending our tax base and we think some extensions of the tax base at its present level will also help. There is not any doubt in my mind, and I think a great many would agree with this, that there is a large area of untaxed revenue into which we can move in order to relieve substantially the problems that arise from our present high level of taxation. There are some areas where extra revenue can obviously be raised — and I think there would be agreement on both sides that greater revenue should be raised — but to think we can raise the amounts of revenue required to make a significant difference to the overall level of taxation on productive activity would be a delusion. Looking for solutions to our present problems in that way only is very unproductive and to present it in that way would do no favour to those who are most concerned, namely, those who want to know whether they will continue to have a job and those who are not in work at the moment and would like to know they have a reasonable prospect within a reasonable time of getting a job. It is against that background that it is proper to look at the provisions of this Bill and what it aims to do.

Deputy O'Kennedy tended to suggest that the concern in this Bill with tax evasion would give rise to apprehensions, tensions and divisions in our society. He implied that the measures designed to deal with tax evasion would give rise to a certain amount of hysteria. I am not so sure he was really convinced that would be the case because I did not hear him at any point seriously suggesting that this was an issue we did not need to tackle. I think it is generally agreed it is an issue we must tackle, and tackle vigorously, and that is what we have set out to do in this Bill. I would make the point that there is nobody who is paying his or her due tax who needs to be in any degree worried about the new tax evasion provisions provided in this Bill. The vast majority of our taxpayers pay their due taxes — there is no doubt about that — and those who pay their due taxes more or less on time have nothing whatever to fear from more vigourous and better thought-out ways of countering tax evasion.

Deputy O'Kennedy moved on from the question of tax evasion to the question of equity. He was not very specific in putting forward any suggestions as to how we could bring about greater equity in our system. My view is that the antitax evasion measures we have brought in are the first move in this direction, because there is no doubt that if we tackle evasion effectively we will correct what is objectionable in the system and thereby bring about a greater degree of equity. Having done that in the circumstances of this year and, indeed, in the short time available to build a programme of this kind, my contention would be that we have made a substantial contribution to improving the equity of the system and my intention would be that we would go on from here and, as a next step, go further into the area of the structure of our system in order to find a way in which the structure can be revised so as to bring about an even greater degree of equity.

During the course of his contribution Deputy O'Kennedy referred to the report of the Commission on Taxation. Indeed he waved it around, something he has done on a number of occasions in recent weeks, but he carefully avoided giving any indication of what his party's view is about the main recommendations in that report. I am bound to say that since that report was published there has been no substantial statement from the Fianna Fáil Party as to their view on the main recommendations in that report and no indication as to what that party's view is as to what we should do about it. On this side there has been no lack of clarity in our approach. As I said, in present circumstances I do not believe it is a practicable proposition to proceed with the implementation of the central recommendation. In saying that I am not in any way criticising that recommendation. I am simply making the point that, in the circumstances of the time and given the problems that exist in respect of the level of taxation, people's perception of that level and the Exchequer condition, it is not at the moment a practicable proposition to implement holus bolus the main proposal in that report.

A number of Deputies expressed some unease about the additional powers in certain areas which this Bill confers on the Revenue Commissioners. A number of Deputies questioned the provision which would mean that the hearing of tax cases in the High and Supreme Courts would no longer take place in secret. These are two points it was reasonable to raise and two points to which a proper response can be given. As far as the additional powers of the Revenue Commissioners are concerned it is clear that in our system, as it stands, there is room for considerable delay and there is a great deal of room for exploitation by people who do not want to pay their taxes on time or who feel that by spinning out the process they can reduce their liability. I have been concerned to give the Revenue Commissioners the extra powers required in order to shorten the process and make the system more effective, to remove the facility, indeed the incentive, that is there for people to postpone the payment of their taxes. This is being done on the basis of giving them just that amount of extra time they require.

The very fact of shortening that appeals process will make our system more efficient in terms of the use of available manpower. It will also make it much more equitable. The system will be seen in that way by those who do not have the option of resorting to a long series of appeals in order to postpone or even put off the payment of their taxes. So far as the hearing of tax cases in the High Court and in the Supreme Court are concerned, the putting forward of changes in the appeals procedure will in itself reduce the number of cases that are susceptible in terms of being brought to court. My intention is that those cases that would be brought to court would not be ones where the dispute is about the amount of the tax or about the computation of the tax but rather cases in which the difficulty relates to a point of tax law. Therefore, those cases that would come to court could be cases in which there would be an interest in establishing a point of law. I do not see any reason for there being any secrecy about the courts establishing that the Revenue Commissioners were right or otherwise in not accepting the kind of scheme being put forward in relation to the abatement of tax. Whether it was a question of proving the Revenue Commissioners right or of proving the taxpayer right it would be useful and desirable that the public would be aware of the situation.

But not where disclosure of company accounts would be damaging to a company vis-à-vis their competitors.

I accept the concern being expressed in that respect but we are simplifying the appeals procedure by ensuring that those cases that do reach the courts are not ones in which the argument is about the amount of tax payable but cases in which the argument is about points of law. In the normal course discussions on such matters relate in one way or another to strategies or devices, to use a more neutral word, that people use in their efforts to claim that certain tax is not payable.

There is a real difficulty in this area but we can talk more about that on Committee Stage.

I appreciate the point being made but I do not think that the considerations that are in mind will arise.

The Minister is oversimplifying the situation.

We can have a detailed discussion on this on Committee Stage when I think Deputies will share my views on the matter.

Deputy O'Kennedy expressed concern about section 83 which is the section relating to penalties. He expressed dismay that negligence is now being elevated to the status of crime. As I pointed out by way of interjection, that is not the case. Negligence has a special meaning in law in this respect. It is already a matter that is covered by the law. Therefore, we are not introducing something new into the law in this connection. Deputy O'Kennedy made a point in relation to what is known as the section 23 incentive for rented residential accommodation. What I am proposing in this Bill is that from now on the tax relief in respect of expenditure on the kind of accommodation in question would be limited to the rental income derived from the property and not as at present to the total of rental income derived from within the State. The Deputy said this was a restriction to which he would object. Personally, I would consider it eminently reasonable to say that if we are giving tax relief to an investor who has used his funds to build or to buy accommodation of this kind for renting out, the tax relief should apply directly to the proceeds of the rent. I do not see any reason for extending that tax relief to rental income which that investor might have from other properties that he owns already but which have not been added to the stock of housing property by the provisions of the scheme in question.

Deputy Mac Giolla described the budget as being unfair, anti-working class and mean. I utterly reject each of those adjectives. At the same time I would have a great deal of sympathy in spirit with the situation as the Deputy sees it. The situation in which we find ourselves as a nation could be described as unfair and anti-working class but we are faced with very serious economic difficulties and it is the job of Government to face those difficulties and to remedy them as best we can. In our present circumstances it is essential that we take action that will lead to a relief of the burden on our working class, on the productive sector and on the community generally in terms of the levels of borrowing that we have seen in recent years and which now form such a heavy part of our public finances. Until we do that we will be in what Deputy Mac Giolla referred to as an anti-working class situation because we will be obliged to continue taxing productive effort and taxing individuals at the level that is required in order to service those debts. Almost one-third of our revenue this year will be required to service those debts. In other words, that proportion of our revenue will not be available to enable us to do what we would like to do from day to day, to promote the level of services from which people can benefit. That is what is unfair and anti-working class but it is the problem to which we must address ourselves. That is why it is so important for us to bring back to public finances the kind of balance that we have set ourselves. It is only because we are concerned about prospects for employment, about prospects for equity in our society and about the prospects of relieving some of this burden both on the productive sector and on individuals that we are so determined to restore balance to our public finances.

Deputy Mac Giolla accused the Government of eroding the welfare state to the detriment of the poor. Again, that is an accusation that I would reject totally because what we are doing in bringing back balance to the public finances is protecting the capacity of the State to provide those services, to provide social welfare services and all the other services for the least well off. If the State were to find itself in a position of not being able to do that, the people who would suffer most would be the very ones who depend for whatever reason on our social welfare system. That is at the basis of our action. We must protect the capacity of the State to respond to those needs.

Deputy Mac Giolla sees these matters differently. He sees them in a way which I think is rather popular in the community. For example, he drew attention to the perilous burden of foreign debt and went on in the next breath to berate me for the action the Government are taking to prevent that debt from growing, to bring it under control. The Deputy's argument is not consistent. The criticism of the action we are taking and which is based on the notion that there is a difference between a concern with people and a concern with bringing public finances back into balance, represents the beginning of the cop-out. It is the line that many people seem to take simply to turn away from the kind of action that is required precisely to meet the needs of individuals, and as I have said, to protect the State's capacity to meet the needs particularly of the less well off.

There was the criticism also that the Government are axing productive capital spending. I challenge those Deputies who made that criticism to be specific. I would challenge them to say what particular items of capital spending they have in mind because there is no doubt but that the return we have got as a community from substantial amounts of capital spending in recent years has not been at the level that we would wish to see in economic terms, in terms of job creation or perhaps indeed even in social terms. That in any case is an area that must be dealt with very carefully. There is no dispute in this House that borrowing for productive investment is something which every Government must be prepared to contemplate but borrowing for what is regarded as investment that does not produce a return is a very dangerous course of action and it is one which has placed a weight on our public finances that we are finding difficult to bear at this point. What we have done in relation to the public capital programme this year has been done in a way that will reduce, as far as possible, the effect of the reductions that were required in the employment-generating capacity of the capital programme itself and of the economy in the investments to which it gives rise, the effects of which we hope will continue over a period of years.

I turn now to the property tax. A number of Deputies have made a series of points in this connection.

The Minister has three minutes left.

Deputies Enright, Woods and Cosgrave expressed some concern about what they saw as the possibility of excessive intrusion by the Revenue Commissioners on taxpayers in the course of collecting this tax. It is not in any way my intention that we should have a very intrusive method of operating this tax, which in itself is part of the reason why the tax is based, as a number of people have pointed out, on the idea of self-assessment. It is not my intention that the operation of this tax should turn into an intrusion on people in their homes and if people accept the operation of the tax as it is set out that will not arise. It has also been suggested that it is wrong in the formulation of this tax not to allow for the exemption of income received by way of old age pension. That is a criticism which is made without having regard to the total picture of income that is being taken into account in determining thresholds for this tax. It is required that the income of the household exceed £20,000 before any tax becomes payable so that it is not in any way, and could not be presented, as a tax that will concern people on the margin.

Deputy O'Kennedy ventured the opinion that the Government were losing the opportunity to take advantage of the improvement in our balance of payments position to relieve some of the burden of taxation on our economy. I was very surprised to hear that kind of comment being made in the circumstances of today. It ignores the reason why our balance of payments is not now the major constraint that it has been in recent years. The main reason why this is so is to be found in the effects of recession on our economy. It is not because our exports have been booming ahead at a huge rate, although we have been doing well on the exports side. It is not for that reason that our balance of payments has become less of a problem. It has been because the recession has affected consumption and activity in this economy to the level where imports are not rising anything like as fast as exports that we have a slow down in the level of imports and progress there in relation to the total size——

I would ask the Minister to bring the debate to a conclusion in accordance with an order made today.

I would simply make the point that recent experiences in other countries on attempts to follow expansionary policies in the kind of climate we have now have shown conclusively that the kind of line Deputy O'Kennedy was following does not work. Recent experience in France has shown that very clearly.

There are many other things I would wish to say but no doubt they are points that can be taken up in more detail on Committee Stage.

Question put.
The Dáil divided: Tá, 79; Níl, 68.

  • Allen, Bernard.
  • Barnes, Monica.
  • Barrett, Seán.
  • Barry, Myra.
  • Barry, Peter.
  • Begley, Michael.
  • Bermingham, Joe.
  • Birmingham, George Martin.
  • Boland, John.
  • Bruton, John.
  • Bruton, Richard.
  • Carey, Donal.
  • Conlon, John F.
  • Connaughton, Paul.
  • Coogan, Fintan.
  • Cooney, Patrick Mark.
  • Cosgrave, Liam T.
  • Cosgrave, Michael Joe.
  • Coveney, Hugh.
  • Creed, Donal.
  • Crotty, Kieran.
  • Crowley, Frank.
  • D'Arcy, Michael.
  • Deasy, Martin Austin.
  • Desmond, Barry.
  • Desmond, Eileen.
  • Donnellan, John.
  • Dowling, Dick.
  • Doyle, Avril.
  • Doyle, Joe.
  • Dukes, Alan.
  • Durkan, Bernard J.
  • Enright, Thomas W.
  • Farrelly, John V.
  • Fennell, Nuala.
  • FitzGerald, Garret.
  • Flaherty, Mary.
  • Flanagan, Oliver J.
  • Glenn, Alice.
  • Griffin, Brendan.
  • Harte, Patrick D.
  • Hegarty, Paddy.
  • Kavanagh, Liam.
  • Keating, Michael.
  • Kelly, John.
  • Kenny, Enda.
  • L'Estrange, Gerry.
  • McCartin, Joe.
  • McGahon, Brendan.
  • McGinley, Dinny.
  • McLoughlin, Frank.
  • Manning, Maurice.
  • Mitchell, Gay.
  • Mitchell, Jim.
  • Molony, David.
  • Moynihan, Michael.
  • Naughten, Liam.
  • Nealon, Ted.
  • O'Brien, Fergus.
  • O'Brien, Willie.
  • O'Donnell, Tom.
  • O'Keeffe, Jim.
  • O'Leary, Michael.
  • O'Sullivan, Toddy.
  • O'Toole, Paddy.
  • Owen, Nora.
  • Pattison, Séamus.
  • Prendergast, Frank.
  • Quinn, Ruairí.
  • Ryan, John.
  • Shatter, Alan.
  • Sheehan, Patrick Joseph.
  • Skelly, Liam.
  • Spring, Dick.
  • Taylor, Mervyn.
  • Taylor-Quinn, Madeline.
  • Timmins, Godfrey.
  • Treacy, Seán.
  • Yates, Ivan.


  • Ahern, Bertie.
  • Ahern, Michael.
  • Andrews, David.
  • Aylward, Liam.
  • Barrett, Michael.
  • Barrett, Sylvester.
  • Brady, Gerard.
  • Brady, Vincent.
  • Brennan, Mattie.
  • Brennan, Paudge.
  • Brennan, Séamus.
  • Briscoe, Ben.
  • Browne, John.
  • Byrne, Hugh.
  • Byrne, Seán.
  • Calleary, Seán.
  • Colley, George.
  • Collins, Gerard.
  • Conaghan, Hugh.
  • Connolly, Ger.
  • Cowen, Bernard.
  • De Ross,. Proinsias.
  • Doherty, Seán.
  • Fahey, Francis.
  • Fahey, Jackie.
  • Faulkner, Pádraig.
  • Fitzgerald, Gene.
  • Fitzgerald, Liam Joseph.
  • Fitzsimons, Jim.
  • Flynn, Pádraig.
  • Foley, Denis.
  • Gallagher, Denis.
  • Harney, Mary.
  • Haughey, Charles J.
  • Hilliard, Colm.
  • Hyland, Liam.
  • Kirk, Séamus.
  • Kitt, Michael.
  • Lemass, Eileen.
  • Lenihan, Brian.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • Lyons, Denis.
  • McCarthy, Seán.
  • McCreevy, Charlie.
  • McEllistrim, Tom.
  • Mac Giolla, Tomás.
  • Molloy, Robert.
  • Morley, P.J.
  • Moynihan, Donal.
  • Nolan, M.J.
  • Noonan, Michael J. (Limerick West).
  • O'Dea, William.
  • O'Hanlon, Rory.
  • O'Keeffe, Edmond.
  • O'Kennedy, Michael.
  • O'Leary, John.
  • O'Malley, Desmond J.
  • Ormonde, Donal.
  • O'Rourke, Mary.
  • Power, Paddy.
  • Reynolds, Albert.
  • Tunney, Jim.
  • Walsh, Joe.
  • Walsh, Seán.
  • Wilson, John P.
  • Woods, Michael.
  • Wyse, Pearse.
Tellers: Tá, Deputies Barrett(Dún Laoghaire) and Taylor; Níl, Deputies Aherne and Briscoe.
Question declared carried.
Committee Stage ordered for Tuesday, 24 May, 1983.