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Dáil Éireann debate -
Thursday, 3 May 1984

Vol. 350 No. 2

Finance Bill, 1984: Committee Stage (Resumed).

Debate resumed on amendment No. 17:

In page 10, subsection (1) (a), line 25, after "Income Tax Act, 1967," to insert "and is not a person to whom paragraph (c) applies,".

—(Deputy O'Kennedy.)

Mr. De Rossa

Will the Minister tell the House if he accepts the justice of the argument pressed in regard to the need to treat widows, widowers and single parents with dependants in a special way in relation to the tax bands? The arguments he has put forward so far against them are on the basis of the unsuitability of the amendment from The Workers' Party. If the Minister accepts the justice and equity of the case will he give us an assurance that he will do something now or on Report Stage to meet the need for equity in that area?

Minister for Finance (Mr. Dukes)

The amendment put forward gives rise to a number of difficulties, and perhaps, constitutional ones. I should like to point out for the benefit of Deputy O'Kennedy and to refresh his memory a little, that during the course of Committee Stages debates on the Finance Bill, 1982, Deputy De Rossa and two of his then colleagues put down an amendment which proposed that double rate bands be applied to single parents. During the course of that debate the then Minister for Finance, Deputy MacSharry, referred to the constitutional problems which could arise from the proposals. That problem still exists. In answer to a specific query from Deputy O'Kennedy, I can assure him that we have set up no new legal machinery in the Department of Finance or elsewhere to deal with these matters. I can also assure him that the law or the Constitution has not changed in the meantime on this matter.

Mr. O'Kennedy

The legal interpretation of the Minister for Finance is wrong.

Mr. Dukes

I advise the Deputy, if he does not wish to take my word for this, that he have a chat with his colleague, Deputy MacSharry, who I am sure will be happy to oblige him by saying that the view he took in 1982 was totally justified and is still justified today. For that reason I cannot accept the amendment or undertake to bring forward on Report Stage any amendment going in the same direction. That is not to say that I do not accept fully that widowed and single parents have a difficult job to do. This has been a concern of the House for some years. We have brought about a situation where the total of tax free allowances available to widowed or single parents is the same as the tax free allowances available to married couples. That was done by specific increase in allowances that are related to the fact that those people have declared children. There is a complete obstacle to applying double rate bands to people in that position for the reasons I have outlined. As long as we have both that and constitutional obstacles that will continue to be the case. We will have to find other ways of dealing with what we perceive to be the specific problems faced by people in that position. I cannot accept that amendment, or the other amendments put forward by Deputy O'Kennedy, for reasons of legal difficulties and cost which I mentioned earlier.

Amendment put.

The Committee divided: Tá, 57; Níl, 67.

Tá

Níl

Tellers: Tá, Deputies B. Ahern and Briscoe; Níl, Deputies Barrett(Dún Laoghaire) and Taylor.

Amendment declared lost.

Amendment No. 18 not moved.

Mr. Dukes

I move amendment No. 19:

In page 10, subsection (1), after line 33 to insert "TABLE".

This amendment is a technical one which is designed to insert a formal heading on the table setting out the rates of income tax.

Amendment put and agreed to.

An Ceann Comhairle

Amendment No. 20 has been ruled out of order. Amendment No. 21 is governed by the decision on amendment No. 17 and is not moved.

Amendments Nos. 21 and 22 not moved.

An Leas-Cheann Comhairle

Amendment No. 23 has been ruled out of order.

Question: "That section 2, as amended, stand part of the Bill" put and agreed to.

SECTION 3.

An Leas-Cheann Comhairle

Amendment No. 68 is consequential on amendment No. 23a.

Mr. Mac Giolla

I move amendment No. 23a:

In page 11, in the Table to subsection (1), to insert the following after the reference to section 138A in column (1):

"

Section 138B (employee. 600	1,000
allowance).

".

Mr. Dukes

The purpose of this amendment is to increase the PAYE allowance from £600 to £1,000. The cost of making the amendment would be £84 million in 1984 and £140 million in a full year. The cost of maintaining the allowances at their present level for the tax year 1984-85 will be in the region of £210 million. On these grounds alone I oppose the amendment.

Mr. O'Dea

To comment briefly on the section——

An Leas-Cheann Comhairle

Not on the section. We are on amendment No. 23a.

Mr. O'Dea

It is relevant to the amendment. It looks at first sight as if the Minister is increasing the single allowance from £1,450 to £1,800, that is an increase of £350. However, that is not the case. Every PAYE taxpayer has a statutory allowance of £600 and an allowance of £286 for PRSI. In effect the Minister is increasing the single person's allowance of £2,218 by £350, that is an increase of about 15 per cent. When the fact is taken into account that the rate for the first £1,000 of taxable income has been increased to 35 per cent the allowance has not been increased to any real extent.

Mr. Dukes

It depends on the way the Deputy wants to do the sums. The increase in the personal allowances, that is the increase from £1,450 to £1,800, more than compensates for the fact that we have abolished the 25 per cent rate. There is a net gain to each taxpayer. The Deputy has chosen to follow the course of adding up the personal allowance, the PAYE allowance and PRSI allowance. That is not a relevant way of looking at the overall allowances.

Mr. O'Dea

It affects the PAYE taxpayer.

Mr. Dukes

We have increased the personal allowance by an amount which, even taking account of the fact that we have abolished the 25 per cent rate, means the total amount of tax free income is reduced and for a given income the total tax liability is reduced.

Mr. O'Dea

The total increase in the allowances does not compensate for inflation.

Amendment put and declared lost.

Section 3 agreed to.

SECTION 4.

An Leas-Cheann Comhairle

Amendment No. 25 is an alternative to amendment No. 24 and these may be taken together.

Mr. O'Kennedy

I move amendment No. 24:

In page 11, lines 24 and 25, to delete paragraph (b).

What we are proposing is to restore the PRSI tax free allowance to what it was two years ago. It was £312 then. Last year it was reduced to £286. There is a cogent case to be made for restoring it to the previous level. The position of a worker will still not be equal to what it was two years ago even if that is done. We are not suggesting a higher figure than that because we know the cost of these concessions. We do not want to push the Minister too far but we hope he will accept this amendment.

In relation to social welfare contributions generally, the Commission on Taxation and the National Planning Board speak about all these levies, contributions and so on as being just one broad form of taxation. Employers and employees are only concerned about take-home pay. In the last two years the level of contribution to the Revenue through social insurance contributions has increased from £739 million to £960 million this year. These figures are so stark as to put the whole question in context. In fact, the level of social insurance contributions is approximately half those collected through direct income tax this year. I do not think these figures are sufficiently understood outside. A sum of £960 million is collected by way of social insurance contributions and the income tax contribution is a little more than double that figure.

The increase in the last two years of the social insurance contributions has been the highest single proportionate increase in the whole tax contribution system, an increase of £220 million on £730 million, over 40 per cent. This is a huge increase. As everyone knows, this is a major disincentive to work and gives rise to a great deal of frustration and even worse. How often do we hear people say they would be better off if they were not working? People at work are only interested in their take-home pay. The Minister has reduced the PRSI allowance this year from £312 to £286. Those figures are inordinately high and this has a very great impact on take-home pay. What we are asking here is most unusual. We are asking the Minister to go where we were two years ago and grant the same tax-free allowances. In view of the figures I have mentioned the Minister should look at this.

Deputy Brennan suggested that a sliding scale of PRSI allowance for employers would encourage employment but the Minister has not done that — he has done the opposite. In my view he should do something to stem the flood of increasing unemployment and seriously consider conceding the well-based case we have made that we go back to where we were two years ago.

Mr. Mac Giolla

I propose that we move forward from the £286 to £350. We have taken inflation and other factors into account in reaching that figure. I would like to refer to the Minister's 1983 budget speech when he came up with the wonderful idea of the family income supplement. This was to be an incentive to people on relatively low incomes to take up work rather than be on the dole. The Minister set aside £5 million for this purpose. As I recall — I do not have the Minister's speech to hand — the PRSI reduction from £312 to £286 was to raise this £5 million. I would like to know where that £5 million went, because no family income supplement scheme was introduced. Twenty thousand families were to benefit from this £5 million. We have not heard anything about this since. What happened to that £5 million? What will happen the money collected this year? Has this scheme been forgotten? Is the money going into the coffers in the normal way without giving any assistance to people on lower incomes? This was the incentive given in this House so that we would vote for this scheme. This year the Minister is making the same suggestions but he is not giving any reason why he is taking this £286 from each worker, and he should tell us why he has not altered his position from last year or, alternatively, agree to the amendments suggested and increase the amount to at least £312. In my view, this amount should be considerably increased. Therefore I am proposing he accept amendment No. 25.

Mr. S. Brennan

I want to ask the Minister if there is not a certain injustice in the operation of the PRSI tax-free allowances because it seems to be the same for married and single people. It does not appear to be related to a person's ability to pay. If I am correct, that is a regressive situation. Unlike other allowances and rates geared for married and single people, this rate seems to apply across the board and does not appear to have any differential in it.

The rate of PRSI paid by an employee is approximately 8½ per cent. Would the Minister like to comment on that calculation? If a person earns £10,000 per annum and pays 8½ per cent PRSI — £850 gross — and if one applies 8½ per cent gross, allowing £2,000 taxation on £10,000, one is talking about 11 per cent net. The effect of PRSI on the employee is exactly the same as if the Minister were to come into this House and increase the 35 per cent taxation rate by a further 11 per cent, bringing it up to 46 per cent. PRSI, because it is on gross income, is equivalent certainly to over 10 per cent net on taxable income which is the same as putting up the tax rate by 10 per cent. If I am reading it correctly, it is quite a hefty bill and I am sure that the Minister is not saying that it is a light one. That makes the 35 per cent rate, in effect, 45 per cent or 46 per cent if put on net instead of gross income as with PRSI.

The third point I wish to make is about another anomaly, that an employee on £12,000 salary would pay £1,000 and the employer about £1,450, making £2,500 PRSI going to the State on a salary of £12,000. The employer can write that off with his business expenses because it is part of his cost of employment. He is thus bringing down his profits and his taxation. The real cost to him is half of £1,450. However, what happens to the employee? He cannot write it off and he gets no deduction for it. He pays up the £1,000 PRSI. That is the second injustice, the first being the difference between the treatment of married and single people and the third being that the payment is on gross income and equivalent to 10 or 11 per cent on taxation.

We must reach the stage soon where the complexity of our taxation regime has to be tackled. I know that there must be different horses for different courses in the taxation code, but there are five different rates of income tax and three or four of PRSI — that is nine different rates of taxation applying to an ordinary worker.

Mr. O'Kennedy

There are two different levies as well, on top of that.

An Leas-Cheann Comhairle

The Deputy is speaking generally on section 4.

Mr. S. Brennan

I understand that, but this is connected with PRSI.

An Leas-Cheann Comhairle

Please confine yourself to amendment No. 24.

Mr. S. Brennan

I am suggesting that the PRSI system is part of a very complicated system of nine to 11 rates of taxation applying to the ordinary worker. There must be a way of making it simpler for the average person to understand. A movement has begun in the United States and in many European countries to simplify their tax codes. In that area we should try to simplify ours somewhat. There is a certain amount of inequity in the operation of that system.

Mr. O'Dea

The present rate of PRSI for employees is 8½ per cent of gross income — that is the correct figure. If you gross up the figure of £286, you get an income figure of £3,400. Therefore, the vast majority of employees — practically all — are paying PRSI out of income already partially burdened with tax, if the PRSI allowance does not match the full amount of PRSI paid. That is a principle with which I am in fundamental disagreement. It is inequitable and wrong. However, we are not asking the Minister to change that, but to increase the allowance slightly. He should certainly look at that sympathetically because justice and equity demand it. I should be very pleased and cheered to hear the Minister say that he will consider our amendment. It is fundamental as far as equity in taxation is concerned.

Mr. Dukes

If I may be permitted for a moment to make a small international comparison, since such comparisons have been in vogue earlier today, the latest figures for OECD countries which calculate social security contributions both for employer and employee——

Mr. O'Kennedy

If the Minister is going to compare these figures he will have to talk about the services provided for these contributions.

Mr. Dukes

I ask the Deputy to be patient for a moment and I shall come to that.

Mr. O'Kennedy

The services are very different.

Mr. Dukes

The services provided are not necessarily a matter of concern in relation to this section. It might interest the Deputy to know that for Ireland the provisional figures for 1982 for PRSI social security contributions for both employer and employee represented some 6 per cent of GDP, or 15 per cent of total taxation. That is consistent with the kind of figures about which we were talking earlier.

In the ranking of 23 OECD members, Ireland is fourteenth — there are 13 countries where the relative rates of social security contributions are higher. They go from four times the Irish level as a proportion of GNP in Sweden to three times Ireland's level in the Netherlands and France and so on down the scale. This is something which many people do not appreciate.

Mr. O'Kennedy

But the services provided in Sweden, the Netherlands and France are completely different.

Mr. Dukes

Finally, we have the lowest rate of social security contributions in Europe. Secondly — and Deputies know this quite well — PRSI contributions do not by any means cover the total cost of the social insurance system and have not done so for some years. There is an input from general taxation into the cost of providing our social services in addition to PRSI contributions.

Deputy Brennan made the point that there is no distinction in this allowance on the basis of marital status, that one gets the same allowance whether married or single. This is an allowance given to each individual taxpayer and is similar in that way to the PRSI allowance. A married couple, where both are earning income, get two allowances but this is an allowance specifically for each individual taxpayer by reference to his or her contribution threshold. Deputy Brennan said if one were to compare PRSI contributions with net income, after-tax income or another method, one would find that the incidence is higher than the apparent rate of 8½ per cent in the case of the employee. Of course, that is true. I am tempted to remark that a rose by any other name would smell as sweet — there is not a lot of difference between 8½ per cent on gross income and 10 per cent on net income if the total amount being paid out is the same. Our rates of contribution are among the lowest in Europe. Our existing rates, combining both employer and employee contributions, do not fully cover the cost of social insurance services.

Mr. O'Kennedy

I suppose Portugal is about the lowest — am I right? Is the Minister going to suggest that some countries which are very badly served as regards their social security system are comparable?

Mr. Dukes

I shall tell the Deputy, if I may, that among the countries which have lower rates than ours we have one of the Deputy's favourites — Denmark. Even the Deputy would say that the social services in Denmark are somewhat more advanced — or sophisticated, to use the Deputy's own words — than ours. Other countries in which the contribution rates are lower are Finland and Canada. Another country in which, curiously enough, they appear to be lower — although we do not have the final information — is Japan, but there is a different reason for it——

Mr. O'Kennedy

That supports my case. If they can do it, why can we not?

Mr. Dukes

There is a different reason for it in those cases. There are with lower contribution rates, countries which have more sophisticated systems and countries — of which there are many — which have less developed social security systems than ours. Deputy Brennan ventured off into a very interesting type of calculation.

Mr. S. Brennan

I am glad that the Minister enjoyed it.

Mr. Dukes

This was in relation to how we look at the incidence of the employer contribution. I picked up my ears on listening to that because the Deputy was making an argument which was very much in contrast with his earlier argument when he was inveighing against the inequity of this imposition on employment. The Deputy now says that the employer can write off the PRSI contributions as business expenses——

Mr. S. Brennan

And I want that kept.

Mr. Dukes

——so that, in fact, the level of contribution is not as heavy as it would appear.

Mr. S. Brennan

I was comparing it to the employee's.

Mr. Dukes

That is quite an ingenious argument and one that I might occasionally be tempted to use when talking to the Deputy or to other people who complain to me, as they do from time to time, about the level of their contributions.

Mr. S. Brennan

I want the Minister to give the same benefit to the employees.

Mr. Dukes

I do not think I would get much thanks or plaudits for making that argument. If Deputy Brennan wants to get out there ahead of me and make that argument he is more than welcome to do so and I will be very happy to see how he gets on with it.

Mr. S. Brennan

I am making it here publicly.

Mr. Dukes

On the amendment, the cost of retaining the allowance at the level of £286 is estimated at £51 million in 1984——

Mr. O'Kennedy

Gross.

Mr. Dukes

——and £86 million in a full year. Of course the figures are gross. The Deputy and I could switch sides constantly on this argument. It would make your head go round to watch the two of us switching sides on this. I will stick to the gross figures. If he wants to put them net that is fair enough. I will even give him the conversion if he is really interested in it. To restore it to the level of £312 as Deputy O'Kennedy suggests would cost an additional £5 million in 1984 and £8 million in a full year and to go as far as Deputy Mac Giolla proposes would cost £12 million in 1984 and £20 million in a full year. Given the circumstances we are in — Deputies have heard me say this before to-day and will no doubt hear me say it again in the course of this discussion — I would not be in favour of increasing the allowance because that would mean we would be foregoing that amount of revenue which would have to be at the expense of some other allowance or part of the programme.

Deputy O'Dea mentioned his fear that in some cases the allowance is not completely used up. In fact, maintaining the allowance this year will benefit about 655,000 taxpayers of whom 10,000 would be relieved of tax altogether by the fact that this £286 is added to the total of their tax-free allowances. In other words, there are people who would have £286 or less of taxable income but for the operation of this allowance.

For those reasons I must oppose the amendment. While, of course, we can calculate the incidence in different ways, our rates of contribution in comparative terms are rather low although, as I have said, I do not believe that these comparisons are all that directly relevant, and the allowance itself is the maximum that we find it open to us to give in present circumstances.

Mr. O'Kennedy

The net cost of what we are suggesting would be about £3 million. We have approached everything in relation to these amendments on the basis of taking account, as the Minister puts it, of the position in which he finds himself. It must be recorded that the amount that it would cost the revenue to give effect to bringing us back to where we were two years ago is £3 million net. That is not asking too much to get something moving again.

Mr. Mac Giolla

The Minister did not advert to the reference I made to the family income supplement. Why was the allowance reduced last year to £286? Was a specific reason not given that the money could be used for the family income supplement? Since it was not used, could the Minister indicate this year what reasons he has for retaining the reduction of the allowance to £286? He has said that if the money was lost on that it would mean that something else would have to do without the money, but what would have to do without it this year? Last year a reason was given as to why we should support the reduction. Can he give any reason this year?

Mr. Dukes

I apologise to Deputy Mac Giolla. I overlooked in my answer the query he had raised about the family income supplement. I said in the budget speech this year, and I quote from the Official Report of 25 January 1984, column 816, Volume 347:

Last year I allocated £5 million to help families with low take-home earnings from work, subject to determining the details of a scheme. This process proved more difficult than anticipated at the time. I am glad, however, to be able to tell the House that the Family Income Supplement Scheme, with an annual cost of £13 million, will come into operation in November. The Minister for Social Welfare will announce full details of the scheme in due course. I do not think that I have made a very direct link between the change in the PRSI allowance last year and the introduction of a family income supplement. The two matters are linked to the extent that both have an effect on the incomes of low income workers.

Mr. Mac Giolla

Is there any indication as what the Minister is taking as highly paid?

Mr. Dukes

Not necessarily but I point out to Deputy Mac Giolla that, firstly, we have provided £13 million for a family income supplement this year and, secondly, we have in this Bill provided for a direct measure of assistance to people on low incomes, that is people with incomes of less than £5,000 a year this year, who will be relieved of the burden of the 1 per cent income levy.

Question: "That the words proposed to be deleted stand", put and declared carried.

Amendment declared lost.

An Leas-Cheann Comhairle

As amendment No. 24 has fallen, amendment No. 25 in the names of Deputies Mac Giolla and De Rossa also falls.

Amendment No. 25 not moved.

Section 4 agreed to.

Sections 5 to 8, inclusive, agreed to.

SECTION 9.

Mr. Dukes

I move amendment No. 26:

In page 14, lines 1 to 9, to delete subparagraph (ii) and substitute the following subparagraph:

"(ii)as respects corporation tax, for the first accounting period of the body of persons which commences on or after the 6th day of April, 1984, and for each subsequent accounting period,".

The amendment here substitutes a new subparagraph for the existing subparagraph (ii) at lines 1 to 9. The intention in the substitution here is a technical one which sets out to clarify the meaning of the existing provisions in the paragraph in question without in any way altering the effect of the current wording. I do not know if Deputies have questions on this. I can elucidate further if they wish. Basically it is a technical amendment.

Mr. G. Mitchell

Is it purely to remove an ambiguity?

Mr. O'Kennedy

The intention of every section in every Finance Bill is to remove ambiguity.

Amendment agreed to.

Section 9, as amended, agreed to.

SECTION 10.

Question proposed: "That section 10 stand part of the Bill."

Mr. Mac Giolla

There were no amendments that could be put down to this section so we are proposing its deletion. This income levy follows the youth employment levy of the previous year which was introduced for a very specific purpose, the money to be allocated for the specific purpose of youth employment. It was agreed on that basis. That is why it had widespread support throughout the country and the trade union movement. People were prepared to forego 1 per cent of their incomes knowing that it was for the benefit of their children and for the future of young people generally. It was so successful the Minister then proceeded to introduce another 1 per cent income levy for no specific reason other than to bring in more income. This started a very dangerous precedent in regard to income levies. Admittedly there are many calls at present for a simplified tax system but it would be highly dangerous to introduce an inequitable simplified tax system and this imposition of income levies is the beginning of that very real danger. For example, if next year the Minister wants to reduce income tax in a certain area he can bring in another income levy of 1 per cent when, instead of then having a 2 per cent levy on incomes, we would have a 5 per cent levy on incomes. Then he might well decide to reduce VAT on something else and introduce a 10 per cent income levy when we would be into this simple percentage levy on incomes which would constitute a highly dangerous and inequitable system of taxation.

The existing 2 per cent levy on incomes, in addition to the enormous PAYE and PRSI contributions we have been discussing, and the enormous VAT rates which have added to the cost of clothing and everything else, is most unjust. The youth employment levy was accepted because everybody saw it as a desirable objective. Unfortunately, most of that money has not gone to youth employment; that is another day's work, to ascertain where the money is going. But this latest levy is not designed for any purpose and the Minister can use it wherever he likes.

The whole business of this income levy has got to be stopped and this one constitutes the beginning of the real danger. It constitutes merely a Minister for Finance's simple system of collecting more money for his coffers by means of another 1 per cent levy on incomes. Therefore it is very important that we block this now. There has been much talk about the desirability of tax reform, with the Commission on Taxation and everybody else advocating it. But this is moving into a highly dangerous area and should be dropped even before we move into the tax reform area. Therefore, we are pressing very strongly for the withdrawal of this 1 per cent income levy. It is no answer for the Minister to say: "Well, if I drop that it will cost so many millions of pounds and we cannot afford this at present because we are all in such a bad way". That is the answer now advanced to everything raised. I have given examples repeatedly of other ways in which the money can be raised. Land tax is one example, a reasonable property tax is another, an equitable property tax to replace the old rates system. Indeed, there are others I can suggest to the Minister or, for that matter, he might just collect the money already due on foot of income levies, the youth employment levy, moneys outstanding by way of VAT, health levies or even the amount already due on income taxation from the unemployed and farming sectors. If the Minister were to collect the moneys already well overdue he could avoid the imposition of these levies.

I am asking the Minister to drop this latest 1 per cent income levy because of its inequity and because of the danger of thereby moving into a whole new taxation system, a very tempting one for Ministers for Finance.

Mr. O'Kennedy

The first thing to be noted about the levy we are now debating is that it was introduced as a temporary measure. It has been temporary now for two years and, by the looks of things, will remain somewhat less than temporary. It is important that that be put on the record, that this was not meant to be a permanent feature of our taxation system which it is now becoming.

It is important to note also that, while it was introduced as a temporary measure, even then it flew directly in the face of what the Commission on Taxation were recommending when they said, very specifically, in terms that could not be misunderstood, that whatever about increasing existing rates of taxation they very definitely advised against new forms of taxation that would render the system so unnecessarily and unduly complex as to make its reformation almost impossible. That advice was totally ignored. They recognised that there might be a temptation for a Minister to introduce taxation here or there but they specifically advised against new forms of taxation. The Minister has found a new form of taxation and, as Deputy Mac Giolla has said, this time it was not said to be for any specific purpose whereas the previous levy was stated to be for youth employment. Quite frankly, this latest levy constitutes a means of getting in money.

I cannot revert to 1980 to draw a comparison, much less 1979, because we did not have any such levies then. We had not then dreamt up this idea. It was started in 1982. The Minister has raised the contributions from levies from £34 million in 1982 to £153 million this year. Let us call it a tax because that is what it is. This constitutes the largest single increase in terms of taxation, an increase of nearly 500 per cent, a huge increase. That is another of the irritants affecting everybody, particularly employees, in a whole variety of ways. It is just another way of imposing tax and it is on gross income; there is no question of allowances. Even if the take-home pay is nothing like the gross income it is 1 per cent on gross income as if it were take-home pay. All of us know the impact it is having on every employee, the way it is aggravating attitudes towards work, acting as a disincentive to work, indeed the alienation of so many people from their employment, not to say their attitudes towards the Establishment generally. All of these levies — and this one is a classic example — contribute enormously to that attitude at present. It was Edmund Burke who said at one time — and I say this without any attribution or implication in respect of the Minister, myself or anybody else who sat in that seat——

Mr. Dukes

The Deputy was in the same shoes himself at one time.

Mr. O'Kennedy

I was. But Edmund Burke it was who said — and I think I am quoting him fairly — that any fool can dream up new tax impositions. There is no doubt that anybody can; any fool can dream up another tax on anything.

Mr. G. Mitchell

Do not make dreams one's master.

Mr. O'Kennedy

Long before we ever thought we would be involved in the political scene that is what Burke had to say. He was a most enlightened person who knew something about taxation. We are now moving to demonstrate that taxes that perhaps Burke never thought of can be imposed. We have all kinds of direct and indirect taxation. There are the PRSI contributions and now the income levies as well, percentage levies on gross income as if it were net income which, of course, it is not.

It is clear that the Minister must reconsider. This was to be a temporary measure but it looks like becoming permanent. The Minister is, of course, making a concession in this section by exempting those earning less than £5,000 from the 1 per cent levy. The administration involved in this concession will cost a certain amount of money. If the Minister tells me it will not cost anything in terms of administrative costs to provide this relief of about 50p per week to these people I suggest he should take his courage in his hands and get rid of the levy. Any kind of concession seems to be an acknowledgement that there are many objections in principle to this levy.

The youth employment levy was stated to be for the purpose of creating jobs for young people but everyone knows it is not achieving that objective. We are increasing the number of administrative agencies and their level of activities through interviews, training courses and placement schemes, to such an extent that the Committee on Public Expenditure, of which I am vice-chairman, have expressed grave concern at the lack of co-ordination between all the agencies concerned with "employment placement". If the rate of growth in employment in the nation generally were anything like the rate of employment growth in those agencies, the economy would certainly be experiencing a lift. The reality is that agencies, boards and sectoral committees will not create jobs. Employers will say one of their problems is coping with those who are there to "help" them.

If we were to leave this money with the people and tell them that they would have an extra 2 per cent in their pockets they would achieve far more than has been achieved by these various agencies. We have more faith in the spirit of enterprise of the people, be they builders, contractors, farmers or businessmen, than we have in the spread of agencies when it comes to creating jobs.

We must define the role of Government. Is it their role to create conditions in which people can find it rewarding to go out and do things or should the Government say they know better and take money from the people to set up agencies? I have a certain degree of respect for the Civil Service but it must be acknowledged that the Civil Service has never had to work in the context of giving employment in the competitive world of trade and business. We will not generate more employment by taking an extra £153 million from the people. I would not often quote Ronald Reagan but at least he had a message which the American people understood and it seems to have worked in terms of employment. The alternative is Deputy Mac Giolla's way — all the way left, not stopping in West Germany but going right across to Yugoslavia, Czechoslovakia, the Soviet Union. Let it be socialist——

Mr. Dukes

Is that the solution the Deputy wishes to see?

Mr. O'Kennedy

It is not. There is the choice of adopting Deputy Mac Giolla's approach and going the socialist way or——

Mr. Dukes

That is the Deputy's preferred option.

Mr. O'Kennedy

No. Our choice is to create a climate in which we get rid of all this nonsense whereby we depend on the agencies proposed by the Labour Party. Where are they? The Leas-Cheann Comhairle is here in his official capacity. Their case is that things would be much worse but for them. They have not taken part in this debate and have not argued against the limitation on incentives.

Mr. Dukes

Where is the group of 22?

Mr. O'Kennedy

We have had a presence here and taken part. Deputy Mitchell has had a fairly constant presence on these issues but otherwise the Minister has not been strongly supported.

Mr. Dukes

Deputy O'Kennedy is not exactly crushed under the weight of his friends.

Mr. O'Kennedy

The Labour Party present themselves only to vote for the maintenance of the income levy, for the increase in PRSI and for the increase in the level of taxation. Not one of them has argued the case for the workers they claim to represent. They are the ones who want all these agencies. We cannot afford to see £153 million taken from the pockets of people who would generate jobs if the money were left with them. Many people are investing their money outside the State and we must recognise that we will not solve our problems by setting up boards and agencies at considerable cost to the Exchequer. Let us give people back their money and the work they will generate will guarantee that the Minister will get a bigger take in tax. There are 12,000 fewer taxpayers this year than last year and unless there is a change of policy there will be fewer and fewer taxpayers paying more and more tax. I plead with the Minister to prove that this is a temporary measure by abolishing it.

Mr. G. Mitchell

I am amused to hear Deputy O'Kennedy referring to President Reagan. We have gone from "Reaganomics" to "O'Kenomics". It seems we have got a new system.

(Interruptions.)

An Leas-Cheann Comhairle

Deputy Mitchell without interruption.

Mr. G. Mitchell

This new system of "O'Kenomics" seems to allow you to delete £150 million from the Exchequer revenue and still come up with the same current budget deficit at the end of the year. Deputy O'Kennedy spoke about the current budget deficit earlier in the year and also about fiscal rectitude. Now he is proposing that we abandon that by deleting a section which would cost the State £156 million. Nobody would be happier than I to see this go because it probably affects a lot more people in my constituency than it does in Deputy O'Kennedy's. The reality of the situation is that unless we can get the co-operation of the Opposition to cut Government expenditure in the areas it needs to be cut we cannot do this.

Mr. O'Kennedy

You will.

Mr. G. Mitchell

I am delighted to see that on the record of the House. If the Government do what I suggested earlier today, bring in those expenditure cuts and relate them directly to taxation cuts, I hope they will have the support of people like Deputy O'Kennedy. I do not want to get too personal in relation to Deputy O'Kennedy because I know he is presenting the case as best he can. It is not very credible to suggest that we should delete a section which would not just increase the current deficit by over £150 million but would throw the Government finances generally into disarray because of the lack of confidence there would then be in the Government's ability to control their own figures.

Mr. O'Kennedy

It is £153 million. The Minister can explain that.

Mr. G. Mitchell

I would like to ask the Minister about the case of people whose income from employment is paid on a weekly basis and in respect of which the income does not exceed £96, for which there will be an exemption. How will that work if a person has been out sick for two or three weeks? Will it work on a week one basis or a monthly basis? I understand that when a person is paid on a monthly basis it will be divided by four. If a person is paid on a weekly basis and is out sick for five weeks will that affect his annual average? How will this figure of £96 be defined? Will it be his annual income divided by 52? How will this matter operate?

An Leas-Cheann Comhairle

I would remind the Deputies that there was a gentleman's agreement that we would conclude section 10 at 5 o'clock.

Mr. Dukes

I will not in any way get in the way of concluding section 10 at 5 o'clock. I have been, compared with my usual way, rather taciturn today quite deliberately. With regard to the question raised by Deputy Mitchell, and I believe Deputy O'Kennedy mentioned it earlier, the application of the exemption of people earning less than £5,000 a year from the operation of the 1 per cent levy it is quite simple. It is a little crude but that is necessary in order to be simple. We will simply provide in respect of people whose income comes entirely from remuneration, that for employment in any week where a person is paid less than £96 by his employer no deduction on foot of the 1 per cent levy will be made. It is quite conceivable that an employee at work would find himself some weeks of the year not paying the levy and in other weeks paying it. If he is paid on a fortnightly basis, anytime he is paid less than £192 in that fortnight he will not pay the levy and so on on the monthly side. When we are talking about a self-employed person we will have to wait until the end of the year to see if during the course of that year that persons's income exceeded £5,000. If it exceeds £5,000 he is liable to pay the 1 per cent levy. If it does not exceed £5,000 he is not liable to pay the levy.

Mr. G. Mitchell

It will be similar to the week one basis for PAYE.

Mr. Dukes

It is done on a week by week basis or whatever is the period of payment for the person concerned. It is very simple and straightforward, as I said. The section, apart from that important modification to the system, provides for the continuation of this levy for the year 1984-1985. I have already given the figures on it and the contribution this makes to the total tax revenue.

Mr. O'Kennedy

What is the figure for this year?

Mr. Dukes

The yield from the income levy would be about £40 million in 1984 and £73 million in a full year. It is £40 million in 1984 in terms of the budgetary side because, technically, we are now continuing the levy in existence. I have to say to Deputy Mac Giolla that he is again taking the case of intent against me by saying that once this Minister gets a levy in God knows where the levy might go. Perhaps I am inclined to be a bit too devious about these things but, listening to Deputy Mac Giolla and reflecting on where he thought I might go, it seemed to me that he was almost going to suggest that a good way of getting through the system proposed by the Commission on Income Taxation, so dear to Deputy O'Kennedy's heart, would actually be to keep these levies and gradually jack them up year by year until we came to what we might regard as an appropriate level for a single rate of tax, but that would be too devious a way of going about changing the tax system.

Mr. Mac Giolla

It is not a just system.

Mr. Dukes

As I said during our discussion on an earlier section, a rose by any other name would smell as sweet. If we had to find in a full year £73 million through the normal taxation system we would either have to add an extra surcharge on to the existing rates or we would have to reduce tax-free allowances by an amount sufficient to produce the same income. I feel it would not be entirely appropriate to do that because once you build it into a rate or into a tax-free allowance it becomes more permanently a part of the system than the kind of levy we have now which, whatever else one might say about it, at least has the advantage that it is renewed from year to year and gives Deputy O'Kennedy and Deputy Mac Giolla the opportunity to make the points they have been making.

Mr. Mac Giolla

That does not answer the point I made.

Mr. O'Kennedy

Obviously we have lost the case, so can we conclude it?

Mr. Dukes

In spite of the concerns expressed by the Deputies opposite, which I recognise, I cannot accept the amendment for the reasons I stated earlier.

An Leas-Cheann Comhairle

I am putting the question: "That section 10 stand part of the Bill".

Mr. O'Kennedy

Vótáil.

An Ceann Comhairle

I am receiving complaints about lack of co-operation when the question is being put. I appeal to the Members to take their seats in the Chamber and to remain silent if they are in the lobbies while the question is being put and while the result is being announced.

Question put.

The Committee divided: Tá, 62; Níl, 56.

Tá

Níl

Tellers: Tá, Deputies Barrett(Dún Laoghaire) and Taylor; Níl, Deputies B. Ahern and Briscoe.

Question declared carried.

Progress reported; Committee to sit again.

The Dáil adjourned at 5.15 p.m. until 2.30 p.m. on Tuesday, 8 May 1984.

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