Financial Resolution No. 11 will be concluded at 2 a.m. when the question will be put.
Financial Resolution No. 1: Excise— Beer. - Financial Resolution No. 11: Income Tax.
I move Financial Resolution No. 11:
(1) That, in relation to income tax for the year 1986-87 and any subsequent year of assessment—
(a) section 2 of the Finance Act, 1984 (No. 9 of 1984), shall be amended by the substitution of the Table to this subparagraph for the Table to that section:
TABLE
PART I
|
Part of taxable income |
Rate of tax |
Description of rate |
|
(1) |
(2) |
(3) |
|
The first £4,700 |
35 per cent. |
|
|
The next £2,800 |
48 per cent. |
the standard rate |
|
The remainder |
58 per cent. |
the higher rates |
PART II
|
Part of taxable income |
Rate of tax |
Description of rate |
|
(1) |
(2) |
(3) |
|
The first £9,400 |
35 per cent. |
|
|
The next £5,600 |
48 per cent. |
the standard rate |
|
The remainder |
58 per cent. |
the higher rates |
, and
(b) (i) where a deduction falls to be made from the total income of an individual in respect of relief to which the individual is entitled under a provision mentioned in column (1) of the Table to this subparagraph and the amount of the deduction would, but for this subparagraph, be an amount specified in column (2) of the said Table, the amount of the deduction shall, in lieu of being the amount specified in the said column (2), be the amount specified in column (3) of the said Table opposite the mention of the amount in the said column (2):
TABLE
|
Statutory provision |
Amount to be deducted from total income for 1985-86 |
Amount to be deducted from total income for 1986-87 and subsequent years |
|
(1) |
(2) |
(3) |
|
£ |
£ |
|
|
Income Tax Act, 1967 |
||
|
(No. 6 of 1967): |
||
|
section 138 |
||
|
(married man) |
3,800 |
4,000 |
|
(widowed person) |
2,400 |
2,500 |
|
(widow bereaved in the year of assessment) |
3,800 |
4,000 |
|
(single person) |
1,900 |
2,000 |
|
section 138A |
||
|
(additional allowance for widows and others in respect of children) |
||
|
(widowed person) |
1,400 |
1,500 |
|
(others) |
1,900 |
2,000 |
|
section 138B |
||
|
(employee allowance) |
600 |
700 |
|
section 141 |
||
|
(child allowance) |
100 |
Nil |
|
(incapacitated child) |
600 |
600 |
|
Finance Act, 1974 |
||
|
(No. 27 of 1974): |
||
|
section 8 |
||
|
(age allowance, single or widowed person) |
100 |
200 |
|
(age allowance, married man) |
200 |
400 |
(ii) section 138 of the Income Tax Act, 1967, shall be amended —
(I) in paragraph (a), by the substitution of "£4,000" for "£3,800",
(II) in paragraph (b), by the substitution of "£2,500" for "£2,400" and of "£4,000" for "£3,800", and
(III) in paragraph (c), by the substitution of "£2,000" for "£1,900",
(iii) section 138A of the Income Tax Act, 1967, shall be amended, in subsection (2), by the substitution of "£1,500" for "£1,400" and of "£2,000" for "£1,900",
(iv) section 138B of the Income Tax Act, 1967, shall be amended, in subsection (1), by the substitution of "£700" for "£600" in each place where it occurs,
(v) section 141 of the Income Tax Act, 1967, shall apply only in the case of a child to whom paragraph (aa) or (b) (ii) of subsection (1) of that section refers, and
(vi) section 8 of the Finance Act, 1974, shall be amended, in subsection (1), by the substitution of "£200" for "£100" and of "£400" for "£200".
(2) It is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).
I move amendment No. 3 in the name of Deputy O'Kennedy:
In subsection (1) (a), to delete the Table and substitute the following Table:
"PART I
|
Part of taxable income |
Rate of tax |
Description of rate |
|
(1) |
(2) |
(3) |
|
The first £5,500 |
35 per cent. |
|
|
The next £3,400 |
48 per cent. |
the standard rate |
|
The remainder |
58 per cent. |
the higher rates |
PART II
|
Part of taxable income |
Rate of tax |
Description of rate |
|
(1) |
(2) |
(3) |
|
The first £10,000 |
35 per cent. |
|
|
The next £6,000 |
48 per cent. |
the standard rate |
|
The remainder |
58 per cent. |
the higher rates |
The purpose of the amendment is to increase considerably both the allowances and the bands. We regard the proposals by the Minister as minimal and derisory. We put down the amendment to indicate that in our view something along the lines of our amendment would be required to give reasonably significant relief to the PAYE sector. The amendment is not comprehensive but it is an indication by us that something of the order would be necessary to give any meaningful relief to the PAYE sector.
Prior to the budget, income tax plus levies were estimated to bring in £2,260 million. As a result of changes today the income tax plus levies will rise to £2,477 million, an increase of £217 million, almost 10 per cent. Let us look at the share of income tax in relation to total taxation. The figures clearly show that in 1982 it was 36 per cent, in 1984, 38.5 per cent and in 1986 it will be 40.5 per cent, that is income tax as a proportion of total taxation.
This clearly shows that the burden of income tax has risen and continues to rise, despite what the Minister said in his Budget Statement. We quite clearly have a system which imposes an excessive burden on income tax payers. I will be more specific. Exchequer returns clearly show that out of every £100 collected in income tax in 1985, the PAYE sector paid £87.16. That compares with £85.55 in 1984. It proves once again that the PAYE sector is supporting the taxation system and that this budget does not do anything for that sector, overall, considering that there is an increase of £217 million in the tax take, or an increase of 10 per cent. The abolition of the 1 per cent levy is very welcome. It was introduced by the present Minister and it will bring in this year a sum of £36 million, so it has not been quite abolished. Its abolition has only been announced. The burden on income taxpayers, more specifically PAYE taxpayers, will continue to increase. This higher income tax burden, the rise in the price of petrol, the higher VAT and the abolition of the £100 child allowance for taxation purposes has to be borne in mind when considering the so-called concessions which amount to between £2 and £3 a week for the average family man. When one does the household budget it is clear that the average family is worse off. It means that the commitment not to increase the overall level of taxation has no relevance to the ordinary citizen. The real tragedy is that the additional income tax will not work for the economy but will service the external debt which has gone from £5 billion to £9 billion in three short years.
In his speech the Minister said that the overall burden of taxation is reasonable. The Minister is aware that every domestic and international authority has stressed the need to reduce the level of taxation. In 1985 the OECD report on the economy stressed the need to reduce the already high level of taxation. The OECD noted that the task of rectifying the public finances had fallen on taxation under the Government and not as per the Government commitment on cuts in expenditure and that the Government had opted for the soft options and dodged the more difficult ones which need to be looked at. I do not need to tell the House that the budget was estimated to bring in £2,260 million. It will take in £2,477 million, that is an increase of £217 million. I fail to see where is the reduction in the burden of taxation. It is clear from the figures that the burden of taxation has been spread on a fewer number of workers. The budget shows an estimate of £9 million for increased unemployment assistance to cater for additional people out of work, so we are clearly spreading the additional burden on a reduced workforce. It just will not work. Taxation remains at levels that clearly encourage tax evasion, acts as a disincentive to work, to people seeking promotion and to rewarding enterprise. It is now encouraging emigration. It is not just those without jobs who are emigrating. There is a more dangerous phenomenon now. Those who have jobs are beginning to emigrate because of the taxation system. Some genuine reforms in taxation are very urgent. I have tried to demonstrate that the overall burden of taxation has increased by £217 million. That is not grappling with the taxation system, it is tinkering with it and putting an increased burden on a reduced number of people.
Deputy Ray MacSharry.
I tried to get in on the last debate, so perhaps the Chair might bear with me if I mention a few points.
The Deputy is very welcome.
The motion before us deals primarily with tax rates and bands. A point I have being trying to get across for some time in relation to people who are working, particularly parents with adult boys or girls who are on unemployment assistance, is that the benefit of a young person on unemployment assistance is means tested and based on his parents' income. Parents who may benefit from tax benefits in this budget will lose them, in effect, as a result of increased deductions from unemployment assistance of their children. The Government have not made any attempt to address the unemployment system.
It is clear that one of the greatest injustices being done to our young unemployed people is that they are walking the streets with virtually no money in their pockets. Unfortunately, if their parents have the opportunity to work overtime or if they are fortunate enough to get a pay increase, they will automatically lose it indirectly through deductions in the unemployment assistance of their children as a result of means testing. It is high time the Government took it upon themselves to set a minimum unemployment assistance rate for our single men and women living at home with their parents so that they are not in a situation where they are virtually beggars in their own homes with nothing on which to live other than what their parents may be able to give them by way of pocket money. It is not just young people who are affected in this way but men and women, of 30, 35, 40 and 50 years of age who have parents living who are working. It is totally unjust. Whatever benefits may arise in this budget for the taxpayers will be lost if they have young people at home or older people at home depending on them because the benefit will be wiped out because of means testing for unemployment assistance.
The second point in relation to taxation relates to the loss of the child allowance and the transfer of that child allowance to the child benefit scheme. A family of two adults and four children with an average annual income of around £8,000 will as a result of the loss of the child allowance of £100 lose approximately £140 a year and on the other hand because of the child benefit scheme they will gain in the region of £144 so the net gain for that family of six is £4 per year. That is an indication of the illusions the Government are attempting to create in this budget and in the last budget. It has been suggested that the Government have no imagination. I suggest that they do but that it is used in the wrong way to try to create an illusion by adjusting a few pounds here and there and juggling the dates of payments by shifting them into the middle of July and making any deductions early in the year, that something is being given to the taxpayer and to those on social welfare. In a matter of five or six months the penny will drop and most people will realise that what they got in this budget is sweet damn all. It is a question of trying to create an illusion in order to stem the tide of disaffection from the Coalition.
I must admit that the Coalition have learned some lessons since 1981. They are now presenting their budgets in a more professional way. They have learned how to present the good news first and the bad news last. It struck me, listening to the Minister reading the budget speech, that he was following the maxim I hear is used by the PR men, "tell them what you are going to give them; tell them what you are giving them and then tell them what you have told them you are going to give them in order to confirm the idea that something worthwhile is being done and something is being given away for nothing." A favourite phrase of the Government is that there are no free dinners.
Except for the press.
But of course they are not free either because we have to pay for them also. The people who are expected to pay for all the dinners are those in the PAYE sector. They will be paying after the budget, despite all the juggling with the figures, the talk about not taking any more tax between now and 1987 as a gross percentage of the GNP and all the gobbledigook about the figures. The reality is that the PAYE sector will again pay more tax this year than they did last year. They paid more tax last year than the year before. I have no doubt that some stroke or other will be pulled between now and whenever the Government decide to call the general election to try to fool that sector once again by bringing in another series of illusions to create the impression that something worthwhile was being done to reform the tax system and spread the tax burden. Taxpayers would be happy if they believed that the burden was being spread around, that everybody was carrying a fair share. One of the greatest complaints I hear from taxpayers in my constituency is that so many people around them do not pay one penny in taxes. They say that the Government appear incapable of devising a system that will ensure those who are earning money and are liable for tax pay that tax.
It is not too much to ask that the burden be spread evenly and it is not beyond the capacity of the human mind to devise a fair system of taxation that would ensure that the burden is spread around. We have been told that there will be an increase in social welfare benefits amounting to 4 per cent for short term and 5 per cent for long term but, based on a very crude calculation, I estimate that with the delay to the middle of July, that 4 per cent in reality will be about 2 per cent if it is spread between now and when those people can expect to get the next increase which, presumably, will be July 1987. One must add to that the increase of 2 per cent in VAT on all items. I am certain that the remaining 2 per cent to social welfare recipients will be halved, if not wiped out altogether. We must also remember that the Government are claiming that there will be a 4½ per cent inflation rate in the coming year. One can see from that that those who are hardest hit by the recession are those who will suffer most in the next 12 months as a result of the budget.
I am certain that as people read the budget speech, particularly the small print in it, they will see the implications underlying the cuts in the various estimates tucked away in the "Principal Features of the Budget". They will see the various implications of the VAT increase, the child benefit scheme and so on. There are many anomalies and injustices that will become clearer as the days go by. I admit to being a bit weary of the whole sham of budget debates. Certainly, over the last two years instead of debating a real effort to shift the resources in our economy towards the creation of jobs we end up debating petty issues which if the Government had any cop on or political will to change the direction of the economy, to lift it out of the crisis it is in, would be dealt with. We could be spending this time debating now our resources, the taxes we collect and the taxes we could collect, could be used to create work to get the 250,000 people who are costing so much in unemployment benefit and assistance back to work. We should be considering not only putting the economy back on its feet but restoring a lot of dignity to the people who have been thrown on the scrap heap by the incompetence of so many Governments in recent years.
I support the amendment tabled by our party. In the debate we should include Resolution No. 12. All evening we have heard about the change in the burden of taxation from the PAYE sector to what are described as the financial institutions. The Taoiseach, in a slip earlier, said the shift was to a tax on investment. He corrected himself immediately but the budget represents a tax on investment. I should like to deal with the so-called benefits that have been given to the PAYE sector in Resolution No. 11. A figure of £76 million is mentioned. The real bad news will not come until the impact of the measures imposed today is felt by the public. When the Minister and the Taoiseach talk about income tax and the PAYE sector, are they suggesting that the PAYE sector do not have any life assurance policies, small savings, a car, do not have to pay VAT on the items they buy, do not buy petrol, drink or cigarettes? Are they suggesting that these people do not have mortgages, do not have to face interest charges, pay ESB bills, increased CIE fares or telephone charges?
The impression is always given on the night of the budget that there are changes in the rates of tax bands and so on. The taxpayer is supposed to have received the sum of £121 million as a result of this budget. The summary and the explanatory table accompanying the Minister's speech shows that a sum of £280 million has been taken in extra taxation and that a sum of £121 million has been given back. That does not take into account the point made by Deputy Brennan that if no changes had been made today the PAYE sector would have paid £250 million more than last year. I think the term used in finance is "fiscal drag". Am I right?
Not quite, no.
I am going by the Minister's figures published in the document relating to receipts and expenditure where we had £2,103 million in 1985 going to £2,351 million in 1986, the difference being £250 million from the same taxpayers. A sum of only £76 million is to be given back to the taxpayers because I am not including the income levy in those figures. Therefore, we are taking about £200 million extra paid by the PAYE sector no matter how it is presented in relation to single people, married people or a married couple with a family. The PAYE sector will pay hundreds of millions more this year than they did last year. It is presented on the basis of a transfer of the tax from the PAYE sector to the financial institutions and I should like the Minister to comment on this. Most of the PAYE sector will be paying the guts of £60 million extra in VAT. All these increases will affect the unemployed also. The increases in car tax and petrol will yield about £19 million or £20 million, but this is overlooked. There is also a retention tax of £75 million. That tax is already being paid at the end of the year, so there is no great change of burden; it is just bringing it forward to the beginning of the year.
The party opposite brought in VAT at the point of entry.
I am not talking about VAT at the point of entry. If the Minister has no more important contribution than that to make, obviously what I say hurts him. The Minister will have the opportunity to reply. I am sorry that my remarks hurt him so much that he made such a stupid remark about VAT at the point of entry which was not even mentioned in the budget or by me.
It is relevant.
If the Minister wishes to raise it I will remind him of the speech he made recently about reducing the balance of trade deficit. Someone in the Minister's Department should tell him how much VAT at the point of entry helped in that regard. I will gladly debate this matter but it is not relevant to the budget——
I will debate it with pleasure.
If the Minister is so concerned about it and if it has been such a big problem why has he not reduced or abolished it?
Because it yields £230 million.
The Minister will not put me off by trying to justify the trick of the loop type budget which he introduced. Who is paying the retention tax? The consumer and the investor. Priority must be given to investment by private individuals who through their investment in financial institutions help the economy. The Government should create confidence and hope, particularly in relation to investment; but this budget does exactly the opposite. It is frightening to see the way in which it is presented because it is dampening any confidence which might be there and giving little or no hope for the foreseeable future.
I now wish to mention the sum of £38 million which will be collected from the life assurance companies. Where do these companies get their money? From the people who take out life insurance on themselves and their families, the PAYE sector in the main. Where is the shift in the burden in this respect? The banks, assurance companies and the building societies will transfer these tens of millions of pounds to the backs of the over burdened taxpayer.
It is time for the Government to be straight and honest. The thing that worries me about the future of the economy is the direction in which the Government are pointing as a result of the budget. I am sure that the Government tried to find a way to present the budget as something which was great for the PAYE sector and that they were changing the burden of taxation on to those — referred to on television as the criminals in the financial institutions — the tax avoiders. On television tonight tax dodgers were mentioned, but after today's budget the Government could be described as criminals and tax dodgers. Is it any wonder that we have to borrow thousands of millions every year to keep our services running? It will get even harder in the years ahead. Any Irishman or foreigner considering investing in our financial institutions at present would need his head examined. The Government have put out the impression that these people are criminals, tax dodgers and so on.
I know families who have a few shillings and whose children put their Communion or Confirmation money in the bank, the Trustee Savings Bank or the Post Office. They opened a savings account because they were glad to get the few pounds interest tax free. This meant their small sums were increasing each year. The situation was bad enough two years ago when the Minister reduced the interest free allowance from £70 to £50, but now that relief has gone altogether. The Minister did not tell the PAYE sector in his television interview tonight that that allowance had gone.
This budget means the average PAYE taxpayer will pay £4 less in tax each week. That is the only message the Minister had to sell. There has been little mention of the fact that the taxpayers will pay £60 million extra VAT, £50 million extra on petrol, £12 million extra on tobacco and £12 million extra on alcoholic drinks, not to mention that the child allowance will lose the taxpayers £18 million, along with the retention taxes, financial institution taxes, life assurance and so on. This budget can only be described as anti-business, anti-investment and anti-family. When I first came to this House postal charges, telephone charges, electricity charges, CIE charges and so on were all contained in one budget, unlike now when the present administration appear to introduce budgets weekly. All these factors must be taken into account when we are discussing these resolutions. If ever a Government misled the Irish people, this Government did it today. They tried to create the impression that the PAYE sector are on the pig's back because they were given £76 million, while the Government have taxed those bad boys, those criminals, those tax dodgers, in the financial institutions. We all know that the people who will end up paying are the majority of those in the PAYE sector.
I would like to continue along these lines but other speakers want to comment. I urge the Minister when replying not to go in detail into the tables supplied today about the single person, the married person, or the couple with two or three children who will save this, that and the other. When we add all the factors in today's budget we see there is an additional tax on work, on the employer and numerous taxes on the ordinary working person, but the tragedy is that rather than trying to give the people hope and confidence in the economy — things which have been lacking for the past two years — the Government are doing the opposite.
In today's television appearance the Minister's message was and in tomorrow's presentation on radio and in the newspapers will be that he is changing the burden from the PAYE sector to the financial institutions. People are not fools and, above all, investors are not fools. As the weekend approaches and in the cold light of day, serious events could arise from this budget.
I want to refer briefly to Resolution No. 12. I know it was to be taken without debate, but there are a couple of points which need clarification.
Briefly.
There is a change in this budget in regard to the abolition of the composite rate for building societies. Now the 35 per cent rate is to be paid. This means that if I am an investor in a building society and was getting away with the 28 per cent composite rate, I am now caught and will have to pay the 35 per cent rate. There is a line in the budget which says that if I pay a higher rate, say 62 per cent, I should pay 62 per cent on my investment in the building society, yet the Minister says there is no disclosure. The impression is being created that the Minister will get extra revenue above the 35 per cent. This is impossible without disclosure, and he said he is not going to ask for disclosure. I would like that point clarified.
My second point relates to foreigners resident abroad but who have investments in building societies here. If such a person's name appears on the register for the inspection of the Revenue Commissioners — they are now paying the composite rate of 28 per cent — are they liable for the 35 per cent rate or does it mean that they will not pay any tax? Does this mean that huge amounts can be lost to the Exchequer?
I support our amendment. The Minister would have to admit that today's budget was a budget where figures were bandied about and an effort was made to try to create the impression that the taxation burden has been transferred from the PAYE sector — 800,000 workers, and that number is diminishing daily — to the financial institutions. The allowances the Minister has made are paltry, a meagre £100 per person at all levels. There is £100 for the single person, £200 for the married couple, £100 for the widow and so on. He said the maximum allowance he could make was £100. The rate bands have been moved slightly — from £4,500 to £4,700 in the 35 per cent band. Could the Minister not have moved that band up to £5,000 and acknowledged the fact that because of inflation over the years and because of the prevailing economic situation, the people on £5,000 today are in the low income group? If he had moved that band to £5,000 it would have eased the taxation burden on these people. There has been no change in the 48 per cent band. Could the Minister not have moved that to 45 per cent and increased the band still further? We must give some incentive to people and encourage them to contribute to the economy. I accept that there has been a reduction of 2 per cent at the higher income level. There has been much talk of financial rectitude on the part of this Government in the past few years. If they had wished to bring about some semblance of tax equity they should have ensured that nobody would have to pay tax in excess of 50 per cent. It is the case that in the other bands people will still have to pay PRSI contributions. The Government have not given any recognition to the contribution they are making to the State.
In this budget there have been increases in the VAT rates, in excise duties and in the cost of petrol. There has been an attack on the financial institutions but at the end of the day it is the consumers who will have to carry the can. Today the Minister took the soft option in his decision to take in one year the maximum amount from the financial institutions. The banks and the building societies have been put on one level. There will be a retention tax and non-disclosure but what confidence will this create among people who may wish to invest? Many people have invested money on the basis of complete confidentiality and on the understanding that they would make whatever contribution they were supposed to make to the Exchequer. Now the financial institutions will be used to collect tax and they will also have to make a major contribution this year to ease the financial pressures the Government have imposed. The Government are travelling on a dangerous road. Economic growth will contract and confidence will be eroded. Many Irish people who have prospered elsewhere will hesitate to invest here because they know that immediately they do so taxation will be imposed on them by the State.
Last year the building societies contributed £70 million to the Exchequer and in 1986 they will be expected to contribute £100 million. That will add to the administrative costs of the societies. Provision has not been made by them for this kind of increased taxation and the consumers will have to pay the cost. In a few months there will be increases in interest rates and mortgage rates. We will have reached the stage of diminishing returns, there will be stagnation in our economic growth and more economic depression. There will be less disposable income and more unemployment.
Once again the building industry has been hit severely. Less money will be available for it. Extra taxation will ensure that money will not be available in the economy for the financing of building projects. There is no recognition in the budget of the skills and commitment of people in the house building sector. We have one of the highest home ownership rates in the EC but there is no acknowledgement in this budget of the many people who are committed to providing homes out of their own resources. What the Government are prophesing are discriminatory measures against these people.
There is no acknowledgement in the budget of the need to provide funds for local authority loans or to raise the income limit. If there is to be extra taxation in house building it is vital that we provide extra funds to meet the increased cost of houses. last year we warned the Government that the 100 per cent increase in the VAT rate from 5 per cent to 10 per cent would destroy the construction industry. It did that and it also put severe pressure on the financial institutions. Many of them, particularly the building societies, have had to dispose of houses at below cost price when their owners fell into arrears in paying their mortgages. The course being charted by this Government and the Minister is completely wrong.
I should like the Minister to explain what he means by the annual 1 per cent charge on property held under discretionary trusts. The option that was designed to give people an incentive to invest in property has been stifled. We have come to the point where even the medical position of a person will have to be clarified by the VHI vis-á-vis payments. Obviously it will lead to an increase in premium and, again, the consumer and the taxpayer will have to carry the can.
That is nonsense.
We will see. The 1 per cent income levy is being removed and we welcome that. That was a decision by the Minister three years ago to extract more money from the taxpayers. However, in the light of the abolition of the child tax allowance, the meagre provisions regarding income tax and the extra taxation across the board, the net effect of this budget will be to increase the cost of living, reduce disposable income and contract economic growth. That will result in lessening further economic stability and consequently in reduced returns to the Exchequer and in higher unemployment.
Obviously at this late hour much of what is said will not be published so perhaps we can use this time to take the Minister to task on a few matters relating to the budget. We consider ourselves entitled to say to him that he has not produced a budget that will be of any benefit to the PAYE sector and if any group are entitled to some concession on this occasion, they are. No amount of manipulating the figures will result in anyone believing that in the final analysis they will be paying less in taxation before the end of this year. One would have expected the Minister to have been more generous than merely granting a £100 increase in tax free allowances to single and married people. On behalf of the entire PAYE sector we are entitled to comment that this is a miserly increase. It cannot be justified by any attempt at fancy economic talk or fiscal policy.
Taking the child benefit scheme in relation to the removal of the allowance of £100 per child and taking it at a tax take of approximately 50 per cent it amounts to £50 or about £1 per week. At best, the child benefit scheme compared with the ordinary children's allowances of £12.05 per month is £3 per month or 10p per day. When one takes into consideration the removal of food subsidies, a target which is expected to be reached some time before summer, the Minister has not done anything to help the people concerned. It is regrettable that having found himself bereft of cash and looking to the various sources for help in that area, he opted for place of last resort, the banks and other institutions. That is no tribute to his management or economic skill. They were an easy mark. They presented an option that had been open to us all for many years. It did not require any genius on the Minister's part or on the part of his financial wizards for him to become the first legalised bank robber in the history of the State.
Jesse James.
He arrived with both six-guns firing.
I do not think he would qualify as the first in that category.
Let us keep Jesse James out of the debate.
There are some who expected more from the Minister. I was one of those. Up to today I was a part time admirer of his but that is no longer the case.
I am desolate.
Not nearly as desolate as the country.
The Minister's considerable expertise as a technocrat would have led one to expect that he would have been able to devise at least some method of rigging the situation other than by becoming a bank robber.
He is in the wrong party so far as rigging is concerned.
Anyone could have used the option of resorting to the deposits in the banks and other institutions by way of bringing in a few hundred million pounds. The Minister has not explained sufficiently to the public what money he is taking, how he is taking that money and when he is taking it. He says he will be taking an estimated £75 million from the banks and £38 million from the financial institutions but we must ask him who will be paying. Surely the Minister is not suggesting that the banks will be paying out this money from their profit margins thereby putting their solvency at risk and leading to a position in which the Central Bank might be talking about takeovers by foreign operators. The banks will not take the money either from their reserves or from their profit margins. They will take it either from their borrowers or from their depositors.
The lowest rate on deposits is about 6 per cent while the highest is about 9 per cent. Borrowers pay interest at rates of between 12½ and 17 per cent. When the banks write the depositors' cheques on the two gale days of April and October, which happily coincide with the AIB and the Bank of Ireland balancing days, they will indicate that they will have to adjust the rates to accommodate the Minister. Consequently those in business who are short of cash and who may be not far from going to the wall will have to pay a little extra whether their borrowing is at the lower or at the higher rates. Likewise, the depositors will have to take less. The Minister should say openly that that is how the money will be raised. He should have indicated also, that is if he was genuine in ensuring that the institutions and the corporate bodies pay for whatever goodies may have been delivered today, what the deposits were. I should like to hear what those deposits amount to and how much the Minister considers to be on deposit in the associated banks both on behalf of residents and of non-residents. How much money is lodged in the other institutions, in the savings banks and in the Post Office? It is not understood outside yet that all these other institutions are included. I refer the House to the Principal Features of the Budget. It is in that document that we read that these other institutions are all for the taking. If the calculations from the last balance sheets of the associated banks are anything to go by, the Minister's figure of £75 million is very much an underestimate. If we take the lowest interest rate to depositors at 6 per cent, no matter how one calculates it, if the Minister is taking tax at 35 per cent of that and with more than £9 billion on deposit in the associated banks alone, and add to that the savings banks and the other institutions, one realises that there is a lot of money involved.
There is something wrong with these figures. There is no concession regarding the bank levy, which continues merrily on its way. I wonder about the concession for non-residential depositors. The Minister said that he proposes to introduce legislation to empower the Revenue Commissioners to require details of existing non-resident's deposits in certain cases. That is certainly ambiguous and it can be taken to mean that it will apply in all cases. This is how it will be interpreted by those who have their money on deposit. A train load of money will leave the institutions unless the Minister does as he did on Monday when he discovered that about £600 million had taken flight in the previous four days. He sent his henchmen to the Central Bank to tighten up the exchange controls to put a stop to the gallop. How many of them will be there tomorrow morning to stop the outflow? How many people in London town will be considering their position tonight, people who have had their money here working for our country? How many will feel safe against the allpervading action the Minister is taking today?
The banks will not be the sufferers in this matter, despite the fact that the handlers have been putting out the message tonight that the institutions will carry the load and the PAYE sector will benefit because of it. Banks will not suffer if their solvency is in question. The Minister was eloquent on that matter when he was helping to bail out an institution during the past year in the ICI crisis. The Minister will not sit by and see their profit margins so reduced as to make them vulnerable. It will be passed on; and because of the decartelisation and decontrol of bank interest rates, the borrowing rate will be moved up and the deposit rate will be reduced because of the money which the Minister intends to suck away from them. If that is not legalised bank robbing I do not know what is.
On a point of order——
I doubt whether it is, but it had better be.
I wonder whether the Deputy is having a dream or a nightmare.
The last mouthful we heard from the far north is from a man who would not understand fiscal policy if he met it going out the door. He should be the last to make comment at this hour of the night. I am explaining to him what he might very well have to explain to many exiles from his county who have made good money abroad and put it on deposit in Irish institutions because they felt they were doing a decent and honourable thing in the interests of their country.
This is a nightmare.
They are going to find out that this Government have decided that their hard-earned savings and deposits are fair game to bolster up the arrangements to keep this Government in office. This is foolish fiscal policy. The Minister knows well that this is no great stroke of economic management. It is no great stroke of genius to tell the banks that we need £75 million or to tell the insurance companies that their investment income will have to be depleted by 15 per cent. Those life assurance companies are handling the money of small investors. Some of their managed funds have not delivered much more than the 15 per cent now being taken from them by the Minister. If administration costs and various slippages are taken into account, the Minister may be putting at risk some of the more vulnerable life assurance companies. That will be critically analysed in the near future. While the Minister imagines that the ordinary punter outside does not really care if he takes a grab at the institutions and the banks as long as he is given something and nothing more is taken from his disposable income, the Minister must admit that he is doing both. That is the message in the convivial atmosphere of establishments around the town this evening. They are being very nasty about the Minister.
(Interruptions.)
If it had a hook stuck in it, it would be worth something but is has not, so I will give Deputy Harte the benefit of my silence. He comes from a county where there are a lot of hooks stuck in a lot of mouths. If one were stuck in his, it would be of some advantage. The Minister has not pleased anybody. There is nothing for the agricultural sector or for the development of natural resources. There is no provision of incentives for investment to continue here. There is nothing for the unemployed. The Minister will be justly criticised for his failure to show any expertise or genius in making life more tolerable for the ordinary citizen.
On a point of clarification, is the child benefit allowance payable to the wife?
Yes.
I wish to comment on the smallness of the tax concessions in this budget. A married couple without children, one spouse earning, will have a saving through the increase in the tax free allowance and the abolition of the income levy of £205 per year. That will be made up of £105 saving in income tax and £100 saving on the income levy. A married couple with one child will benefit by £206 through the tax saving, the abolition of the income levy and the child benefit scheme. The man with a family will be £1 better off when the child benefit scheme comes into operation. In his pay packet every week he will have a saving of £1.75 less than the married man with no children. He will lose the present £100 tax free allowance which cancels out the PAYE extra allowance. He will have less money than his counterpart who has no children at all. The man with a child will have £30 less money in his pay packet coming home but his wife will benefit by another £31 eventually, so the family will be £1 better off than the couple who have no children. That demonstrates that the tax saving for a family man in this budget is less than that for a man who does not have a family. It works out at only £4 a week either way. That illustrates the smallness of the tax increases being given, puts them in perspective. If I am not correct the Minister can contradict me, but I think I am correct in this matter.
A couple of years ago the tax free allowance for a child was £240, at another time it was £295, which was then reduced to £100 per child. Perhaps it was inevitable that some Minister would abolish it. That does not render the cost of maintaining children any cheaper. I do not know what kind of convoluted economic thinking there was on the part of the officials of the Department of Finance which led to the child tax free allowance being whittled away. There may be some kind of economic logic in it. For example, a child over 18 years of age attending university costs his or her parents an awful lot of money. In the Finance Bill the Minister should consider granting a concession in respect of non-grant students whose parents must pay university fees so that they would be fully allowable as a deduction in computing their income tax liability.
I note that there was a tax amnesty announced in the Minister's Budget Statement. I remember there was another in 1975-76. It appears that it is an exact replica of that former tax amnesty, which did not work. If the Minister wants to bring about a real tax amnesty then there is another way of going about it. The last one did not work and I think the one in the sixties was the same. On a strict definition of a tax amnesty it is not that at all because, even though the Revenue Commissioners will implement regulations under the provisions of the Finance Bill, that will not achieve what the Minister really wants. If the Minister wants to achieve a real tax amnesty there is a proper way of going about it which would be of benefit to the country in many ways.
I notice from the Minister's Budget Statement that this famous land tax will not be introduced this year. More importantly, it appears to me that the amount of land involved will not be 80 adjusted acres, that it will be a lot less. The Minister did not say so in his statement but one can clearly deduce that it will amount to a lot less than 80 adjusted acres. I am not contending that the Minister is wrong in that but it is just as well to point out that fact now.
I might refer to the deposit interest provision contained in another resolution. There may be a slight dichotomy in my argument in this regard. I welcome the non-disclosure provisions. That will be beneficial and, in the social sphere, will alleviate many problems in areas such as the west where people have been attacked and mugged at night. It will encourage them to put their money on deposit accounts in banks, which will be beneficial to them. I believe it would suit many people to have that interest taxed at source in that way.
However, there may be some problems encountered in this regard. Under the Minister's proposal this will be done in the manner in which it is now done with regard to the building societies. For example, a person who properly returns deposit interest, who does not come within the tax net, will pay no tax. Under the provisions of the scheme announced a single person, say, earning £2,000 in deposit interest will not have to pay tax at present. I act on behalf of such people and that is the only way in which they can operate. Henceforth they will get into their hand £1,300 only. If they submit a proper tax return my reading is that they will not be reimbursed the £700 involved, and there are many such people. I welcome the non-disclosure requirement which will eliminate an anomaly that existed as between the building societies and the banks. There are many people who would not be paying tax on their deposit interest who now will receive a lot less and will be unable to have that discrepancy redressed. Perhaps the Minister could devise a provision in the Finance Bill to overcome that problem. While the scheme may be a good idea it will present problems for such people. There is much reference to non-resident accounts and so on which can be gone into in detail when the Finance Bill is before the House.
I might pose a question before the Minister replies. Page 39 of the Minister's statement contains some of the most convoluted writing ever contained in a Budget Statement. There are more mysteries contained in it than there would be in an Agatha Christie novel. I might pose one or two questions to the Minister with which he might deal when replying. First, there is the statement:
The present composite rate tax arrangement with the building societies will not apply for 1986-87 and subsequent years and the interest reliefs available on deposits with certain banks and other institutions will be terminated as from 6 April 1986.
Perhaps the Minister would tell us exactly to what that refers. A further question I would have refers to the interest payable to depositors in the commercial banks. At present a certain amount of interest is not disclosed and is also free of tax. Is that concession to go in so far as these small depositors are concerned?
The £50 ceiling is gone.
It does not say so anywhere. I want the Minister to confirm that the present £50 free of tax will no longer apply. I presume that the bank will deduct the 35 per cent from such interest but, if it were still to remain free of tax, then a depositor could reclaim the 35 per cent. Everybody seems to be certain that that ceiling is gone — there seems to be a very pessimistic air prevailing — but it does not say anywhere here that it is gone.
The Minister is nodding.
I would like the Minister to confirm that it is gone, that the small depositor will no longer get his or her £50 interest free of tax.
The last little incentive is gone.
The answer to Deputy Haughey's last question is "yes".
It is gone?
Yes; and, as many people in the House know, Deputy Haughey is no mean decipher of convoluted texts.
The Minister should admit his crime.
That was intended as a compliment to the Deputy. I understand perfectly well why Deputy Haughey wanted to pose the question and have it answered other than by a nod of the head. I will revert to that in a few moments.
The Minister has only 12 minutes remaining.
Twelve minutes, with a passing reference to Resolution No. 12, will probably provide me sufficient time to do most of what I want to do.
Deputies opposite have been talking about the PAYE sector in the course of the evening, alleging that in some way I have singled out that sector. I might make the general point that I have never been one of those people who picks out the PAYE sector — it is a mythical sector — and Deputies opposite seem to have some attachment to the idea of setting up an Aunt Sally just to knock it down. For what it is worth, we can make some estimates of the "PAYE sector" contribution to taxation which belie the allegations made by Deputies on the other side of the House this evening.
The amendment put down in the name of Deputy O'Kennedy is unacceptable in view of the Supreme Court decision in the Murphy case, in that the proposed income bands contained in part 2 of the table relating to a married taxpayer do not come to double the bands in part 1 of the table relating to a single taxpayer. The amendment is, therefore, defective on those grounds and for that reason alone could not be accepted. I am surprised that the Opposition should put down this amendment. I know they have done the same kind of thing in Finance Bills in 1983, 1984 and 1985 and do not seem to have caught up with legislation as it is now. If it were to be constitutionalised in order to bring it into line with the decision in the Murphy case the additional cost of the proposal would be of the order of £42 million in 1986 and about £70 million in a full year. Nowhere, at no stage this evening have I heard any suggestion from the Deputies opposite as to how that would be done.
Rob another bank.
I will get to that too and I will not go too far back. I feel that we are making progress because the Deputies opposite seem finally to have realised that there is nobody who can pay for anything at all that they want to do apart from the Irish taxpayer. I have been saying that in this House since January 1983, yet Deputies opposite seem, all through that time, to have felt that there is somebody else who can provide net extra resources to us other than the Irish taxpayer——
There is something else.
——without paying for them. Here we have them in here talking about——
Growth in demand.
——Irish people resident abroad, foreigners who have invested money here, as if we did not have to pay for that money. Of course we have to pay for it. You would need a hole in your head to invest money anywhere without getting a return for it. The only people who can pay the cost of that are the Irish taxpayers, the Irish economy.
The Minister is bleeding them to death.
I am glad that the message has finally dropped on the other side. We might now begin to get some reasonable comment about taxation matters and economic matters from the Opposition. We could give them a few marks for trying hard on that.
On the question of the PAYE group, to dispose of one thing, first of all Deputy Brennan, thinks that the income levy is not being fully abolished. The 1 per cent income levy is being abolished with effect from the beginning of the 1986-87 tax year. The reason that there is any yield at all from it in the forecasts for this year is that it will operate until the beginning of the 1986-87 tax year and the revenue that is put in is the revenue for the rest of the 1985-86 tax year.
That is a mean trick.
(Interruptions.)
The levy is being abolished from the beginning of the 1986-87 tax year, as I pointed out in my statement this afternoon. As far as we can estimate, the revenue that comes from income tax from the "PAYE taxpayer", the increase in the total income tax take from PAYE, Schedule D and retention tax between 1985 and 1986 is an extra £250 million. The tax take from the "PAYE sector" as far as I can estimate — it is an estimate as the Deputies on the other side will know — goes from £1,830 million in 1985 to £1,985 million in 1986. The income levy from that group in 1985 is estimated at £74 million; in 1986 it is estimated at £34 million. The total goes from £1,904 million in 1985 to £2,019 million in 1986, an increase of 6 per cent.
There are a number of factors to be borne in mind. First, we will take during 1986, as I pointed out this afternoon, £121 million less from income tax payers than we would have had we not changed the system. The second factor to be borne in mind is the fact that incomes increase. Nominal incomes increase and real incomes will increase during this year. That expands the base and, therefore, increases the total pool from which we are drawing taxation, and even at a lower rate of take from each individual the total amount of revenue increases. Deputy Haughey knows well——
That is the same lecture as last year.
——behind the seraphic smile that we should not confuse the rate with the take.
The Minister gave us this last year.
I keep giving this lecture year after year. I am beginning to think I am making a little progress with the Deputies on the opposite side but it is slow and it is hard work——
(Interruptions.)
——because they do not want it made. They are far more interested in making frivolous, off the cuff remarks than getting down to the business of putting together even an amendment that would hang together in terms of the legislation.
(Interruptions.)
I can tell Deputy Woods that the day is gone when the Opposition could decide to hang together because they are going to hang separately from what is going on these days.
The Minister is a case of Fine Gael bad mismanagement.
(Interruptions.)
The income tax yield will rise in 1986 because the increase in incomes is such as to outweigh the effect of the reduction in the rates, the increases in the allowances and the widening of the bands. That represents a real reduction in the burden of taxation on those people during 1987.
Deputy McCreevy asked about the comparison between the married taxpayer and the single taxpayer. I must say that Deputy McCreevy is arguing for bigger tax exemptions or bigger tax reliefs without saying where he is going to get the money. He has made a certain reputation in the years since December 1982, and going back even further than that, of being the one who claimed that he would always say where the cost of the concessions he was looking for would come from. Regarding his question, married persons with no children and married persons with children have now the same allowances. They will get the same tax benefit from the changes I have brought in today. The difference between them is that the married person has the extra benefit of the increase in the child benefit rate.
That is 10p a day, the price of a good lollipop.
The change in the situation is more favourable for the married taxpayer than for the single taxpayer.
(Interruptions.)
Order. The Minister has only a few minutes left.
I have only a very few minutes left. I must say with great regret that there are many points that I will not reach but I want to come to one area to which I will make a passing reference as Deputies on the other side have done. It is in relation to the steps I am taking with regard to the retention tax and the taxation of the gross investment funds and realised gains of life assurance companies. I want to point out to Deputy Haughey, lest there be any misunderstanding, that I detailed in my speech this afternoon and in the resolution before us exactly which institutions are concerned in relation to the retention tax. The associated banks, the PO Savings Bank, the trustee savings banks, the ACC and the ICC are all detailed there. I have given all of these institutions.
I did not raise that matter.
I beg your pardon. Perhaps Deputy Haughey did not, but some member of his party did. One of the diminishing band did. These institutions are all set out in the regulation. I am dealing with this only in a partial way because I understood that we agreed that that resolution would be passed without debate — not at my suggestion, incidentally. It is perfectly reasonable to propose, as I have today, that we should widen the base of taxation in order to allow a relief on direct taxation which will benefit large numbers of people who do not have financial assets in these institutions concerned, by asking those who have these financial assets in the institutions concerned to make a contribution which is somewhat greater than they are making now.
Would the Minister answer me this question——
I fully accept, a Cheann Comhairle——
Half of the deposits placed with the associated banks amount to less than £50.
There is more to that.
That is not fair.
There is more to that than meets the eye.
(Interruptions.)
I cannot reply to the points being made by the Opposition if they keep on with this kind of interference. I do want to make this point, as far as the relevant part of the script is concerned, that I have made it quite clear to the House that the exemptions on interest income from those institutions are being terminated with effect from the beginning of the 1986-87 tax year as part of the system that I am introducing to spread the burden of taxation in order to relieve the burden of direct taxation. That is, in my view, an efficient reallocation of the distribution of taxation in our economy in order to restore and to improve incentives for people whose income comes directly from work. In relation to the insurance companies, the tax, as I said, is on their gross investment income realised gains. That inevitably will find its way into the returns on their insurance policies and the profits that they hand on to their depositors. It is diluted; it takes place in the longer term. I believe that is a perfectly valid substitution to ask people to make within our economy in the interests of the direct effect of changes which direct taxation will have on the incentives on people to work.
I am now putting the question.
I regret that I have not had enough time to deal with these questions.
We shall have another opportunity to do so another day. I should like to spend a good deal more time on this issue.
Question put: "That the words and figures proposed to be deleted stand."
The Dáil divided: Tá, 80; Níl, 72.
Tá
- Allen, Bernard.
- Barnes, Monica.
- Barrett, Seán.
- Barry, Myra.
- Barry, Peter.
- Begley, Michael.
- Bell, Michael.
- Bermingham, Joe.
- Birmingham, George Martin.
- Boland, John.
- Bruton, John.
- Bruton, Richard.
- Burke, Liam.
- Carey, Donal.
- Cluskey, Frank.
- Collins, Edward.
- 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.
- Glenn, Alice.
- Griffin, Brendan.
- Harte, Patrick D.
- Hegarty, Paddy.
- Hussey, Gemma.
- Kavanagh, Liam.
- Keating, Michael.
- Kelly, John.
- Kenny, Enda.
- L'Estrange, Gerry.
- McGahon, Brendan.
- McGinley, Dinny.
- McLoughlin, Frank.
- Manning, Maurice.
- Mitchell, Gay.
- Mitchell, Jim.
- Molony, David.
- Moynihan, Michael.
- Naughten, Liam.
- Nealon, Ted.
- Noonan, Michael. (Limerick East)
- 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.
- Spring, Dick.
- Taylor, Mervyn.
- Taylor-Quinn, Madeline.
- Timmins, Godfrey.
- Yates, Ivan.
Níl
- Ahern, Bertie.
- Ahern, Michael.
- Andrews, David.
- Aylward, Liam.
- Barrett, Michael.
- Barrett, Sylvester.
- Brady, Gerard.
- Brady, Vincent.
- Brennan, Mattie.
- Brennan, Paudge.
- Brennan, Séamus.
- De Rossa, Proinsias.
- Doherty, Séan.
- Fahey, Francis.
- Fahey, Jackie.
- Faulkner, Pádraig.
- Fitzgerald, Gene.
- Fitzgerald, Liam Joseph.
- Fitzsimons, Jim.
- Flynn, Pádraig.
- Foley, Denis.
- Gallagher, Denis.
- Gallagher, Pat Cope.
- Geoghegan-Quinn, Máire.
- Haughey, Charles J.
- Hilliard, Colm.
- Hyland, Liam.
- Kirk, Séamus.
- Kitt, Michael.
- Lemass, Eileen.
- Lenihan, Brian.
- Leonard, Jimmy.
- Leonard, Tom.
- Leyden, Terry.
- Lyons, Denis.
- McCarthy, Seán.
- McCreevy, Charlie.
- Briscoe, Ben.
- Browne, John.
- Burke, Raphael P.
- Byrne, Seán.
- Calleary, Seán.
- Collins, Gerard.
- Conaghan, Hugh.
- Connolly, Ger.
- Coughlan, Cathal Seán.
- Cowen, Brian.
- Daly, Brendan.
- McEllistrim, Tom.
- Mac Giolla, Tomás.
- MacSharry, Ray.
- Morley, P.J.
- Moynihan, Donal.
- Nolan, M.J.
- Noonan, Michael J. (Limerick West)
- O'Connell, John.
- O'Dea, William.
- O'Hanlon, Rory.
- O'Keeffe, Edmond.
- O'Kennedy, Michael.
- O'Leary, John.
- Ormonde, Donal.
- O'Rourke, Mary.
- Power, Paddy.
- Reynolds, Albert.
- Treacy, Noel.
- Treacy, Seán.
- Wallace, Dan.
- Walsh, Joe.
- Walsh, Seán.
- Wilson, John P.
- Woods, Michael.
Tellers: Tá, Deputies Barrett(Dún Laoghaire) and Taylor; Níl, Deputies V. Brady and Barrett (Dublin North-West).
Question declared carried.
Financial Resolution No. 11 is agreed.