I welcome the opportunity to continue to make a number of points in relation to the Finance Bill. I wish to make three principal points in my remarks today. The first one relates to what we believe to be a major omission in the Finance Bill, that is any suggestion that there will be any alleviation of the tax burden, particularly for the PAYE workers. Secondly, I would like to comment on the generally fairly crude approach to the constraining of public expenditure, the effect of which is to cause unnecessary distress to very many people without necessarily bringing about major economic advantages which we all hope for. Third, I wish to make some suggestions about omissions in the Bill in relation to the need for a much more sharply focused approach to industrial policy and industrial development.
In relation to tax reform, one of the problems with the budget and the Finance Bill from our point of view is that we think it is possible and conceivable for substantial public support to be obtained for difficult financial measures — measures which curb public expenditure and which introduce public cut backs, if there is some light at the end of the tunnel or some reason for optimism. Our problem is that there is no suggestion of any such optimism in this Finance Bill because it carefully excludes any reference to the need for improvement in tax reform now.
Thus far one of the most fundamental flaws in the Government's policies, as evidenced by the budget and confirmed in this Finance Bill, is the total lack of any coherent plan for tax reform or even a first step in that direction. This is not just a financial issue. We maintain it is vital to communicate to the public a reason for constraint and tax reform is one such reason. There is no such evidence in the Bill.
Of all areas of fiscal policy I and my colleagues in the Progressive Democrates believe that fundamental tax reform is the issue crying out for the most urgent attention. Government after Government in recent times have paid lip service to the concept of tax reform and we are all aware of the dust that is gathering on the Report of the Commission of Taxation. We have all talked about an equitable tax collection and enforcement system. We have again in this year's budget the by now hardy annual of yet another special task force, this time comprising 25 members, to concentrate on collecting tax arrears. Unfortunately, this appears to be a token gesture and a tinkering with the system rather than a radical root and branch approach to tax reform which genuinely gives to the bulk of PAYE employees some indication that the road has a turning for them.
It is obvious from various sources and reports that the tax collection and enforcement system has effectively broken down. A simple example of this was the recent admission by the Minister for Finance that the Revenue Commissioners were unable to chase up the almost £10 million owing by farmers in health contributions since the task of collecting this money was transferred to the Revenue Commissioners in 1984. It is not a problem of obtaining additional revenue or a problem of imagination, seeking new sources of tax. No, it was the simple exercise of collecting what was owed. We have to accept that if we cannot collect what is due, then the system has faltered, if not totally broken down.
Ordinary workers have been very patient but they are not fools. I believe those in the PAYE net feel conned and bitter at their persistent exploitation and the fact that they, peculiarly and exclusively, have carried the burden for an enormous and disproportionate level of public expenditure over many years. They are exhausted from that burden. They are being driven in large numbers into economic activity outside the legitimate economy, driven in large numbers out of the country and driven away from the idea of personal enterprise and initiative into, unfortunately, depression and despair. This is because it is no longer worthwhile working here because the tax take is too great; it depresses initiative and stultifies any attempt by people to better themselves. Surely that is a reasonable and laudable objective.
The PAYE taxpayers observe the contrasting lifestyles of their neighbours and those lucky enough not to be in the PAYE net. They see there are two broad classifications of taxpayers; what we might call the PAYE group and the PAYL sector. One pays as they earn, having tax deducted before they even receive their wages and under the other system it appears you pay as you like. In the latter sector the extent of tax evasion is scandalous. This scandal is exacerbated and encouraged to thrive by the knowledge of our totally inadequate tax collection and enforcement system and the fact that the nonsensical sanctions which are allegedly in existence are seen to be a waste of time because at the end of the day if people are unlucky enough to be caught they negotiate a settlement that, inevitably, is better than what they would otherwise have had to pay. That is turning economic justice and logic on its head. It is an absolute scandal in terms of the entitlement and equal rights of the PAYE sector.
The Progressive Democrats believe that if this Finance Bill is to attempt to revitalise the economy, a fair tax system must be developed. People must be reassured that when they pay their fair share towards the upkeep of the State their money is being wisely spent and, secondly their share must not be such as to crush them beneath its weight, which is happening at present. Many people are paying half their earnings in tax and that is very wrong.
Part of an equitable tax system has to be a significant alleviation of the tax burden on the PAYE sector. Six years ago only 14 per cent of taxpayers paid tax above the standard rate. This year that figure is likely to be nearly 50 per cent. Instead of the repeated promises of tax relief, this Government have turned the screw still more, not merely by the relentless rise in direct taxation or by the failure to even consider the indexation of tax allowances but by increasing the PRSI take — which is income tax by another name — and, throughout the budget, increasing the tax take by something in the order of 14 per cent or over £300 million. I believe the PRSI take alone is set to reap an extra £11 million this year and the tampering with the mortgage interest relief will take another £10 million out of the allowance previously enjoyed by taxpayers.
All the waffle, the talk and the promises about tax reform and relieving the burden on the PAYE sector is put in stark relief when we look at the revenue projections for this year. This year income tax will bring in £2,721 million, up £333 million on last year, the vast bulk of it coming from the PAYE sector, while certain privileged groups in our society, including people with substantial holdings of land, are getting away yet again virtually scotfree. That is unjust and cries out for some form of correction. This Finance Bill does nothing in that respect.
By contrast, capital taxes this year will bring in a paltry £36 million. When total tax revenue is looked at, we see that income tax again contributes disproportionately to the Exchequer coffers. Of the total increase of £473 million in global tax revenue, £333 million comes from income tax, from people caught in a spiralling net of increasing taxation. They get less reward for their work. We have a declining tax base while in general terms public expenditure and State expenditure — inefficient expenditure in many cases — continue to rise. That is not the type of picture anybody can be optimistic about. The Bill is not the type of measure which can point us in the direction of radical reform of our taxation system.
We will not support any Finance Bill which does not include some rationale for public expenditure constraints, that rationale being some beginning of improvements for those in the PAYE net. If there is not that kind of light at the end of the PAYE tunnel we will oppose that measure and that is why we are voting against the Bill. We are voting against the measure not because we will get any great pleasure in making it uncomfortable for a Government who have in some ways begun to do some of the things many of us were talking about for the past few years, but because there is no point in passing such measures unless there is the beginning of an argument for people who do not understand the cutbacks and constraints and cannot see what the rationale is. Part of that rationale is about ensuring a more equal distribution of tax in our society. That has not happened and it is not proposed in the Bill. If the Minister uses the same type of phrases in next year's Finance Bill, assume we can expect the same Augustinian type of approach to tax reform, namely, in due course make me chaste but not just yet or, as in this case, we will correct the taxation imbalance but not just yet. That is not enough.
We maintain that tax reform cannot wait, that it is an element of social justice relating to the well-being of the State, to the right of people to have fair return for their efforts, to the right of people to have reward for initiative, to the nature of a society which increasingly says to people who work: "You are fools; it is much easier if you do not; it is much easier in the black economy or outside the country." The reason the PAYE net is being tightened about the necks of those people is that they are a soft target. They are in the net. An interesting thing about the approach in the budget in regard to the attempt to collect tax due is that the chase is on after those who are in the tax net but if one happens to have evaded or eluded the grasp of the Revenue Commissioners to date one is safe. That is preposterous.
We are making a strong demand, underlined by our outright opposition to any proposed measure that does not incorporate some meeting of that demand for tax reform now. It is not something that can wait for some hazy global national picture to become balanced in a way that nobody has yet defined. It is not something that can wait indefinitely because the effects of brutal taxation on the PAYE sector are depressing economic initiative and the spirit of people who are — pardon the cliche — the very backbone of society because they are the people who work. That has be be corrected. We are not asking for an overwhelming redistribution in the Bill or very soon, but we are asking the Government to begin the process. I will spell out how we believe the Government should embark on that. We think tax reform is inextricably part and parcel of the problem of economic well-being. Obviously, if we increase reward for effort, we encourage additional reward but if we do the opposite, if we increase the tax take as is proposed in the Bill, we depress the initiative of people who are working and we depress the natural initiative of people to get out and work in the legitimate economy.
How can we create an environment for risk-taking for the entrepreneur or, indeed, for getting up out of bed for the ordinary worker while the black economy, a symptom of the way we looked after our tax affairs, continues to thrive and taxation is at such penal rates? All one has to do is look at the motor industry as an example. In the past five or six years 9,000 jobs were lost in that industry. The were not lost in net terms but were lost from the legitimate economy to the black economy, if motor industry sources we have had discussions with are telling the truth, as I am sure they are. The House must address this primary need.
The reform of our tax system is particularly crucial to the development of the services sector which so many recognise as the primary vehicle in job creation. It is also vital that the tax rates are alleviated especially for those entering the workforce or seeking lower paid employment. Our tax reform proposal would begin at that end of the scale. I should like to ask the Minister to have a look at the document our party published before the election. That document, warts and all, tried to grasp some of the issues and spelled out what the priorities should be. We were so bold as to suggest where the Government could get some of the money to carry out those changes.
It makes little sense for a person on the dole to take on a job when his net pay after PAYE, PRSI and levies leaves him or her no better off than if he or she were on unemployment assistance. We must tackle the poverty trap which ensnares the lower paid and that is why the PDs put forward in the recent election campaign an innovative and practical proposal to begin with phasing out PRSI by abolishing it in year one on the first £3,000 of everybody's income. In that way the measure is particularly beneficial to the lower paid who should be our first consideration. We have examined a programme for abolishing PRSI right across the board and that would have begun by lopping 1 per cent or 2 per cent off the gross rate of 7.5 per cent but that would have meant very little to the lower paid and would have involved a substantial cost in this year. This proposal to exclude the first £3,000 of everybody's income from PRSI would have been a dramatic step in tax reform and would be deliberately targeted at favouring the lower paid. It would ease the tax burden on the lower paid. That proposal will form the basis of an amendment we hope to table to the Bill before us. The cost of that measure this year would be in the order of £60 million and I shall point out where I think that money can be obtained.
I should now like to deal with the manner in which the State oversee the expenditure of taxes they are taking in. It is foolhardy of the State to continue to seek to raise massive sums of public finance unless they address the problems of expenditure, not just quantitively — it is suggested that the State is doing that in the health area where there is a constraint but the bottom line is that we are spending more on health this year than we did last year — but also qualitatively where much work needs to be done. In the qualitative area of State expenditure there is great room for imagination and initiative in successive reports of the Comptroller and Auditor General. That official oversees the various expenditures by Government Departments and every year he points to substantial revenues that would accrue to the State if we had better management and accountability systems and if there was the elimination of abuse, overlapping and, in some cases, downright fraud. Those matters are explicitly outlined in a volume which is, despite its somewhat staid cover and colour, invariably more exciting than a Frederick Forsyth novel by virtue of its revelations. I am referring to the annual report of the Comptroller and Auditor General.
Any Government who stand over the annual publication of those reports without taking on board the suggestions in them do not have the moral right to continue to raise taxes in the way we do. Year in and year out the refrain in those reports about the deficiencies in the systems in place for spending our money is the same. Year in and year out the same inadequacies, inefficiencies and systematic weaknesses are evident and outlined explicitly by Mr. Mac Domhnaill and his staff. However, like recurring plaintive themes, it does not seem to get any better with age and, there is no change in the system. Invariably, the reports are consigned to the Library where they gather dust in some obscure corner. I maintain that if it is evident in those reports, as it is, that there are people in various areas of the public sector who have engaged in the forgery of invoices, in the falsification of documents, in establishing systems which allow them to make inputs to a computer for social welfare purposes, to keep the records and make the payments — a system designed for abuse — the moral entitlement of the Government to demand more tax is whittled away. Indeed, the competence and the qualification of those who oversee that system to remain in office — I am not only referring to Ministers who are publicly accountable but to the senior departmental staff — has to be called into question.
There is no real accountability in that sense and I urge the Minister for Finance to commence a debate in the House on those reports and those issues. We should be permitted to examine how it is that the money we raise in this painful way, the vast sums that are increasing annually, are in some cases so misspent. I am arguing for a major overhaul of the quality of public expenditure, the systems overlapping and duplication which goes on in every Department and sometimes between Departments. It is a preposterous monument to incompetence, inactivity and inertia over the years and, above all, an indictment of our system of Government. It is a major question mark over our entitlement to continue to raise taxes unless we can demonstrate that we have spent them wisely and well and it is perfectly obvious that we have not done so.
I will make a few brief comments in relation to the general approach the Government have adopted. It is true, but pointless, to say that our present system of Government is not what the people, the Fianna Fáil supporters or indeed some of their backbenchers expected. The Government recognised the huge problem in relation to public expenditure, that there was not a limitless pocket and their supporters expected them to draw a line at a certain stage and to say that they would go no further. Leaving aside the damage that they may have done to the shredded credibility of all politicians in terms of a complete somersaultvis-à-vis the promises prior to the election as an interesting philosopical exercise, for the first time in my memory in this House there is virtually unanimity about the need to correct the incredible imbalance between the size of the State sector, the role of the private sector and the tax take. I exclude The Workers' Party from that unanimity as they can indulge in the luxury of being against everything and for nothing because they do not have to worry about implementing these measures. Perhaps, to be fair, they do not agree because of their ideological views. Unless the Government can alleviate taxation for PAYE workers they will not win public support or understanding because the ordinary person does not understand the system.
Unfortunately, some of the ways in which these cutbacks — if they can be so called — in public expenditure are implemented have been very arbitrary and crude. In some cases the Government are depending on mechanisms which are outside their immediate control and in respect of which in some cases, they hope they will work. However, that has not been the case. Minister Woods in his contribution last Thursday went on at some length in this regard and I do not intend to elaborate on it. To give an example of what I am talking about, Minister O'Hanlon, Minister Wilson and, to a lesser extent, the Minister for Finance spoke about the area of health. The reality is that the poor are suffering because the machinery and system for dispensing the central fund of revenue from the Department of Health are loaded with vested interests. It is a preposterous model for spending public money that those in control directly benefit, depending on their decisions. I am talking about consultants, county councillors and others who comprise health boards. It is whistling by the graveyard for the Minister for Health to hope that the taxes raised and constrained by him in overall terms to an increase of £16 million over last year will be all right when it percolates through the system. It will not be all right because the people who make the decisions at middle management level stand to gain from them and because of that they succumb to the temptation of ensuring that the weakest and least articulate suffer. That is wrong. It is an abdication of responsibility by the Government. It is preposterous that medical card holders or those who have had to spend the last 30 or 40 years in old people's homes are bearing the brunt of cutbacks operated by health boards which, in every case bar one, have more money to spend this year than last year. The reason is that those at middle management and health board level who manage the funds are acting in a deliberately politically mischievous manner. They are allowed to do this because the Minister who has been involved for many years with health boards, is a prisoner of their psychology. We all tend to stand up for the institutions with which we are associated but in this case they are doing us an injustice.
There must be curbs on public expenditure accompanied by the alleviation of tax for at least some workers to show that there is light at the end of the tunnel and to give them a belief that there is justice in the system. Various Ministers must ensure that justice is done and that the weak do not suffer. The common contract is an outstanding example of the way public resources are abused, an open-ended capacity to write your own cheque. It is an absolute disgrace which is not being dealt with. I know people in pain who cannot get attention in hospitals and others who cannot get replacement limbs unless they pay for the service. I want the Minister to take heed of what I say and to ensure that people are not abused in this way.
I wish to refer to the question of industrial development policy. The Minister did not refer to this in the Finance Bill but he mentioned confidence which used to be called buoyancy in the old days. Unfortunately, confidence does not butter any toast or fill any pint. Ultimately, industrial development which is about creating an environment in which jobs can be generated is not just about a financial infrastructure which the Finance Bill is supposed to put in place, it is also about the shape, scale, size and nature of the semi-State bodies and organisations devoted to the creation of that kind of environment. I want to make a suggestion in this respect which may seem a bit radical but it is a personal view. The Minister for Industry and Commerce, for example, has a plethora of semi-State bodies under his aegis and all doing good enough work. Some do better work than others and project themselves very well. They range from the IDA with a staff of 700 and an administrative cost of £32 million to groups like the NBST with a staff of 76 and an administrative cost of £1 million. The NBST dole out grants of £3 million and the IDA allocate grants of £176 million. There are many other organisations involved, SFADCo, Údarás na Gaeltachta, Fóir Teoranta, The Irish Film Board, IPC, ICC, NDC, CTT and so on. I could go on for a long time. The organisations which impinge on industry and commerce include ANCO, CERT, YEA, IMI, IIRS and so on. Basically, they employ about 4,000 people and they spend something in the order of £700 million in grants. I wonder whether the State should decide to consider taking a substantial portion of those grants and investing them in infrastructure.
The economy would be aided and enterprise would flourish if we considered the elimination of virtually all grants with the possible exception of certain seeding grants for the purposes of getting industry off the ground and if interest rates, energy, telecommunications, postal and transport costs were brought into line with international competition. That could be done if there was a drastic rationalisation of semi-State bodies. I know it needs someone to bite a fairly large bullet — in this case perhaps 14 or 15 bullets — for this to be done but if we do not do so someone else will. It is profoundly wrong that these semi-State bodies should continue to operate without a clear remit at this point of their function, without any clear accountability for the achievement of targets and long past the date on which they were set up. In some cases, as in the case of SFADCo, they were set up to achieve temporary objectives. In many cases, too, such as the IIRS, substantial technology is now available outside of their particular ambit and consequently the same degree of investment is no longer required. When I inquired as to how many staff are employed in the IIRS I was informed that the number is 603. It is very hard to accept that the number of semi-State bodies has to remain constant for all time. Indeed, if you define a State sponsored body as being a body which receives public funds either directly or indirectly there are many more State-sponsored bodies and, of course, in all of these latter cases there is no accountability to the Department responsible for public funding. That is a matter which should be addressed. No list of those State-sponsored bodies is available in the Department as many of the grants are given by lower middle management bodies who in turn do not necessarily require the same standards of accountability. Indeed, there is no standard form of accounting in semi-State bodies so we cannot compare like with like.
It seems that there is a case to be made for asking whether we would all benefit if we dealt with infrastructure and input costs. Should we spend substantial amounts of money by way of giving grants to individual enterprises, the return on which is sometimes hard to see? I have no doubt that Fóir Teoranta would be willing to substantiate that point. We should put that money directly into infrastructure and the services area and into reducing input costs which would automatically benefit all industries while leaving some funds to help the initiation of companies and their subsequent development, which presumably is the purpose of the NDC, the venture capital agency.
I would like the Minister to comment on section 4 of the Bill which abolishes, in relation to Irish people working abroad, the place of abode test for tax purposes for residents in the State. Under that test Irish people working abroad are deemed to be resident in Ireland for tax purposes if they maintain a place of abode here and return even for a short period during the tax year. In consequence, they are liable to Irish tax on their remittances home. The abolition of the place of abode test will enable such people to visit home and transfer their savings here without being subject to Irish tax simply because they maintain a place of abode here and make short visits home. That is fine but why is it that this welcome provision is not accompanied by the same principle being applied to foreigners who maintain a holiday home in Ireland? The economic benefits are precisely the same and the potential advantages to the Irish economy are significant. Foreign currency would be earned from the initial sales of holiday homes, a development which presumably would be made attractive by such initiative, and the construction industry would obtain more business and consequently create more jobs in the process. Tourism would benefit from the visits to Ireland of these people each year and those who maintain holiday homes here could well be attracted to use those same houses as their retirement homes in due course, thus bringing their retirement incomes to Ireland. That would be a measure which would not cost the State anything but which would offer an extra fiscal inducement to a wide range of people who at present do not make any net contribution to the Irish Exchequer. I suggest that the Minister look again at the place of abode requirement and consider whether it should apply to foreigners who maintain a home here.
Regarding sections 8 to 11 the Minister talks about the improvements to and the extension of the business expansion scheme which obviously are welcome but I do not understand what the thinking behind this aspect of the Bill is. There appears to be a major sting in the tail: two areas are specifically excluded for no apparent good reason but perhaps the Minister would be good enough to explain why that is so. The first of these two areas is data processing and computer software which benefits from the 10 per cent rate of corporation tax under the Finance Act, 1984 and the second is the area of the financial services which will be carried on within the Custom House Dock site. I argue that this provision should be looked at again.
In the case of data processing and computer software, either these internationally traded high quality services are good for the economy and for job creation or they are not. I imagine they are as they are labour intensive and do not have the disadvantages which attach to some heavy product industries operating in a small island economy. They require high skills and generate a high added value. They allow for technology transfer and for the payment of high salaries to employees. They do not place a burden on the balance of payments through the import of raw materials as they depend primarily on Irish brain and telecommunication networks, all positive pluses that one might have thought would suggest some degree of recognition and encouragement. Therefore, it seems that we should be promoting this kind of industry in every way and encouraging Irish people to invest in enterprises in these industries but, unfortunately, they are specifically excluded. I do not see any reason for this in the Bill, in the explanatory memoranda or in any of the speeches which have been made including, that of the Minister for Finance.
In the case of the Custom House Docks site — the ring fence as I call it but to the extent that it is in my own constituency, I welcome it — it seems that the concept of a geographic limit should take second place to the concept of encouraging a type of business. The question of whether that internationally traded service is available in the north dock, in the south dock or in any other part of the country is secondary as regional policy should take care of imbalances in terms of industrial or commercial investment in city areas and not financial mechanisms in a Bill such as this. This Bill should be about attracting industry into this country. Consequently, it should be about a positive move to support internationally traded services be they professional or financial services, including architectural or consultant engineering services, medical services and so on. I do not understand why it should be constrained within certain tight limits.
In sections 12 to 20 the Minister makes a number of suggestions. Much criticism has been levied by certain persons at the witholding tax on payments in respect of professional services. I shall not go over that ground again but on the other hand any right thinking or fair person will not deny that this is an area which must be tackled. However, the instrument which is, being used is crude in the extreme. The probability is that at the end of the day it will not take tax from those who it is supposed to take it from but from those who are serviced by these professional services.
The proposal in the Bill amounts, in effect, to the Exchequer receiving an interest free loan of part of the gross turnover from a wide range of professional practices. That is what it boils down to. The State will take an interest free loan on part of the gross turnover from a wide range of these practices. Therefore, it discriminates between practices which work for public institutions and those which work mainly or exclusively for the private sector. Again, that is very hard to understand. In many cases it amounts to double taxation as some professional practices are constituted as unlimited companies and the partners in this case are the PAYE workers who ultimately will pay the bill.
The real solution is to introduce a tax clearance certificate scheme such as that which applies in the construction industry. This would apply right across the board in both the public and the private sectors. It would apply to the widest possible range of services and would catch the defaulters, rather than penalising those who already pay their taxes in full and on time. This system would insist that anybody operating in these areas would have to show a tax clearance certificate before being able to engage in that area of activity. This would automatically catch everybody involved, not just those already comfortably and snugly in the net. With a little imagination, the concept underlying the withholding tax could be improved to treat that area of potential tax revenue, but fairly and in such a way that everybody who should be caught will be caught.
Section 28 gives effect to the Government decision to develop the Custom House Docks site as an international financial services centre by applying the 10 per cent scheme of corporation tax to certain financial services to be carried on there. I am familiar with that area, having represented it since 1973 in some shape or form, and I have no doubt that it is beginning to tell on me — I do not know about the constituents. The type of proposal made is not ideal, in sociological or economic terms, for the area. It inevitably will be a kind of empty canyon at night, if it ever takes off, an area of non-activity at night time with a large office concentration and people engaged in the financial markets, I presume surrounded by a large wall to protect it from the local citizens and the marauders who might challenge its domain. It is not ideal if we want to do something with that site, but perhaps one should not be too churlish. At least, some commitment to that area is better than none.
Whereas the general question of incentives for the Custom House Docks site is welcome, there are two major defects. The first is that the concept of confining these incentives to financial services alone is far too restricted. We should follow the philosophy behind the designation of internationally traded services under the aegis of CTT. The international services of architects and consulting engineers were named for promotion abroad by CTT in 1968. They felt that here were legitimate areas for promotion which should be supported and encouraged. The services of the quantity surveyor were likewise added in 1971. A major step forward was taken in 1983 when a very wide range of additional services was specified by ministerial order, made under the Export Promotion (Amendment) Act of that year.
These areas are worth listing and included agricultural development and processing services, construction related services, medical services, training services catering for all kinds of activities, technical and general consulting services, including commercial and development services generally, international financial services, computer software and data processing services, public administration services, media recording and publishing services. This section of the Bill could be broadened and its philosophy could be elaborated on to include the kind of reference already explicit in the way CTT promote these areas abroad. That development of these and, indeed, other appropriate internationally traded services should be a mainstream plank in Ireland's new industrial development strategy.
The second flaw is the erection of a fiscal ring fence around 27 acres of the Custom House Docks site. These services about which we have spoken should be promoted here as a whole, nationally. They are good for all of us, not just as a regional strategy to deal with the local problems of a small area. Our laws, our tax regime, our regulatory processes — of which, of course, there are too many — and our administration should apply to the whole of Ireland. This vehicle should be used as a way of presenting Ireland as an attractive investment opportunity. A simple technical amendment to the definition of services which qualify for the 10 per cent corporation tax is what is required, with the IDA being the operational conduit for entry into that regime. Certification of a project by the IDA should not necessarily mean that the payment of a grant to that project by the IDA or by any other State agency should occur, but at least that the IDA should be involved to that extent.
Section 31 talks about a change in the rate of corporation tax chargeable on home loan interest earned by banks when taken in isolation. I hold no great candle for the banks but if we are going to get into the area of comparing like with like, this section does not do that. Instead, it takes in isolation the home loan interest earned by banks and does not put them on an equal footing with other mortgage giving institutions. This issue should not be viewed in isolation but should be related to other aspects such as the basic rate of tax paid by mortgage credit institutions on all their operations and the question of levies, such as the bank levy, which continues under section 43 of the Bill. I must admit that I cannot understand any great rationale for this. It is a totally arbitrary levy unrelated to any criterion that I am aware of. Perhaps it would be bringing in a lot more money if it were related to some common sense criteria or perhaps it should not be there at all.
Also what should be considered in this context is the application to certain institutions of statutory liquidity requirements and of capital adequacy ratios. None of those applies in this case. We are simply singling out one element and pretending, for the purpose of comparing like with like, that the section is in order. I submit that that is not the case. If we want a level pitch for competition, by all means let us have it, but anad hoc action such as this does not achieve that desired end result. It should be reviewed, or at least clarified in that context.
As I have hinted, section 43 imposes a levy on banks, which was announced in the budget. The section says that the duty would be assessed on the average amount of current accounts and deposit accounts as at stated dates in each of the months in 1986, subject to certain adjustments including a threshold of £10 million and so on. I do not know what barometers the average amount of current and deposit accounts gives, or what that tells about the bank. Obviously, it tells very little. In principle it is wrong that there is an arbitrary approach to levies on any financial institution when once again, I have no doubt, it will be the account holder who will pay this levy — the taxpayer once again.
If there is something wrong with a corporation tax regime imposed on banks let us not get around the problem by some kind of arbitrary levy. Let us tackle the root causes rather than continue to play around with the system in a crude and arbitrary manner such as this, which only brings tax law into disrepute. Both the Central Bank and the Commission on Taxation are on record as saying that the bank levy is not justified, is arbitrary and does not have the kind of financial integrity that it should have in this context. When first introduced it was stated to be a temporary arrangement which was to be reviewed after the publication of the report of the Commission on Taxation. The first report of that commission was published in July 1982. How long is temporary? How long do we have to wait for the review? I do not know.