Finance Bill, 1987: Second Stage (Resumed).

The following motion was moved by the Minister for Finance on Wednesday, 3 June 1987:
That the Bill be now read a Second Time.
Debate resumed on amendment No. 2:
To delete all words after "That" and substitute the following:
"Dáil Éireann notes the contents of the Finance Bill, 1987 as presented, but conscious of the failure of the Bill:
(a) to provide for reforms in the system of taxation;
(b) to alleviate the tax burden on workers;
(c) to halt the growth in the burden of income tax;
(d) to amend the provisions of the recent financial resolution providing for a withholding tax on professional fees paid by the State;
declines to give the Bill a second reading."
—(Deputy McDowell.)

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.

It is as temporary as the debate we are having.

The Deputy promised to make his contribution brief.

For four years I sat listening to Deputy Desmond talking about health matters for two hours when he was Minister. When the big parties change the rules we will play by the rules. Until then I intend to exercise the same freedom as anybody else. I sat here all day on Thursday and got in on the debate at 4.50 p.m. I do not want to abuse the right of anybody else to speak and I am about to conclude but I shall not be lectured either. It is in the Government's hands. We do not even get a chance to discuss the Order of Business in this House. If the Government want to resolve it, they can take up what I said today to the Taoiseach. We shall be quite happy to operate a five minute or ten minute limit, but as long as other people abuse it in this House we will take the time necessary to put our views on the record. We understand very clearly that those views will be constricted and constrained at every opportunity — and perhaps electorally if some people get their way. That said, I am sorry I had to get onto that note.

The essential points I wanted to make were that the Bill is not acceptable because there is no suggestion of tax reform. The public expenditure constraints that are being imposed in a crude fashion are hurting the weakest sections of the community. There is a need for radical reform of our industrial policy. Something should be done about the question of spending money directly in infrastructure and in lowering input costs rather than through the system of semi-State bodies. I would be grateful if the Minister would be good enough to comment on the specific sections of the Bill I referred to.

I listened with great interest to Deputy Keating. Lest he think I am being acrimonious, I am only pointing out that on the Order of Business he requested that Deputies would contain themselves when speaking——

On a point of order, I did not ask that.

The Deputy requested that it would be considered. As time went on, while the Deputy's speech grew more interesting it took practically one hour and he has now admitted he had ten minutes last Thursday. Therefore, the Deputy has had an hour and ten minutes. That is certainly lavish.

I do not get in very often.

I think you do. I want to comment on some of the points made by Deputy Keating before I reflect on the general thrust of the budget and the Finance Bill: I am very glad to have the opportunity to speak on this Bill.

Deputy Keating said that his party could not accept the thrust of the Finance Bill because it did not contain in it the seeds of tax equity which his party espoused during the recent general election campaign. Deputy Keating referred to his party's programme of tax equity and expenditure cutbacks. I have to take issue with Deputy Keating — not with him personally because I respect him very much as a person — but with the thrust of the Progressive Democrate policies because they were dishonest in their manifestations. The Progressive Democrats in one fell swoop proposed budget expenditure cuts and, at the same time, massive and sweeping tax reforms. They proposed that all of these would happen instantaneously. However, this could not happen. His party did not cost their proposals fully and effectively. The voter was left awash with ideas which were very vague and insubstantial, attractive in their general outline but containing no depth as to how one would go about achieving them.

Deputy Keating may philosophise all he likes about what we said before and after the election. He has already given us a lecture on that so therefore, it would not be proper to have a rehash of it across the floor of the House. I have to take issue with his comments because during the period of the election campaign it was quite dishonest how his party expressed their ideas. On the the one hand they promised expenditure cuts which were the flavour of the month and simultaneously they promised tax equity. They put before the electorate a rosy dawn, promising things that could not happen together.

Not as rosy as yours.

In his heart Deputy Keating knows quite clearly that they could not possibly come together. Fianna Fáil's first priority when they came into office was to contain public expenditure. We had to address this problem in a very restrictive time limit because the budget had to be introduced on a specific date. We were left with very little time to review the expenditure of each Government Department and to trim our sails in each Department. It is not true to say that the Minister for Finance and the Government have shown no light at the end of the tunnel. When the Minister for Finance introduced the Finance Bill he stated very clearly in his speech that tax equity is high on the Government's agenda and that this will be tackled when we have restrained and contained Government expenditure.

When will that be? It is a long time away.

No, it is not. The Minister for Finance spoke about the introduction of tax equity when we have our first priority established. We have introduced expenditure cuts and the public respect what we have done. We all needed to learn lessons. The public at large — and not just the political parties — have come to accept that if one spends more than is in one's purse one will eventually face enormous problems. From the smallest school child——

That idea used to be described as monetarism.

——to the oldest resident in the land, people have come to realise that. I seem to be causing great repartee among the Opposition Deputies.

It is not you who is causing it. We know your heart is not in it.

Side-by-side with the containment of public expenditure, we have also embarked on a policy of developmental projects and the two policies in tandem will bring in their wake tax equity. Our first priorities are to cut back on public expenditure and to implement our policy of developmental projects which will lead to increased activity on the economic front. Following from that there will be more funding for resources to ease the tax burden.

I accept Deputy Keating's point that PAYE workers can, and do rightfully, feel they have borne the burden of taxaction for quite a long time for the range of increased and enhanced public services which the public have demanded during the years. All of the programmes funded by the various Government Departments are worthy and estimable and are of great benefit to the consumer. However, we must contain public expenditure and this we have set out to do.

We have commenced also a range of developmental projects which will proceed at intervals in various sectors. Announcements have already been made which lend weight to what I have said. The educational announcement made yesterday will be clarified in full on Thursday by myself and the Minister of State with responsibility for science and technology. This announcement holds great potential for development in third level colleges. Its purpose is to enhance and establish well recognised links between the third level institutions dealing mostly in technology areas, the universities, the NIHEs and the world of industry.

On a point of order, does the Minister have a script?

I do not require a script sometimes. The House should be the place where from time to time one should not be a slave to the written word——

Hear, hear.

——and where one can talk freely from one's knowledge.

That is the last time I will ask.

The purpose of the centres of excellence in the designated colleges will be to foster and enhance liaison between industry, the universities and third level technological colleges.

Did you change the curriculum?

The Deputy should not interrupt me. I would love to have a conversation with him and perhaps he will have tea or something of that nature with me afterwards.

That is the best offer I have had all day.

Because of the attractive way in which the Minister, Deputy O'Rourke, directs her comments to Deputy Keating she leaves me little option——

I wonder if I should blush? I do not think I will.

What did Edwina Currie say?

I know what she said and the Deputy is not to repeat it in this House.

The Chair is getting jealous.

Hell hath no fury like a Leas-Cheann Comhairle scorned. The purpose of the developmental projects, particularly the one on biotechnology, is to enhance liaison between industry and education. When in Opposition Fianna Fáil placed emphasis on the importance of science and technology as an essential requirement for national development. Indeed all parties agree with us in this. Our priority must be to get the public finances in order but projects needed to stimulate economic activity must also be undertaken if our programme for national recovery is to get under way. We must encourage indigenous industries because they contain the seeds of growth. We have all woken up for the dreams in which one went abroad and returned with 1,000 jobs under one's belt, 1,000 jobs which turned out to be unsustainable. This is reflected in comments by the previous speaker with regard to grant-aids.

There is great encouragement of innovation and technological self-confidence among young people in our second and third level institutions. The Department of Education have undertaken pilot projects in the areas of science and technology. Young women are now becoming more involved and girls are now taking up the required mathematics, physics, chemistry and allied subjects. Four pilot projects undertaken by my Department are to be increased this year with EC aid.

The regional colleges were the success story of education in the seventies and eighties. They were set up with a remit to serve the needs of a region industrially and economically. These colleges have expanded and have responded magnificently to regional needs. In many cases they achieved a national character in their degree awarding activities. Some colleges have a particular speciality. Through the limitations of the 1930 VEC Act, the VECs are not empowered to engage in research and development. They see this as a constraint upon their activities in interacting with the local business agencies and the local development agencies, such as the IDA, the county development teams and the various other groups set up to attract industry and to develop new processes and new ideas for industry. Because of my long links with regional colleges this was an area I was determined to do something about when I came into office.

I was not happy with the idea of the Fine Gael Government, which was disseminated six weeks prior to the election, in which they proposed to break the links between the regional colleges and the VEC committees. The notion that, if that link were broken, the regional colleges would become dynamic powerhouses overnight was false in its premise and it was not sufficiently explored. I am convinced that with amendments to the existing VEC Act there is great potential for growth in industrial development in the regional colleges. Within the human resources and within the resources of the courses offered by the regional technical colleges, there is great potential for interaction in a region between educational institutions, the training agencies and the industrial development agencies. These aims can best be served by maintaining the links with the VEC committees in an altered fashion. I propose, within a reasonable time, to introduce legislation outlining how this can be done.

The ERASMUS programme which has recently been decided by the Council of Education Ministers in Brussels will have attractive implications in the following three years for third level colleges in Ireland. I was lucky in that I could go off to Brussels and come home with it in the bag. I was lucky that there had been other meetings prior to that at which various hindrances were overcome. I arrived in Brussels on the evening it was all signed and sealed, which was very fortunate for me. It means that over the next three years roughly £65 million will be allocated to the member states of the EC to be devoted to interaction between third level institutions in the various countries. A young man or woman in a third level institution can opt at the end of, say, two years, with a further year to run, to go to a comparable institution in Europe dealing with the discipline in which that student is engaged, and can spend six, nine or 12 months doing that course at that university and can then come back home to the parent college and the student will receive the full credits and full assessment of that period abroad.

In the course of the Estimates debate on Education I will give details of this proposal. In the light of my comments today on third level education and funding, it is a very important milestone. It will give our students a chance to gain from the experiences of colleges abroad. The grants available to students to do so will enable them to travel freely and to enter freely on the course of studies. The grant will not be means tested but will be available if a student fulfils the academic requirements and subject to the finding of a comparable level of study in that discipline at a comparable university. This proposal happens to tie in with the announcement which Deputy McCarthy will be making on Thursday and with the whole idea for development in third level institutions. I am very pleased that the third level institutions have been up front in their initial submissions for the ERASMUS programme and for this biotechnology programme in the centres of excellence which we have designated. I have greatly interested industry in responding to the proposal by way of sponsorship.

With regard to the Government thrust in the Estimates, in the Budget and in the Finance Bill, it is not true, as was said by an earlier speaker in the debate, that in the health services, the poor are the people who will suffer. As Deputy Keating said, vested interests remain on the health boards protecting their interests. For instance, when we came into Government we decided that the prescription charges which were to be levied on medical card holders for each item for which they would go to their prescribing chemist would be lifted because we saw those charges as a direct affront to the medical card holders who would bear the full brunt of that provision. Also we saw fit to change that stipulation about rural doctors as proposed by Fine Gael. We are satisfied that the level of funding available to the health services will enable a comprehensive and adequate health service to be maintained throughout the various regions.

With regard to the Custom House Docks site, it is strange that the Deputy would seek to hinder development within the constitutency and talk of it as being "behind high walls" and not "fit" for that constituency. I would have thought that any development in one's constituency would be welcome, particularly when the spin-off and consequential activities are considered and which one would hope would lead to increased development in that area. I am sure the Minister will bear in mind the matter of the perimeter around the Custom House Docks site and the restrictions on finances at present and that he will speak on those matter when he replies to the debate.

According to the Deputy, St. Augustine said, "Lord, make me good but not yet." What he said was "chaste", not "good". That saying illustrates the programme outlined by the PDs in the recent general election. I cavilled at the previous speaker for the time he took, therefore I must be brief. I am sorry to end on a cranky note, but the PDs told us that in one swoop they could cut public expenditure to an alarming extent. I noticed that they would have no primary school building at all in 1987. They would cut expenditure on that to £6 million. They would practically savage all public expenditure and at the same time would be able to give tax equity immediately.


That was their programme. It was uncosted and, therefore, ludicrous and false. Now they are saying they cannot adopt the present budget proposals and that they will oppose the Finance Bill because it does not carry tax equity immediately and contemporaneously. They are hoisting themselves on to the platform on which they hoisted themselves during the election campaign and trying to appear to be the only party who propose tax equity. We had a threefold approach. Our greatest priority was and is to get public expenditure under control. Secondly, allied to that were the developmental projects which we have initiated and will continue to pursue. Thirdly, the Minister for Finance and the Government are committed to a restoration of tax equity within the system.

I do not wish to interrupt my colleague, but could you give me the order of speakers for the remainder of this debate?

I was going to indicate to the House that the order requires that the Minister get in at 6.40 p.m. to conclude. I was going to comment on the fact that the Chair appreciated the brevity of the Minister's contribution.

Thank you.

Deputy Spring, it is not desirable for any holder of the Chair to predict what is going to happen, but ordinarily, having called Deputy Dukes I would then call a speaker from the Government side after whom, if time allowed, it would be my pleasure to call you. However, many factors will govern that. Deputy Dukes is in order now and if he were so disposed he could consume all the time remaining. Having put it to him in that way, I imagine that he will not do so.

He might need us again.

A Leas-Cheann Comhairle, you may be rather modest about your ability to predict things but you are not a bad man for suggesting things. I assure you that it will be up to the next speaker to ensure there is room for Deputy Spring before the Minister for Finance replies at 6.40 p.m.

There are a number of defects in this Finance Bill. My colleague and our spokesman on Finance, Deputy Noonan(Limerick East)— not the other Deputy Noonan, the Minister for Defence — outlined a number of these in his speech on the matter in this House on 3 June so I do not intend to dwell in any great detail on them. The defects in this Bill can largely be remedied, deserve to be remedied and need to be remedied, and that is the approach we will be taking. They need to be remedied because a number of the measures in this Bill are downright mischievous in the effects they will have on the economy, or else are misconceived.

On the wider question for the need for the Bill, whatever our views on the overall thrust of budgetary policy or detailed measures, we need certainty and clarity in the public financial environment for this year. The main areas in which this Bill is defective have been outlined by my colleague. There is first the proposal to reduce mortgage interest relief, to restrict it to 90 per cent of the qualifying interest. That proposal is designed to yield £10 million in 1987. No doubt the arithmetic is correct and the measure now being implemented will yield £10 million in 1987. Even if we accept that as part of the overall package that reduction in tax expenditure of £10 million is required, the measure before us is the wrong way of going about it. It is a simple, proportionate reduction in the tax relief right across the board. It is inevitable that that will hit some people harder than others. For those on lower incomes, even though they may have lower mortgages, the effect of that will in real terms be more severe than the effect on those with higher incomes. There is an infinite variation of circumstances.

Take the typical case of a person whose income is just about high enough to justify buying a house at the lower end of the price range today. Depending on which part of the country one is in, the range is £25,000 to £30,000 and mortgages in those cases of anything from £18,000 to £20,000. The effect of a 10 per cent reduction in the amount of mortgage interest allowable as tax relief obviously will be more severe on that person than on a person with a much higher income, even one whose total mortgage represents the same proportion of his income as applies to a person at the lower end of the scale. If the Government wished to reduce tax expenditures in this way, if they wished to save £10 million by a measure related to mortgage interest relief, I would have thought at the very least, there should be some relation of the impact and that there should not be a greater real burden on those with lower incomes than on those with higher incomes. Of course this measure has all the hallmarks of having been introduced without a great deal of thought. I would even think that, had the Government given the matter somewhat more thought, they might have changed the balance of the measure before us. Of course that can be done on Committee Stage.

Then we have the effect — and the matter is taken up again in the provisions of the Bill before us — of the abolition of farm tax which, according to the Principal Features of the Budget, as circulated on budget day, will cost a net £9 million in 1987. I do not agree with the abolition of the farm tax; nor have I seen any sign that the system the Government are putting in its place is being pursued with anything like the diligence or attention required even to bring about its stated objective by the Government. Then the Government find, somewhat to their surprise, that the abolition of the farm tax will reduce their revenue yields by £9 million this year and they cast about for a way of recouping that revenue. In what must be one of the most unimaginative answers to this problem that could have been conceived the Government decide to reduce the flat rate addition to farm prices. That is the kind of measure that will be taken by a Government unthinkingly, a Government who see nothing more than a change in the revenue yields. It represents a notable interference in the overall value-added tax system. I readily concede that the flat rate reimbursement system we have is one which was designed specifically for the farming sector. We are not the only country in the EC to have such a system.

The measure the Government are taking in this Bill represents the first occasion on which there has been a departure from the fundamental principle of value-added tax, which means ultimately that it is a tax on consumption and not on production. Because this Government have run away from the principle of the farm tax, because they have found that their retreat from that system costs revenue, they have decided to interfere in a fundamental way with the principles of the value-added tax system. We now have a value-added tax system which, in one part, is actually a tax on production. That is very unwise and, viewed in some lights, it could be seen as sinister or threatening. Once the principle is breached I am not at all sure that there will not be pressure on this Government, at some stage in the future, to do the same in some other sector.

It is a most unwise departure from the principle. It is unnecessary in that the Government did not have to abolish the farm tax in the first place and, even had they decided to abolish the farm tax, it is my belief that a different way should have been found of recouping that loss of revenue. It is very worrying to see a major interference of this kind with the fundamental principle of the value-added tax system. This is not a satisfactory way of resolving that problem; it is not a satisfactory way of going about the overall business of collecting taxation from the farming community and the interference with the principle of what is basically a tax on consumption is most unwise.

We then have the proposed withholding tax dealt with in sections 12 to 20 of the Bill before us. This tax will go down in history as one of the most confused attempts on the part of any Government to bring about a change in the taxation status of any group of people. First, it does not even amount to that. This does not represent a way of bringing people into the tax net who would not otherwise be in the net. Let us look at the categories of persons concerned. First, there are people who are conducting a substantial body of business with the State. The tax applies only to fees paid by certain State agencies to professional people providing services in various sectors. It deals only with people who are dealing with the State. It deals with professionals only to the extent that they deal with the State. That is not a specific category of persons. It is not a specific category of taxpayer, nor is it a specific category of people who, it could be argued, are not now in the tax system.

The vast majority of people who provide services of these various kinds to the State will be in the tax system already. Certainly the great majority of them are in the value-added tax system because they are subject to value-added tax on the provision of their services. Again, by far the great majority of these professional persons who supply services, if they employ anybody, already have them registered as employees for the perfectly straightforward reason that they are registered for value-added tax in order to be able to reclaim it. It is in their interests to do so. They have their employees registered because they are in the public demesne and there is a check on them; put it no higher than that.

This is not a scheme which can be presented as one designed to bring into the tax net people who may not now be in that net. To the extent that it affects groups of people providing professional services it affects them only to the extent of their dealings with the State. Of course the circumstances vary very substantially from one group to another. Some of the groups defined here do most of their business with the State. Some of them do a substantial amount of business with the State, some a relatively small proportion only with the State. The effect of this proposed tax on various groups of professionals will differ depending on the extent to which they do business with the State. It will vary from one person to another, from one firm to another, even in the same line of business, depending on the proportion of their total work covered by their dealings with the State.

It cannot be argued that this proposed tax is designed to bring about a specific effect in relation to these professions. The effect is differential, in many cases is random and would vary even from year to year in many of the professional practices concerned here. It is a tax which takes no account whatever either of the rest of the tax status of the firm in question, of the total taxable content of the work being conducted by the firm in question or, indeed, of their total tax liability.

Over the past few weeks my colleague Deputy Noonan and I have met a great many people involved in the professions concerned with this tax. I can assure the House that the variety of circumstances is huge. There are cases where almost all of the services provided by the firms in question really take the form of labour. There are cases where there is a substantial material content in the services provided and in the base of the charges that are levied. There are cases in which some firms, professions or individuals do 80 per cent of all of their work for the State. There are others where the proportion may be as low as 20 per cent or even 10 per cent. What is common to them all is that a simple withholding tax of the kind proposed has a very much bigger effect on the income, that is the net income left after paying all costs, than any 35 per cent income tax rate or than any 50 per cent income tax rate in the case of incorporated taxpayers.

On budget night it was argued that this was a way of bringing people involved in these professions onto a current basis of assessment. That is a most extraordinary claim and it smacks of what one of my lecturers on statistics once called a retrospective rationalisation of something that had previously been intuitively perceived. That is no way to run a railroad. It is certainly no way to design a tax. To argue that this is a way of bringing people onto a current basis of assessment is absolute nonsense when you find that the situations differ so much from one firm to another and from one individual to another in the same profession. It cannot be argued that this represents a single movement of any kind. If the attempt to bring people in these professions onto a current basis of assessment involves paying in one year's not just two years' tax but in some cases a multiple of an extra year's tax on top of the taxation normally due in the current year, it seems it is a very badly thought out measure and one which certainly needs a great deal more thinking about before it can be enacted into legislation.

Any move to bring professionals or groups onto a current year basis of assessment will, in its first year, involve the payment of more than one year's tax. If the Government feel it is desirable to move to that situation, it seems to me that what they should do is come into this House with a proposal for a tax system that is designed to do that. The way not to do it is the way proposed here which is to bring in a measure, inconceived, badly thought out, which has hugely differential effects and which may not at the end of the day produce the revenue it is designed to produce. We will oppose that. I hope the Government and the Minister for Finance, having listened ever since budget day to the various representations and statements which have been made about the effects of this tax on different professions, will feel moved to propose some amendments on Committee Stage. The Minister for Finance was recently quoted as having said he sees no reason for any amendment. I cannot honestly say that can be interpreted as anything other than simple macho politics.

As I said, if it is the Government's intention that we should have a system that would bring these professions onto a current year basis of assessment, this is not the way to do so. I cannot in any case see why the Government should decide that only these professions should be treated in that way. Why pick these ones and not others? Why pick, in particular, professions that simply happen to do some proportion, substantial in some cases, of their business with the Government? Why pick only the proportion of their business that they do with the Government to have this current year basis of assessment? That is an argument that just will not wash because there was never any foundation for it in the first place. That is an argument which the Taoiseach took up on budget night on a purely opportunistic basis. There is no sustainable case for saying that this measure is designed to bring about a current year basis of assessment in these professions.

Another area of taxation where this Bill produces some rather startling changes is in relation to the treatment of profits made by banks on lending of money for house purchase. As I said, my colleague, Deputy Noonan, dealt with this matter at some length and made the point that the inevitable effect of this measure would be to increase the cost of borrowing money from a bank for house purchase. There may be many reasons the Government would feel they should take such a step. Some of them probably have more to do with the rather muted competition that there is in that market at the moment. Some of them may have to do with a philosophical view as to how much of that market should be reserved to building societies. If that is the case, let the Government say that. Let them make their argument on that basis, but let them not try to conceal what they are doing by claiming this is a measure that is justified in relation to some overall concept of corporation tax or the taxation of financial institutions, because it cannot be justified on that basis. It certainly cannot be justified in terms of the effect it has on borrowers.

Looking through the tax measures in this Bill I can find no trace of any real concern on the Government's part with measures to improve the efficiency of the collection of taxes. In the Principal Features of the Budget circulated by the Minister for Finance on budget day the new tax measures relate to mortgage interest relief, a measure on the place of abode rule for Irish people working abroad, the new 35 per cent tax, the abolition of the farm tax and the consequent unwise change in the system of value-added tax refunds for farmers. There is nothing that improves the administration of taxation other than the institution of the task force, 25 civil servants who were previously involved in, I think, the Department of the Public Service who are now to be drafted into the Revenue Commissioners in order to improve the collection of taxes. To suggest, as the Government do, that this measure will bring in £10 million of extra taxation is simply not credible. There has been no evidence of it so far. As far as I am aware, the Minister for Finance has not so far said what these people are doing or what the effect is of what they might be doing. Nor has he given us anything more than an aspiration that they will collect an extra £10 million.

The lack of any real measure to improve the efficiency of tax collection is perfectly in keeping with the view adopted by the Fianna Fáil Party in 1983, 1984, 1985 and 1986 when, in Opposition, they vigorously opposed every single measure that was brought in by the Government and by the Minister for Finance at that time — it was myself for most of that time — to improve the efficiency of tax collection. It is very clear that they are bringing the same lack of commitment to efficiency in the system into the Finance Bill that is now before us. On that at least they have been consistent and I am sad to say they are consistent only in their lack of ideas in this regard.

We need to have this Finance Bill put in place with the kinds of modifications which Deputy Noonan and I have indicated are necessary. We need it all the more because I suspect the Government will be off target in relation to the balance between expenditure and revenue. Even on the measures set out in this Finance Bill, numbers of them will not realise the revenue or the tax expenditure savings that they set out to achieve. I suspect that in a number of areas the Government's expenditure figures will not hold and that, at the half way stage of the year, they will find themselves off target. It appears also on the basis of the Taoiseach's now famous, or perhaps infamous, letter to Ministers recently leaked, that the Taoiseach believes that will be the case because he is looking for further expenditure cuts for the remainder of this year. It appears that the Government will be off target. To the extent that the measures in this Finance Bill can help to stop the rot, then I believe we need it. It is important that we have these measures enacted with the modifications I mentioned in order to prevent, as far as we can, even further pressures being put on some of the expenditure areas where there has been the most difficulty in the last couple of months.

I am thinking in particular of the health area. That has been the subject of debate on other occasions but it is abundantly clear that the Government have done that job backwards. The Minister for Health said today at Question Time that he expects to have the reports from his teams of civil servants who are investigating the action proposed to be taken by the health boards in July. The Minister for Health, on his own admission, is telling us that he expects to be in a position some time next month to come forward with his considered views on how the measures proposed to be taken by the health boards and by individual hospitals can be put together in a rationalised way. At that stage more than half of the year will have passed and more than half of the originally intended expenditure for the year will have been undertaken.

I do not know to what extent the Minister for Health will have either the room or the ability to have a more rationalised approach to the health services at that time of the year but all the better if revenue raising and the confirmation of what is set out in this Finance Bill can help to avoid more of the hamfisted approach which the Minister and the Government have adopted to the health services. That is another reason for clarifying and solidifying to the maximum extent the position of the public Exchequer for this year. Without this, there will be even greater difficulty and greater pressure on areas where the Government have already done damage not only through the policies they have adopted but also by the way they have gone about administering the financial allocations they have made, particularly in the health services.

Therefore we need this Bill enacted with the kind of amendments I have set out. There are two other amendments being proposed, but one in particular causes me some amazement. This amendment is down in the name of Deputy McDowell. It is a most extraordinary amendment particularly when it is read in the context of comments made by the same Deputy in this House on 31 March last. I propose to quote some of his comments at column 830, Volume 371, of the Official Report. Deputy McDowell chose to chide, to use a polite word, my colleague Deputy Michael Noonan(Limerick East), for his approach to the budget, and said:

I find it remarkable that somebody could be so abusive and so scornful when on the Fianna Fáil benches we now see a change of heart of a very substantial kind which has been made in the interests of the country at large. Everyone should have the generosity to accept it.

He went on to say:

...when people choose to do the right thing, albeit at the eleventh hour, they deserve support for it and not derision.

There is more. At column 831 he said:

The Progressive Democrats were founded as a new and separate political party in order to make the Irish political process not more divisive but more decisive.

That kind of statement would have them rolling in the aisles in the L & H but it was not particularly appropriate for this House. He wanted to make the whole political process not more divisive but more decisive. He went on to say:

We will not make the best the enemy of the good in this debate.

He continued:

Because we believe that these measures are insufficient we will criticise them but, to the extent that they are necessary, they will receive our support.

There was much more but that is enough to give a flavour of what Deputy McDowell was then saying. That Deputy and that party who want our debates to be decisive rather than divisive produced this amendment that declines to give the Finance Bill a Second Reading, that attempts to ensure that the financial position of the State cannot be decided this year, that we cannot get to the Committee Stage of this debate so that we can alter the detail of the Bill in a way that makes it at least efficient in doing what it sets out to do without being excessively oppressive on the people concerned. The party who want to be decisive decide that they do not want to debate the Committee Stage of this Bill. There is another case of that party saying one thing and doing another. This afternoon that party seemed to take the view that political debate consists only of their saying what they wish and then leaving the House and not engaging in a debate with anybody else once they have had their say.

I do not intend to follow that procedure because I believe it is pointless. I regard it as being the purest opportunism and a stance that is taken purely for the optics. That is not the way to go about debating the financial business of the country and it is certainly not the way to go about debating the detailed implementation of the Government's proposals in relation to taxation and other financial matters for this year. Because we need clarity in these matters to the maximum possible extent, because we want to avoid further pressures that might arise in relation to other areas of expenditure, because we need to ensure that some of the more unwise proposals of the Government in relation to taxation are not proceeded with without modification, and because we want to ensure that those parts of the Government's proposals which are excessively oppressive on some sectors are not proceeded with, we want to get to the Committee Stage debate and make the necessary amendments.

For that reason I do not intend to oppose the Second Reading of this Bill but we will be putting forward a number of amendments on Committee Stage to take out of the Bill some of the unnecessary and unjustified effects which it will have on a number of categories of taxpayers.

I am aware that I have until 6.40 p.m.——

Not necessarily.

—— if I am allowed by you, Sir. That is my reading of the matter. While I would wish to continue until the Minister for Finance is called there are two other Deputies anxious to contribute to the debate, Deputies Lynch and Spring. Having regard to that will it be possible to get this agreement of the House to those Deputies sharing my time?

The Deputy will be aware that in accordance with the order of the House, I am obliged to call the Minister for Finance at 6.40 p.m. As the Deputy has said, he may utilise all the time until 6.40 p.m. but should he sit down before that I will feel obliged to call a Member from the Opposition, unless the House agrees to the Deputy's proposal that his colleague, Deputy Lynch, be called after him and that Deputy Spring be afforded an opportunity to contribute.

(Limerick East): The order has been made and the Minister will be called at 6.40 p.m. I suggest that the House should proceed in a normal manner until then. We are not agreeing to a time split between now and 6.40 p.m.

Since there is an objection I should like to advise the Deputy that he has until 6.40 p.m. If he concludes earlier I will call a Member from the Opposition.

Will that Member be Deputy Spring?

That is not the Deputy's affair; it is a matter for the Chair.

The Chair will decide that.

(Limerick East): This is not the High Court.

I would like to accommodate other Members as I would like to be accommodated. I have done my best. I welcome the strategy that lies behind the budget which is to ensure that a firm hand is kept on the economy and that action is taken to ensure a drop in interest rates. I am pleased to note that interest rates have dropped and I expect them to continue to do so for the remainder of the year, all things remaining equal on the international scene. Certainly, the Government have not done anything to cause interest rates to rise and that should be recognised as an indication that Fianna Fáil policies are working. It is necessary that there should be firmness and moderation in Government spending but that is not sufficient in relation to the budgetary strategy of the Government who aim to get growth once again. We are hopeful that as a result of Government policies greater wealth will be created to fund existing services and a reduction in the overall levels of taxation. We all agree that taxation is at a punitive level and cannot be justified on a continuing basis.

I would like to see the Government being allowed to proceed on their course without any mouthing or preaching about the necessity to reduce Government expenditure or introduce cuts. The Government are proceeding in a business-like fashion. They are implementing promises that were made as far back as 1982 by the Coalition Government. However, that Government were not in a position to deliver on those policies because the parties were committed to a marriage that was doomed from the start. They were committed to a marriage of conflicting ideologies and, despite the best intentions of both parties to hold on to power for power's sake, were not in a position to cater for the budgetary needs of the country from 1982 until they fell earlier this year.

It is sad to have to reflect on those facts because I must confess that had I been a Member in 1982 I would have wished the Coalition every success in tackling the problems that faced the country. Had they pursued their policies in 1982 without engaging in a two-horse tug-o-war we would not be faced with taking firm decisions in regard to cutbacks, including cutbacks in the sensitive area of health. Nobody likes implementing cutbacks but they are necessary and I support the Government's moves on them. I will not flinch from continuing to support them. I commend the Government for having the courage to move forward and I assure them of my support. I have no doubt that they will proceed with their policies in a unified way, unlike the last Government. Their management structure is not torn by a duplicity of personalities or a divergence of ideology. It is that aspect of Fianna Fáil that leaves them apart from anything that went before. It leaves them apart from any proposals made by Fine Gael when they were on their own in Government.

And from their own supporters.

And from Fianna Fáil when in Opposition. Will the Deputy agree that there is a big difference in the Opposition now, which is a reasonable one, and the Opposition we had for the past four years?

The Deputy in possession should be allowed to continue without interruption.

I welcome the interruption because it brings forward a matter I had intended to deal with later. I spent a long time going through the various channels of local government, and a long time in politics, and I have consistently heard Fine Gael allegations about U-turns and about the lack of integrity of Fianna Fáil.

Did the Deputy read the advertisements about health cuts affecting the old, the disabled and the infirm?

As a representative of the people of Westmeath I regret such allegations because they synopsise the bankruptcy and facile thought behind many of the contributions of Opposition Members in recent months.

The Deputy should have been around for the past four years.

We went into the last election without promising anything except firm Government. It is sad to hear allegations of U-turns, lack of integrity and so on when one turns on the monitor in one's room in the House. In my view the Government are the finest the country has ever seen and they will be decisive, something that was lacking in the past four years.

I am glad that tourism has proved that it is a get up and go industry, that it is capable of expansion and dynamism. Above all it has shown that it is capable of responding to the leadership shown by the Minister for Tourism and Transport, Deputy Wilson, who encouraged those involved to produce holiday packages. The approach by the Minister in relation to the tourist industry shows how Government and private enterprise can move forward together if the necessary leadership is provided.

As I said before in the House, the agricultural industry is vital to the future of the country but interest rates must come down. That is the first and fundamental prong of the Government's agricultural policy. In my own constituency many farmers are crippled by capital commitments and interest rates and the more they come down the better farming will be. In this context EC negotiations will be difficult. We are well past the honeymoon period of 1973-78 when, automatically, Ministers for Agriculture could expect a transitional increase of 20 per cent, a reduction in tariffs and monetary compensatory in relation to the devaluation of the Green £. There were normal annual increases in prices and the Minister could come back to this country and announce gleefully that the farmers had done well again. That has all gone and the onset of surpluses has created difficulties in relation to price fixing. The trend in many sectoral areas of agriculture is for prices to be reduced or limited by quota restriction such as the super-levy for milk. Notwithstanding that, I commend the Government for their strategy in expanding agricultural production and leading the way in relation to a market expansion. For too long we depended on the begging bowl in Brussels and now when the pressure is on us it is heartening to see the Government, private enterprise in agriculture and other bodies responding to provide the dynamism necessary to ensure that our agricultural products will be sold directly in supermarkets in Britain and across mainland Europe to avoid the difficulties as a result of institutional arrangements for intervention — and its lack — in the EC. I am very heartened by these developments and I wish Minister O'Kennedy well in his continuing negotiations in Brussels. I commend him for the forthright way he has approached his portfolio.

I should also like to praise the Irish Farmers' Association for their document published earlier this year and in which they made a submission as to how agriculture might go forward. While one cannot agree with everything in the document, nevertheless one must praise the association for their realism and clarity of thought.

In relation to industrial development, it is very heartening to see the climate created in the economy through the budgetary strategy, declining interest rates and the commitment of the Government to special projects such as the Dublin Port and Docks and others. It is indicative of the commitment of the Government to growth in that area. Although I come from a farming constituency, increasingly one looks to the large industrial concerns — very often financed by international capital — to provide worthwhile employment. One hopes that small industries in rural and urban areas will respond to the positive climate created by the Government in relation to these matters.

Section 2 of the Finance Bill increases the income allowance for taxation purposes arising from the agricultural leases from £2,000 to £2,800. This is an increase on an allowance given by the Minister for Finance of the previous Government and while that allowance was welcome as indicative of the support which that Government gave to farm leasing, when it was introduced it represented a flag waving exercise in relation to their commitment to farm leasing and the introduction of a new system of tenure to allow for an early start scheme in farming by young people and for the flexibility and mobility of the land resource in this country. It was proceeding on the basis of the total winding down of the Land Commission and the bankruptcy of thought of the previous Government in relation to the allocation of land resources and in ensuring that there was a stable agricultural economy and society in rural areas.

I have often said, outside the House, that the response of the previous Government in relation to getting the leasing system off the ground was not adequate in so far as it did not represent a full, inter-departmental response to the difficulties presented by leasing. Any reasonably competent legal adviser would not have advised an ordinary, elderly farmer to enter into a leasing arrangement because of the difficulties of capital taxation and those which have arisen in relation to transferring the super-levy milk quota. Very often one finds that persons have taken land on a long lease under the master lease and have ended up losing their super-levy milk quota through being ejected from land taken in such a manner. That sort of injustice can put people off leasing land. As time progresses I hope the Government will examine the difficulties of the technical objections I have raised. I also raised these objections at meetings where the former Minister of State, Deputy Connaughton, was present. I have no personal criticism of him and I thank him for the courtesy and enthusiasm he displayed when he went around the country trying to promote the idea of the long lease. I hope that farm leasing will be a vehicle whereby young farmers can get a foothold in the agricultural scene.

I am glad that the farm tax has been abolished because it was inequitable and totally devoid of any basic principle. As Deputy Dukes said, it could be faulted because it was a tax on production. It was not based on an ability to pay, it was based on slick collection methods, nothing else. Some people said that various aspects of the tax were to be commended but they were always very reserved regarding the prospect of the tax being extended as, no doubt, it would have been. Many Members still in the House, especially in the Labour Party, voiced their opinion that the charge per acre and the net should be extended but that would have meant that ordinary family farmers would be crucified in a financial sense.

At £10 per acre? God save us all.

Deputy Spring's party intended to extend it as far as possible, indeed up to £30.

It is like trying to get money out of lawyers.

Tax equity was a favourite phrase from Fine Gael benches in 1982 but it was dropped completely for the last four years.

I urge the Minister to consider the efficiency of taxation in the farming sector. It has been met by the reintroduction of the farm profile system of accounts. If that system were implemented it would be a very efficient method of the collection of accounts. The problem is how it is to be implemented. I was very concerned that there were staffing difficulties in the Revenue Commissioners in relation to the preparation and examination of farm profile accounts and that at the end of the year the farm profile system may be found not to be working efficiently. Every effort should be made at an administrative level to ensure that the system does work as it allows farmers to sidetrack very costly accounting costs.

If farmers had a commitment to the section of the farm tax it was on the basis that it would help them to avoid paying accountancy costs. Small farmers who may or may not have some taxable income wish to avoid the necessity and burden of paying £200, £300 or £400 to a firm of accountants to prepare a set of accounts which would show a negligible liability to tax. Some of those farmers regretted the abolition of the farm tax but I am glad to note that this matter was fully dealt with in the budget through the introduction of the farm profile system. I suggest that the Minister keep a very close eye on how the administrative arrangements are made. While a very admirable system of simplified accounts was introduced in 1978-79 it was not possible for the system to work satisfactorily without ultimately resorting to an accountant who promptly did the job with the agreement of the Revenue Commissioners and who in the process charged the farmer very substantial fees. This is a live issue and as a Deputy representing a farming constituency, one I would like to think I would pursue in a active way with due respect to the very important interests of the Revenue Commissioners and the Department of Finance.

The local authorities would be very glad to have the responsibility for collecting income tax from farmers and I am sure that through their very efficient revenue collection system they would be in a position to ensure that farmers would pay their fair share of tax while at the same time ensuring that they would not be considered criminals by way of allegations that they were failling behind. Farmers have always paid their rates in the past and have always paid whatever was due but, regrettably, there is a tendency in this House to defame and talk in criminal terms of the farming community in regard to their tax paying record. Part of the reason there are substantial farm tax arrears is that successive Governments and the Revenue Commissioners have never looked at the way in which certain commercial bodies and local authorities collect the revenue. They do so by appointing revenue collectors who operate in a humane way.

I would like to think that the Revenue Commissioners would collect in a humane way revenue which is due from the farming community and that, if necessary, persons would be appointed not only to collect revenue but to help farmers with their farm profiles. Revenue should not be collected in an inhumane way and through a depersonalised correspondence system as that only results in resentment and a lack of co-operation. The farming community are ready to co-operate and I have never met a farmer who resolutely refused to pay his tax. There are cultural and psychological difficulties in trying to get elderly farmers to prepare accounts and to pay their taxes. I am very concerned that the farming community will become the victims of the special sheriffs who were appointed by the Coalition Government, freelance executioners, as it were——


——who are now setting out without fear or favour, without flexibility and in some cases without any personal introduction to take whatever is owed on foot of a warrant which might be based on a purely notional assessment. I would like to think that the worst aspects of this system would be avoided as the farming community are anxious to contribute their fair share of taxes.

Sections 12 to 20 relate to the deduction of tax at source. I am conscious of the many criticisms which have been made but I am satisifed that in the collection of that tax no substantial injustices will take place but there may be cases in which some hardship will be imposed on the professional people concerned. I would like to think that the Revenue Commissioners would read closely the provisions in the Bill in relation to hardship so as to ensure that their traditional inflexible approach which has been backed by the courts will not be applied and that no personal hardship will arise under the system. I hope that Ministers who employ professional services will make every effort to speed up payment to the personnel involved. For far too long Government Departments and local authorities have played the cash-flow game to the detriment of those who work for them. It would not be very pleasant if employees were told that they were not going to receive their wages for six to 12 months. Very often professional people who are employed by State bodies are left high and dry in respect of their payments for considerable amounts of time. Any hardship which might result from the deduction at source system might be substantially alleviated, if not eliminated, through prompt payment by the Government having regard to the need to vouch the work that was done and to observe any formalities. There are far too many delays in the matter of these payments.

I welcome the establishment of trading houses and I hope the Ministers concerned can proceed on the basis that no difficulties will arise with the EC. I am satisfied that the terms under which licences may be given will not attract any undue attention from the bureaucrats in Brussels. The establishment of trading houses underlines the commitment of the Government to securing growth in every sector of the economy. If one looks across the different sectors of the economy one sees that there are many incentives in place to encourage production to take place, particularly in manufacturing. Many tax incentives and grants are available and there are institutional provisions in place ranging from the various services provided by the county development teams to the services provided by semi-State bodies such as the IDA and CTT.

If there is a weakness in relation to industrial expansion, it has been in the area of marketing. Very many commentators have highlighted this in the past, but unfortunately Governments, and in particular the last Government, have not been alive to the possibilities of making progress through rectifying that deficiency. I am very glad that this Government have brought in the provision in this Finance Bill, which is very developmental in its nature, to rectify this great lack in the area of industrial development. I am satisfied that when these trading houses get going they will provide a dynamic in the marketing area that this country has never experienced. I hope that from that the potential for growth which is so great here will be realised.

In the context of the general budgetary strategy and of the Finance Bill, I welcome the commitment of the Minister for the Environment in relation to local government reform. He has already unveiled his intentions to this House. It is high time that there was local government reform, not merely legislative reform but in the area of the provision of real resources for local authorities to operate with.

I hesitate to interrupt the Deputy, but that hardly arises on the Finance Bill.

I considered that it might arise in relation to the general budgetary situation.

It is essentially a matter of Government taxation proposals.

Would the Deputy stop wasting time?

In relation to the general taxation proposals, a very large part of the Government budget which goes to funding local authorities from the Central Exchequer over the last few years is constantly diminishing. If this Finance Bill has a deficiency, it might be perhaps that the provisions are not there for the reform of local government in relation to the financial aspect. I would hope that at some stage the Finance Bill, or a Bill in relation to the financing of the Exchequer, whether it be called a local Government Bill or not, would come forward as a result of the decision of the Minister for the Environment to reform local government. It is in the area of financing that I would have a particular interest because there is need to ensure a financing of local government services and, in particular, of the county and rural roads right around the country and in my constituency.

Be reasonable.

In relation to the further aspects of the Bill, I welcome the general context in which the Bill proceeds to raise and allocate funds in the context of the national lottery. The various critics have said that that lottery is part of the taxation system; I reject that proposal. It is certainly not part of this Finance Bill. It is a voluntary code. This arises in relation to the discussion on this Bill having regard to the fact that the Bill is one relating to taxation. The introduction of the lottery will give rise to the funding of many areas of national life in the sporting, agricultural and educational areas, which were hitherto devoid of funds. I should like to think that the funds brought in by the national lottery will be divided out equally across the country in relation to specific projects I have in mind. In relation to the tourist industry——

A Cheann Comhairle, I should like to give notice that I am leaving the House in protest. This is absolutely outrageous.

I should like to have facilitated Deputy Spring.

The Deputy still could have.

I should like to have facilitated Deputy Spring, but I would not facilitate him when the members of the Opposition would not agree that I should do so.

Deputy Spring withdrew.

I am asking for a quorum. The Deputy is losing the House but he is asking for trouble if he delays the House in this way. I am asking now for a quorum and demand one.

The Deputy is entitled to ask for a quorum.

Notice taken that 20 Members were not present; House counted and 20 Members being present,

Deputy Abbott, you have three minutes.

I should like to conclude, despite the unnecessary interruption by Deputy Mitchell in relation to the matter. With regard to the general budgetary strategy which underlines this Finance Bill I regret very much that the health services have had to be dealt with in the fairly stern manner in which they were by the Minister for Health. However, I am very glad to note that in the context of the cutbacks in the health services the hospitals — and in particular the three hospitals in my constituency of Mullingar — will continue to give a good service notwithstanding the unfortunate reduction in the staff involved. I take this opportunity to voice my sympathy for those who were let go. The indications are that the health board concerned will not proceed to penalise the temporary workers who were let go or leave them in a situation in which they will not be given priority for being taken on again.

I should like to think that the provisions of this Bill will represent a taxation policy and a policy for growth which will enable the country to survive the threat of breakdown so that the basic provisions can be made in relation to the health services and to the construction and maintenance of roads and the very many services in the developmental field which are necessary in the area of marketing in industry. The Finance Bill has been criticised by various Deputies as having a lack of developmental approach. This is absolute and total nonsense. It is a travesty because, above all, the Bill contains an emphasis on development. It has been criticised for lack of provision in relation to the efficiency of tax collection.

The order requires that I call the Minister now.

I consider it a matter of deep regret that deliberately, through filibustering, the Leader of the Labour Party was prevented from speaking in this debate. Deputy Abbott will live to regret his filibuster.

Deputy Mitchell——

I do not think the Leas-Cheann Comhairle should show any partisanship in this respect. Deputy Abbott will live to regret excluding the Leader of the Labour Party from speaking.

Will the Deputy resume his seat? The Deputy knows that on Second Stage it is a matter for the Deputy in possession to speak for as long as he wants to. I want to remind him that some Deputies spoke for an hour and a half and he was not here to hear them. Allow the Minister to conclude.

On a point of order, Deputy Abbott proposed a time-sharing arrangement and he deliberately excluded the Leader of the Labour Party from speaking. Even though he is a party colleague of yours you should not seek to defend him. The filibustering by which the Leader of the Labour Party has been excluded——

Deputy Mitchell is now making assertions that are not in order and are very disorderly.

They are correct nonetheless.

They are not correct.

(Limerick East): I would like to point out that when the Ceann Comhairle was in the Chair before you came into the House, Deputy Abbott indicated that he was allowing Deputy Spring to speak and he did not fulfil that agreement subsequently.

Private arrangements between Deputies are not a matter for the Chair. The Chair is concerned that Deputy Abbott having been called to speak, as was his right, was entitled to remain speaking for as long as he liked, so long as he gave way to the Minister.

(Limerick East): It was not a private arrangement. It was publicly stated in the House and the Ceann Comhairle indicated that he would call Deputy Spring next.

Standing Orders do not cover private arrangements between Deputies.

(Limerick East): It was not a private arrangement.

I feel that I am a man who would be regarded as having some honour in this House. I indicated to Deputy Abbott that I would be willing to share time with the Leader of the Labour Party. Deputy Abbott put the proposal that we would share the time between the three of us.

We are all trespassing on the time of the Minister who according to the order has 20 minutes to make his concluding comments.

Before I deal with particular aspects of the Bill I think that what Deputies opposite have said in relation to the offer made by Deputy Abbott is incorrect. The order of the House was maintained as the Ceann Comhairle decided.

If the Minister wants trouble on this Finance Bill, he will get it.

I was here at the time and the Deputy was not.


I should like to thank all the Deputies who contributed to the debate and to respond to some of the major issues which have been raised. Some of the points relating to individual sections of the Bill can be discussed in greater detail on Committee Stage.

If the Minister wants to get as far as Committee Stage he will have to be more careful about the way he treats the Opposition parties.

Before I refer to any specific items in the Bill I should like to respond to criticism made of our budgetary and taxation policies. Deputy Noonan was highly critical of what he described as the absence of economic philosophy. I am not quite sure what he had in mind. Our economic philosophy is straightforward. We must revitalise the economy which has been on the decline. We must restore confidence and encourage investment. To achieve this the management of the public finances must be improved and interest rates must come down. We have wasted no time in demonstrating our determination to reverse the trends of recent years. I am well aware of the difficulties and the pitfalls. It is not an easy brief to manage a very difficult budget situation properly and, at the same time, to promote development opportunities vigorously. We are determined to get the balance right.

The Deputy emphasised the importance of meeting budget targets. He is quite right about this. I fully agree with him. In my opening speech last week I said we will take whatever steps may be required as the year goes on to adhere to these targets. Right now the best information we have is that we are on course both on expenditure and taxation. I assure Deputy Noonan, Deputy Dukes and others that that is the position and it will remain so. I would like to remind Deputies that last year there was an overrun of £145 million in the current budget deficit and no corrective action was taken.

(Limerick East): I would like to call for a quorum.

It is obvious that the Deputies opposite do not want to hear what the Minister has to say.

(Limerick East): If the Minister's party had the courtesy to come into the House and listen to him we would not need to call for a quorum.

Notice taken that 20 Members were not present; House counted and 20 Members being present,

We are on target this year and we will remain so. I should like to remind Deputies opposite and, in particular, Deputy Noonan that last year when the overrun on the budget deficit was £145 million no corrective action whatsoever was taken.

A number of Deputies spoke at some length on the issue of tax reform. Deputy Noonan believes that high levels of taxation are crippling and regrets that the Finance Bill does not incorporate a major tax reform. He did not tell us what shape this reform might take. Deputy McDowell is so concerned that the Bill does not provide for reform that his party are proposing that the Bill should not get a second reading. The word "reform" is much abused in the taxation context and different interests have different priorities. I always understood that the Finance Bill was primarily concerned with budget decisions and not a vehicle for major new initiatives on taxation. I agree entirely with Deputy Noonan that high rates of taxation are a problem and have a serious disincentive effect. However, I would like to remind him of the increases that took place during the term of office of the last Government.

I have already said that we intend to widen the tax base and reduce tax levels. We can do this only on a gradual basis. There is no opportunity for the grand slam, as Deputy McDowell would have us believe, unless we turn a blind eye to the realities of the budget. The Deputy spoke eloquently about the need to alleviate the tax burden and to introduce radical reforms, but he made no effort to fit these arguments into the framework of the budget. It is easy to preach eloquently about tax reform and reducing taxation if budget realities are ignored. As I stated in my opening address, the Government have identified reform of the taxation system as a priority because it is an essential element in achieving the scale of economic progress we need. However, I pointed out also the absolute link between the discretion available for changes in taxation and the level of expenditure and borrowing.

For Deputy Noonan tax reform revolves around reducing selectively the higher tax rates or widening the bands and he asserted that I missed an opportunity by not doing so in the present Bill. The Deputy referred to the present disincentive effect of present high interest rates and in doing so he is echoing what I said in my opening address, that too many people pay interest rates above the standard rates and that the average worker suffers under an unacceptably higher level of tax deduction. The income tax regime of bands and allowances incorporated in this Bill are the same as that in the budget proposals of 20 January last. The previous Government took the view, as do we, that in a choice between lower borrowing and lower taxation the present priority has to be to reduce borrowing. The alternative is income tax reductions paid for by borrowing resulting in higher interest rates and a continuation of the vicious circle out of which we are trying to break.

Deputy McDowell castigated all recent Governments for their inaction in the field of tax reform, but he was short on specifics as regards his own proposals for reform. The Deputy, however, indicated that he considers the thrust of the reports of the Commission on Taxation to be correct. A major plank in the proposals of the Commission on Taxation is the expansion of the tax base. Nobody should be under any illusion as to how the Commission on Taxation propose to expand the tax base. They recommend the virtual abolition of secondary allowances such as mortgage subsidy relief, VHI relief and relief for life assurance premiums. Deputy McDowell did not indicate if he agreed with these recommendations but I mention them here as an illustration of the hard choices which have to be faced in any movement to expand the tax base.

The Deputy's party in their election manifesto had proposals for tax concessions. These were being financed in an unrealistic way by so-called reductions in capital spending and debt service costs. Deputy McDowell was also dismissive of our objective to place two-thirds of taxpayers on the standard rate of tax. The Deputy evidently considers that notwithstanding the existing resource constraints we should aim for a greater reduction but he puts forward no specific measures. Presumably he has in mind income tax promises made by his party in the recent election. This would involve a reduction of 2 per cent in each of the current tax rates. The cost in 1987 would be £72 million. When one considers this is conjunction with the Deputy's amendment that the Finance Bill be rejected, thereby denying the Exchequer the benefit of £25 million yield from the withholding tax and the £10 million yield from the reduction in mortgage interest relief, the Deputy appears to be advocating an increase of over £100 million in the level of the 1987 current budget deficit. It is difficult to reconcile this stance with his continuous exhortation to us to keep within our targets and to keep borrowing down.

Acceptance of the amendments of the Progressive Democrats and the Workers' Party would mean that the development proposals in the Bill in relation to tourism, shipping, financing services and the food processing industry would not proceed. It would also mean that the special PRSI tax allowance would lapse thereby increasing the tax burden on the PAYE sector. The PAYE taxpayers were mentioned by Deputy Mac Giolla who complained that they were expected to carry an unreasonably heavy proportion of the overall tax burden. The position of PAYE taxpayers has been recognised through the introduction of the special allowance which is now £700. I agree that it would seem that PAYE taxpayers pay a higher proportion of the tax burden than the self-employed. The average self-employed person, however, is taxed on income on the same basis as everybody else.

It may be that a proportion in the self-employed sector are not making full returns or are evading tax in some other way. If so, they are guilty of an offence and improved administrative procedures will make it more difficult for them in future to escape. The new withholding tax on professional fees affects, in particular, the self-employed sector; the majority of those liable for this tax are self-employed professionals. The extension of the profile system will bring many farmers into the tax net for the first time.

It is the policy of this Government that all taxpayers should pay tax on an equal basis. If persons are evading tax, no matter what sector they are in, the priority must be to catch them and to expose them to the full rigours of the law.

Deputy Mac Giolla spoke about higher taxes on wealth and property. Is he advocating the return of rates under another name? Unless there is a major property tax applicable to land and housing property in general, the tax yield from this source will inevitably be on a relatively small scale and cannot compensate for substantial income tax reductions. This is a fact of life that we must acknowledge in any debate on tax reform.

There are many things which I would like to have discussed, but I will just touch on a few other points in the few minutes left to me. Deputies Desmond, Mac Giolla and others concentrated to a considerable degree in their contributions on deficiencies in the tax collection system. As I indicated in my opening speech I accept that any reform package must incorporate measures to improve collection. It is folly however to suggest that our problems of high taxation can be solved by simply collecting outstanding taxes. Deputy Desmond must be aware that the existence of outstanding amounts of tax has not just occurred since this Government took office and that during his term of office there were similar large amounts of tax outstanding.

Deputy Mac Giolla referred to a figure of £700 million in outstanding tax which he asserted was legally due. I assume the Deputy is referring to the figures in the Comptroller and Auditor General's Report on the 1985 Appropriation Accounts which indicated that at end May 1986 the amount of collectible tax then outstanding was estimated by the Revenue Commissioners at £664 million. As my predecessor, Deputy Bruton, indicated in a statement he made on the general issue of tax collection and enforcement on 10 December last this figure of £664 million does not represent an amount actually due for collection on 31 May 1986. In many instances tax liabilities were not even finalised on that date. For example, in the case of corporation tax, money is included in this figure which was not actually due to be paid until a later date, and thus was not outstanding at all, in the sense of being due for immediate payment. I would also like to stress that the estimate of tax ultimately likely to be collected is already built into estimates of tax yield according to the expected timing of payments. This amount does not therefore represent a new increment which can be added to available tax revenue. In summary, amounts of uncollected taxes do not in the words of one of my predecessors, Deputy Dukes, represent "a crock of gold out there" which can be harnessed to solve our budget problems.

I would like to take up one specific point raised by Deputy Mac Giolla when he alleged that VAT outstanding for over three years was being written off. As was made clear in a reply to parliamentary questions on 12 May last this is incorrect. There has been no writing-off of VAT arrears by the Revenue Commissioners except where the tax is formally remitted or deemed to be irrecoverable. Remission of tax may be made on compassionate grounds, while tax may be deemed irrecoverable in for example, situations of bankruptcy. The amounts involved for 1985 represented less than 0.1 per cent of the actual VAT yield for that year. Any case involving a loss of £100 or upwards where tax is remitted or passed as irrecoverable is audited by the Comptroller and Auditor General who reports on them to the Public Accounts Committee of this House giving details of the number of cases under each tax head, the amount of tax involved and the grounds of remission or write-off.

There has been much talk about the withholding tax and I do not have time to respond to it. I have listened to the bleating and crying of some Deputies in relation to the introduction of this tax which is not new, which is not inequitable, which is not disruptive and which will not affect employment. I could go on about it. There was also a lot of talk about the question of the change in the tax on bank income from interest on home loans. It amazes me, having listened to most of this debate, that many Deputies referred in much of the debate only to the withholding tax and to the change in the concession given to the associated banksvis-à-vis house mortgage. Those were the two items which occupied most Deputies' minds. I have to search diligently through the reports of the debates on the Second Reading of this Finance Bill to count on one hand the number of times that anybody from the other side of the House mentioned unemployment.

It is a terrible indictment of this House that in a debate such as this there was little or no mention of the 245,000 people who are unemployed and who have little prospect of jobs in the immediate future and they would have even further diminished prospects were it not for the withholding tax and the change in the tax on banks and the other taxation items mentioned in this Bill. We will have much more time to discuss tax issues in greater detail on Committee Stage of this Bill next week. I am sure we will co-operate as fully as we can in any amendments put forward. I think Deputy Dukes described me as somebody involved in macho politics. I call myself a mini-macho, definitely not a macho macho. Any amendments that improve the efficiency of this legislation before the House without costing the Exchquer money will be considered seriously and favourably by me.

(Limerick East): On a point of order, could the Minister provide me with a copy of his text later?

I will. Unfortunately, I was unable to deliver all of it but I have no hesitation in doing that.

Question put: "That the words proposed to be deleted stand".
The Dáil divided: Tá, 71; Níl, 27.

  • Abbott, Henry.
  • Ahern, Dermot.
  • Ahern, Michael.
  • Andrews, David.
  • Aylward, Liam.
  • Barrett, Michael.
  • Brady, Gerard.
  • Brady, Vincent.
  • Brennan, Matthew.
  • Briscoe, Ben.
  • Browne, John.
  • Burke, Ray.
  • Byrne, Hugh.
  • Calleary, Seán.
  • Conaghan, Hugh.
  • Connolly, Ger.
  • Coughlan, Mary T.
  • Cowen, Brian.
  • Daly, Brendan.
  • Davern, Noel.
  • Deasy, Austin.
  • Dennehy, John.
  • de Valera, Síle.
  • Doherty, Seán.
  • Ellis, John.
  • Fahey, Jackie.
  • Fitzgerald, Liam.
  • Fitzpatrick, Dermott.
  • Flood, Chris.
  • Gallagher, Denis.
  • Gallagher, Pat the Cope.
  • Geoghegan-Quinn, Máire.
  • Haughey, Charles J.
  • Hilliard, Colm Michael.
  • Hyland, Liam.
  • Jacob, Joe.
  • Kirk, Séamus.
  • Kitt, Michael P.
  • Kitt, Tom.
  • Lawlor, Liam.
  • Lenihan, Brian.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • Lynch, Michael.
  • Lyons, Denis.
  • McCreevy, Charlie.
  • MacSharry, Ray.
  • Mooney, Mary.
  • Morley, P. J.
  • Moynihan, Donal.
  • Nolan, M. J.
  • O'Dea, William Gerard.
  • O'Donoghue, John.
  • O'Hanlon, Rory.
  • O'Keeffe, Batt.
  • O'Keeffe, Ned.
  • O'Kennedy, Michael.
  • O'Leary, John.
  • O'Rourke, Mary.
  • Power, Paddy.
  • Roche, Dick.
  • Smith, Michael.
  • Stafford, John.
  • Swift, Brian.
  • Treacy, Noel.
  • Tunney, Jim.
  • Wallace, Dan.
  • Walsh, Joe.
  • Walsh, Seán.
  • Woods, Michael.
  • Wright, G. V.


  • Clohessy, Peadar.
  • Colley, Anne.
  • De Rossa, Proinsias.
  • Desmond, Barry.
  • Gibbons, Martin Patrick.
  • Gregory, Tony.
  • Harney, Mary.
  • Higgins, Michael D.
  • Kavanagh, Liam.
  • Keating, Michael.
  • Kemmy, Jim.
  • Kennedy, Geraldine.
  • McCartan, Pat.
  • McCoy, John S.
  • McDowell, Michael.
  • Mac Giolla, Tomás.
  • Molloy, Robert.
  • O'Malley, Desmond J.
  • O'Malley, Pat.
  • O'Sullivan, Toddy.
  • Pattison, Séamus.
  • Quill, Máirín.
  • Sherlock, Joe.
  • Spring, Dick.
  • Stagg, Emmet.
  • Taylor, Mervyn.
  • Taylor, Mervyn.
  • Wyse, Pearse.
Tellers: Tá, Deputies V. Brady and Browne; Níl, Deputies Harney and McDowell.
Question declared carried.

Since it has been decided that the words proposed to be deleted stand, the Bill, in accordance with Standing Order 93 (2), is now declared read a Second Time. When is it proposed to take Committee Stage?

Tuesday next, 16 June 1987, subject to agreement between the Whips.

Yes, subject to agreement between the Whips.

Committee Stage ordered for Tuesday, 16 June 1987.