Finance Bill, 1988: Second Stage (Resumed).

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

There are four remaining aspects of the Finance Bill on which I want to comment briefly this morning: first, the absence from the Minister's speech of any elaboration on section 54, the scheme of support for disabled drivers; second, the proposed £10 cash card levy; third, the tax amnesty; and fourth, the once-off percentage levy on pension funds.

First, I will deal with the position of disabled drivers. In Dáil Éireann on 27 January last, at column 403 of the Official Report, the Taoiseach, when speaking of the existing scheme of support for disabled drivers, said:

I will be very determined to ensure that the change in the system of administration does not in any way disadvantage disabled drivers. I can give the Deputy a very solemn assurance on that.

He concluded enigmatically by saying "I know a lot about that". The existing scheme, in my assessment, has been underfunded in the Health Estimate for 1988 by about £500,000 and it now transpires it is not possible to transfer the existing scheme for what the Department of Finance classically call more effective adminiatration from the Revenue Commissioners to the health boards, or for that matter to the National Rehabilitation Board on the basis of the budget provision of £2.8 million as announced by the Minister for Finance on 27 January last.

I suggest that the Taoiseach knew well, and the Minister for Finance knew equally well, that the scheme was being cut in the budget by £500,000 and that they, quite deliberately, chose not to disclose that basic fact to the House at that time. The Taoiseach said the provision for 1988 was £2.8 million and that the cost in a full year would be £3.3 million. There is grave concern about this provision at this stage so much so that yesterday afternoon we had disabled drivers in front of Leinster House making their case to Deputies as we were coming in, and their case was made very well.

We have a very interesting and comprehensive scheme which provides exemption from VAT and duty on the purchase of new cars for disabled drivers. Each driver can purchase 600 gallons of petrol a year, exempt from duty, and their cars are exempt from road tax. Ironically, that scheme was brought in by the Taoiseach when he was Minister for Finance. With due respect to our departmental colleagues in the Department of Finance, once they get their hands on a reasonably good scheme their ability to emasculate it is never-ending, and it is proposed to emasculate the existing scheme of support for disabled drivers.

In my view the Taoiseach has a nerve, since the Minister for Finance has direct responsibility, to blandly disclaim at this stage all responsibility for what I can only describe as the exceptionally mean proposals to cut a basic mobility facility for some of the most disabled persons in our society. I understand that the bones of a new scheme are being considered by the Minister for Finance. Under it the Minister proposes to substitute cash grants for car purchase in place of a general exemption from VAT and excise duty. That represents a major cut in the scheme, no matter what way we look at it. I understand it is proposed that the provision under which a person gets a new car every two years is being changed to every three years and that that major cut affects disabled drivers. There is a proposal whereby the petrol and road tax rebates which on average have a cash value, if fully taken up on petrol, of £935 per annum will be cut to a cash grant of £600 per annum.

Such propositions have been presented by the Department of Finance to those directly involved in the working party and it is possible that we will see the introduction of a means test and an age limit in relation to these concessions. They will represent a further cut in the allowances paid to disabled drivers. I understand that a member of the working party, bereft of further imagination in regard to the cuts, has decided that secondhand cars should be brought within the ambit of the scheme. That is a classic Department of Finance proposition. In effect, a disabled person may find himself or herself in the middle of the night miles from a telephone and unable to repair their secondhand car which has been converted for use by a disabled driver mainly because of the Minister's decision to substitute secondhand vehicles for new cars. Is the Taoiseach seriously suggesting that this is part of his Programme for National Recovery? That phrase sticks in the mind of disabled drivers who are endeavouring to get back to work or to have social mobility. One good thing the monitoring committee of the Programme for National Recovery could do would be to call for the report of the working party and ensure that the existing scheme is maintained and financed properly. If that does not happen the Labour Party will vote against the relevant section in the Bill and unless we receive an assurance from the Minister for Finance when replying to the debate tomorrow evening in regard to this we will vote against the Second Stage of the Bill. I hope the other Opposition parties will join with us in rejecting that, the unkindest cut of all announced in the budget. It is not good enough for the Minister to specify that section 54 will rescind the old scheme if he fails to disclose the details of the new scheme.

I should like to deal with what I regard as a harebrained proposition for the raising of revenue, the introduction in the budget of a £10 tax on cash dispenser cards. I do not know who concocted this measure to raise £6 million. Since the introduction of the automatic cash dispenser machines an estimated 900,000 cards have been issued and I understand that eight out of every ten current account holders possess such a card. I hold such a card. We are all aware that the banks charge between 10p and 15p for each cash dispensing transaction and that the average customer makes 40 or 50 such transactions each year. The introduction of this levy runs contrary to the policy of the European Community. It is a unique tax in Europe and I do not know of any other European Minister for Finance who is proposing to introduce such a levy. This indirect tax is not matched elsewhere in the Community but what is more serious for us is that it is out of harmony with the efforts to harmonise indirect taxation in the Community. It is ironic that the Minister for Industry and Commerce is berating those in industry, and his colleagues in Europe, in his efforts to introduce general harmonisation — I am totally in favour of this although it will be very difficult here by virtue of our zero rating on food — while at the same time the Minister for Finance is introducing an extraordinary levy of £10 on cash dispensing cards. I find it mindboggling that the Department of Finance should introduce such a levy. It has caused great outrage in the community.

Many young students have handed their cards back to the bank. It is ironic that the commercial banks, in order to encourage students to open accounts with them, lodge £5 to their credit.

"Come into my parlour", said the spider to the fly.

However, as a result of the budget, students will have their accounts debited by £10 on receipt of a cash dispenser card. For the privilege of opening a bank account a student will now find himself or herself in debt to the tune of £5. Students, those on low income, pensioners and small savers whose income is automatically credited to their account through the paypath system are irate that they will have to pay this levy. It was a panic measure by the Cabinet. I understand that several members of the Government were not aware of this move until it was announced on budget day. We had the great irony of the Minister for Labour, having got clearance from Government for the introduction of amending legislation in relation to the Truck Acts to reform the payment of wages by cheque and having obtained the agreement of the Federated Union of Employers and the trade unions, finding himself shafted by the Minister for Finance who decided to introduce the £10 levy on cash dispensing cards.

I know of one employer who had issued over 120 of those cards to his employees. He is now saying to the Minister for Labour: "Are you going to cough up a £1,100 per annum levy because I have issued the cards to the bank to get the cash system in operation?" Whoever thought up this proposition deserves no commendation whatsoever from this House. It is bad enough having to pay prevailing bank charges; God knows they are sufficiently high. For example, one must pay 7p on every cheque one now writes. It must be borne in mind that the cost of installation of one of those dispensing machines is approximately £35,000. It is not easy to have them installed. I have wanted them installed in major industrial locations. I have wanted them installed in, say, hospitals. We have convinced the banks to have them installed in many places such as colleges of technology, university complexes, places where there are large congregations of people. It must be remembered that it costs any bank in the region of £35,000 to £40,000 to instal one of these machines. They are also very costly to service. Therefore, it is much more economic and cheaper to have them used.

I find it difficult to believe that the Government gave this decision any really serious consideration. I find it even more difficult to believe, in the light of the opposition to this proposal, that the Minister for Finance does not wish to bend on it. This was a very stupid decision — not just a bad one, downright stupid. The decision relating to the proposed levy on pension funds was equally ill thought out, stupidly devised and, with much ado, has been rectified in an endeavour to introduce the same yield, allegedly on a once-off basis, but of course we know it will obtain for all time to come. Just because the Cabinet at the last minute changed their minds about the reduction in mortgage interest because the Leader of the Opposition said he could not support such a proposition, there was a mad rush to ensure a yield of £6 million by way of levy on bank ATM machines as an alternative. That is bad budgetary policy. The Minister should be big enough to change his mind and abolish this imposition.

In relation to those bank Pass cards there is involved the fundamental question of cash security. Time and again subversive elements within our society have endeavoured to rip off cash transactions. I am well aware of the extraordinary efforts undertaken in the Department of Social Welfare when I was there for approximately four years, in order to protect employment exchanges and post offices from being ripped off by subversive and criminal elements. We know the risks undertaken daily within the banking system in relation to cash transactions. We are aware of the dangers of wage snatches, payroll bank robberies and so on. In circumstances in which the introduction of the bank dispenser cards constituted a valuable method of protecting cash transactions this latest levy will be seen to be entirely counter-productive. Certainly it does not constitute an advertisement for the protection of the community in their daily multiple cash transactions. I earnestly ask the Minister to change his mind in this regard which would bring a sigh of relief from the community at large and be welcomed by the banking community, in particular, who are totally opposed to this proposition.

The Minister has many other alternatives available to him. I should say that we will be opposing this section. If the Minister is that badly caught for £6 million why does not he or the Government simply increase the bank levy and get the necessary finance in that way? The bank levy is being increased anyway under the provisions of the budget by £5 million to £6 million. There is no reason the Government could not have imposed a straightforward increase in that bank levy if they were determined not to lose any yield in revenue.

I want to refer now to the so-called major incentive provided by the budgetary tax amnesty. I am opposed to the relevant section of the Bill. In respect of those who pay their taxes on time, who have consistently paid their due and lawful taxes, indeed those who for one reason or another have not paid their taxes, who have been rightly caught for the payment of interest, caught by sheriff seizures — whatever transient sympathy we may have for them — who have been caught because they have not paid their taxes, who have been legitimately brought before the sheriff, the courts, caught for late payment of taxes, it is outrageous that overnight the Government should decide to issue a universal, general, amnesty of an extraordinary kind.

There are now major companies writing to their customers. I have here an executive briefing by Cooper and Lybrand which makes interesting reading, which says that if one has undisclosed income or has previously failed to make proper returns they can help by providing a totally confidential initial consultation to consider the implications of availing of the amnesty, free of charge, establishing the actual amount of exposure to tax liability, preparing and agreeing tax returns with the Revenue Commissioners in time to meet the amnesty deadline, negotiating with Revenue on behalf of their customers so as to minimise the ultimate liability and agreeing payment schedules to ensure liabilities are cleared before 30 September 1988. As we are aware, those circumstances would arise in which a person would have arrears of tax in respect of periods up to 31 December 1987 when it is possible to obtain a full waiver or related interest and penalties provided the principal tax is paid over to the Revenue Commissioners by 30 September 1988. That is an extraordinary Government decision which is totally unacceptable on grounds of fundamental equity. In other words, those who have failed to pay their taxes, deliberately in many cases delayed paying them, who have an income which they deliberately concealed from the Revenue Commissioners, are now given an open-ended amnesty of extraordinary generosity.

Any ordinary taxpayer keeping an account in order, paying their ordinary taxes and penalties legitimately imposed, must look upon this amnesty with a great deal of cynicism because such a system should never have been brought in. In one newspaper on 3 April the financial editor, Mr. Des Crowley, a reputable writer, said that this year saw the usual mad rush to beat the taxman before the end of the financial year because of the tax amnesty which continues for several months longer. He went on to say that one person admitted to Revenue that he had an undisclosed balance of £2.8 million in the bank. Because of the amnesty instead of being liable for £1.8 million he is liable for only £1.4 million. That is a classic example and we have heard of other cases.

I remember well in Government considering the question of tax amnesty and we were prepared to give very limited leeway to those who were not paying taxes. However, this handout to people who basically have not paid their taxes and who have undisclosed resources must certainly make tens of thousands of taxpayers feel irate. I congratulate and support the Minister on the introduction of more effective powers of attachment which will come into force on 1 October. However, the provision of a tax amnesty has been quite excessive and, irrespective of the additional revenue which may accrue, it is fundamentally wrong because in three years time people will be baying for another tax amnesty and perhaps a future Minister for Finance will reintroduce it. Once you go down that road, it is hard to stop in terms of administering an effective system.

I wish to comment on the tax on pension funds. I recall in Government debating at great length the introduction of DIRT. We had a working party report and many intensive discussions. There were misgivings and concern about its introduction, not least that the Fianna Fáil Party would exploit it unmercifully. I vividly recall the heartrending criticisms here by the Opposition on the introduction of DIRT. I fought for its introduction and, without it, the Exchequer would not have £300 million today. Indeed, at official level there was great hostility towards the introduction of the tax but I am glad it was brought in because without it our financial problems would be much worse.

I do not consider that much thought was given to the introduction of the tax on pension funds because, on further examination which undoubtedly should have been done before, we can see that there has been a major change in the system of levying taxation on pension funds in the Finance Bill. As a former trade union official, I have always been in favour of the development of effective pension funding on a deferred savings basis and I had many a prolonged row with young industrial workers who could not see the sense in it. I am in favour of building up pension funds to ensure that the Exchequer would not have a huge liability for non-contributory pensions and I was responsible to a large measure for the setting up of the National Pensions Board in 1986.

I am concerned about this once-off tax because I do not believe for one minute that it will be on a once-off basis. In 1989 and 1990 the yield from this tax will increase and in a full year it will probably yield £20 million or £25 million. The rate will then probably change and it will become a substantial tax on pension fund investment income in the years ahead. It is yet another tax and I have strong reservations about its introduction. The Government already receive significant sums each year by way of tax on pensions generally paid out from pension funds and I am worried about a number of pension funds where the capacity for contributions have seized up by virtue of lack of employment and the age factors relating to the funds. The Minister should look again at the decision of the Government in that regard because there are other ways of raising money apart from having a go at pension funds.

I thank the Minister for having had the patience to listen to my prolonged contribution to this debate. I am sure he will not take umbrage when I say that the Finance Act for 1987 and the Finance Bill for 1988, to an extent have been lost opportunities.

Go back to the Finance Bills of 1983, 1984, 1985 and 1986 and consider that if the DIRT had been brought in in, say, 1984 and if the farm tax had been instituted earlier and copperfastened in 1983 or 1984, then one would have had a far better tax system in operation now. When one examines the details of the Finance Bills for 1987 and 1988 one finds they are not particularly striking.

One gets an opportunity in the lifetime of any Government to bring in at most three or four Finance Bills. To this extent this Bill is in many ways a lost opportunity and I think we can improve it considerably by making substantial changes in it on Committee Stage. I have no doubt the Minister will listen to us carefully and we will press him very strongly on the issues I have raised in my contribution to this debate.

I am glad to have this opportunity to speak in the debate on the Finance Bill.

The Finance Bill incorporates changes which reinforce and continue the overall Government strategy in the management of the economy — a strategy which encompasses two key objectives — improving the public finances and revitalising the economy. Of course, revitalising the economy is the paramount objective. I do not need to repeat in this House the legacy of misdirected fiscal and macroeconomic policies that this Government inherited when they took office just over a year ago.

The essential features of the economic situation that we inherited were set out succinctly in the National Economic and Social Council's study A Strategy for Development 1986-1990. That was published just 18 months ago. It also outlined an agenda under which our economic problems could be solved.

A primary requirement outlined by the NESC for solving our economic problems was the stabilisation of the national debt to GNP ratio, as a first step towards the ultimate reduction of that ratio. Indeed, the council went further by suggesting that it would be neither feasible nor desirable to effect the required reduction in borrowing through higher taxation. Accordingly, it was necessary to tackle the problem mainly by means of savings in public expenditure.

On taking office this Government set about implementing a programme for national recovery based fairly closely on the strategy recommended by the NESC. That meant that hard decisions had to be taken on public expenditure; these decisions were taken and we have held the line on them, even though we have had to face some fairly strong criticism from vested interests. A barometer of the success of our policies is evident in the significant reduction in the Exchequer borrowing requirement that we achieved last year.

It is interesting to note the Exchequer borrowing requirements and the percentage of GNP for the years 1985 to 1988. In 1985, it was £2,015 million or 13.1 per cent of GNP; in 1986 it was £2,145 million, with the percentage of GNP gone up by one decimal point to 13.2 per cent; in 1987 it was reduced from 13.2 per cent to 10.3 per cent with an Exchequer Borrowing Requirement of £1,786 million and the post budget estimate for 1988 percentage of GNP is 8.2 per cent while the borrowing requirement is £1,457 million, a drop from £2,015 million in 1985 to £1,457 in 1988. I do not have to underline to the House that this is a significant reduction. This has facilitated a considerable reduction in domestic interest rates which in turn has helped to restore confidence in the economy and as head debtors to banks, the ACC and the various financial houses we know it has encouraged investors. An analysis of the investment economic indicator shows that investment is significantly increased in the plant and machinery area. It may not be significantly increased in the other major sector, namely, building construction which constitutes that economic indicator, but it certainly is very encouraging in the plant and machinery area.

As I said in my contribution to the budget debate, reductions in Exchequer borrowing do not just happen. The reductions which are now coming on stream required a new balance of macro-economic policies to be struck, necessitating a curtailment in public expenditure in a number of areas. Despite criticism from some sections of the community, there is now a broad acceptance of our policies across a wide spectrum of Irish society. This reflects a realism within the country that public expenditure just has to be got under control, in order to remove the burden which the national debt has placed on all our shoulders, individuals and businesses alike. As the House knows, the national debt had reached a figure of £26 billion at 10 per cent interest rate. That is £2.6 billion which if we had not to pay it in interest rates would make a big impact on the various areas now being curbed, namely environment, road making, education and health.

There is no doubt that this Finance Bill, which gives effect to the taxation and other changes announced in the budget of last January, demonstrates a continuation and a consolidation of the Government's strategy. The Bill also demonstrates how this Government have now begun the process of reforming the structure of the taxation system as well as introducing certain specific incentives to important economic sectors. This is in line with developments in other industrialised countries. Indeed, over the past few years there has been increasing recognition, throughout the industrialised world, of the importance of tax reform in improving economic performance. The Governments of Felipe Gonzalez and Francois Mitterand are examples of socialist Governments who are in line with that thinking as of now. They see the necessity. Realism is all.

Of particular interest to individual taxpayers are the general income tax reliefs. In that regard the Finance Bill provides for the implementation of a range of income tax reliefs. These include increases in the personal and PAYE allowances and a substantial extension of the 35 per cent tax band. It is important to point out that the changes, costing over £150 million in a full year, go much further this year than would be required to meet the Government's commitment on income tax in the Programme for National Recovery. The fact that in Britain the standard rate of tax has been reduced substantially, whether we like it or not, will have an impact on this country, although I would not go so far as some speakers in the debate yesterday did when they said it would mean people would leave the country because of the difference in tax. Plenty of people do not subscribe to that ubi bene, ibi patria, whatever you do well that is your native land, type of philosophy.

The changes represent substantial progress towards this Government's aim of having two-thirds of taxpayers paying tax at the standard rate. I think the figure is now over 60 per cent. The bringing down of inflation to around 3 per cent is also very significant in this regard because, as we know, inflation impacted on wages and salaries and people moved into a higher bracket for the purpose of paying income tax and went way above the standard rates. That particular process has been halted and, therfore, any allowances have a greater impact and are a greater help to taxpayers.

What is particularly significant about this Finance Bill is that it confirms that the general orientation of Government's taxation policy is towards a broader base for tax liability and much more effective tax collection. In this regard I would like to refer to the innovative arrangements which were announced in the budget and which are now set set out in the Finance Bill as part of a phased move towards a self-assessment tax system. The changes in the Bill indeed represent a radical overhaul of the tax assessment arrangements for the self-employed and for companies. While the broad objectives are to simplify tax assessment and collection, and to eliminate arrears, they are also designed to make life significantly more difficult for these defaulting.

I should point out that the new arrangements are the product of very careful and serious consideration. This is evident from the very useful discussion paper entitled "New Arrangements for Tax Returns and Assessment" issued by the Department of Finance after the budget. The views expressed by various bodies on that discussion paper have been considered in drafting the legislation.

The new return and assessment arrangements detailed in the Finance Bill are accompanied by two other measures aimed at improving collection and eliminating tax arrears. They are the incentive arrangements to clear tax arrears — Deputy Desmond did not like them very well — and what is known as the power of attachment which he did like. Put bluntly these measures contain elements of the carrot and the stick. There was a belief during the last war that eating carrots improved the eyesight. This "carrot" should make for more clarity of vision in taxpayers. The carrot — and it is one that responsible citizens who have got behind in their tax affairs will welcome — encourages people to bring their tax affairs up to date. In effect, the Finance Bill contains a special incentive scheme which involves a waiver of interest and penalties to encourage clearance of outstanding tax, whether in respect of arrears or undisclosed income.

I can imagine many taxpayers who have been hit hard by the sluggish economic environment and the depressed business environment of recent years, welcoming the opportunity to wipe their tax slates clean. By clearing away their arrears, they can then set about developing their businesses, free from any accumulated tax burden. The Government are playing their part by not only offering this incentive to bring tax affairs up to date but also by providing for a business climate which is immeasurably better than it was when this Government took office just over a year ago. Inflation and interest rates played a part in what has been achieved and are highly significant in this regard.

As regards the stick in the Finance Bill, I refer to the power of attachment to the financial assets of defaulters. In essence, attachment provides that, where the Revenue Commissioners believe that a third party has an amount of money due to a tax defaulter, they may direct the third party to pay the amount to them or the amount of tax due by a defaulter, if less. Indeed I have met some businessmen who were trying to screw money out of people who owed it and they were delighted to hear about this. They thought it would be a very useful weapon as a means of collecting their own debts. Amounts in dispute between the third party and the tax defaulter are excluded from the attachment process.

There is no doubt that the power of attachment is being introduced at a time when the climate has changed — and rightly changed — against the non-complying taxpayer. The power of attachment is a necessary component of the new climate that defaulters now have to face and it will provide an effective deterrent against non-compliance. This and the other measures in the Finance Bill to which I have referred represent a major effort to come to grips with the problems that exist at present in our tax administration. I believe they are positive developments. Indeed, the only people who will consider these developments in a negative light are tax defaulters.

As regards tourism and transport, there are a number of specific issues I would like to touch on. As Members of the House are aware in the budget the Government allocated an additional £4 million for a special package of measures for tourism in 1988, — £4 million of scarce taxpayers' money. The Government set up a special tourism task force to advise on how best to apply these funds in order to ensure the maximum increase in visitor numbers and tourism revenue.

That task force was probably the most experienced that we could command because individual members of the industry were involved. The proposals they made have the realism that comes from being involved in the industry itself. On foot of the recommendations of the task force the Government have given approval for a new tourism campaign designed to renew the impetus for growth in the industry in the current year. Bord Fáilte, with their new executive chairman — Martin Dully who, as the House will be aware, has an excellent track record at the helm of semi-State companies — have been given responsibility for organising and implementing the campaign. As Deputies know, specific initiatives, in particular the "Write and Invite" scheme are now being implemented. These and other initiatives are designed to achieve the challenging targets we have set for Irish tourism for 1988. We are aiming to increase overseas visitor numbers by over 300,000, to increase revenue by up to £75 million and, consequently, to create approximately 4,000 new jobs. The beauty of the tourism industry is the fact that it is labour intensive and that is a very important factor at present.

Our success in achieving a significant revival of the tourism industry's fortunes in 1987, combined with the initiatives which have been and are being taken in the current year, clearly signal the new sense of purpose, direction and confidence in Irish tourism. Moreover, the Government are greatly encouraged by the way in which the industry itself has responded so positively, in particular by pledging £2 million to the task force, which will supplement the £4 million already provided for in the budget. Since I took office as Minister for Tourism, I have found the people involved in the tourism industry ready to co-operate for their own benefit and they have a broader vision for the benefit of the economy and the country. I am very pleased to be able to put that on the record of the House.

The special campaign approved by the Government to which I have referred and the imaginative and innovative initiatives now being implemented by Bord Fáilte are some of the elements in our programme for tourism development. We are taking initiatives in a range of other areas. Many of the activities of Government have a tourism dimension which has received insufficient attention in the past. The Government have resolved that the importance of tourism will be given priority from now on in the activities of all Government Departments. Already access fares have been significantly reduced and we are committed to ensuring that the potential of tourism is not undermined by the cost of air or sea transport to Ireland. The Ministers concerned will give priority to tourism considerations in the areas of the environment, the marine, the provision of public facilities, and in the improvement of our competitiveness, so that we can maximise tourism revenue. The Minister of State at my Department, Deputy Lyons, has a specific role in this connection in ensuring that all Departments continue to accord the highest priority to tourism issues.

I now turn to a Government scheme which encourages investment in tourism. I refer to the business expansion scheme which was extended to the tourism sector in our budget last year. I want to express my delight that the Minister for Finance saw his way to do that because it is capable of being impacted on the whole tourism scene. As the Minister for Finance said in his recent budget speech, the stimulation of tourism related investment by the extension of the business expansion scheme to tourism should have an effect this year and in future years. Since the scheme has come on stream for tourism last December, Bord Fáilte have received over 2,500 inquiries for information about the scheme. That gives an idea of the level of interest. Given the Government's concern to ensure the best possible use of taxpayer's money, a system of approvals has been introduced to assess the robustness of proposed projects. To date there have been many actual applications to Bord Fáilte for certificates of approval in connection with marketing and development plans for specific projects. These projects, which involve a total investment of £6 million, relates to a range of tourism facilities — hotels, holiday cottages, charter boats, marinas — as well as tourism marketing companies. Already approval has been given by Bord Fáilte for nine of these projects. I should also mention that Bord Fáilte are running seminars throughout the country at present to ensure that all sectors of the tourism industry are made aware of the benefits and scope of the scheme.

The Government are committed to a "hard sell" approach over the whole range of areas related to tourism. Therefore, we will ensure that the incentives to invest in the tourism industry are aggressively promoted, just as we adopted sharper and more targeted marketing of Irish tourism products at home and particularly abroad.

Given the constraints on public finances, the Government have unequivocally moved away from a previous overemphasis on increased public expenditure as a solution to all our problems, towards specific targeted schemes which require private sector investment such as the business expansion scheme. As my colleague, the Minister for Industry and Commerce, has pointed out in the industrial policy context, the day of the automatic grant of State funds is over. We have placed and we must continue to place greater emphasis on obtaining the best possible value from the taxpayer's money in providing support for industry money in providing support for industry in general. For too long the grant mentality has pervaded the Irish economy but we are committed to changing this, to redirecting State support and in some cases to seeking a repayable element. We just cannot continue to spend the amounts of money we had been spending on direct public expenditure.

At this stage I would like to refer to some further aspects of the Finance Bill that have a bearing on my own area of responsibility. The Bill contains a number of provisions which will be of benefit to tourism. For example, while the Finance Bill imposes VAT on electricity this will be absorbed by price reductions arising from falling oil prices, lower interest rates and favourable exchange rate movements. But what is more important is that those engaged in commercial tourism will be able to recover the VAT element of their electricity bills. In effect therefore such commercial businesses will in future be paying less for their electricity. I know that the cost of electricity has been a subject of intense discussion, particularly its comparative cost in the EC context. Not many years ago our electricity was being sold at a highly competitive price but we have gone well ahead of continental countries in recent years and this problem must be resolved.

The Finance Bill also addresses the issue of lead-free petrol. We have been aware for some time of the importance of the availability of this commodity to our overseas visitors, especially those from mainland Europe. The Minister for Transport of the Federal Republic of Germany is very pressing on the lead-free petrol issue and is undertaking a missionary campaign. West Germany spends more on tourism than any other country in the world and we are targeting that market. A good fares regime is now in place and we are anxious to attract many more German tourists. The numbers coming here are static at 1 per cent of the German tourism industry. This provision in the Finance Bill will be very helpful in this regard. We have now brought the cost of lead-free petrol into line with that of premium grade leaded-petrol. In addition to being positive from an environmental point of view, this should also help boost visitor numbers from the Continent. I very much hope the petrol companies will now reinforce the concession contained in the Finance Bill by vigorously promoting the use of lead-free petrol. The Europeans are very conscious of the research that has been done on the effects of lead-laden petrol.

I would also like to mention that the extension of incentives for urban renewal detailed in the budget and in the Finance Bill have implications for our tourism industry. The physical appearance of our cities and towns makes a strong impression on our overseas visitors in particular and we must constantly seek to renew and revitalise the core areas of our cities and eliminate unsightly dereliction. I believe that the extension of the renewal incentives scheme can make a significant contribution to this process. Furthermore, the restoration of what is referred to as "section 23 tax relief" can also be beneficial. In this regard, the House should note that the provisions in the Bill go further than announced in the budget by restoring also the similar relief for situations where the expenditure is incurred on the conversion of a building into two or more flats for renting. In addition, the separate relief provided under sections 21 and 22 of the 1985 Finance Act is being reintroduced; this will provide for a deduction against rental income from the rented property in question, of certain refurbishment or conversion expenditure on the property. Again, these provisions should assist in the urban renewal process.

Turning to more general issues, I think it is important to point out that the Government strategy cannot be confined to what is contained in the budget and the Finance Bill. These are indispensible cogs in the wheel of economic development, but the Government's overall policy must be seen within the framework of our longer term macro-economic strategy as set out in the Programme for National Recovery prepared last October, and which was endorsed by the major bodies representing workers, business and farming at national level. A key area in which Government resolve to make progress under that programme is in the creation of a fiscal climate, an exchange rate and monetary climate conducive to economic growth. In this regard the maintenance of a stable exchange rate for the Irish pound within the European Monetary System is an important objective. By achieving this objective we can ensure that the benefits of lower inflation and more moderate interest rates prevailing within the European Monetary System will become progressively available to our domestic producers.

A stable exchange rate environment, particularly if it is combined with the realistic pay increases provided for under the terms of the Programme for National Recovery, can go a long way towards laying the foundations for an improvement in our international competitiveness. There is no doubt that our ability to create jobs — the paramount objective — and hence tackle the unemployment and emigration problems lies in improving the competitiveness of Irish industry. It also depends on developing and improving the performance of the internationally traded sectors and developing our natural resources by targeting specific sectors of the economy for growth.

We in Government have done much in the last year to improve the climate for those operating or starting up businesses. A major contribution to the improved business environment is the fact that we have succeeded in achieving a stable and predictable fiscal environment. Too often in the past optimistic and rosy targets were set but they were not adhered to. In this context this Government were very conscious of the importance of framing credible budgets, with the objective of restoring confidence in the economy. The budgets themselves and the improved economic environment are due testament to the success of the Government's strategy, as are the Exchequer Returns for the first quarter of 1988, which were published recently; they show that we are on course to achieve our budgetary targets this year.

I should at this stage remind the House that Government can only do so much in terms of creating a favourable environment for industry and producing a range of specific measures to help businesses along the road to success. The efforts and expertise of individual business people, as well as the business environment and the overall economic climate, will in the end determine the fortunes of their enterprises. We in Government have committed ourselves to providing for a positive business environment that encourages the development of industry. I look forward to hearing more positive evidence of industry — and here might I refer specifically to the tourist industry — availing of the opportunities and incentives to develop.

Let me emphasise that when it comes to investment and Government support for investment this Government are interested in "winners". In this vein I would like to conclude my contribution to this debate by mentioning a project which the Government are committed to and which we believe will be a winner. One of the success stories of the past year has been the progress made in the development of an international financial services centre in the Custom House Docks area in Dublin. Only a year ago this was a mere concept. While there were some plans for the development of the Custom House Docks site, these plans did not extend to the establishment of a financial centre. But now the groundwork for an international financial service centre is well advanced, with construction work already under way. At present much work is under way to attract business to the centre. In this regard, I should mention that the 10 per cent rate of corporation tax has been provided for companies setting up in the centre, subject to a certification procedure. The Finance Bill also contains a number of additional measures to promote the development of the centre. Of course our objective is to have within a few years a financial services centre of international status here. We have the potential to make a success of this in terms of expertise and infrastructural support services.

I know we have many young people with expertise working in London at present who are more than interested in this development. They are working in the financial services area and are anxious to come back. I was more than pleased to read the address of the London-Irish Society, a group of young people, many of whom are working in the financial services sector, stating at their dinner which they convened for St. Patrick's Day that their prime objective was to give something back to this country for the amount of money that was invested in their education and that they were also committed to returning to work here when an opportunity offered itself. I would be sanguine enough to believe we are on the road to achieving that.

I was very pleased to be a member of Government in the seventies, which had to send the then Minister for Labour, Mr. Gene Fitzgerald, to Britain to persuade young Irish people to come back to the industries we had established at that time. I look forward to that happening again. It ties in with what I said at the outset of this speech, namely, that all the financial and fiscal arrangements we are trying to put in place are for that paramount purpose. As Minister responsible for tourism, I can see potential benefits to tourism in Dublin as a spin-off from the successful development of the Custom House Docks area since the development package includes a range of facilities to augment the financial centre.

Mar a dúirt mé cheana, ta sa Bhille Airgeadais seo na hathruithe ar an bpolasaí a fógraíodh i gcáinaisnéis 1988. Is léir on gcáinaisnéis sin go bhfuil an Rialtas ag dul i ngleic go dearfa le fadhbanna airgeadais na tíre agus an cuspóir leis sin atá luaite agam cheana féin. Tá sé d'aidhm againne sa Rialtas fás a chruthú athuair in eacnamaíocht na tíre agus feabhas a chur ar an staid airgeadais phoiblí. Ní chuirfear dár mbuille sinn agus na cuspóirí sin á mbaint amach againn. Mar sin, molaim an Bille seo don Teach.

I move amendment No. 1:

To delete all words after "That" and substitute the following:

"Dáil Éireann noting that the Finance Bill, 1988:

(a) Fails to make any effort to fundamentally reform the tax system or broaden the tax base, and in particular fails to ensure an adequate return from capital or corporation taxes, and

(b) fails to take any measures likely to stimulate employment and reduce the number on the dole queue,

therefore declines to give a second reading to the Bill.".

We oppose the Bill for the reasons mentioned in the amendment and also for the particular reason that the Finance Bill fails to take adequate measures to ensure that the withholding tax on fees paid by the VHI, for instance, to medical consultants will not be passed on in the form of higher charges. We also oppose and have opposed from the very beginning the £10 levy on cash cards and we further oppose the abolition of section 43.1 of the Finance Act, 1968, with regard to the remission of road tax on vehicles for disabled drivers.

First, I wish to deal with paragraph (a) of our amendment. The Bill fails to make any effort to fundamentally reform the tax system or broaden the tax base. I think the Bill reflects the new right-wing consensus which clearly exists, not only in the House but outside among the various organisations for employers, the Confederation of Irish Industry, the media, and economists, etc. I think the Minister for Finance had in mind ensuring that it would win acceptance from Fine Gael and the Progressive Democrats but certainly he had not tax equity in mind when producing this Finance Bill.

The PAYE workers discovered in their first pay package a couple of weeks ago just how inadequate were the tax concessions announced in the budget. It is agreed by everybody that juggling around with the tax bands is not tax reform, although the Minister for Finance in his speech seemed to indicate, and he endeavoured to pretend, that there were major tax reforms in this Finance Bill. Despite the changes announced in the budget, which became effective a couple of weeks ago, the total take in income tax from the PAYE sector will be virtually identical to what was taken last year. The total take is the same amount as last year. The Bill is totally lacking in any radical tax reform measures which are needed to bring tax equity.

The measures required for tax reform have been listed in various reports by the Commission on Taxation. The Minister for Finance in reply to a series of questions in the Dáil last year showed that no progress had been made in the area of tax reform. In fact, during the past five years the position of the PAYE worker has actually deteriorated significantly compared to other groups. We believe that very urgent action is required if the inequities in the tax system are not to be increased further. Everybody recognises the inequities in the tax system. Everybody recognises the enormous burden carried by the PAYE sector and people at work, but nobody is prepared to take the measures necessary to broaden the tax base and to make the major tax reforms that are required.

In the replies to the parliamentary questions to which I have referred, it was shown that in the period of office of the Coalition Government from 1982-86 the average tax paid by a PAYE worker increased from £1,672 per annum in 1982 to £2,768 per annum in 1986. In that short period of four years the average tax take increased by £1,096 or a 66 per cent increase in the average amount paid by the PAYE worker. At the same time, the average tax paid by farmers increased from £543 to £629. This represents an increase of only £86 or 16 per cent in the amount paid by farmers as against a 66 per cent increase in the amount paid by PAYE workers.

Over the years, I have regularly and constantly been abused and accused by various IFA people of being anti-farmer. I have repeatedly pointed out that I am not anti-farmer but that I am anti-tax evasion. I totally oppose the inequities in the tax system and the refusal by Governments to ensure that everybody pays their fair share. Every pound which is not paid by farmers is an extra pound which has to be paid by the PAYE worker and every pound which is not paid by the self-employed, companies, chancers and speculators, is an extra pound which goes on to the backs of the PAYE workers. That is how it operates and that is why I am against evasion. When I say I am against the system which during the four year period 1982-86 put a 60 per cent increase on PAYE workers and only a 16 per cent increase on farmers, I only give farmers as an example because the figures are available to us and have been given to me in reply to a question. The difference in the increases does not represent equity in the tax system and this Finance Bill does nothing whatsoever to change that or to ensure that we will have a more equitable system.

In the same period the average tax paid by the self-employed increased by £680 or 51 per cent. This is much more than the increase on farmers but it is still much less than the increase on PAYE workers. In 1982 PAYE taxpayers paid an average of three times as much tax as farmers and 1.26 times as much tax as the self-employed. The respective figures for 1986 are four and a half times as much as farmers and 1.38 times as much as the self-employed. The average tax paid by farmers in 1986 at £629 was the lowest for any year since 1982. Not alone was the 1986 figure of £629 lower but it was also lower than what it was in previous years. The take from farmers had gone up for a few years but it came down in 1986.

The replies also show that no serious effort is being made to ensure that farmers are brought into the tax net. The point I am making in relation to the average take from farmers is that it is the average take from the small numbers of farmers who pay tax. No progress has been made in widening the tax net to include more farmers. According to the figures given by the Minister for Finance, Deputy MacSharry, 129,000 farmers were chargeable to tax in 1985, yet only 20,000 are ultimately expected to make any payments for that year. This is an appalling situation and it appears that neither a Coalition nor a Fianna Fáil Government have the courage or the conviction to take on the IFA in this area so as to ensure that the farmers who are making money pay tax.

We can see from the figures in the Finance Bill that a worker will pay tax once he earns over £52 per week or £2,700 a year. Every day we hear farmers on the radio crying out that the average farmer makes £2,500 only a year. No farmer who earns £3,000, £4,000 or £5,000 a year has to pay tax but every worker who earns over £2,750 a year or £52 or £53 a week has to pay tax on that miserable amount. This Bill does not bring the farming and self-employed sectors into the same tax net as PAYE workers.

We believe that a start in this area should be made in the next budget. A clear effort should be made to bring in tax equity by transferring at least 10 per cent of the take from the PAYE taxpayer directly onto other taxpayers such as farmers, the self-employed, business people, owners of capital, etc. This will not mean any reduction in the overall burden of taxation but it will move the burden directly and clearly from one sector to the various other sectors. This would force Governments to ensure that the collection and assessment systems in those other sectors are adequate to ensure that the money is brought in. A clear step should be taken to take 10 per cent off the backs of the PAYE taxpayers and the total take in income tax should be reduced from 93 per cent, or whatever it has reached at this stage to under 80 per cent. If we do not take a major step in this area there will be no reduction from year to year, just as there is none this year, in the total tax take from PAYE workers. We have advocated, and we again advocate it, that 10 per cent of the burden on the PAYE workers should be transferred to all other taxpayers.

The number of staff in the Revenue Commissioners has been cut by more than 11 per cent during the past five years. Reducing the number of staff at the disposal of the Revenue Commissioners, who are the ones who bring the money into the coffers of the State, is an appalling effort at economy. It is perverse to try to save money by cutting the number of staff who have the potential to increase the revenue of the State.

The Minister is endeavouring, as is shown in the Finance Bill, to bring in measures, which are very welcome, to collect outstanding taxes. We have advocated at all times that it is essential that taxes which are due, which have gone through all the processes and are clearly owing to the State should be brought in and that those who do not pay those taxes should be treated as criminals because when those taxes are not brought in other people suffer. We call them criminals because when they do not pay, other people suffer in the areas of health care, education, local authority services and in various other ways throughout the community. We welcome the steps being taken by the Minister to ensure that the taxes which are clearly due to the State are brought in and that every means is used to do so. The Minister has taken fairly radical steps — which we hope he will implement and which will not just be something in a Bill — so that he can collect this money. I want to ensure that the public are not in any way confused about this. The Minister is not taking any steps against tax evasion. What the Minister is talking about is collecting this money which we know has gone through all the existing processes and is due. He is not doing anything about the massive tax evasion.

I have referred to the reduction in numbers in the Revenue Commissioners and the great difficulty in handling the assessment area. They cannot even touch the issue of farmer taxation because they have not got the staff to deal with it. The Minister is talking about this pot of gold which they refused for years to admit existed. We were pointing out over the last number of years that it was there while everybody else on these benches sneered at the idea and said that there was no pot of gold out there. The Minister for Finance is now trying to collect that pot of gold but once that is in, what is he doing about the remainder? What about other years? What about the evasion and what steps are being taken to ensure that those who have the money pay their taxes?

That is not being dealt with by the Minister and the decision to scrap the 16 person anti-evasion unit which had significant success in its couple of years in existence, places a major question mark on the commitment of this administration to stamping out tax evasion. In a couple of years this unit was responsible for initiating investigations where tax evasion was suspected. They went out into the field and discovered who was evading and who was not and followed up complaints and reports made by members of the public just as is done in cases of fraud in regard to social welfare, and those complaints are followed up very rapidly indeed with inspectors hopping out at every little report and cutting people off immediatley before proving anything. They are cutting people off from their social welfare benefits because of some anonymous report and then taking six to eight weeks to restore the rightful payments. In the meantime such people must borrow from moneylenders so that their family can subsist.

This tax evasion unit did not have any such powers. Nevertheless, it was very effective and in 1986 was responsible for bringing in £6 million in tax which would otherwise have gone uncollected. The estimated figure for the following year was £8 million.

Those in the unit were not tax inspectors in the normal sense but investigators and 14 out of the 16 were actually engaged in field work finding out what was happening. Their impact was very obvious from the protests which were coming from all quarters about their activities, and it was these protests which led to the Government deciding in January that they did not want to harass those people any more and those working in the unit received letters from the personnel officer of the Revenue Commissioners informing them that the unit was being disbanded with effect from 8 February and the investigators would be returned to routine duties.

The decision to appoint these investigators in the first place was a political decision, and a good one, but it was also a Government political decision to abolish them as well. In view of the continuing very high level of tax evasion it is inexcusable. This Government are surrendering to various organisations representing the self-employed in particular who are screaming and complaining about alleged harassment by the tax investigators. It was a clear backing down by the Government because of the political clout of the people being harassed. The Government backed down in the face of that and that is in sharp contrast to the continuing and increasing harassment of people on social welfare. On any excuse they are abused, with hatches clamped down in their faces, being told to go away, not being given any money; they have to find out where to make complaints and so on. No matter how they scream or shout the Government will not back down and remove those investigators and inspectors.

I would like to refer to company taxation, capital allowances etc. In this Finance Bill sections 39 to 42 provide for a reduction in capital allowances from 100 per cent to 75 per cent initially and then to 50 per cent next year. That sounds marvellous. To compensate for this reduction in capital allowances, the standard rate of corporation tax is being reduced initially to 47 per cent and then next year to 43 per cent. But the case for capital allowances is very doubtful. In fact very few Governments have been able to make any case for it; they have just introduced them. Even the Thatcher Government in Britain has totally abolished capital allowances over a priod of three years. Deputy Haughey has totally accepted other policies of Mrs. Thatcher. It would be no harm to draw this to his attention so that he could tell his Finance Minister that Maggie does not do it that way and to have a look at why the Thatcher Government abolished capital allowances over a period of three years.

The range and extent of tax allowances is now so wide that many companies are not paying any tax at all. In 1984 two-thirds of all publicly quoted companies paid tax at a rate of less than 10 per cent. In fact the average effective tax rate for publicly quoted companies in that year was 8 per cent. That is unbelievable. In 1964 there were only 3 per cent of companies who did not pay any tax at all. Twenty years later, in 1984 35 per cent of companies paid no tax.

The Economist, which I do not think will be considered in any way a left wing magazine — in fact, it is a very right wing one — stated that here income tax has risen and taxes on companies have declined to a negligible 4 per cent of revenue in 1987, half of the OECD average. The Minister for Finance admitted that the changes will not bring in any more tax. He also admitted that we have excessively high reliefs for investment and that the tax yield from companies is low by international standards. I am not saying anything radical or extraordinary here; the Minister points this out himself. He goes on to say that our incentives have been exceptionally generous — which is quite true. It is no harm to give the figures for this exceptional generosity. The tax relief to companies in recent years was £800 million and direct grants and subsidies to industry amounted to £400 million. Between tax relief and direct grants and subsidies, £1,200 million was given to industry and companies. That is far more than was ever given to State companies in any particular year, perhaps up to ten times more in many years.

That is the climate which is not considered satisfactory for these companies. The Government say that it is not good enough for private companies and that we must improve it. Where else in the world, in Europe, among the OECD countries, is there a better climate for private enterprise, private companies, than the climate here, where they can obtain £1,200 million in reliefs and direct grants? Yet these companies in the past five or six years have put 40,000 people out of manufacturing jobs. The problem is that the strategy of successive Governments has been all carrot and no stick. They have been just handing out taxpayers' money to these companies with no policy behind it, no instruction that they will get their money if they increase work, increase jobs, develop or show expansion. They are given the money in the hope that they will expand but naturally they do not. They put the money into their pockets, their own investments, send it abroad, to tax havens, do what they wish with it. They certainly do not improve the economy and never will.

Regarding employment, the only developmental policy that this Government seem to have concerns the Custom House Docks site. There is nothing else that we can see of development, expansion, or creation of jobs. If that development goes ahead on the scale planned — and there is certainly no proof that it will go ahead at all — it will certainly be an important boost for the construction industry for a time. However, I must be very sceptical that it will lead to any substantial number of new jobs. There will be many jobs in the Custom House Docks site development, but the major portion of these will have been transferred from other areas into that area of high tax advantage. There will be no indication of any great boost of jobs there, apart from the important boost to the construction industry if the development goes ahead. I do not think anybody has yet shown us where these jobs will come from. That is the only developmental, or expansion, or job creation policy the Government seem to have.

The Irish Congress of Trade Unions have called for a minimum tax of 10 per cent on all companies. That is not much to ask, that no company would pay less than 10 per cent tax. In other words, the 35 per cent of companies who pay no tax at all would at least pay 10 per cent and those paying very low taxes, as low as 4 or 5 or even 1 per cent, would at least pay 10 per cent. We would support that. The Congress also said that profits repatriated should be levied. The repatriation of profits is a huge hole in our economy and any Minister for Finance who does not face up to this in some way is not facing up to the problem of our finances. The repatriation of profits exceeds the interest payments on the foreign debt that is causing such enormous problems to this Government, to the country, to our children in schools, to our sick people in hospitals and so forth. We are all told that it is because of the banks that have to be paid first before they can have their health or their education looked after. Repatriation of profits and other movements of funds out of the country amounts to far more than is required to service the national debt.

These are areas that any Minister for Finance who is serious about his job must tackle and we support what the Irish Congress of Trade Unions said, that there should be a levy on all profits which have been repatriated. That is the stick. You also have the carrot of incentives which are there already towards retaining the profits here for expansion and development in this country. I would also like to deal with a matter which is becoming more important to Ministers for Finance with regard to tackling tax evasion and with regard to methods of taxation. That is the question of access to bank accounts and information on them.

We hear banks and building societies regularly advertising that nobody will ever know anything about how much money people have invested, or where it is — that there is absolute, total confidentality. It needs a court order in this country before access to bank accounts can be gained. Yet, the great American system which we laud so much and which gives such tremendous benefit to the private entrepreneur has a system whereby people putting money on deposit must produce their tax numbers. This is the system in America where we encourage all our young people to go, that is, second to Australia which for some reason or other seems to be the place to go. In banking we should adopt the American system. There is no obligation here for banks to give any information and where they must deduct tax under the DIRT tax system they just deduct at the standard rate of tax. There is no obligation on them to ensure that they are deducting at the correct rate.

The Minister should look at the American system and if he finds it useful he should be prepared to implement it here. There is a fear in relation to this area. For some extraordinary reason we do not want to upset the system fixed by banks, bankers, speculators, stock exchanges, businesses, the FUE and the CII who are the people who control what the Minister for Finance will think or do. The Minister should consider the American system in regard to access to bank accounts. It is only through the tax system that the Americans have been able to get at Mafia gangsters, speculators and people like Al Capone.

Another matter which concerns me is the £10 charge on cash cards. This charge is not big but it is not a tax on the banks. It is a tax on consumers. When it was first suggested most people thought that the Minister had made a mistake and that it was meant to be a tax on credit cards. This is to apply to the person who cannot get to a bank because it closes at 3 o'clock. Cash cards are a method whereby people whose wages or cheque, whether social welfare or salary, are paid directly through the bank could draw cash whenever they wanted. It is extraordinary that the Minister is opposed to that. Perhaps he has some objection to new technology and would prefer people to queue in the banks for their money, as that is exactly what people will do. They will throw away the cards and the Minister will gain nothing. In effect the Minister is abolishing a new system. Is that his reason or is he trying to bring in money? If the Minister wishes to bring in money he should have no problem in increasing the levy on the banks as they have no shortage of money. There seems to be some other reason which I cannot understand. This suggestion is ludicrous. Perhaps the Minister made a mistake and is now refusing to admit it. I appeal to him to look at this again and not make a fool of himself.

Another area which concerns me is the removal of section 43 (1) of the Finance Act, 1968 in relation to disabled drivers. This also is difficult to understand. The Irish Wheelchair Association and the Disabled Drivers' Association have been in touch with us and they are totally opposed to this move by the Minister. The Chairman of the Irish Wheelchair Association said in a letter that any scheme on mobility is, by definition a crunch issue for wheelchair users and he hopes that that observation made clear the disappointment felt at this uncalled for "improvement". The Minister has referred to this as an improvement. The chairman also said that under every heading the benefits to the disabled driver under the emerging new scheme are a definite disimprovement on the old scheme. The General Secretary of the Disabled Drivers' Association said:

It is inconceivable that an Irish Government, supposedly operating within the constraints of Christian principles, and who only a few short years ago paid lip-service to the high ideals contained in the United Nations proposals for an International Year of Disabled People, should now propose to abolish the only bit of legislation which gives the disabled any rights under our Constitution. Instead of providing more legislation to protect the rights of the disabled, they are dismantling the small bit we have.

The General Secretary of the Disabled Drivers' Association said that in a letter to TDs of all parties dated 19 April 1988. I also received a letter from a physically disabled person which said:

I am a physically disabled person and a member of the Disabled Drivers' Association of Ireland. I would urge you to ensure that a difficult situation for disabled drivers is not made worse; please ensure that the terms of the 1968 Finance Act are retained, by voting against the measure. I am not in any way against change or progress in this or any other area — but surely the people who must be listened to in this instance are the physically disabled. Why does the Minister not speak to the Disabled Drivers' Association and to the Irish Wheelchair Association?

On Financial Resolution No. 2, on 27 January 1988 at column 403 of the Official Report the Taoiseach said:

Though not strictly relevant to this, one Deputy raised the question of the change in regard to disabled drivers. It was I who introduced that concession for disabled drivers in the first instance.

That was in 1968 and he was very proud of it. He went on to say:

I will be very determined to ensure that the change in the system of administration does not in any way disadvantage disabled drivers. I can give the Deputy a very solemn assurance on that. I know a lot about that. I assure him that this change is being made not to save money or disadvantage anybody but simply to have a more effective and efficiently administered system.

He further went on to say that the new scheme would be devised in consultation with individuals and organisations representing disabled drivers, but it has not been brought in following consultation with individuals and organisations representing disabled drivers. It has been brought in by a Minister for Finance who totally ignored what they had to say. It seems the Taoiseach believes he knows what is best for disabled drivers. He thinks they are like helpless little children who do not know what is best for themselves. I ask the Minister for Finance to take another look at this and to have discussions with the Minister for Health and the working group who are already working on this matter with disabled drivers and the Irish Wheelchair Association and the other organisations concerned and to change his mind on this issue.

Those are the main points that I want to make on this Bill. As I have said, I have moved our amendment on the basis of the first two factors I mentioned — the failure to make any effort to reform the tax system and the failure to take any measures to stimulate employment.

In listening to some of the speakers during the course of this debate today one would imagine that a certain kind of Utopia could be achieved by steamrolling State involvement into every sector of the economy. The opposite has been proven to be the case. If we were to continue to do that into every area of development we would automatically steamroll the lifeblood out of the private sector. That is not to say that the State does not have a role to play in industry but it is clear that the climate for growth has not been all it might have been. One can, as Deputy Mac Giolla has said, get rid of capital allowances, impose more taxation on industry and make it not worthwhile to earn a few bob but the day you do that is the day you will make what is already an extremely difficult situation nationally far worse.

I find it difficult to understand why Deputy Desmond attacked tax relief on covenants. This was symbolic of a generalised attack on a certain segment of society. It seemed to suggest that out there somewhere is a great mass of extremely wealthy people who can afford to pay for their children's education ad lib and who should not be entitled either to that relief or mortgage interest relief. In fact, the opposite is the case. In terms of education and several other areas of activity, the new poor are the same classes about which Deputy Desmond spoke. If a person is earning in excess of £13,000 and has a number of children he may have to educate every one of those children without any assistance from the State. It is ludicrous to suggest that that class of person should not be entitled to relief from the State. It is fair to say that mortgage interest relief which has been retained has been of enormous benefit to many people. If this relief were to be eliminated there are many who would not be able to repay their mortgages.

Up until recently this country failed to create an atmosphere in which the private sector could flourish in tandem with the public sector. It is very easy to come into this House or stand on any platform in any part of the country and attack every measure which appears to be unpopular, as if the measure was unnecessary in the first place. This kind of deception has been prevalent throughout the country over the past year but because of a sense of national pride which has always been part of the Irish character nobody, or very few at least, has been fooled by this. Everybody knows that the economy is in difficulty, that the Government do not like introducing measures which may be unpopular and that the medicine, although harsh at times, has to be swallowed. The people who suggest otherwise have offered few alternatives other than that the State should get more involved in the private sector or, if you like, take the private sector out. That remedy has failed more than once and I could give numerous examples of its tragic effects. In listening to that line of argument one would imagine that every semi-State company has been a resounding success, made massive profits and was a model to all. I wish that were the truth but of course it is not. Clearly, that line of argument has to be rejected.

This Bill which for the very first time addresses the question of tax reform in a real way has to be welcomed. I would like briefly to deal with the background to the Bill. As we all know, the greatest single debilitating factor in the economy is the level of the national debt. In the last year, by the end of March, the Exchequer had raised virtually all its borrowing needs for the year with minimal recourse to net foreign borrowing. Foreign borrowing is now at its lowest level since the late seventies. This in turn has led to the creation of a new kind of atmosphere where stimulation of the economy can take place.

Few would have believed a little more than 18 months ago that interest rates would have fallen to the level to which they have fallen. Interest rates are now at their lowest level for ten years. Whether you are repaying a mortgage or getting a loan for a business this is obviously of crucial importance. The reduction in inflation has been dramatic. Indeed, the Minister has stated that a further reduction in inflation to 2½ per cent or less on average this year is also in prospect. Interest rates have fallen dramatically. Inflation is at its lowest rate in years. We have succeeded at last in bringing borrowing down to its lowest level in years and everybody now agrees that for the first time in several years things are looking good and that there is light at the end of this tunnel.

The enormous success of the Government is mirrored by the fact that inflation is now below the EC average. It has been apparent for several years that there are significant weaknesses in the economy which the Government must continue to address. In the context of the lowering inflation rates it is clear that we must continue to improve competitiveness, failing which the strategy might very well be denied the level of success which it clearly deserves. It has to be borne in mind throughout the entire debate on this Bill and in justice to the young people in our national and second level schools that the national debt is still significantly high, that the problem has not yet been solved and that it is still there. It has been abundantly apparent since the early eighties that, unless this country can break free from the debt spiral, we will not have the resources to invest in the infrastructure upon which industry and jobs can be created. Indeed, it is fair to say that this problem clouds all horizons for development and that this problem has to continue to be addressed, failing which success will be denied.

It has been clear for a number of years that the taxation system has been stifling growth. It has been stifling ambition and it has been stifling to the workers. In the Finance Bill, 1988, for the first time the problem is addressed. It is admitted that the tax reductions are not what they might be but at least there is a concession to those on PAYE and the Minister has stated that this year's tax changes are the beginning and not the end. It is clear that the level of taxation is far too high and that it has to be tackled. The attempts made to do this in this Bill have to be welcomed by any fair-minded person. Indeed, Deputy McDowell, spokesman for the Progressive Democrats, said last night that the introduction of a system of self-assessment was a tremendous achievement, and without any doubt in the world it was. As I have said, the reductions in income tax are not as high as they might be but I hope that by continuing the present fiscal policies, we will achieve a level of equity in the taxation system which will compare favourably with other countries.

It was with a certain amount of disbelief that I listened to Deputy Desmond last night attacking the Custom House Docks site development. He said it was not planned and that when he was in Government only four concessions were given to the financiers and so on who were to go into the centre. He said the Minister for Finance and the Government had given too many concessions. Everybody now knows why the Custom House Docks site was not proceeded with in the life of the previous Government. If you dig in your heels on these issues, fail to negotiate and fail to come up with agreement, you may be absolutely assured that nothing will happen. Deputy Desmond and his Government succeeded very admirably in ensuring that nothing would happen, not just in that area but in others. They succeeded extremely admirably in this instance. Now that the project is beginning Deputy Desmond has decided that too many concessions were given. In all justice one has to say that, coming from a member of a Government who did nothing whatsoever about the matter, it took a brass neck to say that.

The Custom House Docks site brings Ireland in a major way for the first time onto the international stage of finance and that has to be welcomed. Its construction alone in the short term will provide considerable employment and subsequently it should be of enormous benefit to the Irish economy. Its importance and its significance cannot be underestimated in any circumstances.

The reintroduction in this Bill of section 23 of the Finance Act, 1981, is a significant change. There is no question but that when in operation in the past it provided a welcome boost for the construction industry. I would like to see section 23 of the Finance Act, 1981, extended to the public sector. It has become apparent in the course of the last number of years that the amount of money available from the Exchequer for building council houses has been limited. I believe if the section 23 relief were given to the construction industry in the building of council houses, an arrangement whereby the builders would lease back the houses to the local authorities, we would achieve two significant aims. The first would be a considerable boost to the construction industry itself and the second would be the provision of local authority houses without the capital cost being borne, in the first instance, by the local authority. This would solve a temporary problem and is something I would like to see implemented.

The VHI tax scheme has been attacked on several fronts. It seems that the main line of argument is that the consultants will increase their fees with a view to obtaining from their patients the amount of the tax which has to be paid. I do not believe this line of argument will, in the final analysis, hold water. It is clear that there would be no justification whatsoever for members of the medical profession to do this, and to do so would be morally wrong. The situation must be closely monitored to ensure that this does not happen, and the good faith of the Minister in this respect should be respected.

I mentioned self-assesment. This is a radical, innovative and imaginative approach which places responsibility on the taxpayer for meeting his own tax obligations. It will streamline the system, significantly reduce the number of taxation appeals and clearly will reduce the levels of estimated tax. The situation where an inspector of taxes sends out demands, very often for exorbitant amounts, and the subsequent appeals and comings and goings between accounts and the inspector of taxes office, was clearly ridiculous. This new method of assessment is something which must be welcomed as a realistic step forward and one which was very badly needed.

I welcome the levy on the banks. They, too, have a social obligation to the country, at large. They make considerably profits and the argument could be made that they should contribute even more to the economy from which they benefit so much. The banks in this country are in a relatively sacrosanct position and it is only right that they would contribute significantly towards the development of the country particularly at this time. The levy has to be welcomed by all right-thinking people.

The relief for foreign dividends was attacked and I cannot understand why. Section 38 makes provision for the repatriation of dividends earned abroad by the subsidiaries of Irish companies. If we did not give the concession, do the people who are attacking this provision seriously believe the funds would be returned to this country? It is a ludicrous argument to suggest that that relief should not be given, an argument that has more to do with ideology than with the interests of the country. It has more to do with some kind of cuckooland principle than with solving our economic difficulties. It smacks of a sort of throw away to the people who would be left of left, if I may use that term, because it is quite clear that the repatriation to this country of dividends earned abroad can only be of benefit to the country, and anything which is of benefit to the country should not be opposed for opposition's sake.

The intention here is that the funds repatriated to this country would be used for investment within the country, and the Minister has made it clear that it will be necessary to show that these repatriated funds will be directed towards the maintenance and creation of employment here. Now we have reached the stage where those who are opposed to this money coming in free of tax are logically against the investment of that money for the creation of employment here. That is what the far left have said — they are against it.

It is difficult to understand that kind of logic in a country which has faced such severe difficulties over the last number of years. It is difficult, if not impossible, to understand that kind of lunacy. That is the kind of perverted thinking that has left much of this country in extreme difficulty over the last number of years.

Let it be clearly said that there is nothing wrong with repatriated funds coming into the country free of tax in order that the money may be used towards the maintenance or creation of employment here. If anybody on the Left does not agree with me, he can go into the streets of Camden Town or talk to the young people on unemployment assistance all over the country, and they will tell him what is happening.

Those who criticise such a measure would be better off interviewing those who will gain as a result of it. In my view this measure is something different and it in many ways reflects the spirit of the Bill. It amounts to a new approach to dealing with our difficult problems. It is time we approached the problems of taxation, of investment and of duties in a new way, taking into consideration that old modes and practices in regard to taxation and of approach to the economy are obsolete.

The Bill is an indication of the commitment of the Government to a new approach. Conservatism in taxation and in regard to our other problems will not serve the unemployed and will do a disservice to our youth in the long term. Therefore, the innovations in the Bill to try to solve our difficult problems are to be welcomed.

Listening to some speakers one would imagine that we do not have taxation of farmers. People give the impression that a Bill has been introduced banning all taxation of farmers but that is not so. The Government have said that farmers will have to submit tax returns and will be liable to pay tax, like everybody else. It is ludicrous to try to create the impression, for whatever mischievous reasons, that farmers do not have to pay tax. The opposite happens to be the case.

Deputy Mac Giolla said that many of the companies that were given tax relief by the Government were the same companies that put 40,000 people out of work. His solution to that problem was to get companies to pay more tax and not give them any tax concessions. The day that type of thinking is adopted is the day the ground will be cut from under us. However, in this context Deputy Mac Giolla made one good point. He pointed out, very fairly, that grants given by the Government to provide industry very often did not create the number of jobs expected.

It is abundantly clear that in the channelling of moneys into industry by the Industrial Development Authority we must concentrate on the creation of jobs. The amount of money given to any project should in the first instance be directly related to the number of jobs created. In other words, there should be no free handouts and those in receipt of grants must be obliged to create the jobs for which the grant was intended. I accept that that philosophy has been followed up to now but in too many cases those who received grants did not create the number of jobs for which the money was intended. That must end. If it does not I will be very disappointed.

An allegation was made that the Bill did not do anything to deal with unemployment. That is not true. The fact that interest rates have been driven downwards, that there is an attempt to reform the taxation system, that inflation is at its lowest level for years and that our borrowing requirement is at its lowest level for years automatically starts to create the correct climate for the creation of employment.

It has to be emphasised that the Bill increases tax revenue in the State by £146 million this year and any attempt by Fianna Fáil to try to convince people that it amounts to an effort to reduce the tax burden is false. In some areas tax is being increased in an anomalous and unfair way. It is true that the Fine Gael Party gave broad support to the budget and through their underwriting and underpinning of the Government's efforts, are providing to improve the public finances, a level of constructive opposition that was not provided heretofore by any political party. That is evident from the fact that we are not opposing the Second Stage of the Bill. The strength of the Government, if they are perceived to be strong, is only as strong as Fine Gael will permit by their decisions in the House.

In the budget the Government missed a number of opportunities to improve the position of the country. We should not look at the Bill only in the context of the national debt or of the extent of our unemployment problem. We should remember that in 1992 there will be a new competitive position in Europe as a result of the single European market and that in 1993 the Channel Tunnel will be in operation. All the pressures in the nineties must be to remove the structural inefficiencies and defects in our economy.

We must act in a way which will resolve our problems vis-à-vis our lack of competitiveness. For that reason my major criticism of this Bill is that its provisions have not made any attempt to deal with the reform of our tax code. There has been no attempt to deal with the problems which will arise from tax harmonisation in 1992. The Government have dodged this issue. For a country so heavily dependent on indirect taxation, that will be a major problem for us in the years ahead. It should be addressed now because any changes proposed will have to be phased in over a period. It is interesting to note that the problems of tax harmonisation are the subject of an indepth analysis by the OECD countries at present, representing trade unions and management. They are arriving at a number of conclusions we would need to examine.

There is no doubt that one can reform one's tax code in a way that will have a neutral or minimal effect on the level of revenue yield. Our reform should incorporate the recommendations of the Commission on Taxation on simplicity and equity in the administration of our tax code. There was little movement toward simplicity in personal or company taxation in this budget. There has been no attempt whatsoever made to reduce the disincentive effects of personal income tax which have resulted in a major growth in the brain drain and the black economy. We have seen an indexation of bands and allowances barely marking time. Overall income tax revenue will rise this year.

There were some detailed, imaginative reforms I should like to have seen introduced in this latest budget which have not been proposed. Every speaker so far has said that the ultimate purpose of the Government's and all our efforts is the creation and stimulation of employment. There has been no attempt made to utilise the tax code to that purpose. I might cite a scheme in operation in America called the jobs tax credit scheme under whose provisions every employer who recruits an additional employee receives a subsidy by way of voucher or tax credit against the company's tax liability for that year, whether it be $1,000 the first year, or $500 the second year. It would be very simple to incorporate such a scheme into our system.

We have a live register of unemployed people. There are in existence already different provisions whereby people taken off the dole can be given a subsidy under the provisions of the employment incentive scheme. We need to reverse the balance of the payroll tax costs by the introduction of such a jobs tax credit, under which an employer would receive a credit of, say, £600 in the first year and £400 in the second year provided the relevant employee is retained for that period in full insurable employment. Such a credit would go towards an employer's PRSI tax bill or the company's PAYE liability. Such a scheme would ensure that employers would be able to submit such vouchers with their P35 returns or at the end of each year.

I have had umpteen examples of the disincentive to employment obtaining. For example, if employers want to take on an additional employee and pay him or her say, £100 or £150 a week, they fall into a state of relapse when they ascertain from their accountant the total cost involved. One must remember that one is talking of something in the region of an additional 25 per cent on top of wage costs when one takes into account the taxes that have to be remitted, employer's liability insurance obligations, and so on. Therefore, it will be seen readily that there is no real mystery about the huge growth in the casual labour market, why the provisions of the Jobsearch programme must be invoked to deal with people who are working and signing on simultaneously. There is no mystery about the fact that employers are doing everything possible to invest in new plant and machinery in order to do away with labour. Until we seriously examine the tax treatment of labour here there will not be any serious growth in employment.

There is also a limitation on the level of potential growth of employment in certain sectors on which we depended in the past, such as manufacturing industry. We shall also have to examine the potential growth of employment in the personal services sector. I am talking about transferring from the black into the white economy personal services, work undertaken casually at present in the form of, say, gardening, house cleaning, baby sitting. That is an area which all the international forecasters contend will grow. The question must be posed: will those services grow here within or without the taxation system? There are many married mothers at work who would like to be able to avail of tax benefits in order to employ such people. There is a great need to have this sector organised thereby affording people additional employment opportunities. There is nothing by way of provision in this Bill for employers' PRSI, jobs tax credit or for the creation of growth in the personal services employment sector.

In relation to income tax I should say that the previous Government — of which my party were a member — introduced a change in the income tax system vis-à-vis families. The tax free allowance for children was abolished and the child benefit scheme introduced. With the benefit of hindsight I can say it was wrong to have abolished the tax free allowance for children. The financial demands, particularly on relatively low paid workers with large families, are enormous. Looking at the social welfare system one would have to conclude that, in respect of nearly all types of semiskilled or unskilled employment here, if one has more than four children, it would not pay one to go to work. With such an abundance of work available on a casual, black economy type basis, undoubtedly it is paying people not to be employed officially. We shall have to re-examine the question of tax free allowances for children, especially those of large families of low paid workers. That whole poverty trap between the social welfare and taxation systems is of this House's creation.

There must also be questions raised about this Government's commitment to community health care. In all of the glossy reports produced this is something regarded as being worthy and supported by everybody. In practical terms one might well ask: what is being done about it other than the closure of hospitals? I remember when the present Minister for Agriculture and Food stood where I am now standing. Every year he tabled amendments to the Finance Bill incorporating an increase in the tax free allowance for people who minded dependent relatives who were ill, who would otherwise be hospitalised, who would otherwise cost the State a minimum of £150 a week. If we are serious about community care — as they are in other countries about contending that elderly and sick people should be treated in their family environment, we should allow our taxation system to respond and ensure that that allowance is extended.

It is with great regret that I note the treatment of the disabled under the provisions of section 54 of this Bill. Practically every speaker to date has referred to the disgraceful decision to abolish the concessions given to disabled drivers. I appeal to the Minister for Finance to re-examine that decision. This must be seen in the context of the abolition last year, in many cases, of the mobility allowance payable by health boards. Previously disabled people were entitled to three concessions — cheaper petrol, cheaper cars and a concession with regard to motor taxation. We are told by some civil servants in the Department of Finance that the mechanisms that have worked since 1968 are now, for some reason, too cumbersome, too unwidely. How is it we were not told every year for the past ten that they were too cumbersome? They were not.

This is a penny-pinching exercise, worse than any of the rhetoric I have read of well before my time in this House, such as taking a shilling off the old age pension. This is downright unfair and unreasonable. The one thing disabled people value, that affords them independence, is their mobility. I ask the Government to reconsider this decision. Otherwise it will mean disabled people will have to pay more for their cars. Neither does it take account of the fact that they must have special features on their vehicles such as automatic transmission because they are unable to change gears and so on. All of these practical considerations must be taken into account in their case.

Debate adjourned.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.