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.