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Dáil Éireann debate -
Wednesday, 24 Apr 1991

Vol. 407 No. 4

Finance Bill, 1991:Second Stage (Resumed).

The following motion was moved by the Minister for Finance, Deputy A. Reynolds, on Tuesday, 23 April 1991:
That the Bill be now read a Second Time.
Debate resumed on amendment No. 1:
To delete all words after "That" and substitute the following:
"Dáil Éireann believing
(a) that it fails to make any significant progress towards fundamental tax reform, broadening the tax base or a shift in the tax burden away from the PAYE sector,
(b) that the provisions in regard to reform of B.E.S abuses represent a significant retreat from the measures announced in the budget as a result of extensive lobbying from vested interests, and are particularly unacceptable in the light of the findings of the Comptroller and Auditor General,
(c) that it fails to take any steps to promote job creation, despite the fact that the March unemployment figures were, in real terms, the worst on record,
declines to give a Second Reading to the Bill."
—(Deputy Rabbitte)

First, I would like to compliment the Minister on bringing this Bill before the House. The Finance Bill is part of the annual budgetary process. The budget successfully promoted the recovery of the economy while at the same time providing for the needs of the low paid, the under-privileged and the disadvantaged in our community. The consensus between the social partners and the Government has been central to the success of our economic and social objectives. The consensus has ensured advances in areas of employment, debt reduction, social equity and tax reform. The broad economic strategy of the Government was set out in the Programme for National Recovery. The Programme for Economic and Social Progress continues that strategy and underpins the Programme for National Recovery.

The Government's economic strategy in the last few years has been based on the reduction of the national debt and the associated debt servicing cost, the firm linking of the Irish exchange rate to the European monetary system, the achievement and maintenance of a low domestic inflation rate to ensure competitiveness among our exporters and a reform of the tax system to encourage growth and the creation of employment. The provisions of the budget, taken with those of the Finance Bill, represent major changes towards gearing our tax system to the needs of our economy and fulfilling our objectives following the completion of the single European market.

This Bill not only provides for tax rate reduction but also ensures that our main taxes, such as capital gains, stamp duty and capital acquisitions, are all based on self-assessment. The tax concessions in this year's budget, combined with the pay increases agreed in the programme and our relatively low rate of inflation of 3 per cent, provide the basis for a further increase in take home pay. Income tax reliefs announced in the budget will benefit nearly 700,000 taxpayers who will see their marginal income tax rates reduced as a result of these changes.

In a little more than a year we have achieved a great deal, a reduction of 3 per cent in the standard and top rates of tax, a cut of 4 per cent in the standard rate of VAT, a narrowing of the difference between excise duties in this country and the UK, a reduction in the standard rate of corporation tax of 40 per cent from 1 April and significant reductions in the top rate of capital taxes.

The increase in the exemption limits by £150 for a single person and £300 for a married couple — and the age exemptions going up by a similar amount —will be of benefit to the low paid. This year's measures will exempt about 18,000 taxpayers from having to pay tax and a further 26,500 taxpayers will be given marginal relief. The reduction of 1 per cent of both the standard top rates of tax brings them down to 29 per cent and 52 per cent, respectively. Before the 1989 budget they were 35 per cent and 58 per cent.

Chapter VIII of the Bill deals with the urban renewal measures, in particular the special package of investment for the Temple Bar area. Under the new urban renewal programme a generous package of incentives is available to encourage investors to participate in the physical development of our towns and cities. The incentives consist of tax concessions and rates relief for development in designated areas and in 23 specified urban areas. This scheme has been a major success; national projects costing £600 million will be completed in the near future in addition to the development work of £400 million at the Custom House Dock site and the new incentives package for the development of the Temple Bar area of Dublin.

The renewal scheme involves a partnership between public and private sectors; with a combination of tax concessions and the right climate private enterprise is investing in the development of our towns and cities. Local authorities are playing their part by initiating modern planning laws. They have now become development operations in the true sense of the word. Last week in Wexford we had a visit from the Minister of State at the Department of the Environment, Deputy Connolly, who formally opened a £10 million urban renewal project in Wexford town. This project has revitalised the town and given the people there confidence and an incentive to invest in their town. It has also given them a belief that they are one of the best towns in the country.

I ask the Minister for Finance to give serious consideration to extend this incentive scheme to places like Enniscorthy, New Ross and Gorey. In Wexford we have the expertise, developers, finance, know-how and confidence and I have no doubt that if the Minister extended the urban renewal scheme to Enniscorthy, New Ross and Gorey, he would see the same results that we have successfully achieved in Wexford town which is now the flagship of urban renewal. I ask the Minister to give serious consideration to the extension of the scheme to those towns.

Co-operation between the social partners and the Government is of central importance to economic progress. Tax reform and social equity are of equal importance in the Government's overall strategy. Low interest rates are also of paramount importance; I believe that the Central Bank misread the market before Christmas when they, unnecessarily, raised interest rates. The rates of interest charged for mortgages obviously affect the demand for house building and, indeed, have a crippling effect on low paid workers. I cannot understand the present position which exist between building societies were there is such a variance between rates charged and hidden costs.

It is estimated that on a £25,000 mortgage there can be as much as £5,000 of a difference in repayments over a 20 year period. I call on the Minister to ask the building societies to publish each month a comparative list showing the interest rates charged and any hidden costs involved in taking out a mortgage.

The Government's economic strategy in the last two years has been based on low public borrowing, improved competitiveness and an adherence to our obligations within the EMS. Investment in major projects is of particular importance to the development of our economy. I should like to acknowledge the £2 million granted by Bord Fáilte for the development of major projects in 11 locations. I am delighted that one of these is in County Wexford, in the Kilrahan area; I have no doubt that this will make a major contribution in providing temporary and permanent employment and will be a great tourist attraction for the south-east region.

I welcome the commitment of the Minister for Finance to reduce VAT and to have harmonisation in all areas of tax. The Customs and Excise personnel in Rosslare Harbour are unsure of their position; they have been guaranteed their jobs up to December 1992 but, because of tax harmonisation, they do not know what their position will be after that date. There are a number of options open to the Minister, the allocation of new work to existing staff, redeployment to other public service Departments in the local area, redeployment involving relocation to customs and excise or other public departments elsewhere or early retirement. I hope that, in the not too distant future, the Minister will clarify the position as there is a great deal of anxiety at the moment among the staff and their families.

The Finance Bill introduces a new allowance to help widowed parents which will apply for three years following the year in which a spouse dies. There will be a grant of £1,500 in the first year, £1,000 in the second year and £500 in the third year. I very much welcome this, as not alone is there great sadness and anxiety when a spouse dies, there is often a great deal of financial hardship. I would like to compliment the Minister on recognising this by making this provision in the budget.

Section 114 provides for a reduction in the level of conversion required from 30 per cent to 20 per cent of tax-exclusive costs of the vehicle for qualification under the disabled drivers scheme. I welcome this, as many genuinely handicapped people have been excluded from the advantages of this scheme because of this stipulation. Under the 1989 disabled driver's tax concessions regulations repayment of excise duty on motor vehicles imported for use by severely and permanently disabled passengers is limited to vehicles with an engine capacity of 4,000 cc. An anomaly exists in this area. In my own town we have a handicap association which transports seven or eight handicapped persons. Their bus is under 4,000cc. and they are entitled to a refund of excise duty. However, another association that transports 17 or 18 handicapped persons are not entitled to a refund of excise duty because their bus is over 4,000cc. I would ask the Minister to address this problem.

I would like to thank the Minister for introducing this Bill. It reflects sound Government policy, encouraging investment, while at the same time ensuring that those who are less fortunate, those who are underprivileged, those who are disadvantaged, are looked after in our community.

The usual purpose of the Finance Bill is to give legislative effect to what was announced in the budget. It also allows the Government some time to receive representations and submissions from the various interest groups throughout the country who now have the professional ability to analyse the budget and its effects on them within hours of its publication. It is the responsibility of the Government to ensure that there are sufficient funds in the national coffers to provide the services which are asked for by way of representations. In carrying out their responsibilities, particularly in the area of health, social welfare and housing, the Government must ensure that the overall tax take of the State is preserved.

I welcomed the Government's change of heart following the most extraordinary submissions in relation to the business expansion scheme. There was a lot of controversy about this scheme and it was subject to many abuses. Our concern was to be fair to projects, many of them in my own constituency in South Tipperary, in relation to which people had in good faith entered into legally binding contracts for the purchase of property, additional land etc. In some cases people had entered into legally binding contracts with builders. It was appropriate that the Government should realise that great injustice was being done to genuine applicants under that scheme. There has been criticism of the continuation of the scheme but there are exceptions to all rules, and I certainly would agree with the changes made by the Government in line with legally binding obligations embarked upon by many applicants in the belief that the scheme was in operation.

Our spokesperson on finance, Deputy Ruairí Quinn, has expressed his concern at the failure of the Minister to recognise other areas that concern us also. He mentioned particularly the growing number of people who are unemployed. Very little in this Finance Bill will address the problem of emigration, the lack of employment opportunities and the lack of incentives to employers to participate in the process of ensuring that as many people as possible would have gainful employment in their own country. Deputy Quinn mentioned that on present statistics the numbers unemployed could reach the most unacceptable figure of 300,000 before too long. If that happens it will have catastrophic effects on everybody's standard of living because of the dependency factor that will be created, both the standard of living of those who remain at work and of those who are totally dependent on their parents for their basic needs.

This Finance Bill has been obsessed with tax, self-assessment, tax exemption schemes and so on but it has failed to grasp the nettle and do something with the tax base so that more people would pay a fairer share of income tax, profit tax, corporation tax, wealth tax and so that the burden would be spread more evenly and that the burden borne to a large extent by the PAYE workers would be lightened considerably. It is obvious that there are disagreements between Fianna Fáil and the Progressive Democrats. The Minister for Finance has the responsibility to answer to us. There seems to be some measure of disagreement within Government as to how to tackle the problem of taxation in order to spread the load.

There are other ways of approaching this problem. We suggested that we would welcome all-party involvement in many areas. There are many people who could make suggestions that would leave the State with more money available to distribute to the people who need it most, given the strictures that must be on any Minister for Finance. The Department has been very slow to really grapple with this problem of tax. If the burden was spread more evenly among people there is no doubt that the State would have a larger income. In addition, the burden on those who are paying at present would be reduced. While I welcome the exemption threshold for families on low incomes, this threshold is pitched at a level which is not much better than social welfare limits. One must reach that threshold before one can benefit for children's allowances under the tax system. Some of the tax changes introduced appear to be almost anti-family.

I want to refer to tax evasion and self-assessment. Due to the reduction of staff in tax offices since the introduction of self-assessment the opportunities for evasion have increased. While in the past most of us believed that everyone wanted to pay their fair share and very few people owed money to the State, the tax amnesty brought in spectacular amounts of money. That proved our point that tax evaders needed some incentive to pay their fair dues to the State. It is unfortunate that people have that attitude to paying their fair dues to the State, which is expected to provide services such as health services in which I have a direct interest.

The Government are creating a two tier health system — one tier for those who can afford to pay for the services they receive and another tier which subjects people to the odium of means-testing, waiting lists or a lack of medical cards. Even people who have medical cards are forced to wait in never ending queues for basic health and surgical treatment. Since the Health Act, 1970 the Government introduced additional forms of taxation. They were the first Government to introduce charges for hospital services. Up until then such charges were accepted as being included in PRSI contributions. Those contributions are not sufficient any more and people who do not have a medical card are expected to pay an additional fee of £12.50 per day for up to ten days. This is double taxation on workers. The Government do not seem to be interested in spreading this burden more evenly. People who can ill afford it are being forced to join the VHI. It has been proven that VHI cover is not sufficient to pay consultants' fees for the services they render. Since the Government took up office thousands of people who work in the health area have been made redundant, thousands of beds have been closed and thousands of patients have had to wait months and years for hospital treatment. The Government seem to be giving priority to the private sector instead of to those who are in need.

We have always argued that health care should be available to all our people. Even when the Minister decided to provide access to a public bed to everyone irrespective of income he failed to reach agreement with those who will provide the service. He failed to initiate discussions with these people before he announced his intentions. I wish him luck in this but I suggest this is not the way to go about introducing the comprehensive changes needed in hospitals where there are waiting lists for beds of all descriptions. The Minister has said that all people are entitled to a public bed but sometimes these are not available.

Those of us with responsibility in these areas do not like to have to preach doom and gloom all the time but this fact is brought home to us on a daily basis in our constituencies. Old people in need of acute hospital treatment are being discharged from hospitals early into the community where there is no back-up service. Sometimes these people are forced into private nursing homes which they can ill afford because of the failure of the State to provide a public service in geriatric sub-acute hospitals or welfare home type of accommodation. The State is refusing to provide such a service.

Less than seven months ago we passed legislation in this House to enable the Minister to give subventions to approved patients, presumably medical card holders, in private nursing homes. The Minister informed programme managers this year that this legislation now empowered them to make these payments but reminded them that they must provide such payments from their existing allocations. As we have proved in this House, programme managers have £20 million less this year to deliver existing services. How can the Minister expect us to believe that funds are available to give subventions to old people who are taken out of acute beds and have no place to go? The commitment given in the legislation has not been followed up with the necessary allocation. No health board have said they can manage to survive on the allocation given to them in the budget.

I wish to refer to the problems in agriculture. The Government do not have any policy in regard to the review of the CAP, the extension of disadvantaged areas or the redesignation of existing classified areas. People in rural Ireland are not being given any incentives to stay in rural Ireland. Instead small farmers have been plagued with tax forms which they are incapable of completing. Those farmers have been forced to go to their public representatives for help. Even when they submit documentation those small farmers are penalised by the Revenue Commissioners because it is out of date. I am dissatisfied with the Bill and the Labour Party will oppose it on Second Stage.

Debate adjourned.