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Dáil Éireann debate -
Thursday, 30 Apr 1992

Vol. 418 No. 9

Finance Bill, 1992: Second Stage (Resumed).

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

Deputy Boylan was in possession.

On a point of order, would it be possible to share time up to 4.15 p.m.? I understand Deputy Boylan wants only a minute to complete his contribution. If Deputy Jacob were to finish at 4.07 p.m. or 4.08 p.m., perhaps I could be facilitated.

I would welcome anything the Whips can do to facilitate the Deputy, and indeed any other Deputy who wishes to participate in this debate.

I have no difficulty with that.

In conclusion, I ask the Minister for the Environment to specify the source of grants to local authorities. It is not acceptable that all grants — EC and national — are lumped together giving the impression of increased national funding, especially for roads. I am not satisfied that this Government are placing enough emphasis on national, secondary and county roads.

This Bill is a further attack on life in rural areas coupled with the proposed co-operative tax — to which I am totally opposed — the new licensing system for pubs and the increase in car tax. If I had more time I would develop those points further but I appreciate other Deputies wish to contribute. It indicates further the nonsense of trying to rush such a complex document through this House at short notice. I hope this will be the last time this happens and that a more reasonable approach to finances——

I am anxious to give time to other Deputies to make their contributions. Of course I could selfishly take more time: at least a half an hour.

The Deputy is given time and he will not use it.

This is a lot of red tape and maybe the people who compiled this document do not have a notion of what it contains but we will all know what it is about before the end of the year when it affects our pocket. However we will leave that for another day, but there may not be too many days left for this Government in view of how matters are progressing. Hopefully, there will be a change and people who can do the job better will be on the Government benches.

The Deputy had enough time and he is not using it.

I congratulate the Minister for Finance for presenting this very impressive and important legislation. It is a lengthy and detailed Bill and it is obvious a great deal of skilled work has gone into its preparation. Many years have passed since tax changes of such magnitude have been incorporated in a Finance Bill.

There are obvious EC implications, one of which relates to DIRT where there will be a reduction of £80 million. This change was necessary in the context of the abolition of exchange controls, otherwise vast sums of money would leave the country. That happened some years ago and it was to the detriment of our economy. Obviously there are positive aspects of it: there will be more savings, more investment and, hopefully, more jobs. We should concentrate our efforts and our energies more on jobs than other issues, which at present are taking up a greater portion of our time in this House and outside.

The European situation and European Union were obviously in the minds of the Minister and those who helped him to prepare the Bill. Incorporated in the Bill since 1987 is a continuation of fiscal policy in the macro-economic area. The phenomenon is that while things are going well in the macro-economic area, the jobs are not forthcoming. The sooner the issue of jobs is tackled the better.

The period of industrial peace which we have had over the past few years has helped our economic situation; when the Minister for Finance was Minister for Labour he played a major part in that period of extended peace. Recently, the boat was rocked by the lengthy bank dispute. I compliment the Minister for Labour, Deputy Cowen, for his excellent handling of that dispute. Thank God, commonsense prevailed and we are now able to get on with the job.

Unfortunately we have serious postal difficulties which, if they were to be prolonged, would have major implications for the economy. The rural post office comes to mind. I recall speaking on the Finance Bill two years ago when the closure of rural post offices was first mooted. I sounded warning bells at that time but unfortunately, I had to raise this matter again when speaking on last year's Finance Bill when the prospect of closing these post offices was a real threat. I voiced my concern and my aversion to any policy of closure of rural post offices. I hope commonsense will prevail and that the major difficulties in An Post will be dealt with. I do not believe any substantial savings will be gleaned in the context of the present difficulties by closing rural post offices. Older citizens depend on them because there are many areas where public transport is not available to bring them to the bigger post offices in the nearest town. I do not have time to dwell on the many other reasons. I object to such closures but I hope this policy will not be proceeded with. However, I am sure we will have an opportunity to talk about that again.

I am disappointed that there is no improvement in the incentives for transferring farmland from the older to the younger generation. It is vital that such transfers be encouraged and facilitated and that all disincentives are removed. Because of the disincentives, some people stay on their farms until they reach a ripe old age, and at that stage, the younger, up-and-coming farmers, are no longer young. As a result, some of these younger people get frustrated and leave the land altogether. I would exhort the Minister to address this matter on Committee Stage or somewhere along the line, with a view to encouraging the older members of the farming community to retire happily and contentedly to enjoy the fruits of a lifetime's labour and allow the younger generation who are equipped with education and skills to get their teeth into the job of farming. God knows, there are enough difficulties without having that disincentive.

I thank the Minister for his re-examination of the public house licence system. He spoke to me about it in the run up to this Finance Bill, and has changed his mind: somebody said the man who cannot change his mind cannot change anything. Some people on the Opposition benches said the Minister had made a U-turn in this regard. That was astute thinking on his part. The small family run pubs are part and parcel of rural Ireland and would be decimated if the original plan to base licence fees on the valuation with a multiplier attached went ahead. That was a non-starter. I am pleased the Minister has seen fit to depart from that and to put in place what is a much more equitable system. While there will be an increase, it is a scaled one which will be equitable and will take into account the ability to pay.

There are 10,000 of these pubs around our country. They are an integral part of our nation. We are trying to promote and expand tourism and provide a welcome for tourists who will find a welcome in those family run public houses, and any disincentive to keeping those houses of welcome open is to be avoided. I am delighted the Minister has seen fit to put this new format in place.

The Minister doubled the cost of renewing a licence. It is disgraceful. It is the death knell of the country publican.

Anything else I have to say will be related to job creation which are an integral part of what the Minister is trying to achieve. By-pass roads all around the country funded by Europe have made massive improvements in our infrastructural programme. In my constituency, we are screaming for a by-pass on the main Euro route to Rosslare. The town of Arklow is stagnating because of traffic congestion; it is an employment black spot. Industrialists do not want to know about it. They cannot be attracted there because of congestion and the town itself and the south Wicklow hinterland are suffering. It is imperative that we get on with the job of providing a by-pass for Arklow, and that should be proceeded with as soon as possible.

In by-passing towns and villages we must have regard to the interests of local people and how by-passing a town or village affects its way of life and economy. A town that is suffering because there is a by-pass is Kilcullen, the new constituency of Wicklow-East Kildare. That is a typical example of how a town can be affected. The new road, excellent though it is, is by-passing the town and cutting off the town's economic lifeline; it is detrimental to the economic life of Kilcullen. There is a solution — build a link road. I have already written to successive Ministers for the Environment about this and I hope my words will be heard, The solution is there; it is only a question of having the will to carry it out. I hope that will happen.

Section 24 of the Bill refers to the restriction of capital allowances on holiday cottages. I referred to the effort that is going into promoting national tourism. Our tourism industry is growing at 15 per cent, three times the world rate. That is very commendable but we should not do anything to restrict that growth. I believe that, incorporated in this section of the Bill, is a restriction on the growth of tourism. There is also an injustice incorporated here. Once again let me give an example. There is a company in my constituency, within ten miles of my home, which has expended £1 million solely on the strength of the tax allowances that are and have been available prior to this section 24. The project will involve £3.65 million, there are 100 jobs on the construction side and thereafter, there will be 15 permanent jobs. That is music to my ears and it is worth fighting for. If this section is agreed it may remove the possibility of this project proceeding. It is unjust and unacceptable to cut it off at this stage after all the work and planning has been done.

Last April we found ourselves in a similar position in relation to the business expansion scheme. I recall appealing to the Taoiseach, who was then Minister for Finance, to allow hotel projects for which plans had been made, which were ready to proceed and for which finance had been secured, to proceed. He considered this request sympathetically and was very astute because he allowed those projects to proceed. I made representations to him on behalf of two hotels in my constituency and that the work has since been completed and jobs have been created. I ask the incumbent, who I have no doubt is a positive gentleman — we are very fortunate to have him as Minister for Finance — to consider this request as sympathetically as his predecessor considered the request in relation to the business expansion scheme last year.

I welcome the Bill and wish to compliment and congratulate the Minister who put a great amount of effort into producing it. I hope it has a speedy passage through the House.

The Minister is agreeable to Deputy Garland taking two minutes of his time which gives him a total of five minutes.

I thank the Minister and Deputy Jacob. There are two main features which we, in the Green Party, look for in a Finance Bill, first, what it does for the environment, and, second, does it address in a serious way the dual scourge of unemployment and involuntary emigration. I regret to say that this Finance Bill, like previous Finance Bills introduced by the Government, fails dismally on both counts.

In relation to the environment, there are no additional provisions over and above those included in the Estimates. There is no sign that there will be speeding up of the process to establish the Environmental Protection Agency.

The energy crisis is not addressed in the Bill. Indeed, the situation will worsen with the proposed reduction in the price of petrol. This proposal flies in the face of the likely introduction of some form of energy tax by the European Community. The reason the Minister gave in his budget speech for this extraordinary proposal was the cross-Border factor. However, he did not bother to give any facts, figures or estimates of the effect this proposal will have in Border areas. I accept that a large differential in petrol prices between the North and South would result in considerable loss of trade but the Minister did not make his case. I should remind the House that in spite of the fact that the estimates for energy conservation have been cut by 44 per cent and 26 per cent in the Estimates in the past two years, there is no supplementary provision for extra spending in this area.

I would like to comment on some aspects of the Minister's speech. I note he used the term "sustainable economic growth". While I commend him for his wisdom in using the word "sustainable" I am very dubious as to whether he understands it fully. The unpalatable truth is that our economy is not structured in a way that will enable us to operate in a sustainable fashion as the basis of our economy is the continuing profligate use of fossil fuel resources. Our open economy encourages the unnecessary transportation of goods from one side of the world to the other. This has also caused our frightening unemployment rates.

Once again, the Minister refers to tax reform and claims that major progress has been made but surely what is needed is simplification of the income tax code. This Bill extends to no less than 246 pages and we have been told by the Minister that a further Finance Bill will be needed later in the year to deal with the other budgetary changes. Assuming we need an income tax system it is time to realise it is better to start again and sweep away all existing provisions in the Income Tax Act, 1967 and in subsequent Finance Acts as there has to be a better way.

I would like to refer to the problem of unemployment and involuntary emigration. The Minister admitted in his speech that his target for average unemployment of 272,000 has already been reached. Therefore, we are talking about a year end figure of close on 300,000. All parties in the House have failed to face up to the reality of this unemployment figure which everyone agrees cannot be substantially reduced even in the medium-term. It must be obvious to all that the main reason for the increase in unemployment is that modern technology has killed jobs. This trend has been exacerbated by our membership of the European Community. I should remind Members that unemployment is now running four times the level it was at when we joined the European Community in 1972. In the unlikely event of the referendum on the Maastricht Treaty being passed this figure will undoubtedly increase further.

I would like to mention the draconian provisions in section 8 which deal with benefit-in-kind on company cars. These measures represent an attack on the living standards of company representatives who use a car as a tool of their trade. Let us by all means hit hard the managing directors who drive their cars daily into town and have free parking even though they live perhaps 50 yards from a DART station. We oppose the Bill.

I am aware there is no time available to allow me make a contribution but I would like to put it on record that I am disappointed that sufficient time has not been made available for this debate. I am also disappointed I will not have an opportunity to air the grievances of the beleaguered publicans in my constituency for whom the cost of a licence is being doubled in this Bill. This will sound the death knell for many rural publicans.

Deputy Sheehan, having expressed your regret at being unable to articulate it it is a little unreasonable of you to proceed to do so.

A short time ago Fine Gael were giving away time.

I regret the Deputy has not got the time but I have no doubt the Deputy's eloquence will be heard on Committee Stage.

We always consider the reasonable representations by Deputy Sheehan but I am not so sure that in this case they are reasonable.

I would like to thank the Deputies who contributed to the debate and to respond as comprehensively as I can in the time available to the major issues which were raised. Other points relating to individual sections can be discussed in greater detail on Committee Stage.

Deputy Noonan referred to overall budgetary policy issues. I cannot let this opportunity pass without putting one or two points on the record in reply. First, there has not been a doubling of the real EBR over the past two years. The 1990 outturn for the Exchequer borrowing requirement was 2 per cent of GNP: this year's budget projection, which has been generally accepted as a prudent estimate, is for an EBR of 2.4 per cent. To abstract the EBR from the prevailing economic context is not, in any event, realistic. In 1990, the economy was benefiting from an uplift abroad while the subsequent international economic downturn which has dramatically shifted Irish migration patterns correspondingly increased the pressure on our social spending.

There is no question of any weakening in the Government's resolve to maintain fiscal discipline. On the contrary, I would remind Deputies that an EBR of less than 2.5 per cent could not have been envisaged as in any way attainable in the mid-eighties, when the Exchequer borrowing requirement stood at almost 13 per cent of GNP. That achievement, in the context of the pre-emption of over 9.5 per cent of GNP in debt-service costs, should not be so lightly discounted. The progress we have made, and which we have consolidated despite the continuing difficult budgetary situation while making room for real reform of our tax structures, is something which all sides of the House recognise, and take pride in. The national consensus which transformed our public finance and our economic performance is recognised widely abroad and there should be no place for designation of these achievements at home.

I should also put to rest the Deputy's fears about Ireland's ability to meet the budgetary convergence criteria envisaged in the context of European Monetary Union. The fact is that we already meet these requirements. The general Government deficit in both 1991 and 1992 is calculated at virtually a full percentage point below the ceiling of 3 per cent of GDP set out in these criteria. The debt-GDP ratio is declining steadily. Having reduced from about 117 per cent in 1987 to 95 per cent last year, this ratio will fall again in 1992. This is not just my opinion. At a meeting on 10 February last which considered Ireland's economic convergence programme, the ECOFIN Council welcomed the fact that Ireland at present complies with the objective criteria for the move to the third stage of European Monetary Union. I trust that these facts will reassure the Deputy.

I now turn from these broader issues to the narrower area of taxation. Deputies' contributions ranged across the full spectrum of the taxes and I will try to address their major issues as fully as I can in the limited time available to me.

I will begin with income tax, which as usual seems to have attracted the most comment. Much fire was concentrated by Deputy Noonan and Deputy Quinn on what they implied was the Government's policy of concentrating on cutting tax rates. Deputy Noonan raised doubts about the Government's way of paying for it, while other Deputies, including Deputy Rabbitte, questioned the value of doing it in terms of job creation; also, Deputies Noonan and Quinn indicated that they would have had different priorities if they had been framing the budget.

Let me say at the outset that the Government's policy is not one of exclusive concentration on cutting tax rates. It is true that the review of the Programme for Government sets out the Government's firm intention to endeavour to achieve the objective of reducing tax rates; but it also sets out our objective to begin working towards a considerable widening of the standard income tax band and increasing the basic personal allowances.

The review promises a radical overhaul of the entire tax code, involving a systematic curtailment of exemptions, shelters, allowances and concessionary tax rates. Despite what Deputy Noonan seemed to imply, this was not, and was never intended to be, confined to the income tax system: radical overhaul of the entire tax code is what it says, so that it was quite within the terms of the review to consider other taxes — for example VAT, and corporation tax. Finally, the review is crystal clear that the overall budgetary parameters consititute the framework within which tax reform would be pursued. This is what was done and there is no basis for Deputy Noonan's implication that the Government somehow abandoned responsible budgetary policy in framing this year's tax changes.

The essence of this tax policy is to extend the tax base, reduce tax rates and extend the standard band. It is not a policy which has sprung from the Government in defiance of all previous thinking on the subject. On the contrary, it has been recommended by the Commission on Taxation, the National Economic and Social Council and the Industrial Policy Review Group as well as by several international bodies. It is based on the view that exemptions and reliefs narrow the tax base and make tax rates higher than they would otherwise need to be, which in turn leads to avoidance, evasion and inequity, to distortion of economic choice, to complexity for both taxpayer and Revenue alike, and to disincentives for effort and enterprise. By contrast, widening the tax base and reducing tax rates can, as the review of the Programme for Government says, contribute significantly to improving incentives to work, to reducing economic distortions, reducing the opportunities for avoidance and evasion and simplifying the tax code for taxpayers and the administration. It can also make a significant contribution to simple equity by ensuring that as far as possible all income, however received, is liable to tax, but that the rates of tax applying to it are kept as low as is consistent with equity and the need to generate revenue to meet expenditure. I hope on Committee Stage we will have adequate time to talk about these issues.

The contributions to this debate were excellent and I thank Deputies for them. No previous budget ever had such political input because of the long review of the Programme for Government and the various discussions which involved a number of Ministers. I know that Deputy Quinn wanted me to restate that the in-depth examination fully involved the officials of my Department because they supplied all the data on which the Government made decisions. I have been speaking on Finance Bills for 15 years in this House. Between 1977 and 1981 I argued with Deputies on the backbenches who said that they could not understand a system which had high rates of tax and expounded the theory that nobody would invest in the economy unless they got tax breaks. The system was wrong and unfair to the PAYE sector and it was the reason that there were marches in 1980. I made my first speech in regard to this issue before 1980. I look forward to talking about this on Committee Stage. If the only way that anyone will invest is by hiding behind tax shelters and reliefs, then God help this country, because it is wrong. However, we can argue about the implementation of justifiable reliefs.

The basis of this Bill - and I have had the pleasure and honour of working on it for six months — is that 750,000 taxpayers will pay less tax. I should like to do more and I hope I will be in the job long enough to make more improvements. I do not argue with points made by Deputies in relation to improving the system and I will take their views into account. However, the policy is that income in whatever form is taxable and if we have lower rates of tax everybody will pay some, removing discrimination. For example, a person in one house may pay a certain amount of tax and someone in the next house on a similar income pays a different rate of tax, for various reasons.

I have had major disputes with some Members of the House in relation to providing relief in respect of the purchase of shares or anything else. If I allow reliefs of this kind it means that others must pay tax so that these people can play their little games and make money. That is incompatible with everything in the income tax system and against everything in which I believed during the years I studied taxation and accountancy. I also studied the PAYE system and VAT capital allowances and it took me 15 years in this House to get to a position where I can do something about it. I make no apology for trying to change an unfair, bizarre system so that 750,000 people will benefit while penalising a small handful.

We must be sensible and try to make an unfair system equitable. That is the principle behind the Bill. I want to give one example regarding investment and jobs, although I will not mention the names of companies or individuals. People seem to think that curtailing tax shelters or reliefs stops investment. I could give many examples but I shall give just one: a group of 40 per cent companies came together to set up a structure of a limited partnership, with substantial resources from the 40 per cent profits; they constructed an arrangement under which a massive amount of money was invested in a US gas exploration location, which I shall not mention, thereby gaining the relief of 90 per cent of the allowances against their Irish tax. That is the kind of thing that is going on. I know that this may not be fair on Deputies who do not have all the information, but if people want to defend such arrangements on the basis of equity——

I did not defend them.

I know that. In the interests of the 750,000 people who want to pay their tax, who want to be honest and honourable and who want to pay their contribution to society, we have an obligation to protect them from those who do not wish to be so honourable.

I do not want to say that every single allowance and every shelter that I did away with was being abused but a fundamental feature of the Commission on Taxation, which reported almost ten years ago, was that there would be losers and winners. The basis of that was equity and the objective was to achieve an equitable transfer from the losers to the winners. That has concentrated my efforts for the past four or five months. I have listened with great interest to all of the interested groups and lobbies. I have listened very carefully to what must have been about 100 deputations and have heard people agree with the principle of tax reform, say that they fully accept what I am trying to do and assert their belief that the Government should tax the disability benefit, unemployment benefit, unemployment assistance, maternity allowance and every other kind of benefit. They have said that to switch the money around within the system is great tax reform. Then, they have pointed out that their own little tax shelter should not be taxed. I have no sympathy with that attitude. I do not know how Ministers have defended that in the past but I have no intention of doing so. It is perhaps true that in the past couple of months I have lost my temper more than I would normally, when dealing with such groups. In no way do I apologise if some of them left my office in rather a more strange way than they thought my personality would allow. How could I advocate the taxation of the disability benefit, for example, which will take a few pounds off someone, and then allow someone else the benefit of a few million pounds by way of tax relief or shelter? The Committee Stage will provide an opportunity to go through that at length.

My statement has provided some figures. I do not want to start preaching to Deputy Noonan and Deputy Quinn about all of the things that have happened through the years, wherein both Deputies accepted changes in different times. However, I would like to point out that a taxation policy has to try to have regard to the position of all taxpayers. The Government's policy has been doing that: there has been special provision for the low paid, via the exemption limits and child addition; relief for the low paid and the middle paid, via the reduction of the standard rate; extension of the standard band to raise the point at which taxpayers face higher rates; and reduction of the top rate, so that the top rate, when met, is not so onerous. I readily agree with Deputy Noonan that the standard band needs to be extended further. I have no difficulty with that idea and I have made that point constantly since becoming Minister for Finance. I hope to be in a position to make much further progress in this area. Nor do I disagree that that is the area we should be working on. I have much sympathy with the view that it does not matter too much what the top rate is if very few people are on it. I understand that view but I consider that the top rate is still too high.

Deputy Noonan made much of the provisions in the Bill to restrict or curtail income tax reliefs. He almost seemed to imply that the Bill attacked the mortgage interest and health insurance reliefs. Of course it does not, although I have noted and will bear in mind the Deputy's view that in the interests of equity all taxpayers should get relief at the standard rate only. But if the Deputy looks at the income tax reliefs and exemptions which are restricted or eliminated in the Bill he will note that they mostly have to do with ensuring that income, however received, is regarded as such for tax purposes. The budget did not curtail recognition of expenditure of income on mortgage interest and health insurance. I am sure that Deputies will agree that there are very considerable equity arguments for treating income, however received, as income for tax purposes.

It has been said that some of the measures I have introduced will restrict reliefs and diminish incentives. I have dealt with that point but I reiterate that eliminating and restricting reliefs as provided by the Bill will help to ensure that income, however received, is subject to tax, and that will help to reduce tax rates. In this way, the Government will be able to improve incentives for enterprise and initiative across a broad front for taxpayers generally, not just for a privileged few. We can help to ensure that incentives are found, not by going around the tax system by means of special reliefs but within the system by way of lower rates and a wider band. We can also ensure that the considerable enterprise shown by tax planners in recent years is diverted into much more productive pursuits, that is, in giving advice and in making decisions not for tax reasons but for commercial reasons. In other words, we will be able to operate a tax system that, far from diminishing incentives, makes much more sense in terms of incentives and enterprise. That is what the Finance Bill is about. In a real sense, it is pro-effort, pro-enterprise and pro-employment.

In relation to individual reliefs, I welcome the support from Deputy Quinn for the removal of the exemption for patent income for individuals and for its retention for companies. I point out that innovation and enterprise across a broad front now have a simpler, fairer and less onerous tax system with which to contend.

As regards pension refunds, I am sure Deputies will accept the fact of life that changes can be made. I have considered the points made by several Deputies. A number of Deputies referred to the changes I have made to the budget proposals on benefit-in-kind in regard to company cars. It was suggested that I had not gone far enough with my concessions. I want to emphasise that what is being taxed is the availability for private use of a car provided by an employer. There is no question of the business use of a car being taxed. The old rates were too low compared with the cost of private motoring. Tapering relief started too early at a level of 10,000 business miles a year, which works out at an average of about 40 miles a day. There is no way that anyone can argue that 40 miles a day is high business mileage. Finally, under the old system, tapering relief could wipe out the complete benefit-in-kind charge. That was unrealistic, as there is always some benefit in having a company car for private use in the evenings or at weekends. I have met several groups representing commercial travellers and business representatives and my officials met others. I proposed to the Government, and they agreed, that certain changes should be made which will reduce the impact of the benefit-in-kind increases, particularly on people such as company representatives and commercial travellers who drive very high business mileages. I again stress that the benefit-in-kind charge arises only where a company car is available for private use. The benefit-in-kind charge does not apply where employees arrange with their employer that they will not have the use of the car other than for business purposes.

Deputy Quinn mentioned the reference in my opening speech to bringing forward on Committee Stage provisions setting down the final time extension for the urban renewal tax reliefs in the designated areas. While I do not wish to anticipate the details of those provisions, I shall make the following general observations. In setting down final and definitive timescales at this stage, the intention is to remove any uncertainty that may exist in the construction and development sectors as to the timeframe available. It is not realistic to expect that the present urban renewal scheme, with its generous package of tax reliefs, will continue to be extended, and certainly not until 1996, simply to coincide with the ten-year anniversary of the scheme's inception. Due and fair notice is being given of the scheme's cessation, and, as from now, developers have two full years in which to expedite their projects in the designated areas generally and almost five years in the case of the Custom House Docks area. I am confident that the effect of that will be to bring forward pipeline projects and also to accelerate those currently in progress.

I have some sympathy with some other points made by Deputies Noonan and Quinn in this regard. I agree with the idea of the date being final. It is difficult to be extending all of the time. I have a great deal of information, although I recognise that Deputy Quinn has specialist knowledge in this area that I do not share. I do not argue with the Deputy on that score; I have heard him speak on this matter for a long time. However, there are developments that have been on the books since September 1986, when the then Minister, John Boland, asked me as Lord Mayor of Dublin, to launch the urban renewal scheme. I have been a strong supporter of the scheme. I consider it to have been one of the better decisions of the Fine Gael-Labour Coalition Government and it has achieved a lot for Dublin city. Many developers, however, have merely sat around, held planning permissions and have no intention of developing the site in question. The extensions to the scheme in recent years have not been the success that they should have been. I should like to close off this scheme in the hope that I or some future Minister will then have the opportunity to focus better on what areas should have designation.

Deputy Noonan asked for my comments on the provisions in the Bill dealing with section 84 loans in so far as they affect the IDA package of incentives and commitments. The Bill caters for such IDA commitments. It abolishes new section 84 loans on and from 20 December last with the exception of loans for two lists of new manufacturing projects where the IDA or SFADCo had made commitments that section 84 loans would be available for the projects concerned. The total amount of loans on these two lists is £420 million, which is a very large amount.

Both Deputies Noonan and Quinn criticised section 24 of the Bill which restricts the scope of the capital allowances on holiday cottages. The section does not abolish these allowances but confines them for offsetting purposes to the income arising from the holiday cottage renting activity or the trade for which the holiday cottage is used. This change is totally in line with the Government's policy of reducing tax rates while at the same time widening the tax base through the curtailment or abolition of various tax reliefs and tax shelters. Holiday cottage investments were being advertised in the press as the last great tax break and were being used as a tax shelter against their other income by persons not involved in the tourist industry. The change in section 24 has been designed in such a way that it does not adversely impact on those situations where holiday cottages are being developed as a self-contained business. However, in view of points raised in connection with situations where construction of a holiday cottage is already under way, I will look in detail without commitment, at the possibility of an appropriate transitional provision.

Deputy Quinn referred to the new wear and tear capital allowances for plant and machinery which he said had been welcomed. He claimed, however, that the new seven year tax write-off period for these assets does not fit in with the duration of leases of such assets in that these leases are usually for periods of three to five years. As the Deputy will no doubt appreciate, the new improved wear and tear regime in the Bill includes a significant Exchequer cost. This cost is estimated as £6.5 million in 1993, which cost will rise progressively afterwards to about £45 million in 1996. A reduction of the write-off period from seven years to five years would considerably increase this Exchequer cost. If the period were reduced to three years it would virtually amount to the reintroduction of accelerated capital allowances, which would result in the oversubsidisation of capital as against labour. As the Deputy will also appreciate, it is considered that for tax equity and other reasons, the capital allowances for leasing should be the same as for non-leasing situations. In the past leasing was unduly favoured in the tax system and measures had to be introduced in a number of Finance Bills to tackle the problem of unacceptable tax-based leasing practices.

A number of Deputies made points on co-operatives. In the note I circulated to Deputies I tried to deal with these points and I have moved towards dealing with these matters.

With regard to DIRT tax, I am fully aware that the changes here represent a radical change in the taxation of interest income. These changes are an inevitable result of capital liberalisation. The alternative to the changes is not, as some Opposition Deputies suggested, taxation of 27 per cent or 48 per cent on this increase, but rather an outflow of funds from the country caused by the desire of individuals to avail of tax free nonresident accounts abroad. There are many arguments on this which I will make on Committee Stage. I will just make the point that where a person pays tax on the interest on these special accounts, the capital sum does not get off scot free. It is the interest on the amount which is no longer followed by the Revenue. It is wrong to think that the capital sum if used again cannot be taken up by Revenue.

In my examination prior to the budget with regard to money abroad I found that the 10 per cent incentive would not attract money from abroad. It would take more than a 10 per cent rate to attract money in offshore accounts back into the country. I will have more chance of explaining my arguments on Committee Stage.

I thank the Deputies for their time and I acknowledge the fact that some Deputies were not able to get in. On this occasion, however, the Second Stage had a full week of Dáil time. It is only right that the finance spokespersons who follow this matter all year should get more time than other speakers. Between the Whips we have worked out a novel arrangement for Committee Stage. I hope it works. I thank Deputies Noonan and Quinn particularly who asked me to consider this arrangement last December. In the event this year we will get double the amount of time we usually get for a Committee Stage. We will sit in the other Chamber for Committee Stage. I thank our colleagues in the Seanad for giving us these facilities for the Special Committee. I look forward to the debate. I again thank the spokespersons, particularly Deputy Rabbitte for his long considered view of this Finance Bill. I will consider amendments as open mindedly as possible on Committee Stage and I will answer Deputies as fully as I can. I again thank Deputies for their work on the Second Stage of this Bill.

As it is now 4.45 p.m. I am required, in accordance with the order of the House today, to put the question "That the Bill be now read a Second Time."

Question put.
The Dáil divided: Tá, 77; Níl, 67.

  • Ahern, Bertie.
  • Ahern, Dermot.
  • Ahern, Michael.
  • Andrews, David.
  • Brennan, Mattie.
  • Brennan, Séamus.
  • Briscoe, Ben.
  • Browne, John (Wexford).
  • Burke, Raphael P.
  • Calleary, Seán.
  • Callely, Ivor.
  • Clohessy, Peadar.
  • Collins, Gerard.
  • Connolly, Ger.
  • Coughlan, Mary Theresa.
  • Cullimore, Séamus.
  • Daly, Brendan.
  • Davern, Noel.
  • Dempsey, Noel.
  • Dennehy, John.
  • de Valera, Síle.
  • Ellis, John.
  • Fahey, Frank.
  • Fahey, Jackie.
  • Fitzgerald, Liam Joseph.
  • Fitzpatrick, Dermot.
  • Flood, Chris.
  • Gallagher, Pat the Cope.
  • Geoghegan-Quinn, Máire.
  • Harney, Mary.
  • Haughey, Charles J.
  • Hillery, Brian.
  • Hyland, Liam.
  • Jacob, Joe.
  • Kelly, Laurence.
  • Kenneally, Brendan.
  • Kirk, Séamus.
  • Kitt, Michael P.
  • Aylward, Liam.
  • Barrett, Michael.
  • Brady, Gerard.
  • Brady, Vincent.
  • Kitt, Tom.
  • Lawlor, Liam.
  • Lenihan, Brian.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • Lyons, Denis.
  • Martin, Micheál.
  • McCreevy, Charlie.
  • McDaid, Jim.
  • McEllistrim, Tom.
  • Molloy, Robert.
  • Morley, P. J.
  • Nolan, M. J.
  • Noonan, Michael J. (Limerick West).
  • O'Connell, John.
  • O'Dea, Willie.
  • O'Donoghue, John.
  • O'Hanlon, Rory.
  • O'Keeffe, Ned.
  • O'Kennedy, Michael.
  • O'Leary, John.
  • O'Malley, Desmond J.
  • Quill, Máirín.
  • Reynolds, Albert.
  • Roche, Dick.
  • Smith, Michael.
  • Stafford, John.
  • Treacy, Noel.
  • Tunney, Jim.
  • Wallace, Dan.
  • Wallace, Mary.
  • Walsh, Joe.
  • Wilson, John P.
  • Woods, Michael.
  • Wyse, Pearse.

Níl

  • Ahearn, Therese.
  • Allen, Bernard.
  • Barnes, Monica.
  • Barrett, Seán.
  • Belton, Louis J.
  • Boylan, Andrew.
  • Bradford, Paul.
  • Bruton, Richard.
  • Byrne, Eric.
  • Carey, Donal.
  • Connor, John.
  • Cosgrave, Michael Joe.
  • Cotter, Bill.
  • Creed, Michael.
  • Crowley, Frank.
  • Currie, Austin.
  • D'Arcy, Michael.
  • Deasy, Austin.
  • Deenihan, Jimmy.
  • De Rossa, Proinsias.
  • Doyle, Joe.
  • Dukes, Alan.
  • Durkan, Bernard.
  • Enright, Thomas W.
  • Farrelly, John V.
  • Fennell, Nuala.
  • Ferris, Michael.
  • Finucane, Michael.
  • Pattison, Séamus.
  • Quinn, Ruairí.
  • Rabbitte, Pat.
  • Reynolds, Gerry.
  • Ryan, Seán.
  • Shatter, Alan.
  • FitzGerald, Garret.
  • Flaherty, Mary.
  • Flanagan, Charles.
  • Garland, Roger.
  • Gregory, Tony.
  • Higgins, Jim.
  • Higgins, Michael D.
  • Hogan, Philip.
  • Kavanagh, Liam.
  • Kenny, Enda.
  • Lee, Pat.
  • Lowry, Michael.
  • McCartan, Pat.
  • McCormack, Pádraic.
  • McGahon, Brendan.
  • McGinley, Dinny.
  • Mac Gioila, Tomás.
  • McGrath, Paul.
  • Mitchell, Gay.
  • Mitchell, Jim.
  • Moynihan, Michael.
  • Nealon, Ted.
  • Noonan, Michael. (Limerick East).
  • O'Brien, Fergus.
  • O'Keeffe, Jim.
  • O'Shea, Brian.
  • O'Sullivan, Gerry.
  • Sheehan, Patrick J.
  • Spring, Dick.
  • Stagg, Emmet.
  • Taylor, Mervyn.
  • Taylor-Quinn, Madeleine.
  • Yates, Ivan.
Tellers: Tá, Deputies Dempsey and Briscoe; Níl, Deputies Flanagan and Kavanagh.
Question declared carried.
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