Private Members' Business. - Tax Reform: Motion (Resumed). – Dáil Éireann (27th Dáil) – Wednesday, 23 Mar 1994

Private Members' Business. - Tax Reform: Motion (Resumed).

The following motion was moved by Deputy Yates on Tuesday, 22 March 1994:

That Dáil Éireann condemns the Government policies that discriminate againt home ownership, with particular reference to the budgetary changes curbing mortgage tax relief and the extension of the residential property tax; and furthermore calls on the Government to adhere to the policy of successive Governments of supporting families in providing their own homes.

Debate resumed on amendment No. 1.

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

"Dáil Éireann

—welcomes the progress in reform of the tax system which was continued in the 1994 Budget, particularly the major increases in the standard rate tax band and personal allowances

—recognises the Government's continuing major support for home owners and welcomes the significant increased support for first time buyers announced in the budget

—recognises the contribution made by the changes announced in the budget in relation to mortgage interest relief and the Residential Property Tax in tilting the imbalance in the tax code more in favour of productive investment, helping to create and safeguard employment and giving a greater measure of equity in the tax system and

—welcomes the adjustments to the Residential Property Tax announced by the Minister for Finance which preserve the essential features of the budget proposals while at the same time catering for the more deserving anomalies in the scheme."

—(Minister for Finance.)

Mr. M. McDowell

On 10 February 1994, as reported in column 1530, Volume 438 of the Official Report, I said in the course of the debate on the budget that the Progressive Democrats would participate in an all-party select committee to examine the financing of local government. A similar offer was put to the House by the Fianna Fáil-Progressive Democrats Government in 1989. I repeated that offer last night but, unfortunately, it has been cold shouldered. I said in February, and repeated last night, that the Progressive Democrats reject the residential property tax. This party intends to bring the issue to the voters at the earliest available opportunity and ask the electorate to reject the tax.

Our objections to the residential property tax are ten fold. First, it is not a general tax; most people will not pay it but the means of many of those who will have to pay it will be far less than the means of those who will not have to pay it. Second, the proceeds are not allocated to local government. The residential property tax is a second income tax levied on those whose incomes and assets fall into arbitrary categories decided on random criteria such as location, age, family membership and health. Third, it is a tax on honesty. Nothing is as volatile, unpredictable and subjective as a selfassessed ad valorum tax on the home. Fourth, it is anti-family. If four members of a family each earn £10,000, which is well below the average industrial wage, and live in one house worth £150,000 they will have to pay a substantial amount in residential property tax but if they live in two houses worth £75,000 they will not have to pay anything. Therefore, members of families with the same low incomes and asset values will pay huge sums in one house and nothing in two houses.

Fifth, it is anti-urban and anti-Dublin. Identical households with identical homes in different parts of the country will pay radically different amounts. Sixth, it is arbitrary. If a husband and wife jointly own two houses each worth £75,000 they may pay a large sum in tax but if one house is in the name of one spouse and the other is in the name of the other spouse they may pay no tax.

Seventh, it does not form part of a programme of tax reform. The Minister told the House last night that he has no plans to extend the tax. Therefore it is not capable of providing tax reform and has no serious effect on the income tax take which, as Deputy Yates pointed out, will increase by £20 million as a result of the budget. Eighth, it is an ideological tax. The Labour Party has consistently published tax policies which show an intention to impose residential property tax at the rate of 2 per cent or 3 per cent on all homes except on those whom it thinks mistakenly will vote Labour.

Ninth, it was widened in direct contradiction of a clear political promise given by the Labour Party in leaflet form to the voters of Dublin in response to a claim by their partners in Government, Fianna Fáil, that it intended to widen the tax in this manner. Tenth, it is a penal and destructive tax in terms of its effect on home building and the buying and selling of houses. The effect of the penal 2 per cent on more valuable homes will be to depress home building and inhibit home improvement to an extent which in the last analysis will cost much more than the yield from residential property tax in lost stamp duty.

It is a dead letter as a tax and should have been opposed much more vigorously at an earlier stage by a number of Members. We have to live with it until it is repealed. I suggest that it should be repealed at the earliest available opportunity. Deputy Lawlor argued last night that the intention was to create a revenue base for local government but I suggest that that is a separate issue. The Progressive Democrats pledges itself to participate in determining a suitable alternative to the residential property tax.

A number of measures have been introduced in relation to the taxation of land. The land tax came and went. A derelict sites tax was imposed by statute but I have yet to hear of one person who has paid a halfpenny to the Exchequer or anybody announcing the yield from this tax. I do not know the reason for this; it may be that the registration of derelict sites has been retarded due to bureaucratic laziness but it seems that the system of commercial rates is vindictive and penalises those who make good use of the land they own and at the same time rewards those who allow dereliction and under-utilisation of their land.

In this context is it right to ignore the potential, as a tax base, of houses let in multiple units for occupation and of zoned land which is the subject of planning permission for development purposes? When dealing with the family home this is a small-minded, negative and obnoxious tax which has been designed to be ideological, to raise the least possible yield and to have the greatest possible political effect. Those who have supported it will pay the political price. It is not seen by the electorate, rightly so, as a major ingredient of tax reform. The Minister has announced concessions which will reduce the total yield by 40 per cent. How could this sum make any impact on tax reform, employment and so on? In refusing to say whether he will extend the tax in any way the Minister is admitting that it is a show piece tax which has been put in place by the Labour Party in particular.

I was surprised when I read that the Labour Party intended to impose a 2 per cent tax on family homes above the value of £50,000 and a 3 per cent tax on homes over the value of £75,000 or £100,000, depending on which documents one reads. These proposals are foolish. If the name of the game is, as Deputy Lawlor suggested last night, the imposition of a new revenue-gathering base for local government, the time has come for politicians on all sides of this House to admit it and set in train a process to bring it about. This tax will not suffice and while the Government parties insist that it should remain in place it will be opposed and cause extreme damage to those who support it.

Mr. R. Burke

I wish to share my time with Deputies Callely, Eoin Ryan and Éamon Walsh. In my 21 years in this House both in Government and Opposition I have discovered that in putting down questions or resolutions to be debated in the House one should be careful to retain some credibility in the context of one's words as against one's actions. Here is a motion by Deputy John Bruton condemning the Government policies that discriminate against home ownership, with particular reference to budgetary changes covering mortgage tax relief and the extension of the residential property tax. That is all very well, but it was Deputy Bruton who supported Deputy Dukes when he introduced the residential property tax with our present temporary partners.

Mr. M. McDowell

They are the common denominator.

Mr. R. Burke

Now they condemn this Government's residential property tax. Where is the credibility in this? Are the continuing wars within Fine Gael the reason for Deputy Bruton's motion? I do not blame Deputy Yates — he was not here at the time.

Mr. Yates

I was here but I was not in Government.

Mr. R. Burke

It is ludicrous that Fine Gael should criticise the residential property tax and organise meetings of rightly concerned property and home owners. It is no wonder that Fine Gael is suffering in the opinion polls.

Deputy McDowell of the Progressive Democrats spoke about the property tax. We have heard for a long time that the Progressive Democrats were in favour of reforming taxation. In the background was the idea that to do that there would have to be a property tax. Now they are opposed to the residential property tax.

I have been consistent. I do not like the residential property tax. It is a measure that, on its own, would adversely affect property ownership. However, our Minister has listened carefully to the views put forward by the Fianna Fáil backbenchers about this property tax and the problems it will create, particularly in Dublin, and he has made major changes to the proposal announced in the budget in January last. Those changes, together with major changes in taxation, will help middle income earners. That is to be welcomed and I congratulate the Minister on what he has done.

Much has been said about the improvements made in 1993 and about what will happen in 1994. I welcome that and I appeal for job creation as a consequence of those improvements. However, the world did not begin at the beginning of 1993. Again I come back to Deputy Bruton's motion. Deputy Bruton was the Minister for Finance in the last Fine Gael-Labour Government when the national debt was doubled and inflation was rampant. Fianna Fáil got into Government in 1987 and tackled those issues and laid the foundations on which the progress we see today was built. I encourage the Minister and his colleagues to tackle unemployment so that when we next face the public in a general election we will be able to say that we have tackled that problem.

It is the height of hypocrisy for Fine Gael to put down a motion condemning property tax, having introduced it with Labour in Government. It is a bit much to take.

Mr. Callely

I am happy to contribute to this debate. My views on residential property tax are well known. So far in the debate there has been blatant hypocrisy by all political parties. I refer specifically to the actions of the Opposition and their political propaganda in recent elections relating to additional takes by way of residential property tax and other such proposals to fund local authorities. It is sad to see the hypocrisy of Opposition Deputies objecting to residential property tax when their own parties introduced or supported the principle at a time when we have one of the best budgets ever with, for a change, a long term strategy and the economy on the right track. In the context of overall budgetary structure and expenditure, the additional take from the residential property tax is but a drop in the ocean. We are losing sight of our target when so much debate and attention is focused on one aspect of the budget and I regret that the Opposition parties are focusing to such an extent on it.

I was happy to raise the question of the residential property tax at my parliamentary party meeting when we discussed the budget in detail. I raised it because of the anomalies and inequities of the tax itself. I do not want to argue about whose tax it is, whether it was put forward by one party in Government or by the other. I would very much like to see the tax totally abolished, but it is my understanding that that is not possible. When Fianna Fáil Deputies highlighted the anomalies and inequities in it, the Minister took a very pragmatic approach. We were pleased that the Minister took the time to meet us, took on board the recommendations made by the Members and acted on them. We are familiar with Ministers taking notes and throwing them in the dustbin when they walk out the door. On this occasion the Minister's pragmatic response was to indicate he would accommodate our suggestions and act on them.

I am pleased the Minister indicated in his amendment that he will address the glaring anomalies in the scheme. I am concerned at the Minister's reference to investment in homes and that people should invest in other risk ventures to create employment. That does not apply when referring to the value of a person's home. Many people invested a relatively small amount of money in their family home and were not in a position to make a similar investment in a risk-taking opportunity to create employment. That matter should be clarified. It is possible that a person who owns a home valued at, say, £200,000 may have bought it ten or 20 years ago at a cost of £20,000. That was the amount of money they had available to them with the assistance of a financial institution to invest in a family home but because of the increasing value of property or the geographical location of the house its price could have escalated to a value which they cannot realise because it is their family home. The value of a person's home is not disposable and cannot be invested in a risk venture for employment purposes. Those sentiments have been expressed to me by a number of people and money is not available for risk ventures to create employment. Will the Minister indicate the monetary alterations the changes before us will make to the £5 million additional take which will give a total take of £14 million in 1994?

I am disappointed that this aspect of the budget has received so much attention. This year's budget was the best ever introduced in the House in terms of long term strategy. The economy is ticking over and the Opposition parties are jealous.

Mr. Yates

With 300,000 unemployed?

Mr. Callely

I would be happy to challenge Deputy Yates in any debate he wishes across the floor of this House and, if he will excuse the pun, we would wipe the floor with him. He is well aware of that. The Deputy and his party were a disaster in Government from 1982 to 1987. The record speaks for itself. I am proud to be a member of a party that took on board courageous but appropriate and necessary steps. In the Fianna Fáil Administration of 1987——

Mr. Yates

That was a minority Government, kept in power because of the Tallaght Strategy.

Mr. Callely

I agree with the Deputy and I admire Deputy Dukes for what he did to assist Fianna Fáil to turn the economy around. Deputy Yates's party made short work of Deputy Dukes's courage in the Tallaght Strategy and Deputy Yates was quick to throw out the Tallaght Strategy issue. Having regard to what his party did to Deputy Dukes he must be very embarrassed.

Mr. Yates

I do not need to be told about my internal party business by the Deputy.

An Ceann Comhairle

Let us get back to the debate on the property tax.

Mr. Callely

Since 1987 Fianna Fáil has taken on board some necessary and courageous moves to put the economy on the right road. From 1989 to 1992, in coalition with the Progressive Democrats, further developments were made by the Fianna Fáil-led Administration.

Mr. M. McDowell

We should have got rid of the residential property tax and set up an all party committee to finance local government.

Mr. Callely

Perhaps the Deputy's absence from the House at that time was the reason it was not abolished. Since 1987 Fianna Fáil-led Administrations and the Fianna Fáil minority Government have given us a very confident economy and great progress has been made. The mechanisms which have been put in place have given young people in particular a future in Ireland. I would like to see a total abolition of the property tax, but from speaking to the Minister for Finance I understand that is not possible. I also understand from discussions with the Minister and others that the measure was welcomed by all political parties.

Mr. M. McDowell

It is a most unwelcome measure.

Mr. Callely

In my contribution on the budget debate I indicated that Fianna Fáil backbenchers would take up the matter with the Minister for Finance and I am pleased that some changes were made. Many more are necessary, but I assure Members of the House and those affected by the residential property tax that we will continue to lobby the Minister and bring to his attention the anomalies and inequities in relation to the property tax with a view to devising a satisfactory solution.

Mr. E. Ryan

I welcome the debate on this motion. I knew this would be a difficult issue and since the budget many people have contacted me to highlight the property tax anomalies. They also expressed anger at the change in the thresholds. This year's budget was excellent and widely welcomed. It tackled the tax position of low paid workers. A ludicrous position existed in that it was not worthwhile for people to go to work because of the high amount of tax they had to pay. People were better off staying on the dole and availing of medical cards, other benefits such as lower rent when living in local authority houses and so on. This measure addressed an important area in the economy and collected revenue of £330 million in one year, a substantial figure. That measure is widely supported as a step in the right direction.

I welcome the changes to the property tax introduced by the Minister. Many of the anomalies have been addressed, particularly those in respect of elderly or incapacitated house owners, widowed house owners with dependent children or elderly or incapacitated relatives. The extension of the marginal income tax relief to £35,000 and the introduction of the 2 per cent valuation over £150,000 have taken the sting out of the residential property tax for many people.

I do not favour the tax. It is a blunt instrument. Changes in the tax highlight the anomalies in it. As Deputy McDowell said, there should be an all-party committee set up to consider this area. That issue is a political football and it should be examined by all parties.

It is difficult to listen to Fine Gael opposing the tax. That party introduced this tax and abolished child relief at one stage. The new pro-family Fine Gael is difficult to take. Some people have said this is a Dublin tax. It is not. In urban areas the price of property is higher for obvious reasons and many more people fall into the property tax net. Nobody is advocating one tax for Dublin and another for the rest of the country. That would be ludicrous. The propaganda that this is a high tax, high spend Government is a media trick. If that statement is made often enough people will begin to believe it.

Mr. Yates

People are paying for it.

Mr. E. Ryan

When Fine Gael was in Government we had outrageous tax rates of 58 per cent and 35 per cent and borrowing was at 13 per cent. That is the party's record. The party's former leader, Dr. FitzGerald, in an article recently in The Irish Times defended the property tax. I do not know why — perhaps it was in the interest of a member of his family to do so. I did not agree with all the comments in the article but he made a good case for the tax. His decision to hand over leadership may have resulted in a slippage in the party's popularity. He was willing to face up to difficult decisions and was not as opportunistic as present members of the party.

This motion tabled by Fine Gael has little integrity. As the Minister and other Deputies said, Deputy John Bruton has made many references to property tax and tax reform. We must accept major changes are necessary to bring about tax reform. The Taoiseach stated on many occasions that tax reform does not necessarily equal a reduction in tax. We must be mindful of the effects of tax changes. I do not fully support this tax but I favour tax reform. I welcome the changes to the tax introduced by the Minister. They go a long way towards helping people who find themselves in this tax net.

Mr. E. Walsh

Since the January budget much has been written about taxation, particularly changes in the residential property tax. It is necessary to ensure that tax reform is given priority to increase employment and reduce inequities. The relationship between our tax policy and employment will have the greatest impact in increasing and sustaining employment in future years. The report of the Commission on Taxation recommended a comprehensive definition of income, equivalent tax treatment of income from different sources, neutrality in respect of inflation, a minimum tax impact on individual or business choices, general reliance on direct payments to those in need rather than assistance through the tax system, no earmarking of taxes and the evaluation of compulsory social insurance contributions as taxes.

The share of taxation derived from personal income is 31.9 per cent, which is significantly above the European average of 25.9 per cent. The share of taxation derived from property has declined substantially. The National Economic and Social Council has been to the fore in advocating the introduction of property tax and a widening of the tax base. In recent budgets the Government introduced a modest change to a tax which has been in place for some time. It has suddenly become the most important issue in what was regarded as a successful budget. The budget provided for the low paid and the unemployed. Fine Gael has accused the Labour Party of being a tax and spend party and that is what it is. The statements made by members of the Fine Gael Party during Private Members' Business highlight that it is a party which advocates spending without taxation. Fine Gael does not indicate where funding may be obtained. It wants a spending policy with no accountability for funding. Where will funds be obtained to provide for schools, hospitals and housing?

A constituent who is a local authority worker has a weekly take home pay of £167 and requires an immediate pay rise to provide adequately for his family. The finances for such a pay rise must come from taxation. It is important that such a key worker in our community is justly rewarded for his work.

In 1982 the Government introduced a residential property tax. At that time the Labour Party advocated extending that tax to cover all property but Fine Gael insisted that the tax should only apply to residential property. The Opposition should indicate where the Government will obtain funds to operate services, to build houses, reduce hospital waiting lists and build hospitals in addition to the Tallaght Regional Hospital. Additional resources are necessary to finance our educational system and improve it, as suggested by members of the Opposition. Additional funding is required also to provide facilities for the mentally handicapped. The £12 million required to make up the £25 million promised for that area prior to the last election has now been secured. That funding must be collected through taxation. Fine Gael calls on the Government to provide good services. It cannot have it both ways. There cannot be spending without taxation. It cannot have its cake and eat it. The PAYE sector cannot be expected to pay higher tax. The wealth of the country which is largely invested in bricks and mortar must be diverted from property and invested in people.

Mr. M. McDowell

Is the Deputy in favour of extending the tax?

Mr. E. Walsh

I favour extending it to include all property. Some parties claim that the tax is not significant in the revenue it will collect, but it will help finance essential services.

Mr. Rabbitte

If I am joined by my colleague, Deputy Gilmore, I ask for the agreement of the House to allow me to give him a few minutes.

An Ceann Comhairle

Is that satisfactory? Agreed.

Mr. Rabbitte

The Democratic Left Party would have framed tonight's resolution somewhat differently from that before the House, nonetheless, we support the thrust of the Fine Gael motion for a number of reasons which were spelled out last night by Deputy Yates in proposing the motion and by Deputy McDowell. The most important reasons for supporting the motion concern the fact that essentially the residential property tax is equivalent to double taxation. It is an anti-Dublin, anti-urban and anti-family tax. The extent to which residential property tax contributes to real tax reform in shifting tax from earned income to property is wildly exaggerated. The only property targeted by the residential property tax is the family home. In the extension of the tax no regard was had to the reimplementation of water charges in Dublin, the area most affected, and to the diminution of mortgage interest relief. The residential property tax disregards the duration and extent of mortgage indebtedness, and the revenue from this tax goes to the Exchequer, not to local government.

Since only 5 per cent of the self-employed declare an income in excess of £25,000, PAYE taxpayers with no facility to conceal income will bear the brunt of the residential property tax. It is essentially double taxation. Virtually all those caught in the extended net are resident in Dublin either because they were born there or found employment here. Many have mortgages, the discharge of which diminishes their disposable income to very modest levels. If they were resident elsewhere in the country their homes would be valued well below the £75,000 threshold. Many of these compliant taxpayers will be affected by the ongoing changes in mortgage income relief, VHI and medical expenses. To argue that extending the terms of the residential property tax to such people constitutes shifting the burden of taxation from earned income to property is a wild exaggeration.

My party favours a shift in taxation from incomes and labour to property, assets and wealth. Such a shift is desirable for reasons of equity, employment and local democracy, but property taxes defeat their purpose if they are merely additional taxes on tax compliant citizens — there are two kinds of citizens in this country. It is not feasible and certainly not desirable to engage in piecemeal reforms of the tax system, and this is not because piecemeal reforms, even if moving imperceptibly in the right direction, may be reversed in the next year or before the next election. A truly radical tax reform package must include the transfer of part of the burden of taxation from incomes to property, land and other assets. If local government is not to be abandoned, a structured nationwide property tax is inevitable but only in the context of real and visible tax reform. The Government has learned that it is not possible to inflict an additional invidious tax on tax compliant citizens who, despite improvements in recent years, know that the system remains discriminatory and inequitable.

Last week the leader of the tax officials' union, Mr. Mark Flanagan, told his annual conference that "tax fraud is taking place on an enormous scale within the self-employed sector but yet the Government refuses to allocate additional resources to increase the number of audits carried out by staff of the Chief Inspector of Taxes". Mr. Flanagan also said that fewer than one half of 1 per cent of declarations are subjected to audit. Perhaps it is not surprising that only 5 per cent of the self-employed declare an income in excess of £25,000 — I would have thought that a similar number of such people would be present at a Fianna Fáil Ard-Fheis. Tax officials who work at the coalface know what they are talking about and how the system works. The average tax compliant citizen instinctively knows that.

The children of large farmers and of substantial business people mysteriously qualify for higher education grants, although there is no mystery about it. The self-employed legally have the facility to contrive to artifically reduce their income for the designated year. The PAYE taxpayer has no such facility. There would have been no requirement for, or advantage accruing from, the introduction of a tax amnesty if tax fraud was not continuing on the wide scale suggested by the leader of the tax officials' union.

It is no surprise that the extension of such a tax or the imposition of new taxes on top of such a system should cause such the outcry. At the union conference Mr. Flanagan said:

The property tax reflects the ethos of the Government's attitude to taxation always take the soft option and only collect tax when payment can be enforced. If all else fails — introduce an amnesty.

That is not very far removed from the tape we heard last Sunday, courtesy of RTE, of the Taoiseach's little homily on his approach to the difficult question of taxation and his casual acquaintance with the taxman in his early days. That ethos still pervades and that is why tax officials know what they are talking about.

It is not surprising that there has been an outcry, but what is surprising is that Labour Deputies joined in it. Apparently they clearly see the unfairness and inequity of inflicting an additional £3 million tax burden on middle income earners. However, the same Labour Deputies apparently see no injustice in the Government's intention to take an extra £30 million in taxation from the unemployed. The Minister of State involved, Deputy Burton, has stoutly defended shifting the tax burden to the unemployed. It seems our only hope is that Mr. Gay Byrne, who has been mentioned several times in this debate, might take up the cudgels on their behalf. If that happened one could be confident that a Labour Deputy would express his concern about it, or if we were particularly fortunate, the father figure, Deputy Kemmy, might make a well timed intervention.

This debate should not be allowed to conclude without querying whether the Government which introduced extensions in the residential property tax are in possession of all their faculties. One half penny on the pint would have brought in £3 million, the amount anticipated from the changes in the residential property tax. Why invite such opposition from middle income earners and cause such distress to hard working journalists and leading broadcasters? Is it all a cruel Fianna Fáil stratagem to do down the unfortunate Labour Party which seems to have taken most of the flak? Is it a ruse to kill off the prospect of a rational tiered property tax in the context of genuine comprehensive tax reform? Could it be that the Government convinced itself that a measure like this would somehow convey the image of a reforming Government?

I am on record as giving credit to the Minister for Finance for introducing minor reforms in successive budgets in recent years. However, the facts of history remain salutary. Fianna Fáil has never had the bottle to risk offending its wealthy backers and has refused to tax any property other than the family home. During the 1970s we had a wealth tax which was abolished by Fianna Fáil. During the late 1970s we had a resource tax which was abolished by Fianna Fáil and the money was refunded to those who had paid it. Also, during the late 1970s Fianna Fáil, opportunistically and for the purposes of electoral advantage, abolished rates without putting anything in their place. During the 1980s we had a land tax which was abolished by Fianna Fáil. Clearly, the Fianna Fáil view is that all property, other than the family home, is sacrosanct. The real tragedy in this debate is that it appears the Labour Party has joined Fianna Fáil in that view.

I had the pleasure of listening on the monitor to a number of contributions. We had a great old style around the house attack on Fine Gael by Deputy Ray Burke who at the same time very loudly professed his opposition to the tax. If he was still around the Cabinet table, this tax would certainly not have been proposed, just like Aer Lingus would not have got into trouble. I was very impressed by his speech. I was also very impressed by Deputy Callely who thinks the budget was exceptional but who wanted to put it on the record, so that it can be used in the leaflets distributed in his constituency, that he is opposed to the tax. Deputy Callely, who distributes a number of leaflets every week, deserves some support because in one giant step last week his constituency colleague surpassed him and earned more notoriety than him. I noted the warm support from Deputy Callely——

Mr. M. McDowell

Deputy Ryan——

Mr. Rabbitte

I understand why Deputy Ryan, like Deputy McDowell, would be opposed to the tax — many of their hard pressed constituents will be affected by it. I would be the last Member to accuse Deputy McDowell of being disingenuous——

Mr. M. McDowell

The Deputy had better be careful.

Mr. Rabbitte

He would be the last Deputy to which the epithet would be appropriate in any event. I would like to have the time to search the record for Deputy McDowell's position on this tax. I listened to a typically bravura performance from him last night. However, I recall both Deputy McDowell and I being guests of the estimable Olivia O'Leary on, if I may modestly say, two very exceptional television programmes which not only entertained the people but which, I would like to think, probably instructed them somewhat at a time when Deputy McDowell was sponsoring the notion of a property tax. He said at the time that I was the only socialist in the western world who was opposed to a property tax.

Mr. M. McDowell

Which the Deputy then claimed to be.

Mr. Rabbitte

I was and I made the point that I opposed the imposition of such a tax on the family home because most constituents in Dublin are in hock to a building society or financial institution, are already paying their taxes and are generally PAYE workers who have paid their taxes. The residential property tax is an additional tax imposed on top of an inequitable system of taxation and ought to be opposed. I welcome the formidable voice of Deputy McDowell rowing in behind that position. I promise not to suggest in any way that it is a socialist inclination on his part.

Deputy Eamon Walsh made what was probably the most honest speech in so far as he supports this tax. However, he is misguided in saying that £3 million will be of major benefit to projects such as the Tallaght hospital or that it will solve the problems of the mentally handicapped. This sum would not pay for the panoply of special advisers we have imported to help the Government introduce farseeing measures such as the property tax, a measure which does not deserve any support.

Last night the Minister for Finance told us it is wrong for us to argue that this is an anti-Dublin tax, which it plainly is. It coincides with the reintroduction of water charges — which Deputy Ray Burke was very successful in abolishing in 1986 — and service charges, the diminution in mortgage interest and VHI relief and the raising of the threshold for medical expenses, which will hit people badly. The Minister said that this is not a real situation because the position in regard to mortgages is not nearly as bad as it was this time last year. Anyone who would pick the middle of the currency crisis, when people did not know from where they would get the next month's mortgage and interest rates were going through the roof, and suggest that the present situation represents an improvement on that is not being very serious. I will hand over to Deputy Gilmore.

Mr. Yates

On a point of order, Deputy Rabbitte is also sharing his time with Deputy Fitzgerald.

Mr. Gilmore

I am aware that I am squeezed in between Deputy Rabbitte and Deputy Fitzgerald.

Mr. Yates

The marmalade in the sandwich.

Mr. M. McDowell

That is an interesting position.

Mr. Gilmore

I am pondering the ideological possibilities of it. The interesting point about this tax is that it is about the Government defining the new rich. The Government has defined the new rich as those whose combined family income is between £25,000-£28,000, irrespective of the number in the household who will make up that income, and who live in houses the value of which is between £75,000-£91,000. These people have been identified by the Government as constituting the new rich who will pay additional property tax.

I am opposed to the extension of the residential property tax to these categories of people. Instead of introducing a proper property tax which would address, for example, the kind of windfall profits made by land rezoners in Dublin during the land rezoning orgy in recent years and addressing multiple home ownership, section 23 and the ways people get tax breaks rather than being taxed on the ownership of property, the Government has taken the soft option and once more sought to extract more tax from the people who are already paying the bulk of tax.

The tax is now being dressed up — an ideological gloss is being put on it — as a measure which will introduce some equity into Irish society. The last time a Government sought to make such an assault on privilege was when Barry Desmond decided to take medical cards from students in the interests of providing equity in health care. That misguided measure probably hit the very same people who will now have to pay the property tax. Those who in the course of the past few weeks have got their certificates of tax free allowances and seen the extent to which their mortgage interest relief has dropped, who have received bills from the VHI and seen what has happened to the relief, who have received bills from their local authority for local charges and who now face the additional prospect of being defined as the new rich by the Government will not support this measure.

The issue is not so much about the principle of property tax because there was no issue about the residential property tax which was already in place before this budget. The issue is the way the measure has been extended by the Government.

Ms F. Fitzgerald

Some speakers here yesterday suggested that the reaction to the residential property tax had been overstated, hysterical and had not been a true indication of the way people feel about this tax. Many representations have been made to me at meetings, by telephone and by letter on this tax. People feel strongly about it; they have detailed and clear complaints to make and feel it is unjust, anti-family and anti-Dublin.

There are strongly held views within the community about the inequities of this tax and the punitive imposition which it places on those striving to provide homes and standards for their families. It is not surprising there is such strong feeling about this tax in Dublin given that the Minister informed me in reply to a parliamenary question on 9 March that the Revenue Commissioners had sampled 400 RPT returns from 14,797 residential property taxpayers in 1993 and that three-quarters of those live in Dublin.

Genuine anomalies remain in this tax. These include the fact that there is no allowance for mortgages, the effect on families in combining the household income, the discrimination against joint ownership of houses and the discrimination against residents of Dublin as 77 per cent of those paying the tax reside there. I agree with Deputy Yates who said last night that this is a surtax on income.

It is incorrect also to call this tax reform. When we in Fine Gael attack this tax it is not tax reform per se we are attacking because this is not tax reform. I fail to see how the additional revenue envisaged under this tax can be considered as serious tax reform. Fine Gael published detailed proposals for tax reform last November. What is being proposed here is not tax reform, and to pretend otherwise is incorrect.

This is a tax on home ownership, a letter of one of my constituents reads:

I write to express my fury at the proposed arbitrary, additional income tax to be levied on me by virtue of my home ownership ... How the Government can possibly think it can get away with such an inequitably applied tax is beyond my comprehension. This is the most inequitable tax introduced by any Government in my lifetime.

The writer goes on to say that the tax takes no account of even the most basic tenets of equality, that it takes no account of the relative house values in different parts of the country, that it takes no account of the wealth of the householder or of stamp duty and it takes no account of buying a house versus putting money on deposit. The writer made the point that when one buys a house, especially a secondhand house, there are many jobs to be done and employment can be created and sustained as a result of this. If one compares this with not buying a house and leaving the money on deposit, there is no stamp duty, tax is not payable on the money by the depositor and downstream jobs are not created. The winners are the banks and the losers are householders and the dole queues.

This tax is inequitable also because of the contrast between the recent joint ownership legislation and what is being attempted by the imposition of this tax. A great effort was made to get this legislation on the Statute Book. Unfortunately, it was unsuccessful. Now a tax is to be imposed on the family home. By including the incomes of all members living in the house the Government is encouraging the break up of the family once the children start to work.

I note also that the Fianna Fáil-Labour Programme for a Partnership Government under the heading "Social Justice and a Compassionate Society" states: "Continuing encouragement will be given to people to own their own homes. This will include the maintenance of mortgage interest relief." There is no hint there of the sort of changes we have seen and there was certainly no hint of this in the last general election when quite the opposite was promised by Labour during its election campaign. Labour certainly fooled householders during the last general election and I echo the call made last night that householders in Dublin and around the country should give a clear reply to Labour for this turnabout and renaging on election promises which the introduction of this tax signifies.

If we are to reinvent Government, which is urgently required, and reduce bureaucracy and the lack of access of our citizens to many services, and if we are to give people a basic belief in democracy, we must empower our citizens by returning control to the community and the individual citizen. If we wish to empower citizens who are able and who wish to achieve, supporting home ownership should be an essential part of that philosophy. People who have succeeded in becoming home owners through a lifetime of effort should not have to face an inequitable tax. Bureaucracies should treat the people to whom they provide services as customers and not as numbers or impediments to their everyday work. The introduction of this tax will further alienate law abiding citizens and those who make the most effort. This is an inefficient tax, it is not tax reform. It is highly selective and inequitable for the reasons I have outlined. I commend this Fine Gael motion to the House.

Dáil Éireann debate - Wednesday, 23 Mar 1994

Private Members' Business. - Tax Reform: Motion (Resumed).

A Deputy

Tá

CLASS="CP">Níl

Dáil Éireann debate -
Wednesday, 23 Mar 1994