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Dáil Éireann debate -
Thursday, 12 May 1994

Vol. 442 No. 7

Finance Bill, 1994: Report Stage (Resumed).

We now proceed to amendment No. 3 in the name of Deputy Rabbitte. I observe that amendment No. 10 is an alternative. I suggest, therefore, that we discuss amendments Nos. 3 and 10 together.

I move amendment No. 3:

In page 13, between lines 23 and 24, to insert the following:

"2.—For the purposes of income tax assessment, married persons shall mean——

(a) a man and woman who are married to each other, or

(b) a man and woman who are not married to each other but are cohabiting as man and wife.".

Amendments Nos. 3 and 10 are similar. As we debated this matter on Committee Stage I will not delay the House. The point at issue is that those people who are in de facto marriages or second unions and who cannot, under the law, get married are not recognised as man and wife under the tax code. The Minister raised our expectations during the debate on the Finance Bill last year when he indicated he would review the matter. Unfortunately, he indicated last week that tax law must lag behind general law in terms of a review and, therefore, he has not tabled any amendments.

The travesty is that those people who are cohabiting and wish to claim a lone parent's allowance are told that under the social welfare code they must claim as man and wife. If they go out to work they cannot claim an adult dependant allowance or child dependant allowance even though under the social welfare system they are treated as a family unit. This is farcical and illogical.

The question is how we confine it to couples living as man and wife and who, under the law, cannot remarry. That is a simple proposition. The advice of the Attorney's General — which was not published — is that we cannot introduce a cohabiting allowance. I ask the Minister to review the matter before the next Finance Bill — God only knows where any of us will be at that stage — and consider introducing a cohabiting allowance for married couples in all but name. This is the purpose of amendments Nos. 3 and 10.

This has become a hardy annual in recent years but I am sceptical about its worth. I can see, at a superfical level, the attractiveness of this proposition but the cruel truth is that single people in particular do extremely badly under the tax code. No matter how we would seek to define the arrangements in a case such as this people would be able to drive a coach-and-four through it in practice. For that reason, far from eliminating anomalies, it would create even more glaring ones.

A different logic is applied under the social welfare code. When one considers extending one line of reasoning from one code to another sometimes it can be seen they are applied for different reasons and that it is logical to treat people separately. I cannot support these amendments.

On Committee Stage the Minister said he had been advised by the Attorney General that this would be inconsistent with the Constitution. I have tried to highlight this major issue in Irish life at the request of many couples who are living as man and wife in a common law relationship and believe they are discriminated against under the tax code. The Minister has not denied this. These people do not have the opportunity to remarry. It is not a cliché to say that we have divorce Irish style; what we do not have is the right to remarry. The Government states that 60,000 marriages have broken down. One cannot automatically say that 60,000 persons find themselves in this situation but I think the Minister and each Deputy in this House knows that there are a great many people in second relationships, many of whom would remarry if they had an opportunity. They are living as man and wife in a common law relationship; yet, they are assessed as single individuals irrespective of their responsibilities. Whatever about my amendment being unconstitutional this is an injustice.

When I tabled a similar amendment last year the Minister indicated he hoped that we would deal with the question of divorce before another Finance Bill was presented. The position would then be that tax law would follow civil law. One year later we still have not dealt with this major problem in society. If we can manage to do this under the social welfare code what is the reason we cannot do so under the tax code? If this resolution is not constitutionally firm I invite the Minister, as I did on Second and Committee Stages, to present his own amendment or suggest how the wording of the amendment can be improved but the fact remains that I have taken this amendment from the Social Welfare Act, 1991. Many people find it hard to understand the reason people who are cohabiting, unemployed and in receipt of various social welfare benefits are regarded by the State as being married for the purposes of assessing the benefits to which they are entitled but as being single under the tax code where the State takes money from the citizen.

It cannot be reasonable or fair that when the State gives out money under the social welfare code it regards two people as married, but when it is taking in money it regards those two people as single. There is a major anomaly in this area. I will not enter into an argument with the Minister if he says this amendment is not the way to go about changing this, but the 60,000 known cases of marital breakdown and those in second relationships, many of whom would remarry if it were possible to do so in this jurisdiction, are being discriminated against under the tax code. If the Minister continues to hold the view that this amendment is not constitutionally practicable, what hope is he offering those people? What is he saying to those in second relationships? If he continues to oppose this change because of the advice available to him, so be it, but it is incumbent on him and his advisers to tell those people that there is hope and that they are considering addressing the injustice.

This matter has been discussed at some length, but I will restate some of the points. The right to remarry is prohibited by our Constitution and because of that there is no reason tax or any other law should recognise the status of cohabiting couples on a positive basis. Social welfare law is designed to prevent cohabiting couples getting better treatment than married couples. That is an anti-avoidance provision, not an anomaly.

The treatment of cohabiting couples for income tax purposes arose out of the Supreme Court decision in the Murphy v. Attorney General case in 1980 in which it was held that a position in which a married couple might pay more tax than two single persons living together would be repugnant to the Constitution. Therefore, a married couple is entitled to double tax free allowances and bands, whereas a person cohabiting is entitled to only a single person's allowances and bands. Deputies Rabbitte and Yates will appreciate that the tax law in principle follows and reflects the general law relating to marriage. That has been the position for a number of years because of our Constitution. As the House is aware, the Government is committed to holding a referendum on divorce in the near future and intends reviewing the taxation of cohabiting couples in the light of the outcome of that referendum.

The treatment of cohabitating couples under social welfare provisions arises out of the 1989 Supreme Court decision in the Hyland case. That decision found that the social welfare provisions in question were unconstitutional in that they treated a married couple living together less favourably than an unmarried cohabitating couple. The social welfare provisions now in operation explicitly give cohabitating couples the same treatment as married couples in determining the level of entitlement to benefits. The effect of the provisions is to preclude cohabitating couples from receiving better treatment than married couples. It is not possible to extend the treatment of cohabitating couples under the social welfare code to the tax code because cohabitating couples are explicitly given similar treatment to married couples in determining the level of entitlement where either both partners are on unemployment assistance or where one partner is on unemployment assistance and the other is receiving social insurance payments. The effect of this is to restrict cohabitating couples from receiving better treatment than married couples and follows from the Supreme Court decision in the Hyland case in 1989. The matter must rest there until the referendum is held and the Government reviews the matter in the light of the results of the referendum.

The intention is not to make married couples worse off than cohabitating couples. What we want is equality. We want the provisions of the social welfare code extended to the tax code. I question the political will in this regard. We know the Government is long-fingering the divorce referendum and that many Government backbenchers do not want divorce in this jurisdiction. This is a practical example of how people who have been unfortunate enough to suffer marriage breakdown lose out under the tax code when they enter a second union. Will the Minister review this matter again? It is not beyond the scope of the Revenue Commissioners, the Minister's Department or the Attorney General's office to devise a successful formula and I ask that their attention be focused in that direction in the coming year.

We will review the matter in the light of the referendum.

Amendment, by leave, withdrawn.

Amendment No. 4 is deemed out of order on the basis that it involves a potential charge on the people.

Amendment No. 4 not moved.

Amendments Nos. 6 and 7 are alternatives to No. 5. Therefore, it is proposed to take amendments Nos. 5, 6 and 7 together.

I move amendment No. 5:

In page 13, to delete lines 28 to 39 and substitute the following:



Part of taxable income (1)

Rate of tax (2)

Description of rate (3)

The first £12,000

25 per cent.

the standard rate

The remainder

40 per cent.

the higher rate

They are still cohabiting.

They are still cohabiting, but will not get their due allowances under the regulations.

According to the Culliton report, for single people, approximately the first £12,000 should be assessed at the standard tax rate and the remainder at the higher rate and for married people the first £24,000 should be assessed at the standard rate and the remainder at the higher rate. A clear and reasonable conclusion can be drawn from the progress of the past two budgets of this Administration in respect of this standard band. It has decided rhetorically to genuflect in the direction of Culliton, but in practice it has abandoned the Culliton thesis in terms of radical tax reform. I welcome the move to widen the standard band, but the puny steps taken in no way tackle the radical hurdle set by Culliton. Following the introduction of two budgets by this Administration, I can only conclude that when it faces the public in a general election we will have only limped towards the Culliton test rather than jumped the hurdle. That is a serious failure.

The most fundamental observation in that report related to the need for radical tax reform. The single most substantial suggestion in respect of income tax was that not more than 20 per cent should pay tax above the standard band. Considering this Bill and last year's Act, one is entitled to say the Government has abandoned that as an achievable target during its life. If it cannot be achieved during the life of a Government which has the largest majority in the history of the State, one wonders if there is a genuine appetite for a radical, pro-jobs tax reform of the type advocated by the people asked to advise the State on this matter. They gave solid, clear and unequivocal advice, which has been set to one side.

The rates of 25 per cent and 40 per cent are primary targets which my party has argued for. In the 1992 budget the Minister gave a commitment to move to an upper rate of 44 per cent which appears to have been quietly buried. That is regrettable. I could continue at some length but I have made the essential point. I do not suggest it can be achieved in one fell swoop but it is the litmus test of a commitment to radical, pro-jobs tax reform recommended by Culliton. It is clear from the two budgets of this Government that it is not prepared to go down that road. The largest single writeoff under any one heading in terms of giving tax back was the abolition of the iniquitous 1 per cent levy. That is not tax reform but tax repentance. This Bill does not represent radical tax reform.

I do not consider there is a great deal wrong with the existing tax rates of 26 and 48 per cent provided the bands are adequate and the exemption threshold is correct. The real difficulty with our tax structure is that people are drawn into the tax net at very low incomes. Those people become liable for the marginal rate of tax at a comparatively low income because of the narrow rate bands.

It is difficult to have a comprehensive discussion on the Finance Bill and to suggest how to fund some of the changes we seek to make when it is not possible to table an amendment which involves a potential charge. That restriction effectively puts us in a straight jacket. I sought in the amendment the Chair has ruled out of order an alternative three-tiered tax code whereby the cost of lessening the burden on people on low and middle incomes would be clawed back from people on very high incomes.

It is disappointing that for the first time in some years the Minister has made no concession to raising the exemption level. That is a mistake. The public will not acknowledge progress has been made in tax reform until the exemption level is right. Higher income earners would also benefit, but low income earners would benefit disproportionately for a change because in some cases it would take them out of the tax net.

The second element is the rate bands. The existing bands are not fair because shortly after coming into the tax net on the 27 per cent standard rate one must pay tax at 48 per cent. By any standards that is punitive. On Committee Stage we discussed in detail the increasing number of taxpayers who become liable at the marginal rate. That is a serious problem with our tax system. My approach would be somewhat different from that of Deputy Cox in that I seek to ensure that such moneys as are available to relieve the burden of tax would go to people on low and middle incomes, but that will have to be funded. The real inequity is the narrowness of the bands, the short duration people pay at 27 per cent tax before they become liable for 48 per cent tax. That inequity must be addressed.

My amendments Nos. 6 and 7 take a slightly different approach, but their thrust is broadly similar. The problem is that people who are in receipt of moderate rather than top incomes pay the top rate of tax. People here reach the top rate of tax at the lowest level of income in Europe. A single person whose income exceeds £223 per week pays more than half of it in income tax. It is staggering that people on such modest incomes should be so penalised. I not only refer to income tax at 48p in the £1, but 7.75 per cent PRSI which makes up a marginal tax rate of 55p to 56p in the £1. For every £1 a person earns over that level he or she must pay more than half in tax. That causes the brain drain because people who cannot amass after tax income leave the country. In Britain the standard rate of tax applies to the first £23,000 income. Our tax system is detrimental to employment because the non-wage element of labour costs is uncompetitive. It is 15 per cent out of line with that in England and Northern Ireland. As long as labour costs are central to competiveness we must consider reducing those costs.

Last week while debating the Finance Bill I was intrigued that an economist at a construction industry conference in Killarney said that, even allowing for a real growth in public expenditure, the fruits of economic growth would facilitate cuts in income tax of a minimum of £200 million annually. That is a significant amount of money and contrasts with the reduction in income tax this year which, including the 1 per cent levy, amounted to £125 million. If the Minister is able to control the excesses of his partners in Government while continuing to cohabit with them, he should focus his mind on meeting the pre-election promises of Fianna Fáil and, in next year's budget, take the modest step of increasing the standard rate for a married couple from £16,400 to £20,000 and for a single person to £10,000. As far back as 1990, when the Taoiseach was Minister for Finance, he promised at a Fianna Fáil Ard-Fheis that this would be done. Four years later we still have the modest levels of £8,200 for a single person and £16,400 for married couples. Our tax wedge is uncompetitive in terms of non-wage labour costs and single people in particular working in a bank or in any white collar or professional employment, or even in the public service, find that a huge amount of their hard earned income is taken in tax.

These amendments seek to vary the income tax structure and the bands outlined in section 2 which proposes to increase the standard rate by £525 for single and widowed persons and £1,050 for married couples, while maintaining the 27 per cent and 48 per cent rates. Deputy Yates's amendments would cost £164 million in a full year and the amendment in the names of Deputies McDowell and Cox would cost £620 million in a full year. I have sympathy with the general direction of the proposals in so far as they relate to widening the standard band. The vast proportion of money available this year went towards reducing the burden of tax by increasing personal allowances and widening the standard band.

In the Programme for Competitiveness and Work the Government gave a commitment to raising the threshold at which people start paying the higher rate of tax. This is part of the Government strategy to try to alleviate the burden of taxation on workers with low incomes. That was done in a number of ways this year. It will be my responsibility to continue reducing the burden on workers with low incomes, particularly those with families and dependent children, but this can be done only as budgetary resources permit. I accept Deputy Yates's argument that a tight rein on public expenditure assists that process. We are trying to devise a budgetary strategy to keep Exchequer borrowing and inflation under control. I accept that is the best vehicle to reduce the burden of taxation on the working population generally and we will continue in that direction.

Section 2 provides for a widening of the standard band for the current tax year by £525 in the case of single and widowed persons and £1,050 in the case of married couples. This is a substantial widening of the standard band, the largest in ten years. The last time it was widened to this degree, the tax rates were 65 per cent, 58 per cent and 35 per cent. Since 1987-88 the standard band has been widened by £7,400, from £9,000 to £16,400, in the case of married couples and by £3,500, from £4,700 to £8,200, for single and widowed persons, an improvement of 75 per cent. The Opposition is right in saying we have to do more in this area, we would if we had the necessary resources. It must be acknowledged that in the last six or seven years we have made substantial strides in this area.

The cost of the full tax package, including the cost of renewing the PRSI allowance and the revenue foregone by dropping the income levy, is £250 million in this tax year. This is all that can be offered in present budgetary circumstances.

Deputy Cox will understand our reluctance to accept the 44 per cent rate. Perhaps rates of 25 per cent and 45 per cent would be welcome, but it is more acceptable to put available resources into increasing the standard band. The argument about adding PRSI to the 48 per cent rate is not straightforward. I hope that for the next five or six years the standard band will continue to increase instead of adding small amounts to allowances and reliefs. We have got away from that practice, which Deputy Cox welcomes. If we continually focus on increasing personal allowances and the standard band we will make an improvement.

The position of rates is secondary. I agree with Deputy Rabbitte that the 48 per cent rate is not out of line with international rates. If we widened the band by a further 75 per cent in the next six or seven years we would have reached the £20,000 rate. This year we made the biggest move in ten years and I hope that trend continues.

I agree with the sentiment expressed by the Minister of focusing attention in financial planning on avoiding the blunderbuss approach whereby money is scattered around so much that we fail to consolidate available resources to areas of tax reform in which they are most urgently needed. There is consensus about the urgent necessity to reduce the tax rate, particularly the standard band. A penal feature of the tax code is that people on comparatively low levels of income are drawn into it and, at a very early stage, pay high rates of tax in cases where average earnings may be substantially less than the average industrial wage.

The Minister acknowledged that during an earlier phase in his ministry he was an adherent of a reduced upper rate of tax, but he has the characteristics of the television advertisement for a credit card; he is a flexible friend and it depends on who is advising him. He should be advised to reduce rates as well as broaden bands.

The Deputy was not very anxious about the 44 per cent rate; the band was his priority.

Nonetheless, we also burned the midnight oil on the matter of rates.

That is so. I am not saying we should not concentrate on that area. It is difficult to justify a single person on £12,000 having to pay 48 per cent tax.

There is no argument on that, but there is an argument about the sense of urgency with which one wishes to achieve the desirable end. The Minister said that the cost of the proposal put forward by Deputy McDowell and myself would be £620 million in a full year.

On occasions our debates on taxation are what I would regard as arguments about a certain false economy. I do not argue that our tax system is the sole cause of unemployment, but I have no doubt that its structure is a significant underlying problem. In that regard the cost of a change must be balanced against the anti-jobs dimension of the existing structure. Currently our dole bill is more than £1 billion a year, and if the number receiving dole could be reduced there would be more capacity for expenditure in other areas.

The tax area has to be first among equals precisely because it was identified as the single most effective policy instrument in the hands of Government to tackle unemployment. I acknowledge the attention it is receiving which is consistent with a run of change over time. However, the change in not radical enough. I suggest that looking at the cost without looking at the dynamics in terms of employment and unemployment and the benefits that would flow from a radical pro-jobs tax reform can exaggerate the cost because, in the end, the real cost of excessive taxation is excessive structural unemployment.

Amendment, by leave, withdrawn.

I move amendment No. 6:

In page 13, line 32, to delete "£8,200" and substitute "£10,000".

Question, "That the figure proposed to be deleted stand" put and declared carried.
Amendment declared lost.
Amendment No. 7 not moved.

I move amendment No. 8:

In page 13, between lines 47 and 48, to insert the following:

"3.—A deduction shall be made from the total income of a parent for the year of assessment 1994-95 and subsequent years of assessment in respect of relief amounting to £400 per child.".

We are dealing with a group of amendments which were not debated on Committee Stage and to which I attach some importance. This amendment seeks to reintroduce into the tax code a basic tax free allowance for dependent children on the basis that the cost of rearing children should be acknowledged in the tax code as it is in the social welfare code. Any parent will confirm that rearing children does not come free. Whether it is for clothing, food, education, health care, right up to the point when the chickens leave the nest, there is a major cost in rearing children resulting in a reduction in the standard of living of their parents. That is an inescapable fact.

The Minister may argue that changes in child benefit have the effect of meeting the needs of parents. This is an utterly inadequate argument because people find that they are caught in poverty traps by virtue of the fact that, although they get more money from the Department of Social Welfare for each child they have, they get no recognition in the tax code. Under the social welfare code a married person with ten children has a vastly different income from a married couple with no children. Under the tax code a teacher with ten children is treated as if those children did not exist. A teacher with ten children and a teacher with no children have the same tax free allowance.

My proposal, which I estimate will cost about £90 million, is fundamental to equity in the tax code. Studies of the income tax system from 1981-93 show that the tax burden on married couples and parents has risen acutely. So much lip service is paid to supporting families and family values. A practical expression of that would be to change the tax code. It was a mistake to abolish the tax free allowance. It was another Labour Party inspired measure on the grounds of so-called equity. Such change could be implemented by way of tax credit or tax allowance. I take the point that the benefit would confer greater value on those who are on higher incomes, but I do not go along with standardisation across the whole spectrum because one must take account of the amount of tax people are paying as opposed to a theoretical argument about percentages and rates.

The question of whether parents should have a greater tax free allowance than those who have no children is an important and fundamental issue which I will seek to make a central issue in the next general election campaign. I feel very strongly about this issue. Given that this country's psyche is pro-family and pro-children, it is a fundamental flaw that our tax code does not recognise it. I accept that if a person has four or more children it is not worth his while to go to work except for an income well in excess of the average industrial wage. That is wrong. People with large families have to have a spouse at home minding those children and they are the people who are most likely to be long term unemployed because it simply does not pay them to go out to work. I know such people in my constituency, people who have been farm workers, with a fixed income agreed with SIPTU and IBEC. It would not pay them to go to work if they had five or six children, given that their medical card and rent allowance are based on their gross income and taking into account transport costs and fringe benefits such as the Christmas bonus, the free fuel allowance, etc. A key feature is that their take home pay is not as enhanced as it should be because there is no basic allowance for children.

This is one of the most important amendments tabled. It is the most important area in which to bring equity between relative groups of taxpayers.

We find ourselves dealing more with the level of existing allowances and suggesting new allowances because of inequities in the existing tax system. Some of these allowances might not be necessary if there was genuine equity in the tax system. We must, therefore, address the situation as it is.

I would feel more comfortable with Deputy Yates's amendment if we had a system of tax credits because then the benefit would go to lower income families. I would enthusiastically support the spirit of the amendment where parents on low incomes raising children would get the benefit of the provision. Rearing children is very expensive and that is not acknowledged in the tax code. There is a world of difference in the circumstances of a married couple with no children and a married couple with two, three or four children. People with children at different stages of development appreciate the additional financial burden that imposes. I very much support the spirit of the amendment.

The amendment proposes to restore the income tax child allowance on a universal basis at the rate of £400 per child. The child allowance was withdrawn, as Deputy Yates mentioned, from the income tax code with effect from 1986, in conjunction with the introduction of the new social welfare child benefit payment, in accordance with the Government's intention to consolidate secondary tax allowances with social welfare payments. Last year there were significant increases in that scheme which brought the rate up to £20 per week for the first, second and third child and £23 per week for the fourth and subsequent children. The additional changes announced in this year's budget mean that the £23 rate will increase to £25 from September next and that the higher rate will be extended to cover the third rather than the fourth child. Substantial improvements were made, therefore, last year and this year.

The amendment must be viewed against the progress in reducing the level of income tax over the years which has had significant benefits for families and taxpayers. There has been a reduction in the top rate of tax from 58 per cent in 1988-89 to 48 per cent now, which has been of substantial help, and the 35 per cent rate has dropped to 27 per cent. Everybody benefits from those reductions in addition to the exemption limits to which we referred earlier. Under the proposals in this section, the child additions to the exemption limits are being increased by £100 to £450 for the first two children and £650 for the third and subsequent children. Again, this will help low and middle class income families and there is a concentration on the child additions to the exemption limits rather than the child tax allowance. That is the best way to achieve our aim, as Deputy Rabbitte correctly said. The amendment would cost £52 million this year and £88.7 million in a full year but we have given substantial reliefs.

I quoted certain figures last week which I would like to mention again because the argument that the tax system gives no recognition to children is not correct. As I said last week, on an income of £8,500, the saving per year as a result of the child exemption for a family with two children is £360, for four children the saving is £520. For a family on an income of £9,500 with two children the saving is £360 and with four children the saving is £880. For a family on an income of £10,500 with two children the saving is £313, with four children it is £833 and for a family with six children the saving would be over £1,200. There are, therefore, benefits in this. Deputy Yates outlined how this could be targeted because otherwise a wealthy person with ten children would get the child benefit. Of course, where children are not recognised in the tax code they are included in the social welfare code.

The changes last year and this year — and we are committed in the Programme for Government to continue to move in this direction — are of major benefit and a direct acknowledgment of what everybody said here, that the costs to a family of having children as against a family with no children are substantial from the point of view of clothes, food, educational costs, overheads, etc. That is recognised in Government policy. The changes last year and this year are substantial and it is the Government's intention to continue in that vein.

We must face reality. To deal with this matter by way of child benefit alone is to make insignificant changes. A couple of pounds per month is spread over many people. The wealthiest people get child benefit but the people on the lowest level of income get the same amount. The benefit is not focused in any way and there is a fundamental inequity. If someone goes to work with the primary motivation of trying to give their sons or daughters the opportunity of having a better life, the tax code should take that into account.

In Germany, where the demographics are such that they do not have a birth rate to sustain their population, there is now a strong argument about who will pay the pensions of childless people in years to come. If someone gets tax relief on a good apartment or drives a Porsche, surely the tax code should acknowledge the cost of child rearing? We have not reached that stage yet but the way our birth rate is going, in ten or 20 years the key issue will be who will fund our pensions which are paid out of current requirement. This amendment will be seen in posterity as being perspicacious, far-sighted and worthy of support. I regret that the Minister's policy is against granting tax free allowances for children. This is a matter which strikes a chord with the general public and ultimately I will let the case rest with them.

Amendment put and declared lost.

I move amendment No. 9:

In page 13, between lines 47 and 48, to insert the following:

"3.—Where an individual provides child minding services in their place of residence, a deduction shall be made from the total income of that individual for the year of assessment 1994-95 or any subsequent year of assessment in respect of relief amounting to £1,000.".

This amendment deals with the situation where both spouses are required to work and the resulting additional child minding costs. One of the growth areas for employment will be personal care services, home repair services, child minding, etc. This service operates extensively in the black economy at present and the acceptance of this amendment would be one way of bringing this whole area into the tax code — which would cost less than £12 million — in cases where bona fide child minding expenses are established. This problem primarily faces women. They should not be chained to the kitchen sink, we must try to improve their role in the labour force and one way of facilitating them is to ensure that at the end of the week when they do their sums and take account of childminding costs, they are left with a reasonable take-home pay. This amendment would help them in a small way.

I know many couples with young children who both must work to pay the mortgage. This is a modest amendment that would give a modicum of relief where both spouses are required to go to work in those circumstances. If this proposal was successful it could be extended to other areas of personal services and home improvement services, gardening, etc. It is consistent with my earlier amendments because it represents support for the family and parents and acknowledges the stresses and costs associated with child rearing. We must remember we are moving into an era where it is commonplace for people not to get married and where couples deliberately decide not to have children. Notwithstanding the fact that marriages break down, there is no better structure than the family in which to bring up children. Child minding expenses are a bona fide cost where both parents are working. In cases where there is a combined income of, say £10,000 the couple could not survive on one income.

The wording of the amendment could be improved but the principle is a sound one which the Minister should accept.

I sympathise with the case made by Deputy Yates. It would be regarded in certain quarters as a popular measure and his argument is not without force. The basic system is so penal in respect of ordinary levels of income that the need to seek extra allowances arises. If we had a fair tax system the need for allowances would be diminished and would remove the force from such arguments.

Proposals such as those made by Deputy Yates should be consolidated and form part of essential tax reform. If people were left with more of their income they would have freedom to make choices and could pay for child minding facilities or whatever. The cruel burden of taxation robs them of that freedom. That must remain the focus of those interested in tax reform.

I respect the logic in the amendment but we must return to the core argument that we have a penal tax system, the rate, bands and structure of which need to be reformed. That is how to facilitate the case made by Deputy Yates.

We did not have an opportunity on Committee State to debate this amendment and I am anxious to hear the Minister's views. During the currency crisis the number of visits to the clinics made by young married couples, both working, who did not know how they would pay the next mortgage repayment was remarkable. One had the impression that the combined income of two young people with a new mortgage was modest and both were compelled to work in order to discharge the mortgage in the early years. Notwithstanding the caveat I entered earlier, I am disposed to helping such people in any way we can, in the absence of the ideal tax code which we will probably never see.

What is the Minister's view on whether this amendment would contribute to persuading those who offer this service to come into the white economy if there was an allowance in the tax code for so doing? Child minding services are offered widely and in most cases the person providing the service does not wish it to come to the attention of the Revenue. At this stage of society's development, both parents go out to work and someone else minds their children either in the child's residence or the residence of the minder.

Deputy Yates suggests that the tax relief would apply to the person supplying the service in their residence. He is right about the potential employment in this area. The problem is exacerbated by the absence of any pre-school structure. To the best of my knowledge, many Montessori pre-schools are not within the white economy. If the Minister looks favourably on the amendment, does he consider it would invite such people to provide the service on the basis of remunerated income in the normal way within the tax system?

This matter was brought to my attention by a number of groups and I undertook to examine it in detail. On the surface it seems as if it might be feasible but when one examines it one sees the pluses and minuses. I agree with Deputy Yates that there is no better structure than the family and it should be helped under the tax code, if possible.

In his amendment Deputy Yates would give an allowance of £1,000 to a family where both parents are working but would not give anything to the member of the family who stayed at home on a full-time basis minding the children. When I floated that idea at meetings there was no doubt which side of the argument the audience favoured — the allowance should also be given to the person who stayed at home to mind the children. It is a difficult argument to answer.

Deputy Cox rightly said that we had four Finance Bills over three years. I have been lobbied by various groups and been involved in negotiations on the Programme for National Recovery, and with the Department of Labour. It is the same story each year. Some people are obsessed with getting reliefs, allowances and concessions for everything — I do not want to refer to any area in particular. This may be due to the tax system. I am worried that we will reach the stage where people will invest in apartments, offices, hotels or restaurants only if they get a section 23, section 27 or section 35 relief or qualify under the BES or urban renewal scheme.

People are very imaginative when it comes to qualifying for reliefs. The section 35 relief introduced in the 1969 Act was intended to be of benefit to artistic people who could help develop the arts. However, I recently heard about a person who put together a tuppenny book outlining how to add one and one and who sought relief on the basis that this was an addition to the arts. Even before the debate on this Bill is concluded people will be thinking of ways to qualify for relief. Last night I opened a tax conference and some of the stories I was told later would make the hair stand on your head.

I agree with the points put forward by Deputy Cox on this matter, and I think Deputy Rabbitte would go part of the way with us if he could see how the overall system worked. If we keep on granting reliefs we will never get anywhere — every relief costs money and either reduces the amount of money available to the Minister for Finance or ensures that the rates stay higher and the bands stay lower.

What about the balance if most of the people providing the service are in the black economy? Is there a balance there?

I have sympathy with that point. The reality is that many people on the unemployment register are working for a few hours a week. I do not believe they are all working 50 hours a week, but they do a few hours work a week in one form or another. It would be very beneficial if these people could be attracted to leave the black economy. The last time a relief of this kind was introduced was during the late 1970s when a relief was given for home improvements. At that time contractors operated a two-tier price system depending on whether a person was claiming tax relief. For example, a person claiming tax relief was quoted a price of £1,000 while a person who was not claiming tax relief was quoted a price of £800. This relief was done away with because everyone claimed it and there was no corresponding saving.

The amendment proposes the introduction of a tax free allowance of £1,000 per annum in respect of expenses incurred by a parent in taking care of his or her child or children in the home. I had hoped to introduce a similar relief in the budget because it sounded like a very good idea. I have not totally written off the possibility of introducing such a relief in future years. This amendment would introduce a new discretionary relief into the tax system with an inevitable narrowing of the tax base and lead to renewed demands from other groups which are seeking discretionary tax reliefs. It would also involve a large cost for the Exchequer — the estimate is £30 million — and, more importantly, it would signal a change in the Government's position on tax reform. The Government's objective is to remove as many low income families as possible from the tax net. If we continue to grant reliefs it will not prove possible to achieve this.

Several points have been put forward in favour of an allowance for child-minding costs. I agree with Deputy Yates that this allowance would make it easier for both spouses in a marriage to go out to work. Families living in new houses, particularly in the Dublin area, require two incomes to pay the mortgage even with low interest rates. It has also been argued that the allowance would help to create jobs, combat the black economy where child-minders pay no tax and draw social welfare at the same time and help offset the child-minding costs incurred by working single parents.

While an allowance for child-minding would undoubtedly be of assistance to a married couple where both spouses worked outside the home or wished to do so, it would clearly discriminate against a married couple with children where one spouse stayed at home to care for the children. A married couple with both spouses working would get an allowance for employing a child-minder whereas a married couple with one parent working and the other remaining at home to care for the children would not. This issue would first have to be dealt with if we were to move in this direction. The amendment would benefit, among others, the better off double income taxpayers who could afford to employ a child-minder while not recognising the valuable contribution of those working in the home.

There is no guarantee that granting a tax reduction of £1,000 to a person employing a child-minder will create any additional jobs or automatically bring the child-minder out of the black economy. The value of tax reliefs in achieving greater compliance is highly questionable since such reliefs involve high costs for relatively little return. The net result of a relief along the lines proposed by Deputy Yates could leave employers faced with a substantial increase in fees. A tax deduction of £1,000 would not seem very attractive in those circumstances. The experience of the tax relief for personal services is not very encouraging in this regard. That relief was abolished in 1983 because it failed to create any worthwhile additional employment.

As regards single parent families, the Government is not insensitive to the plight of such families, which have a particular difficulty. The tax code already provides an additional personal allowance for single parents to give them allowances equivalent in aggregate to that of a married couple. This allowance was intended to cover to some extent the childminding costs of a working single parent.

I will continue to consider the possibility of introducing such an allowance, but it will have to be broader than the one proposed by Deputy Yates if it is not to create difficulties. Such an allowance would also have to be granted across the board.

I do not intend to press my amendment. Deputy Cox and the Minister take the straightforward simplistic view that all reliefs should be given at the basic rates. Politicians have an obligation to put forward the experiences they come across and to espouse the introduction of certain values in the system. Politicians do not have to calculate the rates — the guys in Merrion Street can do that, it is a simple case of arithmetic. If the Minister says it cost £30 million, if one takes as many people claiming at the top rate as the lower rate, something in the region of 75,000 people will be eligible for this relief, which would be of real help. In fact, it might facilitate people in their family planning.

The point the Minister made about single parents was valid — I could not have put the argument better — they have a problem regardless of whether they go to work. This type of relief would directly benefit such people.

This package of amendments has an underlying philosophy which is that parents do not weigh up the cost of child rearing. Indeed, this philosophy was aptly demonstrated in a song which depicted a very demanding child who, for doing various household chores, washing dishes or removing the dustbin charged $5 or whatever. Then the mother wrote down all the chores she undertook such as making the bed, cleaning, cooking, a myriad of tasks and, at the bottom she had put "no charge".

The tax system discriminates against families.

I will withdraw this amendment. I do not accept that politicians should not interfere in the tax code to support views and values, which is what these amendments attempt to do. Bureaucratic constraints impede what the Minister could do at the basic rate but it would send out a message attributing greater relevance to the many political statements all parties make about support for the family.

Amendment, by leave, withdrawn.
Amendment, No. 10 not moved.

I move amendment No. 11:

In page 13, between lines 47 and 48, to insert the following:

"3.—Where a spouse works full-time in the family home, caring for an adult or child dependant, a deduction shall be made from the total income of that person for the year of assessment 1994-95 and subsequent years of assessment in respect of relief amounting to £1,000.".

It is a simple, practical fact that if a couple have a certain number of children one spouse must remain at home.

I first entered this House in 1981 on the crest of a wave attributed to the charisma of our former party Leader, Deputy Garret FitzGerald. One of the infamous issues in that June 1981 election, when we won 20 seats, was the £9.60 to be paid to the wife who remained at home. It was a matter of subsequent derision that this was never implemented. I understand the reason it was not was that, when it came to administering and implementing it, the mandarins of Merrion Street baulked and said it could not be done. I am now endeavouring to bring about the same effect, which is to recognise the role of the full-time parent working in the home. There is no doubt that the value of a mother in the home is totally underrated. I am sure it is politically incorrect to say this but the love and attention a woman in the home can give on a full-time basis must have a very beneficial impact on bringing up children. That is not to decry people who have to go to work; I have already spoken in support of them. Where possible, such full-time spouses working in the home should be assisted. Indeed if the purpose of this amendment is to get more women to remain at home, it may well free up great job opportunities for sons, daughters and school-leavers seeking work.

This is a very simple amendment which can be implemented and would give effect to that infamous proposal of paying £9.60 per week to stay-at-home wives, which was profoundly popular. It needs to be re-examined because it is something from which many women would benefit. If the Minister has the relevant statistics he might let us know how many spouses of taxpayers fall into that category. The spouses at work reaping the benefit of an additional tax allowance of £1,000 would be of practical benefit. If we had a system of tax credits it would also facilitate greater equity in that it would be of greatest benefit to the lower and middle income groups. As we do not have a system of tax credits this relief is proposed in the form of an allowance. While I can see the political arguments against it I can also see the political benefits of implementing it.

I do not want to detain the House unduly on this amendment but I feel obliged to respond to Deputy Yates. One of the difficulties with our tax system is that it has grown in a very ad hoc way and has become progressively more incoherent, with bits having been added or subtracted here and there. We had begun to get into a type of culture — the Minister mentioned this when responding to an earlier question — in which, if there was not some kind of a tax break, people felt they should not engage in something. In the earlier days of this State, and I revert to times when Governments were not involved to the extent they are now in the economy, when some people thought it was in their interests to build the railway system. They did not do it with grants from Structural Funds, Exchequer grants or the like — even before that some people thought it was in their interests to build the canals system. I merely revert to observe that more and more over time one has the impression here that if one wants to do something somehow or other it has to be helped by the State with incentives and so on.

I reject the charge of having a simplistic approach to the tax system. My party and I have endeavoured to have a coherent approach. The difficulty about wanting a little bit of everything — and I accept the politics that a little bit of everything can appeal to many target groups is interesting politics — is that, in the end, I do not even know whether that is the most coherent approach. That is a matter of one's own political judgments, and Deputy Yates has made his choice.

I do not have an argument with Deputy Yates when he extols the virtue of family life. Neither do I have an argument with him when he talks about the contribution of full-time mothers working in the home because, among others, he is talking about my wife. I do not have an argument about the kind of contribution she and people like her, make to one's family, one's home and all that goes with them.

When dealing with taxation issues the essential question is that households — and when talking about families we can talk about them broadly in that sense — need a system which encourages and rewards effort. The system should also give an incentive to work harder and substantially keep the benefit of that harder work in one's pocket rather than have half or more of it, between a variety of taxes and PRSI payments, appropriated by the State. That is a pro-family view because, the more one encourages a household to look after itself, the better the overall result for that family and household. I do not argue with the desirability, if we had the resources, to spread things around. If we continue to spread the resources in an inefficient way we will get reform which is loosely targeted at various groups and which is a mile wide, an inch deep and makes no real difference.

I support the idea of giving some income to the stay-at-home housewife. On the tax welfare trap many people say there is no point in taking a low paid job because they would lose out by a withdrawal of benefits and, possibly, family income supplement and so on. A strong case can be made for substantially increasing child benefit as one way of mediating between the income tax and welfare elements. It is not a direct form of income for the stay-at-home housewife but it is a way of addressing some of the fundamental results in our tax welfare system. The more we integrate tax and welfare the more one is entitled to follow the logic of Deputy Yates' suggestion about targeting the household and the stay-at-home wife. It has got to be done in a way which is coherent and which, together with tax and welfare, is sufficiently so to get over the worst features of our penal tax system and of the poverty traps between the operation of tax and welfare. Far from having a view which is simplistic mine is a coherent one. I share the values which Deputy Yates espouses but one is entitled to differ on the means to achieve them.

I did not want to contribute to this amendment but, lest anyone thinks I am not caught up in the warm family glow that has overtaken us or the fact that I do not have a simplistic view every day should be mother's day. If the Minister can help in that objective I support him.

Deputy Rabbitte is correct. I could not help thinking that it is 13 years this month — as mentioned by Deputy Yates — since we all had to do battle against the £9.60 for the stay-at-home wife.

No one could explain it in Fine Gael.

Nobody had thought it our properly so it could not be implemented. The £9.60 for the stay-at-home wife was not in the context of a tax credit. Half of the tax credit was to be paid direct to the spouse in the home who had a correspondingly reduced tax credit. There are approximately 250,000 people in this category.

This amendment proposes the introduction of a new tax allowance of £1,000 for a spouse working on a full time basis in the home, the cost of which would be about £30 million this year and £50 million in a full year. To the extent that the amendment is designed to give recognition to the spouse in the home — who would generally have no income in her own right — the income tax system provides for this. Notwithstanding that the decision of the Supreme Court in the Murphy case related only to the position of a married couple vis-à-vis two single persons when both spouses were in employment, the Government at that stage decided to treat married couples the same for tax purposes irrespective of whether they had one or two incomes. This was to avoid any possibility of discrimination against one income families, particularly where a spouse elected to care for the family on a full time basis at home rather than take up work outside the home.

The proposal would be discriminatory as between married couples, a situation which, as I said, the present law seeks to avoid and could be open to the same constitutional challenge that arose in the Murphy case. In many instances, the spouse in the home would not have any income or sufficient income to absorb the allowance. In such circumstances where the couple were jointly assessed for tax purposes, it would be available to the other spouse earning an income outside the home. This could lead to an anomalous situation vis-à-vis a couple where both worked outside the home in that, in many cases a one income family, by virtue of the extra allowance, could be better off than a two income family with the same combined income. The amendment would not achieve the desired effect but would probably create more problems.

Deputy Cox asked how we could integrate the system. The Government is committed to it and we have the preliminary report of the tax and social welfare group and the computer hardware is in place. The experience of the working group is that it is not an easy task and is not quite so simple as people stated. Last weekend I had the opportunity of speaking with some of those involved and I understand they are arriving at some interesting conclusions. It is ultimately the way to resolve many of the difficulties. When the working group has completed its task perhaps the issues about the children's allowance, child benefit or whether there should be tax allowances will be clearer. Some years ago when the present Taoiseach considered a change in how family benefit would be paid the reaction was unified in that there was a consensus to stay well away from it. The idea that the richer people should in some way lose out to the benefit of the poorer——

It went to the woman.

It was just not on. Perhaps that matter could be examined again by the working group. For the information of the House we will have a report from the working group on integration of tax and social welfare — perhaps not the final report — in late summer. I hope to have the benefit of that report for next year. On the simplication of the system, I have no doubt that, as Deputy Yates said, it is a more popular way to operate. It is easy to stand up and give out ten goodies, rather than a few taking tax back, and say that everyone is a little better off. It so happens that it makes a better headline if we can say we are targeting relief to particular groups. Until the final report on the social welfare and tax strategy is available I cannot see us making much more progress. We hope to have that report this year subject to the group not getting into deep water.

This amendment has been adequately debated. I am mindful of the fact that the Minister said that 250,000 people can benefit. I can see how it ran aground in the Department of Finance with constitutional and other arguments. I object to Deputy Cox implying that as his view is coherent therefore my view is incoherent.

The Deputy is too sensitive, I made no such assertion.

Not at all.

The Deputy made a direct reference to my view being simplistic which was rather more robust than my assertion.

When Deputy McDowell spoke on Committee Stage I used the word facile, but either term is applicable in that regard. The point I am making is that they have a common denominator and they all have an underlying theme. I appreciate that one can take a cynical view of the family but in my lifetime's experience, which I am sure is replicated by everyone in this House — it is significant that four men are debating this issue as I think women would have a completely different view — I was never short of money in my pocket, I used to smoke, drink and gamble when I was single but not after I married and had children. The people with whom I went to school are in the same position. When one has to pay the mortgage, insurance and VHI premiums, pay for clothes and household bills it is only then one experiences the cost of living for ordinary working people.

Giving up the cigarettes was good for the Deputy.

My amendments try to acknowledge this fact. Neither the ESRI nor some economists acknowledge this but the practical experience of life needs to be acknowledged. Support for the family, which we so highly value is given little or no recognition by economists and needs a political input. I believe this is worthy of support but I am happy to withdraw my amendment.

Amendment, by leave, withdrawn.

I move amendment No. 12:

In page 12, between lines 47 and 48, to insert the following:

"3.—Section 14 of Finance Act, 1992 is hereby repealed.".

Section 14 of the Finance Act, 1992, had the effect that certain employees in publicly quoted companies lost certain tax benefits enjoyed by comparable employees in private companies. I wish to hear the Minister's comments on this matter.

The amendment proposes to repeal section 14 of the Finance Act, 1992, which abolished the relief in respect of interest on loans to acquire an interest by way of share or loan capital in a quoted company. In the case of existing loans, relief is phased out over a three year period, generally beginning with the second next tax year after the company becomes a quoted company. For example, in the case of a taxpayer who took out a loan to acquire shares in a company which first became a quoted company in the tax year 1992-93, the relief available in this tax year will be on 40 per cent of the loan interest. In these circumstances for a higher rate taxpayer it would confer relief at an effective rate of 22 per cent, which is not very far removed from the standard rate of tax of 27 per cent.

Section 14 was enacted because it was felt that the rationale for relief to acquire an interest in a company was dubious for quoted companies which had access to capital through the stock market.

I have had representations from people in a number of the larger Irish publicly quoted companies who feel that the practice is discriminatory as between private company directors and the public company senior executives and directors. The basis of their argument is that there be equity among comparable people in a similar context. I observe that the Minister is drawing a distinction regarding access to finance. In some but not all instances that argument holds.

Will the Minister consider the question of equity in terms of the individuals involved and consider the matter in the future?

I have received similar representations and I have committed myself to meeting two groups together to discuss the issue. I will examine the amendment in conjunction with that.

Amendment, by leave, withdrawn.

We now come to amendment No. 13 in the names of Deputies Michael McDowell and Cox. Amendments Nos. 16, 20 and 21 are related and it is proposed, therefore, by agreement to discuss them together. Agreed.

I move amendment No. 13:

In page 13, between lines 47 and 48, to insert the following:

"3.—With effect from the year 1994-1995, the provisions of section 138B of the Income Tax Act, 1967 (as amended) and section 6 of the Finance Act, 1982 (as amended) shall apply to all taxpayers, whether employed or self-employed or otherwise.".

It is proposed to extend full PRSI and PAYE allowances to all taxpayers, irrespective of their employment status, whether self-employed or employed. Some of these allowances were introduced because of the payment cycle. The PAYE sector were given allowances to try to compensate for the time lag in the payment of tax by the self-employed. There have been radical reforms in the assessment and processing of self-employed tax liability. Now that the process for dealing with taxation of the self-employed has changed there is a question of the equity of the system. In essence the core of amendment No. 13 seeks to extend to all taxpayers equivalent allowances in respect of equivalent incomes because all taxpayers pay their tax in the same year. There is a strong case to review the matter.

Amendments Nos. 16, 20 and 21 in my name are being discussed with amendment No. 13. This deals with the very core of what Deputy Rabbitte calls tax equity in terms of the burden borne by the PAYE sector compared with Schedule D taxpayers. I have read reports and studied the statistics in support of the argument that the self-employed, especially farmers, have not paid their fair share and if one divides the amount of tax paid by the number of taxpayers there is a huge discrepancy. There are all sorts of reasons that is not the full story but I accept that the self-employed have an opportunity to work the system that those whose tax is deducted at source do not. The case for a PAYE and PRSI allowance is valid. The system needs to be finely tuned. I accept that the system of accounts for the self-employed is the fairest system and after the rigours of audit gives a fair indication of one's net disposable income. I am in both categories, the self-employed and the employed, and I can see that under the legal code the self-employed have certain advantages.

Deputy Cox makes the point that because of current year assessment everybody should get a personal allowance. I would not agree with abolishing the selectivity of the PAYE allowance. In amendment No. 16 I propose that those who get the benefits of the PRSI allowance should get the benefits of the PAYE allowance and those in the public sector who do not pay PRSI at the full rate would get the benefits of the PRSI allowance. We would combine the £286 PRSI allowance and the £800 PAYE allowance into a new allowance of £1,086 for those people who receive the PAYE or the PRSI allowance. That would meet the point of trying to give greater equity to those who are employed. There are people at the edges who lose out, such as public sector employees, by not getting the PRSI allowance. That allowance was introduced following a by-election campaign which coincided with the debate on a Finance Bill and has been retained since.

I was asked by the ICMSA to table amendments Nos. 20 and 21 which were not discussed on Committee Stage. The purpose of the amendments is to ensure that sons and daughters employed on family farms will be given the PAYE allowance and, where the farmer or business person has no son or daughter and is transferring the farm or business by way of an inheritance or gift to a favoured niece or nephew, they will also get the PAYE allowance; in other words a wider definition would be applied.

Some of the claims made are exaggerated but it is true that the PAYE sector is being screwed. It is also true that the self-employed take more risks; it is possible that someone who is self-employed will have no income next year. If they get sick they will have less protection. A range of factors has to be taken into account. I appreciate that in relation to private and public sector workers there are degrees of security of tenure of employment. I ask the Minister to consider combining the PAYE and PRSI allowance as it may be a better way of achieving the objective of income tax equity.

This is a complex issue. Deputy Yates has been fair. I, too, have read the statistics and literature on this matter but these do not represent my view. I have a basic instinct; the PAYE worker is being screwed for tax and no one will ever convince me otherwise. It does not matter what changes have been made; there are opportunities open to the self-employed to arrange their affairs in a certain way. By definition, these opportunities will never be available to the PAYE worker. No one can seriously challenge this.

In relation to the self-employed there are differences especially in an era when PAYE workers are being forced to accept self-employed status. Given the changing nature of the workforce there is a grey area. As there is a facility open to the self-employed to work the system and arrange their affairs in a certain way there should be positive discrimination in favour of the PAYE worker.

On Committee Stage we had an interesting debate on the question of inequity in terms of who may qualify for a higher education grant. It is possible in a given year to contrive one's income to artificially diminish one's normal income to ensure one's son or daughter qualifies for a higher education grant to enter third level education. There is no point in pretending otherwise.

I have no objection to the changes the Minister has introduced this year in respect of this allowance as it applies to the sons and daughters of proprietary directors, the self-employed and farmers. There are some conditions governing qualification but I do not see any reason the sons and daughters of farmers, proprietary directors and the self-employed should not benefit. That is a different issue.

Amendment No. 15 is not being taken with this amendment, but which is related, is based on my conviction that there should be positive discrimination in favour of the PAYE worker who cannot claim when he or she has to go to the garage to have the puncture to which Deputy Yates referred fixed. Anecdotal evidence is best; we all have friends who are self-employed. I have friends and colleagues who were forced to become self-employed against their will and who now say, "you do not know what you are missing; we have never had it so good". I accept that the issue is more complex and that their are different categories among the self-employed but I am in favour of positive discrimination.

On the question of positive discrimination in favour of PAYE taxpayers I support the Minister. I am pleased Deputy Rabbitte has some good Fianna Fáil colleagues who are self-employed and enjoying the experience.

I wish to take up the point that the self-employed can arrange their books and affairs in a certain way. While I accept that this is the case we should recognise that the self-employed encounter bureauracy and red tape, that there are checks and balances and that they now have fewer opportunities to arrange their affairs in a certain way to obtain additional benefits. We should also recognise that most of the self-employed take huge risks. They would argue that, in turn, they are not getting the rewards in a difficult economic climate. On the PRSI allowance, I support the Minister.

The purpose of this amendment is to give the PAYE allowance of £800 and the PRSI allowance of £286 to all taxpayers irrespective of their status. It is worth recalling the reasons these allowances were introduced.

The PAYE allowance was introduced to differentiate between, on the one hand, ordinary PAYE taxpayers and, on the other, the self-employed, proprietary directors of companies and their spouses and children. One of the principal differences between ordinary PAYE taxpayers and the self-employed is that the self-employed enjoy a more favourable basis of taxation. Deputy Yates has been honest in this regard. Despite the introduction of self-assessment and the current year basis of taxation this difference still obtains. Some groups tried to tell me that this was no longer the case but I did not listen to this for longer than 30 seconds.

The self-employed enjoy more liberal tax relief for expenses than an employee and are still not taxed on a full current year basis. They are taxed on their profits in the year of account ending in the current tax year. The self-employed have to pay a minimum of 90 per cent of their liability in the tax year, compared with 100 per cent in the case of PAYE taxpayers. The balance is not due for payment until 31 January in the following tax year.

The combined effect of those two examples means that the self-employed, having the use for a long period of money owed in tax, enjoy a more favourable tax collection system than those within the ambit of PAYE who do not have such use as the tax is deducted before they receive the balance of their income.

In addition, the self-employed have opportunities for tax planning which are not available to employees. For example, they control their own remuneration so that it is paid in the most tax efficient manner possible. Last week Deputy McDowell was kind enough to tell us he had received 18 pamphlets on the BES.

Not to mention the types of Mercedes he has driven.

Other Members from the various professions could also come clean on the number of brochures they receive. Farmers have advantages, such as stock relief and income averaging, which are not available to taxpayers in general.

Spouses of the self-employed and proprietary directors are excluded from the PAYE allowance to avoid a repetition of old abuses. The scheme was not successful because people found ways of abusing it, a matter which was referred to last year.

The PRSI allowance was introduced in 1982 to compensate for substantial increases that year in PRSI rates. The allowance was confined to those who paid PRSI at the higher rates and was not made available to public servants and others who contributed at the lower rate of PRSI. In 1982 PRSI did not cover the self-employed or proprietary directors and, therefore, they were not entitled to the allowance. However, the children of higher rate contributors were entitled to the allowance. When social insurance for the self-employed was introduced in 1988 this allowance was not extended to them. The reason for this is that the employee element in the rate of PRSI which the self-employed pay is 1.8 per cent out of their present 5 per cent rate, compared with the employee rate of 5.5 per cent to which the PRSI allowance relates. Accordingly, extension of the PRSI allowance to the self-employed could not be justified. It is estimated that the cost of extending the PAYE and PRSI allowances on the basis proposed in the amendment would be £84.3 million in a full year.

This year we have acknowledged many of the problems of the self-employed and small business people, particularly with the introduction of reliefs for sons and daughters of higher rate contributors. That provision is very welcome and will have knock-on benefits. It is worth noting that I have introduced 21 reliefs in one form or another this year which I hope will result in additional employment, otherwise they would be merely costly reliefs. I am sure their benefit or otherwise will be scrutinised in a future Finance Bill.

I agree with Deputy Yates that there is a type of black economy in the area of child minding. Some people provide such a service because they badly need the money, but others provide it because it is a sophisticated business in the black economy.

Small business people have brought to my notice the fact that some sons and daughters working for parents are paid out of the till. The reliefs I have introduced in respect of sons and daughters should eliminate such abuse. I hope the other incentives will encourage employers to employ more people and that there will be meaningful and tangible benefits for the economy. It is all very fine to suggest that every small business person should be encouraged to take on an additional employee, but last year out of 60,000 businesses here we received tax from only 21,000 and out of 87,000 farmers we received tax from fewer than 40,000. There are more than 1 million PAYE workers and approximately 800,000 of them pay tax. I hope the benefits we introduced this year will result in more employment.

That is not to say that everyone who is self-employed is well off.

The Chair will have observed that I did not over extend my repertoire in introducing the amendment. I will convey the Minister's eloquent response to my learned colleague and I am sure the Bar will not go into a severe decline as a result of the withdrawal of this amendment.

Amendment, by leave, withdrawn.
Amendment No. 14 not moved.

Acting Chairman

Amendments Nos. 15 and 22 are related and may be discussed together.

I move amendment No. 15:

In page 14, between lines 27 and 28, to insert the following:

“section 138B (employee allowance)



When was the £800 employee allowance fixed? It has not been increased for a long time. From the argument we have just had, it follows that there should be an element of recognition of the different set of circumstances that apply to PAYE workers. The Minister detailed those in a more logical fashion than we did. It is only fair and reasonable that the employee allowance should be updated and I have suggested £1,050 as a reasonable level. PAYE workers do not have refuge from the taxman, he or she cannot conceal any of their income and the vigilance has become more rigorous in recent years. There is an element of discrimination that carries on into other areas, such as education. If we accept that the PAYE worker is being screwed it is only proper that the CPI should be applied to the £800 which should be updated. A level of £1,050 is reasonable.

Amendment No. 22, in my name, is similar. I was more modest in that I suggested the allowance should be increased to £1,000. In my constituency I frequently meet self-employed painters, plasterers or other handymen. They may not have work in winter. Because they are not in the PAYE net they are not automatically entitled to unemployment benefit and must undergo a means test to qualify for unemployment assistance. They may be told they are liable to £3,000 tax for the previous 12 months and be assessed with a £60 means test levy. The impression should not be given that all self-employed people are on the pig's back and are milking the system by avoiding their liabilities. One cannot generalise in this regard. In the tax system there are opportunities legally to minimise tax payments or avoid them. I favour an increase in the PAYE allowance. Will the Minister indicate the cost of the proposal in my amendment No. 22. I am sure that someone as parsimonious as the Minister in giving tax reliefs would be anxious to accept my amendment rather than that of Deputy Rabbitte.

The cost of the PAYE allowance to the tax system is £238 million. While that allowance has not been changed for a number of years it is an important one for PAYE earners. The cost of the increase in the PAYE allowance proposed by Deputy Rabbitte is £46.9 million for this year and £74.4 in a full year. The estimated cost of the proposal in Deputy Yates's amendment is £37.7 million and £59.8 million in a full year. This year I have concentrated on personal allowances and the standard rate and that has worked well. It is better to concentrate on those rather than PAYE and PRSI allowances. The allowance was £250 in 1980; it increased to £500 and now is £800. The system is more closed than it was in 1980. The regime of the self-employed versus the PAYE is different now. Compliance is greater and the system is simpler.

I do not agree with the view that our tax regime for keeping the books is too complicated. That opportunity does not exist for the PAYE person who can only calculate his or her tax payments. Nowhere in the world is the calculation of tax and the submission of returns by the self-employed considered over complicated. We have tried to simplify the procedure this year. I have sympathy for people who must obtain tax clearance certificates and the person to whom Deputy Yates referred to cases of tax refunds being withheld, but that period of retention has been reduced to a few weeks. One tax clearance certificate will now be issued instead of the 14 issued previously. The system has been simplified, streamlined and will become more efficient as the Revenue becomes more computerised. If problems exist in that area we will address them.

The Exchequer cost in this area is a substantial one. Other groups would argue that they should have this allowance, but I do not agree. The existing PAYE allowance should remain because the differences between the two systems can be narrowed only to an extent because of the expenses issue. I cannot increase the allowance because of the cost factor, but I see the benefit of maintaining, streamling and simplifying the system to enable people submit returns in the proper manner, not necessitating the services of an accountant. I have been involved for more than 20 years in the area of personal tax returns and the argument that one needs an accountant to keep one's books does not stand up to scrutiny. The majority of people can keep their records if they buy a good analysis book and problems will only arise for other reasons.

I accept broad generalisations cannot be made about an area as complex as the self-employed sector in 1994. I will not repeat the arguments, but I believe the Minister accepts there is a sound basis in equity for an element of compensation for the PAYE workers. The Minister said that the existing relief costs £238 million in a full year. That figure represents a smaller proportion of the income tax yield from the PAYE sector than when the allowance was first established at £800. What year was it fixed at £800?

It was established in 1988.

We should not allow the value of the allowance to be eroded by inflation. If it is too expensive for the Minister to fund the proposed increase he should give a commitment to increase it in line with the consumer price index and inflation.

There has been a significant reduction in the upper tax rate which was 65 per cent in earlier years and 58 per cent in 1988.

Amendment put and declared lost.
Amendment No. 16 not moved.

I move amendment No. 17:

In page 14, between lines 31 and 32, to insert the following:

"4.—Section 142 of the Income Tax Act, 1967 (dependent relatives), as amended by the Finance Act, 1982, is hereby amended by the substitution of ‘£1,000' for ‘£110' in each place where it occurs.".

This amendment seeks to increase the carer's allowance. A carer receives an additional tax free allowance of £110 for minding a dependent relative. The dependant may be disabled or seriously ill and may need to be turned in bed regularly because of bed sores, may be incontinent or require full-time nursing. The tax free allowance of £2 a week is appalling and I propose it should be raised to £1,000. The State is getting great value from carers because one would be lucky to cover the cost of a nursing home subvention or a long stay geriatric bed at £110 per week, not to mention the annual cost.

We must support the 70,000 carers who, through thick and thin, have had the quality of their life greatly altered. It is not easy for them to take a weekend break or go out at night because they must consider their elderly relative. The carers provide a very cheap service and the cost of increasing the allowance to £1,000 is a paltry £10 million.

Deputy Woods talks ad nauseam about the Government's concern for the elderly, what he is trying to do for pensioners and so on. On the other hand, people at work who are paying income tax and trying not to be a burden on their local health board, not to look for subvention or for a full-time bed, receive an extra £2 a week, which for a person on the standard rate of tax is worth 54p a week, a derisory sum.

This measure was introduced many years ago. When I first came to this House the then Deputy Michael O'Kennedy, standing where I am now, made an eloquent case about Fianna Fáil's concern for the elderly who are cared for in the home environment and asked that the figure be increased to £500. Yet no subsequent Minister for Finance has seen fit to consider this matter. This is an existing facility in our tax code that will not be abused. The principle is already in place through a number of supports for people who care for relatives in the home. I have been contacted by numerous people whose free electricity allowance and telephone rental were withdrawn when a relative come to live with them as they were no longer able to live alone due to illness. We do not encourage people to be cared for in a family environment. I would ask the Minister to show compassion in this area and accept the amendment.

The point raised by Deputy Yates is worthy of support. If the cost of the proposal is as he described, it would be the equivalent of two grants to Croke Park. It would not be an excessive burden on the Exchequer. We should encourage people to care for the elderly in their homes. This would be a good investment by the State when compared with the amount that would have to be provided in various budgets if up to 70,000 people had to be cared for in public institutions.

I have no reservation about supporting this amendment. I predict that in the not too distant future the Minister for Finance will put forward a more generous proposal than that advanced by Deputy Yates, for economic reasons. There ought to be a dimension of comparison and even emotion in this area. For economic reasons the Minister for Finance will come in here in the not too distant future to offer this as one part of a response to the issue of caring for elderly or otherwise dependent relatives.

Reference was made earlier to demographic trends in the population — there was some discussion about children and young people. The structure of our population is such that for the rest of the decade and into the next century there will be a disproportionately large number of older people, but our infrastructure is totally incapable of meeting that demand. The Minister for Finance must take a wider view than merely dealing with the tax code. The mind boggles to think of the vast sums that would be required, through the Department of Health, to fund the necessary infrastructure in the form of nursing homes to cope with this problem in the next 25 years.

There are relatively few old people in my constituency but I was shocked recently to meet so many older people in other constituencies. In my constituency virtually everybody is at family formation stage. The cost of access to a nursing home in the Eastern Health Board region is prohibitive. Responsibility for providing this service rests almost entirely with the private sector. It is a very expensive service which is heavily subsidised by the Eastern Health Board. The economics of the matter are such that the Minister for Finance ought to be down on his knees praying to whomsoever he believes in and thanking people for caring for relatives, as Deputy Yates put it, "looking after granny" at home. If people do not continue the Irish tradition of caring, where possible, for relatives at home, the cost to the State will quadruple. This is a most reasonable and meritorious amendment. Some recognition should be given in the tax code to taxpayers who willingly provide this service in their domestic residence. Because of our demographic structure this will become a much greater issue in Irish politics in the years ahead and a much more costly one.

As a member of the Eastern Health Board for many years I was involved in a report on care of the aged and future health policy and I have no doubt that Deputy Rabbitte is correct about the demographic trend. The number of old people will increase in coming years. I referred many years ago to the great bulge in the labour market in 1977. At that time 58 per cent of the population was under 27 years of age so it is inevitable that 30 years later great difficulties will arise.

The dependent relative's allowance is worth £38.50 in terms of tax saved to a person liable at the standard rate. It has little effect in deciding on care for an aged or dependent relative. It is not intended to address the bigger issue. The first report of the Commission on Taxation recommended that this allowance be abolished and that direct payments be made to needy elderly persons — the carer's allowance partly deals with that issue. Deputy Yates will quickly tell me it does not help a family member who is looking after a relative, which is the problem with that scheme.

The dependent relative's allowance has not changed for more than ten years. The reason successive Governments of all persuasions have steered clear of it is that it was, in the 1970s, the most abused allowance under the tax code. There is a litany of abuses available if the Deputy wants to hear it. It was not the people who needed the allowance who abused it — they were too busy caring for their relatives; it was others, who claimed the allowance for a relative who was not really dependent. The commission recommended abolishing it. However, the Government did not abolish it but allowed it to die out.

The other point is more interesting. Deputy Rabbitte is correct in saying that there would have to be a substantial allowance. Unlike Deputy Rabbitte's, two thirds of my constituents would be aged. My constituency contains many areas which were built before the turn of the century and has some of the oldest parishes in the city and county of Dublin, always turn the most heartrending case cost and, to assist them, the allowance would have to be substantial. One does not have to be an expert on changes in Irish culture and values to see that it is not so easy now to continue the practice of caring for a dependent relative at home. In the past many people gave up their jobs to care for dependent relatives. That does not happen to the same extent today but, thankfully, it still happens and there is no argument but that it keeps down the costs to the State. Perhaps Deputy Rabbitte is right that a special scheme should be designed. However, one would not start with the present scheme. Deputy Rabbitte's amendment would cost £7.5 million. That would be a start but it is certainly not enough to deal with the issue.

The carer's allowance and grant-aid to the health boards are of tremendous benefit. The vast majority of people in my area would not be able to pay the full rate; they get a subsidy which is of major benefit to them. The Commission on Taxation stated that the Government should give the grant aid directly to the individuals. That practice has been followed for some years and the amount of money for that is increasing all the time. The problem now is to provide locations. The Minister for Health discussed that not too long ago when dealing with the Health (Nursing Homes) Bill. I do not argue against the principle of change. However, this relief would do very little in the context of the argument being made. I cannot, therefore, accept the amendment.

The Minister's briefings can always turn the most heart-rending case into a matter that is either unconstitutional or unworthy and, certainly, open to abuse if it were considered. This is a case where politicians must insist that there is an important issue at stake. If the Minister wished to attach a medical test to the dependent relative's allowance, that would be fine. That applies to other codes. However, I do not agree that the solution to every problem is to give grants, because there are many people who are just over the limit for everything, those earning, perhaps, £200 a week or a little more. In terms of take-home pay, they are not well off. They are not eligible for a medical card or for the carer's allowance. If Mrs. Murphy is minding her mother on a full time basis, Mr. Murphy's income is regarded as her income and if half of that income happens to be over the limit, she does not get the allowance. That is why out of the 70,000 carers several thousand only get the allowance. The Minister must adopt a dual approach. He must look at it in the context of the tax code and in the context of direct financial assistance. The Minister may wish to perfect my proposal by making it more rigorous and not open to abuse, but let him not throw the baby out with the bath water by saying that there is nothing he can do because a scheme already in existence does not operate as effectively as it should. That could be improved upon and made to work.

The Deputy should not forget what we spoke about last week and the reason I agreed to an amendment on that occasion. Families who have dependent relatives are assisted in the tax code because they avail of the medical expenses relief. In regard to covenants, Deputy McDowell reminded us not to get caught up with education covenants. He was quite right. I looked at the figures afterwards and a great amount of covenanting is for elderly relatives. These people are assisted in the tax code as well as under the social welfare code.

We can return to the higher education issue. I might add that the covenanting system is also very expensive. The Minister said that the cost of accepting this amendment is £7.5 million and surely that is affordable. We know that the Commission on Taxation has a heart of stone on these issues and also that the Minister is capable of being selective in regard to the recommendations of the commission, particularly today when he is not giving anything to carers.

We did not abolish the dependent relative's allowance. The Commission on Taxation recommended, 12 years ago, that it be abolished.

The Minister is doing well to keep it there at a value of £38.50——

What I am saying is that this is irrelevant. The value of it is £38.50 — it would not pay the taxi fare to the home.

That is my point. Let us make this scheme relevant. I thought the Minister would have agreed to make it £500 instead of £1,000 when this Bill goes to the Seanad. However, there seems to be a deeper problem and, in the interests of the 70,000 carers who feel bitterly aggrieved that there is so little recognition in the tax code of the invaluable work done, I have no choice but to press this amendment.

Amendment put and declared lost.

Amendment No. 18 is in the name of Deputy Yates. Amendments Nos. 19 and 40 are related. It is suggested that we discuss these three amendments together.

I move amendment No. 18:

In page 14, between lines 31 and 32, to insert the following:

"4.—Section 15 of the Finance Act, 1922 (treatment for tax purposes of certain benefits payable under the Social Welfare Acts) is hereby amended by the deletion in subsection (1) of paragraph (b).".

This matter was debated on Committee Stage for an hour and a half, so I will not labour the point again. This amendment has to do with the taxation of unemployment benefit. Before I became too acquainted with this issue I supported the theory set out by the Commission on Taxation and others that this was simply a question of taxing all income equally before the law. If someone who got an invalidity or old age pension was taxed, why should someone on unemployment benefit not be liable to tax? Again, the theory is impeccable. It is cold, clean and capable of being applied.

On Committee Stage I told various anecdotes about part-time and seasonal workers and those on systematic short-time who experienced a drop in their income of £30 per week. There were also cases where one spouse was working and the other receiving unemployment benefit.

This issue is now beginning to surface. My understanding is that when the Revenue Commissioners sent out the revised tax free allowances, they did not know in all cases that one of the spouses was receiving unemployment benefit. A very nasty shock, in the form of a PAYE balancing statement, will be due at the end of the tax year for people on unemployment benefit, whose full allowance has been given to the spouse at work because the Revenue Commissioners were not aware that the other spouse was receiving unemployment benefit.

In terms of the change the Minister made on Committee Stage, I am requesting that it be extended for short-time workers. There are people who work systematically, half a week on, half a week off or a full week on and a full week off and who receive flat rate unemployment benefit for the remaining part of the week or the full week they are unemployed. They will suffer a major drop in their income because the tax treatment of their earnings will be greatly revised, resulting in a decrease in their take-home pay.

I offered the Minister a way out of this difficulty — and he should not be surprised if this issue comes back to haunt him later in the year — in the form of an exemption limit below an income of, say, £10,000 per year which would provide tax relief for the low paid. It is impossible to convince someone who earns £90 a week and whose spouse earns £63 a week that they are well off and should pay more tax. If the wealthy are unemployed they do not claim benefit, only those who need it, who have paid into the system claim it and that is a telling point.

I have received many letters on this issue, one from an irate person in Kilkee, County Clare, who referred to my complaints about the residential property tax and wanted to know what I had done in relation to the tax treatment of the unemployed. The person went on to state that the cut in pay related benefit meant that from 1 April this year they would lose £18.80 per week and, with the taxation of unemployment benefit, an additional £18 per week. Those people consider themselves to be at the lowest levels of income.

As in the case of the property tax and the last amendment, if the Minister continues to take the advice of the academics, the economists and the experts who have landed him in such hot water on this issue, he will find that his backbenchers will complain that he is out of touch and does not understand the problems of ordinary people. The Minister would save himself a lot of bother if he again examined this issue in the Seanad and came up, in conjunction with the Minister for Social Welfare, with some form of alleviation that will ensure that the poorest in society will not have to bear the burden of increased taxes to pay for the Government's extravagance which this year amounts to £30 million in additional taxes.

Deputy Yates is correct when he predicts trouble down the road for the Minister on this issue. I do not agree with Deputy Yates that the Minister relies on academics and his advisers, if he does it has only started recently. I suspect the Minister knows the difficulties this measure is causing and I have also had a flood of letters and telephone calls about it. No matter how often one points to items in the small print of the budget, people do not follow it closely until it directly impacts on them and some very low income families are affected by this decision. The wider decision introduced in the 1992 Finance Act to tax social welfare benefits is perhaps an issue for another day; this is just an aspect of that.

The Finance Bill, 1992 gave the Minister the power to tax all social welfare benefits. Disability benefit was taxed initially and this year it has been extended to include unemployment benefit. In an ideal tax code, there would be equity and justice and the exemption thresholds would be at a reasonable level but in the context of the tax code, as it applies now to people on very low incomes, this decision affects them badly.

On the specific matter, the subject of this amendment, I have had a number of telephone calls from people who say it has provoked serious marital disharmony. Women have been appalled at the prospect of explaining to their husbands that as a result of their getting social welfare benefit, their husband's tax free allowance will be savagely reduced. They are extremely upset about the implications. They have tried to conceal it from their husbands or tried to ensure that blame is not apportioned to them. There is considerable public anger about this issue.

How much does the Minister propose to levy as a result of narrowing the issue to the particular ambit of this amendment? What is it worth to the Minister this year or in a full year? Because of the aggravation and hurt it is causing some people, the Minister should reconsider this measure. It is difficult to explain to ordinary people how we can relax the tax code for the high fliers in the tax exile category. We have made special arrangements to facilitate the super-rich while, at the same time, the short-time workers and the unemployed are savagely hit. I am sure the Minister has already heard these complaints in his clinics and I ask him at this late stage to backtrack on this proposal.

As Deputy Yates said, we spent a long time on this issue last week and examined some of the issues involved. Last year a monitoring group examined disability benefits and changes were made. As I said on Committee Stage, the Minister for Social Welfare, Deputy Woods, and I will continue to monitor this issue during the year to address some of the real problems. In regard to the balancing statements, I have already said that if there is an amount underpaid at the end of the year, the Revenue Commissioners will take into account difficulties experienced by people, or cases of hardship, and will arrange for a distribution of any balancing amount. That is the case in regard to ordinary funds and the Minister for Social Welfare already stated that they would have to be dealt with in an even more sympathetic way.

For many years in this House people have asked why we cannot consider certain categories. I have no difficulty in examining hardship cases. If, for some reason, a person is experiencing particular hardship in their taxation we try to deal with that. In the last ten weeks of each tax year many people feign illness to claim tax refunds. Years ago in Dublin Corporation we tried to analyse why 80 per cent of sickness occurred in the last ten weeks of the tax year and it was incredible how so many people were ill on 1 January and recovered on 1 April. There were anomalies and the system was abused. People who agreed to systematic short time working to ensure their positions made a case to me and I examined the matter.

That is right.

Deputy Rabbitte made that case to me when other people were talking about residential property tax and other issues. I met them and agreed with their case. If there are other affected groups I will try to deal with them.

The combined income of a married couple, both of whom are working, is taxable. However, in cases where one partner was working and the other was receiving benefit they were taxed differently. Regardless of whether income is generated from employment or benefit or a combination of both it is taxed in the same way. It is not a tax on social welfare benefit. If the only income a person receives is social welfare benefit that is not taxable.

It raises serious questions about the separateness of PRSI as a social insurance fund if people who paid into it all their lives now find that it is combined with their spouse's income.

Total income received on a weekly basis is taxable regardless of how it is generated. I know anomalies exist but they involved small amounts of money. If Deputy Yates gives me an example of cases where a fall in income of £30 arises I will examine them. For a long time a person receiving social welfare benefit was just as well off, if not better off, than somebody who was employed. That led to the employed person taking illness in the last quarter of the tax year and seeking a tax rebate. However, both the Minister for Social Welfare and I will look at hardship cases that arise.

In the case of employees systematically working a three day week or week on/week off or fortnight on/fortnight off the deferral will be for the tax year 1994/1995 or to the end of their current unemployment benefit claim or current period on short term working, whichever is the shorter. The reason for the deferral is the people concerned, having been in full-time employment, entered into systematic short-time working arrangements in agreement with their employers on the basis that their unemployment benefit would not be taxable. In addition, people on systematic short week working, which comprises almost 90 per cent of systematic short-time working, are paid at a low level of benefit.

My amendment will deal with those who have a justifiable case. I have spoken to a number of groups about the matter and, while there have been individual cases, no other category has been put forward.

If a working spouse whose marginal rate of tax is 50p in the pound has two children, she is entitled to unemployment benefit of £63 per week and 50 per cent is roughly £30 per week. All the cases put forward by the Minister related to disability benefit. It is true there was high absenteeism in the last quarter of the tax year. My amendment and that of Deputy Rabbitte referred to unemployment benefit. There is a fundamental difference between unemployment benefit and disability benefit. Disability benefit does not involve the collusion of the employer whereas unemployment benefit requires a complaint employer to lay off the person.

Last week I spoke about a security worker, a port worker and so on. We had a very successful church gate collection last week in Enniscorthy despite the Government's policy.

I hope they did not charge VAT for the service.

A person told me he had lost his job after 30 years and had claimed unemployment benefit. He said there was only himself and his wife but he had not received any word on his pay related benefit. I told him he was not entitled to any and he said he had been in Joe Doyle's pub and was told that since he had been unemployed for eight weeks he was due the second round of his tax refund. He was told by the lads he could claim his tax back every four weeks. I told him the further bad news that he was not entitled to any tax refund as unemployment benefit is now taxable. Unknown to me he went to a local councillor, a tax expert, who had given him this information. He then produced a letter stating that he was not entitled to it. The Minister referred to abuse, avoidance and people who are playing the system. These people have lost their jobs and are traumatised.

Deputy Rabbitte conveyed an understanding of the real world. The Minister should ignore academics and esoteric points on the theory of fairness. These people who may never work again are suffering psychological and emotional trauma. They are being given a kick in the backside and told they are not entitled to a tax refund. The whole nature of unemployment benefit is finite; it only lasts for a year. Any scheme will be for a very limited period because under the revised cutbacks on PRSI workers unemployments benefit will be exhausted after a year. I would be happy to refer some of these hard luck cases to the Minister. If he proposes to raise £30 million by way of tax receipts from the unemployed there will be hardship cases.

Amendment put.
The Dáil divided: Tá, 20; Níl, 57.

  • Allen, Bernard.
  • Barrett, Seán.
  • Boylan, Andrew.
  • Bradford, Paul.
  • Browne, John (Carlow-Kilkenny).
  • Bruton, Richard.
  • Crawford, Seymour.
  • Creed, Michael.
  • Currie, Austin.
  • Deasy, Austin.
  • Deenihan, Jimmy.
  • Dukes, Alan M.
  • Fitzgerald, Frances.
  • Gilmore, Eamon.
  • Gregory, Tony.
  • Hogan, Philip.
  • McManus, Liz.
  • Mitchell, Gay.
  • Rabbitte, Pat.
  • Yates, Ivan.


  • Ahern, Bertie.
  • Ahern, Michael.
  • Ahern, Noel.
  • Aylward, Liam.
  • Bell, Michael.
  • Bree, Declan.
  • Brennan, Matt.
  • Broughan, Tommy.
  • Callely, Ivor.
  • Coughlan, Mary.
  • Cox, Pat.
  • Doherty, Seán.
  • Ellis, John.
  • Fitzgerald, Brian.
  • Fitzgerald, Eithne.
  • Fitzgerald, Liam.
  • Flood, Chris.
  • Moynihan, Donal.
  • Moynihan-Cronin, Breeda.
  • Mulvihill, John.
  • Nolan, M.J.
  • O'Donnell, Liz.
  • O'Donoghue, John.
  • O'Hanlon, Rory.
  • O'Keeffe, Batt.
  • O'Leary, John.
  • O'Rourke, Mary.
  • Pattison, Séamus.
  • Foley, Denis.
  • Geoghegan-Quinn, Máire.
  • Haughey, Seán.
  • Hughes, Séamus.
  • Jacob, Joe.
  • Kenneally, Brendan.
  • Kenny, Seán.
  • Keogh, Helen.
  • Killeen, Tony.
  • Kirk, Séamus.
  • Lenihan, Brian.
  • Leonard, Jimmy.
  • Martin, Micheál.
  • McDaid, James.
  • McDowell, Derek.
  • McDowell, Michael.
  • Moffatt, Tom.
  • Morley, P.J.
  • Power, Seán.
  • Quill, Máirín.
  • Ryan, John.
  • Ryan, Seán.
  • Shortall, Róisín.
  • Smith, Michael.
  • Taylor, Mervyn.
  • Treacy, Noel.
  • Wallace, Dan.
  • Wallace, Mary.
  • Walsh, Eamon.
CLASS="CP">Tellers: Tá, Deputies Boylan and McManus; Níl, Deputies N. Treacy and B. Fitzgerald.
Amendment declared lost.
Debate adjourned.