Finance Bill 1995: Report Stage.

I move amendment No. 1:

In page 14, to delete lines 19 to 34 and substitute the following:

"2.—Section 2 of the Finance Act, 1991, is hereby amended—

(a) as respects the year of assessment 1995-96, by the substitution of the following Table for the Table to that section:

‘TABLE

PART I

Part of taxable income

Rate of tax

Description of rate

(1)

(2)

(3)

The first £8,900

25 per cent.

the standard rate

The ‘remainder

45 per cent.

the higher rate

PART II

Part of taxable income

Rate of tax

Description of rate

(1)

(2)

(3)

The first £17,800

25 per cent.

the standard rate

The remainder

45 per cent.

the higher rate

",

(b) as respects the year of assessment 1996-97, by the substitution of the following Table for the Table to that section:

"TABLE

PART I

Part of taxable income

Rate of tax

Description of rate

(1)

(2)

(3)

The first £10,000

23 per cent.

the standard rate

The remainder

42 per cent.

the higher rate

PART II

Part of taxable income

Rate of tax

Description of rate

(1)

(2)

(3)

The first £20,000

23 per cent.

the standard rate

The remainder

42 per cent.

the higher rate

",

(c) as respects the year of assessment 1997-98, by the substitution of the following Table for the Table to that section:

"TABLE

PART I

Part of taxable income

Rate of tax

Description of rate

(1)

(2)

(3)

The first £12,000

21 per cent.

the standard rate

The remainder

40 per cent.

the higher rate

PART II

Part of taxable income

Rate of tax

Description of rate

(1)

(2)

(3)

The first £24,000

21 per cent.

the standard rate

The remainder

40 per cent.

the higher rate

",

(d) as respects the year of assessment 1998-99, by the substitution of the following Table for the Table to that section:

"TABLE

PART I

Part of taxable income

Rate of tax

Description of rate

(1)

(2)

(3)

The first £14,000

20 per cent.

the standard rate

The remainder

38 per cent.

the higher rate

PART II

Part of taxable income

Rate of tax

Description of rate

(1)

(2)

(3)

The first £28,000

20 per cent.

the standard rate

The remainder

38 per cent.

the higher rate

",

(e) as respects the year of assessment 1999-2000, by the substitution of the following Table for the Table to that section:

"TABLE

PART I

Part of taxable income

Rate of tax

Description of rate

(1)

(2)

(3)

The first £15,000

20 per cent.

the standard rate

The remainder

35 per cent.

the higher rate

PART II

Part of taxable income

Rate of tax

Description of rate

(1)

(2)

(3)

The first £30,000

20 per cent.

the standard rate

The remainder

35 per cent.

the higher rate

.".

I embark on this debate with a heavy heart as a result of what has transpired here today. Some of the most important amendments to be considered by this House are still unknown to me and this House has voted to allow them to be decided by one question tomorrow, without adequate debate or notice.

This amendment proposes that over a number of years there should be a gradual but sustained programme of tax reform designed to bring the standard rate of income tax down to 20 per cent and the top rate below 40 per cent. The necessity for this arises from the present state of our tax laws. Even taking into account the minuscule changes made in this year's Finance Bill which add 3 per cent to the real value after inflation of bands and allowances, single workers earning approximately 80 per cent of the average industrial wage — slightly more than £12,234 per annum — are still taxed on any extra earnings they receive at the rate of 57 per cent if PRSI is included in the transaction. This means that the total outlay for an employer who wants to give an employee earning below the average industrial wage an extra £10 in his or her pocket is of the order of £26. That is the reality of modern Irish employment taxation under the Minister for Finance, Deputy Ruairí Quinn.

We have failed thus far to address adequately this anti-worker tax system. An employee who takes home £172 per week faces confiscatory tax rates of 56.75 per cent on all his marginal earnings. This means that many employees do not want promotion or the responsibility that goes with it. An employer who wants to give an extra £10 in overtime to an employee in those circumstances has to lay out £26. I am talking about real people, not imaginary people. I am not talking about statistics; rather I am talking about genuine people who are caught in the Minister's poverty and taxation trap. If I were talking about the super rich or super wealthy, the haves in our society compared with the have nots, I imagine that a Labour Party Minister for Finance would be the first to remind me that there were people who deserved priority over others when it came to tax reform.

I have looked at the budget, which the Minister claimed was radical, to see what is in it for ordinary single workers. During a year in which the Exchequer could have permitted a radical departure in the direction of tax reform these workers got nothing except a collective insult in the form of a tiny marginal increase in the value of bands and allowances. I am not talking about the haves, the super rich or the moderately comfortable. I am talking about men and women who take home in their pocket £172 per week. It is immoral and wrong politically and economically to say to people in those circumstances that they must hand up more than half of every extra penny they earn in taxation and social insurance.

It is not a matter of abstract figures on paper. This is a matter of real people suffering real deprivation and being cemented into a real trap from which they cannot escape. These people are earning well below the average industrial wage and they are entitled to a tax system which gives them incentives, which values their work and encourages them to work harder and to take overtime, promotion and extra work if it becomes available.

I am talking about ordinary people like those in Packard. Last year the Exchequer took £5.5 million or 35 per cent out of Packard's total payroll cost of £15.5 million. That is the reality of the tax system. It was inevitable that Packard, a highly labour-intensive industry which has to complete with sister plants around the world, would begin to contract before our eyes and probably disappear because of the brutal anti-work tax system.

If the Packard plant had been located in Newry as opposed to Tallaght approximately £750,000 less would have been taken out of its payroll costs by the United Kingdom Government than is taken each year by the Irish Government. There would have been that much more money for management to divide with the workforce to ensure decent productivity and working conditions for ordinary men and women. Instead, £15.5 million is spent on the payroll including employers' and employees PRSI and PAYE. Packard is effectively in crisis and is bound to suffer as long as this tax system exists.

This is radically wrong and something radical must be done to correct it. Successive Ministers for Finance since the budget in 1993 have abandoned the process of tax reform and, on one occasion, set it in reverse. In the 1993 budget the 1 per cent income levy was equivalent, for most lower paid workers, to a 2 per cent increase in income tax. That was in force for one year in scandalous disregard of what was suggested in the Cullition report.

I hesitate to interrupt Deputy McDowell. I am prepared to allow quite some latitude in respect of debate on the Report Stage of this measure but I have to dissuade the Deputy and the House generally from embarking upon what seem to be wide-ranging speeches. I ask the Deputy to confine his remarks to the amendment before us.

The amendment runs to over two pages and deals with the tax rates we will charge single workers in this country over the next five years. I am not simply dealing with paper people or paper figures, I am dealing with real people. This House must finally face up to its own responsibility in this matter. It is easy to evade responsibility and to say we would love to do more for lower paid workers but the facts are that we have put in place an anti-low paid worker tax regime.

I make no apology for saying this is not simply a matter of economics, it is a matter of basic social justice. If you have a system that penalises work and effort to the extent that we have in this country, and insist on keeping this in place, there will be mass unemployment, high crime and drug abuse rates, high rates of breakdown of marriages and families and all the social evils attendant on creating a huge underclass in our society.

As far as I am concerned, Ireland is pursuing a policy of human setaside. By our tax system we are telling not merely 270,000 people but the people between 55 and 60 years of age who have been airbrushed out of the unemployment statistics, those on training and special employment schemes which bring the number to in excess of 350,000, to stay out of the economy — just as agricultural land is set aside for non-production — and we will give them the dole or whatever social welfare payment is available.

Our tax system is fundamentally unfair, not in that it is too harsh on the well-to-do in Irish society, though God knows it is hard on them as well but it is extremely hard on those who are least capable of defending themselves, the below average industrial earner. The budget is a disgrace and this Bill, in so far as it represents the first effort of a Labour Party Minister to put in place a system of taxation in the interests of working people, is a monument to his failure.

Committee Stage of the Finance Bill was conducted in a very harmonious fashion and was worth while. The Minister will agree it was beneficial to him, his advisers and others. It is a pity Report Stage cannot be conducted in the same fashion. The row about ordering Report Stage has been disposed of. That suggestion came from the chairman of the select committee, Deputy Jim Mitchell, and was agreed to by the Minister for Finance, Deputy Quinn, Deputy McDowell and me. I am aggrieved that the Order of Business did not reflect that this morning. It is an unsatisfactory way of doing business in that amendments will be delivered later in the day. This proves there is a good case to be made, when dealing with the Finance Bill, for the taxation changes, as far as they relate to tax bands, allowances and so on, to be dealt with in one Finance Bill and for the technical and other changes to be dealt with in a Finance (No. 2) Bill which would not be subject to the same time constraints.

I am aware the Finance Bill must pass all stages by 8 June. I pointed out during the debate on Committee Stage and in a number of press releases that this timescale is not conducive to debate. The Minister would probably agree that we should move from the way in which we have been conducting business for years. I make the suggestion to the Minister and the Government for future Finance Bills, it is, perhaps, something that should have been considered a long time ago. I cannot understand for the life of me why something which was agreed last week, and the Minister knew it would be agreed, could not have been put in place before today. We will discuss amendments later in the day which will not be available until the afternoon. That is most unfair and unsatisfactory.

The amendment tabled by Deputy McDowell — the same amendment which was tabled on Committee Stage — puts in train a programme of continuous tax relief and commits any future Government to the rates of tax which we will achieve by the end of this decade. Naturally, an idea like that is very attractive but I do not think it is responsible given the line we take regarding public expenditure. There are two schools of thought in this regard, whether one should set rates of tax one wants to achieve and the rate of tax that should be collected from the community and base everything on that. In a sense it is similar to a person operating a company and where one looks at either the income side or the expenditure side. I agree it is a bona fides school of thought that one can proceed on that basis. If we say we will have X rates of tax for the following number of years we will be able to predict the amount of revenue that will accrue and everything will be tailored to suit it.

The one major disadvantage is that you have to face the pruning of public expenditure possibly to an inordinate degree that will affect many people who will be hard done by. The experience during the past seven years is that the people in employment, particularly those in public sector employment, have benefited more from the upturn in the economy than any other sector. Since 1987 this country has undergone a radical change in its political thinking regarding financial management. At that time, the Government, under Mr. Haughey, decided to get the public finances in order. You cannot have a tax policy committing the Government to tax rates in the future unless you are prepared to say what elements of public expenditure will be hardest hit. It is legitimate for a future Government to proceed on one road or the other but it would not be wise to commit ourselves to agreeing tax rates and bands into the future without at the same time saying what public services would be reduced.

Low tax rates and an adjustment in the tax bands are very attractive to those at work, but there is a large number not in that privileged position. If I am on any side of the economic argument, I could be fairly regarded as being to the right. However, I have never suggested levels of taxation that would squeeze public services to the extent that people not fortunate enough to have employment or well paid employment would be left unprotected. There is merit in the proposal to tailor measures to expected income, but in our present economic state. I do not believe in that approach despite its political attractiveness. For several years successive Governments have endeavoured to lower rates of taxation and remove more and more low paid people from the tax net and have succeeded in doing that. In addition the top rates of tax have been reduced successively since 1987. I have been a politician and an accountant for long enough to remember when tax rates were as high as 80 per cent.

Plus PRSI.

That included PRSI. Widening tax bands results in a greater loss to the Exchequer whereas cutting the tax rates is less expensive. Deputy McDowell's proposal not alone cuts tax rates but widens the bands — the Deputy has been consistent in that regard. However, it is contradictory to preach about controlling public expenditure while at the same time advocating very low rates of tax. The late John Healy used to say that consistency should not be a hallmark of politicians.

It is not.

He did not admire it in politicians, although I would have though consistency was a virtue to be admired. However, I am consistent and I have been somewhat tough on the Minister for allowing his colleagues in Government to increase levels of public expenditure in 1995. Given the expenditure to which the Government is committed, I see little likelihood in 1996 and 1997 of the Minister being able to keep to the proposals set out in the Programme for Government. Although it would be politically attractive to support Deputy McDowell's amendment, it would be inconsistent with my stand and would commit future Governments to maintaining certain levels of income without knowing what levels of expenditure would be required. It would not be proper to do that.

The trade unions and other bodies argued the case for regarding PRSI as a separate entity. I asked the Minister on Committee Stage to state his views but he did not have the opportunity to answer. Will he agree that perhaps the time has come to regard PRSI as another form of taxation as pay-related benefit has, effectively, been abolished? I accept the arguments for keeping the social insurance fund separate, but PRSI should be regarded as another tax. Perhaps that could be discussed in the Central Review Committee between the social partners. It is a vexed question on which I would like to see lengthy debate because there are advantages and disadvantages to not having a separate social insurance fund. I put the idea forward to stimulate debate.

Much as I would like to support Deputy McDowell's proposals. I cannot because, despite the exhortations of the late and great Mr. John Healy, I suffer from the disease of consistency.

I extend my sympathy to Deputy McCreevy on his disorder. It is a dreadful limitation in politics. I have suffered from it from time to time and found it extremely painful. In the interests of making progress in politics one should do everything possible to find the best treatment so that one can totally forget the delightful tunes one played at a different time when they were politically fertile.

I spent 15 years in Coventry as a result of the illness.

From another perspective, perhaps it benefits the whole body politic. The amendments before us should be put in context and there is considerable pressure to increase public expenditure. In his drive for tax reformation, Deputy McDowell did not object to the £10 million made available yesterday so that people on community employment schemes, many in my constituency, can return to previous levels. What is in question here is our concept of society. The full extent of the proposed changes would be to take about £1 billion out of the economy. That can be put into perspective if we take into account that education costs about £2 billion, the health service about £2.5 billion and social welfare about £3 billion. To implement the proposed changes one would have to reduce expenditure on education by half — that would mean reducing the number of teachers by half because that is where most of the money in education is spent. Half of the hospitals would have to be closed and the services cut back by half, and expenditure on social welfare would have to be cut back by one third. The people who make such radical proposals should say where their impact would fall.

I do not accept that these changes would make for radical change in employment levels. Most of our difficulties in the area of employment are because of a mismatch between the skills available and those needed to produce products or services that will penetrate international markets. We have not given nearly enough attention to that. Reducing the tax take will not create jobs where they do not exist. In many ways Deputy McDowell also suffers from the disorder of being consistent and radical and, in a sense, it is to be welcomed. However, the question is whether society should be divided radically and the market let rip as happened to a large extent in Thatcher's Britain, or whether we should have some element of cohesion. On budget day the Minister for Finance spoke in terms of social solidarity and social cohesion, and he was right.

If we were to go along with Deputy McDowell's proposals there is no doubt we would have further social disharmoney. Deputy McDowell related the enormous drugs problem and other social problems, including the break-up of families, to the tax system. That is bunkum. A series of factors have to be taken into account. I cannot accept that the tax system is the source of social decay which in many ways can be related to the values which now pervade society. In that context perhaps we would all benefit if more emphasis was placed on duties and responsibilities rather than rights. What is being proposed is impractical and would cause considerable social discord. That is the last thing the country needs at this time.

This is an important amendment in that it raises the fundamental question of whether budgetary strategy and fiscal policy should be expenditure driven or whether we should consider opportunities to reduce taxation. My colleague, Deputy McCreevy, reasonably suggested that we have to try to balance the two. However, the Minister opted for expenditure driven policies and failed to take the opportunity to reduce taxation. This is a source of frustration and deep concern in the market place.

For the first time in 25 years there was a budget surplus but the Minister unexpectedly returned to a position where there will be a current budget deficit. There was a general expectation, having achieved a budget surplus after a long struggle, that it would be maintained. Not alone did the Minister fail to do this, he set a ceiling of 6 per cent in terms of public expenditure. I note this ceiling is not being adhered to. In terms of growth in public expenditure the figure of 6 per cent was the upper limit. The Minister should have left himself room for manoeuvre if there were unexpected expenditure costs. Clearly, there have been. The Minister opted for the best case scenario in the hope that there would be revenue buoyancy but the gamble has not paid off. As a consequence when he comes to prepare the Estimates for 1996 in the autumn he will encounter serious difficulties because he will not be able to maintain the same level of expenditure without increasing taxes.

In the context of this amendment it is a source of frustration that the focus is on expenditure with the residual money to be used in providing for tax reductions and tax breaks. The correct balance has not been struck; both elements should be central to the Government's strategy in terms of fiscal policy. That is the reason this amendment places firmly at the top of the agenda the questions of tax reductions and public expenditure. If the current levels of public expenditure are maintained we will face serious problems.

It is not legitimate to say tax reductions have to be financed by serious cutbacks in public expenditure. Maintaining public expenditure at certain levels allows for more focused tax reductions which would have a bigger impact on the markets. The problem is that expenditure continues to grow in the public sector which does not form part of the productive economy. The greatest number of jobs are created and the greatest amounts in tax revenue are generated in the productive economy; the creation of one job in this sector leads to the creation of jobs in other sectors.

If we compare the increases in salaries in the public sector with those in the private sector in recent years there is a huge difference. Companies such as Packard have to live in the real world where they endure pressure in terms of productivity, competitiveness and efficiency. Despite the fact that the public sector has been sheltered there has been sustained growth in expenditure and manpower and huge increases in salaries in recent years. The question which has to be asked is whether the State is benefiting.

On Committee Stage a very simple example was given. It cost £250,000 to produce and publish the White Paper on Education. This was an extraordinary waste of scarce resources given that the original copy was sufficient and quite acceptable. If such largesse is available we can only look forward to further wasteful increases in public expenditure.

While I acknowledge that the process of tax reform has continued in recent years and no one can deny that there have been improvements this year the Minister failed miserably to take an unprecedented opportunity to make further progress in reforming the taxation system and to make a radical and definitive statement which would have had an impact on the markets given that tax rates and employment costs are major factors taken into account by companies when deciding whether they should locate here.

Given current levels of expenditure it is clear that the Government's policies are expenditure driven. In preparing the next budget the Minister will be faced with the question of whether taxes will have to be raised if these levels are to be sustained. These two elements are of equal importance; the Minister did not give equal importance to both, but went for policies which were expenditure driven to the detriment of tax reform.

Before I refer to the amendment I wish to make two general points. I understand from the Whips that the question of whether section 153 should be recommitted was not raised. Neither was the question of whether amendments should be grouped.

The Whips met before it was agreed.

How could they agree to something which had not yet been discussed?

A large number of amendments have been tabled in my name and these address many of the concerns expressed by Deputies. I will therefore deliberately curtail my comments during Report Stage to facilitate debate. I do not propose to respond in full for those reasons.

Deputy McCreevy asked a number of specific questions. In relation to the social insurance fund the contributory principle has to be maintained. How it is to be treated for the purpose of taxation has to be considered but the question of pensions in the future is a Europe-wide issue. The current teachers' dispute is partly related to it. We have to be very careful in addressing it. I have not yet reached a final view on the matter.

In response to Deputy Cullen no one was more surprised than the former Minister for Finance that he had a current account surplus at the end of last year because he had not planned for this at the beginning of the year. We should move towards a position where the Government plans expenditure over three or four years and, with such a track record, it could then begin to do the sort of planning to which the amendment refers. I agree with Deputy McCreevy that one must first control expenditure planning. Deputy McDowell's amendment is the same as his Committee Stage amendment, his speech was very similar and likewise my response is the same. I am opposed to the amendment.

I am very grateful to the Minister for his fulsome reply. It seems the Minister and Deputy Upton who spoke for the Labour Party believe in high taxation and high spending. That is what Labour is all about. Deputy Upton said that the ballpark figure for the four year programme would be £1 billion. I have no doubt that is the case, but that would mean that in every one of those four years an extra £250 million in resources would have to be made available to sustain a programme of tax reform of this kind. If the increase in public spending is maintained within 2 per cent of the inflation rate, the Government could easily afford such tax reform over a four year period given the growth rates we are likely to experience in the next three to five years. It could be done if the Government exercised basic self-control on expenditure.

Deputy Cullen referred to the cost of the White Paper on Education, a matter I raised on Committee Stage. That £250,000 self-aggrandizement by the Minister for Education is a scandal. I do not know why the Department of Finance did not prevent that Minister spending £250,000 on this item. If 400 such mistakes were made in a year, £1 billion would be wasted on worthless self aggrandizement. There are many more examples of mistakes such as that.

Much more crucial is the content of the White Paper on Education. It does not mention the Department of Finance's estimate of £1.2 billion extra expenditure which it will cost to implement its provisions. The Department was ashamed to put a price tag on this Labour Party programme for an extra £1 billion in public spending. Deputy Upton is a member of a party that will increase public spending wastefully in the way described in the White Paper. I want to contain public spending. It is strange that not a single word in the White Paper indicates how much any provision in it will cost. I am glad the Minister for Finance is in the House because he abdicated his position as a member of Government by allowing a White Paper to be published in the Government's name with a huge expenditure implication without including, even on one page, the cost of the provisions. It is a scandalous abuse of taxpayers' patience and time to publish a White Paper which on the face of it is uncosted but costed in secret dossiers in the Department of Finance. That is very bad Government. It is very bad to create a public appetite for expenditure when one cannot deliver on it.

I agree with Deputy McCreevy that the social insurance fund must be reviewed. Social insurance as a concept is outdated, and I am not speaking from a peculiar economic perspective. The Labour Party in Britain knows that the social insurance concept is dead and is preparing to abandon it. Of course the Minister is correct in saying that the contributory principle should be maintained in some form, but he does not have to pretend there is a social insurance fund when that is not the case. He can simply set notional payments for people with certain employment records.

Nothing I have heard today has deflected me from the point of view that any Government that wants to tackle the taxation of low paid employees at the rate we are doing must control expenditure and set out a programme at the beginning of its term to which it will adhere. In that context Deputy McCreevy is not consistent — he claims to be so — because his party leader favours reducing the top rate of tax to 40 per cent and the bottom rate to 20 per cent. At the next election Fianna Fáil may cosy up to the Labour Party again——

—— or the Progressive Democrats.

—— and repeat its mistakes, or it will find there are other parties in this House who will insist on the delivery of tax reform. The Fianna Fáil Party in particular must wise up in one respect and face up to the issue — Deputy Upton in particular should be concerned about this — that if a person taking home £172 per week earns an extra £10, the State will take £5.80 of that. That is unjust, and any socialist who has a concept of the interests and demands of the working class would not permit those circumstances to exist. Nor would they accept the intellectual and economic cant to which we have been subjected today that that is the alternative to slicing money off public expenditure programmes. That is not so, and a properly managed economy would not force us to make that type of choice.

I am glad the Minister has not responded to this amendment indepth because I am content to rely on what he said on Committee Stage. As long as the Labour Party is in office and controls the Department of Finance, decisions will continue to be made to keep in place an unfair, anti-work, anti-enterprise tax system. The Labour Party is not demonstrating consistency. It published a document in 1988 or 1989 in which it accepted, with slight variations, the argument for radical tax reform and changes of the kind I am talking about. It got votes on foot of that argument. It had red roses plastered everywhere demanding support for those policies, but when it went into Government it sat down on the job and started spending money as if it grew on trees. That is the difference between the Labour Party when it is looking for votes and when it is in office. It has surrendered in terms of public spending this year to a whole range of interest groups and the débácle of the White Paper on Education is only one instance of that. It is piling up more and more expenditure obligations out of which it will have to reverse even this year.

I do not accept there is anything wrong with consistency. I agree that inflexibility is a vice in a politician, and no-one will be as flexible as I am in ensuring this tax package is delivered. Anybody who thinks the Labour Party will go to the polls without having around its neck the broken promises on taxation it wilfully made to the electorate is codding himself.

Question, "That the words proposed to be deleted stand," put and declared carried.
Amendment declared lost.

Amendment No. 2 in the name of Deputy McDowell has been ruled out of order.

How can that amendment be ruled out of order?

Acting Chairman

It has been ruled out of order in accordance with the long-standing precedent that it involves a potential charge on the people.

How does it involve a charge? It is unusual that it was not ruled out of order on Committee Stage.

Acting Chairman

The Ceann Comhairle has given it long consideration and has ruled it out of order.

Amendment No. 2 not moved.

I move amendment No. 3:

In page 15, line 41, after "residence" to insert "or was the residence, for the purpose of attending an institution of third-level education, of a student of whom he was the parent or guardian".

When I raised this issue with the Minister on Committee Stage I thought he would give it a fair hearing and hoped he would table a similar amendment.

I took the Deputy's strictures on public spending to heart.

There are two issues involved and two ways of approaching them. We have had a debate on education. The majority of people directly involved in sending their children to third level education and those delivering the service have said that maintenance costs as opposed to the fees issue is the main concern. I commend the thrust of the Minister's provision to include landlords in the legitimate economy and my amendment expands on that. Many thousands of third level students live in rented accommodation. The exclusion of such rented accommodation from the remit of the Bill will have two consequences. No direct benefit will be given to those struggling to send their children to third level education and a number of unscrupulous landlords will move into that market exclusively as students are not required to secure and forward those landlords' PRSI numbers to the Revenue Commissioners because they do not benefit from a tax reduction as the majority of them are not income earners. If there is no mechanism for students to avail of a tax break those landlords will not be included in the legitimate system. I am concerned that a number of them are unscrupulous enough for whatever reasons, tax avoidance probably being the greatest, to concentrate on the student market and this may result in a deterioration in the quality of properties rented by students.

This is a reasonable amendment and will not impose a major charge on the Exchequer or force it to incur a substantial loss of revenue. It is vital that this is considered at a time when there is such high level debate on education following the publication of a White Paper. It is becoming more difficult for families to secure the necessary funding to send their children to third level education. Parents or guardians of non-income earning students in rented accommodation attending third level institutes should be able to avail of a tax break. That would mean a great deal to the family involved in terms of some return for the high cost of maintaining a student at third level.

I cannot remember the figure the Minister gave of the proportion of students living in rented accommodation, but I recall it was small in terms of the total number of students.

Twenty-one thousand.

That is a small proportion of the total student population of 150,000. The cost of this provision to the Exchequer is marginal.

Three million pounds. That would cover the cost of many White Paper publications.

It must be considerable on the basis that we are seeking to ensure that as many students as possible enter third level.

The Deputy does not suffer from the McCreevy condition of consistency.

I have been consistent on this issue and we will not fall out over a provision that would cost £3 million. There are far greater elements of expenditure in the Finance Bill with which I have difficulty. I do not accept there is a legitimate argument for paying the £260 million equality payments in the one year as there was no demand for that in the public domain. People were surprised and happy to get those payments.

If we had resisted in court the cost would have been £340 million.

They should be paid, but they need not all be paid under this year's budget. That commitment has thrown public expenditure radically out of kilter.

We have saved a probable cost of £80 million.

The Minister has not and he knows that is the case. He has indicated that the cost of this provision is £3 million, but he has not stated the revenue that would be gained by the inclusion of such landlords in the tax net. The effect of it may be revenue neutral.

That is possible.

Thousands of people are involved in providing accommodation for students attending third level institutes in the main cities. Much of that is valuable and welcome, but the Minister is missing an opportunity to include landlords in the tax net and to provide an incentive for parents, particularly those marginally above the grant threshold who do not receive any State assistance and would benefit greatly from a small tax break while sending their children to third level education. The £3 million charge may be revenue neutral as the revenue gained from the inclusion of such landlords in the tax net may offset the cost of the provision to the Exchequer. I was under the impression on Committee Stage that the Minister saw some merit in this measure and on the basis of what I have said I hope he will consider the amendment. If the State promoted such a course of action that would encourage parents to send their children to third level education.

I considered this amendment and a number of others sympathetically. I have made concessions on a number of other amendments which will incur a cost. On the balance of priorities I have decided not to make this additional concession as this is the first year the new concession will operate and I welcome the Deputy's support for it. We are already giving support towards reducing the costs of third level education to parents and students who are not able to avail of the grant system in terms of measure to abolish third level fees that will come into effect in the next two years. The extension of relief to students as distinct from flat dwellers would be an additional cost which I regret I cannot afford.

I am disappointed the Minister cannot accept this amendment, but I press him to consider the possibility of including such a provision in next year's Finance Bill. There may be indications of general improvement as a result of the inclusion of people in the tax net under the section in the Bill and, if so, the inclusion of a provision similar to that in my amendment next year might be revenue neutral and might have a positive effect.

Amendment put and declared lost.
Amendments Nos. 4, 5 and 6 not moved.

I move amendment No. 7:

In page 19, line 38, after "£150" to insert" or the amount, if lesser, of the service charge actually proven to have been paid".

I have a particular reason for tabling this amendment. I am worried that if the tax free allowance of £150 in regard to service charges is confined to only those who pay the full charge then those who have the greatest objections to paying the charges, and may by and large qualify for a waiver from local authorities, will not be eligible to claim the full allowance. Some people do not pay service charges and others pay only a portion of them. Under the Bill, unless a person pays the full local authority charge they are not eligible to claim the £150 tax free allowance. The Minister is wrong in this regard because, by and large, the greatest objectors to the charges do not pay the full amount, some do not pay anything. Local authorities are concerned about the Government's position on such charges, for example, they do not know if the charges will be abolished or if they will be given the power to turn off water supplies on those who break the law. People should not be above the law or advised to break it.

I am sure the Minister is aware of the value we receive from EU structural funds and of the importance of local authority income. Many local authorities are generating income and are in a position to match EU funding for schemes under operational programmes and this has been beneficial to many communities. Waterford Corporation is endeavouring to employ 250 people under the community employment scheme, a significant figure for the area. While funding is available under the community scheme, it must be prime-pumped to provide the materials to get people to work. In Waterford we have been able to use local authority income to provide materials to carry out works. I do not underestimate the great benefit of income to local authorities. My amendment seeks to remove the animosity of this double taxation from as wide a range of people as possible, but I am concerned that a partial waiver applies to the greatest objectors who will not benefit from the tax break, and will continue the protests. I hope the Minister will accept my amendment.

While the Deputy's contribution was very constructive, the amendment is redundant in that, as I understand it, the allowance applies to such people. If those to which a partial waiver applies pay income tax they can receive up to a maximum of £150 tax allowance against the charge. If, for example, they pay an £80 service charge, they will receive a tax allowance of £80. If a person pays a service charge of £200, the maximum tax free allowance would be £150. Apro rata rate applies against income tax up to £150 and I understand that is the thrust of the Deputy's amendment. If a partial waiver applies to the people to whom he refers and they pay tax, they qualify for the allowance.

I am glad the Minister clarified the matter.

The Deputy made a constructive argument.

The maximum charge in my local authority area is £150 with different rates applying within the city of Waterford, the lowest being approximately £75. A person could live in an area where the charge is £150 and under a waiver scheme only pay part of the charge. Will such a waiver be included irrespective of the initial charge?

The amount that applies is that paid after the waiver is taken into account, the net cash paid by the person is offset to the maximum of £150. The waiver is not included. In other words, if the nominal charge is £150 but the waiver applying to that person is £75, he or she is covered for the £75. People are covered by whatever amount they pay up to a ceiling of £150.

That is excellent, that is what I wanted to achieve.

Amendment, by leave, withdrawn.

Acting Chairman

Amendment No. 9 is an alternative to amendment No. 8 and No. 10 is related. Therefore, we will take amendments Nos. 8, 9 and 10 together.

I move amendment No. 8:

In page 19 to delete lines 42 to 44, in page 20 to delete lines 1 to 18 and substitute the following:

"(2) In relation to income tax for 1996-97 and each subsequent year of assessment, if an individual (referred to in this section as a ‘claimant') proves that in the financial year immediately prior to that year of assessment, the amount which he or she was liable to pay in respect of service charges for that financial year has been paid in full and on time, the income tax to be charged on the claimant for that year of assessment, other than in accordance with section 5 (3) of the Finance Act, 1974, shall, subject to subsection (4), be reduced by an amount which is the lesser of —

(a) the amount equal to the appropriate percentage of the amount proved to be so paid or the appropriate percentage of the specified limit, whichever is the lesser, and

(b) the amount which reduces that income tax to nil:

Provided that—

(i) in the case of a claimant who is assessed to tax for the year of assessment in accordance with the provisions of section 194 of the Income Tax Act, 1967, any payments made by the spouse of the claimant, in respect of which that spouse would have been entitled to relief under this section if the spouse were assessed to tax for the year of assessment in accordance with the provisions of section 193 (apart from the provision thereto) of the said Act, shall be deemed to have been made by the claimant;

(ii) in the case of an individual who resides on a full-time basis in the premises to which the service charges relate and pays such service charges in accordance with the requirements of this section on behalf of the claimant, that claimant may disclaim the relief provided by this section in favour of the individual and such disclaimer shall be in such form as the Revenue Commissioners may require.".

For legal reasons this is a fairly lengthy amendment. Deputies will recall that on Committee Stage we debated the case of a son or daughter living at home, maintaining the occupier — the person to whom the service charge is billed — and paying the outgoing costs of the household. Deputies felt it was essential that if such a person pays income tax, he or she should benefit from this allowance. The point was well made on Committee Stage and I am giving effect to it in this amendment.

We had a fruitful discussion on this section on Committee Stage and I appreciate what the Minister has done. As he stated, the purpose of these amendments is to give sons or daughters who pay the service charges the benefit of the allowance. In County Kildare old age pensioners and the unemployed are entitled to benefit from a waiver scheme, but if their sons or daughters reside with them and earn an income, the total income of the household is taken into account and a waiver does not apply. The local authority in Kildare has built up a sophisticated waiver system over many years and, in such circumstances, this section, as originally drafted would not have allowed the person paying the service charge to benefit from the tax break. The Minister's amendment solves this problem.

On Committee Stage we also referred to the phrase "in full and on time", which has not been deleted from the section. The Minister will be aware that most local authorities operate a weekly payment method. For example, in the Kildare local authority area people usually pay instalments of, say, £2.50 per week. While the charge is paid in full over a period, I am concerned that those people would not benefit for the full tax relief. If the Minister assures me they will, I will accept his amendment.

My colleague, Deputy Dempsey, made a valid point on Committee Stage about certificates being sought from local authorities to prove that people have paid their service charges. Has further consideration been given to that matter? Suggestions were put forward on Committee Stage to simplify the procedures so that people who pay their service charges would be given proper relief, which is the whole thrust of this section.

I welcome the change which the Minister's amendment makes because it is twofold. It does not merely deal with the points I raised, it also raises the question of spouses. On my reading of it, it does not require cohabitation and, therefore, it is of some significance that non-cohabiting spouses can pay their partners' bill for service charges. In that way, it is an improvement on what I was suggesting. Would the Minister be willing to take the view that the phrase "of an individual who resides on a full-time basis" is unduly restrictive? The phrase I used, "who normally resides", is fair because if somebody is away for two or three months of the year, can it be said that they reside on a full-time basis with that other person? I believe "normally resides" is a more sensible phraseology.

With regard to Deputy McCreevy's point about being paid in full and on time, since the service charge is paid in the subsequent year people on a weekly or monthly payment system will not have that difficulty because the service charge paid in the first year will be allowable against tax in the second year. The tax year runs to April——

The relief will be on the basis of the preceding year?

Yes, It deals with that. In regard to Deputy Dempsey's point, as I recall he was concerned about the intrusion of privacy of giving somebody one's RSI number. That was done at the suggestion of the Revenue Commissioners. Meath County Council, which is responsible for Deputy Dempsey's constituency, would simply give a disc to the Revenue Commissioners with the RSI numbers of all the people claiming the relief. That information would then go into the system and I believe that is an efficient way of doing it rather than having numerous files in various locations. The local authority will decide what constitutes "on time".

In regard to Deputy McDowell's point, "normally resides" basically means that that is their normal residence——

It states "on a full-time basis".

That is their full-time home. If they are temporarily away, either for work reasons or on holiday, they still reside at their full-time home and that is the way it will be interpreted.

Amendment agreed to.
Amendment No. 9 not moved.

I move amendment No. 10:

In page 20, to delete lines 38 to 51 and substitute the following:

"(5) (a) Where, in a financial year —

(i) a claimant has furnished his or her identifying number in accordance with subsection (3), and

(ii) the total amount which he or she was liable to pay in respect of service charges for that year has been paid on time, and

(iii) arrears, if any, of service charges have been paid in accordance with guidelines in relation to the payment of arrears of service charges entitled“Finance Act, 1995 — Payment of Service Charges Arrears” issued to local authorities by the Department of Environment,

the local authority to which payment was made shall, subject to the provisions of paragraph (c), give to the claimant a certificate in respect of such payment.".

Amendment agreed to.

Acting Chairman

We now come to amendment No. 11. Amendments Nos. 11 and 77 form a composite proposal and No. 12 is related. Is it agreed that we take Nos. 11, 12 and 77 together? Agreed.

I move amendment No. 11:

In page 23, line 12, after "Minister for Finance" to insert the following:

"or any of the charities listed in the Second Schedule".

This amendment relates to the provision in the Finance Act to give tax relief on donations to designated Third World charities. As I am sure the Minister is aware, his noble and good idea has brought a considerable amount of controversy upon his head. I have sat in the Minister's chair on previous occasions putting various Bills through and I know that when a Minister comes up with a good idea, some people will agree with him but it often creates controversy involving many other organisations which results in a lot of abuse being levelled at the Minister. He probably wonders why he ever went ahead with the idea in the first place.

And some people say "we told you so".

As I said on Committee Stage, I can envisage the type of debate that took place in the Department of Finance when the Minister came up with the idea of giving tax relief on donations to designated Third World charities. I referred to it some time ago as a kind of hypothetical discussion between the Minister and his officials and I am well aware of what would have taken place during such a discussion. The Minister might have been told that if he goes down this road, he might open a Pandora's box which will never be closed. In fairness to the Minister, he stuck with his idea of tax relief on donations to Third World charities.

I suppose the original idea was that individuals and organisations would be given tax relief on donations to Third World charities, which other tax jurisdictions to the west of Ireland allow. However, a very smart official in the Department of Finance decided that if the Minister was so insistent on this particular idea, it could be a way to kill two birds with one stone. The way the section is proposed has much to say for it as far as the Government is concerned because it does not give tax relief to the person donating money to the Third World charity; it puts in place a mechanism whereby the State will know the total amount of money that taxpayers give annually to Third World charities. The relief is not given to the person making the donation. When the designated Third World charity receives a donation, the person making it will be asked to give their RSI number — some people may not be prepared to do that. At the end of a certain period the charity will send all the RSI numbers to the Revenue Commissioners who will, by their mechanism, give a grant for the amount of tax that would have been foregone by the individual concerned. That has great merit from a Government viewpoint because, at the press of a button, it will know the total amount of money Ireland donated to Third World charities. In that way, Ireland's contribution to Third World aid will be seen to be nearer the mark set by the OECD. I congratulate the person in the Department of Finance who thought up this particular mechanism.

This mechanism, however, has made the playing pitch uneven. It is a noble and good idea to recognise our contribution to Third World charities but we all know the phrase "charity begins at home". This amendment states "or any of the charities listed in the Second Schedule". That refers to amendment No. 77 which contains a list of organisations concerned with Third World charities that come under the National Charities of Ireland. I believe the Minister should set a ceiling — and this was proposed by the charities — in regard to what the cost to the Exchequer would be in line with the cost of providing tax relief on donations to Third World charities. This is a fair proposal, I would not take from the Minister the power to come up with some other mechanism of designating Irish charities but it is unfair to ask people to discriminate between a charity here and a charity abroad.

The benefits of the national lottery are there for all to see. The idea of a national lottery was resisted initially by many people, not least by members in my party for a variety of reasons and was introduced by a Coalition Government of which Deputy Quinn was a member. The national lottery has had the effect of lessening the take for all charities, both Third World and Irish charities. If measures now proposed make it more attractive to donate to Third World charities, people will be encouraged to give donations to them. It is only fair to give this concession to Irish charities as well. What is evident from the list of charities in the Third Schedule, which are under the umbrella of the national charities in Ireland, is that they are all very worthwhile.

The Minister has been lobbied by Members from all sides to give similar relief to Irish charities. I am disappointed we did not convince him on Committee Stage to table an appropriate amendment which would have the same effect as this amendment which I ask him to accept.

When I saw the alphabetical list that Deputy McCreevy had put down, my eye immediately went down to "f" to see if he had looked after himself, but he had not.

Fianna Fail is not in, although it is a very good case.

That was not a charitable remark.

I saw a few other things that might be applicable to Deputy McCreevy but I will not go into them now.

I agree with Deputy McCreevy that it is invidious to discriminate between charities. It is invidious to exclude, for instance, the Irish Red Cross from this because it is not committed solely to the narrow focus which subsection (2) (d) requires. One can either allow the Minister for Finance to designate the charities or alternatively take the view Deputy McCreevy has taken to achieve the only fair result in circumstances such as this, that every reasonable charity should be treated equally by the State and we should not make this fundamental distinction between domestic and foreign charities. The Minister explained on Committee Stage why he did not agree with that and I will not ask him to repeat himself but to consider the point I raised on Committee Stage and which Deputy McCreevy raised today — the damage done to charities' fund raising capacity by the national lottery.

It is probably three to four years since a proposal was first made to the Departments of Finance and Justice that the Gaming and Lotteries Act, or the National Lottery Act in so far as it amended the Gaming and Lotteries Act should be amended to increase the prize funds and therefore the scale of the lotteries which non-government charities can run. I ask the Minister to indicate in principle a willingness to increase the prize funds for lotteries organised by domestic charities. If he cannot accommodate them in the way Deputy McCreevy and I have proposed in these amendments the very least he could do is indicate that the present unreasonable limit on their capacity for fund raising by lottery should be altered and they for example should have a prize fund of £100,000 to enable them to run a decent lottery where the prize is something more than a very modest car.

I note from subsection (2) (d) that a charity must have as its sole object, relief and development in a country or countries where the country or countries concerned is or are for the time being on the list of Aid Recipients of OECD. There are other charities such as the Society of St. Vincent de Paul and the Irish Red Cross who work abroad as well as in Ireland and they will be excluded from benefiting from his very worthwhile section. If the Minister will not give all charities relief under this section will he consider charities that have a commitment to countries outside this country as well as in the country? The work they are doing is as important as the work by those who are working solely in developing countries.

I cannot say I have read extensively through the charities listed in Deputy McCreevy's amendment but the Red Cross is not among them.

Because it is an international charity.

If that is the case, presumably the Red Cross will qualify but if it is not the case it is probably an over-sight. I can understand the concerns of the charities. The benefit does not come directly to the individual so there is no personal incentive for an individual to contribute to Third World charities. For example, if one gives £100 to a Third World charity one gets nothing extra compared with giving £100 to a charity on Deputy McCreevy's list. The Minister made the reasonable point earlier in the debate that we will look at this next year to see how it will impact on the income of charities. I think he has given a commitment to review the situation if it has a significant deleterious effect. It is worth going ahead with that measure on this basis. It is a new idea and as Deputy McCreevy rightly said we should give new ideas a greater hearing than we have in the past. I do not expect it will have a radically deleterious effect but if it does, there is provision that the Minister will make changes if necessary.

Nobody is objecting to the tax incentive being given to overseas charities but what clearly is at issue is that domestic charities have been on a bad run for the past few years with none of the breaks seeming to come their way. The national lottery had an effect on the fund-raising capacity of the Society of St. Vincent de Paul and many other organisations that provide services here. If voluntary organisations did not provide these services, it would fall back on the State to provide them. We should be mindful of the work of the voluntary sector. We, more so than any other country in Europe have a record of raising funds for charitable causes and using charitably donated funds to supplement what the State does or to fund activity which the State does not fund.

Irish charities feel rightly that the changes in recent years have gone against them and nothing that has happened would lead them to see that the State recognises the huge volume of voluntary work they do and its impact on the deprived in our society. This provision in the Bill highlights the impression that nothing seems to be going their way. The issue was raised on Second Stage. Clearly, there is a case for allowing charities to increase the prizes they offer and that could be done in this Bill. It would be a sea change and would recognise the value of their work. It would also enable them continue their activities on the domestic market. It is not just one part of the world which is deprived. All countries have difficulties and Ireland has much social deprivation with which the State alone cannot deal. Charitable organisations help to meet the need. I listened to what the Minister said on Committee Stage. However, it would be quite easy to include Irish charities as well. I do not know if we asked what the expected cost to the Exchequer would be.

The estimate is £21 million.

This year or in a full year?

In a full year.

That is substantial.

It is an estimate.

It seems to be very high.

There would be many White Paper publications on it.

We will forget about the White Papers at this stage.

If you are going to sit beside a contagious person, you may as well get the infection.

I did not hear the Minister. Something may arise in the future and we may want to make a major contribution to an Irish charity. It might be right and proper for the State to back that contribution by giving an equivalent tax incentive to the charity. The Minister should retain power to enable him react to something that might arise in the future. Such a power may never be exercised but it would be worthwhile to have it in the Bill.

I welcome the provision relating to Third World charities which the Minister spoke about on Second Stage. However, I am disappointed that Irish charities are not included. I received correspondence for a number of organisations, particularly from the Society of St. Vincent de Paul, and they point out that the success of the national lottery has affected their ability to fundraise. Over £4.5 million may be won tonight on the national lottery and it is relevant to discuss the effect the lottery has on Irish charities. I know at first hand the great work the Irish Red Cross is doing in south Galway helping the victims of the recent flooding. That organisation will not qualify under this Bill. Consideration should be given to including Irish charities. The national lottery prize fund is tempting and Irish charities find that people do not contribute as much to them as they did in the past.

I appeal to the Minister to amend this section. In common with other Members I am sure the Minister has received representations from Irish charities. One letter I received was from the Society of St. Vincent de Paul. I know every organisation will make its case but this letter was written by a person who worked in the Office of the Revenue Commissioners for 41 years before his retirement in 1988. He expressed the view that he had not seen a section like this in any previous Finance Bill. The Minister should take note of that and address the matter even at this late stage.

The person stated that a large part of his work involved reading and interpreting Finance Acts. As regards section 2 of this Bill, he doubts if any Third World charities, apart from two, will qualify given the wording of the Bill. Such a statement from a person who held a responsible position and knows about finance deserves careful scrutiny. Deputy Kitt also mentioned the society, an organisation with which we are familiar and support. The Irish Society of St. Vincent de Paul is involved overseas yet it will not qualify under the Bill. Similarly, the Irish Red Cross is disqualified because it is helping people in Galway. I ask the Minister to ease the restriction in this area. I acknowledge the original intention was a good and laudable one but it will cause problems for Irish charities, the Revenue Commissioners and future Ministers. It is unnecessarily restrictive and I ask the Minister to accept the amendment.

I am not in a position to accept the amendment. If I were to extend charitable status for tax deductible purposes to domestic charities, I would not do it in this form. It is in a particular form and Deputy McCreevy touched close enough to its genesis.

When I was arguing this case and the necessity for it to be ring-fenced so that it would not have a knock-on domestic effect, which is a very valid argument — one is giving substance to the wisdom of those people who predicted that it would have a knock-on effect — I said I wanted it to be done in such a way that it would qualify as an additional part of Ireland's overall ODA contribution. The OECD in Paris has indicated that the transfer of cash will have to be from the State to the recipient body and not via an individual who has a tax allowance, as is normal in the United States and other countries. As Deputy Upton said, there is no apparent benefit from the point of view of an individual subscriber; in other words, £100 is £100. For example, if I give £100 to the very eminent charity, the Society of St. Vincent de Paul, it is £100 to me whereas if I give it to Concern, assuming it qualifies under section 2, it is worth approximately £127 to it.

Approximately £200.

One would do it under a standing order.

On the general points on charities, I will consult with the Minister for Justice about lotteries and their effect on revenue. Virtually all of the charities listed in amendment No. 77 relate to some form of physical or mental illness and most, if not all, of them — I am open to correction on this point — are in receipt of direct or indirect State funding and all the people directly affected are in receipt of funding of one kind or another. There is no similar social welfare system in the Third World. An enormous amount of money, £3 billion, already goes into the social welfare system.

As Deputy McCreevy will be aware, within the budget for the Department of Social Welfare there is a fund which is given to charities, particularly at Christmas time. The Society of St. Vincent de Paul is one of the major recipients. It is not fair to say that this is an "either or" situation, that charities are not getting any help from the State and are being put at a disadvantage. I accept the argument that this could pose a further difficulty for charities in terms of fundraising. Deputy McDowell and others referred to the prize money they can give in competitions, and we are examining this matter. The national lottery makes donations to many of these bodies through the Department of Health but it does not give money to Third World charities — it is prohibited from doing so.

The point I made in my Budget Statement and on Second Stage is that this is the 150th anniversary of the Famine and this system gives citizens an opportunity to indicate their priorities in terms of Third World charities. The tax relief will go directly to the receiving charity and, as a result of the way in which the money is transferred, it will officially qualify for inclusion by way of additionality in Ireland's ODA contribution. As a member of the United Nations we are obliged to move to a figure of 0.7 per cent of GNP and, if my memory serves me correctly, we are at a figure of approximately 0.2.

I appreciate the strength of the lobby by the various organisations which contacted Deputies on all sides of the House, including me. If they can demonstrate satisfactorily next year that their income has been severely damaged then we will look at that matter in due course in the totality of Government action.

In reply to Deputy Dempsey, the conditions in subsection (2) were drafted in consultation with the ODA section. In the normal course of events many of these bodies would receive State moneys directly under the multilateral aid programme and they would be required to have a standard set of books, accounts etc. There were also consultations with the Revenue Commissioners who have a major role to play in the drafting of all Finance Bills. I do not anticipate the kind of difficulties to which the Deputy referred but if they emerge we will correct them.

I welcome the Minister's initiative and decision to go ahead with this proposal which I am sure was tossed around for a long time. He was probably advised that he would open up the debate we are now having. There may be a plus factor for many Departments in going down the road of giving tax relief to Irish-based charities in that it could give the Minister for Justice, the Revenue Commissioners and other Departments a handle on all the Irish charities in existence and the people raising money for charities.

As long as the Deputy would not call it an informers charter.

Before they raise money these charities should have to get clearance from the Revenue Commissioners or the Department of Justice and people should be able to examine their accounts. This should be a condition of giving tax relief to them. Irrespective of the arguments in favour of tax relief, there is compelling evidence of the need to do this. For example, whenever I stop at traffic lights I am approached by people carrying buckets who are collecting for charities. I was secretary of a Fianna Fáil Cumann in County Kildare and before we can hold a fundraising event we have to get permission from the local Garda superintendent and go through procedures which have been in place for many years. These procedures now seem to be ignored by charities. The Minister should liaise with some of his colleagues on the possibility of putting a mechanism in place which would ensure control in this area.

I have already argued the need to give some tax relief to Irish-based charities from the point of view of equity. The Minister gave some credence to that argument and said he would look at it again next year if major distortions had taken place. Distortions will inevitably take place as it is the Third World charities which will be designated and it is only to be expected that they will advertise this fact, thus encouraging people to give their contributions to them. There is nothing wrong in doing this, it is a good selling point, but it will give rise to distortions.

We are sending an indirect signal, notwithstanding the good work done in the Third World, that Irish charities are perhaps not as worthy. It is not a compelling point but it can be construed that way particularly by people who work in those organisations. Many of those people who give voluntarily of their time — not the paid executives of such organisations — may feel slighted. I know the Minister has no intentions in that regard but the net effect may be as I stated. The biggest crib I have is that on Committee Stage the Minister, on foot of figures given to him by the Department, said the cost of extending this relief would be £21 million. I find that difficult to believe. On Committee Stage I suggested — this is a suggestion from the Irish national charities — a cap on this relief of £2 million. If the relief was given across the board I find it difficult to ascertain how the Minister's Department arrived at a figure which would cost the Exchequer £21 million.

Amendment No. 77 lists the 75 members of the National Charities of Ireland. That organisation believes that not more than 100 charities in Ireland would be in a position to avail of the proposed relief as enunciated by me. For those 100 charities, 90 per cent of their income comes from sponsored events, flower days, fund-raising functions, public collections, etc., and 10 per cent comes from unsolicited donations. Included in the 10 per cent are those who donate in the region of £200 to £750. The Minister's relief for Third World charities is only for donations in the £200 to £750 bracket. It does not include the odd £5 or £10 which a person may put into a collection for Third World charities. The Minister should bring forward tax relief for national charities for donations in the same £200 to £750 bracket. If the relief was confined to donations in the £200 to £750 bracket — the same as that proposed for Third World charities — the National Charities of Ireland confidently predict they could not exceed £2 million. I have done small sums and without being an expert in this area I cannot for the life of me understand how the cost of £21 million, as suggested by the Department of Finance, was arrived at, I humbly submit that £2 million would be closer to the figure.

The suggestion was made by the National Charities of Ireland that if the amount of relief exceeded £2 million in any one year it should be capped for that amount and the relief carried forward to the following year, a reasonable proposal. The Minister gave some credence this morning to the figure of £21 million compiled by the Department of Finance or the Revenue Commissioners when he said there were so many thousands of registered charities in Ireland. I understand about 3,000 charities are registered with the Revenue Commissioners. Putting on my hat as a practising chartered accountant, charitable status is designated by the Revenue Commissioners to include parishes, educational and religious establishments and so on. The main purpose of doing so is that the deposit interest earned by those organisations in bank accounts can be exempted from DIRT tax. These 3,000 charities include a wide range of organisations which have charitable status from the Revenue Commissioners to avail of that relief but they are not fund-raising charities, as described in my amendment, or the 25 or 35 other charities as well.

I suggest the Revenue Commissioners or the person in the Department of Finance who arrived at the cost of £21 million based his figure on the 3,000 organisations which have charitable status. Perhaps the Minister's officials did not have time before this debate to get those figures. I suggest the figure of £21 million is based on the 3,000 organisations and not on the 100 or so charities on which relief would be given. I think I have a reasonable case. As Deputy Upton said, capping at an amount of £2 million is acceptable where Third World charities or Irish charities are "playing off scratch". I am a great believer in the phrase: what is sauce for the goose is sauce for the gander. It is only fair that Irish charities not be put at a competitive disadvantagevis-à-vis their counterparts who do great work in the Third World. I ask the Minister to accept my amendment.

Amendment put.
The Dáil divided: Tá, 63; Níl, 77.

  • Ahern, Dermot.
  • Ahern, Michael.
  • Ahern, Noel.
  • Brennan, Matt.
  • Brennan, Séamus.
  • Briscoe, Ben.
  • Browne, John (Wexford).
  • Burke, Raphael P.
  • Byrne, Hugh.
  • Callely, Ivor.
  • Clohessy, Peadar.
  • Connolly, Ger.
  • Coughlan, Mary.
  • Cowen, Brian.
  • Cullen, Martin.
  • Davern, Noel.
  • Dempsey, Noel.
  • de Valera, Síle.
  • Doherty, Seán.
  • Ellis, John.
  • Fitzgerald, Liam.
  • Flood, Chris.
  • Foley, Denis.
  • Geoghegan-Quinn, Máire.
  • Harney, Mary.
  • Haughey, Seán.
  • O'Malley, Desmond J.
  • O'Rourke, Mary.
  • Power, Seán.
  • Quill, Máirín.
  • Ryan, Eoin.
  • Jacob, Joe.
  • Kenneally, Brendan.
  • Keogh, Helen.
  • Killeen, Tony.
  • Kirk, Séamus.
  • Kitt, Michael P.
  • Kitt, Tom.
  • Lawlor, Liam.
  • Lenihan, Brian.
  • Leonard, Jimmy.
  • Martin, Micheál.
  • McCreevy, Charlie.
  • McDaid, James.
  • McDowell, Michael.
  • Moffatt, Tom.
  • Molloy, Robert.
  • Morley, P.J.
  • Moynihan, Donal.
  • Noonan, Michael (Limerick West).
  • O'Dea, Willie.
  • O'Donnell, Liz.
  • O'Donoghue, John.
  • O'Hanlon, Rory.
  • O'Keeffe, Batt.
  • O'Keeffe, Ned.
  • O'Leary, John.
  • Smith, Brendan.
  • Smith, Michael.
  • Wallace, Dan.
  • Wallace, Mary.
  • Walsh, Joe.
  • Woods, Michael.

Níl

  • Ahern, Theresa.
  • Barrett, Seán.
  • Barry, Peter.
  • Bell, Michael.
  • Bhamjee, Moosajee.
  • Boylan, Andrew.
  • Bradford, Paul.
  • Bhreathnach, Niamh.
  • Bree, Declan.
  • Broughan, Tommy.
  • Browne, John (Carlow-Kilkenny).
  • Bruton, John.
  • Bruton, Richard.
  • Burke, Liam.
  • Bruton, Joan.
  • Byrne, Eric.
  • Carey, Donal.
  • Connaughton, Paul.
  • Connor, John.
  • Costello, Joe.
  • Coveney, Hugh.
  • Crawford, Seymour.
  • Creed, Michael.
  • Crowley, Frank.
  • Currie, Austin.
  • Deasy, Austin.
  • Deenihan, Jimmy.
  • De Rossa, Proinsias.
  • Dukes, Alan M.
  • Durkan, Bernard J.
  • Ferris, Michael.
  • Fitzgerald, Brian.
  • Fitzgerald, Eithne.
  • Fitzgerald, Frances.
  • Flaherty, Mary.
  • Flanagan, Charles.
  • Gallagher, Pat.
  • Gilmore, Eamon.
  • Harte, Paddy.
  • Higgins, Jim.
  • Higgins, Michael D.
  • Hogan, Philip.
  • Howlin, Brendan.
  • Kavanagh, Liam.
  • Kemmy, Jim.
  • Kenny, Seán.
  • Lowry, Michael.
  • Lynch, Kathleen.
  • McCormack, Pádraic.
  • McDowell, Derek.
  • McGahon, Brendan.
  • McGinley, Dinny.
  • McGrath, Paul.
  • McManus, Liz.
  • Mitchell, Jim.
  • Mulvihill, John.
  • Nealon, Ted.
  • Noonan, Michael (Limerick East).
  • O'Keeffe, Jim.
  • O'Shea, Brian.
  • O'Sullivan, Toddy.
  • Owen, Nora.
  • Pattison, Séamus.
  • Penrose, William.
  • Quinn, Ruairí.
  • Rabbitte, Pat.
  • Ring, Michael.
  • Ryan, John.
  • Ryan, Seán.
  • Shatter, Alan.
  • Sheehan, P.J.
  • Shortall, Róisín.
  • Stagg, Emmet.
  • Timmins, Godfrey.
  • Upton, Pat.
  • Walsh, Eamon.
  • Yates, Ivan.
Tellers: Tá, Deputies D. Ahern and Callely; Níl, Deputies Barrett and B. Fitzgerald.
Amendment declared lost.
Amendment No. 12 not moved.

We now proceed to amendment No. 13. I observe that amendment No. 15 is related, that amendment No. 14 is an alternative to amendment No. 13, that amendments Nos. 16, 19 and 20 are alternatives to amendment No. 15 and that amendments Nos. 17 and 18 are consequential on amendment No. 20. I suggest therefore that we discuss amendments Nos. 13 to 20, inclusive, together by agreement. Is that satisfactory to the Deputies concerned? Agreed.

I move amendment No. 13:

In page 28, to delete lines 5 to 51, in page 29, to delete lines 1 to 55, and in page 30, to delete lines 1 to 27.

I note that the Minister has included a hardship clause in amendment No. 20. It seems that this is apposite to the points raised and will definitely deal with the domestic circumstances to which Deputy Cullen and I referred on Committee Stage. It would have been unjust if the change proposed had spelled financial ruin for certain families.

Will the Minister indicate that the hardship clause will be interpreted fairly? Much will depend on what view the Revenue Commissioners will take in any given case. For instance, according to the Minister's amendment, the Revenue Commissioners will have to be satisfied that hardship would be caused and will have discretion to apply the exemption to the extent they consider just. I note that there will be no right of appeal against the decision of the Revenue Commissioners in this matter. We will therefore be bound to accept what the Revenue Commissioners think is just and consider to be hardship. If the Minister is in the business of granting an exemption on the grounds of hardship I seek an assurance that the Revenue Commissioners will be fair-minded and positive towards the small minority for whom this amendment is being inserted and will not be niggardly or unfair in their dealings with them. Many people feel that the Revenue Commissioners have a bad image; I do not accept that, in general the Revenue Commissioners are fair-minded but I seek an assurance that the amendment will be operated in a just and generous way.

On amendment No. 16, it is fair to insert a minimum sum in terms of covenanted income. By definition, the 5 per cent income limit is not fair. Before I reminded myself that it was a pointless activity I had written out a table placing an upper limit on the amount of money which could be covenanted. It is unfair that a person with an income of £1 million per year can covenant £50,000 with impunity whereas someone with far less is caught by the 5 per cent limit when they would be willing to be more generous. I cannot see the justice in this or the reason the limit has been set at 5 per cent. I cannot understand why a floor and a ceiling cannot be set. It is unfair and unjust that a millionaire can contribute £50,000 to needy relatives while someone on an income of £15,000 per annum can only give £750 to his relatives. This does not seem to be consonant with any sense of justice in the tax system that the better off one is the more flaithiúlacht one can be under the covenant system. If one is on a modest income and has a needy relative they are stuck with this percentage.

The restrictions were introduced in 1979. We can ask the researchers to find out what arguments were advanced at that time in favour of their introduction.

I appreciate that the limit of 5 per cent was sensible in a context where there was no limit but I do not agree with the proposition that it is as fair as one can make it. In many respects it is unfair.

I welcome the Minister's amendment. I thank the Bills Office for its help in devising an amendment to cover the particular case referred to. There would be a number of similar cases.

With potentially devastating effects.

The Minister recognised this on Committee Stage and was keen to ensure that the changes in the rules this year would not have a devastating effect on a family.

A specific set of circumstances led to the tabling of this amendment. I am concerned about the way it will be interpreted by the Revenue Commissioners. Inspectors of taxes throughout the country may take a subjective view. Will the Department of Finance set out for the Revenue Commissioners the particular case the Minister is trying to deal with to ensure that a Revenue office will not adopt a certain procedure which will be continued indefinitely? In this regard will the Department issue guidelines?

There will be consistency.

If there is no consistency we will receive representations indicating that the people of Waterford got a good break and that this was not the case in Galway. This should not be the intention. There should be clarity and consistency for the benefit of the families involved.

Debate adjourned.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.