I wish to advise Members of a typographical error. The line references in page 210 of the Finance Bill, 1998, as amended in Select Committee, are incorrectly numbered. The current line numbering on this page of the Bill omits lines 16 to 31, inclusive. This affects amendment No. 92, in the name of the Minister for Finance, which is properly addressed to line 38 and not line 26 due to incorrect numbering.
Finance Bill, 1998: Report Stage.
Mr. Coveney
I move amendment No. 1:
In page 12, between lines 19 and 20, to insert the following:
"3. — Section 15(2) of the Principal Act is hereby amended by the insertion of the following:
‘or
(c) in a case where such individual is a widowed person who has not remarried before the commencement of the year and a qualifying child is resident with him or her for the whole or part of the year, at the rates specified in Part 2 of that Table. A qualifying child shall have the same definition as in section 462(1)(a).'.".
The purpose of the amendment is to allow widowed persons with dependent children to benefit from the tax bands for married people. About 25 per cent of widows, most of whom have dependent children, pay tax at the top rate at present. This amendment proposes that the married double tax bands be applied to widows and widowers. The State should support rather than penalise widowed persons in the trying and often traumatic circumstances in which they find themselves.
The State has handled income tax measures this year by launching an all-out drive to reduce tax rates. However, a more balanced approach, which would incorporate measures such as this amendment, would be more beneficial. It is interesting to note that 18,000 more people are now paying tax at the higher rate than was the case before the budget. I urge the Minister to consider this small extension of relief to widowed persons with dependent children.
Can the Chair clarify the order of debate on Report Stage? I understand changes were made to the format recently.
The Minister can speak twice and the proposer of the amendment can speak three times. The proposer has the right to move his or her amendment and then has the right to conclude the debate. There is no limit on the Minister's first contribution but his second contribution cannot exceed two minutes.
The purpose of this amendment is to grant the same income tax bands which apply to the taxable income of married couples to the taxable income of widowed persons with children attending full-time education. I have a degree of sympathy for the idea behind the proposed amendment. I considered the option of married rate bands for widowed persons with dependent children when I prepared the last budget. In the event I chose another option, to increase the special allowance for widowed parents following the death of their spouse from £1,500 to £5,000 and to taper the allowance over five years instead of three. This would provide a more focused way of giving relief to widowed families at a time when financial pressures can be greatest.
The amendment, if accepted, would cost £2 million in 1998 and £3.3 million in a full year. However, in equity it would be difficult not to extend it to other lone parents, thereby increasing the full year cost to £9.2 million. If the married entitlement to reliefs such as mortgage interest relief were also extended to single parent families, as would seem to follow, costs would be even greater. The Government appreciates that widowed and other lone parents might have particular difficulties but there are serious practical objections to giving them the double rate bands. Double rate bands would only be of value to lone parents taxed at the higher rate, that is, to about 40 per cent of such parents who are on the higher rate. Any concessions, therefore, would apply only to better off lone parents.
Double rate bands are given to married couples because there are two adults to support. This is not the position with lone parents whose present tax treatment essentially falls between that of a single person and a married couple. Such treatment is not unreasonable given that there is only one adult to support. If a concession were made for lone parents because they have children, there would be immediate calls for concessions for such parents with lower incomes, who could not benefit from a doubling of the bands, and for married couples with children compared to married couples without children. As a concession would have already been made for lone parents on the higher tax rate, such calls in equity would be difficult to resist.
The pressure for extending the married rate bands to lone parents arises essentially from the level of the higher rate of tax and the income level at which the rate begins to apply. Cutting tax rates and extending the standard rate band, as envisaged in the Government's programme, will help taxpayers generally, including widowed and other lone parents, and will avoid the difficulties to which I referred. In these circumstances I cannot accept the amendment.
I spent a great deal of time considering the tax position of widows and widowers before announcing the budget. I am greatly influenced in this by my upbringing and I discussed what I could do about it in the budget with the Department's officials. I would have liked to have taken the course proposed in this amendment if it could be confined to widows and widowers. However, in equity I could not justify not extending it to lone parents. By extending the provision to lone parents the cost increases dramatically and such a concession would mean other concessions in the future. With that in mind, I suggested the additional allowance of £5,000 for widowed people which would be tapered down over five years. It is a significant concession.
I respect the Deputy's motives in tabling this amendment. I considered the option but due to the additional costs which would arise, because in equity the concession would have to be extended to lone parents and others, I regretfully concluded I could not adopt it. My sympathies are with the Deputy in this matter. I am greatly influenced by my upbringing as my mother was widowed and left to rear three young boys, of whom I, at four and a half years of age, was the eldest. She was not in a position to pay tax as her income was too low.
However, widows with children are not looked after in our social welfare system as well as they should be. I considered allocating the married rate tax band to widowed people but due to the inevitable additional costs I could not so do. Hence, the proposal to increase substantially the bereavement allowance and to taper it down over five years instead of three.
Mr. Coveney
The Minister has given eloquent testimony of where his heart lies and I appreciate that. There are similarities between widowed and lone parents but the amendment was to cater for widowed persons. There are additional traumatic effects of widowhood — having one's life dashed, sometimes suddenly, and the fact that the surviving spouse might not have been the main breadwinner — a scenario which does not apply to lone parents.
The advice to the Minister was not to dip his foot in that water because of the extended consequences, but I do not accept such consequences necessarily follow. There would be wide sympathy in the community for treating widowed people in a more favourable manner than others, including lone parents. For that reason I will try once again to tug at the Minister's heartstrings, which were evident when he spoke.
If I could be convinced that this could be ring fenced——
As there are other Deputies offering, the Minister might wish to wait before making his second contribution.
While the Minister is sympathetic to widowed people, they are still getting a raw deal. I wish to raise a matter which, if it cannot be discussed in conjunction with this amendment, could perhaps be discussed in the context of other amendments. It relates to carers who become widows. When a carer becomes a widow she is given the widow's pension for the loss of her husband but automatically loses the carer's allowance, despite the fact that she continues to be a full-time carer. Can that be discussed in the context of this amendment?
If I could be convinced this matter could be totally ring-fenced and apply only to widows, I would accept Deputy Coveney's amendment. I gave this matter considerable consideration in the lead up to the budget because this is what I wanted to do. I was not convinced I would be able to restrict the provision to widows or widowers. Inevitably, in all equity, I also had to extend it to lone parents. Even though in the tradition in which I, Deputy Coveney and Deputy McCormack were brought up, there is great sympathy for widows and widowers, after a period of time the provision would have to be extended to lone parents because it would be difficult to defend if it was not. This brings additional cost. If I am convinced between now and next year's budget I will go in that direction.
There are approximately 200,000 widowed persons in the State, of whom around 66,000 are taxpayers. Of these taxpayers, 8,200 are widowed parents. The beneficiaries of Deputy Coveney's amendment would be approximately 2,600 widowed parents who pay tax at a rate of 48 per cent. His proposal would cost £3.3 million per year. In contrast, the increase I made in the widowed parents' bereavement allowance will benefit approximately 3,500 families and will cost £2.5 million per year. More families benefit from my provision at a lesser cost.
My relief is more equitable and provides substantial relief to widowed families at home, where financial pressures are the greatest. There is less than £1 million difference between my change and that proposed in Deputy Coveney's amendment and it is not something about which we should fight. My difficulty is that I was not convinced I could apply the provision to widows and widowers only. Extending it to other categories means a considerably higher cost. If I am convinced, I will put forward the amendment at next year's budget.
What about carers who become widows? If a carer is looking after her husband's bedridden father or mother and she becomes a widow, she qualifies for a widow's pension because she qualified for a carer's allowance. However, she immediately loses the carer's allowance. She is much worse off without her husband and the carer's allowance, despite the fact that she must continue to care for her husband's relatives.
That is a matter for the Minister for Social, Community and Family Affairs, and I will bring it to his attention. I am satisfied he is aware of the anomaly.
Is the amendment being pressed?
Mr. Coveney
I accept the Minister's bona fides and his assurance to look at it in next year's budget.
Amendment, by leave, withdrawn.
Amendment No. 3 is an alternative to amendment No. 2, amendment No. 5 is an alternative to amendment No. 4, and all may be discussed together. Is that agreed? Agreed.
I move amendment No. 2:
In page 12, line 28, to delete "£10,000" and substitute "£10,300".
I did not hear Deputy Coveney's opening remarks and perhaps he did not comment on the point I wish to raise. One hundred pages has been added to the Bill since Committee Stage. It is undesirable that such major renovations happen with such little notice. Deputy McCreevy is not the first Minister for Finance who has found himself in this position.
Over 70 pages of that additional figure are due to two amendments relating to urban and rural renewal, where it is necessary to recite previous urban renewal legislation and a number of townlands. I have been on the Opposition benches and I accept the Deputy's point that the situation is unsatisfactory. Many amendments are tabled after the Bill is published. However, this is the era in which we live and many of the measures introduced are anti-avoidance ones. Perhaps we will improve matters in next year's Bill.
The Minister did not recite enough townlands.
I accept what the Minister said about the two amendments. However, they are not unimportant.
I ask the Deputy to reserve his point until we reach the amendments concerned. On Report Stage, we must deal with the amendments before us.
I will not raise any points on those amendments, but I will raise a point which I think I am entitled to do procedurally. The budget has been brought forward to early December, as distinct from late January. We finished Committee Stage of the Bill last week and have been propelled into Report Stage the succeeding week. This is not a good practice. In addition last week's debate is not on the system. If it is, I cannot access it. By the time the report of Committee Stage proceedings is published——
I understand the proceedings of last week's Committee Stage debate were published this morning.
I am grateful for that information but I do not think any Opposition spokesperson is aware of it. This is critical annual legislation and the Minister put a lot of information on the record during Committee Stage. Some of us would like to take advice on it and it takes a great deal of time to read through proceedings. We have not had that opportunity as they are not on the system. If they were published in conventional form this morning, I, along with a great number of my colleagues, was elsewhere. The Limerick Leader and Limerick Echo were pre-occupying me more than Committee Stage of the Finance Bill. The country must be on auto pilot, judging from the number of the Minister's colleagues I met.
Amendment No. 2 relates to the different architecture of how the parties on this side of the House would have spent the money available to the Minister. The Minister took a great deal of time on Committee Stage telling us he did not give a damn what the Conference of Religious in Ireland, the Combat Poverty Agency, Fine Gael, Democratic Left or the Labour Party said and that he has his views. I will not invite him down that road again because I accept that is the case. Like a predecessor of the Minister, I will not urge on him the views of what was formerly known as the Conference of Major Religious Superiors in Ireland. His predecessor said he distrusted any organisation which had both "major" and "superior" in its title.
Was he right?
He had a point. The name has since been changed.
The Minister has taken up an intensely ideological position on how to spend the money available to him in terms of tax reform. I will not suggest he should have taken on board the views of the Opposition parties or the organisations to which I referred. However, he took up a consciously ideological position which went for reductions in rates rather than giving a nod in the direction of the unique consensus achieved before the budget and the publication of the Finance Bill which favoured concentrating such relief as was available in the area which would best assist people on low and middle incomes.
This was a unique consensus and I am sure the Minister will not dismiss it. He acknowledged on Committee Stage that it existed across the board. It was highly unusual to see employer organisations like ISME coming on board. It was the view of the social partners, the trade union movement and Opposition parties that by concentrating on tax free allowances and widening the tax bands we had a unique opportunity to give some relief to those on low and middle incomes who have been hard pressed over the years, and to take out of the tax net those people who are taxed at a ridiculously low level of income. My amendment is a piece in the jigsaw of widening the tax bands. Deputy McDowell tabled a similarly constructed amendment. Our proposals, taken together with the tax free allowances, would mean a single worker on the average industrial wage would not have to pay tax at the marginal rate. We propose that a single worker should be able to earn £14,600 before he or she has to pay the higher rate of tax.
The Minister seems to think he has given these people a major concession by providing that they now pay the element of their salary liable to the marginal rate at 46 per cent rather than 48 per cent. However, this was not the point; rather it was how soon one becomes liable to pay at the rate of 46 per cent or 48 per cent. The Minister had an opportunity to take people on the average industrial wage off this rate. He also had an opportunity to encourage the trend initiated by the previous Government in assisting people from welfare to work. There is a problem of low pay in the economy. At the same time employers are looking for employees. This has been articulated frequently in the media by way of various stunts. There has also been genuine commentary about the difficulty of getting people to fill certain jobs. In many cases the low rates of pay are an impediment to entry into the workforce. Depending on one's circumstances, there is a barrier to re-entry to the workforce.
The idea behind concentrating on tax reform measures in the way I propose is to assist people from welfare to work, to make it worth their while to go from welfare to work. The Minister, for his own ideological reasons, decided against this and instead went for the PD approach of slashing income tax rates. The optics of this are good; everyone likes to hear they will pay less in terms of the rates. However, people are able to calculate their take-home pay and they know that the other system was more fair, more equitable and more conducive to helping people re-enter the workforce.
When I was in the community centre in Moyross this morning I saw a poster which said, "The budget is an opportunity to create more or less equality in Ireland". There is a consensus not only on this side of the House but also outside the House that the Minister has foregone the opportunity to create more equality and has effectively exacerbated inequalities. This is regrettable as he had an opportunity no Minister for Finance in living memory had in terms of the propitious financial situation he inherited from his predecessor. He could have used the money differently but regrettably he choose to use it in this way. This has set back the path of tax reform.
Deputy Rabbitte said that people will judge the budget and Finance Bill in terms of the extra money in their pockets. Will the Minister confirm that the increases in take-home pay for single and married couples are greater under this Bill than they were under the last three Finance Acts?
We have already travelled this road and we are assembled here to see if the Minister had a Pauline conversion over the weekend. We will soon discover, as the Minister discovered in Brussels yesterday, that people's minds are not so easily changed.
These amendments propose a different way of making income tax reductions. I agree with Deputy Rabbitte that the Minister has adopted an essentially ideological position. We must ask ourselves what tax reductions are for and why we propose them in the first instance. We must have coherent answers to these questions. Inasmuch as I can determine it, the Minister's answer is that he wants to reward people at work and he got a mandate in last year's general election to do it in this way. However, the Minister needs to go a good deal further. The way of reducing tax proposed by this side of the House would do a number of things. It would increase the incentive to work, particularly for people on low and middle income, by reducing the impact of poverty and unemployment traps.
It would also contribute significantly to social partnership. The Minister does not need me to tell him that when the current Partnership 2000 agreement was negotiated, the social partners were given to understand that tax reductions would be carried out in a particular way. There is no doubt, and we know this directly from the mouths of the social partners, that the way in which the Minister has chosen to do it is not helping. It may indeed have exactly the opposite effect.
In moving these amendments, Deputy Rabbitte and I do not really expect the Minister to have changed his mind in the course of last weekend since he has clearly taken this view for some time. We wish, however, to put down a serious marker for next year's budget and budgets in subsequent years. It is correct to say that the Government has a mandate from the people to reduce income tax in a particular way. It is also true to say, however, that the Government changed that proposal some days before the election to include a general proposition in relation to bands and allowances. If we can do nothing more, perhaps we can get some indication from the Minister as to how he sees the balance next year and the year after in relation to the method of reducing tax as between rates, bands and allowances.
Deputy Ahern made the point about people on average incomes. It would be surprising if we were not all a good deal better off because the Minister actually granted half a billion pounds' worth of tax reductions. It would be astonishing if he had not succeeded in substantially improving the position of nearly everybody in our economy. He should be seeking, however, to improve the position of particular people, including those on £8,000 to £10,000 a year and those who are just inside the marginal upper rate of tax, earning £13,500 to £15,000. As Deputy Rabbitte said, those people should be paying tax at 24 or 26 per cent rather than at the higher rate.
I hope the Minister will give serious consideration as to how he will go about reducing taxes and distributing the benefits of growth next year and the year after.
As we approach the end game with regard to the Finance Bill, the Minister has a credibility problem because he certainly talks the good fight——
Here we go again. Personality attacks.
I will deal also with the points that Deputy Ahern made. I did not interrupt him.
The Minister has a credibility problem. We have just dealt with amendment No. 1 on Report Stage which deals with widows. In replying to that the Minster talked the good fight but did not deliver. I accept there may be problems in giving effect to that amendment, but I fail to see why it is not possible to deal with that matter and to include single parents. I accept there would be a cost factor, but in a Finance Bill the Minister is presented with choices and the choices he has taken throughout this budget are working consistently against low earners, the marginalised and those dependent on social welfare.
Deputy Michael Ahern raised the point about take home pay as a consequence of the budget. One of the more significant consequences of the budget is that it flies in the face of the commitment in the joint programme for Government about the numbers of taxpayers who will pay the higher rate of tax. The Minister may argue that the top rate has been reduced, but the proof is — as the Minister said in reply to a parliamentary question — that 18,000 extra taxpayers will pay the higher rate.
We also had the credit union debacle when, regrettably, the Minister's mask slipped somewhat on Committee Stage. The Minister was offered the opportunity by Deputy Noonan to withdraw a derogatory analogy he had drawn between credit unions and mad dogs. Over a period of time from budget day to Report Stage of the Finance Bill, the picture has developed of a Minister who is focused on the interests of those on high incomes rather than low ones.
I invite the Minister to correct the record and withdraw his regrettable comment about credit unions. I was present when the remark was made and, while I accept it may have been delivered in a jocular fashion, it would be remiss of the Minister not to avail of the opportunity to withdraw it now, having had time to reflect.
I do not think the matter is relevant at this stage, Deputy.
It is relevant——
Time has moved on since then.
The Deputy has nothing else to say.
——in so far as we are dealing with the consequences of tax bands for lower income earners and the lack of focus in the Minister's budget as to where the £550 million was focused in his order of priorities. Regrettably, a picture is coming across of a Minister who talks the good fight about the marginalised, but who fails to deliver. In these amendments the Minister has an opportunity which I do not anticipate he will avail of. I invite him to correct the record about credit unions.
Mr. Coveney
I support the view expressed by other Opposition Members. We are not rerunning the general election, but it is clearly more difficult to get across to people that widening tax bands, as well as increasing personal allowances and exemption limits, is more beneficial than simply cutting rates. In reply to a parliamentary question the Minister said 18,000 more people are now on the top rate. Deputy Rabbitte is quite right — it is more important for somebody to remain longer on the lower rate of 24 or 26 per cent than to get a reduction in the top rate. While my party is not opposed to reducing tax rates, we would give more priority to widening bands in order to keep out of the top rate longer, which is of greater benefit to taxpayers, as well as increasing exemption limits and personal allowances.
The Minister's approach is excessively loaded in the direction of rates. It does not deliver to lower and middle income groups in as focused a way as all the Opposition parties would want it to do.
Section 3 of the Bill proposes to extend the standard rate band by £100 for single persons and £200 for married couples. Coupled with this is a two point reduction in both the standard rate of income tax from 26 to 24 per cent and the higher rate from 48 to 46 per cent. These changes are part of an overall personal tax and employees' PRSI package which would cost over £516 million in a full year.
Deputy Rabbitte's amendments would increase the standard rate band by a further £300 for a single person and £600 for a married couple at an additional cost of £40 million in a full year. Deputy McDowell's amendments would go further by increasing the standard rate band by £400 for a single person and £800 for a married couple at a full year cost of £53 million.
The cost of personal tax changes already provided for in the Bill, which represents a significant first step in meeting the commitments set out in the Government's An Action Programme for the Millennium, is the most the budgetary situation will allow for this year. In the circumstances, I am not in a position to accept either Deputy Rabbitte's or Deputy McDowell's amendments.
The Government's An Action Plan for the Millennium envisages, among other things, a reduction in tax rates. The standard rate will fall to 20 per cent and the higher rate to 42 per cent over five years. If circumstances permit, the top rate will drop further to 40 per cent. In addition, personal allowances will be increased and the standard rate band will be widened over the five year period of the programme to ensure that 80 per cent of taxpayers do not pay tax at the higher rate.
The budget proposals contained in the Finance Bill are a significant first step in giving effect to that programme. It has been said by Opposition Deputies that this budget inappropriately focused on cutting rates rather than bands or allowances, and ultimately favoured the rich. As I have already said in my reply on Second Stage, the 2 per cent in both the top and standard rate of tax cannot be characterised as a sop to the rich. Single people on £14,000 per annum are on the top rate. Married couples earning £27,000 and over are also on the top rate. These people are not rich by any stretch of the imagination. There is a genuine wish on all sides to seek a greater equity in the tax system and to ensure that all taxpayers pay a fair amount of tax based on their level of income.
Tax policy is a matter for political choice. The people ultimately decide through the ballot box how they will be taxed. The Government has a mandate for tax proposals in the budget which it received from the electorate in June l997. I can hardly be faulted for implementing what was promised in the election and for which the people voted.
Deputy Rabbitte made reference to CORI, the Conference of Religious of Ireland. In reply to a recent Dáil question and again on Committee Stage, I quoted the comments of CORI on the budgets of 1995, 1996 and 1997 brought in by the Government of which Deputy Rabbitte was a member. That did not receive much publicity but in the past few weeks a well known columnist who writes a weekly article for one of the national newspapers quoted CORI's view of the budgets of l995, l996 and l997. Remarkably, the phraseology used by that columnist was more or less the same as that used about my l998 budget.
Deputies, and particularly Deputy Rabbitte, were anxious to quote CORI when speaking about my budget, so it is a fair political point to quote CORI on the budgets of l995, l996 and l997. It is the job of CORI or any other pressure group to make worthwhile suggestions about the taxation system, but it is obvious that the only time we will hear favourable comment from CORI is when a Government brings in a budget which includes its suggestions.
I enjoyed Committee Stage of the Finance Bill not only this year but in previous years also. For as long as I have been in this House I have contributed to Committee Stages of Finance Bills, whether in Government or Opposition or on the front or back benches, and have given my views on tax rates versus bands and allowances. My argument in that regard relates to the intellectual dishonesty of some people participating in this debate. Over a period of years they gave the impression to many people that there is only one way of reducing taxation and that is by concentrating solely on allowances and bands. There is not only one way and I object to the people who have succeeded in getting across that message.
Four or five years ago that issue was not a major part of the debate. This is a recent Irish argument and the opinion makers, if one wants to use that term, have come around to this particular view. Many of them are simply following what other people say but this was not the consensus a number of years ago and it was not the imposed dogma. All my life I objected to accepting dogma from anyone, particularly in my own party, and my record as a politician will bear that out.
I do not want to dispute with Deputy Rabbitte, who may have a different intellectual viewpoint in this regard, or Deputy McDowell, who may have been one of the opinion makers who said there is only one way to reduce taxation, but the majority of people in this House do not agree with that view. They are going along with it now because it is the political "in thing" to do and they will not attract unfavourable headlines and commentary if they do so. I do not agree that the only way to reduce taxation is through bands and allowances. It will have to be done through a combination of bands, allowances and rates. I believe Deputy Coveney, who is not his party's spokesperson on finance, is of the same view. It is not necessarily the view put forward by his party on this occasion but it was his party's view for many years. That is no longer the position because everybody has fallen into this cosy consensus. It is incumbent on me to reduce taxation through a combination of allowances, bands and rates.
As a Member of this House for the past 21 years I have seen at least 21 budgets as well as a number of mini-budgets and I know that a piecemeal approach to a particular problem does not solve anything. Over the five year lifetime of this Government we will significantly reduce taxation by concentrating on all of those areas.
High nominal tax rates are a clear disincentive to work and enterprise, to the people both at the lower and upper ends of the income scale and to employers. High tax rates are a disincentive in all forms of activity, be they in the income or capital taxes spheres. People may describe this as an ideological position but I believe it is better to give people incentives at all levels of the scale because that is where the greater good will be achieved. Deputy McDowell said either on Second or Committee Stage that that may have been the position of the left in the 1960s and early 1970s but that the left has changed its position over the years. I am glad that is the case but there is a lingering doubt in that regard among the left wing of Irish and European politics.
Deputy Jim Mitchell gives me credit on occasion for predicting in the late l970s, before I became a Member of this House, that there would be 300,000 people unemployed in a certain number of years, which turned out to be correct. In regard to the consensus in Ireland that there is only one way of reducing taxation, which is copied from our European partners, I predict that in the next five years the consensus in Germany, France and other EU states will change. There is evidence to suggest there is a move away from that opinion in Germany and other countries and we should ask why that is the case. The answer is that this approach to the taxation system did not work. It did not offer incentives to people or lead to a growth in the economy. It has been a constraining factor. Hopefully some of us will be here in a few years' time to discover who was right on this particular matter and see what the other European countries did in that regard.
It is not a coincidence that on the two occasions in the past 25 years when Labour and Fine Gael were in Government, nominal tax rates were enormously high. In the period 1973-7 the top rate of tax was as high as 77 per cent. There were rates of 35, 45, 55, 65 and 70 per cent. The Minister for Finance then introduced a 10 per cent surcharge so that the 35 per cent rate became 38.5 per cent and the 70 per cent rate became 77 per cent. When that Government left power the top rate was 62 per cent, or perhaps higher. In the period 1982-7 the top rate of tax was reduced from 62 per cent to 58 per cent. In the period post-1987 the rate was reduced to 48 per cent. The Opposition certainly favours high tax rates.
People whom I regard as having the utmost common sense who wrote about this matter went off on a tangent about rates and bands while saying nothing about the nominal rates. Some people put forward the view that nominal rates should have been maintained as high as possible, with the ultimate logic that the best rate would be 99 per cent. That is what people advocate who do not speak about the nominal rates of tax. Taxation should be reduced by a combination of bands, allowances and tax rates.
Deputy McDowell referred to what the social partners understood to be the Partnership 2000 arrangements. He said it was put to them that we would proceed in one way only. As I said on a radio programme, that was never the understanding. The Deputy is referring to option P, an illustrative document outlining for trade unions the possible position. The leader of Deputy Rabbitte's party, then Minister for Social Welfare, said that the Government's hands would be tied in that regard. Immediately after the option P document issued to trade unions, the document was incorporated in an illustrative package which one of the largest trade unions sent to its members. The general secretary of the Irish Congress of Trade Unions issued a letter, which is available, stating that no commitment was given that we would proceed in a certain way. In discourse with one of the leading trade unions in a radio studio shortly after the budget, that point was not contradicted, nor has it been referred to since.
Like many commentators, Deputy Creed, when referring to my comments on Committee Stage, gave the impression that the Minister is on the side of the rich. As a result of the budget, the after tax position will be as follows. In the case of a single person, the gains range from more than 2.5 per cent to almost 4 per cent. For married couples the gains range from 2.5 per cent to 3.5 per cent, and up to 5.5 per cent in some cases. In the case of a single person on £14,000 per year, the average tax take has been reduced from 28.2 per cent in the tax year 1996-7 to 22.4 per cent in 1998-9. In the case of a married couple on the same level of income, the average tax take has been reduced from 21.3 per cent in 1996-7 to 16.9 per cent in 1998-9. The 2 per cent reduction in both income tax rates will reduce the marginal tax rate of one million taxpayers.
The increase in take home pay for most workers after the Partnership 2000 increases will be in the order of 4.5 per cent to 5.5 per cent, with increases close to 7 per cent in the case of some married couples. Many workers on lower pay — for example, most single workers on incomes less than £13,000 per annum — will get more from this year's budget than they got from the 1997 budget. In this budget I did more to change the rules about tax shelters than was done by any Minister in a long time — I cannot remember when a Minister brought in such significant changes relating to tax shelters. That will widen the taxation base and ensure everybody pays a fair level of taxation.
On Committee Stage Deputy McDowell referred to minimum taxation. That question was raised with me when in Opposition. Interesting studies have been carried out in this regard and I am convinced the abolition of tax shelters would be more effective. If we set a minimum tax rate for high income earners we would be encouraging them to reduce their tax to that figure to avail of the shelter. A study carried out by the Revenue Commissioners of people with incomes in excess of £250,000 showed that a relatively high proportion of those earners pay tax at more than the average rate. If a minimum rate was introduced, there would be a danger that people would aspire to that rate. That is, however, a point that may be considered at a future date.
Deputy Creed made political charges about my comments on Committee Stage regarding credit unions. I did not make those remarks. In fairness, the Deputy said that the statement was made in a jocular fashion. From my experience of the credit union movement, my advice to future Ministers for Finance would be to beware of credit unions — I will leave that caption over the door. It is advice which I will take to heart.
The Minister is right in that option P is not explicitly written into the Partnership 2000 agreement. Some people felt they could not bind future Ministers for Finance to specific proposals of the kind we have been talking about. I think I am right in saying — the Minister will correct me if I am wrong — that options A to O include a variety of possibilities, all of which involve changing bands and allowances in a particular way. It is some time since I had the opportunity to read through those options but I am not clear the option the Minister took was discussed with the social partners as a serious possibility. I would be surprised if it was discussed with them. Therefore, while it is not down in black and white and it is not explicitly part of the agreement, there is no doubt that the social partners, and in particular the trades unions, were under the impression that the major thrust of income tax reduction would be done in the way we have been arguing on this side of the House. The reason they wanted assurances to that effect was that they wanted to be able to go to their members on low and medium incomes and say that they would receive benefits of this kind or that from likely budgetary changes in future years, and it is only right and fair that they should have been given information to that effect.
The Minister makes the point that the left in previous years was in favour of very high marginal rates of taxation and he suggested the logic was that we should want 99 per cent taxation at one point. I take it that was intended as a debating point.
Nonetheless, it is fair to say that the left now would speak about income tax less in terms of redistribution and more in terms of the incentive to work. If the Minister has been listening to my argument and that of Deputy Rabbitte, he will have heard the argument about the incentive to work. The imperative must be to remove the unemployment traps and the poverty traps. This is all geared at the incentive to work because we accept that the best way in which one can redistribute wealth and opportunity is by giving people jobs and the wherewithal to earn more money.
In fairness to colleagues who have tabled amendments on other matters, a Cheann Comhairle, take these as my concluding remarks.
In terms of job satisfaction, I enjoy the Minister because he is one of the few ideological politicians left in the House and I respect his view. I think he is wrong, but I respect his view. He argues a very clear ideological position and he goes on to justify it with his memories of bogeymen of the left of the past when he was at university, etc. The world has changed. There is no point throwing up the 77 per cent top rate of income tax in the present debate. We can all go back and state who was responsible for a 77 per cent rate having to be introduced in the first place, but it would take us nowhere. When he refers to it being fashionable now to concentrate on personal tax allowances and the widening of the bands, does it ever occur to the Minister that that fashion has come into existence because we are no longer dealing with the astronomical high rates of tax of 20 years ago to which he referred?
The Minister went on to make the point himself when he predicted that the situation in Europe will turn around in the next five years. Ireland's rates of tax are not out of line with those in almost any European country other than Britain, if that is a European country at present — I imagine it will become one soon. In fact, some of our tax rates are better than those which are operable in other European countries, but the problem is that it bites too soon. One reaches the marginal rate of tax in Ireland at an absurdly low level of income.
I accept that.
With respect, the Minister does not accept that because if he did he would accept the thrust of the argument from these benches, which is that the top rate of tax should not bite so early and that a person ought to be able to retain more of their income at the 24 per cent or 26 per cent rate before he or she becomes liable to the 46 per cent or 48 per cent rate. That is the net point. We are not comparing like with like.
We on this side of the House do not need the brilliant minds which are available to the Minister in the bull pen to be able to work out average figures which show that the typical worker benefits by 2.5 per cent to 4 per cent. One can prove anything with such statistics but it does not change the equity argument, which is that there were two things which we were trying to do: one, encourage people to come off welfare and take up work; and, two, ensure a person would enjoy the standard rate of tax until he or she was on a decent level of income. Essentially, those were the two points. There is no manipulation of figures or presentation of averages. We have all been down that road and nobody knows it better than the Minister. He knows well that one can do a great deal with figures and make them look one way or another. Deputy Creed can state that there are 1.2 per cent more people now paying tax at the marginal rate than there were before the Minister started, but that gets us nowhere.
We did not really expect the Minister to do a volte face. I do not know whether his tenure of office will be longer or shorter as a result of the by-elections. Today his Cabinet colleagues say that we will all be ruined before the year is out if they lose these two by-elections. In the past few days stability has become the issue and in the aftermath we will see how badly Government stability is affected.
Never count one's chickens.
Deputy Healy-Rae is around today anyway. They are all right.
The issue we were probing was whether he gave any credence to this argument in terms of forthcoming budgets and Finance Bills. From what the Minister has said about nominal rates of 20 per cent and 40 per cent, we are going to get more of the same. We will, as Deputy Coveney stated, be able to sell that because we believe it strikes a chord and is more resonant with the people. Rates of 20 and 40 per cent look neat and good as distinct from people's take home pay. I have more confidence than that in the people, notwithstanding the result of the general election. I believe they can figure out their take home pay and what is equitable, because at the end of the day there are public services to be run and public servants doing essential jobs to be paid.
I do not know anybody inside or outside this House who believes in a 77 per cent marginal rate of tax or who would go along with the Minister's argument that because we are saying he should focus the relief on middle income earners means 77 per cent is a tremendous argument. What kind of logic is that? As the Minister well knows, one of the reasons nobody with a tither of intelligence would believe that is that no super earner nominally liable at 77 per cent would pay 77 per cent. There have been a plethora of shelters in existence. If such a person had expert tax advice, he or she could avoid that. It is to delude oneself to think that because there is a punitive marginal level of tax, super high earners will be caught and we can all feel they are making their proportionate contribution to running this economy. That is not the case.
The Minister is unfairly ascribing to people on this side of the House an argument or affliction of some years gone by which was produced originally in terms of the 1977 package which, if I am correct, probably brought the Minister into the House.
Correct. Were we not lucky?
That was the beginning of the slide downhill. I am not referring to the Minister's entrance to the House because he has added to the gaiety of nations.
The 77 per cent rate was introduced by the Labour/Fine Gael Coalition which held office between 1973 and 1977.
Unlike the Minister, I cannot remember back that far.
The Deputy should remember because he and I are roughly the same age.
I recall that there was an oil crisis during that period and I cannot understand how decisions made in 1977 helped that situation.
These amendments seek to create incentives for people returning to work and encourage relief for middle income earners. I regret that we are not going to obtain either, particularly in view of the fact that the Minister has mollified the Progressive Democrats. That party is not going anywhere because it is caught in a lover's grasp. If the Tánaiste, Deputy Harney, was to let go, she would tumble into the river. Therefore, the Minister can relax. If he reverted to the more social democratic Fianna Fáil position he would be widely applauded inside and outside the House.
Question, "That the figure proposed to be deleted stand", put and declared carried.
Amendment declared lost.
Amendment No. 3 not moved.
I move amendment No. 4:
In page 12, line 33, to delete "£20,000" and substitute "£20,600".
Question, "That the figure proposed to be deleted stand", put and declared carried.
Amendment declared lost.
Amendment No. 5 not moved.
Amendments Nos. 6, 11 and 13 are related and may be discussed together by agreement. Is that agreed? Agreed.
I move amendment No. 6:
In page 12, between lines 35 and 36, to insert the following:
4. Section 46(7) of the Principal Act is hereby amended by the insertion after ‘spouse' in both places where it occurs of ‘or other relative prescribed in that behalf by regulations made by the Minister'.".
This amendment was not discussed on Committee Stage because we ran out of time. The Minister will be aware of the genesis of the amendment and those in the names of Deputies Rabbitte and Coveney.
The Carers' Association met with the Minister for Social Welfare and the Minister of State at the Department of Justice, Equality and Law Reform, Deputy Mary Wallace, in advance of the budget and its representatives were given reason to believe that a number of uncostly amendments would be included in it. The Minister for Finance included one of those proposals in his budgetary statement on 3 December, namely, the calculation of FIS on the basis of net earnings. However, it must be stated that this commitment is contained in the Partnership 2000 agreement. The Carers' Association argued that a similar application should be made in respect of carer's allowance and that it should be assessed on the basis of net rather than gross pay.
To return to the main debate, one part of those proposals relates to the Finance Bill, namely, the allowance paid to people employed to care for an incapacitated person. At present, that relief is confined to care for oneself or expenditure incurred in employing someone to care for oneself or one's spouse. I understand that a persuasive argument has been made by the Carers' Association and others that this relief should be extended to include costs incurred in employing someone to care for parents, siblings or children. The amendment tabled in my name would allow the Minister to prescribe the relatives to whom this relief could be extended. The amendments tabled by my colleagues are clearer and more prescriptive in stating exactly to which relatives the provision should relate.
The case in favour of accepting the amendment is persuasive. On Committee Stage, we had lengthy discussions and anecdotal conversations about people we met in Limerick and North Dublin. Everyone knows people with incapacitated children who have incurred considerable costs, either in employing someone to care for those children or in caring for them themselves. Amendment No. 6 proposes the provision of a relatively modest assistance to those people in respect of part of the costs incurred in caring for children. The same argument applies equally to parents. Everyone is familiar with people who care for elderly parents and whose social lives are severely restricted by having to spend a great deal of time caring for their loved ones.
The amendment suggests the provision of a modest relief which would give people some recognition and assistance. It would also provide employment and save money for the State in so far as some of the incapacitated people to whom I refer would otherwise have to be cared for in day care or residential care. This would cost the State a great deal of money.
I support Deputy McDowell's amendment. On reflection it provides a better way of dealing with this matter than that suggested in amendment No. 11 tabled in my name. As Deputy McDowell stated, amendment No. 11 is more prescriptive and it defines the relative as "a parent, sibling or child". At present, tax relief is confined to care of oneself or one's spouse. My amendment seeks to extend that in respect of the specific relationships to which it refers.
Amendment No. 6 ought to recommend itself to the Minister because it gives him the authority and discretion to decide by way of regulation what extension of the relief he believes fair and justifiable and which could be managed in a given year. One would not survive in this business without a shell of cynicism but it is difficult to be cynical when one encounters people seeking to care for a relative or a member of their family who is incapacitated. That is extremely onerous and it often falls to women to bear the burden. The State gives minimal recognition in this regard, notwithstanding the fact that the alternative would be immensely costly to the State and the taxpayer. On Committee Stage we discussed tax incentives to improve the infrastructure for nursing homes and acknowledged that the demographic portents for the future are such that we have made inadequate provision for that situation. Having regard to the alternative, amendment No. 6 would provide a fair, equitable and less costly way of dealing with this matter.
I am anxious to hear what the Minister has to say in respect of the calculations. The amendments tabled by Deputy Coveney and I specify the categories of families to whom we would extend the tax relief. Amendment No. 11 states that section 467 shall apply to a parent, sibling or child of an incapacitated individual. Deputy McDowell's amendment leaves the Minister with the discretion of deciding to whom he would immediately choose to extend the tax relief. I plead with the Minister to acknowledge the hurt in the community at a time when the economy is doing well. It is usually the mother in a family who bears the enormous burden of additional care imposed on her and there is no recognition of it other than the tax relief confined to care of oneself or one's spouse. For example, mental handicap is not provided for sufficiently.
Of what is the Minister fearful in accepting Deputy McDowell's amendment? It puts him in charge because it provides that he will make the regulations as appropriate. If they had to be dictated by available finance so be it but it gives the Minister of the day the discretion to make an important reform.
Mr. Coveney
Three parties have come with a similar proposal without consultation. Deputy McDowell's amendment would give discretion to the Minister and while I would not be unhappy with that, I would prefer to be more specific. The Minister proposes to increase by £1,000 the income tax allowance in respect of the cost of employing a person to take care of an incapacitated spouse. We propose to extend the relief to cover the taxpayer or his or her spouse's parents, brothers and sisters or children. The present scheme is restrictive and the take up of it is relatively small. I urge the Minister to take on board Deputy Rabbitte's or my amendment, although I see merit Deputy McDowell's amendment. His amendment would commend itself to the Minister given that he would have more control if he were to adopt it. However, the three amendments seek a significant extension of the present scheme and I hope the Minister will recognise the unanimity on the principle.
These amendments propose that the allowance granted to an incapacitated person or to the spouse of an incapacitated person in respect of a person employed to take care of the incapacitated person be extended so as to be available to the incapacitated person's parents, siblings or children. I have sympathy with the amendments and there is a commitment in the Government's programme to provide tax relief for those caring for the elderly and the incapacitated in the home. Arising out of this commitment, I announced in my budget speech that I have set up an interdepartmental working group to examine for the next budget the question of tax reliefs for those caring for family members in the home. I want to come up with a targeted relief at a reasonable cost which will complement health and social policy measures in this area. An amount of groundwork needs to be done before it can be decided what form of tax allowance for carers might be most appropriate.
The current tax system has a number of personal income tax allowances which are related to the care of incapacitated or dependent individuals. These are the dependent relative allowance, medical expense relief, covenant relief and the carer's allowance under section 467.
These provisions are varied and have developed in an ad hoc way at various times in order to meet different needs. I want to examine fully these reliefs and their interaction and I hope to bring forward proposals relating to the question of care in the community for the next budget.
Deputy Rabbitte asked the cost of the proposals put forward by Deputies. It is difficult to cost these proposals and we can only do so on a tentative basis. It is assumed that the proposal would permit some taxpayers currently claiming the smaller dependent relative allowance of £110 to opt for the incapacitated taxpayer allowance of £8,500. Information from the Revenue files indicates that the number claiming the incapacitated taxpayer allowance is about 400 while the number claiming the dependent relative allowance is about 24,000. If we assume that half the taxpayers already claiming the dependent relative allowance would be entitled to claim the incapacitated taxpayer allowance, the additional cost associated with the proposal is estimated to be £33.5 million.
Would that include the three categories?
Yes. The dependent relative allowance is a small relief which 24,000 people claim. There is a good reason why some people should claim it which relates to claiming of medical expenses related to the person for whom the allowance is claimed. Only 400 people opt for the incapacitated taxpayer allowance, which is £8,500 to be claimed against taxable income. The purpose of the amendments is to extend this allowance to the siblings or children. At present the allowance is given to the incapacitated taxpayer who pays a person to look after them. The £33.5 million cost is calculated on the basis that half of the 24,000 claiming the dependent relative allowance will claim the incapacitated taxpayer allowance of £8,500.
In the lead up to the great events of June 1997, a commitment was given in the Fianna Fáil policy document on taxation changes to give a tax free allowance at the standard rate to carers, women at home and people paying childminders. In the 1998 budget I was not in a position to go ahead with this relief because I concentrated the tax changes on matters discussed many times in House. However, I set up an interdepartmental working group to examine this proposal before the next budget. I am convinced of the need for a change in this regard from my experience as a Deputy and my time as Minister for Social Welfare. When the social welfare carer's allowance was introduced it was subject to a means test for Exchequer purposes and very few people qualified. Over the years the rules have been relaxed and more people qualify. However, the number remains a very small percentage of the total number of carers, while an even smaller number again receive the full carer's allowance.
I agree with Deputies that something needs to be done. Many people care for incapacitated people in their own homes, without any contribution from the State, and the Exchequer would not be able to provide the cost of care in hospitals or homes. Their contribution in society must be recognised and that is why I put forward the idea of a tax relief on the carer's allowance in the Fianna Fáil election manifesto and carried it over in the programme for Government, but due to budgetary constraints I was not able to do so this year. However, it is under examination for the next budget.
It is possible to get over the non-availability of the carer's relief through taxation planning. One covenants an amount of money to the incapacitated person which will allow the donor to obtain tax relief and the recipient to claim back tax. I accept many taxpayers will not bother going down that road for one reason or another. However, it is a mechanism to get over the problem alluded to in the amendments. It will be examined prior to next year's Finance Bill in conjunction with the other matters relating to the interdepartmental working group which hopefully will bring forward proposals to meet the concerns expressed by Deputies.
Will the Minister comment on the specific amendment that would put him in a position to make regulations when he is ready to address the problem? He did not deal with that in his reply. Deputy Coveney's amendment and mine specify categories. I am surprised the sum of money per annum is as low as the Minister suggested. It is apparent no work has been done in terms of the other costs incurred as a result of our doing nothing. This is a factor aside from the question of compassion and it ought to be taken into account. It is not as punitive as I thought but it does address why the Minister will not take on the power to make regulation, if and when he is ready to make a concession in this direction. It is difficult to explain to people in grave personal circumstances when the economy is doing well why some relief or assistance is not available to them in terms of bearing a family burden.
I am surprised at the reason given by the Minister as to why he did not act on this in the budget. He said it was because of financial constraints and choices he had to make in terms of reducing taxes. I am surprised he should put it so boldly. It is extraordinary that he could not find the £20 million or £30 million necessary to make the proposed changes in the context of a current budget surplus in excess of £1 billion and reductions in income tax of over £500 million.
The Minister condemns himself out of his own mouth when he says this because he will then turn to us indignantly when we accuse of him of favouring the better off and claim with injured innocence that he is doing nothing of the kind. He said he made choices and this is the wrong one. Even if he wanted to stick to his income tax reduction programme and spend more money — his spending targets daft, as they were, were shot long since despite all the creative accounting last October — it would not have damaged his budgetary targets excessively to have found the £20 million or £30 million to go down the route that has been suggested.
I take his point that this is a complex area and that the dependant relative allowance and covenanting are other ways to deal with this. However, those measures would be a good deal less generous to the people involved than the proposal that has been made, for which I do not claim credit as it came from the Carers' Association. I tabled my amendment not because I believe giving the Minister power to make regulations is the way to go but because I thought it offered a better prospect of appealing to him by allowing him to take on the power whenever he would so choose and also give him a control over the costs that might be incurred in implementing it. I hope in that context the Minister will consider it more favourably.
Mr. Coveney
The people involved are in need of greater support. The present scheme is very restrictive and it is self-evident that the take up on it is small. There is a strong desire among the public for the Government of the day to tackle this issue. In that context I defer to Deputy McDowell's amendment because it is a more attractive option for the Minister as it would give him time to introduce it on a more gradual basis. Will the Minister accept Deputy McDowell's approach which is less specific than mine but is the same in principle?
It was in recognition of the problem that exists that I made a commitment in the Fianna Fáil election manifesto and the programme for Government in this regard. Time spent in Opposition gives one time to reflect and come up with new ideas and one of ours was that a tax allowance would be provided in this area. We were so convinced it was included as part of the election campaign and it will be honoured during the lifetime of the Government. I did not want to take a piecemeal approach similar to Deputy McDowell's and am not prepared to follow that route. I announced in the budget speech that I would set up an interdepartmental group to come up with a targeted and focused way of providing relief.
I do not generally favour giving power to the Minister for Finance to make regulations on taxation matters but I take the Deputy's point in this regard. I do not mind giving powers to the Revenue Commissioners even though certain powers are given to me in the Finance Bill and the previous Minister gained some also. I do not want to take on powers to prescribe what category of carer will get this relief because I will then be dealing with the matter in a piecemeal fashion. The interdepartmental group will produce a report and I will act on that. The commitment in the programme for Government is to move in this area.
Deputy McDowell stated this was a case of my targeting the rich rather than the poor. That is far from the reality. I put forward the idea of a carer's relief in Fianna Fáil's election proposals and I will do something about it. The other parties did not make such a proposal, but everyone now wants to make political capital of the issue.
Deputy McDowell is wrong to suggest that extending the carer's allowance would benefit the less well off in society. They are entitled to the carer's social welfare allowance. This is a tax relief that would benefit only those who are paid substantial amounts of income. The real benefits would accrue to those paying the top rate of tax. The Deputy's proposal does not stand up to logical scrutiny.
I accept that general point.
As I said in reply to Deputy Rabbitte, the figures I put forward as a costing for this proposal are tentative. It is important to put that on record in case they turn out somewhat differently. We are not sure what the actual costs of the relief would be. I merely gave a calculation of what they might be.
I am confused by the plethora of working groups the Minister has set up to deal with these related issues. Will he confirm if the same working group is examining the question of child care and crèche costs? I believe I am correct in stating the Minister's party committed itself in its election manifesto to allowing up to £2,000 against tax for that purpose. Is the same working group dealing with that matter?
Yes.
The learned gentlemen behind the Minister are shaking their heads.
An interdepartmental group is reviewing the carer's allowance scheme, but there is also a group dealing with child care.
There are also the associated issues of basic income, child benefit, child dependant allowance and other related issues.
Yes.
Are they being dealt with separately or together? What mechanism is being used to deal with those issues?
I am sorry the Minister did not find it possible to accept the amendment I put forward in good faith today. It would have given him a power I would not normally choose to give him. It would have given him discretion to make this concession to a very deserving section of society.
Amendment put.
The Dáil divided: Tá, 41; Níl, 72.
Tá
- Barrett, Seán.
- Belton, Louis.
- Boylan, Andrew.
- Browne, John (Carlow-Kilkenny).
- Bruton, John.
- Burke, Ulick.
- Carey, Donal.
- Cosgrave, Michael.
- Coveney, Hugh.
- Crawford, Seymour.
- Creed, Michael.
- Currie, Austin.
- O'Keeffe, Jim.
- Deenihan, Jimmy.
- Durkan, Bernard.
- Enright, Thomas.
- Farrelly, John.
- Fitzgerald, Frances.
- Gilmore, Éamon.
- Gormley, John.
- Hayes, Brian.
- Higgins, Jim.
- Higgins, Joe.
- Higgins, Michael.
- Kenny, Enda.
- McDowell, Derek.
- McGahon, Brendan.
- McGinley, Dinny.
- McGrath, Paul.
- Mitchell, Olivia.
- Naughten, Denis.
- Neville, Dan.
- Deasy, Austin.
- Perry, John.
- Rabbitte, Pat.
- Reynolds, Gerard.
- Shatter, Alan.
- Stagg, Emmet.
- Stanton, David.
- Timmins, Billy.
- Yates, Ivan.
Níl
- Ahern, Michael.
- Ahern, Noel.
- Ardagh, Seán.
- Aylward, Liam.
- Briscoe, Ben.
- Browne, John (Wexford).
- Byrne, Hugh.
- Callely, Ivor.
- Carey, Pat.
- Collins, Michael.
- Cooper-Flynn, Beverley.
- Coughlan, Mary.
- Cowen, Brian.
- Cullen, Martin.
- Daly, Brendan.
- Davern, Noel.
- de Valera, Síle.
- Dempsey, Noel.
- Dennehy, John.
- Doherty, Seán.
- Ellis, John.
- Fahey, Frank.
- Fleming, Seán.
- Flood, Chris.
- Foley, Denis.
- Fox, Mildred.
- Hanafin, Mary.
- Harney, Mary.
- Haughey, Seán.
- Healy-Rae, Jackie.
- Jacob, Joe.
- Keaveney, Cecilia.
- Kelleher, Billy.
- Kenneally, Brendan.
- Killeen, Tony.
- Kirk, Séamus.
- Brady, Johnny.
- Brady, Martin.
- Brennan, Matt.
- Brennan, Séamus.
- Kitt, Michael.
- Kitt, Tom.
- Lawlor, Liam.
- Lenihan, Brian.
- Lenihan, Conor.
- Martin, Micheál.
- McCreevy, Charlie.
- McDaid, James.
- McGennis, Marian.
- McGuinness, John.
- Moffatt, Thomas.
- Moloney, John.
- Moynihan, Donal.
- Moynihan, Michael.
- Ó Cuív, Éamon.
- O'Donoghue, John.
- O'Flynn, Noel.
- O'Hanlon, Rory.
- O'Keeffe, Batt.
- O'Keeffe, Ned.
- O'Kennedy, Michael.
- O'Rourke, Mary.
- Power, Seán.
- Reynolds, Albert.
- Roche, Dick.
- Ryan, Eoin.
- Smith, Brendan.
- Treacy, Noel.
- Wallace, Dan.
- Wallace, Mary.
- Walsh, Joe.
- Woods, Michael.
Tellers: Tá, Deputies Stagg and Barrett; Nil, Deputies S. Brennan and Power.
Amendment declared lost.
We proceed to amendment No. 7. Amendments Nos. 8, 9 and 10 are related. For the purposes of discussion and debate I suggest amendments Nos. 7 to 10, inclusive, be taken together. Agreed.
I move amendment No. 7:
In page 13, line 11, to delete "6,300" and substitute "7,000".
We have had a debate on the issue of each of these amendments already. In deference to colleagues I will not go back over the debate. The amendments provide the missing pieces of the jigsaw of the alternative architecture. The Minister has had his way. He has not promised to mend his ways in the future and I do not suppose he will do it now. I am happy to allow it proceed without debate.
Question, "That the figure proposed to be deleted stand", put and declared carried.
Amendment declared lost.
I move amendment No. 8:
In page 13, line 13, to delete "6,300" and substitute "7,000".
Question, "That the figure proposed to be deleted stand", put and declared carried.
Amendment declared lost.
I move amendment No. 9:
In page 13, line 14, to delete "3,650" and substitute "4,000".
Question, "That the figure proposed to be deleted stand", put and declared carried.
Amendment declared lost.
I move amendment No. 10:
In page 13, line 15, to delete "3,150" and substitute "3,500".
Question, "That the figure proposed to be deleted stand", put and declared carried.
Amendment declared lost.
I move amendment No. 11:
In page 13, between lines 31 and 32, to insert the following:
"5. —The provisions of section 467 of the Principal Act shall apply to a parent, sibling or child of an incapacitated individual who pays or contributes to the employment of a person for the purposes of having the care of the individual who is so incapacitated.".
Amendment put and declared lost.
I move amendment No. 12:
In page 13, between lines 31 and 32, to insert the following:
"5. —For the purpose 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.".
We did not have an opportunity to hear the Minister's views on this amendment on Committee Stage. Its purpose is to provide for a situation where cohabiting couples would be regarded, for the purposes of income tax assessment, as married. Deputy Michael Higgins remarked to me that he has heard it said that cohabiting is more stressful than marriage — a compelling reason to support the amendment. I am willing to take that advice.
This is an amendment I have tabled during the years. I remember being advised by one of the Minister's predecessors that it would have to await the enactment of divorce legislation. The social welfare and income tax codes treat this phenomenon in society differently. Under the social welfare code where the State gives money away it regards cohabiting couples as married whereas in the collection of tax it regards them as single. That is an anomaly. We have had the divorce referendum and the legislation has been passed. There is still extensive evidence of the phenomenon of cohabiting couples. It was predicted that the divorce legislation would mark the end of civilisation as we know it but it has not turned out that way. It is an inequity and unjust to those who find themselves in these circumstances.
I would like to hear why the Minister was not ready to deal with this phenomenon in the Bill. It is difficult to understand how he can treat it differently under different codes. Having regard to the fact that the divorce option is now part of the law, it is especially compelling that we dispose of and tidy up this anomaly.
If the amendment is accepted, what would the implications be for such couples in terms of capital gains tax and capital acquisitions tax?
I endorse what Deputy Rabbitte said. The position is inequitable and unfair to tens of thousands of people who are living together as man and wife. I expect there would be anomalies if the exact wording of the amendment is accepted where somebody married to a third party and living with somebody else could, theoretically, claim allowances on two levels. This would create a difficulty. The sentiment behind the amendment is clear. I am sure the Minister appreciates where Deputy Rabbitte and I are coming from. In the 1990s there are many forms of family set-up. We do not need to reflect on them from a moral point of view to accept people are making choices they might not have made a generation ago. It is only fair that those legitimate choices should be reflected in a fair way in the tax code.
This matter was the subject of a brief debate on Committee Stage when I declared a personal conflict of interest in the matter in that I am one half of a cohabiting couple. Changes in taxation law, therefore, would affect me directly. Because of this I indicated that I would prefer to await the proposals of the inter-departmental group which is considering the matter. It would not be fair to allow my personal circumstances to influence taxation law. If I was not so constrained, I might, possibly, have given the amendment some further thought.
The amendment proposes to treat cohabiting couples in the same way as a married couple for income tax purposes. In support of the proposal, emphasis is often laid on the fact that cohabiting couples are treated the same as married couples for social welfare purposes. What needs to be remembered in this argument is that the social welfare provision is designed to prevent cohabiting couples from getting better treatment than married couples. Deputy Rabbitte may be aware that a similar provision also exists in the tax code whereby a cohabitee is debarred from the single parent allowance or the special bereavement allowance for widowed parents. These provisions arise from the cases of Murphy v. the Attorney General and Hyland v. the Minister for Social Welfare where it was held that, in so far as families based on marriage may be comparable with other groups of society, the taxation laws should not place such families at a relative disadvantage because to do so would amount to a failure in relation to the constitutional requirement to protect the family and guard the institution of marriage.
On the other hand, granting relief to cohabiting couples is a different matter and raises a number of legal and administrative issues which need to be addressed before a decision to grant relief in this area could be made. I presume it would be common ground that relief should be confined to those instances where there is a genuine stable relationship. There are definitional difficulties in this area.
The Attorney General has been asked for his advice on this matter on a number of occasions and his most recent advice is that married treatment for tax purposes could be extended to cohabiting couples or a subgroup of cohabiting couples, for example, those with children, without necessarily offending articles in the Constitution dealing with the family and marriage. However, care would have to be taken in defining cohabiting couples qualifying for relief so as to avoid introducing invidious discrimination as between one category of cohabiting couples and another.
The Deputy is no doubt aware that the matter was considered by the Expert Working Group on the Integration of the Tax and Social Welfare Systems, known as the TWIG group. While there was no general consensus within the group on the matter, it did recommend that consideration should be given to allowing married tax treatment to cohabiting couples with children. However, the group also recognised there was a range of issues which would have to be addressed before any action could be taken in the matter.
At present an interdepartmental working group, set up by the previous Administration, is examining the whole area of the tax and social welfare treatment of married, cohabiting and one-parent households. As part of its terms of reference the group has to take account of previous reports on the issue such as the TWIG report and the final report of the Commission on the Family. The group is due to report to Government within the next few months. Pending receipt and consideration by the Government of that report, I cannot at this stage accept Deputy Rabbitte's amendment.
Deputy Michael Ahern asked a question about the treatment of cohabiting couples for capital gains tax and capital acquisitions tax purposes. I presume if we were to extend the definition, as suggested by Deputy Rabbitte, a similar amendment would be required for the purposes of the capital gains tax code and capital acquisitions tax code. The present position is that if a husband disposes of an asset to his wife or vice versa no liability to capital gains tax arises, but in similar circumstances a cohabiting couple would be fully liable for capital gains tax. There is an exemption under the capital acquisitions tax code in regard to the total value of assets transferred between spouses. That is in place because of an amendment introduced by Deputy Dukes when Minister for Finance to, I believe, the 1986 Finance Act. Prior to that, depending on the value of the gift or inheritance transferred, liability to capital acquisitions tax may have arisen, but it no longer arises because of the introduction of Deputy Dukes's worthwhile amendment. In the case of cohabiting couples full liability arises on the transfer of assets. From my personal experience I know that gives rise to considerable distress between cohabiting couples who have long-standing relationships and children from those relationships. This is something that will have to be addressed in changes that will be brought forward.
Deputy Rabbitte will know from my comments on Committee Stage that during my time as Minister for Finance I would like to address this problem. From what Deputy Rabbitte said about the introduction of divorce and the figures available to date, it is clear that many people who have been in relationships have not availed of divorce. According to the Central Statistics Office there are approximately 34,000 cohabiting couples and about half of them have children. We were told by others that introducing divorce would open the moral floodgates. When I was sitting where Deputy Coveney is and Deputy Noonan was Minister for Health, I remarked during the debate on the abortion information referendum that people always say the moral floodgates are about to open. In the l970s it was said the moral floodgates would open with the change in the law on contraception, it was also said they would open with the introduction of legislation on abortion information and with the introduction of divorce, but we are always a little away from them opening on us. They have never opened. It does not surprise me that the number of those applying for divorce is nothing like the figures expounded by the anti-divorce lobby. I am sure it had good reasons for using those figures, but there are many reasons people in long-standing relationships do not want to open what might be a Pandora's box in regard to matters that were settled some years ago. We should have a debate on that matter on another occasion.
This is a difficult area on which to legislate. Deputy Rabbitte has tried to introduce changes in this regard over many years. I hope we can come up with a solution in the near future, but at present I am awaiting the group's final report.
I am interested in the Minister's reflections on divorce with which I agree. Since we on this side of the House are all moral reprobates, perhaps he should address some of his remarks to those behind him. I accept the Minister's bona fides on this matter. It has been an issue for some decades and I accept his bona fides when he says he wants to deal with it.
I despair of all the interdepartmental groups dealing with such matters. I accept the Minister has not used that excuse as a shield, but nonetheless he has expressed his view. Will he indicate whether the interdepartmental group has met recently and when he expects to get its report so that we can ascertain if there is any reasonable prospect of progress on this matter?
I thank the Minister for his remarks. With the ultimate respect to the Minister, they do not advance this matter one whit from the time I tabled this amendment. He has retraced the law that has given rise to this anomalous position. The figure of 34,000 cohabiting couples is a large number, but there is no relief for them in sight. One hears the argument that it is extremely difficult and complex to deal with this matter legally and the advice of successive Attorneys General is such and such, but it is extraordinary that matters can be dealt with when they have to be dealt with.
I do not believe any Member would suggest that the Minister's personal position would prevent him from dealing with this matter without allegation of conflict arising. That is an outdated argument and no Member would view it as such if the Minister were to put his mind to addressing this matter. I ask him to do that before we enact another Finance Bill. How is it so difficult to deal with this matter in terms of the income tax code when we can deal with it under the social welfare code and have done so for a long time?
Deputy Rabbitte sat at the Cabinet table for three years.
I did.
It was not long enough.
I put through a Bill that presents a way for the Minister to regularise the tax code. The argument up to that stage was that it could not be addressed until divorce legislation was enacted, although not with a great deal of assistance from Deputy Michael Ahern's party. Now that divorce legislation has been enacted and is the law of the land, the way is clear to deal with this matter in the income tax code.
The Minister confessed he has not turned his mind to this matter yet. It is clear it will not be addressed in time for this Bill, but I ask him, if he is still Minister for Finance, to ensure this matter is dealt with before the introduction of another Finance Bill. This matter is anomalous and punitive on a significant number of our citizens who are wage earners and entitled to tax relief when they are in stable relationships.
Amendment put and declared lost.
Debate adjourned.