Vol. 510 No. 4
20 Mr. Rabbitte asked the Minister for Finance if his attention has been drawn to the recent call by the vice-president of SIPTU for the Government to facilitate the extension of share ownership and share purchasing schemes for employees in the public and private sectors; the proposals, if any, he has for initiatives in this regard; and if he will make a statement on the matter. [22003/99]
This call, which was made at a recent SIPTU conference on employee financial participation at which I also spoke, was in respect of a major tax package to encourage all forms of employee financial participation – share ownership, gain sharing, profit related pay etc. – in both the private and public sectors. However, the call did not contain any specific proposals. In my speech to the conference I explained the Government's ongoing support for employee share ownership schemes which encourage greater partnership at the level of the firm thereby improving the performance of the company, its profits and widening share ownership.
I have received a number of pre-budget proposals from various organisations and companies concerning employee share schemes and profit sharing and, as is the case with all pre-budget submissions, the matters raised will be borne in mind in the preparation of the forthcoming budget.
I also attended that conference and had the benefit of hearing a contribution by Dr. David Went in relation to the SAYE scheme which the Minister introduced earlier this year. Can the Minister indicate what the take-up on that scheme has been and if he is satisfied with it? Is he aware of the criticism made by Dr. Went and others that the mechanisms for savings are too restrictive and will he look at the possibility of extending those mechanisms in the future?
I do not know the extent of participation in the SAYE scheme but I will get that information and relay it to the Deputy. I am aware of the criticism made by Dr. Went and others of certain restrictions in this area and those will be borne in mind in the preparation of next year's Finance Bill. Everyone is very much in fav our of gain sharing and profit sharing. This and previous Governments have tried over the years to develop new concepts of achieving that within the taxation code. That being said, it is proving difficult to marry the objectives of encouraging gain sharing through the tax structure and ensuring that reliefs are not abused. Certain reliefs are mainly confined to high income taxpayers and it would be to the detriment of equity in the tax system to introduce more. However, I am willing to listen to all new ideas in the context of the tax code for next year's Finance Bill.
The Minister is familiar with share option schemes in a variety of companies. Is he aware that when an employee realises the value of the shares by way of sale, the gain between the option price and the selling price is treated as a benefit-in-kind and taxed at 45 per cent rather than being treated as a capital gain and being taxed at 20 per cent? The Minister will realise that this is a major disincentive. What appears to be an attractive share option scheme on the face of it becomes very unattractive at disposal. Is he aware that it is anomalous that if the same employee had shares in a third party company, he would be taxed at 20 per cent on any capital gains but, because he has shares in his own company, the effective tax rate is 46 per cent?
I am aware of these problems and I will bear them in mind in the preparation of next year's Finance Bill, given the caveats I have entered in the whole area.
Does the Minister agree that there is not any reason in principle why share holding schemes in State companies – ESOPs – should not now be extended to all State companies rather than used as an implement to facilitate privatisation?
In principle I cannot see any objection to that, but ESOPs were set in train in the light of changed structures in these semi-State companies in the instances so far. That is the way the system developed until now. As I said to the conference to which the question refers, I am not against looking at more innovative ways of extending the concept of gain sharing but I will really believe that gain sharing has come of age in the public service when the civil servants in the Department of Foreign Affairs are involved in an ESOP scheme. Then we will know that we have come of age.
