Vol. 559 No. 1
185 Ms M. Wallace asked the Minister for Finance if he will dedicate that part of the 2% stamp duty on non-life insurance premiums, as it applies to property insurance premiums, to help specifically fund flood defence management actions by those State Departments, agencies, offices or authorities which hold such responsibility; and if he will make a statement on the matter. [25503/02]
194 Ms M. Wallace asked the Minister for Finance if he will dedicate that part of the 2% stamp duty on non-life insurance premiums, as it applies to property insurance premiums, to help contribute towards the set up and running costs of a single agency with responsibility for flood defences throughout the State; and if he will make a statement on the matter. [25805/02]
I propose to take Questions Nos. 185 and 194 together.
The stamp duty levy on insurance premiums was introduced to broaden the stamp duty base, thereby raising additional revenue. The yield from the 2% levy, as part of taxation receipts generally, contributes towards funding the general requirements of the Exchequer, and it is estimated that it will raise €87 million in 2002. I understand insurance companies pay this levy en bloc to the Revenue Commissioners and that therefore there is no breakdown of the total yield attributable to each chargeable category, such as property insurance premiums.
I am generally opposed to hypothecation, i.e. the earmarking of certain tax revenues for certain expenditures. It removes flexibility in public expenditure decision-making, which should be on the basis of the most cost effective outcomes, and ties Government's hands in deciding priorities as part of the budgetary process. Another weakness in the effectiveness of hypothecation as a means of allocating expenditure is that, while the required expenditure may match the likely income from a tax in a given year, this is unlikely to remain the case in the long-term, and both figures may diverge.
If there is a case to be made for increasing expenditure in an area in a given year, such an increase should not be dependent on the success of a specific tax in raising the necessary funds. In addition, in the current budgetary context it should be remembered that if directed to new expenditure there would be a net deterioration in the Exchequer finances.
