Dáil Éireann debate -
Thursday, 30 Jan 2003

Vol. 560 No. 2

Capital Acquisitions Tax Consolidation Bill 2002: Second Stage.

Minister for Finance (Mr. McCreevy)

I move: "That the Bill be now read a Second Time."

I am delighted to introduce the Second Stage of the Capital Acquisitions Tax Consolidation Bill 2002. The Bill consolidates the law relating to capital acquisitions tax which is contained in the Capital Acquisitions Tax Act 1976 and in provisions in 24 of the subsequent Finance Acts amending and extending that Act. The new consolidation Bill continues the successful process of the ongoing modernisation of the tax code. In 1997, the Taxes Consolidation Act consolidated direct taxes legislation dealing with income tax, corporation tax and capital gains tax.

In 1999, the Stamp Duties Consolidation Act consolidated stamp duties legislation. In addition, the consolidation and modernisation of general excise law on mineral oils was included in the Finance Act 1999 and the consolidation and modernisation of general excise law was included in the Finance Act 2001.

By way of background, capital acquisitions tax, CAT, consisting of both gift tax and inheritance tax, was passed into law by the Oireachtas on 31 March 1976. The introduction of CAT followed the publication of a White Paper on Capital Taxation in February 1974. This White Paper, among other things, recommended replacing the then method of taxing the assets of a deceased person with a new inheritance tax on benefits. The old tax, known as estate duty, taxed the assets contained in the estate of the deceased person, while the new tax, in contrast, taxed the inheritances received by each of the beneficiaries. In addition, the White Paper also proposed the introduction of a gift tax which was to complement inheritance tax.

As a result of the fact that a period of almost 27 years has elapsed since the Capital Acquisitions Tax Act was enacted, and because that Act has been amended and extended in Finance Acts every year since then, with the exception of the 1976, 1979 and 1983 Finance Acts, the need to consolidate the legislation relating to capital acquisitions tax is self-evident. The preparatory process for consolidating capital acquisitions tax followed the same rigorous process that was adopted for the Taxes Consolidation Act 1997 and the Stamp Duties Consolidation Act 1999. The aim at all times was to ensure the most accurate consolidation of the existing law with nothing left out and nothing added. This is what has been achieved in this Bill. The Bill was considered by the Parliamentary Counsel's office and has been duly certified as a consolidation of existing law by the Attorney General.

In preparing the Capital Acquisitions Tax Consolidation Bill 2002, the Revenue Commissioners adopted much of the same approach as was adopted for the earlier consolidation Acts. An initial draft of the Bill was made available to the Law Society of Ireland, the Institute of Taxation in Ireland and the consultative committee of accountancy bodies in Ireland. In addition, two independent expert referees were appointed to examine the accuracy and structure of the Bill. The comments made by these referees added greatly to the final product. I would like to take this opportunity to extend my thanks to the parties concerned.

Another area of similarity to the previous consolidation legislation is in the structure of the Bill, where for example, as in the Taxes Consolidation Act 1997 and the Stamp Duties Consolidation Act 1999, generally applicable provisions such as definitions and the charging sections appear at the beginning of the Bill. These are then followed by more specialist provisions, for example, special provisions relating to the value of property for the purposes of gift and inheritance tax. In addition, the commencement and transitional provisions are set out at the end of the Bill.

The use of archaic language in general and of the old-fashioned device of using provisos to change the meaning of a section have also been eliminated in the Bill.

To facilitate readers of the Bill, statutory derivations for the legislation provided for in the Bill, which I will refer to as new legislation, are set out in the margin opposite each section. These entries show the source of the new legislation. In addition, the memorandum published with the Bill sets out the old legislation in chronological order and shows the reader where it is located in the new legislation. If a previous provision has not been enacted in the Bill, the memorandum explains why. The most common reasons for not including a provision in the Bill are that the provision in question has already been repealed or it is unnecessary for some reason, for example, it might be superfluous.

The Bill before the House is the culmination of over two years' work. Perhaps the greatest benefit which will result from this consolidation will be the restructuring of the capital acquisitions code in a clear, coherent and logical way. This will make it more accessible and user-friendly for all users, including Members of the Oireachtas, who have to cope with annual changes to the capital acquisitions tax legislation.

The consolidation of capital acquisitions tax will also make it possible for future changes to capital acquisitions tax to be slotted into the Consolidation Act by way of amendment to that Act. It is intended that this should happen and I would like to give the House a commitment to that effect.

I do not intend to go through every section of the Bill. The explanatory memorandum, which has been published with the Bill, sets out in summary form what each section of the Bill is about. However, I would like to give Deputies some flavour of the overall structure of the Bill.

Mr. Broughan

Will the Minister change it in the Finance Bill?

Mr. McCreevy

No. However, there will be some additions to the capital acquisitions tax legislation in the Finance Bill, as there have been in 24 of the last 27 such Bills.

The Bill contains 120 sections and three Schedules. It is divided into 12 Parts. Part 1 consists of definitions and rules of construction. It also contains the Short Title. Definitions of terms, which are used throughout the Bill, are contained in this Part. Definitions, which only apply to a particular section, are contained at the beginning of that section. This is in line with the structure adopted for the Taxes Consolidation Act 1997 and the Stamp Duties Consolidation Act 1999.

Part 2 contains the charging section for gift tax and other provisions relating to gifts. Part 3 contains the charging section for inheritance tax and other general provisions relating to inheritance tax. It also contains provisions dealing with the initial 6% charge imposed on certain discretionary trusts and the subsequent annual 1% charge imposed on such trusts.

Part 4 sets out how property is to be valued for capital acquisitions tax purposes. Part 5 contains general provisions relating to gifts and inheritances. Part 6 contains provisions dealing with returns and assessments. Part 7 contains provisions dealing with the payment of tax, interest and penalties. Part 8 contains provisions dealing with appeals. Part 9 contains the exemptions from gift and inheritance tax. Part 10 contains the various reliefs such as agricultural relief, business relief and other miscellaneous reliefs. Part 11 contains miscellaneous provisions relating to capital acquisitions tax. Part 12 contains provisions relating to repeals, the commencement of the Capital Acquisitions Tax Consolidation Bill, when enacted, and transitional provisions.

The Revenue Commissioners have prepared guidance notes which they will publish as soon as possible after the Bill is enacted. I understand that these notes will be available on the Revenue's website. For the information of Deputies, the guidance notes follow the format of the guidance notes relating to the Taxes Consolidation Act 1997 and the Stamp Duties Consolidation Act 1999.

As for the timetable for passage of the Bill, it is proposed that the Bill be referred to the Standing Joint Committee on Consolidation Bills for consideration next week. A number of motions will be included on the Order Papers of both Houses to comply with the various rules and procedures as set out in Standing Orders, to facilitate the timely passage of the Bill. These motions will facilitate the taking of Committee, Report and Fifth Stages and will shorten the minimum periods of time allowed for in Standing Orders.

I would like to place on the record my own and the Government's appreciation of the amount of work which went into preparation of the Bill. The staff of the Revenue Commissioners and the parliamentary counsel's office are to be congratulated on a job well done. The input from the private sector was invaluable and demonstrates what can be achieved through a team approach.

I commend the Bill to the House and I look forward to the co-operation of the House in its speedy enactment.

Mr. R. Bruton

While, undoubtedly, a huge effort has been made by the Revenue Commissioners and the Department of Finance in producing this Bill, that effort has been somewhat misdirected. The Revenue Commissioners are talking about the need to review and simplify this tax within its own narrow terms. As I understand it, they are commencing such a review, so it is difficult to understand why we should have gone through the considerable effort of reorganising the parliamentary counsel's time to produce this Bill which, from its inception, will be under review and subject to simplification.

If I were looking at the overall demands currently being placed on the Revenue Commissioners and on the Department of Finance to reform and update our tax laws, I would not look to the consolidation of this legislation. Rather, I would examine the very ill-considered tax policies that have been introduced in recent years and which have resulted in a complete collapse of revenue compared to the predictions made by the Minister and his officials on budget days over the past two years. That is where we should look to see whether we are getting to grips with the administration and application of tax.

This legislation represents a substantial waste of effort. Sadly, the consequence of the collapse in tax revenues, which we have seen, is that in his last budget the Minister introduced a series of what are rightly described as stealth taxes. Essentially, people are being asked to pay in a thousand different ways for the various miscalculations in administrating tax over the past couple of years. For instance, the cost of the savings scheme, which was one of the Government's most extraordinary decisions, is running at over €600 million and heading for €0.75 billion. That is a huge amount to have to recover.

We also know that all the borrowing the Minister is undertaking this year is required for two purposes: first, funding the savings scheme and, second, funding the investment by the pensions reserve fund in overseas stocks and shares. These are real revenue issues that need to be addressed, yet the Bill will not do so.

Despite having produced this legislation, I can understand why the Revenue Commissioners are seeking to review and simplify the capital acquisitions tax code. That revenue currently stands at approximately €135 million, which is less than 0.5% of all tax revenue raised. I suspect that because of the extremely complex nature of the tax, in terms of effort by the Revenue Commissioners it must have the worst cost-to-yield ratio of all taxes. It is extremely complex in terms of aggregation obligations, valuations the Revenue Commissioners have to contest, the administration of exemptions and relief, deciding whether surcharges might be due and in administering other complex provisions of the Bill.

Welcome as a consolidation of the Bill may be for tax administrators, the time of the House and of the Revenue Commissioners has not been well applied in producing this Bill. If the legislation is to be simplified substantially over the coming years, the effort in producing it will have been misguided. That is not to argue against the capital acquisition of tax, however. Even though its yield is small, it is an important element of an equitable tax code because it contains the principle that those who are in a position to inherit substantial amounts of wealth should make a contribution from that wealth to the Revenue. It is a fair and acceptable principle of equity that those who have the opportunity to acquire great wealth should make an equitable contribution. That is also the reason there is considerable concern that this legislation's provisions can easily be avoided by those with substantial resources.

It is my understanding – the Minister may correct me if I am wrong – that if a person moves to Newry, for example, and spends enough time there to establish that their residency for tax purposes is not in the State, they can bequeath their resources to their children without paying any tax. This is a problem. A tax such as this has to be seen to be applied equitably. If some people can avoid payment of this tax by simply preplanning absences ahead of making gifts or bequests, it undermines the confidence of the public in the fairness with which the tax is being administered.

If the Minister was to direct his efforts to consolidating and reforming legislation, even in the area of wealth taxes, I would like to see those efforts invested in the area of stamp duty. The stamp duty code is one of the most difficult to understand and it is applied, in many ways, with extraordinary inequity. It does not have the normal features of any other tax where there are thresholds and bands and if a band is exceeded, tax is paid at one rate on a certain amount and at a higher rate on the next tranche. Stamp duty is applied in such a way that if a threshold is exceeded the higher tax is paid on the whole amount. It is an extremely inequitable tax. Similarly, the inequity in terms of the stamp duty paid by first-time buyers is something people find very difficult to understand.

If the Minister intends to look to simplification and reform to make these taxes more equitable, stamp duty is an area to which he ought to turn his attention because there is enormous scope for making that tax much fairer in its operation. I suspect that successive Ministers for Finance have decided to leave this sleeping dog lie because generally people pay stamp duty only once in their lives and the clamour for reform is not that great. However, if the Minister is interested in gaining a reputation for having been reforming and for having made the system more fair, he should certainly turn the focus of his effort to stamp duty.

I mentioned the stealth taxes already. There is widespread concern that these taxes are being introduced at the wrong time from an economic point of view. Everyone knows that, at present, inflation is the greatest threat to our continued economic prosperity. Far from the Government introducing a coherent anti-inflation policy, since the election last summer every Minister has been scrambling to find money from somewhere, whether by increasing the charges for medicines, third level college fees, motor tax or credit cards. Anything that moves is being taxed and that is undermining our competitive position.

I am sure the Minister studies factory gate prices. Last week I saw the figures for the past 12 months. Factory gate prices are down 1%. At a time when the Minister is contributing to the fuelling of inflation in the economy, those who are competing in external markets are seeing their prices fall by 1%. Those prices will fall more sharply because in the US market – our principle market for much of the more modern sectors – the appreciation of the euro against the dollar has been close to 25% in the past 12 months. We are facing real competitive pressures. The appropriate response is not that adopted in the budget. That response was to cut back wherever possible, leave the bureaucracy intact and make people pay more. What we needed was a much more coherent attempt by the Government to review value for money issues and deliver a quality service.

This is also an opportunity for us to look ahead to the forthcoming debate on the Finance Bill. Another element that is causing general concern is the Minister's decision in the budget to abolish indexation in relation to capital gains tax. He seems to be leaving it intact in relation to capital acquisitions tax. The underlying message this sends to people is that the Minister is willing to become the beneficiary of inflation. That is a bad message to send out. He has done this in two respects. He failed to index any of the bands or allowances in relation to income tax, which has been the standard practice of every Minister and of this Minister in his previous five budgets. Now he is removing indexation from the capital gains tax code not just for one year but for eternity. That means the Minister is setting the Exchequer up to be a major beneficiary of inflation.

We do not want to see the re-emergence of a situation where there is an unhealthy alliance between Ministers for Finance and inflation where, effectively, they are willing to benefit from prices running ahead of wages and ahead of people's savings. It is a rot that should not be allowed develop and it is contrary to any principles of fairness in relation to the tax code. It is interesting that indexation in relation to capital acquisitions tax is still intact, but for how many weeks? Perhaps this day week we will see changes.

There are other areas—

Acting Chairman (Mr. McCormack)

The Deputy should confine himself to capital acquisitions tax.

Mr. R. Bruton

It is extraordinary that penalties contained in the legislation are so low. The penalty for failure to make a return is only €2,500. The penalty for compliance in failure to make a return is only half of that. Even for fraudulent returns, the penalty is only about €6,500 – albeit there is a penalty in relation to the tax paid when one is caught. In an ideal world, the Revenue should be minimally involved in the administration of a self-assessment tax. In practice, it is hugely involved in the administration of this tax. If we want an efficient self-assessment tax under CAT, we need to have effective penalties and to run it on the basis of any other sound self-assessment tax, that is with high penalties and random audit. That is the way to go. To do that effectively there needs to be a review of the penalty clauses. I am sure the Minister is looking into that.

I note also that in the consolidated Bill the Minister is reinstating the provision whereby if people underpay tax they will be charged 1% interest but if they overpay they will get only 0.5% interest. It is a long-established practice to penalise. However, I hope that when he is consolidating this treatment the Minister will bear in mind the Ombudsman's report which has drawn attention to cases where the Minister does not pay any interest to those who have overpaid and correct that in the Finance Bill. The consolidation of this Bill again underlines the need for equitable treatment of people who overpay tax, particularly those to which the Ombudsman drew attention, people who overpay tax as a result of maladministration on the part of the Revenue Commissioners. The Ombudsman made an important point in that regard.

Some practitioners in the field have expressed concern that a Bill that was intended to be a consolidation Bill and, therefore, certified by the Attorney General and by the Minister and his officials is to be subjected to a number of amendments at a later stage. One wonders why changes are needed if this is simply a consolidation Act that has already been certified by the Attorney General. There is some ground for concern about that. However, it is good to have one document relating to tax that contains every tax. The notion of consolidation is, therefore, welcome. However, as I said earlier, I would like to have seen some of the effort that has undoubtedly gone into this directed where it is needed, towards ensuring that our tax system is properly established in law, properly administered in practice and that everyone pays their fair share according to those tax laws.

Mr. Broughan

On behalf of the Labour Party, I welcome in principle any Bill which simplifies the administration of taxation. In so far as this Bill makes it easier for citizens and tax professionals to understand and comply with the complex laws on capital acquisitions tax, it is very welcome. It is worth noting that while it may be welcome, it is a strange reflection on the priorities of the Government that parliamentary time can be found for a consolidation Bill, given that our sister parliament in London is many weeks in session and has presumably been able to deal with the gamut of legislation the Minister for Justice, Equality and Law Reform has in hand but which we are reaching in a very lethargic way. Clearly, this is crucial legislation.

There is a long list of urgently needed legislation for which we do not seem to be able to find time. It is odd, therefore, that we can find the time to debate something which can only make the law clearer rather than change it, given that so many changes in the law are needed. Tackling the problem would require more sitting days and some measure of genuine parliamentary reform, which the Government, apparently, is not prepared to countenance. The Leader of the Government seems to prefer to be away from the House rather than being here to debate issues, including this one. On the contrary, the Government seeks to reduce its accountability to the Oireachtas by limiting the number of sitting days. The Taoiseach's attitude to the commencement debate yesterday, which was deplorable, speaks volumes about the lack of respect for the House. We were expecting a type of State of the Union address from the Taoiseach, given that our small State has suffered so many difficulties in the past. Even though it is six weeks since we sat, we had to listen to a brief lecture from the Chief Whip on upcoming legislation.

Having said that, I commend the Minister, the Department of Finance and the Revenue Commissioners for the lengthy consolidation process. My colleague, Deputy Quinn, spent a good deal of his time in the last rainbow coalition developing the Taxes Consolidation Act in relation to income tax, corporation tax and capital gains tax. The Minister followed on with this in 1999 with the Stamp Duties Consolidation Act. However, I agree with the comments of my colleague, Deputy Bruton, on the difficulties in that area. The process has also been advanced in the Finance Acts of 1999 and 2001. It is a little unreal to be standing here discussing a Bill which we cannot change. I understand the Minister will table some amendments but it is a strange situation because of the nature of the consolidation. If one looks back at taxation handbooks used by practitioners, one will discover that it is very valuable to have simplified legislation. However, there are a number of aspects, particularly in relation to rates and other areas of capital taxation, which the Labour Party would be interested in considering.

I commend the Department of Finance and the Revenue Commissioners for their work on difficult issues such as aggregation and so on. I commend the Office of the Attorney General and other professionals such as the Law Society and the Institute of Taxation which made comments on the initial draft. I understand there is a time constraint in passing the legislation before the Finance Bill is introduced.

Having read the Bill yesterday, I took an opportunity to look back over the history of capital acquisitions tax. The Minister referred to death duties, including estate and succession duties and a plethora of death duties in place in the 1970s. In the early 1970s large tranches of the population did not pay tax. It was the unfortunate PAYE workers and business people, very often small business people, who were in very visible businesses who bore the brunt of the taxation system at the time. The Minister came to prominence in the 1980s campaigning largely – I know he is haunted by that era – on the disastrous fiscal policies being pursued by Charles Haughey and others in relation to the escalation of the national debt. It was always the contention of my party that there was sufficient money in the country to have provided the kind of social services which former leaders of the Labour Party such as Michael O'Leary, Frank Cluskey and Dick Spring desperately wanted.

It is interesting to look at the early capital acquisitions tax rates of 5% to 25%, and up to 60% in the four tables, including gift tax at 75%. It seems to be the first attempt at introducing some sort of fairness in the taxation system. I recall in secondary school looking at the canons of taxation and thinking this was a fundamentally unfair country. Many still hold that view. During the years legislation such as the Finance Acts of 1982 and 1984, including the recent capital acquisitions tax system under the Minister, has been operated in an ad hoc fashion. It is important, therefore, to have this simplification of the tax system.

A key feature of capital acquisitions tax is the self-assessment system. Under section 59, there will be very low and basic penalties in relation to inheritance tax, gift tax and discretionary trusts. The Labour Party would have been interested in reforming this area. Obviously, it is an important concession to those who need to meet this tax to have a self-assessment system. It has been a cornerstone of the system for the last couple of decades. However, the penalties under section 59 are remarkably weak.

The explanatory memorandum to the Bill indicates clearly the wide range of legislation incorporated in the Capital Acquisitions Tax Act, 1976, including the Finance Acts 1977-2002. I presume there will be other changes in 2003. The reality is that Deputy McCreevy is a radical Minister who has shown remarkable bottle throughout his career. I profoundly disagree, however, with his approach to fiscal and economic policies. He has a determination and can say he was proved correct about capital gains tax when he halved the rate. Overall, my party and a large proportion of the population believe he presides over a growing, divided society and a bitterly unfair taxation system. He may have noticed, wearing my other hat as Labour Party leader in Dublin City Council, I was embattled in a struggle against local service charges.

Mr. McCreevy

Which the Deputy luckily lost.

Mr. Broughan

The local administration believed it had to embark on this totally undemocratic tax because of the lack of resources. Obviously, our supporters are bitterly opposed to it because they see it as a form of double taxation in a State in which the tax system, including capital acquisitions tax, is grossly unfair. That is the fundamental point I was going to make. The Minister mentioned that we lost the struggle, but we were prepared to take the Minister, Deputy Cullen, to the Supreme Court, if necessary.

Deputy Cullen mentioned the possible introduction of a system of local income taxation before Christmas, but I do not know if he has run it past the Minister for Finance yet. The previous Minister for the Environment and Local Government, Deputy Noel Dempsey, used to announce all kinds of things without telling anybody – sometimes he did not even mention them to himself. I believe strongly that in all critical areas of policy Kildare should run Kildare, Cork should run Cork, Mayo should run Mayo and, of course, the Dubs should run Dublin. A system of local taxation may well be a good idea as part of the major reforms needed in this area, such as the introduction of new types of sales tax and VAT.

The Minister, Deputy McCreevy, should turn his attention to the issues I have mentioned. He has shown that he can be radical in relation to capital acquisitions tax, particularly by slashing tax rates and increasing tax reliefs over the years. In 1998, the Minister gave a special relief to persons aged over 55 and to close relatives. In 1999, he changed the base date for determining the amount of tax due from 1982 to 1988. In budget 2000, he excluded the inheritance of the family home from capital acquisitions tax and introduced the single 20% rate, replacing the multiple rate structure. The Minister introduced the £300,000 threshold with effect from 6 December 2000. In 2002, the base date for aggregation was moved from 1988 to 1991. He has been a radical Minister in relation to capital acquisitions tax and capital gains tax, but I contend that he has introduced changes that ultimately reduce the possibility of maximising yields from capital taxation.

The tax strategy group paper that was released yesterday sets out a most revealing picture of the Government's record in respect of capital taxation. It shows how the Government has substantially reduced the rates of taxation that apply to both capital gains tax and capital acquisitions tax from 40% to 20% in each case. It is remarkable that a single PAYE worker earning more than €28,000 pays tax at a marginal rate of 42% whereas the capital taxes I have mentioned stand at 20%. When I looked at the most recent budget, I noticed that the projected yield from capital taxation in 2003 is only about 3.3% of the total tax take of €31.6 billion and that the relevant figure for 2002 was only 2.48% of the €29 billion total. Income tax, paid largely by PAYE workers, accounts for almost 30% of total tax take and VAT accounts for a similar percentage.

I concur with Deputy Richard Bruton's view that the Minister's decision not to change tax bands in the budget, allied to the vicious increase in VAT, has made the tax system greatly more regressive than it was a couple of months ago. Working families and families on social welfare are bearing the brunt of the Minister's choices. It has to be said that, along with reducing debt to 34% of GDP, the divided society we now have will be the Minister for Finance's legacy. In years to come, people will ask if this coalition Government, which I hope will not be in power after 2006 or 2007, enhanced social divisions by grossly reducing any possibility of extending or widening the tax base.

It is worrying that capital taxation, according to the projections made by the Minister's officials in the budget, will fall to €998 million, or 2.77% of total tax receipts. The capital acquisitions tax yield, as outlined in the tax strategy group papers, also makes interesting reading, as a modest increase on 2001 is projected. The tax structure under this Government has resulted in the vast burden of tax being shouldered by PAYE workers, a phenomenon that will be consolidated by this Bill. Those who have major capital assets, on the other hand, can escape the tax net, in effect, as a result of the ideological vision brought to the Government by the Minister for Finance.

The Minister has made much of the increase in revenues from capital gains tax since he halved the rate. The Government claims that the increased yields result from its tax policy, which is based on the belief that lower rates result in higher levels of activity. This may be true, but one wonders how much of the additional activity has resulted from people taking advantage of the significant difference in the rates of taxation of capital gains and capital acquisitions, on the one hand, and ordinary earned income on the other. Such a difference offers a major incentive to find ways of categorising earned income as a capital gain or acquisition. If the Department of Finance or the Revenue Commissioners are interested in finding reasons for the decrease in income tax yield in recent years, they would do well to examine the issue I have mentioned.

Our system of capital taxation contains a simple injustice. Taxing capital at a lower rate than earned income flies in the face of notions of social justice or equitable taxation. It is known that capital is even more unequally distributed than income in Ireland, which has one of the most uneven distributions of income in the advanced world. The uneven distribution is made worse by the actions of the Minister, Deputy McCreevy, and the Government, even though Deputies opposite may claim to be uncomfortable with the fact. The Minister has presented a major gift to the well-to-do by cutting rates of capital taxes, although I assume he will not go as far as President George W. Bush, who recently introduced budgetary measures that will take rich people entirely out of the tax net.

The Government decisions I have mentioned are part of its broader ideological agenda to make the tax system as unfair and unequal as possible. Why else would the Minister have made such strident efforts to cut taxes for the better-off at a time when the economy was growing at unprecedented rates? Other legacies of the Minister for Finance's term in office are Ireland's high rate of inflation, which is twice the EU average, and a decline in our competitiveness, which is a direct result of the Minister's foolhardy determination to transfer resources to the better-off. The Minister's decisions badly overheated the economy, thereby directly contributing to the hard landing we are now experiencing.

When we look back at the boom, it is a salutary lesson to realise the full extent of the Government's mismanagement of the economy. The tax levels paid by the rich were slashed due to the Government's misguided ideology and its determination to win the general election at all costs. The consequences of these policies are now being felt by working people throughout the country, who are paying the price of high inflation, short-time work and, in all too many cases, redundancy. Far too many families are encumbered by large debts, accumulated during the boom when the Government promised year after year of lower taxes. The well-off benefited most and working families are paying the price.

Since the boom ended, we have learned that the Minister for Finance is ideologically opposed to public borrowing, despite the fact that we have the second lowest debt to GDP ratio in the EU. Perhaps there is no point in mentioning Luxembourg. Despite the low interest rate regime which membership of the eurozone brings and the fact that the exchange rate risk in respect of foreign debt has been all but eliminated, the Minister rejects the notion that we should borrow to invest in our economic future. He is backed up by the Taoiseach who insists that the nation is only a step away from bankruptcy.

The Minister did a brilliant flimflam job after the election, with all the sad faces on display and George Lee getting everybody terrified on the six o'clock and nine o'clock news. The Minister created a major myth, namely, that the country had a current budget surplus of €5.4 billion all the time. Despite this, the Minister insisted – and continues to insist – on cutting public services to reduce borrowing. The upshot is that we are presented with cases in which people have died.

On Friday night I dealt with the case of a man suffering from a serious condition who died while on a trolley in an accident and emergency department. My great predecessor, Conor Cruise O'Brien, although I did not agree with his approach to the national question, had some interesting political philosophies. He believed that the people who run the State are directly responsible for what happens in it. He would have said that the cutbacks in health, and also the mismanagement over which the Minister for Health and Children presides, might have contributed towards this horrific tragedy. There can be terrible outcomes as a result of the kind of taxation strategies we have pursued.

Even if the Minister wanted to avoid borrowing, he still had the option of increasing taxation rather than reducing services. In particular, he could have found ways of ensuring that the better off in our society pay a fair share. He has also rejected that prescription. He has refused, for example, to raise a meaningful contribution from the horse-breeding industry. Before Christmas, some of the Minister's constituents and various others in the horse industry came to the Oireachtas to present the case against any kind of taxation of stallions. It is interesting that they did not go to see the Minister, they went to see Deputy Rabbitte, my party leader. They obviously felt there was no need to see the Minister because he represented Kildare.

The Bill includes a range of exemptions. In a fairer society we would consider all of them. For example, artists and writers have done well in this State. To be an artist or a writer is an honourable profession, just like any other job, and perhaps everyone should pay his or her fair share.

In the Minister's county – it is the birthplace of some of my ancestors and I hold it in high regard – a significant proportion of the population is working in the horse industry at all levels. Deputy Stagg used to say that it was the only place in Ireland where the pubs fell silent as the racing results came on the six o'clock news. While those jobs are very important, we frequently see the top men in this very wealthy industry flashing their wealth around, hopping from Manchester to Glasgow and Leopardstown to Cheltenham. Maybe they could pay a fairer share.

Acting Chairman

I have given the Deputy a great deal of latitude in regard to straying from the subject of the Bill.

Mr. Broughan

I thank the Acting Chairman for that.

The commitments made before the election in relation to the national anti-poverty strategy – a portfolio in respect of which I used to represent my party – turned out to be all manner of promises which the Minister and the Government once again felt able to break. On many occasions I called on the former Minister for Social, Community and Family Affairs, Deputy Dermot Ahern, and the Minister for Finance to link social welfare income to the average industrial wage for those who have no other means. However, since the recent budget Deputy Coughlan's Department has completely abandoned that idea. The Government has, therefore, completely fallen out of line with its commitments under the strategy. The Minister for Finance felt obliged to deliver to the corporate sector, but felt he could renege on his promises to the poor. For example, he could have raised the rate of capital acquisitions tax. I am not sure what he will do in the future, but he has opted not to do so thus far.

It says something about the priorities of the Government that it would rather maintain lower rates of capital taxes than deal with the growing crisis in, for example, the area of crime. I will not stray off into that territory, but we all remember a key promise made by the Minister involving the provision of 2,000 extra gardaí. I recently had a meeting with the four superintendents from my locality, Dublin metropolitan area north. They did not say it, but it seemed they did not have adequate resources. We do not need to mention another Irish city and the horrible events taking place there. The Minister did not deliver on a simple promise.

In the year or two before the election Cork, Limerick and Dublin took part in the RAPID programme, involving intervention in disadvantaged districts. I can see nothing happening under this programme, which was supposed to add to the infrastructure in many areas to try to prevent people from falling into crime and other problems. It all comes back to the Minister's decisions – I recognise that Deputy McCreevy is a radical Minister in relation to capital taxation – and his failure to spread taxation around.

It is worth pointing out why we have capital acquisitions tax at all. Capital acquisitions are basically gifts, inheritances and trusts. We are used to arguments from the Tánaiste about how lower tax on income creates an incentive, but does that really apply to gifts? The Bill describes the person who receives the gift or inheritance as the "donee" or "successor". How are we encouraging economic activity by having lower taxes on gifts than on income earned from employment? In fact, in any society which professes to believe in equality of opportunity, let alone equality of outcome, it is essential to have a reasonable level of taxation on gifts and inheritance and on management of trusts. Otherwise we simply facilitate the multiplication of inequality over the generations.

It is interesting to see, in OECD advanced countries, the way in which the more wealthy sections of society are enabled to transfer wealth from generation to generation. Families do not tend to go up and down, they tend to go up and stay up, while some of the rest of us, including the people represented by Members on this side of the House, stay down.

This Government intends to re-introduce third level fees and has had the effrontery to claim that doing so would be an egalitarian measure. Its members claim that the children of the better off should pay for third level education. If they are so keen to make the children of the better off pay their share, would it not be more logical to require them to pay a reasonable level of tax on gifts and inheritance? Would it not be reasonable to pay tax on gifts and inheritance at at least the same rate as earned income? The truth is that the Government has no real interest in equality or fairness. It sees its role as serving the interests of the well heeled at the expense of working families. It constantly protects them against any form of fair taxation and its position on capital acquisitions is another example of this.

My colleague referred to section 59. In this age of self-assessment, the penalties seem to be ludicrously low. This should be investigated. Some years ago there used to be problems with aggregation of benefits. I wonder if the position in that regard has been clarified to everybody's satisfaction in the Bill. I welcomed the recent comments by Mr. Frank Daly, the chairperson of the Revenue Commissioners, to the effect that there will no longer be any hiding place for those who evade tax.

A few months ago we discussed Ansbacher, DIRT and some of the other scams that have happened over the years. It is good to see that the Revenue Commissioners have, as shown in their tax compliance document, succeeded in bringing the percentage of outstanding tax liabilities for collection down to an all-time low. The Acting Chairman and I used to have interesting debates with the Revenue Commissioners when we were both members of the Committee of Public Accounts during the 27th Dáil. That was before we discovered the enormous scams that were going on, when Ansbacher was just a German name of which we had never heard. We suspected things were happening and we would try to rattle the chairman of the Commissioners and convince the Comptroller and Auditor General to pursue the issues. We, and the other members at that time, including Deputy Rabbitte and the late Deputy Jim Mitchell, initiated some of the developments which have led to a much more compliant regime.

On the legislation, I read that we only have 400 audits per year, which is a small check on the extent of wealth in this country. I commend the Minister for the Bill and ask him to think again about the strategy.

Mr. Boyle

I wish to share time with Deputies Ó Caoláin, Finian McGrath and Connolly.

Acting Chairman

Is that agreed? Agreed.

Mr. Boyle

Given the interest for this debate in the Chamber, there could be an argument for separate slots. I congratulate Deputy Broughan for literally exhausting his 30 minute slot. What I have to say will not take that long and I am sure my colleagues will remain within a similar timeframe.

In general, my party supports and encourages the principle of consolidation of legislation but questions why there is such a sense of priority about this tax. I am grateful for the briefings the Department of Finance has provided in anticipation of the legislation. Other questions should have been asked and perhaps one final Bill would have allowed us to make necessary changes to the tax itself or question the future of the tax before the consolidation exercise took place.

It is unfortunate we are not using this opportunity to put the three ‘e' test that every tax has to be put through to gauge whether it is efficient, effective and equitable. We can ask questions on capital acquisitions tax as to whether each of these criteria is being met. It is a low-yield tax which does not raise much for the Exchequer and is inefficient in terms of the administrative back-up it requires to produce that yield. Whether it is equitable depends on what standpoint one takes. Some people get badly caught out in terms of gifts and inheritance and, for those individuals, the tax is inequitable. The problem with this capital tax as with many others is that the equity is perverse because many people who benefit from income as a result of having assets are rewarded by our taxation system and, rather than consolidate inequitable taxes like this Bill does, we should address the real and deep inequalities that exist in our system of taxation. It has already been mentioned that Ireland is the OECD's second most unequal nation in terms of wealth disparity, just behind our American cousins.

Within that we have the lowest tax yield of all taxes collected by the Revenue Commissioners. Even if one analyses those low tax yields, the balance between the taxes is heavily weighted towards taxes on people's income. This is a negative tax. We should instead encourage people to earn as much money as possible, hold on to as much as possible and tax negative activities within society through environmental taxes, for instance, which my party promotes, as well as taxes on wealth. The capital taxation system, as Deputy Broughan has pointed out, accounts for a mere 3.6% of all taxes collected in this country.

Because of that inequity, the Opposition must challenge the Government for representing the interests of the few – those who benefit from being on the right side of the wealth disparity which this country is so unwilling to properly tackle. I welcome the presence of the Minister of State at the Department of the Environment and Local Government, Deputy Noel Ahern, who, under his portfolios, deals with the results of those inequalities. Through a series of budgets, the Minister for Finance has failed to tackle the fact that Irish people are more sinned against in terms of income tax and less so in terms of capital tax. I would take legislation like this more seriously if I thought that real reform was involved.

I do not agree with Deputy Broughan's description of the Minister as radical. My definition of radicalism is about reform in its real sense. It is not radicalism for change's sake or entrenching bad practices and inequalities that exist in our society and making them worse. On all those grounds, the Minister should be continually challenged.

There are difficulties in the Capital Acquisition Tax Consolidation Bill 2002 which cannot be addressed by way of amendment and there is a degree of superfluity about a debate of this nature. Why have we not looked at the difficulties, despite the indexing that exists in the levying of this tax, concerning the difference between actual inflation and the multiplier effect that exists with property inflation and how people will get caught out by it? Why are we not reflecting the realities of changing life within Irish society and Europe concerning what inheritance comes from where and from whom? For example, a number of European countries have legislated recently for legal recognition of couples of the same gender. We are in the EU and people who live within our jurisdiction will seek some kind of parity in terms of taxes of this type when matters such as gifts and inheritances are involved. I do not see how the nature of capital taxation, particularly capital acquisitions taxes, can evolve in light of those changing circumstances.

A consolidation Bill at this stage is disappointing because we have missed the wider picture. It should have been brought forward in the context of real reform of the taxation system. The disparities that exist in society as a result of the budget will worsen still further when the Finance Bill is introduced in coming weeks.

I reiterate my general support for the nature of consolidation of this area of legislation. I hope that the Minister and the Department will think about what has been said in this debate and introduce further legislation that will tackle the more important areas of fiscal policy, and I hope we will have a real debate and bring those changes about.

Caoimhghín Ó Caoláin

I welcome the introduction of the Capital Acquisitions Tax Consolidation Bill 2002. It is a step towards making the legislation regarding capital acquisitions tax clearer and less cumbersome. However, there remain significant shortcomings which I will highlight and which I hope the Minister will address. I would appreciate if he would take notes on the anomalies I intend to draw to his attention.

This is an opportune time to reiterate Sinn Féin's belief that there needs to be a comprehensive review of the taxation system in this State. We need to rebuild our tax regime based on the principles of equity and transparency so it becomes a fair and just means of distributing the resources of the State. To do this properly will involve all the social partners, there must be a time limit and we must seek to formulate proposals for a truly equitable tax system. The contributions of businesses and the wealthy have continued to decrease while the average worker and consumer has ended up making an even greater contribution to the total tax revenue.

We need to take the low-paid out of the tax net through increasing tax credits. As I said, I was deeply disappointed that the Minister did not take the required steps in the budget he introduced in the last term to address the disgraceful situation where people not yet in receipt of the minimum wage were still in the tax net.

We need to evaluate the array of tax reliefs set up during the years to see what benefits we are getting from them and what are the costs. My party is calling for an increase in the rate of capital gains tax to 40%, as the Minister will know from the pre-budget submissions I have sent him each year since I became a Member of this House. We want to see it increased to the level it was at before the Minister took office. The cut of 20% impacted hugely in favour of the most well-off. The average worker has to pay tax at the rate of 40% at the high end of his or her income while his or her wealthier bosses do not.

The recently released CORI Justice Commission briefing document on this matter states the total take from tax and social insurance clearly illustrate the inequalities within the current tax system. The CORI Justice Commission compared the post-budget tax take of the State with those in other EU countries and found that, although Ireland's per capita income is far above the EU average, its infrastructure and social provision are a long way below it. This is because of the Government's insistence on keeping tax takes far lower than the EU average. The CORI Justice Commission's analysis shows that Ireland's total receipts from tax and social insurance post-budget 2003 are the lowest in the European Union when measured either in GDP or GNP terms. They are at least 7.5% below the EU average when measured in terms of GNP.

Let us look at the Comptroller and Auditor General's report for 2001 which further highlights the current deficiencies in the tax system which are continuing to be nurtured by the Minister and his Government colleagues. These deficiencies have to be addressed. The report looks at the weaknesses in the work of the Revenue Commissioners in the areas of compliance, registration and enforcement, and examines the appropriateness of certain tax write-off decisions taken. It finds that the tax registration process needs to be tightened up, that there is a lack of monitoring and review in the area of compliance, and that there is a need for prompt and, importantly, decisive action in the area of enforcement. It concludes that write-off decisions taken by the Revenue Commissioners, who I am sure are represented here today, were taken based on inadequate decisions. It states the following: "Given the depth of information revealed in some cases, the Revenue write off review could only be considered to be superficial in nature".

These inefficiencies have led to a loss of revenue to the Exchequer. It is very important, therefore, that Members of the House address them. Furthermore, the Comptroller and Auditor General's report states there was no assessment of the extent of non-compliance or the likely size of the full tax debt and that the write-off was based purely on charges on record, even where these only equated to some payments from a failed fixed payment arrangement. This raises serious concerns about the functioning of our tax system. The report states the extent of the write-offs may hide the successful efforts of tax evaders.

The findings of the Comptroller and Auditor General's report further endorse Sinn Féin's assertion that there needs to be a comprehensive review of the entire taxation system. The Minister has the time to do this but the process needs to be time-limited. Why does he not take the opportunity to set in train such a review?

An Leas-Cheann Comhairle

There are only four minutes left for the other two speakers.

Caoimhghín Ó Caoláin

I was not conscious of that. I thought a half an hour was allowed and we each had ten minutes. I have not spoken for ten minutes yet but will conclude.

There are elements contained within the Capital Acquisitions Tax Consolidation Bill which are characteristic of the inequalities within the tax system, specifically the treatment of cohabiting couples. I will not deal with them now in deference to my colleagues, to whom I apologise. I am surprised at the time constraints.

Sections 70 and 71 need to be addressed. The anomaly between spouses and cohabiting couples should be grappled with by the Minister. I appeal to him to address these shortcomings. Perhaps he will clarify in his response how he intends to proceed and how the failure to acknowledge and appreciate the rights of cohabiting couples sits with European legislation.

Mr. F. McGrath

The principal definitions are clearly laid out in this Bill and I welcome the clarity and detail. In the knowledge that time is limited, I will speak about sections 4, 46, 47, 51, 55 and 59 which are extremely relevant.

Section 4 imposes the charge of tax on gifts and provides that the tax will be charged, levied and paid on the taxable value of each taxable gift taken by a donee. I welcome section 46 which requires a person primarily liable for payment of tax to deliver a return and assess and pay the tax within four months of the valuation date. This tightens up the procedures and gets revenue in quickly without too much delay. We need efficient management of our taxes to ensure the maximum quality and expenditure on our public finances.

Section 47 is essential because it ensures returns are signed by an accountable person. This will guarantee honesty and transparency which we are still lacking in our whole taxation system.

Section 59 deals with hardship cases. We must always be compassionate in respect of genuine hardship cases. Life is like that and people have problems from time to time. The section allows time for postponement. However, it should only be for genuine hardship cases. The fat cats in our society should never be let away with ripping people off. It is important that we keep this in mind while addressing the Bill.

Section 109 provides that when a sum of money exceeding €31,750 is lodged or deposited with the banker in the joint names of two or more persons, the banker cannot on the death of one of the persons pay the money or any part of it to the survivor or survivors without first obtaining from the Revenue Commissioners either a certificate confirming that there is no outstanding charge to tax or consent in writing to the payment.

An Leas-Cheann Comhairle

Our clock was not working properly and I misinformed Deputy Ó Caoláin. There are 11 minutes left.

Mr. F. McGrath

Deputy Connolly will be delighted. I welcome the fact that the requirement to which I referred does not apply where the person who dies is the spouse of the surviving joint account holder. This is particularly important for couples and also where a sad tragedy occurs in a family. However, there are always legal necessities in legislation and while these should be well planned and enforced, they should also be based on compassion and human need. We must constantly bear this in mind. Before Christmas, the Government tried to rush through a disability Bill which had major flaws and antagonised every disability group in the country. I hope it has learned from the experience and I welcome the deep consultation process of the past few months on this issue. Legislation should always be planned and implemented in this way.

Section 1(1)(6) of the Bill provides for the Revenue Commissioners to make regulations which may be necessary to give effect to the Act and states that every such regulation must be laid before the Dáil. I have the highest respect and regard for the Revenue Commissioners and I use this opportunity to pay tribute to the valuable work they do in the interest of the law abiding taxpayer. At the same time, I strongly support the laying of their regulations before the House. It is essential that there is a link between quality public servants, accountability and democracy.

Regarding taxation, it should always be recognised that the country is run and paid for by the PAYE workers. I thank them for their massive contribution to paying for and running our services and I challenge those who do not pay their fair share of taxes to get off the fence and play their part. We should never lose sight of how much revenue PAYE workers contribute. I concur with Deputy Boyle's remarks in relation to the Minister for Finance and I strongly disagree with Deputy Broughan's contention that Deputy McCreevy is radical. He is not radical enough, unlike the President of Brazil who speaks about a radical civic republicanism. He wishes to include every citizen in that republicanism and he is to redeploy $700 million which was available to be spent on military aircraft, the order for which he has postponed. The money is now to be used for food vouchers for the 10 million poorest people in the state. This form of radicalism should be put to our Minister for Finance. Today he has an opportunity to prove how radical he is. He should bring in a small supplementary budget of €20 million to be aimed at the crisis in disability waiting lists.

We have made progress, but there is a still a long way to go before we achieve equity in the taxation system. I commended the Revenue Commissioners who have done excellent work in tackling those who do not pay their taxes. The figure of €127 million in settlements which have been made was published recently. This revenue should be used to fund services. I accept that we have made progress, but we have much more to do.

Mr. M. Smith

A lot done, a lot more to do.

Mr. F. McGrath

We must ensure that our taxation system is equitable. I have pointed out sections in the Bill which I welcome as positive and I am grateful for the opportunity I have been given to discuss the legislation.

Mr. Connolly

This Bill is welcome, if only because it continues the process of streamlining and modernising our tax legislation. Income tax, capital gains tax and corporation tax were dealt with previously, as was stamp duty legislation and excise law. Anything which consolidates and simplifies the capital acquisitions tax legislation and subsequent Finance Acts will make a coherent and valuable contribution to the further evolution of tax legislation generally.

A wise man once said that where there is a will, there is a bill. In the case of the CAT one has the distasteful task of considering one's mortality and what may happen when one passes away. Such morbid thoughts are part and parcel of the capital acquisitions tax process and can pay off when one is enabled to minimise one's CAP liability by availing of the various tax thresholds which allow inheritances to pass CAP free. In the unreal world of tax, an average family of relatively modest means may be shocked when told that they may be considered wealthy with all the attendant problems that entails when they attempt to provide for their children. Galloping property values in particular create this possibility for many families throughout the country. The introduction of family home exemption does not mean that the transfer of the home is automatically exempted from capital acquisitions tax. There are stringent conditions which will not suit everybody's circumstances. The home is generally a family's biggest asset, especially with property prices going through the roof. Many feel they can forget about capital acquisition tax in relation to the home, but they may not be aware of the conditions. Those conditions may be difficult to meet especially since most offspring have their own homes or an interest in another property.

Escalating house prices must also be factored into any decision in relation to section 60 policies which cover the tax payable on a house. House values have increased dramatically from year to year. If this increase is not factored in, a capital acquisition tax liability beyond the amount covered by the premium might be payable. Passing on family wealth invariably involves consideration of taxation which can in certain cases result in significant charges. Transferring wealth can potentially trigger capital gains tax, capital acquisitions tax, stamp duty and probate tax. In the case of gifts, capital gains tax, gift tax and stamp duty must be considered, and in the case of an inheritance the primary taxes are inheritance and probate tax. In general, the gift or inheritance is assessed at market value on the day the gift or inheritance is made or is capable of being given, with special rules applying to agricultural property and family businesses. In the interest of a more streamlined, simplified and coherent taxation regime, I welcome this Bill.

Minister for Finance (Mr. McCreevy)

I thank Deputies for their contributions and the general welcome they have given to the consolidation of the capital acquisitions tax code. As I pointed out during my opening remarks, the legislation was first enacted in 1976 and in every Finance Act except three some changes have been made to it. Consolidation has been a major operation for the Department of Finance and, particularly, the Revenue Commissioners. The method they initiated in the preparation of the Taxes Consolidation Act 1997, was repeated in this instance and it has worked effectively. It incorporates the public and private sectors. Hopefully, this legislation will give relief to people who have to make a living by understanding laws in this area.

On Second Stage, I pointed out that as this is to be a consolidation Act, no substantive changes in law are being made. The Bill consolidates existing legislation and the Attorney General has stated that to be the case. In the course of the debate, it was inevitable that Deputies opposite would raise some matters relating to CAT legislation. Deputy Richard Bruton referred to the current review of CAT legislation by the Revenue Commissioners, the first stage of which is the consolidation of existing legislation. This is not unusual as it would be hard to review something that is not consolidated. In any event, the law in this area was badly in need of consolidation.

Deputy Bruton also referred to the change I made some years ago to the residency provisions with regard to CAT liability. As the Deputy is aware, the income tax residency provisions were changed somewhat in 1994. Residence in the State is the basis for income tax as it is in most other countries, but there were unusual rules regarding CAT residency rules.

A few years ago I availed of the opportunity to put it on a residency basis also.

Irish property is always subject to capital acquisitions tax. If Deputy Richard Burton decided for taxation purposes to become resident in an exotic location—

Mr. M. Smith

Things are not that bad.

Mr. McCreevy

If in such circumstances he disclosed an interest in property in County Mayo, it would come under the terms of the CAT legislation, irrespective of where he was resident for taxation purposes. The situation would be unchanged even where he was resident abroad for a long period of time, say 20 years. That is the position for Irish real property.

With regard to non-Irish real property, the capital acquisition charge arises if either the disponer or the beneficiary is Irish resident or non-ordinarily resident. Deputy Bruton referred to cases where people move across the Border. That approach would not work because the person would have to be non-ordinarily resident for a considerable period, say four to five years. The receiver of the money would also have to be a non-Irish resident.

Under the old rules there were possible avoidance mechanisms. In one celebrated case involving a prominent person, the assets were non-Irish and the gift was given outside the territory. In such circumstances no liability would have attached. The fact that the person concerned did not contest that point is irrelevant. That was the law since the initiation of CAT in 1976 and I changed it to a more easily understood residency basis. A person would have to be out of the State for a long period of time before losing the status of ordinarily resident in Ireland, which is a criterion used in both capital gains and capital acquisitions tax.

A number of years ago I introduced the shared home relief, which was widely welcomed. Difficulties had arisen when the relationship between two house residents were not of husband and wife status. In such circumstances and where two people lived together for a period of time, if the owner of the house died and there was no blood relationship with the person to whom the house was willed, enormous taxation difficulties presented to the survivor. The relief I introduced takes no account of the nature of the relationship between the donor and the donee.

I was amused to hear Deputy Broughan refer to some of the reliefs in the capital acquisitions tax code. Perhaps the most significant is the 90% business or agriculture relief introduced by the former leader of his party when he was Minister for Finance. It was extraordinarily generous for a person of a socialist persuasion to introduce this relief. Deputy Richard Bruton was a member of that Administration.

Most of the CAT exemptions referred to are in place for social or national reasons. An example is the exemption for a surviving spouse. If my memory is correct, the then Minister for Finance, Deputy Dukes, introduced the provision that any transaction between husband and wife was exempt from capital acquisitions tax. If I recall correctly, the same class one threshold applying to gifts from parents to children also applied between spouses. It was a good development.

Other exemptions deal with pensions, heritage, property, charities and care of sick relatives and incapacitated persons. One Deputy questioned whether my taxation philosophy would mean following President Bush's example in the various measures he has announced in the past few weeks. In 1999, I abolished the tax credit on dividends, thereby making it fully taxable, which is the opposite of what President Bush proposes.

I thank Deputies for their contributions. It is important that this Bill is passed within a short period of time and I thank them for their co-operation.

Question put and agreed to.

An Leas-Cheann Comhairle

It is understood that the order of referral to a committee will be made next week.

Mr. McCreevy

Yes.