Finance Bill 2003: Second Stage.

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

This Bill implements the tax changes announced in the Budget Statement and includes a range of other measures. Many of these are targeted at closing off tax loopholes and updating and modernising the tax system. Deputies will be aware that the annual Finance Bill is considerable.

This year the Bill runs to 155 sections and six schedules. I propose to outline the main provisions in the time available to me. Committee Stage will provide an opportunity to debate the Bill in greater detail. I look forward to hearing the views of Deputies.

Part 1 of the Bill, which runs from sections 1 to 68, deals with income tax, corporation tax and capital gains tax. In my period in office, I reduced the income tax burden significantly. The average tax paid, including PRSI and levies, by a single person on the average industrial wage has fallen from 28% in 1997 to 17% now. This lowering of the income tax burden has rewarded both employees and employers alike and contributed to our strong employment growth. The period we now face limits the scope for further major reductions in the direct tax burden – instead we face a period of consolidation. The resources available this year in respect of an income tax package are being targeted on those in the lower income brackets and the elderly.

When the statutory minimum wage came into effect in April 2000, less than 64% of the minimum wage was exempt from tax. On foot of the tax measures I took in budget 2002, 90% of the minimum wage became exempt from tax. I am pleased to confirm that section 3 provides for an increase in the employee tax credit which maintains this 90% even with an increase in the minimum wage in October 2002 to €6.35 per hour. It also increases the entry point of the tax system for all employees from €209 per week to €223 per week.

My other priority this year in the budget income tax package was to assist the elderly. Section 2 increases the exemption limits from income tax for persons aged 65 and over to €15,000 for a single person and €30,000 for a married couple – this represents an increase of over 15%. When combined with changes last year, the limits have increased in value by almost 40% over the past two years. When I came to this job, I set a goal of removing large numbers of elderly taxpayers from the tax net. I am glad to say that I have seen this policy through and I will continue to pursue this target for the future.

Section 6 provides for the direct application of PAYE to many of the currently taxable benefits-in-kind. This will facilitate the application of PRSI, including the training and health contribution levies, to these benefits. From next year. employers will deduct and pay over to Revenue the appropriate PAYE income tax, PRSI and levies from wages paid to employees at the same time as the benefit is being provided. While tax has always applied to these benefits, hitherto they have not been subject to PRSI and levies. Application of PRSI and levies to benefits-in-kind is the norm in most EU countries. Share options are not being included in this treatment because of practical issues that apply specifically in their case, but revised procedures for their taxation are being introduced in section 8.

Section 6 also provides for a major simplification of the calculation of the benefit-in-kind taxable charge in respect of cars and vans. Deputies will be aware of my record of introducing simplification into the tax code wherever it is possible. From next January, a simple five rate structure will apply to cars, replacing the current system where up to 17 different percentages and categories can apply. Many thousands of those paying BIK on cars and vans will see their BIK income tax charge reduce as a result.

Sections 7 and 8 deal with the tax treatment of share options under unapproved share option schemes. I am making a number of changes to ensure that in future the income tax liability is settled at the time the share options are exercised, while providing some relieving measures for those currently in difficulty where the tax charge on their share options exceeds the value of the shares.

The seven year deferral facility introduced in 2000 is being abolished and from 30 June this year, a person exercising share options must pay the tax due within 21 days. The tax payment will, of course, be taken into account in calculating the person's final liability to income tax for the tax year concerned. By way of concession to taxpayers whose income tax liability may be higher than the value of the shares, such taxpayers will have the choice of making a payment on account capped at the value of the shares. The balance of income tax will become due for payment where the taxpayer makes a gain on the disposal of these or other shares. If a taxpayer wishes to avail of this provision, he or she must notify the Revenue Commissioners by 1 June this year.

Section 9 gives effect to the increase in mortgage tax relief available to first-time buyers. The current annual ceiling on the amount of interest that can be allowed will be raised by over one quarter from €3,175 for a single person and €6,350 for a married couple to €4,000 and €8,000, respectively. In addition, the period for which the relief is available will be extended from the current five years to seven years in all. Some 45,000 first-time buyers will benefit from these changes.

Maintaining a broad tax base with low tax rates has contributed successfully to our economic development and strong employment growth. While one can admire the ingenuity of tax advisers in exploiting particular aspects of tax legislation in a way that was never intended, it is essential that tax avoidance schemes and loopholes are tackled vigorously when they come to attention. I have a proven record in this respect. A range of provisions throughout this Bill are designed to put a stop to such schemes or to tighten up legislation to ensure that reliefs are focused on the intended objective.

Section 12 is designed to counter schemes whereby tax reliefs available to a trading company are transferred to individuals who, although nominally trading, are in practice passive investors. The effect of the section is to ring-fence the tax reliefs arising from certain specified trades carried on by an individual in a passive way to the actual income arising to the individual from that trade. The trades covered are the generation of electricity, oil and gas exploration and the film and music industries. These new provisions complement changes made in the case of limited partnerships in 1998 and 2000.

Section 13 closes a loophole in regard to the transfer of capital allowances on buildings from companies to individual investors. Where a building in respect of which a company has claimed capital allowances is sold to individual investors, those investors will only be entitled to set the capital allowances related to the building against their rental income from the building concerned instead of against a wider range of income.

Section 14 makes a number of changes to the tax regime governing various pension products. In summary, the main items provided for include: first, the alignment of contribution limits for personal retirement savings accounts or PRSAs with those applicable to other personal pensions and occupational schemes; second, the abolition of the facility to obtain excessive tax relief by making last-minute additional contributions just prior to retirement; and, third, new rules that will prevent approved retirement funds being used for investment in assets or property for private or family business use, for example, the purchase of a holiday home by the fund for personal use.

Section 15 provides for a number of changes to ensure that the BES and seed capital schemes continue to apply as intended. These schemes are due to expire at the end of this year and I will be reviewing them before next year's budget. Section 16, another anti-avoidance measure, counters contrived arrangements between spouses in relation to mortgage interest relief for investors.

The question of repayments of overpaid tax and the application of interest to such repayments has been the subject of considerable discussion in recent times arising from the Ombudsman's report on this issue last November. The provisions in existing legislation have grown up over time for different purposes and vary both within and across tax heads. There is no general right of repayment of tax or general entitlement to interest. In reviewing this issue I considered it essential that a new general provision be introduced which was coherent across different taxes and different situations. Of course it is also essential, as I indicated in my response to the Ombudsman's report when it issued, that whatever scheme is put in place takes account of the potential Exchequer costs of any new general scheme. I consider the proposals in this Bill represent a balanced approach to these objectives.

Section 17, together with various other sections in the Bill, provides for a general right of repayment of tax in relation to valid claims made within a four year period. These replace existing provisions on repayments where they exist. This will apply across all tax heads except customs duties which are a direct EU tax. The right of Revenue to make assessments to tax and to pursue inquires will also be limited to four years unless Revenue has grounds to suspect fraud or negligence for earlier years.

These sections also provide for a new general entitlement to interest on overpaid taxes. This provision will apply from six months after the date on which the claim is made by the taxpayer. However, where Revenue misconstrues the law, interest will be paid, in general, from the date the excess tax was paid, subject to the overall time limit on repayments of four years. This new scheme will replace all other existing arrangements, including those provisions dealing with interest paid on refunds of overpayments of preliminary tax. The rate of simple interest on repaid tax is being reduced from 0.0161% per day to 0.011% per day or from approximately 6% to 4% per annum. Such interest is tax-free. These measures provide a fair and transparent scheme for the refund of overpaid taxes and interest on such refunds in the future. They also address the issue raised by the Ombudsman in relation to the need for a general scheme. All of these provisions are subject to a ministerial order and will come into effect after the orders are signed.

Sections 18 and 19 provide for an extension until 31 December 2004 of the existing schemes of stock relief for farmers in general and for certain young trained farmers. A commencement order will apply to the young trained farmer scheme, given potential EU State aid implications. Section 20 provides for a tightening-up of the type of capital expenditure covered by capital allowances for the purchase of transmission capacity rights. Section 21 relates to tax relief on donations. The section provides for a maximum limit on the amount of donations that can attract tax relief where the donation is made by an individual who is directly associated with the organisation, for example an employee or certain members of the body. In these cases, where the aggregate of donations in a year of assessment is greater than 10% of the individual's total income, the excess will not attract tax relief. Tax relief for donations in all other situations will continue, as currently, without any ceiling.

Section 22 gives effect to the increase from five years to eight years in the write-off period for allowances for capital expenditure incurred since budget day on plant and machinery. As I indicated in my budget speech, I consider it appropriate in present circumstances to seek an equitable balance in raising revenue from all sectors of the community. This is one of the measures which will raise revenue from the business sector. Section 23 provides for the reduction of the annual rate of write-off for capital expenditure incurred on hotel buildings to 4% per annum, while the annual capital allowances for holiday cottages are being abolished. Subject to transitional arrangements, both these amendments apply to construction or refurbishment expenditure incurred on or after budget day. The transitional arrangements provide that these changes will not apply to such capital expenditure incurred by 31 December 2004 if a full and valid planning application is received by the relevant planning authority by the end of May. These dates should cater for the vast majority of cases that have been brought to my attention since the budget.

Section 24 sets out the expiry dates for a number of tax incentive schemes. Those affected are the urban renewal scheme, the town renewal scheme, the park and ride scheme and the student accommodation scheme. Sections 25 to 28 make various minor changes to these schemes. I have always held the view that targeted, well designed tax incentive schemes can be a useful instrument in achieving desirable public policy objectives. However, the value of such schemes must be balanced against the important objective of ensuring a wide tax base if we are to maintain low rates. It must be borne in mind that such schemes usually also mean that higher earners can reduce their tax bill substantially. Given the current and prospective budget situation and the objective of broadening the tax base, I consider it necessary to finish these schemes and others by the end of next year. I will be keeping all tax expenditures and incentive schemes under review. This is not to say that I will not consider introducing tax incentives where I see the potential benefits as outweighing the other factors I mentioned. For example, we wish to encourage research and development expenditure by companies to safeguard our location as a base for new manufacturing and other activities and a tax incentive is one of the possible options being examined by relevant Departments.

Section 30 closes off a loophole relating to tax avoidance schemes involving contrived financial arrangements in relation to a relief available to lessors in respect of capital expenditure incurred on the provision of student accommodation. I announced last July that I would introduce legislation to close this loophole. This section requires, among other restrictions, that any loan involved for the lessor must be taken directly from a financial institution instead of from the third level college. Relevant contracts tax is the tax that principal contractors are obliged to deduct at a rate of 35% from payments made to certain subcontractors in the construction, meat processing and forestry industries. Section 31 contains provisions to tackle certain administrative problems that have arisen regarding underpayments and late payments of this tax as well as tightening up the procedure for the issue of payment cards to principal contractors. These cards effectively authorise principal contractors to make payments without deducting tax.

As I have just said, all tax incentives and reliefs are subject to ongoing review. In the case of some of these incentives, there are no legislative provisions regarding a return of the exempt income or gains. The relevant legislation is now being changed in section 33 to provide for the return to Revenue of the details of the exempt income or gains arising in connection with three of these tax incentives, namely, the exemptions for stallion fees, profits from forestry and greyhound stud fees. This will enable a further assessment to be carried out of the actual costs and benefits involved in these three reliefs. The legislative change will come into effect at the commencement of the next tax year, 1 January 2004. I will be putting forward an amendment on Committee Stage to ensure that losses as well as profits are captured in the returns to be made so that the full effect of any potential future change in taxable status can be assessed.

Section 34 closes a loophole under which the sale by an individual to a company of a rent roll from a building can facilitate tax avoidance. This loophole has been used to ensure that the rental income that should be charged at the 42% rate of income tax is charged instead to corporation tax at the 12.5% rate through the sale of the rent roll to a financial institution. Section 36 permits the Government to enter into tax information exchange agreements with the governments of other jurisdictions. Double taxation treaties already provide for exchange of information but this section facilitates agreements with any jurisdiction specifically on exchange of information. Deputies may be aware that a range of states that might be regarded as tax havens have undertaken to the OECD that they will be prepared to enter into such agreements. Section 39 provides for the introduction of a pay and file system for corporation tax. This will require a company to submit the balance of tax within nine months after the end of the accounting period in question. This will align the corporation tax return filing and final payment deadlines.

I recently established the National Development Finance Agency to assist in providing cost-effective finance for public investment projects by advising State authorities on the optimal means of financing and in some circumstances providing finance or forming companies to secure finance. Sections 40, 68 and 134 confer exemptions from tax on the NDFA in the performance of its statutory functions. Sections 41, 43 and 44 are further anti-avoidance provisions. Section 44 is designed to counter tax avoidance schemes involving a balancing charge, that is, a claw-back of capital allowances following the disposal of machinery or plant. These schemes seek to avoid the charge or to pass the balancing charge arising from an individual to a company, which would be taxable at a lower rate.

Our capital city has become a significant player in international securitisation transactions and it is important that we continue to compete successfully for this business. In order to achieve this, Irish tax law must keep pace with international developments. Securitisation involves the creation of tradable securities, traditionally from existing assets or future income streams. It is used to raise finance in a manner more efficient than traditional borrowing. By its nature, the securitisation business is constantly evolving and producing more sophisticated transactions. Section 45 updates our tax regime in order to bring more of this high-value business to Ireland. Accordingly, the overall effect of these changes is to greatly increase the types of financial assets which can be securitised. Ireland has also become a successful international centre for fund management. A feature of this sector in Ireland is that a high proportion of the business is fund administration. Our strategy is to build on this by encouraging more fund promoters to locate their investment management function here in addition to their fund administration operations. In this regard, section 47 removes a technical obstacle to achieving this goal by providing that a tax liability on a foreign fund will not arise solely because of the activity of the Irish agent acting on its behalf.

Section 49 amends the taxation regime that applies to "gross roll-up" collective funds and their investors. Such gross roll-up applies tax only when the moneys are paid out of the fund. The changes allow payments to be made without the deduction of an exit tax where the payments are being made to an Irish resident company – in the case of a money market fund, to a credit union, or to the Courts Service, which administers the investment of funds lodged in court. The Courts Service will be required to operate the exit tax on payments made to it by the collective fund when they allocate those payments to the beneficial owners.

Section 58 amends the scheme of tonnage tax for shipping companies introduced in the Finance Act 2002 to conform more fully to EU requirements. Tonnage tax is a scheme whereby, as an alternative to charging corporation tax on certain profits of a qualifying shipping company, a tax charge is levied each year instead on the tonnage of the ships operated by the company. The European Commission has given state aid clearance to the scheme of tonnage tax, subject to amendments being made to certain provisions of the legislation as enacted so as to make the scheme conform more closely to the Commission's tonnage tax policy. The amendments to the scheme include confining the tonnage tax regime to profits derived from shipping activities and a requirement for separate accounting where a company engages in tonnage tax activities and other activities.

Section 59 amends the definition of a close company. A close company is one with five or less participators. Companies owned by the State are excluded from the definition of a close company. This exclusion is now extended to companies owned by EU member states and any countries with which Ireland has a tax treaty.

Section 60 adds a number of organisations to the Schedule of non-commercial State sponsored bodies granted exemption from tax, other than DIRT, in respect of non-trading income which would otherwise be chargeable to income tax or corporation tax. The organisations are Tourism Ireland Limited, the Occupational Safety and Health Institute of Ireland, the National Consultative Committee on Racism and Interculturalism, the National Qualification Authority of Ireland and the Irish Sports Council.

Sections 61 to 63, inclusive, make significant changes to the capital gains tax regime to remove some relieving provisions which are less necessary now that the tax rate is set at 20%. These changes will also spread the burden of the revenue raising measures needed in the current budgetary situation. Section 61 gives effect to my budget announcement that indexation relief will not apply for years after 2002. Section 62 removes the facility to defer capital gains tax by the issue of debentures, loan stock or other similar securities. Section 63 abolishes roll-over relief. This relief allowed for the indefinite deferral of a capital gains tax charge on gains accruing on the disposal of certain assets where the proceeds were reinvested in certain other assets. This change is effective for all disposals from 4 December 2002 onwards.

Section 64 contains a number of amendments to legislation providing relief from capital gains tax where an individual, having attained the age of 55, disposes of certain business assets or shares in his or her family company. The amendments provide for the situation of widowed spouses in farming, for updating the relief by reference to the latest EU early retirement scheme for farmers and to provide for company restructuring situations. The opportunity is also being taken to round up the limit for the relief to €500,000.

Certain tax rules which, at present, allow individuals to avoid a capital gains tax charge by selling assets during a period of temporary residence abroad are being changed. Section 65 accordingly imposes a capital gains tax charge in such circumstances. Section 66 is another anti-avoidance measure that ensures that someone who is paid for agreeing not to compete in business is taxed on the payment. Section 68 adds certain persons to the list of those who are entitled to exemption from capital gains tax. These additions are sports bodies and registered trade unions, subject to certain conditions being fulfilled. This is consistent with the income tax exemptions already available to such bodies.

Part 2 of the Bill deals with excise duties. Sections 69 to 82, inclusive, relate to alcohol products tax and include provisions to consolidate and modernise excise legislation covering the various alcohol products in order to make it more accessible to users. Much of the existing law in this area dates back to the 19th century and is obsolete in the modern excise context. It has been supplemented and amended over time to the extent that it has become fragmented and disjointed. These provisions are being replaced by a structure of law which is based more closely on the EU law relating to alcohol products. The opportunity is also being taken to streamline existing provisions and to make some minor changes in the area of offences. Sections 83 to 86, inclusive, are restatements of existing provisions on foot of the consolidation and modernisation of existing legislation.

Section 87 confirms the budget night increase in the rates of excise duty on auto diesel which, when VAT is included, amounted to 3 cent per litre. Section 88 confirms the budget increase in the main rate of excise duty on spirits which, when VAT is included, amounts to 20 cent on a standard measure. The lower rate of duty which had applied to low strength spirit alcopop drinks is also abolished.

The House will be aware from media coverage of Revenue's efforts, successful in many instances, to tackle significant cases of evasion of excise duty. The legislation is being strengthened to assist these efforts. Section 89 provides for an updated offence of selling, delivering or keeping for sale any spirits on which excise duty has not been paid. Hitherto Revenue has had to rely on 1830s legislation in this area. It also provides for a presumption, in any proceedings for an offence involving counterfeit spirits, that excise duty has not been paid on those spirits.

Section 90 introduces an offence of keeping for sale as auto fuel any mineral oil on which excise duty has not been paid at the appropriate rate. Section 91 introduces a presumption, in proceedings for certain mineral oil tax offences, that diesel used as a propellant which exceeds the maximum sulphur content allowed for auto diesel has not been taxed at the appropriate rate. Section 92 confirms the budget increase in the rate of duty on cigarettes which, when VAT is included, amounted to 50 cent on a typical packet of 20, withpro rata increases in respect of other tobacco products. Section 93 provides for the charging of interest on the late payment of excise duty in line with the rules for other taxes.

Sections 97 and 102 make an amendment to the definition of "crew cabs" for VRT purposes. Such cabs have the capacity to act as both domestic and commercial work vehicles. This will ensure that smaller domestic type crew cabs, currently classified as category C vehicles which are liable for a flat VRT of €50, will be reclassified as category B vehicles which are liable for VRT of 13.3%. The Bill also includes an amendment to the definition of "pick-ups" to ensure that certain genuine small pick-up trucks will continue to be classified correctly as category C and not category B. These changes will be effected by ministerial order.

Section 98 provides for the issue of a single vehicle registration certificate, to be issued by the Department of the Environment and Local Government, incorporating both the vehicle registration certificate issued by the Revenue Commissioners and the licensing certificate issued by the Department of the Environment and Local Government. Section 99 confirms the budget change that the 30% VRT rate will apply for vehicles over 1.9 litres instead of two litres as heretofore. Section 101 extends to 31 December 2001 the schemes under which hybrid electric vehicles are rebated 50% of the relevant vehicle registration tax.

Sections 103 to 106, inclusive, deal with definitions of gaming and amusement machines and the rules relating to licences for amusement and gaming machines and gaming premises. Definitional changes are needed to deal with certain new machines to ensure that they are classified as amusement rather than gaming machines. There are many different licences in this area and, to simplify administration, the number is being reduced. Section 107 provides for time limits for Revenue to raise assessments of betting tax consistent with the approach to other taxes.

Part 3 of the Bill deals with VAT. Two important EU directives are being transposed into EU law. The electronic commerce directive provides for changes in the rules concerning business to business supplies, new rules regarding supplies of services to private customers in the EU from outside the EU and a special scheme for such non-EU suppliers where supplies are made to private consumers. There is a series of sections in this part of the Bill which transpose this directive. The VAT invoicing directive aims to simplify, modernise and harmonise the conditions laid down for VAT invoicing and to remove barriers to electronic storage and transmission of invoices across the EU. The Revenue Commissioners have issued regulations which partially give effect to the directive. However, it is necessary to transpose the remainder of the directive in the Bill in section 118 and follow-on regulations.

Three changes are proposed to the VAT treatment of property in the Bill. Last year's Finance Act introduced the concept of economic value into VAT law. Economic value means the cost of acquisition and development of a property and identifies the full amount on which the developer claims input VAT in respect of the development of a property. This concept was introduced to prevent avoidance schemes. Section 110 ensures that the meaning of development in the definition of economic value includes expenditure such as architects' and other professional fees.

Short-term letting of property is usually exempt from VAT. However, it is possible to waive the exemption on short-term letting and charge VAT at the standard rate. In some cases prior to short-term letting, individuals will have claimed input VAT on the development of the property with the intention of entering into long-term leases which did not materialise. The change in section 113 allows the Revenue Commissioners to take this into account when calculating what the taxpayer needs to pay if he then cancels the waiver. Section 117 creates a requirement to maintain records as long as the property is in the VAT net and for six years thereafter.

Section 114 makes the local business responsible for paying VAT on the supply and installation of equipment where the supplier is not established in the State. Section 115 confirms the budget night increase in the 12.5% VAT rate to 13.5%. This was part of the budget's revenue-raising measures.

Where car dealers pre-register certain cars for their own use prior to sale, for example, replacement vehicles for breakdowns and courtesy cars, it gives rise to an anomaly whereby more VAT is chargeable than if the vehicles in question were sold to customers without pre-registration. Section 116 provides for the introduction of a new VAT-based mechanism to correct this anomaly which will apply to all pre-registered cars. An existing VRT refund scheme for pre-registered demonstration cars will therefore become redundant and will be discontinued. Section 123 extends tax-geared penalties for VAT to cases where a return is not submitted and brings VAT into line with income tax and corporation tax in this regard.

Part 4 of the Bill deals with stamp duties. The tax code exempts from stamp duty the transfer of shares and property between associated corporate bodies, subject to certain conditions. Section 131 amends these conditions to include certain situations where the companies are clearly associated but would not meet the existing conditions. Section 132 confirms the budget night extension of the stamp duty exemption for young trained farmers. Section 133 extends the existing stamp duty provisions which exempt foreign national Government loans and securities to loans and securities of foreign local governments and foreign local authorities. Section 135 confirms the budget night increase on stamp duty on cash cards and credit cards.

Section 136 gives effect to the announcement on budget day that a specific contribution to the Exchequer is to be obtained from the financial sector for the three year period 2003 to 2005. The targeted contribution is €100 million per annum for each of the three years. The required amount for 2003 is to be obtained from each relevant financial company or group by reference to the amount of the tax payable on deposit interest by it to the Revenue Commissioners in the calendar year 2001, excluding arrears relating to earlier years. The payment will be in the form of a special stamp duty which will be due for payment in October 2003. This duty will be levied at a rate of 50% on the amount of the tax on deposit interest referred to. However, there will be an upper limit on the amount payable by each relevant financial institution or group. This upper limit will be equal to 0.0015 of the institution's or group's average deposits from residents in 2001, excluding Government deposits and inter-financial institution deposits. The same amount will be payable for 2004 and 2005. Section 138 confirms the budget night increase in stamp duty on cheques and non-residential property.

Part 5 deals with residential property tax. The threshold for a residential property tax clearance certificate is being increased from €382,000 to €1 million. This increase will reduce administration costs and free up resources to carry out more audits in this area so that the yield in back tax can be maintained. Sections 142 to 148 deal with Revenue Commissioners' powers and administration. Section 142 enables an additional estimate to be raised where a previously estimated amount has been paid and a return showing the correct liability has not been made or where the Revenue Commissioners have subsequent information indicating that the original estimate was too low.

Section 144 allows the Revenue Commissioners to carry out an on-site audit of accountable persons in relation to professional services withholding tax. Section 145 increases the maximum fine for summary offences from €1,900 to €3,000. Section 146 contains a number of provisions to facilitate the investigation and successful prosecution of revenue offences. It is proposed to allow for the creation of certain evidential presumptions in relation to proof of books, records and so on in court proceedings for tax evasion cases. A provision is also included creating an offence of falsifying, concealing or destroying documents relating to a Revenue investigation. A judge hearing a trial on indictment will now be able to make information available to the jury to assist them in their deliberations such as charts, transcripts, summary information and so on. Section 147 allows unpaid penalties to be pursued in the District and Circuit Courts as well as the High Court. Section 149 is an enabling provision that will allow the Revenue Commissioners to oblige certain categories of taxpayer to file returns and pay tax electronically.

Section 150 provides for the revocation of minor annual payments from the central fund. These payments relate to Marsh's Library, King's Inns and the Lord Mayor and citizens of Dublin and are provided for under legislation which, in some cases, is over two centuries old. Section 152 provides that the Exchequer may be reimbursed from the small savings reserve fund for amounts transferred to the dormant accounts fund which represent accrued interest on the national savings schemes.

There are no capital acquisitions tax provisions in the Bill as published because of the new CAT Consolidation Bill. However, I will be putting down several amendments to CAT on Committee Stage after the CAT Consolidation Bill has been enacted within the next few days.

As Minister for Finance, I have managed in successive budgets and Finance Bills to create a low tax rate environment across all tax heads. It is a position from which our economy has thrived. The task is to build on what we have gained. This Finance Bill recognises that this is the case. It provides for targeted reductions in income tax where they are needed. It also targets additional revenues that can be put towards improved public services and it closes off various tax loopholes and limits or curtails a number of reliefs which will protect the tax base and secure our low tax rate environment for the future. I hope the House has benefited from my outline of the provisions in the Bill. I look forward to the debate on the Bill and I commend it to the House.

The Minister had billed that this was the start of his second book – the first chapter in the second series of five budgets which he hopes to present to the House. However, he must realise he is producing a horror story. The most forlorn notion to emerge from the recent partnership negotiations was the hope among employers and unions that the Minister would contribute to stabilising inflation. That is surely a triumph of hope over expectation – it is a bit like asking a pyromaniac to take charge of the fire brigade. Here is a Minister whose Finance Bill's central theme is the use of price rises, imposed by the Government, to pay for the mismanagement of public spending that has occurred in recent years.

The vast array of price increases that the Minister for Finance has imposed in recent weeks add up, for a typical family, to almost €1,500. If the Minister doubts that, I can give him the figures. VAT is up €182 per household; motor tax, €30; hospital charges, €133; drugs refund, nearly €200; VHI, €66; cigarettes and alcohol, €187 and bank card charges, €83. Bin charges vary but are up to nearly €50 in many parts of the country, ESB bills, €72 and college fees, €275. These are all administrative price increases which have come directly from the Minister's budgetary provisions. Most of these have dribbled out under cover because Ministers were afraid to face the public honestly and say this is how they are paying for the misspent revenue of the past few years.

Another clever device has been to short-change agencies like local authorities and health boards that are at arm's length from Government so they, rather than the Government, take the heat for increases. It is particularly evident in rates increases which, in some local authority areas, are up 12% – thankfully it is only 7% in my area – rents are up 10% and bin and parking charges have also been increased by up to 25%. This is a direct consequence of Government policy. It is enough to make a cat laugh for the Government to claim it is undertaking an anti-inflation campaign when it is the main driver of inflation through its services. We will, no doubt, hear from the Tánaiste about how the Government proposes to introduce a more competitive environment and new aggressive approach to competition from which consumers will benefit.

However, this comes from the Government that has used the near monopoly powers of the ESB, the VHI and CIE to increase charges this year by two, three and four times the rate of inflation. The Government is using State-owned near-monopolies to jack up prices for ordinary consumers, although the partnership programme no doubt will contain highly ambitious words about how the Government will address competition issues. It is using these companies to push up prices and increase costs rather than face up to the issue of reform of public spending, which is clearly needed. Not content to dip into consumers' pockets in the way I outlined, in this Bill the Government is not making any provision for increasing tax credits or the basic tax thresholds. It may be a sleight of hand that this area was passed over in silence in the budget and a section in this regard was left out, but the consequence of that for ordinary households is that an extra €400 will be collected by the hidden tax collector before the end of year. The Government is using inflation as its tax collector this year.

It is also going beyond that. In the case of business tax, not only is the Government saying that it will use inflation to collect tax through capital gains tax, but forever more we will see paper improvements in the value of property being taxed by the Minister. This is a decision he is making to do away with a fundamental basic principle of fair tax, that one does not tax paper gains which do not represent any real benefit to a person. The Minister is cementing into our capital gains tax code a provision that inflation forever more will be one of his tools for gathering tax.

The Minister has elevated to a fetish the issue of the capital gains tax rate. He has made that a totem and is sacrificing basic sound tax principles on this altar. He has set himself up and now we are seeing the consequences of this narrow, blind commitment to tax rates above all else. It is producing anomalies in the tax code going forward, as are other ways in which he is dismantling prudent approaches to taxation.

In short, the Government is bedding in a vested interest in inflation for itself over the coming years. It will use inflation to increase revenue, it will fail to index and it will undermine people's positions by unfair taxation using the erosion of inflation to benefit the Exchequer. This is the sort of approach that undermines the sound economics of years gone by. I am amazed at the Minister taking this approach to the operation of the tax code.

This approach has potentially catastrophic effects for a small open economy like ours. The key issue we must keep in mind is competitiveness. If the Government pursues a pro-inflation policy then, as sure as night follows day, the cost will quickly come in job sacrifices. We are already losing jobs on a weekly basis. I am sure the Acting Chairman has witnessed that in his part of the country recently.

A figure that was passed over in remarkable silence was contained in a report by Forfás last week. Its report showed that in the past two years 61,000 jobs were lost from companies supported by the IDA and Enterprise Ireland. These companies are the productive core of the so-called Celtic tiger. There was a loss of 61,000 jobs in those companies, which represents more than one in five of those types of jobs being lost in the space of two years. Those job losses were not compensated by job replacements elsewhere. However, there was job creation and, therefore, we did not experience the full impact of that meltdown, but it highlights how vulnerable we are when in the past two years, which people would say were relatively stable years, there was that level of attrition.

If the reputation of Ireland becomes one of an economy that is no longer competitive and we do not continue to attract jobs at the level that we have in those IDA and Enterprise Ireland-backed areas, we will quickly see those 60,000 people who lost their jobs in that two year period going directly on to the unemployment list. We will see a meltdown in employment if we continue to pursue a policy that undermines basic competitiveness in the economy. The Government has lost sight of the crucial importance of competitiveness in a small open economy. Instead of assisting enterprise in this difficult time to deal with these challenges, the Government, for short-term reasons, is using inflation and undermining competitiveness for purposes that were entirely foreseeable and which prudent management of finances would have avoided.

The Bill also directly damages the climate for investment. It introduces a series of short-term measures based on short-term thinking about the needs of this economy, which will undermine the confident climate we need for investment. I will single out a few of these measures. I mentioned capital gains tax, but the Minister has gone further in regard to that tax. Apart from abolishing indexation, he has also decided to abolish the relief that was afforded to businesses which decided to sell under-performing assets in order to replace them with other assets that would better serve the future of such businesses. This is the relief that has been commonly known as rollover relief. That relief was based on the sound principle that when the owners of a business decide to take money out of their business, they should be hit in respect of capital gains. However, where they retain it in their business and replace under-performing assets with assets that can better serve the business, we should allow them to keep those resources within the company and continue to support its employment performance.

I am sure the Minister has had a post bag full, as have I, of letters from the owners of small businesses who will be seriously caught by this measure. Some of them will be caught because there are in transition. They had made business decisions based on the expectation of rollover relief which will now be withdrawn without any transition provision that would allow them to deal with its removal.

The Minister must remember that one of the basic tenets that has been so strong in our economy was certainty for business as regards the way the tax system would work for them. In this Bill the Minister is pulling out important pillars of certainty in relation to the tax treatment of business. This very much represents short-term thinking built on the Minister's perception that mechanisms such as tax rates are crucial and that the way the tax system works in its actual mechanics does not matter. We need a much more far seeing approach.

For crude cash flow reasons, the Minister has pushed out the period over which businesses can get tax relief on their investments. He has extended the period from five to eight years. I am no expert in business, but I do not believe that there is much equipment that has an endurance of eight years. Most equipment technologies are changing rapidly. We hear that five years is a minimum survival rate for technology. The IDA would say that five years is the maximum period for investment, but the Minister is saying that, to meet his cash flow needs, he will not allow business write-off in five years, even if that is the need, but will seek to extend it to eight years. That measure undermines the business climate for investment. Again it represents short-term thinking in that it sacrifices long-term needs.

The Minister is also imposing a 50% increase in tax on people who invest in business assets by way of an increase in stamp duty. I find it difficult to understand the rationale for this measure. If people want to invest in Irish assets to create businesses here, why has he decided to increase by 50% the levy imposed on them. It represents a levy on new investment, which is difficult to rationalise.

I noted in this morning's newspapers that the tourism industry is in trouble. I am sure that problem affects the Acting Chairman's part of the country more than it does mine. However, the main measure the Government has given to the industry this year is a 1% increase in its charges. We are aware that the industry is already struggling with charges and is uncompetitive in many of its products. I do not lay all the blame for that by any means at the Government's door. There are problems in a competitive tourism package being provided by pubs, restaurants and so on, but I do not consider that the appropriate response is to add an increase of 1% to their costs. We will rue that later in the year.

This approach is part of a deeper failure by the Government to keep its sights on the important principle that a small open economy must be competitive. We have also witnessed that in many other ways. Elements of the competitive package that are in the charge of the Government are the ones that are most seriously undermining our performance. The way we underpin Irish jobs is by having quality transport, telecommunication and waste management systems, quality energy supply, access to decent child care and keen insurance costs. These are all heavily influenced by Government. I do not believe the Minister could put his hand on his heart and say that Ireland under this Government has managed its responsibility shrewdly in relation to those areas.

If one looks at the slide down the world rankings that Ireland has suffered in recent times, it has been as a result of factors like failure to roll out broadband, congestion costs and slow delivery of parcels – with Dublin second only to Calcutta in that respect – and problems in terms of capacity and price in electricity. We are not at the races in terms of provision of child care support for women who choose to work outside the home. Our policy on waste is a total shambles. The Ministers responsible should have used the good times of recent years to get policy right in these areas. Those years were undoubtedly squandered.

Unfortunately, one of the first casualties of the Government was the concept of prudent planning. This trend was led from the top – the Taoiseach was the most profligate of all. His approach to the whole Campus and Stadium Ireland project was marked by absolutely no sense of prudence in relation to planning. There was no effort to look at what the actual revenues were likely to be, what the actual costs were likely to be or how successful or viable the project would be. None of those things mattered. They were just dismissed. The project was a political objective. It was about getting back into power or satisfying certain friends the Taoiseach thought would support him, and prudence just went out the window. Careful project evaluation, tight control of project costs and focus on value for money were foreign concepts to Ministers in the Government and we are now paying the price.

Even when it came to putting up election billboards to say how successful they had been, Ministers measured their success in terms of the amount of money they had spent, not in terms of actual improvement in the quality of services delivered. They boasted of increasing spend on health by a sum I cannot even recall – it could have been 100% or 120% – but they could have claimed 150% for all people cared because it did not deliver any improvement.

The Minister for Finance was not content to sit on his hands while this profligate approach went on. He got in on the act as well by undermining the tax base. He tried to lure voters through initiatives that deliberately undermined the tax base. This is evident in his Estimates volumes and his budget statement. In the past two years, he allowed spending to grow at over six times the rate of growth in tax revenue. That is a recipe for disaster in anybody's language. One cannot travel down that road and survive in the long-term. The Minister, above all, should know that.

Since the election, the Minister has sought to rebuild his credibility and curb spending, but the same short-term practice is flowing over into this period also. Instead of restructuring spending programmes, looking for value for money, reassessing programmes – and dropping underperforming ones – and delivering quality services, large bureaucracies have been left intact in the State sector and the people who are suffering are the people who get the crumbs that fall from the table in the form of discretionary spending. We see this left, right and centre at the moment.

The Eastern Regional Health Authority could not commit to nursing homes and had to reduce its number of contracted beds. What happened? Those same patients occupied €1,500 per week beds in the Mater Hospital and Beaumont Hospital. This, in turn, impacted upon their accident and emergency departments and they could not admit patients. Thus, a very short-sighted economy resulted in absolute chaos in accident and emergency departments and left hospitals unable to cope and with nowhere to turn.

That is the sort of pruning of spending the Government has engaged in. It has been short and sharp but has also been very short-sighted, and we will see that type of impact manifest itself throughout the year ahead. The figures are there to show this. The public pay side of the Minister's budget this year is going up by 11.5% but the non-pay side is going up by a mere 1.5%. The consequence is that the actual delivery of services will be tightened in every walk of life. Social workers will be unable to visit people because they do not have a petrol allowance and so on. We will witness these types of narrow-minded, short-sighted savings that impact upon ordinary people. The home help service, as Deputy Rabbitte pointed out earlier, is being squeezed, another very easy target because it is not part of the main bureaucracy. It is the people on the ground who get hurt. That will be the real legacy of the Government.

Ominously, the January tax returns suggest that the Minister's undermining of the income tax base has still not come to an end and that we may face more of this. The Dáil, which ultimately gives the Government authority to spend, must reassert its insistence upon fiscal responsibility. It must insist that Ministers who introduce new initiatives present to the Dáil the long-term costs of them and outline what they mean for year one, year two, year three and so on. When Ministers present their Estimates, they must also present the performance indicators by which they believe they should be judged during the course of the year. When it comes to the appropriations accounts, the Minister should present details not only of the funds he has spent but of how he fared in relation to the targets he set when introducing the Estimates. This is basic management but we do not do it here. This House needs to change the way it approaches these matters so that the Government cannot continue to spend in the way that it has without reporting to the Dáil on the quality of what it is doing.

Real people are suffering the flaws of the stop-go approach to public spending of the past two years. Another example that has been discussed at great length is the first-time buyer. The main Government party promised in its manifesto that it would protect the first-time buyer from being squeezed out of the housing market. That was a solemn commitment, although maybe people did not regard the contents of the manifesto as a commitment. What happened? Just 12 months ago the Government gave massive relief to investors. Typically, they get the full interest relief of 42% and a concession on stamp duties. This year then the Government, having pledged to protect first-time buyers from being squeezed, tightens the screw on them further by abolishing the first-time buyer's grant and imposing stamp duty on sites and 1% VAT on the house price. The Minister's minuscule concession on mortgage interest relief is of no value.

The Finance Bill 2003 cements a typical penalty on first-time buyers of about €6,500. The concession the Minister gives in terms of mortgage interest relief is €330. This is completely contrary to the commitments that were made in the Fianna Fáil election manifesto. To crown the Minister's contempt for young families struggling to buy their first home, he hit them immediately from 1 January with the 1% VAT increase, even if they had already signed contracts. By contrast, the impact of the restrictions imposed upon those buying holiday homes or investing in hotels is being lessened. If they get their planning applications in by May 2003, they will not have to suffer the new restrictions. Thus, a very generous transition arrangement is granted to people investing in holiday homes and hotels, but those trying to get on the first rung of home ownership are hit immediately from 1 January, with no transition phase. When it comes to the equity of tax measures, there are no prizes for guessing who has the ear of the Minister.

The Finance Bill 2003 consolidates the anti-family features of the Government's tax policy. The tax penalty for a family in which one spouse stays at home to care for the children has grown under the Minister from €384, which was the PAYE allowance, to €4,210. That is a massive wedge being taken from people who opt to stay at home. No effort has been made to increase the home carer's allowance since it was very hurriedly introduced in the wake of an outcry from the public and a Government backbench revolt. No help has been given to persons who have caring obligations in the home, whether chosen voluntarily or involuntarily. That is anti-family. We need to allow supporting options and also to support options for people who go out to work.

If spouses go out to work they should get support. There was not a word about child care in this year's budget, but child care costs are spiralling. It costs in the region of €200 to €250 a week per child in my area, and it is commonplace for people to pay that much money. That is a massive burden and the tax code should reflect the fact that this is a real life cycle problem. Then there is the cost for families trying to fund education. The registration fee has been increased and the Government is edging towards the reintroduction of fees but there is no provision for tax relief in this regard. It is time for a fresh look at the entire tax code to ensure that it is sensitive to the pressures on families at different stages in their life cycle. There are real problems for young families and later in life for families that must support relatives in old age. The Government sees people in a narrow economic role and this philosophy is doing serious long-term damage to the proper functioning of our community.

No one ever doubted that the Minister has a hard neck but reports in yesterday's newspapers took the biscuit – he will have to get a brass neck award. Yesterday, I read that the Minister was lecturing the EU and blaming it for the threatened cutbacks in public spending. I do not know if the Minister recalls that he increased public spending by 40% in the past two years. When the EU timidly asked the Minister if this was prudent it was contemptuously brushed aside. Telling the Minister how to run the economy was regarded as an assault on our man in the green jersey. We are now trying to deal with the consequences of the profligate approach to public spending and the Minister has the gall to blame the EU as if it was the EU who would impose cuts. It is the Minister's foolish approach to public finances and his undermining of the tax code that will impose problems on us.

The Minister sat on his hands while his colleagues decided to indulge in chequebook electioneering. This is what has us up against stability pact constraints, so that we are finding that we cannot even fund our investment needs. It is not because the stability pact was excessively burdensome. The Government promised us it would protect us from the euro rip-off; 200,000 additional people would be given medical cards; hospital waiting lists would be ended in two years; the €10 billion health strategy would be started immediately; no child would attend a sub-standard school; and 2,000 additional gardaí would be on the beat. One by one these promises were dropped into the bin as the Government told us it could not deliver them. Why? The Minister brandished a phrase he had tucked into the manifesto "We will maintain the budget close to balance or in surplus in accordance with the stability and growth pact".

I included that myself.

Now the Minister is turning to Brussels saying the stability pact is killing us and that it should be changed. The Minister's credibility is even further shot through. He is either standing by the need for prudence and is using a sensible stability pact to tell his colleagues that we need to manage public spending prudently, live within our resources and meet our international obligations, or he is blaming Brussels and hopes to go there with the begging bowl so that the EU might take this yoke off our back. It is crazy. The EU should be extremely wary of changing the goalposts for a Government that is not delivering value for money or delivering its projects either within budget or to schedule.

The French and British want similar changes.

I am sure they do. Having made promises he cannot deliver, having spent the money and having said the stability pact is the bedrock on which we stand, the Minister has dropped the election promises. These words means nothing to him, he will blame the EU. The underlying theme will be to shift the blame on to the EU and blame it, for example, for the inability of a woman in Cork to get home help. That is the subtext and it requires a brass neck.

I am surprised the Minister did not advert in his speech to the new spending obligations he is undertaking in the new partnership agreement. Some of the newspaper reports suggest these are substantial. The so-called productivity deal he got in return for benchmarking is pretty thin gruel. I am surprised we did not see the Minister addressing these crucial issues.

We will have a lengthy Committee Stage debate when we will have the opportunity to go through the details of this Bill. I cannot understand the measures regarding the Ombudsman's report. Having read the Minister's provisions, I understand a number of people about whom the Ombudsman has made a report will not benefit from this change. The widows who had moneys mistakenly taken by the Revenue Commissioners will not benefit from the interest repayment tax relief the Minister is proposing. People who carry illnesses and have to withdraw will be penalised with no interest relief.

The Minister needs to make clear that he will direct the Revenue Commissioners to make the provision for those to whom the Ombudsman has adverted. The Ombudsman is the last line of defence against the system for ordinary people. He has reported to the Dáil that the actions of the Revenue Commissioners are unfair, unwarranted and unprecedented. He has asked the House to be the court of appeal and the Minister should rule in his favour. The Minister has dealt with the longer-term issue and it can be done for the cases of clear injustice I have highlighted. I will table an amendment to the Bill so that we can debate this. The Minister could do it by simple indication. The Ombudsman told us last week that a previous Minister for Finance had indicated that the Minister would respect findings of the Ombudsman.

I am also surprised about the provisions for the bloodstock industry. I agree with the Minister and think we should establish the benefits and the taxes forgone and make a balanced decision. There are obvious advantages but the bloodstock industry is mobile and could move elsewhere and there is significant employment in the sector. I cannot understand why the Minister is pushing out the declaration of this income. As I understand it returns will not have to be made until the tax year 2005, it would not be able to be assessed until 2006. I do not think the Minister is making a realistic attempt to allow the public interest to be properly evaluated. The date should be brought forward and the Minister should make provision for it to take immediate effect.

The Government continually tells us it takes tough decisions. Now we have proof that the Government means what it says in its purposeful determination to eliminate waste and give value for money to taxpayers. The eagle-eyed Minister spotted an opportunity for major savings. In section 150 he proposes to revoke payments under the Irish Charges Act 1801 to the under-keeper of Marsh's Library and the Lord Mayor and citizens of Dublin. He is also revoking a payment to the Society of King's Inns. If these payments merit the attention of senior officials in the Department of Finance and Office of the Parliamentary Counsel, presumably these earth-shattering decisions involve major savings. The answer is "no". In the case of the Lord Mayor and the citizens of Dublin, the Bill brings to an end two payments established by Charles II to the city of Dublin, one for a total of €351.63, dating back to 1662 relating to the pay attached to the captaincy of a company of foot, the other for a total of €555.73 granted on 12 July 1665 in recognition of services to Charles II and his father. The overall total is €907.36. Taxpayers can sleep easily in their beds and, once again, the intrepid Minister for Finance leaves no stone unturned.

St. Augustine was a great man who enjoyed an occasional bout of temptation. He is eternally remembered for his plea to God to make him pure, but not just yet. The Minister of Finance is obviously a disciple of the Augustinian school. He always announces his steadfast determination to dismantle the bewildering edifices of tax shelters but is never quite ready to do it, and it is a case of "not just yet" in the Finance Bill. Perhaps he will do it next year, but it is more likely that he will not.

The Finance Bill is a key part of the State's budgetary process which gives legislative effect to the measures announced on budget day. It provides the Government with an opportunity to introduce additional measures or make changes to budget day proposals. God knows the budget of last December is in need of review. It is so flawed in content and intent that the Minister, on mature reflection, ought to have decided to quietly scrap its more obnoxious defects. Regrettably, there was no chance in this instance of such a conversion. Whatever else he may be, the Minister is not a candidate for conversion of the St. Paul or St. Augustine variety.

This is unfortunate because since budget day much has changed on the national and international fronts and the experience of this short interval is enough to require a change of policy and direction. Alas, there is no sign of this in the Bill and, regrettably, the country and its citizens will pay the price for this style of obduracy which does the Minister no credit. Fortunately, if public opinion is a guide, the Minister and his party will also pay a heavy price – no change, no chance. I suspect his colleagues, perhaps even the Taoiseach, know this, even if the message has not yet got through to the Minister.

Some weeks ago, the Governor of the Central Bank observed to journalists that European economic conditions had changed course dramatically in the first weeks of the year and that the outlook for growth was much more limited than the original forecast for the year, even though that forecast was laced with a tough dose of pessimism. We know since the threat of war that those situations and that outlook have become darker. How can a responsible Minister for Finance obdurately persist in budgetary measures that add to the inflationary pressures in the economy at such a difficult time and in such a hostile environment? If ever there was a time for taking stock and calmly reviewing policy, it is now. The Finance Bill, which is a heavy tome, is barely worth the value of the many sheets of paper on which it is printed and is a lost opportunity.

The Finance Bill demands that the Government puts up or shuts up and that it spells out the detail of what it proposes. It can no longer hide behind generalised statements of intent. Unfortunately, this Finance Bill is all too faithful to its partner, the budget. It sticks closely to the misguided economic policies set out on budget day. It also shows up the Government for what it is. After all the bluster about closing off loopholes, the Bill does not deliver. Once again, the wealthy interests in society, resident and non-resident, are let off the hook. The Minister promises action in the long run. Keynes once observed that in the long run, we are all dead. We will certainly all be dead and gone before the Minister and his party tackle this issue seriously.

One of Keynes's books has the titleHow to Pay for the War. It could have been called, “Who will pay for the mess.” The answer is simple. Working families will pay for the mess the Minister has created and will carry the can for his failures, misguided policies and refusal to listen or adapt to the dramatic change in circumstances.

Ireland's inflation rate is the highest in the European Union and is twice the EU average. This did not happen by accident. It is the direct result of overheating of the economy by the Minister. Despite all the advice to the contrary, he persisted in pursuing a reckless set of policies. At the height of the boom when interest rates were falling, he threw oil on the fire by skewing tax reductions towards the better-off while failing, despite his rhetoric, to bring tax credits up to the level of the minimum wage. In a monetary union, there is only one way for an economy to adjust to overheating and that is through higher inflation and falling competitiveness. That is why we experience higher inflation and a growing number of redundancies. It is nothing other than sheer mismanagement and the effects are evident everywhere, not least in the glaring failure to meet the targets in the national plan.

Now the Government is making matters worse by ensuring that there will be no let-up in price rises. It has adopted a twin-track approach to driving up inflation. The Finance Bill copperfastens the first element in the plan. The Minister has made a deliberate decision that wealthy interests will not pay for his mistakes. He has failed to find adequate compensation measures from the corporate sector to balance the loss of income from the reduction of corporation tax. Bank levies are justified and the results from the AIB confirm this.

In our stint in Government, we established the framework to reduce corporation taxes when Deputy Quinn was Minister for Finance. We have no problem in principle with this policy now that the crunch time has come to implement these reductions. However, we feel that balancing measures are needed to deliver an equivalent return from the corporate sector in a situation where many sectors enjoyed windfall profits in recent times.

The Minister has insisted on and is proud of treating capital gains more favourably than earned income. He refuses to tackle realistically tax loopholes for high earners and persists with a notorious obduracy in allowing his favourite sectors, such as horse breeders and their stallion fees, to have tax-free earnings. The cost of his incompetence will be visited on working families. The Finance Bill is based on a strategy of increasing every charge and fee the Government can possibly levy on working families. The Minister does not want to row back on his mistaken policies. He is increasing charges and levies, willy-nilly, for ordinary families, thus increasing the rate of inflation. Last week's inflation figures bore that out once again.

The Budget Statement listed a series of 12 tax cases and how they gain in the budget. When I resume the debate later, I want to discuss their plight more fully. What the Minister gave them in minuscule tax reliefs, he took back by a factor of five in levies and charges.

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