Finance Bill 2006: Second Stage.

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

I am pleased to introduce my second Finance Bill at a time when our country is doing well, both economically and socially. The radical restructuring of the tax system which has taken place since 1997 has contributed considerably to the progress we have made. However, even a successful system requires that the relevant policies be adapted to changing times, that the system itself be maintained and protected and that, wherever necessary, the tax system be evaluated and reformed. Budget 2006 and this Finance Bill deliver on these three key requirements.

The policies of recent years have delivered a personal tax environment that fosters and supports effort and enterprise. For those on average pay, it has delivered one of the lowest tax wedges in the OECD area as well as taking many taxpayers out of the tax net entirely. It is no coincidence that since 1997 over 600,000 new jobs have been created and unemployment has been reduced from over 10% to a predicted 4.3% for this year while we expect the numbers in employment will increase by 60,000 in 2006. Tax policies framed in an employment friendly fashion have played a big part in achieving these impressive results. The personal tax changes in this Bill continue in this direction, as I will demonstrate later. Measures are also being introduced to ensure the tax system continues to operate effectively and to protect the system from unwarranted avoidance of taxes by the few.

There is much reform in this Finance Bill, for example, reform of tax incentives, reform of pension tax arrangements, reform of the tax treatment of high incomes to ensure individuals who are among the highest earners in the country do not use various tax reliefs to avoid paying any significant tax and reform of tax administration to ensure the system is not abused.

A large part of these reforms build on the review of tax schemes which I have had carried out over the past year, the reports of which were published yesterday. Last October, I made clear my commitment to a high standard of public financial management when I launched a series of initiatives in relation to public expenditure. In dealing with special tax incentives, I have sought to apply the same sharp focus on efficiency and value for money based on the review. Approximately two dozen separate schemes were investigated and the public can see in the studies which were undertaken the basis of some important decisions announced in budget 2006 and put into legislation in this Bill.

The various area-based property schemes were targeted at many areas throughout the State. Currently the urban renewal scheme has 49 areas in 42 towns and cities designated for relief. The town renewal scheme has areas in 100 towns designated for relief spread across all counties with the exception of Counties Longford, Leitrim and Dublin. The rural renewal scheme includes all of Counties Longford and Leitrim, north County Roscommon, parts of south and east County Sligo and west County Cavan. The present living over the shop scheme is confined to the city council areas of Cork, Dublin, Limerick, Waterford and Galway — in total 12.7 km of street length are designated for relief under this scheme.

Among the landmark schemes of the urban renewal tax schemes were the following: in Dublin, the development of the Custom House docks area as a location for a thriving financial services centre with high-quality buildings, the development of the rundown area of Temple Bar as a key part of Dublin's tourist attractions, the successful development of Tallaght town centre and, more recently, the major development of the Harp area in Smithfield in which over €200 million was invested between 1999 and 2004. Outside Dublin, the various urban renewal schemes have helped to revitalise and transform the inner city areas of Galway and Limerick, in particular.

I wish to make it clear in this context that I am committed to having anex-ante cost-benefit assessment of any new schemes and I am also in favour of time limits on schemes, as recommended in the reviews. However, I do not believe it is necessary to provide in the legislation on any particular scheme that there must be a cost-benefit analysis for that scheme. Indeed, the consultants recommended a continuation of the existing tax reliefs for private hospitals, nursing homes and child care facilities without suggesting a time limit for these particular schemes. As I said, I agree with cost-benefit analysis of and time limits on new schemes but they are a matter for Government practice rather than statutory provision.

A picture has been painted by some commentators and certain Opposition spokespersons of a tax system which has resulted in the emergence of a substantial body of high income individuals who pay little or no tax. That is a distortion of the position. Despite assertions to the contrary, the position is that those who earn more contribute more to the income tax yield than was the case in 1997 when we took office. It is estimated that in 2006, the top 1% of income earners will pay approximately 20% of all income tax collected. In the 1997-98 tax year, the top 1% paid less than 15% of all income tax collected.

In the same period, the contribution of lower earners to the income tax yield has reduced significantly. Those earning at or under the average industrial wage will pay 6% of the expected income tax yield for 2006 as compared with over 14% in 1997 when we took office. A small number of individuals with very high incomes have been able up to now, through the use of tax incentives and reliefs, to reduce their income tax liability to a very low level or to zero. However, this is precisely what I am addressing in this Bill which will ensure that from 2007 such individuals will generally have an average tax rate of not less than about 20%.

Under this Government's management, we have given money back to the taxpayer. We have become less reliant on taxes on labour to fund Government expenditure. In 1997, income tax represented 37% of total Exchequer tax revenue while taxes of a capital nature represented less than 5%. In 2005, income tax as a proportion of total tax revenue was less than 29% while the tax take from capital taxes and stamp duties increased to approximately 13% of total tax take.

As regards the SSIA scheme, it is amusing to see the two leading Opposition spokespersons now criticising as insufficient the new initiative in the Finance Bill for encouraging SSIA holders to invest their SSIA savings into pension schemes when one considers what they said in the past about this very successful savings scheme.

In his reply to the 2003 Budget Statement, Deputy Bruton was critical of the amount of money going into the SSIAs. He also criticised the fact that the specified amount of money was still being invested every year into the National Pensions Reserve Fund. Deputy Burton in the same debate in December 2002 complained that nothing was being done to curtail the cost of SSIAs. Two months earlier in October 2002, she had described the SSIA scheme as most ridiculous.

The economic background against which this Bill is being presented is encouragingly benign. The economy is forecast to grow by 4.6% this year. We have one of the healthiest fiscal positions in the EU with a low debt to GDP ratio and substantial savings in the form of the National Pensions Reserve Fund being put aside to meet future pension needs.

This benign scenario is subject to a number of downside risks.

As Ireland is a small and open economy, we are especially exposed to changes in the global economic environment. The prospect of further appreciation of the euro as well as increasing oil prices are causes for concern. If the increased oil prices are sustained, the subsequent fall in world demand could be expected to have some negative impact on Irish economic growth.

The risks I have outlined are effectively beyond our control. Therefore it is vital that we focus on those domestic factors which we can control so as to counter possible negative developments. I am concerned about the decline in cost competitiveness in recent years. This has an impact on employment in the exposed sectors of the economy. A vital part of competitiveness is the cost of doing business in Ireland. If Ireland's inflation rate exceeds that of our competitor countries, our businesses will not be able to expand and provide the jobs that will help us provide the standard of living we want in Ireland. We must ensure that future wage increases are in line with productivity improvements if we are to prevent further deterioration in our competitive position.

Sustaining economic growth and maintaining full employment in the Irish economy are Government priorities. Low inflation, responsible fiscal policies and effective investment are central to this objective. The Government will keep the public finances in a healthy condition and will keep down personal and business taxes to strengthen and maintain the competitive position of the Irish economy. We will continue to address our infrastructural deficit to safeguard the future economic well-being of our country. To this end, our rate of public investment will remain at almost twice the EU average as a percentage of gross national product. However, prudent management of the public finances remains essential in achieving all these priorities. In this context, increases in public expenditure must be carefully managed with, as I have stressed, a strong focus on ensuring enhanced efficiency, accountability, transparency and value for money. Of particular importance is the need to ensure that public expenditure grows broadly in line with available resources.

While respecting these parameters, the Government is committed to concentrating the resources available to it on improving the quality of public services and delivering further real improvements to pensioners and people on low incomes. We took important steps in that regard in the budget. The Economic and Social Research Institute's analysis indicates that this was "perhaps the most progressive budget package for many years — poorer households did proportionately better than rich ones". Our economic performance in recent years leaves us in a position of strength to deal with the challenges we may face in the coming years and in addressing the risks which I have outlined.

This year's Finance Bill, when passed, will remove all those on the minimum wage from the tax net — 90,000 people; exclude workers on the average industrial wage from the higher tax rate — 55,000 people would enter the higher tax rate were this action not taken; confirm the restrictions on the use of tax reliefs by high income taxpayers to secure greater equity in the tax system; phase out various existing tax schemes and exemptions; and end the current remittance basis of taxation. It will continue the stamp duty exemption for young trained farmers for a further three years, increase the tax exemption limits for income from farm leasing for over five years and extend certain existing reliefs to cover the EU single farm payment entitlement in appropriate circumstances.

This Bill will also introduce a new scheme of tax relief for heritage property donated to the proposed Irish Heritage Trust. It will provide for income tax disregard for certain people minding children in their own home as announced in the budget and will adjust the rules governing "top-hat" pension provisions and approved retirement funds. The Bill will increase VAT registration thresholds to help small business, exempt biofuels from excise duties and reduce excise duties on certain home heating oils, including kerosene and LPG. These measures were announced in budget 2006.

In addition, the Bill will introduce a new initiative designed to encourage low income earners who hold SSIA accounts to transfer funds into pension schemes and will provide significant improvements in the film tax relief aimed at enhancing Ireland's competitive position as a film location. It will provide for automatic reporting by financial institutions and Departments of interest and certain other payments made to taxpayers. The Bill will provide for a surcharge of 10% in certain circumstances on undisclosed tax avoidance schemes. It will ensure that landlords will be obliged to meet their statutory registration requirements as a condition of getting generous tax relief and will tighten up the relevant contracts tax to discourage fraud and tax evasion. The Bill will include a range of provisions to facilitate business, including the financial services sector in particular, to assist in maintaining Ireland's competitiveness in these sectors and to create more jobs. It will also close off a series of abusive tax loopholes in the areas of film leasing, transfer of Irish assets into a foreign company, capital gains tax and VAT grouping.

The Bill consists of 122 sections and two Schedules. In the time available to me today, I will outline some of its main provisions. I will listen carefully to Deputies' contributions and will try to respond to their points in my reply to the debate.

On income tax, the various income tax measures and reliefs announced in the budget are dealt with in sections 2 to 7, inclusive. These widen the tax bands and increase various credits, including the basic personal credit and employee tax credit. The effect will be a reduction in average tax rates and removal of those on the current minimum wage from the tax net.

Section 8 revises the tax relief provisions in respect of local authority waste charges to maintain the value of the relief for taxpayers following the introduction of the "pay by use" principle. The existing provisions governing the relief require adjustment to take account of the revised charges structure at local level.

Section 9 deals with the budget day announcement and financial resolution which abolishes the relief for interest on loans taken out to acquire an interest in property rental income companies after 7 December 2005.

Section 11 links mortgage interest relief on rental properties to the registration requirements of the Private Residential Tenancies Board so as to encourage compliance with the registration requirement. Section 13 confirms the budget day announcement of a childminding relief for individuals minding up to three children in their own home, provided the income in question does not exceed €10,000 in the tax year.

Section 14 contains a number of important changes to the tax treatment of pension provision. First, the rate of age-based tax relief applying to all pension products is being increased where the contributor was 55 years old or over at any time during the tax year, to 35% of net earnings or remuneration, and to 40% for those aged 60 and over. This is aimed at incentivising individuals who have underfunded their pension over the years and now wish to improve their position as they approach retirement. The overall benefit limit of two thirds of final salary will still apply.

Second, the current annual earnings limit of €254,000 for certain contributions to pension schemes is to be indexed from the tax year 2007 to maintain its value in the future. Third, an annual taxable 3% imputed distribution is being applied to the value of assets in approved retirement funds. This will be phased in over three years. Fourth, the maximum tax-free lump sum for draw-downs from a pension fund made on or after 7 December 2005 will be €1.25 million. A cap is placed on the maximum allowable pension fund on retirement for tax purposes, at €5 million or, if higher, the value of the fund on 7 December 2005.

Section 15 provides for the discontinuance of the remittance basis of taxation with effect from 1 January 2006 in respect of employment income in so far as the employment is exercised in the State.

Section 17 provides for the measure announced in the budget which will place a limit on the use of tax reliefs by those on high incomes. The measure will ensure that such taxpayers will not be able to use specified tax reliefs to reduce their tax bill in any year below approximately 20%. A full list of the reliefs which are covered is included in the Bill. Broadly, these consist of the various property based reliefs and other incentive reliefs such as film relief, the business expansion scheme and donations. However, the normal expenses of business, including standard depreciation allowances and losses, will still be allowed in the normal way.

Section 18 provides for significant improvements in the relief for investment in film production. The percentage of expenditure that is eligible for tax relief is being raised to 80% for all films, up from the existing levels of 55% or 66%, depending on the film budget. In addition, the ceiling on qualifying expenditure for any one film is being increased from €15 million to €35 million. These improvements are subject to European Commission approval.

Section 19 increases the annual cap on the amount that can be claimed for expenditure on farm pollution control measures to the lesser of €50,000 or 50% of qualifying expenditure, with effect from 1 January 2006.

Section 20 extends the scheme of tax relief for donations to approved bodies to include the donation of publicly quoted securities, which will be treated in much the same way as cash donations of equivalent value.

As my budget day announcement noted, section 22 abolishes the stallion and greyhound tax exemptions from 31 July 2008. Discussions will take place with the industry and the European Commission on a replacement scheme.

Section 23 includes the proposed Irish Heritage Trust in the list of approved bodies for the purpose of the tax relief on donations scheme. This will facilitate the trust in building up an endowment fund for the maintenance of its heritage properties. Three other provisions relate to the trust and are contained in sections 66, 107 and 116.

Sections 24 to 33, inclusive, set out the termination dates and transitional arrangements relating to various tax relieved property schemes, the details of which were announced on budget day. Sections 34 to 38, inclusive, deal with capital allowances for private hospitals, psychiatric hospitals, nursing homes and child care facilities. I am extending the clawback period for these facilities from ten to 15 years and the "tax life" rules will be revised to facilitate investors in transferring their interests to other investors within the 15 year clawback period. These provisions will apply to facilities commencing in use after 31 July 2006.

Sections 39 and 40 set out requirements for those who wish to invest some or all of their SSIA funds in a pension product. The purpose of this initiative is to encourage SSIA holders on the lower end of the income scale to provide themselves with improved retirement arrangements by transferring moneys from their SSIA accounts into pensions. A total of €1 will be added for every €3 transferred from an eligible SSIA account into a personal retirement savings account, PRSA, a retirement annuity contract or an additional voluntary contribution, AVC, subject to a maximum bonus of €2,500. In addition, the exit tax to be paid on the SSIA moneys so transferred into individuals' pension accounts will be refunded. The scheme is aimed at lower earners and will not be available to 42% taxpayers who have access to considerable incentives. There will be restrictions on the scheme, in particular that the incentive will not be available to fund regular normal pension contributions. This bonus is for making a new additional contribution. This is a once-off special pensions initiative relating to lower earners with SSIA funds. The wider issues relating to improving global pension coverage, as discussed in the recent report of the Pensions Board, will be examined by the Government in the coming months.

Section 41 amends the law relating to relevant contracts tax, RCT, which principal contractors are obliged to deduct from payments made to certain subcontractors in the construction, meat processing and forestry sectors in order to tighten controls and discourage fraud and evasion. Applicants for C2 certificates will face more stringent application criteria, while the payment limit Revenue operates for some subcontractors regarding C2 payments is being put on a statutory basis.

Sections 42 to 44, inclusive, 49, 57 and 99 provide for measures of a substantive, clarificatory and technical nature to assist in the development of the funds industry in Ireland, an important part of the international financial services sector. Section 45 amends legislative changes included in the Finance Act 2005 to ensure the 23% exit tax on the proceeds of a life assurance policy cannot be deferred indefinitely by the continual rolling over of a policy without it becoming chargeable to the tax. The changes respond to certain points made to me by the industry but I am determined to ensure the tax deferral available to investors is reasonable and definite.

Section 50 ensures life assurance companies only benefit from group losses and certain other loss reliefs at the corporation tax rate of 12.5% as opposed to the standard income tax rate of 20% which applies for the income and gains of policyholders from such policies. Section 51 is aimed at preventing abuses of the patent income exemption through recategorising franchise licence fees as patent royalty payments and also limits the amount of exempt patent royalty distributions that may be made by a company in certain circumstances to the aggregate of its research and development spend over a three-year period.

Section 53 removes the requirement to deduct withholding tax on interest paid on quoted registered Eurobonds, bringing the treatment of such bonds into line with that of those in bearer form. Section 54 provides for the ring-fencing of losses and capital allowances in qualifying shipping trades. Section 55 gives effect to the 2005 EU mergers directive which broadens the scope of the original reliefs in the 1990 EU mergers directive. Section 56 makes a number of minor additional amendments to the provisions dealing with the tax aspects of the move, by companies, to the new international financial reporting standards, IFRS.

Section 58 gives effect to the budget announcement on the restriction of interest relief under section 247 of the Taxes Consolidation Act 1997 in the context of transactions between related companies. This is an important measure to block off avoidance attempts but I appreciate that the section 247 relief is being used by firms in a perfectly appropriate way. It is not my intention to cut off genuine use of the section.

Section 59 deals with the research and development tax credit. The section provides that a proportion of expenditure on machinery or plant which is to be used partly for research and development will qualify for the tax credit. Where plant and machinery are included in the incremental spending calculation but are in dual use in both research and development and production, there will be a proportionate allocation of the expenditure for the purposes of the credit. The section also makes additional provision in regard to the credit which is only one of the Government's actions in incentivising the development of research and development in Ireland.

Section 60 improves the legislation on the taxation of shipping-related profits by providing for a clearer, more streamlined process for applicant companies electing for the tonnage tax regime. Section 61 introduces measures to increase the scope of income against which losses and capital allowances in the big ticket leasing sector can be offset.

Turning to capital gains tax, section 63 gives effect to the budget proposal that the EU single farm payment entitlement will qualify as an asset for the purposes of the capital gains tax retirement relief, provided the farmer in question fulfils the ten-year rule in regard to the ownership and usage of the land which is disposed of at the same time as that entitlement. The section also caters for the situation where a husband and wife are co-owners of land but only one of them becomes a partner in a milk production partnership.

Section 66 deals with relief from capital gains tax on the disposal of certain works of art where prior to the disposal they were on loan to and displayed in an approved gallery or museum. The minimum period of loan is being increased from six to ten years and the section is being extended to apply also to such loans made to the proposed Irish Heritage Trust.

Section 68 is an anti-avoidance measure dealing with capital gains tax in certain circumstances of a disposal of a chargeable asset to a spouse, a separated spouse or a former spouse. Section 69 and 70 provide that the Revenue Commissioners can obtain information for capital gains tax purposes regarding the issue of shares to the members of a mutual life assurance company or a mutual building society on the occasion of these ceasing to be mutual companies.

Parts 2 and 3 deal with indirect taxes, that is, excise and VAT. These include sections 71 to 84, inclusive, which set out a range of changes in regard to excise duties, including confirmation of the budget day reduction in excise duty on kerosene and LPG used for heating and the reduction of betting duty from 2% to 1% with the industry bearing the liability. In recognition of the environmental issues we face the House will welcome the large-scale scheme I have provided for in the Bill to promote biofuels. This is complemented by providing a new VRT relief to promote new flexible fuel vehicles and the extension of the existing relief to dual electric-petrol vehicles.

Sections 85 to 94, inclusive, contain a number of important revisions to the VAT code. Sections 88 and 94 confirm the increases in the VAT registration thresholds for small businesses from 1 May 2006. The revised thresholds are €27,500 in the case of services and €55,000 in the case of goods. Sections 87 and 89 amend the VAT Act to provide for the taxation of the private use of deductible and non-deductible business services. Section 88 also contains an anti-avoidance measure designed to strengthen the VAT grouping provisions so as to ensure the related companies are appropriately grouped for VAT purposes. Sections 86, 90 and 92 replace the existing rules regarding the VAT treatment of the supply of a "package" of services comprised of two or more elements which attract VAT at different rates. Sections 91 and 92 provide for the granting of deductibility for VAT incurred on costs associated with the issue of new stocks, shares, debentures and other securities made to raise capital where that person is entitled to VAT deductibility.

Part 4 deals with stamp duties. Section 96 extends to a foster child the stamp duty reliefs available to a natural or an adopted child. Section 97 provides for an amendment to the exemption from stamp duty of any instrument made for the purposes of or in connection with the demutualisation of an assurance company which carries on a mutual life business. Section 98 gives effect to the budget announcement extending the exemption for transfers of land to young trained farmers from stamp duty for another three years until 31 December 2008. Section 101 provides for an exemption from stamp duty on the sale, transfer or other disposition of an EU single farm payment entitlement. Section 102 gives effect to the budget announcement regarding the abolition of companies capital duty for transactions effected on or after 7 December 2005. Section 103 ensures that where a combined ATM and debit card is used solely as an ATM or debit card, the charge will be €10, whereas if it is used for both functions, the existing €20 charge will apply.

Part 5 deals with capital acquisition tax. Section 107 is concerned with the clawback of the exemption granted to heritage objects contained in a gift or inheritance if such objects are sold within six years after the valuation date of the gift or inheritance. This clawback does not apply if the objects are sold by private treaty to one of the qualifying bodies referred to in section 77(3) of the Act and the proposed Irish Heritage Trust is now being added to the list of qualifying bodies.

Section 110 gives effect to the budget proposal that the EU single farm payment entitlement will qualify as agricultural property for the purposes of agricultural relief under capital acquisitions tax rules. It also provides that, where land which qualified for agricultural relief or business relief, as the case may be, is disposed of in the period commencing six years after the date of the gift or inheritance and ending ten years after that date, the relief granted will be clawed back in respect of the development value of the land at the date of the gift or inheritance.

Section 111 amends the provision which grants a credit for capital gains tax that has been paid against capital acquisitions tax where those taxes are chargeable on the same property and arise on the same event. This credit will cease to apply where the gift or inheritance is subsequently disposed of by the beneficiary within two years of its acquisition.

Section 114 provides a new scheme of tax relief for heritage property donated to the proposed Irish Heritage Trust as announced in the budget. To qualify for relief, the heritage property will have to be approved by the Minister for the Environment, Heritage and Local Government by reference to the criteria set out in the section. There will be a ceiling of €6 million on the aggregate value of the heritage properties that can be approved in any one year. Allowing the proposed trust to avail of this scheme will be important to its successful launch.

Sections 117 and 118 are important tax administration provisions. The first of these will allow the Revenue Commissioners, with the consent of the Minister for Finance, to introduce regulations governing the automatic reporting to Revenue by financial institutions of interest and other profit payments made to customers as well as certain payments made by Departments. The Revenue Commissioners and my Department will consult the financial institutions before implementing this reporting system. Section 118 addresses the use of tax avoidance schemes by way of a surcharge of 10% on undisclosed transactions that are ultimately determined to be tax avoidance transactions. The surcharge will not apply where full details of the transaction are disclosed in a "protective notification" to Revenue within a specified time limit. People who are open about their tax planning arrangements will be able to show them to Revenue, and will not be surcharged if the arrangements concerned are later determined to be in breach of anti-avoidance rules.

I hope the House has benefited from this elaboration of the measures in the Bill. There are still some matters under consideration that I may bring forward on Committee Stage should they receive Cabinet approval. At this stage, they remain part of the deliberative process. Should I have such amendments to bring forward, I will seek to notify Opposition spokespersons in advance of the Committee Stage. I will also give consideration to any constructive suggestions put forward during our debate today and tomorrow. I commend the Bill to the House and look forward to a constructive debate on it.

I congratulate the Minister on the opportunity to introduce the second Finance Bill. While it contains some positive provisions, which I welcome, it contains some negative ones, which I do not welcome. Given the nature of these debates, the time restriction and others reasons, I will concentrate more on the negative aspects.

The Bill provides for a further extension of the various property-based tax reliefs. This is happening, even though the Government has known for years that these tax reliefs had outlived their usefulness. It was already evident in 2000 that these reliefs had run out of rope. Naturally, the Minister for Finance at the time left it until after the general election to introduce his decision to curb them and bring them to an end. He did so at the end of 2002, shortly after the election. These reliefs were to come definitively to an end in 2004. However, the Government changed its mind a year later, when it extended the timescale from 2004 to 2006. We are now seeing a further extension, albeit on a partial basis, to 2008. An idea conceived of in 2002 to bring these tax reliefs to an end because they were being abused will be strung out over a subsequent six year period before they will be discontinued.

No doubt the Minister for Finance will say he did not know definitively that these reliefs were such bad value for money and targeted at the well-off. However, that rings very hollow. It was clear from an early stage that these provisions were very focused on an industry that was already extremely strong, and the so-called social benefits were diminishing. It was also very clear that it was particularly high income people who were benefiting. I sought in the past to put a cap of €100,000 on what any individual could take by way of these tax reliefs, which was rejected by the Government.

This aspect is not news. For the Government, the Taoiseach or anyone else to come into the Dáil and say they did not know about it and they are acting in a timely way is not true and the evidence does not support it. While the Minister for Finance knew in 2001 that these tax reliefs needed to be curbed, successive renewals and extensions were given without any effort to carry out the necessary evaluation. Yesterday's report must be viewed in this context. The Minister cannot claim plaudits at this stage for phasing out these reliefs four years after the Minister and the Government signalled they needed to be discontinued.

The amount of money involved is mind-boggling. I recall the Revenue Commissions referring to €200 million at most. The figure for the past five years is €1.6 billion, which is a huge sum of money. It is greater than the spending of at least five Departments. If one contrasts the scrutiny by the Minister's Department of any of the five Departments, compared to the scrutiny which was not carried out of the expenditure of this money year in, year out, one will become aware of the extraordinary contrast in the way the Department of Finance considers spending as against taxation. However, it is coming out of taxpayers' pockets in the same way, which is not acceptable.

It is scary to read in the Indecon report that the net tax forgone was more than double the total tax benefits across the 11 schemes examined. We were paying far too much for the benefits. We were paying twice as much for the benefits as should have been the case, which was a very bad return. The study indicated that while €4 billion has been invested under these schemes, another €6 billion will be invested under the various extensions the Minister for Finance introduced when he started to roll it forward from 2002 and 2004. He has brought €6.5 billion extra into these schemes in the period after he identified they should be discontinued. An avalanche of money has been invested in these schemes in that time. The Government facilitated this and it cannot be defended.

Its impact on tax equity has been very severe. The Minister is trying to say that people who criticise it are pretending wealthy people do not pay tax, which is not the issue. We are all aware that most wealthy people pay tax, but a small minority have used these schemes to the hilt. Unfortunately, even with the Minister's concession, I do not believe he is going far enough to deal with the issue. One can still invest €250,000 in a scheme, plus €250,000 through a pension fund. Some €500,000 is still allowable without a cent of tax being paid. It is only after that amount the Minister will put some restriction on these investors, which is an extraordinarily high income. At that level, one is talking about a tiny minority of people with mega money, which does not square up to the ordinary person's view of tax equity. Even though the Minister said he wants to achieve tax equity, this is not a practical way of achieving it.

The Minister said on the radio this morning, and again here today, that he agrees there should be a sunset clause and a cost-benefit analysis before any extension of tax relief is introduced. However, he appears to be saying, "Make me virtuous, Lord, but not just yet", which is the problem. The Minister decided to extend the film relief in the Finance Bill. I do not know whether it is a good or bad idea. His predecessor thought it was a bad idea. He produced some sort of cost-benefit analysis from the Revenue Commissioners to back up his view that it was a bad idea. He pulled the rug from under people who had certain expectations, but there was a universal belief across all the benches that one could not pull the rug from under people.

The Minister is introducing a new concession without carrying out any cost-benefit analysis. I did not hear anyone saying that the film industry deserves more reliefs. I have heard people saying that it is difficult to bring film-makers here, but that is a different issue. Cost-benefit analyses must be carried out before introducing any concessions.

The Minister said that he will extend the tax reliefs to private nursing homes and child care facilities for another few years. He has not proposed an end to this. The Minister has not indicated if it will be for three years, four years or whatever, nor has he said we need a proper cost benefit analysis. I do not know if the Minister has read them but I have looked hard at the cost benefit analyses that were carried out and they do not ring true as being the sort of analysis we ought to have to make sure that the concessions to private hospitals and nursing homes are in the context of the public policy we want to develop in terms of a strong public health system that is equitable. That means, for example, that we should promote public private partnerships, contract out opportunities to deliver within the public system, but by private practitioners. This is not what we are doing here. We are saying we will give tax subsidies to the private sector to do its own thing, which would not necessarily be consistent with public health policy.

We have seen problems with nursing homes and there are clearly public concerns in this regard. If we are to go forward with this approach, and the jury is out on whether it is a good or bad idea — I suspect it is not a great idea — we ought to have the kind of real analysis that is required in the context of the type of health policy we wish to pursue and ensure that it is the right way to go. It may be — I will not prejudge it — but the Minister has not done that and if he was genuine about wanting to see this, he would start now. I accept that one of his colleagues in Government believes it is the right thing to do but we need to see that stood up.

The Minister made a barbed comment in regard to the pension relief issue to the effect that it is extraordinary that I would be critical of this. Quite honestly, I am critical of this, for the reason I outlined earlier. The Minister is willing to give people who have substantial income, €32,000 every year for their pension fund. It is not just a once off payment for people who are well placed enough to set up pension funds because he has proposed to index this system so that the sum would increase every year. In contrast, he is saying to people who are at the bottom of the scale, who do not have any pension fund, that he will put in, at most, €2,500. The contrast between those two positions is dramatic.

That is in respect of SSIAs on account maturity. The wider general pension provision is still under consideration by Government.

This was the opportunity to give a serious kick-start to pensions.

We need that one-for-one scheme. I would support that. I do not know the position of other parties in the House but the Fine Gael Party would support it. We have advocated that and the Pensions Board has endorsed it. The Finance Bill should contain such a provision. The Minister's scheme is confined to people on the 20% rate of tax so half the tax paying population is automatically ruled out. He has not delivered the promise in regard to people who pay tax above the standard rate and he is capping the sum that can be invested at €2,500. People who have no pensions and those who could not afford to have an SSIA, which is a huge swathe of those who have no pensions, are entirely excluded. I will not turn it down but it will not make the sort of impact the Minister could have made on the pension issue this year when it would have been timely to do so. It would also have been sensible to try to pull a considerable amount of money out of the SSIA to prevent it being spent in the economy and to have it squirrelled away for the long-term financial security of families. The Minister should have seized that opportunity. If these issues are still under review I suggest that this provision should be re-examined.

A number of issues arise and I will briefly go through them. I am disappointed the Minister has not tackled the issue of paying back to people the money which has been paid to the Exchequer. If one examines the amount of spending people are incurring on private medical expenses it is clear they are getting tax relief on only about a quarter of medical expenses that are properly tax allowable. That is a scandal. No serious effort is made to refund people who are compliant taxpayers. If the boot was on the other foot and these people had failed to pay hundreds of millions of euro, which is what it tots up to, we would be rightly clamouring for the Revenue to be out after them. The Minister would reply that new powers were required and we would agree to give these new powers.

The amount of unclaimed tax relief on health alone is probably about €200 million but there is no similar urgency from either the Department or the Revenue Commissioners to put in place ways that would facilitate people in getting this money back, such as, for example, simple chits that could be signed and sent in to the Revenue Commissioners at the time the medical expenses are incurred. Those things are easy to do. If the same imagination was put into making sure that people were not taxed too much, as goes into ensuring that the money due is collected, we would have done these things years ago. The Minister could do much more.

I noted the information on approved retirement fund, ARF, abuse. Will the Minister indicate if it only relates to larger funds? If people have small amounts of money in ARFs, if they are just a standard, common or garden pension provider, does the Minister still want to tax them at 1%, 2% and 3% per annum? I do not quite understand this issue but perhaps the Minister can clarify it when we come to the end of Second Stage or on Committee Stage.

Another issue that arises in terms of pensions is employers' contributions. Perhaps I am wrong but, as I understand it, one can write off pension on up to €254,000 of one's personal income but there is no ceiling on what an employer can put into the pension fund of a privileged manager. If one is talking about equity, should caps not also be applied to the amount an employer can invest? In many cases, senior management is effectively in a position to decide what the employer does. They are not arms-length arrangements but packages put together by the parties involved and to which the taxpayer contributes a significant amount. Perhaps we should do something in this regard if the aim is to produce equity. I am surprised nothing was done but there may be more to be read in these things that may explain why it was not done.

The other matter that has raised some eyebrows is the automatic reporting requirement. It appears to me that thresholds should be introduced at some point. The Minister is hardly trying to find out about pensioners who have a few thousand euro on deposit. That is not the purpose for which these powers were intended. In trying to identify problems, a great deal of worry can be generated if there is a belief that Revenue is looking for a few bob from people like that. The Revenue powers report put these powers in the context that one had to prove that it was worthwhile and that the benefits to the Revenue justified what was being asked of people in terms of compliance. All I see in this is an enabling provision; I do not see any cost.

Those issues can be worked out in the consultation process with the financial institutions. The report also made the point that thresholds could encourage the splitting of accounts. We must be mindful of that. The details will be worked out.

Perhaps one could also include somebody in the process who could put the consumer's perspective. It is all very well consulting financial institutions but the Minister should also consult people who might have a reasonable view. Perhaps the consumer director in IFSRA would have a view that would uphold the rights of consumers. Much of the compliance headache will be on consumers if this is being reported.

I note that the Minister does not have to make a positive motion to the House in order for the provision to be introduced so it would be necessary for us to annul it. It is the old story that the Minister makes the order and we do not see it. Once the Finance Bill is passed we will not get another chance to find out whether the costs and the benefits were warranted. I have no objection to the power. The case for it was well made, but it was done in the context of reasonableness and of putting tests in the way. When one is using invasive and intrusive powers there have to be tests as to how far one can go and how far it is reasonable to go. I heard somebody refer to the right to an Ombudsman in regard to tax. There is an expectation that while the power may be justified, a test of reasonableness must be included in it. Those tests are not in the Finance Bill as it stands but I take it from what the Minister said that he will assess them.

An issue that keeps coming back from rural Deputies is that of capital gains tax, CGT, on compulsory purchase order, CPO, land. The Minister has rejected this in the past but it appears to be a continuing concern to rural Deputies and I am sure it will come up again on Committee Stage.

I noted the Minister made a concession on the old VAT thresholds but he was not at his most generous the day he rewrote those sections. The money must have been beginning to run out at that stage because it was a fairly small increase.

The other matter I note in passing is the income disregard for child minders. A concern has been raised as to whether such persons will enjoy social insurance cover. I would have thought they would enjoy such cover, that the Minister is providing an exemption from paying the social insurance levy but that they still enjoy social insurance cover. Perhaps the Minister would clarify in his reply on Second Stage that the exemption from tax and PRSI will not leave such people without proper PRSI cover.

Would such persons not be better off paying the €250 and getting the credit?

I expect the Minister to confirm that such persons will get a full stamp and it is just that the Exchequer is paying it for them. I hope that is what the Minister will state but I do not see a flurry of notes going across from the officials to the Minister to tell us the good news.

Keep an eye on the Social Welfare Bill; it is under consideration.

The Minister's speech contained a self-congratulatory piece on competitiveness. While I welcome his introduction of that issue, Ministers have forgotten some of the hard lessons of the 1980s on the competitiveness challenge. We are a small open economy. Our success depends on being more alert, more agile and more competitive than our competitors. The Government has slipped into the economic equivalent of bad eating habits. It has reduced its exercising and does not want to believe what the weighing scales are showing. The Ministers continually come out with this mantra of the importance of being competitive and as we approach the partnership agreement it is vital to be competitive, but it is vital that they themselves are competitive.

Taking public sector pricing, since 2002 Government charges have increased by 86% — approximately eight times the consumer price index, CPI — and the price of public utilities has increased by 40% — approximately four times the CPI. While Ministers will always say their bit about the need to keep our wage costs competitive, they need to keep our public sector costs competitive. That is an important issue which the Minister and his colleagues are overlooking. Many people are quite bewildered to see electricity prices and gas prices rising by more that what is justified by international costs. The regulators are pushing these prices up and there is a scepticism growing regarding what exactly the Government is about.

Similar views exist about the Government's charges. After the general election there was a welter of these charges, resulting in significant upward pressure. The Minister's lecture is appropriate but it should be directed internally towards his 14 colleagues as well as externally towards the wider public.

Let us be blunt. Our economy is much more fragile than it has been for many years. I accept that the performance is strong, creating 90,000 jobs, but equally we have lost our share in export markets in successive years. This is the third year in a row in which we have lost export share. Our performance in the export markets is the worst since 1974. Construction's share of economic growth is unusually, most would say unsustainably, high. We are walking a tighter and higher wire than in the past. People can correctly state that the economic performance is still strong and the public finances are still strong. The Government deserves a share of the credit, not the exclusive credit which I hear some of the Minister's colleagues seeking to claim in imagining that all of us on this side of the House were spendthrifts and wastrels.

There are serious threats coming down the line and there is a sense that people are seeing the enterprise strategy, long the envy of other countries, creaking and cracks emerging. There are important jobs that the Minister must perform correctly and we must learn from the past. One of them is avoiding boom and bust fiscal strategies. It was crystal clear that in 2001 the fiscal strategy pursued by the Government of which the Minister was a member was seriously damaging to the economy. It was done with an eye to the election and we had to pay a heavy price afterwards. It was a serious mistake and there are worrying signs that the same sort of thinking is afoot again, with spending high this year and the SSIAs on a roll. We do not want to find that there is this froth in the economy over an 18-month period the residue of which would be a further ratcheting down of our competitiveness, more rip-off and more pressure on prices. That would be a serious blunder and unfortunately there are worrying signs that such is a feature of what is happening.

The Minister correctly called publicly for the delivery of value for money in the public sector but I cannot see that the action of his Government squares with his call. As I pointed out to him in the past, the expenditure review initiative has just collapsed. Big spending Departments like the Department of Health and Children and the decentralising OPW were exempted from expenditure review. The thinking of the Government is that one ought not bother with how the big guys, who are on a political mission of curing the health service or curing the regional strategy with this flawed decentralisation approach, are spending the money. That is what the Minister is saying and his officials have allowed happen. That is so wrong. It is so wrong that these big spending Departments, which have dominated public spending, should be allowed to not have those demands and scrutiny applied to them. The evaluation should be greater in the Department of Health and Children because that is a Department in which they have trebled the amount of public spending. The Minister is now giving €8,500 for every family to the health service, that is, three times more than what was being given when they took power. Then one finds that he has decided to exempt the Department from expenditure scrutiny. It is indefensible. It is not surprising then that one sees bad value for money. The Minister admitted it. He stated that some of the way in which the health service has been run is totally wrong and some of the agreements in place are totally wrong, and yet he is not putting them under scrutiny and making people accountable for those poor performances. The Minister is on the right track in saying value for money is the core issue but he is not doing the jobs that need to be done to make it happen. There needs to be a much tougher line of approach in getting performance delivery. He is talking about having a system but he states it will not be until 2007 that we will begin to see what Departments are doing with their money. There has been such a litany of projects suffering from poor evaluation and poor project management. The list is well known to all of us. It includes PPARS, Media Lab Europe and the Punchestown project. There is an endless list of projects where evaluation systems and project management systems, which should have been running well and which we learnt from Europe, have been allowed rust. That has happened on the watch of the Minister and his colleagues.

Equally, the Government is not delivering in the key infrastructural areas. We have lost our lead in telecommunications and ports. Ireland is bottom of the leagues on ports, broadband and electricity availability. We have lost ground and we are still unable to spend. While I agree with the Minister that he should spend 5% of GNP, over the past three years he is €2,500 million off that target. He is not bringing forward bankable, decent public projects to tackle our infrastructure deficit in a timely way. Many of these basic measures to make his slogans of "value for money" and "competitiveness" a reality, are not being taken.

The same may be said in the case of fostering competition in sheltered sectors. That should be a core approach of Government but the Minister has ducked it, for example, on bus services where there was to be competition. His ministerial colleague, Deputy Brennan, the former Minister for Transport, was going to have bus competition three years ago. Senator O'Rourke, who preceded Deputy Brennan as Minister, was going to have it five years ago. Here we are in 2006 and nothing has happened in that regard. The Government is continually backing off from creating competitiveness within the sheltered sector and if the Government does not get its act together, we will pay dearly for that too.

Much of what the Minister states is correct, but he is acting far too timidly and is not reforming the way his colleagues do business in the way necessary to achieve the results sought. The Bill would scarcely merit more than a poor pass if marked out of ten.

The publication yesterday of the report on tax shelters revealed in an extraordinary way the extent to which nine years of Fianna Fáil-Progressive Democrats Government have succeeded in creating an amazing two-tier tax structure for Irish society. The Labour Party has repeatedly demanded two principal changes to our tax structures to restore some sense of fairness. We propose the introduction of a minimum effective tax rate, such that even where incentives are retained, no one can avoid making a reasonable contribution. Alternatively, schemes could be capped. Our second proposal concerns the creation of a standing committee on taxation which would undertake an independent and costed review of all tax breaks as they arise. I am disappointed to hear the Minister specifically rule out the notion of ongoing review and cost-benefit analysis.

Opposition spokespersons must play a game of blind man's bluff with the Minister as we try to second guess some of the arcane secrets of our annual Finance Bill.The Da Vinci Code has nothing on the mysteries of the annual Finance Bill. The only thing about which one can be sure is that every year for the past nine the small print of the Finance Bill has contained a secret bonanza for those who understand the Masonic rituals of tax avoidance for the super rich.

This year, contrary to his promises to mend his ways, the Minister has included several hidden nuggets for Ireland's super rich. Many pensioners on modest incomes must have struggled yesterday to understand the case studies supplied by the Department of Finance which showed pension funds of €100 million being built up for an individual, with a €25 million tax free up-front payment, the balance to be invested in further attractive approved retirement funds with more tax breaks to come. Not only will the pensioner concerned receive a €25 million tax-free payout on retirement but these schemes are arranged in such a way as for the benefits to be passed on to the spouse and children.

I heard the Minister uncharacteristically moaning on "Morning Ireland" that people did not understand how necessary it had been to allow Ireland's tax structure to become a milch cow for the super wealthy. It must have been too early in the morning for him. His extended appreciation of the super rich contrasts with the position of the young single person earning just over €30,000 per annum who will pay income tax at a rate of 42% on any bonuses or overtime earnings he or she receives. That is the reality of tax equity in this Fianna Fáil-Progressive Democrats Administration: funds of €100 million for the super wealthy and a tax rate of 42% on overtime payments for a young single worker.

The Bill shows that the Minister is determined to brazen this out. Not alone has he been timid in applying sunset clauses to some of the most lucrative tax shelters such as hotels and car parks but he is determined to extend the principle of property based tax breaks to new areas of economic activity. The Bill will copperfasten the financial health of investors worth €1 million who will be allowed a new set of tax breaks and conditions to develop private psychiatric hospitals and what the Bill describes as mental health centres.

Section 34 extends the private hospital tax relief to private psychiatric hospitals and mental health centres. In addition, sections 35 to 37, inclusive, contain changes in the investment regime in private hospitals. Private psychiatric facilities will now qualify for tax breaks at the top rate of 42%. This will provide significant extra investment opportunities for very wealthy private investors wishing to take advantage of these reliefs. In sections 37 and 38 existing institutions such as nursing homes which qualify for tax breaks but are converted into another type of facility such as private psychiatric hospitals will receive roll-over relief and, therefore, continued tax breaks. We have recently heard of several unfortunate scandals involving nursing homes. However, nursing homes closed by the health authorities, thereby losing tax breaks, could, under the Bill, be turned into psychiatric or other health care institutions and carry valuable tax breaks in the special roll-over relief the Minister has introduced.

The Minister has been forthcoming on this issue before and I hope will be so again. Were these new reliefs the subject of specific representations to the Department of Finance? On Committee and Report Stages I will tease out why the Minister has undertaken to introduce such generous roll-over arrangements allowing cross-travel among care institutions in respect of valuable and lucrative tax breaks.

The massive extension of tax breaks for private health care institutions is uncosted, contrary to the promises made by the Minister in his Budget Statement. Given that he is in an alliance with the Progressive Democrats, the Tánaiste and Minister for Health and Children may call the shots on these issues in Government discussions. Nevertheless, the Minister promised to provide information and costings. If he proposes to limit property breaks for certain types of investment such as hotels and car parks, he is opening up a new area of tax breaks. I agree with his eminent friend on the backbenches, Deputy Ned O'Keeffe, who told me hospitals were the new hotels. As the Minister closes one door he opens another.

Section 17 reflects the Minister's budget announcement that he would introduce a limit on the use of tax reliefs by certain high income individuals. It will apply to those with an income of over €250,000 per annum, with tapered relief for those with an income of between €250,000 and €500,000 per annum. High income earners who pay no tax need not worry too much. The new rules will apply only from 1 January 2007 and any reliefs not claimed by virtue of the new rules can be used later. The relief will be spread over a longer period. The Minister is not capping the total amount. He is simply providing for roll-over relief. This is not an effective minimum tax rate.

I now come to the sections of the Bill dealing with an extension of the rules in investing in private medical facilities, psychiatric hostels, nursing homes and so on. The individuals in question are of very high net worth and have very high incomes. When God or the Minister for Finance closes the door on one tax break, he never does so without opening another. The consultants' report shows that, regarding private hospitals, €500 million in tax breaks awaits projects already in the system in the short period during which they have been available. That is why a cost-benefit analysis is essential.

Perhaps the Minister should check this with his colleagues in the Progressive Democrats. It can involve a triple whammy against the State, the first being that, according to the Tánaiste and Minister for Health and Children, Deputy Harney, private hospitals and psychiatric institutions will receive public lands on which to build. Second, they will get the tax breaks that the Minister for Finance is so generously providing. For an investment of €1 million a bed, they will receive €420,000 in tax breaks. For a €100 million private hospital of 100 beds, some €42 million will come from the taxpayer. They will also be guaranteed business from the National Treatment Purchase Fund, NTPF. We already have reports from the Comptroller and Auditor General showing that, while the NTPF has undoubtedly improved access to procedures for those who badly need hip replacements and so on, the cost has been extraordinarily high, since many of the procedures have been carried out by the same consultants in their private business in whose queues patients were waiting in public hospitals.

We urgently need a serious, detailed breakdown of all the implications of the policy in the taxation feel good factor of the Minister for Finance's predecessor, former Deputy McCreevy. I knew the Minister well and he was a great man for betting on a horse or dog, as well as for a punt on a tax break. A hunch told him that it would do the trick. I noticed that the Minister recently used the term "health industry". The Government has abandoned the concept of health care as something we hope to provide for our people on the basis of need rather than the size of their wallets.

The Minister's review of tax relief concluded in his own words on budget day that "any new reliefs should be time-limited and should, where relevant, be subject to an assessment of costs and benefits prior to their introduction". He said he would follow that advice as far as appropriate. Why, in his speech a few moments ago, has he denied us this and said he will not provide any public information on a cost-benefit analysis? Was it because the Progressive Democrats pulled the plug on greater transparency? It would be interesting to find out why the Minister has signalled such a change from what he announced with some confidence on budget day.

All the Opposition parties in this House would join in appealing to the Minister to change the position he has just announced and publish the evaluations and cost-benefit analysis of the entire area of tax breaks for private medicine and the investors who are queueing up to put money in. The Minister for Health and Children advised me that she had met a representative of the Department of Finance and her own adviser on economics in separate meetings regarding the hospital in Blanchardstown in my constituency. I understand they took place in one of the Kildare Street clubs rather than in James Connolly Memorial Hospital in Blanchardstown. According to her reply to my question, the Minister had had discussions with the consultants and, together with someone from the Department of Finance, prospective developers. We have since heard that developers are queueing up for this.

The Dáil in general and the Opposition, in particular, would be remiss unless they asked the Minister for Finance time and again to give us some information on costings. We know that projects worth €500 million are in the pipeline, at a minimum cost to taxpayers of €250 million. There may be an argument that there is a better way to improve health and we deserve to be able to make an assessment.

I welcome the scheme to encourage low income SSIA-holders to invest in pensions, but one should not forget that pension fees are generally high, particularly in the early years. The Minister should clarify how he proposes to ensure the pensions industry does not appropriate that benefit, or a great deal of it, and rip off lower income SSIA-holders. His colleague, the Minister for Social and Family Affairs, Deputy Brennan, knows well that one of the reasons the PRSA structure has fallen flat is that it is so costly for low income earners to enter that they perceive no benefit in doing so.

Section 2 of the Bill sets out the standard rate bands and increases for 2006. These expansions, although welcome, will still see approximately one third of taxpayers continue to pay income tax at the top rate of 42%. The Government promised that only 20% of taxpayers would pay at the top rate. The Bill confirms that after nine years in office, the Government remains as far away as ever from meeting its biggest promise to ordinary taxpayers. The challenge for the Minister is to introduce policies that support sustainable growth and employment in the economy, while ensuring a fair system of taxation.

Despite record levels of growth, a series of recent reports, including from the National Economic and Social Forum, NESF, are a damning indictment of our two-tier economy and tax system. I spoke on this issue at the time of the budget. Every year significant numbers of young men leave school with no qualifications to compete for minimum wage jobs or face a life on the dole. They are written off. We are allowing the potential of many young men in working class areas who attend schools where the drop-out rate is high to be wasted. It is an extraordinary indictment of nine years of the Government that yesterday the Minister for Education and Science, Deputy Hanafin, classified no fewer than 750 schools as disadvantaged. That may be a pre-election stroke to try to spread some extra resources.

It is a function of the resources provided.

After nine years we have an enormous number of schools classified as disadvantaged. One must remember what disadvantage in education is ultimately about. Let us leave the teachers out of it and think of the children who attend a disadvantaged school, asking ourselves how many will secure good, well paid jobs and how many will go on to university. Particularly if they are boys, the answer is that many will drop out into dead-end jobs, a great waste of our people's potential.

The Bill, contrary to the Minister's promises on budget day to introduce fairness, equity and a level playing pitch for all taxpayers, shows that it is business as usual for the Government. It would make a great deal of economic sense to wean the construction industry off unnecessary tax breaks, something the three reports show. However, so far the Minister has not found the courage to do so. I acknowledge the forces in the construction industry. Big developers are very powerful economically and have significant assets. Any flattening regarding the construction industry must be implemented on a graduated basis because we do not want a construction industry bubble that bursts and hurts the little people in economic terms.

Section 13 deals with the allowance for child minders. During the passage of last year's Finance Bill, I recommended this kind of flexibility and I am happy that the Minister has adopted this proposal. However, the measure could be improved. I spoke on this during the debate on last year's Finance Bill to highlight the many women in the black economy who mind one to three children. They are not insured for pension or PRSI purposes and when they reach 65 or 66 years, are entirely dependent on their husbands to qualify for an old-age pension. It is important that either this Bill or the Social Welfare Bill brings those women in from the cold. Measures exist to enable them to regulate their situation and to be registered as child minders. The measures introduced by the Minister are simple and attractive but he needs to ensure the provision of a PRSI element to bring those women out of the black economy.

I referred earlier to the sliding relief for the super-rich with regard to paying some minimum tax. The amount is €250,000 and there is a sliding scale of relief for people on an income of between €250,000 and €500,000 but the limit is €10,000 for the lady minding up to three children in her own home, not a penny more nor a penny less. A person earning €10,500 is out. Why does the Minister not provide a sliding scale? There is a good argument to be made for avoiding a precipitative capping of reliefs both in social welfare and in taxation. However, why is the Minister's proposal so hard on the woman minding a couple of children or one child by decreeing that everything stops at €10,000? I ask the Minister to consider a sliding scale of relief which would not be difficult to arrange and which would not cause the sky to fall in. This would make for a more flexible and more attractive uptake on the package.

I wish to raise the question of Gama. The Minister's colleague, the Minister for Social and Family Affairs, disclosed to me by way of a reply to a parliamentary question last year that Gama was obtaining hundreds of exemptions from PRSI certificates. It has been confirmed to me by the Revenue Commissioners that as a consequence, the company flew under the radar of the Revenue Commissioners. They did not know that the Gama workers were employed on a remittance basis. Once the company received the exemption from PRSI for their workers, they were then assigned to the remittance basis for taxation purposes.

I do not know who worked out the Gama scheme but I suspect it was somebody very clever in a legal or accounting office somewhere in this town. I do not regard it as fair for the same legal and accounting offices to whinge that the Minister is having a look at the remittance basis. There have been scandals such as Gama and over-aggressive tax planning. If business advisers such as tax advisers, accountants and lawyers, choose to exploit our system, then I support the Minister's attempts to ensure that we are not taken to the cleaners and that low-paid workers such as the Gama workers are not abused.

I welcome the Minister's proposals for the film industry. I refer to the principle of carrying out cost-benefit analysis reviews, pulling taxation into the light of day to see how it survives. The debates on the film industry which took place in the Joint Committee on Finance and the Public Service disclosed that the film industry is very valuable to this country. My colleague, Deputy Michael D. Higgins was the person who really created it as we know it now.

It was Albert Reynolds actually.

It is a valuable industry employing many people. It is a globally competitive industry which should be encouraged. The other side of the story was that, officials from the Revenue Commissioners and a few officials from the Minister's Department, clearly indicated abuses of the scheme. A public debate and public knowledge about incentives should lead us to examine the arguments for a proposal and also the abuses such as aggressive over-use which have been disclosed in the three reports.

Many people are concerned about the lateness in the issuing of tax credit certificates and I ask the Minister to comment. This is causing problems. If the work situation changes for a husband and wife claiming as spouses, late amendments to tax credit certificates can produce a nasty shock for the person who may lose some of their tax credits. I have received many representations on this matter.

With regard to those people who fail to collect tax refunds to which they are entitled, such as those for medical expenses and bin charges, I suggest, as I did last year, the establishment of a tax ombudsman — or woman — with the remit to take cases on behalf of the ordinary taxpayer to the Revenue Commissioners. This ombudsman could speak to the Revenue Commissioners on the issue of repayment of money to which the taxpayer is entitled. This office exists in the United States and in many European countries. It is high time such an office was established.

The proof of the pudding will be in the eating regarding the arrangements made by the Minister for relevant contracts tax. I have raised the matter of significant tax evasion scams which are in operation in the construction industry and as a result the Revenue Commissioners have now agreed to focus audit attention on this matter. Any reform of relevant contracts tax must be thorough, particularly in the case of larger builders and public contracts where there is not a joined-up relationship between PRSI and taxation.

At Christmas, the Minister's colleague, the Minister for Social and Family Affairs, announced on RTE that something like 40% of people involved in claiming the lone-parent allowance were making a fraudulent claim because they were not living alone. A recent report detailed massive PRSI identity fraud, particularly because the computers at the Department of Social and Family Affairs are not geared to recognise non-Irish names. It is the job of the Government to ensure that everybody contributes a fair share but that equally, the country is not left open to identity fraud. This is a growing problem in the UK and much of it is organised by criminal gangs on a global basis. It is indicated that Ireland may be at risk.

I welcome any measures to ensure that the construction industry and contractors are made more compliant and that the employment status of bona fide workers is recognised and honoured. It is early days to decide whether the measures the Minister is introducing will be successful.

I have a couple of other queries to which the Minister may revert.

The Deputy should conclude.

I will finish on this point. As regards yesterday's report into the extraordinary largesse of the pension arrangements for higher income individuals, is the Minister proposing that the existing €100 million schemes — the seven case studies in the report — should be capped or limited? Is the Minister trying to close the stable door after these particularly valuable horses have bolted?

I wish to share my time with Deputies Ó Caoláin, Connolly and Catherine Murphy.

Is that agreed? Agreed.

On budget day I remarked on the Minister for Finance's cautious approach to budgetary matters and I meant it as a compliment. It is always important for a person in his position to be prudent. However, the reverse side of the coin is that if one is of an overly conservative bent, one might be less inclined to recognise the need to bring about changes where inequity exists. Where the Minister has pushed out the boat in this Bill he has tended to do so in a half-hearted fashion. The effect of that may be to cause more damage in terms of social inequity. I hope that both on Second and Committee Stages the Minister will be more open to examining how even these cautious approaches towards reform might be further improved because they are necessary.

Today's debate has been framed by the Government's release of the reports on the review of tax reliefs. The Minister had those reports at his disposal in October 2005 and they helped to inform him in the preparation of the budget. It is unfortunate that Opposition spokespersons and other Members of the House have only gained access to this stage of the review process today, as we begin debating the Finance Bill. The Bill is a fairly weighty document in itself but the fact that three other documents of doorstep dimensions have been added to it hardly helps our preparations in making sure that everything is examined in its proper context.

The documents reveal facts concerning how tax reliefs have been applied and how their effects will continue to be felt in future. This does no credit to the Government or to the idea of using tax reliefs properly. Even though the reports released yesterday contain useful information, which is necessary to this debate, their terms of reference were wrong. I would like the consultants to have asked why each and every one of these reliefs was introduced, by whom, who influenced the process and how they were introduced at the time? If we had the answers to those questions we could see how arbitrary the introduction of many of these tax reliefs has been. It may be anecdotal but it has never been denied that many of these reliefs were introduced the day before a budget speech was delivered to the House. If that is the way in which taxpayers have ended up paying so many billions of the country's reserves, the practice must be ended once and for all.

The Minister has indicated that he is willing to examine the question of time limits as well as discussing cost-benefit analyses but it will be a matter of debate as to how he goes about doing so. In the interim, the Minister has chosen to extend some of the more contentious schemes and introduce new tax reliefs seemingly without the benefit of such a cost benefit analysis. If that is the way the Government and the Minister intends to proceed, the interests of taxpayers will not be properly served. This is particularly true of the property reliefs, which have been mentioned by other speakers. Not only do we have to account for massive over-expenditure with seemingly little benefit in cost terms but a ratio of two to one is a high price for the country to pay for many such reliefs. The decisions made by the Minister and his predecessor will have a long and swollen tail. As revenues and tax liability increase, so will the amount of tax foregone by the State.

I was struck by one figure in the Goodbody report. It showed that the extension of property reliefs from 2004 to mid-2006 will cost taxpayers €1.3 billion. I do not think the Minister is being entirely honest in this debate because on his own watch we have seen this type of expenditure going out of control. The Minister states that he can further control such expenditure by extending time periods and increasing benefits to particular people in society but it begs further questions as to why the reliefs were introduced in the first place and why they are being extended.

That was the recommendation of the consultants.

I found the consultants' reports curious in many ways and, as I said earlier, I think the terms of reference had a great deal to do with that. I find it hard to square the analysis and the recommendations of the consultants' reports with the facts they presented in the course of the reports. If they are saying, as Indecon has said in its executive summary, that tax reliefs are a highly costly and wasteful form of achieving policy goals, I find some of their recommendations inconsistent in the extreme.

It is fairly convenient that the expiry date for these reliefs, as with the introduction of tax liability for stud fees on stallions and greyhounds, will be after the next general election. If the Minister wants his legacy to include bringing about change and equity, these changes should be introduced now. If the Government was really interested in making up lost ground on this issue, the changes should have been introduced several years ago.

The measures the Minister is introducing in this Finance Bill are the rabbits in the hat that we do not get to learn about on budget day. The Minister is showing too tentative an approach, particularly on the proposals concerning SSIA holders and pensions. The Minister should be acknowledged as having tried to put in place some mechanism to encourage further saving and many Members of the House would approve of that. The difficulty is, however, that the thresholds he set for being within the 20% band and the income limit exclude far too many people who could and should benefit from such a move. The Government seems to be in a heap over what exactly its pensions policy is. We have a national pensions fund which seems likely to cover only the public sector pensions bill when it comes to fruition. There is massive inequity as regards how existing tax reliefs are being used and who benefits from private pensions. Those inequities will increase because of the proposals the Minister is making in this Bill. However, the Government seems to adopt an almost timid approach to what the basic State pension should be in ten, 15, 20 or 25 years' time. The benchmark we should set for our pension policies is a guaranteed standard of living for all citizens when they retire. They may no longer contribute economically to the manufacturing or services sectors but they will still be consumers.

I ask the Deputy to move the adjournment of the debate.

I had not realised the time had gone so quickly.

Debate adjourned.