I move amendment No. 1:
In page 9, between lines 15 and 16, to insert the following:
1.—The Ombudsman shall include in her annual report a special report on the overpayment of tax by PAYE taxpayers, and on the take up of credits by such taxpayers, and the branch of her office dedicated to ensuring that the take up of credits is readily available to all taxpayers, and refunds made as rapidly as possible where this arises, shall be known as the taxpayers' advocate office.
This amendment proposes to create the office of an advocate for the taxpayer, either as a separate office or as an adjunct to the Office of the Ombudsman. The objective of the amendment is to create a level and fair playing pitch for PAYE taxpayers. Like other Finance Bills, this Bill is littered with new tax breaks and special exemptions which, in practice, can only be availed of by the very wealthy. For example, the decision by the Minister for Finance to extend tax relief for private hospitals to psychiatric hospitals and mental care centres will, in practice, only be available to people with very high net worth and very high incomes. These people are likely to have made considerable fortunes out of the construction industry in Ireland and have shielded these fortunes with the help of a plethora of tax breaks, particularly those burnished and encouraged by the previous Minister for Finance, Charlie McCreevy.
The office of an advocate for taxpayers would be a small payback and would be comparative fairness for PAYE taxpayers. There are a number of areas in the tax code where PAYE taxpayers can avail of tax refunds in respect of a number of areas of expenditure once they present the appropriate information to the Revenue Commissioners. Taxpayers can claim tax refunds in respect of certain medical expenses, certain elements of refuse charges and rent paid to a private landlord. However, we know that many taxpayers fail to receive their due deserts from the Revenue Commissioners either because they do not keep full and complete records which are sufficient to make a claim or because they find it difficult to make an appropriate claim. The majority of fit young taxpayers will pay infrequent visits to doctors during the year given that they must pay between €45 and €60 to do so. It is likely that such people will not keep detailed receipts. Similarly, while there is a tax allowance available against the cost of rent paid to a private landlord, many private landlords do not encourage their tenants to avail of it because they are anxious not to disclose their income to the Revenue Commissioners. Many people fail to claim tax relief for refuse charges.
In his replies to parliamentary questions tabled by me, the Minister stated that €242 million was refunded to PAYE taxpayers in the form of credits by the Revenue Commissioners in 2002. That amount was €265 million in 2003, €278 million in 2004 and €332 million in 2005. Over the past four years, taxpayers have received refunds worth over €1 billion from the Revenue Commissioners in respect of claims they were entitled to make. However, all of us here know that, at the most, these refunds account for 50% of the moneys which taxpayers are entitled to claim back. In many cases, the refunds amount to up to 60% of the moneys which taxpayers are entitled to claim back.
Why is the Minister so slow to act in respect of giving ordinary taxpayers a fair deal when he is so anxious to help very wealthy people claim their maximum tax breaks and so anxious to create special schemes to allow such people to write off income for tax purposes? I am aware that in recent years, the Revenue Commissioners have improved their services with developments such as Revenue Online. However, people often find the process of reclaiming tax confusing and are sometimes treated less than fairly by the Revenue Commissioners.
What is wrong with establishing the office of taxpayers advocate so that the Revenue Commissioners are encouraged to find ways and means of ensuring that honest and compliant taxpayers get the tax refunds to which they entitled? The coffers probably gain up to €1 billion per year through the Minister's failure to ensure that taxpayers receive the appropriate refunds. To many ordinary taxpayers, €1 billion is a considerable amount of money. If the provision of various tax credits and breaks for small earners is to be more than lip service, it is necessary to ensure that the tax code is designed in such a way that, as far as possible, the Revenue Commissioners seek out people who are entitled to refunds and make appropriate arrangements for them.
If an office of advocate for taxpayers was established, the Revenue Commissioners would be forced to look for more imaginative ways to ensure that people received their refunds. The Minister argued on Committee Stage that it was possible for individuals to appeal to the Ombudsman. However, as members of the Oireachtas Committee on Finance and the Public Service have witnessed, appeals to the Ombudsman are relatively rare and involve sums of money or principles which are deemed to be very significant.
Unfortunately, the Revenue Commissioners stay silent about the failure of taxpayers to claim back all the credits to which they are entitled. The Minister takes the lordly view that it is up to taxpayers to claim the refunds to which they are due and that they are responsible if they do not receive them. That is a very poor and unacceptable attitude. Although the Minister has closed, or promises to close, some of the special schemes for very wealthy people, he also proposes to open other schemes such as those relating to heritage properties and heritage gardens, and to extend tax relief for private hospitals to include psychiatric hospitals. A bed in a psychiatric hospital may cost between €500,000 and€1 million. If the bed costs €1 million, at the rate of 42%, the tax break for the individual involved will amount to €420,000. That is a considerable amount of money. The Minister goes out of his way to ensure that extremely wealthy individuals get everything to which they are entitled, but he has a much meaner attitude to ordinary taxpayers.
Despite the promises made by the Government, the Minister should bear in mind that this year 31% of ordinary taxpayers will pay tax at the 42% rate. He promised that just 20% of taxpayers would pay at the top rate. We are not sure what the exact figure will be by the end of the year but it will be between 31% and 32%. This is an attempt by the Labour Party to give some sense of justice and fair play to taxpayers who are working, who have no choice but to be compliant and who find it difficult to reclaim medical expenses. Landlords may actively discourage people from claiming tax relief on their rent. If they pay service charges to local authorities in respect of refuse collections, they may find it difficult to complete the paperwork.
We heard the Minister's explanation about more advertising and more revenue for on-line services. However, what he proposes is not sufficient. There must be an independent office that can exert pressure on the Revenue Commissioners to take far more active steps to ensure that ordinary taxpayers get a fair deal. The income tax these people pay, together with the VAT they pay on the bulk of their purchases, is what keeps the system together and delivers so much taxation for the Revenue Commissioners and the Government. Given that it is the Minister's second Finance Bill, he should be imaginative in making refunds available to taxpayers. The sums that are currently refunded are not trivial. Some €332 million was refunded in 2005. All of us know that this money is likely to be approximately half the amount of refunds actually due. This means that the Minister is taking taxpayers' money, holding on to it and doing relatively little to ensure that these people are refunded the money to which they are entitled.
As the Labour Party spokesperson on finance, I am anxious to ensure that people who are liable to pay tax should do so. I also favour lower, more moderate tax rates on the basis that everyone contributes. Allowances, which are built into the system, were introduced to try to rectify a scenario where the State made no provision in regard to hospital care and health services, where people may be obliged to pay a private doctor or where it provides very little by way of social housing, which makes it difficult for many people to get on the private housing ladder. Far more people are now renting and the rents they are paying are very high. While the average rent in the Dublin area is between €900 and €1,400 a month, many people fail to get the tax relief on rent to which they are entitled.
In tabling my amendment, I am trying to get a sense from the Government that it cares about ordinary taxpayers in terms of their entitlement to refunds, rather than simply using ordinary taxpayers as a milch cow. There is preferential treatment for the very wealthy. It was interesting that, in a reply to me last week, the Minister was able to show that the cost of the tax forgone on tax breaks for stallions on a relatively small number of returns was more than double that indicated following a professional survey commissioned by the industry last year.
Tax avoidance and tax evasion are big business. The other side of it is that ordinary taxpayers should get a fairer deal. Revenue should be encouraged to ensure that taxpayers receive all the refunds to which they are entitled. It is not morally right that the Minister should benefit from retaining money that rightfully belongs to taxpayers. It is not good enough to say that it is the taxpayer's responsibility to claim the refund. This is a complex business. Certain records must be kept. If there was a taxpayers' advocate office, I am sure it would result in far more imaginative and quicker ways of ensuring that people who are entitled to tax relief would receive it.