Finance Bill 2006: Report Stage.

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.

I support the amendment, which seeks to ensure that there is a proper balance between those who are compliant with the tax code and entitled to support in getting their due refunds and those who try to evade tax and who Revenue rightly uses its full powers to pursue. Compliant taxpayers have a right to expect that the Government and Revenue will make an equal effort to ensure that people receive the refunds they are due. Perhaps the Minister will consider four suggestions when replying.

First, I would like him to consider proper independent estimates of the level of underpayment of taxation, drawn up between himself, the Revenue Commissioners and the CSO. The latter has adequate data on the various rent payments, unrequited medical expenses and bin charges. It has a huge level of information available to it. My back of the envelope calculations suggest that there is approximately €350 million of unrefunded tax each year.

Second, when tax free allowance certificates are issued to taxpayers, the Minister should ensure that a form that will allow people to claim back tax in the principal areas, such as medical expenses, rent and refuse charges, is included. This form should explain, in simple terms, what people should include and what documentation should be forwarded in order to make a return in respect of the period completed.

Third, the Minister should take steps to remove from the code the inertia that prevents people from claiming tax relief, particularly that relating to medical expenses. The two elements that are excluded are routine dental and optical services. In an era when we are encouraging people to take preventive measures and assume responsibility for their health, we should not exclude routine dental and optical treatment. Such optical treatment is responsible for the early detection of glaucoma. We should ensure that people do not spend the final years of their lives being effectively blind because they did not avail of early intervention. The idea of having a deductible of €125 for an individual or €250 for a family is purely a ruse on the part of the Department of Finance to make it more difficult for people to claim tax relief. It means that one cannot automatically be aware that a refund is due in respect of money one paid in respect of a service.

Fourth, the Minister should consider the imbalance between compliant taxpayers, who can only look back over a period of four years in respect of tax they inadvertently did not claim, and Revenue, which can, as a standard rule, look back over a period of six years. In the event of being in hot pursuit of a suspected fraud case, Revenue can go back indefinitely. The latter is a matter with which I have no difficulty. However, I have a problem with the four-year restriction that was introduced a couple of years ago.

Perhaps the Minister will consider these four suggestions. They can all be done and would not cost much money. They would begin to build up a sense that there is some form of equity of treatment.

I support the amendment. What would the situation be if the reverse was true and taxpayers were granted all existing tax reliefs which had to be claimed back by Revenue? I suspect systems would be in place which would find out fairly quickly the money due to the State. The onus is placed on the taxpayer to make themselves aware of reliefs available, how he or she can benefit and the type of row back on those benefits. That says something about the psychology of taxation and the role of the taxpayer in the equation.

The Department of Finance regularly misreads the sums of tax expected in a given year and surprise is expressed in regard to how wrong the sums can be in favour of the Minister and the Exchequer. The reason the sum is wrong is due to two factors. One factor is the failure to properly index link the bands and credits and I suspect the other factor, on which we need information, is the failure of taxpayers to properly apply reliefs available to them.

Going through the three volume report recently produced on property based and other forms of tax reliefs, one will see an industry of accountants exists whose sole purpose in life is to ensure there are people in our society who end up paying little, if any, tax. That the ordinary taxpayer must find out what his or her entitlements are without recourse to such professional advice shows the injustice as well as the imbalance in our taxation system.

I fully concur with the view that the Office of the Ombudsman or an independently established tax ombudsman or a tax advocate office should be established. There is a need for someone with the resources of the State to act as an arbiter in dealings with other agencies of the State and in decisions on whether tax is being collected fairly. Given that the Comptroller and Auditor General's role is to ensure tax money is spent fairly, there is a lacuna in terms of the offices and services available to the taxpayer.

Given the length of time taxpayers who overpay or who have not fully availed of tax reliefs must wait for a refund, the restrictive terms applied to those seeking such refunds, the obvious imbalance in terms of how the Revenue Commissioners tend to seek underpayments from taxpayers as well as the availability of large tax reliefs to those who have the resources to buy the professional expertise to help them avoid paying any tax to the State, this is a fair amendment which should be considered positively. The amendment was not considered positively on Committee Stage and I suspect we will go through the same routine we will go through with several other amendments until the conclusion of Report Stage at 11 p.m.

I am sure the Minister is tired listening to the same arguments, so I will try to be simple and brief. On Committee Stage, the Minister responded passionately in regard to Revenue's efforts to advise citizens of their entitlements to claims for tax credits, refunds, rebates and so on. In my experience, the overwhelming numbers of ordinary citizens who broadly come from the lower middle income bracket do not avail of their entitlements to tax credits, refunds and rebates.

Try as the Minister must in his position to defend the effort in place, I ask him to take a more open view, recognise this factual situation and encourage a re-examination of the methodologies already employed. Greater proactivity is needed. People broadly view Revenue as an inanimate body. It has no public face and nobody knows what people working in it look like as they never meet them. In my region, the office is located in Dundalk. If an outreach effort was made, even every 12 months or couple of years, where people from Revenue visited the different population centres in the regions and invited ordinary citizens to attend——

Crowds would flock to meet people from Revenue. Is that what the Deputy is suggesting?

A large number of people would avail of the opportunity, which would be good. I encourage the Minister — I am not here for an argument — to think about it because greater proactivity will result in a fairer and better supported tax system. People will recognise that there is fairness, that it is not only about the pursuit of unpaid taxation, taxation evasion, taxation avoidance or whatever the case might be and that there is justice in the culture of taxation and a concern on the part of those responsible for its management that people are not overburdened. That is the bottom line here.

It is well within the Minister's gift to consider ideas as to how this could be done to afford people access. That is the spirit of Deputy Burton's amendment, although I know it is prescriptive in regard to the ombudsman's role. If the Minister is not prepared to accept the formula in Deputy Burton's amendment, I ask him to at least accept the spirit of what is intended and what has been reflected by all speakers. I ask him to work towards the achievement of a more equitable and more considerate system of taxation reflecting the needs of all citizens and not only some.

There is probably a legacy in this regard. I remember when tax rates were high, one would hear horror stories. Whether they were true or not is open to question. People would say they applied for a tax refund but that they ended up paying more tax. To an extent, there is still a little uncertainty because there is a perception that those who benefit most from the taxation system or who pay least employ professionals. That demonstrates a lack of understanding about how the taxation system works. That is why this amendment is a good one.

People believe they need expertise or that they are not competent to deal with taxation. I am surprised by the number of people who cannot figure out how much tax should be deducted from their salary or wages and how tax credits work, although I know it is being taught in some secondary schools. A large number of people cannot calculate what the bottom line should be despite being given a tax certificate. Some of us were well trained. When I first started work my father went through the calculations with me so that I would not be short-changed. There is a frivolity about that now because we now see a significant number of people incapable of even figuring out their own bottom line in terms of their income.

I am always surprised at the range of issues about which people contact me. Quite often, working people ask about their entitlements, and the last thing that occurs to them is that they are entitled to some of their own money back. In the past week I spoke to someone who never claimed mortgage interest relief. It is quite common not to claim medical expenses because people do not see the small sums involved totting up to a large sum at the end of the year. Bin charges are similar. People do not put these charges together in terms of how sums accumulate. When one sees the profile of people oblivious to their entitlements, to the fact that they can claim their own money back if they have overpaid, it is clear a problem exists.

People are not reading the documentation, a good deal of which arrives even with one's tax certificate. There is a need for one-to-one explanation. I do not see how that can be done without setting up an office which people will feel confident in contacting, without feeling they need to have a professional on the case.

We discussed this on Committee Stage, when I said the Ombudsman's office is not appropriate in this regard. I do not propose to accept the amendment.

The Revenue Commissioners do not deliberately withhold repayments of tax due to taxpayers, or unduly delay such repayments. They make every effort possible, through mail shots, information leaflets, customer inquiry units and their website to ensure taxpayers are aware of their entitlements. To do so, the Revenue Commissioners use a variety of channels. There are 600 PAYE customer service staff available in PAYE regional offices to answer phone calls, amend tax credit allowances, deal with PAYE repayments and answer any queries customers may have. The tax credit certificate sent to each PAYE taxpayer is accompanied by a detailed leaflet setting out a wide range of information about the main personal tax credits available for the year in question, with comparative figures for the preceding year, tax rates and bands for the year in question, exemption limits for single, widowed and married persons, and how to claim an adjustment to the tax credit certificate. The Revenue website has an easy to access customer service information centre on the full range of reliefs available to taxpayers, together with claim forms for download and completion. The home page on the website contains a "what's new" section which alerts customers to timely items of interest. The website also has detailed information to direct customers to the appropriate contact point should they wish to phone, call, write, e-mail or to fax.

There are other means of communication offered including a wide range of general information leaflets, a nationwide network of information offices, an 1890 lo-call phone service, media advertising campaigns and targeted campaigns for particular issues. Revenue seeks opportunities to meet its customers on a more general basis. More significantly, it has fundamentally reorganised itself on a regional basis to provide a more coherent one-stop-shop service to taxpayers throughout the country. Deputy Ó Caoláin visited the ploughing championships and got a chance to meet Revenue there.

I had a great day there and look forward to returning.

There are trade fairs and many other places where Revenue is anxious to see people and discuss a range of matters.

Deputy Richard Bruton asked if the formatting of the information could be improved and made more simple and client friendly. We should always consider improvements and I have no objection to that. However, despite all these customer focus initiatives by Revenue, the taxpayer has the ultimate responsibility for his or her tax affairs. We must make it as amenable and as simple as possible but the ultimate responsibility stays with the taxpayer.

There is a four-year time limit on repayment claims and that is matched by a similar time limit on revenue-raising assessments in the normal course, except where fraud and neglect are involved. There is a matching restriction of four years on the part of Revenue to assess taxpayers, which matches the four-year rule or restriction on the taxpayer's right to a repayment. I am informed there is no discrepancy there, though some people may have thought there was.

In looking at the main reliefs claimed by taxpayers, the pattern emerging seems that the bigger the allowance, the higher the take-up. That is not surprising, for example in the case of the home carer's credit and the rent relief. Revenue believes there is almost full take-up on the home carer's credit and perhaps 80% take-up on rent relief. There is a lower take-up on the service charges relief. As I said, we are making a change this year to provide for a general upper limit of €400 per annum on which relief can be claimed irrespective of how the charge is determined. When claimed once, it is automatically carried forward to subsequent years. In 2002, an estimated 124,900 claimants availed of it at an estimated cost of €5.2 million, and provisional figures for 2003 indicate there were more than 165,000 claims for bin charge credits. That is a significant increase, a rise of more than 30% year on year. I am sure 2004 and 2005 saw further increases, perhaps because of greater public awareness.

I will follow up the suggestions made to see if we can improve the Bill but the allowances and credits are made for a purpose. They are made available so that people entitled to them can claim them. The ultimate responsibility for claiming them lies with the taxpayer, not the Revenue Commissioners. The only person who can say what is right or wrong in this area is the taxpayer. We recognise these are the parameters within which we operate. There are client-focused initiatives in an effort to make the system user-friendly through all the technology, assistance, simplification of forms, specialised staff to deal with client queries, lo-call numbers and fax. The Revenue online service has been a great success and should not be under estimated. We see many areas where people are using online services, with usage increasing quite significantly over relatively short periods of time. That provides for much interaction which otherwise would not take place. The technology provides for a quick interactive approach.

Taking all that into account, it is important to recognise the progress we are making. Revenue tries to ensure everyone takes the credits or allowances available to them. The information is made as broadly available as possible but unless every taxpayer takes on his or her own responsibility there will be less than 100% coverage in respect of every relief. The system must be made as operable as possible. The Revenue is extending the PAYE computer system to allow taxpayers access their Revenue records, perform a range of services, amend tax credits, request online reviews and receive an automatic repayment in certain cases where the Revenue is fully satisfied that a repayment is due. We should recognise that an adversarial approach is not being taken. Where there is a bona fide entitlement, the Revenue Commissioners are as anxious as anyone else to ensure taxpayers receive their entitlements.

The primary responsibility for bringing that about lies with the individual taxpayer. The more we can do to remove the mystique from interaction with the Revenue Commissioners, the less people will hesitate to contact them directly. Everything that can be done consistent with our responsibilities is being attempted. Specific suggestions about improvement of certain formats will be examined.

The Minister does not see the bigger picture. This year, 400,000 people were left without tax certificates until the week before last. The Revenue Commissioners have a number of new computer systems, including the revamped ITS systems, but the Minister is blissfully unaware that many people have serious questions about their entitlements to their basic tax credits, which they have not been able to establish. Where a woman has been at home on extended maternity leave, her husband will have claimed some of her credits. When she returns to work, he is in for a nasty shock unless the Revenue Commissioners can come up with amended certificates quickly.

At the moment some Revenue Commissioners offices are practically under siege, to the extent that in recent weeks, they had to suspend telephone responses because the system was overloaded with queries from the public about basic information. Of course the Revenue Commissioners are making strides with on-line systems but there are many problems with the Revenue Commissioners.

A young person taking up a job and renting an apartment who is being taxed on an emergency basis may find those tax deductions make the difference between being able to pay the rent and not. The Minister is far too sanguine about how well the system is working. There is a need for an advocacy structure whereby taxpayers can get their just entitlements. Relying on the Minister's goodwill, and that of the Revenue Commissioners, is not enough.

When the Finance Bill was published, the Minister talked about the additional powers he would confer on the Revenue Commissioners to look at individuals' bank accounts to find income that had previously been undeclared. I have been stopped on many occasions by large numbers of older people, whom I am confident are tax compliant, who are scared about the Revenue Commissioners going through their various bank accounts over the years to see if they were not tax compliant. I told people that I did not think they had anything to worry about because I could not think of anything else to say. It has been difficult, however, to get information from the Minister about the approach he is taking.

This time last year when the inquiries were starting into single premium insurance policies, I asked the Minister to say that people who took these up legitimately with a lump sum at retirement would have no problem with unpaid tax. This is where the office of an advocate is very important. We need someone to say to tax compliant people, particularly older people, that the Revenue Commissioners are getting the extra powers to investigate those who have cheated on tax in the past, not to investigate those who have been tax compliant during their working lives.

There are many frightened people because the Minister has failed to state that the new powers in the Bill were for tax defaulters, approximately 10,000 people, who could be identified and who owned a percentage of the single premium insurance policies. If the Minister adopted an approach which favoured the compliant taxpayer, he would tell people that they have nothing to worry about, and the advocate's office could tell people that if their tax returns were broadly in line with requirements, they have nothing to worry about. Instead, needless anxiety is caused to many people who were compliant. In the meantime, the people who illegally evade tax do not give a damn about the regulations — their motto is "catch me if you can". They do not lie awake at night worrying about some small bank account being investigated by the Revenue Commissioners. There must be a greater level of communication so those who paid for the progress made by this State are not now frightened about what the Revenue Commissioners will visit upon them.

Subcontractor status and certificates in the construction industry demonstrate the need for an advocate's office. More than 200,000 people work in construction and the vast majority are treated as subcontractors. Young men earning €1,000 in the building trade can be told by their employer to get a subcontractor certificate and that he will look after everything for them. They find it hard to understand the complexity of the situation and, subsequently, unless they have been very careful to comply with all the regulations, it is difficult for them to properly claim refunds and credits when they have been on the emergency rate of tax with deductions at source by the main contractor. It is vital, from the point of view of preserving the integrity of the PRSI system, that these workers be treated as employees. They should pay a lower rate of income tax and they and their employer should pay PRSI. God only knows what has been happening in the construction industry during the recent boom years. It is in the interests of compliant taxpayers, honest builders and those in the construction industry who are treated as subcontractors but are essentially employees that this issue is addressed and an office of an advocate is in a position to do so.

On pensions, volume three of the report on tax breaks produced by the Department shows comprehensively that those on very high incomes enjoy the overwhelming tax advantage in the area of pensions because one would probably need to have an income in excess of €250,000 to benefit from the relief available on pensions. The report highlighted the example of two individuals with pension funds of €100 million on which each received a tax break of €25 million. Not only will the individuals in question be able to invest the remainder of their funds in approved retirement funds, ARFs, attractive vehicles from a tax avoidance point of view, they will probably be able to pass these funds on tax free to their spouses and, in turn, children.

Only 52% of the population have made provision for a pension. The complexity of signing up to a PRSA and the fact that various financial institutions rip off small savers and investors by applying high costs to products such as PRSAs indicate that the tax system is tilted strongly in favour of wealthy high rollers who can put €250,000 or €500,000 into a pension fund without difficulty. In a fair tax system an advocate for taxpayers' rights would step in and ask what benefits the system was delivering to the 50% of the population who do not have pension coverage. Currently they receive few advantages, even to the extent that information on taking up tax products is scarce.

Under the Bill, a person who invests €7,500 of an SSIA in a pension product will receive a bonus of €2,500 as a special concession. On the other hand, a person who invests €100,000 annually in a pension product will receive from the Revenue Commissioners a tax break of €42,000. Under this Bill, a person with no pension provision on the lowest rate of tax receives a bonus of €2,500, whereas a person who is sufficiently wealthy to be able to invest or have his or her employer invest €100,000 of his or her salary in a pension fund will receive a tax benefit of €42,000. That is the scale of the inequality between the wealthiest and those who have no pension provision.

The argument in favour of appointing an advocate to ensure ordinary taxpayers get their fair due is unanswerable. While taking out newspaper advertisements and enabling those with technical knowledge to use Revenue's on-line service are positive developments, they are not sufficient to address the fundamental inequality of the tax structure. The whole system is geared towards those who can afford to pay accountants and tax advisers to look after their tax affairs, while those at the lower end of the scale are not facilitated in a manner of which we can be proud.

Amendment put and declared lost.

Amendments Nos. 2 and 3 are out of order.

Amendments Nos. 2 and 3 not moved.

I move amendment No. 4:

In page 9, between lines 15 and 16, to insert the following:

"1.—The Minister shall establish a new subhead in the Book of Estimates on expenditure to be incurred as a result of obligations under the Kyoto Protocol.".

Having been ruled out of order on Committee Stage, I resubmitted this amendment in a form which ensured it would be in order. It seeks to have the Minister account, through the usual accounting mechanisms, for how the Government intends to meet, in expenditure terms, its commitment on greenhouse gas emissions and global warming under the Kyoto Protocol and, more important, how it intends to raise the funds to meet this commitment. Although modest, the amendment will be important if it forces the Government to take seriously its responsibilities in this area and helps Deputies to see at a glance what precisely are the accounting mechanisms being used to meet what is likely to be an expensive commitment under an international treaty.

In his Budget Statement the Minister referred to the establishment of a carbon fund and indicated that the Minister for the Environment, Heritage and Local Government would introduce a Bill to this end in 2006. I have asked questions on the position with regard to the allocation of moneys to a carbon fund in the current financial year. Will the Minister provide a response because there appears to be considerable uncertainty in this regard?

The establishment of a carbon fund is inherently the wrong mechanism to address this issue because the moneys required to meet our international obligations must be raised in a fair and proportionate manner. Given that the respective contributions of various sectors, whether energy use, transport, industry or agriculture, towards preventing Ireland from meeting our international obligations on greenhouse gases is being measured, it should be easy to introduce mechanisms which would determine the contribution of each sector to the eventual financial obligations the State will be required to meet.

That said, irrespective of the mechanism chosen — this will be a source of considerable debate — the assumptions underpinning the Minister's comments in the Budget Statement grossly underestimate the likely cost to the State of meeting our Kyoto Protocol obligations. The Minister appeared to assume that in 2008, when the bill for Kyoto starts to come in, we will pay in the region of €15 per tonne of carbon load. If the prices were being established in 2006, the price would be €40 per tonne. Given that carbon load prices are linked to world oil prices, the price is likely to increase in the years prior to 2008 and thereafter. Furthermore, an agreement to replace the Kyoto Protocol is likely to be concluded for 2012 and onwards. The Government has, therefore, underestimated by a factor of three the likely costs of breaching our targets under the Kyoto Protocol. If the Minister were to use ESRI estimates of the probable cost of such breaches to the State, he will need more than a carbon fund to meet Ireland's liability.

I ask the Minister to accept this simple amendment which would improve overall accountability in this area in the years ahead. I would like him to make further commitments and accept he is underestimating the future costs to this State and that the mechanism he has chosen is unlikely to work.

My colleague, Deputy Eamon Ryan, attempted to establish an all-party committee on long term energy policy and I would like a collective approach to be adopted by this House in terms of how we can address the issue of paying for our international obligations. Not only will this increase until 2008 but, as I already indicated, a future agreement will probably establish a harsher regime from 2012. There are even indications that the United States, which opted out of the Kyoto Protocol, may be party to the latter agreement.

With 25% of its energy needs already being met from renewable resources, Sweden's Government has decided to move to an oil-free economy by 2020. Given our poverty in terms of renewable energy, such ambitions are unrealistic in an Irish context. However, if we were to develop a common political approach to the medium to long-term prospects, my party and I would feel more confident that these issues were finally being treated seriously. In terms of taxation, the OECD noted that Ireland has the fewest fiscal instruments for environmental intervention. If the Minister wants to leave a legacy from his second budget and Finance Bill, he could make significant progress in this area and might find some on this side of the House who are prepared to work with him in that direction. Unfortunately, this Government has been obstructionist by refusing to acknowledge the scale of the problem and has not come up with workable long-term solutions to meet the commitments for which this society is collectively responsible.

I welcome this timely amendment from Deputy Boyle. There has not been sufficient debate on the environmental impact of greenhouse gases and carbon emissions and minds could be focused through a closer financial examination of this issue. Recently, I read the NESC report on settlement strategy, which was withering in its conclusion that we have an unbalanced and unsustainable housing settlement pattern. It argued that we are creating dispersed, low-density and car dependent neighbourhoods. In view of the events of recent years, the report is spot on.

We delight to pay lip-service to the environment but, when it comes to real decisions on the extent to which we are willing to invest in public transport or to suppress people's appetite for scattered development, our stated commitments have not been met with practical solutions. The Minister's party won political kudos in some constituencies by playing on the demand for one-off housing. However, if he and his colleagues believed that the Kyoto Protocol commitments were important, they would not have followed that route but would have structured taxes to limit car dependent and resource intensive developments.

I am sure Deputy Boyle does not believe I could pass for a Green.

The Deputy is getting closer.

I certainly recognise that we need to create a framework by which we can come to terms with the policy instruments needed over the long term. I dislike the Kyoto Protocol's rigid approach, although it may be inevitable given that it can only try to control one aspect of policy. Optimal decision making does not accord with the assignment of 10% to one and 11% to another but that is probably the only way that subscribing states can be focused on reaching an international agreement.

I would welcome a tangible debate on Government strategies which reflect a common approach to this area. The Minister for the Environment, Heritage and Local Government articulates a very different view on these matters from other Ministers, even though they have supposedly signed up to a shared position. We need to bring these issues into the open to see the whites of the eyes, so to speak, of the Kyoto Agreement in terms of what it means for us and what the next agreement might involve. Public opinion can then be shaped in a way that responds to these issues in a timely fashion so that we do not have to implement reactive measures. That is the value of Deputy Boyle's proposal.

I congratulate Deputy Boyle on getting his amendment accepted, which was no small feat. It is useful that we find ways of dealing with the financial implications of the Kyoto Protocol. The Government would probably like us to believe that, because the implications of the Kyoto Protocol will only kick in after the next general election, the matter should not be discussed in detail by this House. We were given the impression that, once the system of permit trading is agreed and the interests of big players and the cement industry in particular are addressed, all will be well.

However, we have been unable to learn from the Minister the implications of the Kyoto Protocol system on the cost of foreign direct investment. If Intel, Hewlett Packard or another company expands its operations in Ireland after the full Kyoto Protocol regime is in place, what will happen in terms of the cost of the inward foreign investment which we all want? These companies will not be included in the permit structure. I presume they will have to buy permits but that will be expensive. Will the Government assist them? We do not know the answers to critical questions such as this.

Controversy has arisen on the respective merits of concrete and timber framed housing. Certain advertisements claim that one building method is more efficient from a Kyoto Protocol point of view because of the energy conserved. There has been no debate on the implications of that for taxpayers. In light of what the Government has done thus far, it is not unreasonable to expect that PAYE taxpayers will be paying for this rather than those based offshore. The taxpayer will carry the burden of any levies or fines charged on Ireland as a consequence of our failure to meet Kyoto agreements.

Our Government freely entered into these agreements as part of its contribution to the fight against global warming. We have undertaken this as a liability, and we have no indication, even on a shadow estimate basis, of what it is likely to cost us. We should have an idea, as it would help to inform public debate. It would help to inform choices regarding the road we should take to keep the charges incurred as low as possible. As a result of our level of industrialisation at the time the Kyoto Protocol was agreed, our permit system and allowances are much less generous than those of more traditional industrial countries in Europe, which have higher levels of older industries and greater levels of associated pollution and greenhouse gases.

I welcome this proposal, and the Minister for Finance should welcome it also. It is difficult to gather from the Minister's colleagues, which of them, if any, is in charge of this issue. There has been much huffing and puffing from the Minister for the Environment, Heritage and Local Government, Deputy Roche, from time to time. He seems to be partly in charge of some element. There is some information from the Minister for Transport from time to time. In terms of the tax strategy group papers, it would seem that the primary responsibility for the overall shaping of policy rests with the Department of Finance and its Minister.

The amount of published documentation on this is meagre. There have been a number of papers from the ESRI setting out its opinion on what is likely to occur. As I have stated, the tax strategy group has published some papers. However, those papers, for the most part, are more than four years old. There is little current or up to date information on the costs we are likely to face. What has the Minister done in conjunction with his Department to establish the likely implications from a financial perspective of our commitments to the Kyoto Agreement?

Does the Minister have a budget or shadow estimates that would indicate cost? It would be interesting to ask the Minister the cost to the country this year if the Kyoto Protocol was fully in force and we were fully liable, as we will be some years down the road. Is there a current estimate for this? Does the Minister believe these obligations will arrive? There have been some suggestions that the Government believes this is an indefinite mañana scenario, and the cost will never arise. If this is the view of the Government, could the Minister explain why this is so?

I support the amendment. Nobody speaks of the Kyoto Protocol without using the words "we" or "our". There is talk of our obligations and what we must do. We should find a more inclusive definition of we, which includes more than just environmentalists and policymakers. The public should take the obligation on board. The public must see the obligation in financial terms. That is the reason this amendment is good.

The public can, with this amendment, take on board the choices that will be put in front of them on the likes of carbon trading, for example. We are better than this, and we can persuade public opinion with regard to choices the public makes in reducing the amount of carbon emissions and the obligation of the public to do this. The public is capable of taking this on board. However, it must be seen in black and white terms. This amendment provides the opportunity to move to such terms, where people understand the exact obligation we are taking on board.

It has been stated that leadership is always about loss, that is, it is not about giving people things but outlining the changes they must make. In this context, we must find a way of delivering loss in terms of the choices people are currently making against the choices they can be persuaded to make in the future. It would be in the interest of people to make these choices. The sooner we move to a point where everyone takes on board the idea that a personal obligation exists, the less it will cost us financially in the longer term.

The Deputy will be aware that I made provision of €20 million in the budget for the purchase of carbon credits in 2006. I assure the Deputy that this is already represented as a subhead in the Book of Estimates in Vote 25, for the Department of the Environment, Heritage and Local Government. This amendment asks me to establish a new subhead, but it has already been put in place.

I indicated in my Budget Statement that a national carbon fund will be established to be used for the purchase of carbon credits, and to be funded on a multi-annual basis. The fund will be set up on a statutory basis by means of legislation to be brought forward by the Minister for the Environment, Heritage and Local Government. The State's requirements relate to the Kyoto Protocol commitment period from 2008 to 2012. The market for carbon credits is developing rapidly. For example, it is already possible to invest in multilateral investment funds. It is therefore considered prudent for the State to become active in this market to take advantage of this.

While the carbon fund will be a multi-annual fund established in legislation, it is not appropriate to make an announcement on the envisaged size of the fund until the Government has made decisions on purchasing strategy and the second phase of the EU emissions trading scheme. As part of an overall approach to meeting Ireland's target for the purposes of the Kyoto Protocol, the Government signalled in 2004 an intention to purchase up to 18.5 million carbon credits, that is, 3.7 million credits in respect of each year of the five year commitment period. The annual amount of credits to be purchased will be influenced by the extent to which emission reductions can be identified in areas of the economy other than the sectors involved in emissions trading under the EU emissions trading scheme. The Government is actively engaged in seeking to identify emission reduction measures in the context of the ongoing review of the national climate change strategy.

The Government's approach to meeting its Kyoto Protocol commitments does not simply rely on the purchase of carbon credits. Domestic greenhouse gas emission reductions will be achieved throughout the economy using a variety of measures, many of which are set out in the national climate change strategy and are currently being implemented. Others are being considered in the context of the review of this strategy. Reductions will also be achieved by Irish installations in the EU emissions trading scheme.

Significant initiatives with regard to renewable energy are also provided for in this Finance Bill. People will be aware of the five-year biofuels excise relief scheme, and as a complementary measure, the introduction of a 50% VRT relief with regard to flexible fuel vehicles. In addition, funding for renewable energy schemes costing up to €65 million through Sustainable Energy Ireland was also announced in the budget. This funding will go towards biomass boilers, support for installation of renewable technologies in domestic dwellings, and support to encourage the take-up of compliant heat and power technologies.

Debate adjourned.