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Dáil Éireann debate -
Tuesday, 6 Feb 2007

Vol. 630 No. 5

Finance Bill 2007: Second Stage.

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

I am glad to introduce this, my third, Finance Bill to the House. In my first Bill I concentrated on reducing the tax burden on low and middle earners. In my second Bill I reformed and refocused the structure of investment tax reliefs and set a minimum tax which the well-off must pay. In this Bill I seek to ensure the benefit of strong economic growth is shared by all taxpayers and, in particular, low and middle income earners. I also seek to ensure that the ordinary taxpayer can better access the full range of normal tax allowances by improving the way the tax system works.

The principal aims of the Bill are, therefore, to reduce the income tax burden on the lower paid by removing almost 40% of income earners from the tax net; deliver on our promise to middle income earners to ensure that 80% of all taxpayers in effect pay tax at no more than the standard rate; promote jobs, enterprise and investment, particularly in small firms through measures specifically aimed at that sector; promote greater investment in research and development and to retain our attractiveness as a prime location for foreign domestic investment; continue to improve the efficiency and effectiveness of the tax system and close off the loopholes that are an unfortunate feature of all tax codes; and use the tax system to promote environmental and other socially desirable policy goals.

It is worthwhile at this point to set out a few basic facts about our tax code which will help dispel a number of myths that might otherwise go unchecked. First, the tax system has become incomparably fairer than the one we inherited in 1997. There will now be more than 845,000 low income earners exempt from income tax compared with 380,000 in 1997. The average tax burden on those on average incomes is less than half that in 1997. We have one of the lowest tax takes in the world from persons on low and middle incomes.

Second, rather than extending tax reliefs to all sorts of projects, as happened in the past, we now have a rational measured approach with appropriate caps on how far those reliefs can be exploited. There is a case for targeted, productive, job giving reliefs where they can be shown to deliver for the taxpayer. The business expansion scheme and regional relief schemes in the Bill pass this test and involve a degree of risk taking by investors perhaps lacking in other tax relief schemes.

Third, the system of indirect taxes under this Government seeks to safeguard the lower paid. It is not regressive as some studies maintain, for example, VAT does not apply to a range of basic foodstuffs — bread, butter, milk, meat, fruit and vegetables — children's shoes or clothing and oral medicines.

Fourth, we have gone a long way to achieve an efficient and effective tax system. More tax is being paid by self-assessed taxpayers. More taxes are being paid on time. Modern IT systems mean more on-line payments. Greater revenue powers achieve a better collection performance and complete change in the culture of paying one's taxes. Better IT facilitates the customer and a range of measures in this Bill will help make claiming tax reliefs easier. It is important to appreciate these facts and acknowledge this perspective when examining the contents of this Bill, as I will now do.

The Bill is being presented against a backdrop of continued strong economic performance and sound public finances. The economy is estimated to have grown by 5.4% last year and is forecast to grow by 5.3% this year. Our public finances are healthy and we have recorded a general Government surplus in nine of the past ten years and reduced our debt to GDP ratio to the second lowest in the euro area.

Good economic and fiscal performance does not happen on its own but is nurtured and supported by sensible economic policies which reward hard work and enterprise through low taxes on labour and business. Hand in hand with this, a strategically balanced, prudent and stability-orientated approach to the public finances facilitates historically high levels of investment in the productive capacity of the economy, while at the same time enhancing public services and protecting the most vulnerable in our society. In this regard our record speaks for itself.

Since 1997 the economy has been transformed, growing at an annual average rate of more than 7% in GDP terms. More than 600,000 more people working than in 1997. For the first time in our history more than 2 million people are employed in the State. With so many more jobs and people employed, more goods and services are being produced and the consequent increase in tax receipts has allowed for a significant increase in the level of public services.

Our approach of making work pay has proved hugely successful. We are not complacent about our success and must continue to work to create the conditions necessary to sustain economic progress in the future. We recognise that Ireland is a small and open economy especially exposed to changes in the global economic environment. As such, we must address those domestic factors that we can influence or control in order that we can ensure the economy is suitably prepared in the event that external difficulties arise. In these circumstances, a key policy challenge will be to enhance our competitive position to ensure continued improvements in our living standards.

The Government is addressing the competitiveness challenge in a number of ways. We are investing in infrastructure and people and improving the skills of the population, which will help us to compete by repositioning the economy for the production of more knowledge based goods and services. We are also committed to enhancing the capacity of our economy and have illustrated this commitment in the recently announced national development plan. We are improving our infrastructure and moving towards a more knowledge based economy by investment in research and development, science and innovation. This will sustain our economic progress, improve our competitive position and create new and better jobs.

The planned total spend of €184 billion in the national development plan is an investment for us all in the future, which serves to increase competitiveness, enhance productivity, reduce congestion and improve services. The plan builds on the significant achievements of its three predecessors. In the 2000-06 period the previous national development plan delivered: more than 525 km of new national roads and 51,000 km of non-national road refurbishments; more than €10 billion in housing projects and almost 50,000 new homes built; more than 460 schemes under the water services investment programme have been completed to improve water quality and help the environment; more than €500 million has been invested under the rural water measure, with more than 450,000 people benefiting from the upgraded group water and small sewerage schemes; 57 new primary schools and refurbishment of almost 5,000 more; 19 new secondary schools with a further 13 already in construction; and 31,000 additional child care places.

These facts show that the previous NDP delivered for the people. We are fortunate to live in good times. The current plan seizes the potential presented by current prosperity, strong financial standing and favourable demographics to position the country for continuing progress if the environment becomes less benign in future. While continuing the good work of the previous development plans, the new NDP necessarily has a different focus in that it is designed to secure the gains made, sustain our prosperity into the future, balance growth across our country and do all this in a way which protects and enhances our environment.

A vibrant economy underpinned by the reward of enterprise and work, strong and stability orientated public finances and the ambition of the national development plan are strategic cornerstones of the Government's economic and social policy. The Finance Bill I present to the House today, focusing as it does on ensuring the benefit of strong economic growth, is shared by all taxpayers, and in particular low and middle income earners will further enhance the solid underpinning for future economic growth and the broader well-being of our society.

In each of the three Finance Bills I have introduced to the House I have been able to introduce measures which make the tax system fairer. The tax burden on the low and middle income earner has been significantly lightened. When this Bill has been enacted two out of every five income earners will have been removed from the tax net. The Bill delivers on our promise to middle income earners to ensure that 80% of all taxpayers in effect pay income tax at no more than the standard rate.

The Bill runs to 118 sections and three Schedules. I will outline some of the main provisions in the time available to me, listen carefully to the contributions of Deputies and try to respond to the points they make when I reply to the debate.

The various income tax measures and reliefs announced in the budget are dealt with in sections 2 to 4, inclusive. These widen the tax bands and increase various credits, including the basic personal credit and employee tax credit, and reduce the top rate by 1%. When this Bill has been enacted, almost two out of every five income earners will have been removed from the tax net. The Bill delivers on our promise to middle income earners to ensure that, in effect, 80% of all taxpayers pay tax at no more than the standard rate.

Section 5 provides for a 9% increase in rent relief. Section 6 confirms the budget increases in the ceilings on mortgage interest relief. For first-time buyers the ceiling is doubled from €4,000 to €8,000 in the case of a single person and from €8,000 to €16,000 in the case of a married couple or a widowed person.

Section 8 provides that the foreign service allowances of employees of certain agencies, working in the overseas offices of those agencies, are treated in an equivalent manner in terms of the allowances paid to staff in the Civil Service who are serving in foreign postings.

Section 9 provides the necessary legislative changes to allow the Revenue Commissioners, where possible, to credit and repay automatically reliefs such as age-related tax credits, health expenses, tuition fees and trade union subscriptions.

Section 10 extends indefinitely the special tax exemption for unemployment benefit paid to systematic short-time workers. This had previously been renewed from year to year.

Section 11 amends the provisions exempting from income tax income arising on the investment of certain compensation payments. This will exempt returns from offshore funds from tax in the same way as returns on domestic investments.

Section 13 closes off an abuse of the rent-a-room exemption scheme in order that the exemption will not apply where an adult child pays the rent to a parent for staying in the parental home. Section 14 increases the child-minding tax exemption limit of €10,000 per year set in last year's budget to €15,000 per year to encourage a greater uptake. Section 15 introduces an additional threshold of relief of €20,000 per year for qualifying long-term leases of farmland exceeding ten years' duration.

Section 16 amends the tax treatment of various pension products and approved retirement funds in a number of respects. The main changes are that: first, Revenue will in future be able to approve, subject to conditions, generic pension products such as those under which single-member retirement benefits are marketed without the need for individual Revenue approval for each case and, second, an amendment to the legislation is being made to clarify that the operation of the pension fund limits is not affected as a consequence of pension adjustment orders made by the courts in circumstances of judicial separation or divorce.

Section 18 confirms changes to the business expansion and seed capital schemes. Both schemes are being extended for a further seven years until 31 December 2013. The company limit is being increased from €1 million to €2 million, subject to a maximum of €1.5 million to be raised in a 12-month period. The investor limit is being increased from €31,750 to €150,000 in the case of the business expansion scheme and to €100,000 in the case of the seed capital scheme. Recycling companies are being added to the list of qualifying trades. These changes to the schemes, with some additional alterations to the operation of the schemes provided for in this section, are subject to a commencement order being made on foot of approval by the European Commission.

The Government is firmly of the view that this relief is important to the creation of jobs in Ireland and for the development of the small business sector and that the European Union will recognise this also. In this general context, the film investment relief is due for renewal next year and before we renew it we will have it fully reviewed, as before, to ensure that it is delivering the desired effect.

Section 19 proposes a number of changes to income tax appeal provisions to provide that where a determination of the appeal commissioners is to be reheard by a Circuit Court judge or a case is to be stated for the opinion of the High Court, the inspector will not be obliged to amend the assessment under appeal until the appeal process has been fully completed. In such a case, a refund of tax paid or the collection of tax levied will not proceed until final judgment.

Sections 21 to 23 amend the tax code concerning farmers as follows. Certain farmers who were in receipt of Feoga and single farm payments in the calendar year 2005 can qualify under the income averaging scheme. The 25% stock relief for farmers and the special incentive stock relief of 100% for certain young trained farmers is extended for a further two years, subject to clearance with the European Commission under State aid rules. The educational qualifications for the special 100% relief are being aligned with rules governing stamp duty relief for young trained farmers. The scheme of capital allowances for milk quota is being amended to ensure this relief is available for quota purchased under the new milk quota trading system. I will bring forward further tax relief measures for farmers on Committee Stage.

Section 24 sets out proposed new tax arrangements for stallion stud fees, which will come into effect on 1 August 2008 with the present regime ending from 31 July 2008. These will replace the present tax arrangements which had been objected to by the European Commission. The bloodstock industry and the wider racing industry are important economic drivers in rural Ireland. Despite its small size, Ireland is now the third largest producer of thoroughbreds in the world and accounts for 42% of total EU output. The existing exemption was key to the development of the sector and in recent years up to 70% of the world's top stallions have been located in Ireland.

A recent survey estimated that the total number directly employed in the stallion breeding sector is 2,400. An additional 2,300 are employed in the brood mare sector with estimates of up to 16,500 employed in directly associated activities in the economy. In addition, the availability of good stallions, together with the high reputation of Irish breeders, has led to more foreign owners boarding their mares here. In the past 30 years or so, the number of foals born here has tripled and thoroughbred foal output now stands at more than 12,000 per year.

The key measure in this new arrangement is the provision of a deduction for the purchase cost of the stallion, which will allow the cost to be written off over a useful economic life of four years. This four-year writing down allowance, which the Bill provides for, is in step with the existing accounting practices in the industry which have evolved over time to deal with the reality in this business, that in the majority of cases investing in thoroughbred stallions is inherently risky and is often a loss-making venture.

Overall, the measures contained in this section of the Bill will mean that the same broad principles will apply to the stallion breeding industry as for other businesses. These tax arrangements are subject to clearance by the European Commission.

Section 25 amends the tax relief for donations to approved bodies to remove a number of references to the requirement that various educational bodies must be established in the State. A number of named bodies are also removed either because they are defunct or are already established charities to which the donations scheme applies.

Section 26 introduces a scheme aimed at encouraging the development of tourism infrastructure in the mid-Shannon area. Such a scheme has been under consideration for some time. In the lead-up to budget 2006, a submission proposing such a scheme was received from Shannon Development. This was the subject of an ex ante evaluation by Goodbody Economic Consultants last year. The review was followed by the completion of Fáilte Ireland’s tourism product development strategy 2007-13. In addition, in the lead-up to this year’s budget a follow-up proposal was received from the Department of Arts, Sport and Tourism. Accordingly, I have decided to proceed with such a scheme on a pilot basis. In doing so, I point out that in their report Goodbody recommended that if any such scheme was to be implemented: the scope of the scheme should be strictly limited; the scheme should only allow for accommodation where it is integral to the resort; it should not apply to cabin cruisers; it should only operate for a limited term; and there should be an independent certification body. All these recommendations have been met in the design of this scheme.

A certification body will be established to vet proposed developments so as to provide quality assurance for the scheme. Such certification is aimed at establishing eligibility under the scheme before proceeding with any project. The qualifying period for expenditure under the scheme will be three years from the date of its commencement, which will be done by way of ministerial order. It will not cover stand-alone hotel or holiday cottage developments and the accommodation content of any qualifying development cannot be more than 50%.

The designated areas involved are in a corridor of about 12 kilometres on either side of the river, stretching roughly from the bottom of Lough Derg to Lough Ree. The tax relief will consist of accelerated capital allowances over seven years for qualifying construction and refurbishment expenditure incurred in the qualifying three-year period. This is aimed at assisting the development of a critical mass of the type of tourism projects needed in the area, such as marinas, leisure centres, equestrian centres, adventure sport facilities, sailing schools, interpretative centres, health farms and spas, heritage houses and gardens.

It is envisaged that following the passing of the Finance Bill 2007 at the end March, the scheme will be immediately notified to the European Commission at which stage work will commence on the drawing up of guidelines and establishment of the certification board with a view to signing the commencement order in June, assuming there are no problems with the European Commission. The scheme will be operational for three years after this date — that is, to approximately June 2010.

Section 27 closes a loophole concerning unallocated partnership profits by clarifying the position that the tax-adjusted profits of a partnership must, for tax purposes, be fully apportioned between the individual partners each year. This will close off a potentially large tax loss in some major partnership firms.

Section 28 makes various amendments to relevant contract tax which applies to payments made by principal contractors to subcontractors under relevant contracts in the construction, meat processing and forestry industries, including a number of amendments to meet commitments, contained in the partnership programme Towards 2016, to strengthen the RCT system.

Sections 29 and 30 amend the current tax laws on SSIAs and the pensions incentive tax credits scheme so as to empower Revenue to seek various information returns from SSIA managers and to require SSIA moneys invested in pension funds under the pensions incentive tax credits scheme to be held for at least one year to avoid a claw-back of credits given under the scheme.

Section 31 provides for DIRT-free interest to be paid automatically by financial institutions to taxpayers of 65 years of age or over, whose total income does not exceed the relevant income tax exemption limit. This will also apply to permanently incapacitated people in receipt of such interest in defined circumstances. It will ensure that relief is given without the need to apply to Revenue for a refund each year.

In section 32 I seek to afford relief to persons who may suffer double taxation arising from capital gains in countries with which we have a double taxation treaty but where the treaty itself predates the introduction of capital gains tax in Ireland. The section also removes an element of double taxation on the profits of a foreign branch or agency of an Irish company, where such a branch or agency is located in a country with which we do not have a double taxation treaty.

Section 34 provides for a number of amendments to the scheme of dividend withholding tax to deal with the introduction of electronic dividend vouchers, the application of the general four-year time limit that applies to other tax repayments to refunds of dividend withholding tax, and an extension of the existing exemption from dividend withholding tax available to non-resident subsidiaries. Section 36 is an anti-avoidance provision which makes a number of changes to provide special rules for the taxation of personal portfolio investment undertakings in regard to payments made to unit holders. This will prevent the exploitation by some wealthy individuals of the lower exit tax rate on certain investment funds.

Sections 38 and 39 amend taxation procedures in regard to life insurance policies in order that the investment proceeds of all life insurance policies will become chargeable to income tax after an eight-year period. Section 40 strengthens certain anti-avoidance provisions in regard to the transfer of assets abroad.

Section 41 extends the application for a further three years to 2009 of the base year 2003 expenditure on research and development against which incremental expenditure will be measured for the purpose of the research and development tax credit. In addition, expenditure by companies on subcontracting research and development work to unconnected parties will qualify under the tax credit scheme up to a limit of 10% of qualifying research and development expenditure in any one year.

Section 42 confirms the budget day announcement that the preliminary corporation tax liability threshold for treatment as a small company is being increased from €50,000 to €150,000. New or start-up companies with a corporation tax liability of €150,000 or less for their first accounting period will not be required to pay preliminary tax in respect of that first accounting period. In addition, provisions are being introduced under which large companies in a group will be allowed offset their preliminary tax payments between group members for the purpose of working out the adequacy of such payments for interest purposes. This will assist in minimising interest charges on the group.

Section 43 deals with group relief for companies, the provisions for which are being amended mainly to comply with a ruling of the European Court of Justice in the Marks & Spencer case on the use of foreign tax losses. Section 45 introduces a measure that provides an option to companies not to have interest payments made to associated companies in countries with which we do not have a double taxation agreement deemed as a distribution of their profits. This removes an element of double taxation in the tax code and will help the IFSC.

Section 46 extends the qualifying period for the scheme of tax relief for corporate investment in certain renewable energy projects from 31 December 2006 to 31 December 2011, subject to clearance by the European Commission from a state aid perspective. Sections 47 to 51 amend the tax code in regard to capital gains tax in a number of ways. They increase the retirement exemption threshold from €500,000 to €750,000, amend the site to child relief to limit the size of the site to 1 acre, exclusive of the house, and make a technical change to the exemption for sports bodies to ensure the full value of the existing asset must be applied for approved purposes. There is a technical amendment in the offshore income gains provisions to update a reference to resident individuals and, where a capital gains tax clearance is not produced on the closing of a sale, an amendment will ensure that any consideration withheld must be paid to the Revenue Commissioners within 30 days.

Parts 2 and 3 deal with indirect taxes, namely, excise and VAT. These include sections 52 to 67, inclusive, which set out a range of changes in regard to excise duties, including confirming the budget day reduction to zero of excise duty on kerosene and LPG used for heating, the increase in excise on tobacco and the introduction of a VRT relief of 50% for electric cars. Existing provisions relating to substitute fuels are being amended so that such fuels, including biofuels, will in future be taxed at the rate applicable to the fuel for which they can be substituted. The definition of "mechanically propelled vehicle" is amended to exclude vehicles that do not meet EU-type approval standards for entry into service on the State's roads. Arising from the Criminal Justice Act 2006, excise duties are being adjusted or imposed in regard to firearms.

In response to rulings by the European Court of Justice relating to other member states, the Bill provides that company cars driven by Irish residents on behalf of firms based outside Ireland will be exempt from VRT subject to certain conditions. Provision is also being made for the late opening of betting shops on days on which an evening race meeting is taking place in Ireland, regardless of the time of year. Currently, late opening is allowable when daylight hours facilitate evening race meetings — from April through to August. This change is in response to the advent of floodlit night-time horse racing in Ireland from the latter half of the year.

Sections 68 to 89, inclusive, contain a number of important revisions to the VAT code, as follows. They confirm the budget increases to the VAT registration thresholds for small businesses from €27,500 to €35,000 in the case of services and from €55,000 to €70,000 in the case of goods with effect from 1 March, the increase in the farmers' flat-rate VAT addition from 4.8% to 5.2% with effect from 1 January, and the reduction of the VAT rate on child car seats from 21% to 13.5% with effect from 1 May.

Section 71 provides for the removal of the option for landlords to waive their right to exemption from VAT on short-term letting of residential property to remove an anomaly whereby the landlord can claim VAT on the assets of the property in year one but the equivalent VAT on rents from the property will only be received by the Exchequer over a prolonged period. This currently acts as an unintended Exchequer subsidy to private letting. The change will apply to properties acquired or developed after the passing of the Finance Bill 2007 and will not affect lettings in existence prior to that date.

Sections 76 and 81 provide for the deductibility of VAT on conference-related accommodation expenses from 1 July to help Irish hotels compete more favourably on the global stage for conference business. This change is in line with the recommendations of the tourism action plan implementation group and was announced in the budget. Other VAT changes relate to hire purchase transactions in cases where the customer defaults on repayments and where finance houses are involved in the transactions, the taxation of certain services received by public bodies, for example, consultancy services from abroad, and the application of the open market value to certain transactions between connected parties in determining the amount on which VAT is chargeable.

Sections 91 to 102 introduce changes to the stamp duty code to achieve the following: abolish the head of charge for mortgages; simplify the code; amend the relief available for young trained farmers; extend the relief for farm consolidation for a further two years to 30 June 2009 and allow relief where only one farmer is consolidating; introduce a new exemption from stamp duty for sports bodies which are already entitled to relief from income tax and capital gains tax — this exemption will relate to purchases of land for the purposes of promoting games or sports; limit the transfer of a site from a parent to a child to build a house to 1 acre, exclusive of the house; provide for an exemption from stamp duty on certain intra-family transfers of farmland; and extend the existing first-time buyer stamp duty exemption to persons who have undergone a judicial separation or divorce where certain conditions are fulfilled. I am currently considering further changes to the stamp duty code which may be introduced on Committee Stage. These relate to the application of the code to the development of land.

Sections 103 and 104 are technical amendments which arise as a result of a High Court case decided last year in regard to when a discretionary trust created will come into existence. Section 104 changes the date on which the tax becomes payable where a trust is created following death. This follows a High Court decision earlier this year. The tax will now apply from the date of appointment to the trust instead of the date of death, as before.

Section 105 alters the date from which interest becomes payable in the context of a clawback of agricultural or business relief where the assets are sold within the specified period. The interest will now apply from the date the clawback arises. Section 107 deals with capital acquisitions tax agricultural relief and amends existing provisions in order that an individual may offset borrowings on an off-farm principal private residence against the property's value, for the purpose of the 80% farmer test.

On tax administration, section 110 amends the tax code so the need for a person who holds a fixed charge on the book debts of a company to send to Revenue a copy of all the papers lodged with the Companies Registration Office is replaced with a simplified return. Section 111 provides for a reduction from six months or 183 days to 93 days in the period which must elapse after the receipt of a valid claim before Revenue is required to pay interest on overpayments. The shorter period applies for repayments made after the passing of the Bill.

Section 112 provides for a once-off increase this year in the ceiling for donations to the Irish Heritage Trust from €6 million to €10 million. This would allow for the donation of a collection of fine Irish paintings and furniture for display in Fota House.

Section 113 amends the existing requirements that Departments, the HSE and local authorities and similar statutory bodies that make any payment in the nature of rent or for the purposes of rent subsidy in regard to any premises to make a return containing details of the premises, its owner and payments made. The amendment will extend this provision so that these bodies will also be required to obtain the PPS number of the landlord concerned.

Section 114 amends the tax law to clarify and confirm the search powers of Revenue to assist in investigations with a view to prosecutions. Section 115 creates a new offence of impersonating a Revenue officer. There have been a number of instances in recent years of persons impersonating a Revenue officer.

I hope the House has benefited from this explanation 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. I will also give consideration to any constructive suggestions made during our debate today and tomorrow. I commend the Bill to the House and look forward to a constructive debate on it.

This is the last chapter in what the Minister's predecessor described as something of a great epic, which, like the works of Charles Dickens, he decided would be issued in serial form. Like the work of Dickens, this epic started with great expectations, but much of it for many ended in fairly hard times, which is part of the mark of the Government in its approach to public finances. It has been very much the tale of two Irelands, with many doing well, but, unfortunately, many more left in the margins. Many of those in the margins are people waiting for public services that should have been delivered considering the wealth available to the country.

Deputy Bruton is the Nicholas Nickleby of Ireland.

Is the Minister Little Dorrit?

Perhaps Uriah Heep.

That is the background to the Finance Bill. People look on this country as one with a tremendously successful economy which has yielded extraordinary wealth to the Government. However, we have not achieved what should have been achieved and this will be the core issue on which we will go to the country in the election. Much money has been spent, but too much has been left undone. People will look at the alternatives and decide whether we should have another five or ten years of what we have had or whether it is time to look afresh at the appetite for change.

Unfortunately, the Bill comes from the same stable as so many before it. It is disappointing on many fronts. It reinforces the strong bias against families, which is contrary to the sort of social policy we should see; it fails to square up to the environmental challenge, the urgency of which we become more aware daily; and it continues to glide along with public spending which is growing 50% faster than the growth of national income. It does so on the basis of an increasing dependence on a property boom which we all know is unsustainable. The main problem is the Bill does not address fundamental issues at this time of great opportunity.

I would like to develop some of these themes, beginning with the issue of families and the way in which we inadvertently, not just through the finance and tax system, pursue policies that make life difficult for them. If families at work want to put a child into child care, even if they put all of their child benefit and the new under-six payment into child care, they will still have to meet another €145 per week. The cost of that in gross income is €13,500. Therefore, they must find that amount for each child in child care. If a family has two children, the cost of that child care wipes out the entire industrial wage.

As a result of this, people have to opt out of the workforce for a few years to care for their children at home, but the result is they are penalised further tax-wise, first by losing the PAYE tax credit, a whammy of €990 or approximately €1,000, and then up to €5,250 as a result of the individualisation bands. What sort of policy is it that has the effect that if people decide to opt out of work for a few years to engage in home care, they are penalised to that level? This inadvertently creates an environment where parents find it hard to cope. It is even deeper than this. If people separate, the tax system decides they should have four tax credits, whereas if they stay together, they should have two. If they happen to cohabit, are not married and only one is working, they are reduced to just one tax credit. Some crazy concepts underpin the way we treat families.

The situation is similar in other sectors, for example, housing. Many families now have to go into private rented accommodation. Why is it we decide these families only deserve €14 a week of total subvention support towards their housing expenses, while someone in a council tenancy gets 40 or 50 times this amount? Similarly, someone out of work would get 40 or 50 times, while someone purchasing a home gets five or six times that amount. Why do we apply these significant distinctions to the many families forced to go into private rented accommodation? We must focus more clearly on what we want to do to support families and this should inspire our tax and welfare system.

Let us look too at the welfare system. Many of the means tests, for example for higher education grants, medical cards etc., do not take account of the fact that two people trying to cope on one income have higher expenses. This fact is airbrushed out of the equation. However, that is the reality. We want to promote a family policy where people stay together and share the responsibilities of rearing families, but we promote the very opposite through our welfare and tax codes. We must get our minds around this and deal with the challenge to create a successful environment for parents. We see ever increasing problems of young people going astray in various ways and to deal with this we must try and support family policy in a more coherent way. Tax and welfare policy can contribute to this.

Environmental strategy is another area needing attention. If we look honestly at the Government record, we see the Government has failed to push the need to change if we are to comply with the Kyoto Protocol and use scarce resources more effectively. We have a most dysfunctional planning strategy which has continued. We continually force development further into green spaces leaving people with long commutes and areas without any traffic infrastructure support. This pattern has been passed as coherent development in the past, particularly in the past decade when we have built 500,000 extra homes and increased our housing stock by 50%. This was a significant opportunity to lay out or cement a coherent way of using resources, but it was let pass. We did not reform the planning system, impose the proper building standards on those homes or try to create compact systems of development.

The strategic development zone, SDZ, proposal was the right way forward, but as far as I know, Adamstown is the only area where the system has been applied. This is only one case out of 500,000 houses. This is not good enough and does not demonstrate coherent, joined-up thinking. There is scope within the tax code, even in one Finance Bill, to be more ambitious about trying to promote sound decisions about the type and location of houses etc. Development levies, VRT and other such duties could be used as levers to encourage this. Stamp duty could provide an opportunity when houses change hands to do something about energy standards in houses. We could create vehicles that would promote the sort of change we need, but this has not been high on the agenda.

I am baffled that we do not have an interconnector. I was spokesman on energy many years ago when the issue of an interconnector to the United Kingdom or beyond was mooted in order to open our electricity system to the use of more alternative sources and to provide a more efficient and competitive electricity system. Here we are, a decade on and billions spent on infrastructure, but the opportunity to achieve that core element, which should have been part of a strong environmental change in trying to achieve more balanced use of energy where we would be more reliant on renewable sources, has been missed.

We must have much more strategic thinking in government on these challenges, but we come in here and deal with the issues piecemeal. The Finance Bill results from all the various financial pressures and from the input of accountants and lobbyists, but it does not create a strategic picture about how we treat families or the environment. We have unwittingly created in recent years a bonanza in property revenue where approximately €100,000 plus from every new house built goes to the Exchequer. Stamp duty on an average house in Dublin is €41,000. For an apartment, the figure is now €30,000. Massive sums are being borrowed in the private sector. Everyone is aghast at how people could get themselves so deeply into debt, and the Central Bank has been wringing its hands. Let us not forget that at least €100,000 goes to the Exchequer for every new house built in Dublin, with another €41,000 if it is second-hand. The figures are obviously lower in other parts of the country. Even first-time buyers are putting in a great deal, and in Dublin they pay €33,000, even after the Minister for Finance's reform.

Stamp duty receipts have trebled in the last four years. The Central Bank is worried that borrowers are fuelling spending, and one cannot escape the fact that the level of Government spending seen in the last five years will not be sustainable in the longer term. One cannot increase spending 50 times faster than the growth in the economy other than for very short periods such as at present, with a massive property boom allowing such largesse in the absence of tax rises.

That is not a sustainable basis on which to build spending programmes, and we must return to a much tougher value-for-money approach to squeeze value from public spending. When one invests new resources, one gets real targets delivered. That is at the heart of the programme that the Labour Party and we have put together, The Buck Stops Here, in which we try to set out how we might squeeze extra value from public spending. In that manner, even in a more constrained environment such as we face in future, we can deliver in those key areas in which people have been so disappointed.

I will make some more specific points about the Bill. I know the tourism scheme concerns the midlands, and the Minister for Finance, coming from the area, will understand its benefits. I agree we need better tourism products; except in certain regions, we do not need much more accommodation. I cannot see that the lessons of the past have been internalised by those who designed the scheme. We were told that the first thing to do when introducing such a scheme is to assess its cost and benefits. There is no mention of what the cost or benefits might be, however, despite it being a prerequisite. It was at the core of all the consultants' reports, which were a foot thick. They looked back at such schemes, and after many years of their operation, found that we had procured only small benefits and that the cost of tax reliefs had been excessive. We had not designed or thought them through at the beginning.

I am disappointed there has been no attempt at a cost-benefit analysis of this tourism scheme, which may be wonderful for all I know since I do not know the area. However, I do not see any such attempt. One thing that has been taken on board is the need for certification, but we have not yet been told what the eligibility criteria will be. Somewhere in the Bill it states that they must have regard to a great many factors. Having to have regard to something is not a very rigorous test criterion, and we must beef that up.

Before we vote this through, we should see very firm criteria set out in order that we know exactly what will be included. We cannot leave that question to some large group established afterwards by a Minister for Arts, Sport and Tourism who, with the best will in the world, will wish to use the scheme to maximise investment. He will not think of the taxpayers or the benefit-to-cost ratio. For him, it is a tool given him by the Minister for Finance that he intends to pump for everything possible; anyone else in his position would do the same.

We must see such controls put in place, since this is the last time we will see the Bill, and the relief will continue for seven or eight years. Many of us present will no longer be in the Dáil at a time when the benefits are still accruing. We must take a more rigorous approach, since it is taxpayers' money rather than funds from some pool separate from what we spend on health, for example. We are deciding that tourism projects in certain areas are more important than investment in plant and machinery in a factory or in an industrial building. We are deciding that certain things are more desirable than others and that we will use taxpayers' money to make them happen. We must take that rather more seriously than hitherto. I am not saying that the pattern has been such, and I have always recognised the benefits of what the Minister has done. However, he has allowed cost-benefit analyses to slip into the past, when he must instead carry them into the future with equal rigour. That is missing, although it should be part of such schemes.

I am still concerned at the level of tax write-offs that we allow certain individuals who can manage the various schemes. The Minister for Finance is increasing the threshold for the business expansion scheme which is probably among the better examples in that it is based on risk rather than property. However, the Minister still allows someone, depending on his or her age, to put up to €100,000 into a pension scheme, with a tax subsidy of €40,000 or so provided on that pension each year. Then the person receives €250,000 from various reliefs if his or her tax affairs are managed properly. It is only thereafter that certain caps begin to take effect.

It all ends up with such people paying tax at a rate of 20%. If they are over the €500,000 mark, the Minister says they will pay 20%. Let us not forget that an ordinary person pays 41% on income earned above a threshold of €34,000. That is the reality, and these schemes would have to be extremely good to justify some paying 41% after €34,000 and others 20% on €500,000. That is the structure we have allowed, however, and the financial caps should be set at much lower levels than at present. The Minister did not introduce proper restrictions on such schemes. It is very hard to justify why someone on €34,000 should pay the same marginal tax rate as a multimillionaire, and certain such millionaires will be asked to pay tax at only 20%. It ought to be dealt with in a more clearcut fashion than in the vehicle invented last year as a first step.

I will take some credit for reclaimed tax. There is growing momentum on the part of the Department of Finance, Revenue and the Minister to take seriously reimbursing those who have overpaid. In a back-of-the-envelope calculation, I estimated that the total was €350 million a year for each of the four years on which one may reclaim money. That is a great deal, worth some €1.5 billion in total.

The Minister should ask Revenue to conduct a study, since it has access to the full figures for money spent on medication, doctors and fees. From its own returns, it could tell the Minister how much ought to attract tax relief. While there is now a welcome commitment to opening tax relief at source, there are still signs of niggardliness in how it is approached. For example, the Minister is leaving intact the €125 figure as a hand-trip on medical expenses claims. It is designed to do nothing other than cut the number of people making such claims.

The Minister should forget about the €125 and simply make medical expenses tax-allowable. That would be much more clearcut, and one would not then have to depend on people applying. The tax-relief-at-source vehicle is much more effective, but it has not been implemented. He has consolidated the limits from €250 and €125 to a single €125 instead of simply abolishing it as he should have done.

Another matter thrown into sharp relief is the limit on retrospection. People who have overpaid tax may reclaim it only for the preceding four years. That minimisation is a running sore, the Minister having decided to reduce it from ten years. The Statute of Limitations period has been reduced to four years. He has underlined that sore point by saying that only three months after they make the claim may they accrue any interest on money owed them for many years. I am not arguing that we should have limitless retrospection, with interest paid. The Revenue Commissioners regard it as a great concession to move from six months to three but it seems that the clock should start to tick straightaway.

There has been much debate about the business expansion scheme and the Irish Congress of Trade Unions is of the view that it is the wrong way to go. I would be better disposed to it as it tends to involve genuine risk capital. Successive Ministers tried to weed out the mortgage-based investment that was low risk and one might instinctively think this ought to involve higher risk capital. Some €16 million has passed through the BES, with €1.2 million in seed capital. It is not a huge amount and probably worth it. To be consistent, we ought to see a cost-benefit analysis. It was not assessed in the Department's last batch of investments and I have not seen any cost-benefit assessment. Nevertheless, we are deciding to significantly expand it. I note from the Department's website that a survey was carried out, but this concerned beneficiaries. It was not exactly a rigorous cost-benefit analysis in which the views of beneficiaries were sought.

There is interesting information on those who benefited from the scheme such as many start-up companies. It is disappointing that many of them were not involved in exporting, with 44% not exporting anything. I believed the scheme would involve more leading edge exporting activity but this does not appear so.

An element which could act as a warning to taxpayers is that 90% of companies report that investors are satisfied or very satisfied with the returns. This suggests the number who are dissatisfied is very small. Perhaps the risk involved is not great and the scheme is not getting to the areas of capital shortages for start-up and developmental companies. The returns for investors appear to be very comfortable; a very low number of investors are going wrong. The effort involved in making a proper assessment of the scheme, in the same way as others, would be repaid.

We need to hear from the Minister's Department on patent income relief. This avenue was opened up last year but the Minister was very agnostic in the end, deciding to do nothing. Nothing appears to be coming from official circles on what will happen. I also have concerns about the different ceilings for individuals who have earned income compared to those with rental income who appear to be able to roll money over into other schemes one after the other, yet individuals with earned income have sharp caps to deal with of approximately €31,000. I find it hard to understand why much more generous terms of relief should be offered in these schemes for persons who have rental income as opposed to those who earn. This issue should be considered.

The Government is still redefining the goalposts on what was actually promised in the last general election, which intrigues me. There was an absolutely clear promise that 80% of the population would only be paying at the 20% tax rate, which implied that 20% of the population would pay at the higher rate of 42%, as it was, now 41%. The Department has come up with the new idea of effective rates of tax and the Minister is pretending that this is what was promised. There were no references to effective rates of tax in the Fianna Fáil or joint manifesto. This is purely a post-hoc rationalising of the failure to honour one of the key promises made to taxpayers. The people will not be taken in, although this is now rolled out of the word processor every time the Minister makes a speech. It comes very high in the litany of achievements and amounts spent under the NDP, etc.

The Government has the unique distinction of increasing taxes in proportion to GNP faster than any of its predecessors. For a Government which talks about keeping taxes down, it may be surprising. It is not so surprising, however, when one takes into account the spending side of the equation.

I look forward to the debate on Committee Stage. Thankfully, the Bill is shorter than some of its predecessors. This takes into consideration the times pressure on some of the individuals who will have to listen to the debate on Committee Stage, the Minister most of all. I will not be supporting the Bill.

The Finance Bill is the product of a budget which promised the biggest bonanza in history. As the Minister delivers his Bill, it is clear that the anomalies, uncertainties and inequalities which pepper the whole tax system remain unaddressed by him. He began the year with the €184 billion national development plan. When figures are that large, they tend to become meaningless for people who work and do not earn more than €50,000 or €60,000 a year. The Minister for Finance is a former Minister for Health and Children and I would like to focus his attention on a concrete issue.

The Alzheimer's disease ward in my local hospital, James Connolly Memorial Hospital, named after James Connolly by the late Dr. Noel Browne, does not have an adequate supply of hot water. Speaking about a sum of €184 billion and tens of millions of euro in tax breaks, somebody such as the Minister in a leadership position should be able to consider why we are like kids in a sweet shop. Although we have so much money, we do not have an adequate supply of hot water for patients suffering from Alzheimer's disease. That is possibly one of the reasons the electorate wants a change of Government. The people yearn to see all the money being put to good use. The strong economy of which we are understandably all proud does not mean much if patients suffering from Alzheimer's disease cannot be washed with hot water.

In previous discussions on the Finance Bill I proposed a standing tax reform commission to address the anomalies in the tax system on an ongoing basis to ensure we could understand the purpose of an incentive; if it met its goal; and whether it could be continued indefinitely, changed or renewed. These are complex issues and there are not always easy yes or no answers.

I wish to highlight an issue of which many are strongly aware, the challenges presented by climate change and global warming and the dangers posed or opportunities provided in dealing with the issue from an economic perspective. The Minister is Minister Bigfoot in terms of the carbon footprint stamped by the Department on behalf of Ireland. The Government has a pollute now and pay later policy. Our children and grandchildren will be bequeathed this legacy, for which they will pay dearly. Just as most Irish people are aware that this is one of the critical issues facing us, we understand that this week the EPA will report on Ireland's position on climate change and that its report will leave us hanging our heads, particularly on the issue of transport emissions. In our great cities and towns we really only have a skeleton public transport system in place to show for the Government's ten years in power and all the money in the sweet shop.

The Minister's attempts to meet the Government's Kyoto Protocol commitments will be exposed as a complete failure of action. He has set aside in the budget €270 million to pay for carbon credits. Most do not understand that carbon credits are really fines that the Minister will pay through the Kyoto Protocol mechanism for our failure to reduce our carbon emissions to the level promised. The taxpayers, when they hear that the Government is lining up to pay €270 million — many analysts have suggested that figure will possibly double — in carbon credit fines will see this is a failure of leadership which will cost the country dearly. The old style public service would never have dreamed of lashing out €270 million in fines. We all would have been so shocked we would not have allowed it to happen and would have sought ways to reduce our emissions rather than pay the fines. It is one reason the electorate is considering, and I think will vote for, an alternative Government because the Minister has not addressed this issue by giving any meaningful leadership.

The Finance Bill is an attempt to long-finger getting to grips with climate change until the general election is safely out of the way, even in the case of large car emissions where the Minister sent a postcard to his colleague, the Minister for the Environment, Heritage and Local Government to let people offer their insights, or "ideas on a postcard, please", as to whether polluting SUVs or other cars which are heavy polluters ought to pay a little more tax. Talk about abandoning any concept of leadership in this booming economy; there is no hot water for Alzheimer's disease sufferers in hospital and he sends a postcard to the Minister for the Environment, Heritage and Local Government about vehicle emissions just when the EPA will announce, apparently later this week, that Ireland has far exceeded the commitments to which the Government signed up.

Other countries can provide public service vehicles, including buses, which run on biofuel mixes. In many major cities all over the world young Irish people see signs stating the bus is running on a clean fuel source. Our young people are used to taking metro systems. They are accustomed to taking public transport, not the train from Clonsilla, popularly known as the Calcutta express, which has only a small number of carriages and on which people regularly faint as it is so crowded. This is the Minister's answer to problems of climate change.

The Minister seems to be unwilling to offer any leadership. Most countries operate wind energy regimes which provide small, but significant, alternative energy sources to carbon. Incidentally, countries such as Denmark have grown a vibrant economic sector out of the development of alternative fuel strategies, both in building components for capturing wind energy and in all the design elements involved. Denmark, like Ireland, is a small country with a critical urban-rural mix. It tries to balance this mix and is doing so somewhat successfully.

Much of our carbon usage literally goes up in smoke. Where is the imagination to insulate the tens of thousands of inadequately insulated homes, many of which were built in the construction boom in recent years? Could the Government not even look after the inadequately insulated homes of older people? Pollute now and pay later is the underlying message of this Finance Bill on climate change.

In recent days Chambers Ireland produced an interesting idea, that there should be a shadow carbon tax to give a sense of what it would cost to rebalance the tax system to take account of climate change and reduce that fine of over €270 million which the Minister, according to his budget speech, plans to pay. There is much that can be done, but the Minister is avoiding leadership on this issue and one of the reasons we need a change of Government is that we need fresh leadership to address these important issues.

There are a number of areas which affect hard-working families which I want to address in some detail in this Bill. My party has also called for and tabled amendments to create an office of taxpayers' advocate or ombudsman to ensure PAYE workers get the tax breaks and refunds due in respect of health expenses, bin charges, etc. This is my fifth year to put this forward. I acknowledge that the Revenue Commissioners have taken steps to improve people's access to information about collecting various tax refunds and breaks to which they are entitled. The Minister is more than willing to give the hand to the stallion owners and those in the construction industry who need their bit of a break, but he is far behind when it comes to PAYE workers getting the tax allowances and breaks to which they are entitled. Perhaps it will appear in the Fianna Fáil manifesto. Perhaps the Minister is saving the taxpayers' advocate and ombudsman and the standing tax commission for this. Perhaps we will convert him yet.

I want to mention individualisation. There is now a gap of more than €5,000, whereby single income families face a significant tax disadvantage compared to families where both parents are working. In a country where child care is so expensive and where housing is now so dispersed, particularly in the greater Dublin area and Leinster, many parents have no option but for one of them to give up work when their children are young, particularly if they have two or more children, never mind that the family may decide that doing so is in the best interests of the family. That is not addressed at all in the Finance Bill. The Minister has allowed the gap to widen.

The Minister has proposals in the Bill for some stamp duty reforms, including a confirmation that families may gift a site up to €254,000 or up to one acre to a child or children free of stamp duty and capital tax. While the Minister argues, understandably, that these measures are a tightening of existing schemes which have emerged as being far too generous, as valuable lands of as much as ten acres including quarries, etc., have been gifted to children who have avoided stamp duty and, presumably, other capital taxes, this is startling news to ordinary PAYE workers who do not own lands or sites to gift to their children. Their children must pay stamp duty on a second-hand house costing over €317,500, even if he or she is a first-time buyer, or if he or she is trading up from a first home to a modest family home when they have children. In the long run, we want families to be successful in Ireland. Much of our future economic prospects are built on this.

New tax breaks for property-based development were included by the Minister in the Bill. Last year the Minister, the Taoiseach and even the Tánaiste agreed with me that it was scandalous that millionaires paid no tax, and that most of the people who got away with paying little or no tax received tax breaks. A single person pays tax at the rate of 41% once his or her earnings exceed €34,000. The Minister must contrast this with a person who will now receive a whole new set of tax breaks for developments related to tourism, particularly hotel and holiday cottage building in the mid-Shannon region.

They are excluded.

It is limited to 50% and also includes a restaurant, but not a pub. I am used to accountants and tax advisers and it does not take much ingenuity to create attractive tax avoidance schemes. Previously, in less politically correct times, one could have used the back of a cigarette packet and now all it would take is half a page. The point is, a person on €34,000 with some overtime will pay tax at 41%. The Minister for Finance, Deputy Cowen, promised he was phasing out these schemes last year but now he has a new one, much of which relates to his own political backyard. The schemes are a vote getting measure for the property industry to ensure the situation continues, whereby some very privileged individuals pay little or no tax.

The former Minister for Finance, Mr. McCreevy, introduced individualisation as a way to get more women to join the workforce. He acknowledged this himself but the country is more complex today in terms of spatial strategy and where couples can afford to buy a house.

The gap between taxes on single income families and families with two working spouses continues to widen as a result of the changes the Minister for Finance made this year. A single income family can now pay up to €5,250 more in tax than its double income counterpart, compared to €5,060 last year. The gap relating to allowances has been widened by several hundred euro. The standard PAYE, tax credit for each working spouse is €1,760. The home carer's allowance has remained fixed at €770. Therefore, the gap has widened, potentially, to €990. As mentioned, the single parent's tax credit in the Bill has gone up from €1,630 to €1,760. The single income family has been left standing in this Finance Bill.

This is not an easy issue but we must, as a society, give it consideration. The budget for 2007 has exaggerated the discrimination in taxation between these two types of family by continuing the policies initially introduced by Mr. McCreevy through individualisation. The cost of these measures to families is now close to €700 million per annum, based on the Revenue Commissioners' pre-budget analysis. The purpose of the policy was to incentivise, as far as possible, both parents in a family to go out to work, regardless of circumstances.

It is important to note that there are as many single income, married households in Ireland as there are dual income. According to the Revenue Commissioners' annual statistical survey up to 31 December 2005 there were approximately 307,000 of each type of household. There are approximately 75,000 single income households earning between 150% and 250% of average national earnings. Most of these families are committed to caring for their children themselves or to looking after aged relatives. This is now one of the most expensive countries in the European Union and the policy of individualisation is costing them dearly.

Most of the earners in these single income families are employees, not owners of businesses, because spouses and children of owners of businesses and family companies can go on the books of that business as employees or directors, as the Minister knows. More than 80% of these 75,000 middle income households fall into this category. They are people who cannot afford crèche and travel fees and have had the decision made for them in many cases. They are people with sick or disabled children in need of special care that has been denied them. They are people who have elderly parents or relatives who require additional care. They are the people who choose to care for family members at home for long periods rather than use nursing homes either because they are not available or they cannot afford them.

This discrimination was introduced to make work a more palatable choice. However, this is not possible without the provision of many services at a community level, which the Government never had any intention of providing.

My colleague from the Kerry South constituency, Deputy Moynihan-Cronin, pointed out that the home care package for one elderly man in her area, as set out by the Health Service Executive, HSE, came to €60 per week. What will €60 buy in terms of a home care package?

Individualisation continues to widen the gap between single and dual income families and ignores the reality that people's lives change more than once during their lifetimes and that many people will need or want to take time out a various stages, particularly relating to child care or care of the elderly. How many of us have already taken time out to look after our parents in their old age or will want to do so in the future? Is it right that we should suffer a double penalty for doing so? Loss of income is a choice that people who care make, but to pay more tax, at the rate they are paying, is a choice that has been forced upon people by the Government for the past eight years.

If one works in Dublin and moves to Kinnegad, Gorey or Tullamore to get an affordable family home and have two children, crèche fees could cost up to €300 per week, with commuting times of four hours and more per day. Small wonder that in this situation many families decide that it is better for one parent, usually the mum, to opt out of work or reduce working hours while the children are very young. The alternative of getting children up as early as 6.30 a.m., taking them to minders and then doing the long commute is so hard that many families do it for a year or two but, particularly when the second baby comes along, decide that one parent must take time out.

Children need time with their parents. Parents need time with each other and with their children. The burden on families of our current development policies on housing and commuting are not good for relationships and we all know this. Anyone who has had a child or cared for a child knows that the early years fly by rapidly and do not come back. When one adds a €6,000 tax penalty for the decision to opt for home care it makes one wonder how family friendly the Government really is.

It is almost as though the policy of individualisation continued like an unchecked juggernaut after Charlie McCreevy introduced it. It grew and grew and nobody has examined it to see if what was appropriate seven or eight years ago is still appropriate now, in its expanded and hugely costly phase. I find it problematic that the Government considers things gone, done and dusted and considers that we must merely live with the consequences.

This policy of individualisation has led to dramatic transfers from families with children and dependants to two income households, many without dependants. This is the reality of Government policy towards the family and care in the community and it provides a startling contradiction to some of the rhetoric we heard this week and last week about the €184 billion in the national development plan. It is time we debated this matter.

The Minister for Finance made a number of changes relating to stamp duty in the Bill. They are unlikely to benefit the first-time buyer or the person trading up from a first to a family home.

The scheme for gifting an acre, or a €254,000 site, is well and good for those who have such sites. As the Minister stated, the provision in this regard tightens a loophole that was obviously open to abuse. In the course of discussing the Bill will the Minister outline the instances and costs of the abuses in the structure? He did not address the issue of large property deals in Dublin such as that concerning the Irish Glass Bottle site which seemed to escape stamp duty or property tax through an arrangement for a transfer of shares rather than property. I have spoken before about deals that each netted the movers and shakers involved savings of €30 million plus. The Minister is silent on this issue.

I welcome the provision exempting sports bodies from stamp duty. While discussing the past two Finance Bills, I referred to GAA clubs being obliged to pay stamp duty on fields they buy rather than availing of the exemption that applies to charities. I am glad the Minister has listened to my proposal in this regard.

The Labour Party has proposed a number of reforms concerning stamp duty. We have talked about the introduction of a stamp duty allowance, or tax credit, attaching to the family home or the principal private personal residence such that duty would not apply to second homes or investment properties. The stamp duty regime would be reformed in order that it would only be payable on amounts over the threshold. That measure could be introduced either singularly or over a period of years, as resources permit.

Stamp duty thresholds should be indexed on an annual basis. If indexation were applied annually, it would reduce the risk of spikes in house prices when the threshold is raised on a once-off basis. This is what happened the last time the former Minister for Finance, Mr. McCreevy, increased the threshold significantly. It was clawed back within a couple of months by the property industry.

The Labour Party also wants to examine a system of relief for older people who are downsizing to a smaller family home or arranging personal retirement care facilities.

Let me turn to the new scheme the Minister has introduced in respect of the Shannon region. His constituency is one of approximately six or seven, all within a 12 km radius of the mid-Shannon area, to benefit from his proposals. He needs to show us what his scheme involves to ensure it is not a vehicle for the high flyers and very well heeled to avoid paying their fair share of tax, as is the case with the other property-based schemes.

Goodbody Economic Consultants, in a report published during the passage of the Finance Bill last year, stated the cost of area-based tax incentives to the Exchequer was very high and that the area-based schemes already in existence were and would cost the Exchequer many tens of millions of euro. In its review of the schemes it stated:

These tax costs are high relative to the outputs achieved. For example, the present value of tax costs represent up to 43% of the building costs associated with developments undertaken as part of the schemes.

The fact is that the Minister has decided to blatantly fly in the face of his expensively commissioned consultants' report and the statement of the Taoiseach and others that the property-based tax schemes would be wound down, particularly in the context of the construction boom which we are still experiencing and the inflationary impact of such schemes on property prices in the designated areas. It is particularly worrying that the scheme has been announced without any evidence, cost-benefit analysis or consideration for the overall environmental impact on the beautiful Shannon region. We need to learn from earlier schemes which resulted in certain mass developments of apartment blocks and holiday homes in parts of the upper Shannon region that simply do not appear to be sustainable in the long run. Where is the environmental audit of such schemes? When the former Minister for Finance, Mr. McCreevy, announced the upper Shannon relief scheme some years ago, he said it would make a Klondike of the region. The Klondike made the gold miners and others who could get there rich. However, one must question the current position of the Klondike and its economic activity.

We want long-term sustainable investment and development in beautiful areas such as the Shannon region. We want quality employment rather than quick bucks for property developers who build and then leave the locals to play catch-up forever afterwards, which practice is not sustainable. One should bear in mind that those who will benefit from the schemes are not the ordinary Joe Soaps. They are earning incomes of millions of euro and pay little or no tax, even under the arrangements the Minister introduced last year, compared to the single person on an income of €34,000. If the latter is offered overtime, a bonus, a second job or extra work, he must pay tax at a rate of 41%. This is not fair.

I propose to share time with Deputies Cowley, Boyle and Ó Caoláin.

Is that agreed? Agreed.

I welcome the opportunity to speak on the Bill. It is characterised by an approach of tweaking and tidying up by the Government prior to the adjudication of its stewardship in a few months. The Bill's main function will cover the implementation of the tax changes in the budget and make adjustments to tax credits and bands. It will make a rather tentative effort at tax reform.

In recent years foreign property has been attracting Irish investors who have ploughed huge sums into holiday homes in locations as far-flung as Shanghai and the Bahamas. The revamp of the business expansion scheme would appear to be an effort to counter this major outflow of investment funds in that it improves incentives for investors in the scheme. This is to be achieved by raising the upper limit for investments from €31,000 to a more realistic €150,000 and by doubling the figure for each company from €1 million to €2 million.

In particular, I was very disappointed that there was a failure to countenance any real reform of the stamp duty system and no joy for first-time buyers of second-hand homes. There was much hope there would be real reform in this area but it is regretted that it did not occur. First-time buyers are placed on the horns of a dilemma in that there is no change to the threshold of €317,500, despite the fact that the average price of a home is in the region of €350,000. This is a weakness.

Estate agents have indicated that house prices have risen by upwards of 12% in the past year. County Leitrim has topped the league with an increase of approximately 28%. Nevertheless, the stamp duty threshold remains static, at €317,500, and any prospect of stamp duty reform appears to be a distant dream, as prices continue to reach astronomical levels. Families anxious to trade up will be hit with a double or triple whammy, as they will have to factor an extra €40,000 to €60,000 into their calculations.

One of the most punitive aspects of the unfair stamp duty system is that house buyers are forced to pay the higher rates for the full value of their property, not merely on the small excess above €317,500. If they were to pay the difference between €317,000 and €350,000, the system would be a lot fairer.

Section 97 of the Bill provides a stamp duty tax break for parents who transfer sites up to one acre, or with a value not exceeding €254,000, to each of their children to construct a private residence. I do not know how many "regular" or "ordinary" families would be in a position to do this for their children. The relief is aimed at wealthier families who will benefit a little more as a result.

One stamp duty adjustment that is to be welcomed is the exemption for amateur sports bodies, a matter referred to by Deputy Burton. The Independents have lobbied for such a measure. These voluntary bodies provide many facilities, which is to be welcomed. No doubt the initiative will be very popular throughout Ireland because the vast majority of sports activity is amateur and most clubs strive to have their own premises.

The Bill provides a new set of generous property-linked tax breaks for tourism in a number of midland counties. Known as the mid-Shannon corridor tourism investment scheme, it is designed to stimulate investment in the area. I have no doubt it is an ambitious plan, but there are parts of the BMW region that have been starved of investment. There has been an underspend in large tracts of the region. I should like to see that type of imaginative initiative being examined for the wider region. There are many borderline examples between the standard income tax and the 42% rates. Many would welcome the opportunity to have their pension fund topped by the €2,500 under a transfer of €7,500 from their SSIA account. An alarming figure was released recently by the CSO which showed that 50% of the population does not have any pension cover. There is an opportunity here for us to do something about this. In fact, more than half of SSIA account holders were not regular savers. If the Government matched the pension schemes on a euro for euro basis, many new savers would find this very attractive.

I am more worried by what is not in this Bill. I was very pleased that the Minister for Finance looked after a number of constituencies, his own included, on the River Shannon. I welcome this. Since I entered the Dáil, I have been anxious to see such an initiative taken as regards my own area. I am speaking in particular about Ireland West Airport at Knock. This is a wonderful catalyst for the development of the west which has come on in leaps and bounds under Mr. Liam Scollan, its CEO, and chairman, Mr. Joe Kennedy and his board. It is a wonderful success story and it is vitally important for the area that this international airport has a special provision. They are working on a 65-acre business park at present to facilitate knowledge-based industries and high-tech manufacturing in internationally traded companies. They will be marketing this programme at the end of the second quarter this year. I ask the Minister to think about this in the future because it is badly needed. There is a great need for some positive discrimination. The Minister has proven himself in this regard. I have raised this in the Dáil on several occasions, and I have been disappointed because there never has been any positive response.

This is why I was pleasantly surprised that the Minister had introduced the Shannon-based scheme, and I had hoped he would do the same for Ireland West Airport, Knock. It dealt with 35,000 passengers in December. When one considers the enormous numbers coming into Dublin Airport, it is certainly in everyone's interest to have balanced regional development. This is one way the Minister might have done this, through the Finance Bill. I am very disappointed that such provision is not made. There is a €45.9 million investment programme in Knock airport, which has started. It is looking for dedicated funding of €30 million to extend the apron and for a number of other matters that need to be dealt with. There must be some positive discrimination, however. Banks will not invest in the west as they should. They say there is an insufficient footfall there for industry as regards projects and so on. It is strongly rumoured that the agencies are telling manufacturers in the west of Ireland to go to China and elsewhere. Already IDA factories are being used as car showrooms. It was a scandal that IDA factories on which the Government had to pay rent were lying empty. Now they are being sold. Therefore, this cannot be said any more.

The alarm bells are ringing because of the overdevelopment along the east coast. If Ireland were afloat, the east coast would be well under water. It would, therefore, make great sense to get away from the ass and cart pace at which people have to move in Dublin, as compared to the opportunities on offer in the underpopulated and underdeveloped west. It would have made much sense for the Minister to have allowed this special scheme for manufacturing in the region, along the lines of that in Shannon Airport. This would be of major use because we are still trying to catch up. The Minister is well aware of the €3.75 billion underspend in the national development plan in the BMW area. That shows there is a serious problem.

Ballina is an area which does not even have an industrial park. IDA officials paid something like five visits since 2000 in the company of industrialists. However, there is no industrial park to bring them to. That fiasco is ongoing, and it must be realised that there is a great need for some type of tax incentivisation scheme for County Mayo and, above all, for Ireland West Airport, Knock. The Minister has looked after the horses as regards allowances for the equine industry, but how about the homo sapiens? They deserve some recognition too. The west is still the most economically deprived area of Ireland. I am glad to see the Minister preaching balanced regional development but I wish he would practise what he preaches. Where there is a will there is a way, as I have said to him before. However, the will at this time was for the Shannon basin. I only wish it were there for the industrial zone at Ireland West Airport.

Ballina has an unemployment rate of 11%, equivalent to twice the national average. There are more people on the live register in Ballina than in the entire county of Roscommon. We have lost a net total of 1,000 jobs net in the past nine years. All told, there is a great need for a proper road into Ballina. The N26 is an absolute disgrace. I thank the Minister for his attention and ask him to bear in mind what I have just said.

I congratulate the Minister for Finance on introducing his third Finance Bill. This is his third set of budgets and Finance Bills to come before the House, a trilogy. It is something not many of his predecessors achieved and it gives us the opportunity to assess over a three-year period the Minister's medium-term plan and how it has succeeded.

On the positive side the Minister has achieved to a certain extent a degree of redistribution that was quite beyond the ability or willingness of his immediate predecessor. That said, such redistribution was quite modest and has been achieved at a time when the opportunity for wide scale reform could have been taken, but was not. I appreciate the Minister operates under a certain number of constraints, including the fact that he has a coalition partner who apparently believes that a little inequality is no bad thing. However, as we approach the general election it is not what the Government is promising in the recently announced national development plan but rather what it has achieved, particularly in its second term in office, that it will be judged on. On those grounds there are scores of missed opportunities and this Finance Bill in particular highlights the mix and gather approach the Minister has taken to what may be achieved in the course of his brief.

The Minister has closed a number of tax loopholes and that is to be commended. However, it must be asked what the procedure was that allowed these loopholes to be created in the first instance. Why was there not enough consideration at departmental level or why was this House not allowed to debate at committee level and identify these loopholes? One particular loophole he has identified is the exemption for people who have been gifted property residences in which they lived for more than three years. That has been a tax loophole since 1999 and he is closing it off now because he and his Department have discovered there is widespread abuse. There is also an onus on the Minister to say, now that this loophole has been identified, how much it has cost in tax forgone, not just in terms of tax relief, but in its abuse. The loophole was created by people who have exploited it and another, perhaps on a smaller scale, concerns the children of property owning parents renting accommodation in their own homes. This seems to have been exploited at another level. The fact that his Government has introduced tax reliefs, budget after budget, on an unthought and costly basis for the taxpayer is again something on which it will be judged.

The second area is of particular interest to the Green Party and something to which the Minister devoted a great deal of attention in his budget speech. Some three pages of the 30-page speech were devoted to environmental matters. He did not say much in those three pages. The end result is that of the €300 he promised to put aside, €270 million will leave the country because we must pay Kyoto Protocol credits. However, we now know that the Minister vastly underestimated the figure. The EPA will soon announce figures showing that our carbon emission levels are actually rising. The Minister based his figure of €270 million on the premise that the cost of carbon credits and the amount needed would be much lower than is now the case. Deputy Burton was of the view that the amount would double, but given the Minister's budget speech and his failure to take action in the Finance Bill, he is likely to make an underestimate that will make that in respect of the Residential Institutions Redress Board seem like a hiccup. We could be talking about sums that reach €1 billion or €1.5 billion, owing to the measures the Government has chosen not to put in place and its decision to underestimate the scale of the problem.

I see little or no reference in the Bill to environmental measures. The Minister states some measures need the approval of the European Union. Some of his much vaunted measures have taken 18 months to arrive, having been announced in previous budget speeches and Finance Bills. At a time when the EPA informs us that the position on carbon will get far worse, the Minister and the Department have chosen to say nothing. The three pages on environmental policy in a 30 page speech count for nothing in terms of the Government's credibility.

What is so special about the horse breeding industry? Why has the Minister decided that this industry, above all others, should be paying little or no tax? It effectively pays no tax. The measures introduced in this Finance Bill mean that there can be a carry-over from the current arrangement into the new one which will be put in place in August 2008. The expenses incurred in running a stud farm can be counted twice, both to assess profit and against the tax liability. The Minister is creating a capital allowance for the purchase of stallions that can be written off over a four-year period. This invites comparisons with the old "Scrap Saturday" sketch of the cow that was transported back and forth over the Border. I can see a future satire involving Sinbad the super stallion who will be sold every four years to different studs, with the amounts written off. This is just like the loophole in risk equalisation which the Minister for Health and Children failed to spot. If the Bill provides loopholes that allow measures to be changed after four years, such loopholes will be exploited. The Minister has to explain why he has created this one.

The Minister might be surprised to find that the Green Party supports business expansion schemes. The net result of increasing indigenous industries is badly needed. The difficulty we have with the Minister's proposed changes is that we have not properly assessed the effects of the current scheme. The recent study which only affected 35% of those availing of BES schemes does not give us enough information to make decisions. The Minister needs to be forthcoming, be it through the Revenue Commissioners or the Department, in releasing more detailed information on the people applying to participate in BES schemes. We can then make a proper assessment of their real worth, which must be to increase the number of businesses and jobs in Irish indigenous businesses.

The measures supposed to encourage environmental initiatives are almost insulting. The Minister mentioned one category — recycling. As it is not specified in the Bill, I suspect it will be open to abuse and that waste management companies will avail of the measure, rather than recycling companies.

A stud recycling scheme.

The Minister does his own recycling, but I would not say it is environmentally sustainable. We hear too much of it in this House.

It was leaked beforehand that sustainable energy sources would be recognised in the Bill for BES schemes, yet they have not been specified. Another opportunity could have been provided for in the area of regional development. Deputy Cowley mentioned County Mayo, but the situation in the Cork docklands is very much up in the air. As an opportunity, the Finance Bill fails to tick many of the boxes.

There are eight sections in the Bill dealing with the financial aspects of the Criminal Justice Act. They seem to be the only ones included in the Bill at the behest of the Tánaiste. The Bill refers to licence fees for the purchase of dangerous weapons and the three-year period for their achievement. It seems there is a high degree of detail in one specific area. The licence fees are very modest and the Government seems to be encouraging a tourist trade in crossbows and firearms. Given the resources available to the Minister, why does he choose to seek such detail about such a small area? He has ignored so many other areas, especially those about which he spoke at length in his budget speech. He will not be surprised to learn that I will attempt to make amendments to the Bill in so far as Standing Orders allow me to do so. Ultimately, my party cannot support the focus of the Bill.

When he launched the Finance Bill last week, I was astonished that the Minister for Finance had the audacity to claim that the Government was trying to use the tax system to ensure those on low and middle incomes benefited from the economic boom. The evidence contradicts that claim absolutely. Under the Government's tenure, successive income tax cuts have benefited high income individuals more in real terms than those on low incomes. Meanwhile, tax expenditures have redistributed wealth regressively in favour of the already better off. This trend is reinforced in the Bill. If the Minister tried to use the tax system to ensure those on low and middle incomes benefited from the economic boom, he would eliminate unfair tax advantages for the better-off, review VAT charges which hit low income families hardest and increase the restrictions on the use of specified tax reliefs for high income individuals.

The Bill gives effect to the budget announcement of a cut of 1% in the top rate of income tax. Those on high incomes received the cumulative benefit of the increase in personal tax credits and the widening of the standard tax band. They are the beneficiaries of the 1% cut in the top rate. Contrary to the Minister's claims, those just below the average industrial wage of €30,000 per annum gained least per week from the budget. I pointed out during the debate on the budget that workers on such a wage gained €8 per week, compared with gains of at least twice as much per week for those earning above €35,000. High income individuals were granted the highest increases in weekly pay as a result of the budget. These are the facts.

The Government has attempted to justify the cut in the top rate of tax by linking it to the current buoyant tax take. It is true that more revenue than ever is flowing into the Exchequer, but from where is it coming? As the Central Bank notes in its most recent quarterly bulletin published last month, "a substantial factor in this has been the exceptionally large revenues derived from the property sector". The Government has become ever more dependent on consumption taxes, particularly VAT. The revenue generated from such taxes is far more open to fluctuation and contraction than that from other sources. The unpredictability of the amount of revenue generated from these taxes has contributed largely to the Government's poor ability to project tax take. The Central Bank report states:

While these have increased much more rapidly than forecast from one year to the next, it is clear that such strong increases in revenue from this source cannot continue indefinitely. It is prudent to provide for some perhaps significant easing in revenue from this source.

The Central Bank is looking ahead. The entirely wrong and imprudent thing to do in this context is to cut the top rate of income tax and narrow the tax base, thereby making the Government ever more dependent on taxes related to consumption and the property sector. It needs to be in a position to ensure it has the revenue to provide public services, to fund social protection and to address infrastructural deficiencies, especially when the current rate of consumption and construction slows down, as it certainly will.

As I have limited time in which to speak, I will focus on a small number of issues. I will discuss many others during the Committee Stage debate.

I would like to welcome a number of measures in the legislation. While Sinn Féin welcomes the decision to keep those on the minimum wage out of the tax net, it would have preferred it to apply in circumstances in which the minimum wage was increased to 60% of gross average industrial earnings. This has also been sought by the Irish Congress of Trade Unions. Sinn Féin welcomes the fact that those on the average industrial wage are to be kept within the standard tax band. In addition, I welcome the increase in mortgage interest relief. Sinn Féin had argued for such a measure in its pre-budget submission. As we are enduring high interest rates following the five European Central Bank tax hikes in 2006, more could and should be done under this heading.

Today's newspapers have reported that the State's emissions output has again accelerated. It is now heading for a level 25% higher than that of 1990 and 12% higher than the level set out in the Kyoto Protocol target. This further acceleration is apparently being driven by increases in emissions from the transport sector, which brings me to one of the most bizarre aspects of the budget. I refer to the need to introduce a higher rate of motor tax for vehicles which produce large emission levels, which should have been addressed in this legislation. I tabled a parliamentary question on the matter to the Minister, Deputy Cowen, but it was kicked to one of his colleagues for answer later this month. In his Budget Statement the Minister announced that the introduction of a high rate of motor tax for high emitting vehicles was to be delayed. It seems that it will not come into effect until this time next year, and then only in relation to vehicles registered after January 2008. Why did the Minister and his Government colleagues purposely give people a year's notice of this measure? It amounts to an incentive to purchase high emitting vehicles throughout this year, which is exactly what is happening. Sales of sports utility vehicles and similar vehicles soared in January, which is contrary to international trends in this regard. In many countries a clear slowdown in the sale of high emitting vehicles is evident as a consequence of the actions of governments.

Similarly, the Government announced that it would consider changing the rate of VRT in order that it would be based on the level of output of emissions. Such a change is not actually being introduced, however. For some inexplicable reason the Government has merely signalled that it will engage in a process of consultation in this regard. While I welcome any form of consultation on the part of the Government, I wonder about the merits of such a process in this instance. As other governments face the reality of climate change and move to implement measures to reduce emissions, the Government is long-fingering even these minor measures which would receive substantial support from the public. I have to say its approach is unacceptable.

I question a number of other aspects of the Bill. One of the more highly publicised aspects of the legislation is the proposed tourism investment scheme of property-based tax reliefs in the mid-Shannon corridor. As a Sinn Féin Deputy, I want the Shannon region to be developed to its highest potential in tourism. It is highly questionable whether the proposed scheme can go any way towards achieving that objective.

As the finance spokesman of my party, I have made clear on numerous occasions Sinn Féin's position that all tax exemption schemes should be ended, except when the economic and social value of such schemes outweighs their cost to the Exchequer. The Indecon review of property-based tax incentives, already mentioned in the debate, recommended that any "decision to introduce any new tax incentives should be informed by a formal assessment of the likely costs and benefits". I ask the Minister to tell the House whether a formal assessment of the likely costs and benefits has taken place in this case. What is the projected cost of the scheme? Indecon also recommended that "where there is justification for government incentives the option of direct public expenditure as an alternative to tax incentives should be considered". Was such an alternative considered? I urge the Minister to answer these extremely important questions.

We have been presented with no clear case for the introduction of the scheme for the mid-Shannon region. Does the Government have a vision of what is ultimately lying ahead for the region and other parts of the country? There must be a serious justification before new tax incentives can be introduced because such measures reduce the overall tax base and thereby impose higher tax burdens on average households which are not in a position to avail of many tax relief schemes. Such incentives provide many people, especially high income earners, with opportunities to avoid paying their fair share. While I wish the mid-Shannon region well, I need to get certain answers from the Minister. Why has the line been drawn 12 km either side of this great national resource?

Debate adjourned.