I wish to share time with Deputy Curran.
Finance Bill 2007: Second Stage (Resumed).
Is that agreed? Agreed.
I am glad to have the opportunity to contribute to this debate and to raise a number of important issues that may assist the debate on taxation matters in this House. The Bill demonstrates the continued commitment of the Government to use the tax system to promote fairness so the benefits of strong economic growth can be enjoyed by all taxpayers, especially low and middle income earners. It also contains a number of important initiatives to support enterprise and maintain and grow our strong employment levels.
I welcome the income tax changes in sections 2 to 4 of the Bill which will increase the personal and PAYE credits to ensure that those on the minimum wage will stay out of the tax net in 2007, reduce the top rate of income tax by 1% to 41%, increase the standard rate bands to ensure that those earning the average industrial wage will not face a liability for the higher rate of tax in 2007, and increase the personal credits and bands to ensure that at least 80% of income earners will pay less than 20% of their income in income taxes in 2007.
I also welcome section 6 of the Bill confirming the budget day announcement doubling the ceilings on mortgage interest relief for first-time buyers from €4,000 to €8,000 in the case of a single person and €8,000 to €16,000 in the case of a married couple or a widowed person. This measure offers real tangible financial relief to house buyers trying to enter the property market for the first time.
With regard to tax changes which impact positively on particular sectors of the economy, I applaud in particular the new tax incentive scheme aimed at encouraging the development of tourism infrastructure in the mid-Shannon area covering a corridor of about 12 km on either side of the river stretching from approximately the bottom of Lough Derg to Lough Ree, which is dealt with in section 26. I also welcome the deductibility of VAT on conference-related accommodation expenses from 1 July 2007 to help Irish hotels compete more favourably on the global stage for conference business, dealt with in sections 76 and 81.
With regard to business, section 18 extends the business expansion and seed capital schemes for a further seven years until 31 December 2013 and increases significantly the company limit and investor limits under both schemes.
Section 42 confirms the budget day announcement that the corporation tax liability threshold for treatment as a small company will be increased from €50,000 to €150,000 and that 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. Section 87 confirms 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 regard to the farming and bloodstock industry, the new tax arrangements for stallions allow their purchase price to be written off over four years. This represents a sensible approach to protecting what is an important sector of our economy. Farmers' flat-rate VAT addition will increase from 4.8% to 5.2% with effect from 1 January 2007. The 25% stock relief for farmers will be extended, as will the special incentive stock relief of 100% for certain young trained farmers for a further two years. Stamp duty relief for farm consolidation will be extended for a further two years to 30 June 2009 and the widening of the scope of the relief will include cases where only one farmer is consolidating his holding.
On the environment, I welcome section 46 which proposes to extend 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.
I believe this Finance Bill builds on the solid achievements of recent years and supports the progress of our economy. It should be seen in the context of the past decade when taxes on work and enterprise have been reduced dramatically and there is record growth in the country. Nearly two out of every five earners, or 846,000 persons, will be outside the tax net in 2007 compared to one third, or 677,000 persons, in 2004 and one quarter, or 380,000 persons, in 1997. With regard to tax rates, when we came to office, we made a commitment to the people to reduce the marginal rate of income tax from the then 48% to 42%. In this year's budget we reduced the top rate of tax from 42% to 41%. Our public finances are now in excellent shape and unprecedented resources are being committed to health, education and social inclusion. The Finance Bill is a clear signal of the continued commitment to the sound macroeconomic and fiscal management that has been the hallmark of this Government.
I welcome the opportunity to speak on the Finance Bill which specifically gives legislative effect to a number of the proposals made in the recent budget. Before looking at the Bill in detail, I would like to look at its economic background.
For more than a decade we have seen an extraordinary period of economic growth. This did not happen by chance, but rather by adopting and implementing a range of policies that fostered economic development and growth. We have succeeded in attracting a significant amount of foreign direct investment into Ireland. On a per capita basis, foreign direct investment into Ireland is the highest in Europe. This has been achieved by the strategies adopted by State agencies and the policies pursued by Government. Since 1997, for example, the economy has grown at a rate of more than 7% annually.
We must continue to ensure that Ireland remains a pro-enterprise environment. The foundation has been laid upon which to build permanent progress, but this cannot be taken for granted and we cannot be complacent. I have heard Opposition Members say that economic growth would have happened anyway irrespective of who was in power, but nothing could be further from the truth. The economic growth we have seen has occurred because of a range of policies we have introduced, such as low taxation, lower corporation and income tax and efforts to attract foreign direct investment into the country. These have been good policies. In addition, there have been partnership agreements. We have created the conditions for economic growth, but it is the people who have taken the opportunity, worked hard, returned to education and gone for further training who have driven the economy. The result is what we see today and we cannot take it for granted.
If we are to maintain a pro-enterprise environment, we must ensure that regulations do not unreasonably discourage small and medium businesses. While we recognise that regulations are necessary, they must be proportionate. Businesses cannot afford to be unnecessarily caught up in red tape. A reduction of the burden of regulation on business that has been much welcomed is the raising of the audit exemption limit to €7 million. A review of other business regulations is also necessary.
It is worth noting that small and medium enterprises, businesses employing up to 50 people, now employ more than 800,000 people or 40% of the workforce. We should not forget that these businesses are critically important to the economy. Some aspects of the Bill specifically address the issue of small businesses. Section 42 confirms the budget day announcement that the preliminary corporation tax liability threshold for treatment as a small company will be increased from €100,000 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 the first accounting period. Provisions are also being introduced under which large companies in a group will be allowed offset their preliminary tax between group members for the purposes of working out the adequacy of such payments for interest purposes. We must remain conscious of these SMEs that employ 40% of our workforce.
With regard to very small companies, sections 68 and 89 contain a number of important provisions on the VAT code. Specifically they confirm the budget increases of VAT registration thresholds for small companies, from €27,500 to €30,000 in the case of services and from €55,000 to €70,000 in the case of goods, with effect from 1 March. These initiatives are welcome.
I want to look briefly at the area of income tax. The Government is committed to a taxation policy designed to maintain and strengthen the competitive position of the economy and foster improvements in productive capacity, economic and social development and equity. It is also committed to maintaining a sound fiscal stance and will continue to implement enlightened policies in this area.
The Bill provides for increases in personal and PAYE credits to ensure that those on the minimum wage, which has increased, will stay out of the tax net in 2007. It has reduced the top rate of tax from 42% to 41%. There have been increases in standard rate bands to ensure that those earning the average industrial wage will not face a liability for the higher rate of tax in 2007. Personal tax credits and bands have been increased to ensure that at least 80% of income earners will pay less than 20% of their income in income tax in 2007. We have one of the lowest income tax regimes in the European Union.
Members of the Opposition often use the fact that a substantial number of people are exempt from tax when talking about those on the higher or lower rate. They do not talk about the total number of people in employment, but about people who are paying tax at the higher and lower rates. They deliberately exclude those exempt from tax from their calculations so as to manipulate the figures. The number excluded is a substantial number as it includes all those on the minimum wage who are totally exempt from income tax.
I want to look briefly at the issue of first-time buyers. It has often been alleged here that high property prices are a result of the cost of land and sites and developers' profits. I do not disagree with the allegation that property developers are making substantial profits. However, I fundamentally disagree with the argument that a property's cost determines its purchase price; nothing could be further from the truth. The purchase price that someone pays is absolutely a function of supply and demand. We have recently heard arguments about stamp duty for first-time buyers and so on, but we should be absolutely clear that the price that someone pays for property depends entirely on market forces. Those property developers have made substantial profits, but we must take a step back to see why. The fundamental reason is that affordability and access to loans in the shape of lower deposits, longer-term loans and lower interest rates have driven up prices significantly.
Before the last budget there was a great deal of debate regarding stamp duty for first-time buyers, but the Minister chose not to alter the position that obtained, a decision with which I agree. If stamp duty had been lowered for first-time buyers, the net effect would have been to benefit the person selling the property rather than the buyer. I welcome the Minister's move in this case instead of lowering stamp duty for first-time buyers. We must be clear that the price that people pay for a property is not specifically related to the cost of the site or the construction. It is specifically related to what the market will bear, with prices decided by demand.
In that regard, the changes made in section 6 of the Bill, which confirms the budget increases and the ceiling on mortgage interest relief, are extremely beneficial to first-time buyers. I do not mean those who will buy in future but those who have bought recently. For a single first-time buyer, the ceiling is doubled from €4,000 to €8,000, and for those married or widowed, it is raised from €8,000 to €16,000.
When Deputy Rabbitte asked questions today, he referred to high property prices in Dublin, making insinuations about the Taoiseach's friends and so forth. That was absolutely disingenuous given the prevailing economic position. We have high property prices in Dublin because of supply and demand. Demand is one issue, and supply the other, but affordability is driven by access to funds. In recent years, we have seen mortgages extending over much longer terms. In my day, if one could get a mortgage over 20 years, one was doing well. Now they have gone up to 40, and I recently heard a radio commentator talk about a 42-year mortgage with lower interest rates. That is primarily what has driven prices up.
Those who have specifically argued for a reduction in stamp duty for first-time buyers would not have delivered the market's competitive advantage as they intended. However, the Minister's move in this Finance Bill and budget is delivering competitive advantage to the first-time buyer, which is what I want to see.
While the midlands are not my area, I have an interest in that part of the country. I would like to acknowledge the improvements and advances that the Minister is making regarding tourism along the Shannon. I have taken most of my holidays in Ireland. With two or three children, we have been abroad only twice in the last 15 or 16 years. All our holidays have been here, and the midlands region, particularly along the Shannon, where I have holidayed once or twice, has vast potential. Too often we Dubliners who wish to holiday in Ireland speak of Cork, Kerry or the west coast. The midlands have——
The Irish riviera.
The Deputy should not go too far.
The midlands have great potential, and more tourists than ever are coming to Ireland. It is absolutely appropriate that we target development. Some parts of the country where there is tourism are now at maximum capacity. While it is not my patch, and there are enough Members who wish to talk of their proximity to the Shannon, as someone who has holidayed in Ireland I welcome the Minister's initiative in this regard and look forward to the new facilities to be created along the river.
I commend the Bill to the House.
I wish to share time with Deputy Naughten.
I welcome the opportunity to speak on the Bill, and while I have not had much time for preparation, there are one or two issues that I very much wish to raise. I will begin with the subject on which the last speaker finished. I too welcome the support for the Shannon region. Bringing tourism into more difficult sectors is welcome, but in saying that I wish to put down a marker that we have heard a great deal of talk about large sums being made available to the Border and Northern counties through the St. Andrews Agreement. The sooner the package is made specific and people understand what it is all about, the better. It would certainly help to cement the peace process in Northern Ireland and Border areas.
I was canvassing in Clones within the past week. One looks around and remembers what was there, a thriving railway town with a major station. The trains came in, and there were turntables, with hundreds employed. That has now closed completely, and the town has never got over the decimation wrought by closure of the CPV factory.
In that light, we certainly need a package for the Border areas. Money from previous packages, such as the IFI and the PEACE fund, was supposed to be additional but was not, and even the Taoiseach has acknowledged that. In the main, it was a case of replacement. The Taoiseach and the Minister for Finance, Deputy Cowen, have an opportunity over the next few weeks, with the elections in Northern Ireland and, one hopes, agreement towards the end of March, to provide the details of that package. We require an absolute guarantee that the Ulster Canal project will be advanced. It could be the mechanism to recreate the necessary infrastructure and tourism, not only for the Clones town area but for all of north Monaghan and the immediate Border region. The potential is absolutely enormous.
The second matter on which I would like to speak is the primary certificate for disabled drivers. The Minister must utilise the Finance Bill to rectify the completely unacceptable strictures in that regard. In some areas, people can secure such certificates, while in others, they cannot, an anomaly that I find very unfair. There has been a great deal of talk regarding the amounts that we are prepared to spend on the disabled and handicapped, but I find this area above all others completely unacceptable. A friend of mine was involved in a very bad accident many years ago. He has been through the mill several times to get the certificate. He simply cannot drive a car without its being customised. His friend, who claims to have a stiff knee, has received it, but he simply cannot get it. It would be laughable if it were not so serious. I would like the Minister to consider the issue again in the context of the regulations in the finance structure. I hope he ensures that some common sense is allowed and that people will be able to get the primary medical certificate and all the benefits that go with it.
I refer to the issue of stamp duty, mentioned some moments ago. This presents a problem for first-time buyers, and people in co-operatives are not currently buying either. To state that if stamp duty relief was given to first-time buyers it would not be beneficial is naivety.
Under the current regime a property sale is free of stamp duty for first-time buyers up to a certain level, but once that is reached it is payable on the whole amount. Fine Gael policy is that a sale would be free of stamp duty up to a certain level, and a sale above that level would only be liable to stamp duty on the balance. The overall cost to the Exchequer would not be very high, with Deputy Bruton estimating the cost at approximately €100 million. That is not much in the context of the yearly budget. I ask the Minister to consider that matter.
I also ask him to consider the transfer of land within the farming industry. The Minister of State used to have some interest in farming.
He had at one time.
If a person is a few weeks or a few years over a certain age, that person loses everything, which is absolutely unacceptable. If we are sincere about trying to move the younger generation into farming, proper relief must be available, and stamp duty is one of the costs.
I wish to discuss compulsory purchases for road building. The Minister of State claims he did a great deal when president of the IFA in getting relief on tax from land sales.
It is still a very good one.
It has been given back and the roll-over relief was removed. The Minister of State should ensure that is reinstated.
I wish to share time with Deputy Tom Hayes. He will take three minutes at the end of my time.
Is that agreed? Agreed.
I warmly welcome the scheme for the mid-Shannon area, which is a very positive development. I thought the Minister and the Minister of State had forgotten all about us until the announcement of the scheme.
There is more to come.
Neither of them made an impact within the Department up to now, but this is a positive development, which I warmly welcome. I hope it will succeed in the targets that have been set in providing the type of facilities urgently needed in the area, which does not have and traditionally did not have tourist amenities.
The River Shannon is a significant asset, but it is critically important there is one promoting agency for it. Currently, the river acts as a boundary in tourism promotion, with Ireland West, which deals with matters up to the River Shannon, Midlands East, which takes over from there and other tourism agencies in Limerick, Clare and Tipperary. The River Shannon is the single biggest asset in the midlands and it should be the focus of development rather than the unco-ordinated and bordered development it is at the moment. I hope the Minister, with the Minister for Arts, Sport and Tourism, will consider this issue.
I am glad the Minister of State, Deputy Parlon, is here for my contribution. I hope he will at last act on the annual flooding caused by the river. When he was president of the IFA, he was going to move mountains and he blamed the Government and politicians for their lack of action. Although a pre-feasibility report has been produced, it is about time we saw action on the ground.
The Deputy can watch this space.
Maintenance of the River Shannon is critically important and I hope it will happen. I know the Minister of State has made soundings on it but he has made many hollow soundings to date. We want to see the colour of money with this issue.
In tandem with this we need to consider communities marooned along the River Shannon. Over Christmas a home was flooded in County Roscommon, with a number of farm buildings. We must put investment in place to once and for all raise roads so they are not prone to flooding and are safe and secure. Many of these roads have been raised over the years and, although they are not over the level of the Shannon floods, in some instances they are two metres above the ground around them. When the ground floods there is a serious safety hazard as none of them has crash barriers. If a vehicle went off an icy road it may not be found for months. It is very important to deal with this in tandem with the maintenance of the river.
There is a proposal before the Minister for the Environment, Heritage and Local Government to re-flood part of the cutaway bogs in the north midlands to develop a national wetlands park. This would have the potential to flood an additional 18,000 acres just north of Lough Ree, which would attenuate to some extent the annual flooding south of Athlone. I ask the Minister for Finance to consider the matter and promote it, ensuring the Minister for the Environment, Heritage and Local Government takes a progressive attitude in promoting and developing the scheme.
It may be no harm for the Minister of State to come to Roscommon to see what is happening on the ground. He could see the impact of the flooding and speak to some people whose farmyards have been flooded and whose sheds need to be relocated from the flood basin. Other people have had their homes flooded. The Minister of State has a golden opportunity to address the issue. We are in the dying days of the Government and now is the time to act.
I wish to focus on some agriculture issues.
Perhaps the Deputy will supply a list of the houses and farmyards he would like me to visit.
That will be no problem.
The Minister for Finance has indicated he will consider on Committee Stage tax relief measures for farmers. I hope he will consider a number of issues, the first being the sugar compensation package due to farmers. We were told by the Government that the payments would begin in June, but the Minister for Agriculture and Food yesterday sang a different tune. She stated that it would depend on the legal case being taken by Greencore and that the payments could be made later in the year.
Currently, at least 80% of the sugar compensation package is liable to tax and the Department is awaiting clarification on the other 20%. It is possible that all of it will be liable to tax. I hope to see an amendment on Committee Stage to deal with the issue. Farmers got a bad deal in the distribution of the sugar compensation package, receiving one quarter of the available compensation, a far cry from the traditional 60% to 40% split on the beet crop return. Now that the Government has turned its back on the beet industry and giving farmers a fair breakdown of compensation, the least it can do is not penalise the compensation by taxing it. I hope the matter will be addressed.
It is a significant disappointment that there is no measure to address the €1,000 taken from retired farmers. Many such farmers have had a raw deal from the scheme because of the anomalies that exist. We all know about these and I will not go into them, but up to last March the Minister for Agriculture and Food consistently stated that it was impossible to give a top-up payment because the European Commission would not allow it. Last March, information was received from the Commission that it would allow a top-up from the Government, but the Minister kept that quiet until November, when a top-up was distributed.
If she had given it from 1 April, when the information became available to her, farmers who joined in the first scheme would have been entitled to an extra €1,166 and those involved in the second scheme would be entitled to an extra €875. The value of the pension has reduced dramatically because of the increases in the old age pension and the rising cost of living. The Minister had a golden opportunity, especially in light of such a low uptake of the farm retirement scheme in the past couple of years, to allow that top-up payment. The money was available within the Department of Agriculture and Food and it would not have had an impact on the Exchequer, but for some reason it was not given. The Minister, Deputy Coughlan, had a poor record on dealing with the vulnerable when she was in the Department of Social and Family Affairs.
That is very unfair. She is the best Minister for Agriculture and Food the State has had. She has given more money directly from the Exchequer to agriculture than any previous Minister.
Does the Minister of State, Deputy Parlon, want to speak about the savage 16 cuts or does he want me to spend the next few minutes speaking about them?
Fair is fair.
The facts are available on the matter.
The facts are that the Minister has given more——
The Minister of State has made his point and should allow Deputy Naughten to continue without interruption.
It is a disappointment that she is now turning her back on another vulnerable element of the community — retired farmers. The Minister of State, Deputy Parlon, had an opportunity in the Finance Bill to address it.
Deputy Naughten should look at the partnership deal.
People will be scared of the Minister of State, Deputy Parlon's leadership now that he has said that.
Allow Deputy Naughten to continue.
It is not the only area where the Government has turned its back on the farming community. For example, a self-employed person, regardless of whether he or she is a farmer, is not entitled to the PAYE tax credit which has increased over the past number of years — in this budget by €440 to €3,520. That is discrimination against farm families and the farming community, and of the self-employed. That anomaly increased in the budget.
In tandem with that is the plight of stay-at-home spouses on farms, who are completely ignored in the PRSI system where they are given no recognition. The Minister for Agriculture and Food and the Minister for Social and Family Affairs have paid lip-service to it, but nothing has been done about it.
My final two points are ones on which the Minister of State, Deputy Parlon, has gone out on a limb. The first relates to the tax implications of the compulsory purchase of land. He negotiated a deal but the minute he got into Government, he rescinded it. It is a disgrace that farmers who are forced by the State to sell lands have been taxed on the proceeds. I have first-hand knowledge of this because my own family's farm is being divided by the new motorway to the west and they are getting a raw deal.
I meet people all the time and that is not my experience.
He negotiated a good deal but the minute he went into Government, he overturned it.
People are signing up to deals, which are very fair.
My final point relates to his comments on the promotion of biofuels. While I wholeheartedly welcome the positive development in the budget, there is not much point providing incentives for the growing of a crop if there is not a market for it and nothing has been done to develop it. I ask the Minister of State to look at this matter in the context of the Finance Bill. He will be aware of what needs to be done in this regard. One simple suggestion we in Fine Gael have put forward is to change the law to ensure that a percentage of all petrol and diesel would include renewable energy. This at least would provide a market.
One cannot put the cart before the horse.
There are a few points I want to make on the Finance Bill. Has the Government costed the abolition of the tax relief for stallion fees, the impact of which will be considerable on the economy of south Tipperary? I refer not to Coolmore but to the many small stallion operations that have developed in that part of the country because of the success of the horse breeding industry. Other countries, France and Italy in particular, are putting pressure on the EU because of the sector's success in this country. Is this another case of the Government giving in to the Europeans on a tax relief which has been very successful?
The Minister of State, Deputy Parlon, is one of those who would support me on this and who would understand the benefits of the bloodstock industry in many constituencies, but particularly in south Tipperary. Before the Bill is enacted, will the Government put a hold on its abolition to determine whether there is a real benefit to the economy involved? Figures from various sources which I have seen prove beyond a shadow of a doubt that this investment in the bloodstock industry has been of enormous benefit, particularly to employment throughout the country.
Deputy Naughten referred to the drainage difficulties in the west. I wish to bring to the attention of the Minister of State, Deputy Parlon, the difficulties in Clonmel. He saw them at first hand when — fair play to him — he came to Clonmel.
It is all over local radio today that there is still no money coming from the Department to the people of Clonmel. I am extremely concerned about this and on behalf of the people of south Tipperary I ask the Minister of State to take the matter on board. The mayor of Clonmel and several others have just raised it on the news. There is much worry about that matter.
I assure Deputy Hayes that he need have no such worry. The scheme is in hand. Thankfully, there has been no flooding since we did preliminary work in Clonmel.
I take the point that there has been no flooding, but the scheme was supposed to start last September. It is February and it still has not started.
One cannot do it in the winter time.
Then why was it promised at the time?
We never promised to do it over the winter——
It was to start in September.
——when they are not even allowed on the river.
I do not want to banter with the Minister of State on this matter. I was genuine in raising the matter because I heard about it. Officials also told me about it over the past number of months. I accept what the Minister of State has said and I would appreciate a letter from him to that effect.
At the outset, I wish to give a little advice to Deputy Hayes on the horse breeding industry. We are aware that the European Commission was examining the tax relief concerned, but I advise him to look for criticism much nearer to home. His potential coalition partners are the ones who have made the noise.
The sting of a dying wasp.
It might be worth looking at.
Deputy Hayes should look to his partners.
That is the sting of a dying wasp. They are feeling the effects of it now.
Deputy Curran referred earlier to the new tax relief scheme for the Shannon area and there is also tax relief for the film industry. I support all those schemes although I have no direct involvement in any of them. There is a significant amount of begrudgery on many sides of the House on these issues but we cannot afford it because too much employment is at stake and we are under too much pressure.
There was personal begrudgery in much of the criticism of the horse breeding industry. In many cases, the same principles were involved in funding the film industry and no one objected to that because the people working in it were lobbying them directly. Likewise, the Shannon scheme is an excellent one. I do not think I should state that I am against it, because it is further north than Cork, but we are hearing an element of that.
I wish to comment briefly on the highly personalised attack on the Minister for Agriculture and Food, Deputy Coughlan, by Deputy Naughten. Referring back to the Minister's position in a previous Ministry is of no benefit to us. She has an excellent track record. Early in life she has achieved a status of which the Deputy, like me, will probably only dream. She has done an excellent job in her ministries and it is grossly unfair of the Deputy to refer back to her former Ministry with a casual throwaway suggestion that she was not caring or did not worry about the vulnerable in society. I do not accept that; it is inaccurate and unnecessary.
As others stated, the purpose of the Bill is to protect our prosperity and encourage further enterprise and investment by underpinning the main provisions of budget 2007, which was designed to foster fairness for all. Obviously, tax related issues figure prominently in any Finance Bill. Andrew Jackson, the seventh President of the United States, apparently once claimed that the wisdom of man never yet contrived a system of taxation that would operate with perfect equality. I suppose that is the goal to which we all should aspire. There is also an old saying which suggests that, next to being shot at and missed, nothing is quite as satisfying as an income tax refund. In that context, I hope there will be many satisfied people. As previous speakers have said, this Bill, when enacted, will remove almost two in five income earners from the tax net. It delivers on our promise, which largely affects middle income earners, to ensure that 80% of all taxpayers pay tax at no more than the standard rate.
The recently proposed increases in the minimum wage, together with the €400 increase in tax credits, means that an employee can earn €17,600 without paying tax. This compares with €5,000 in 1997. The lowest paid workers in society can now earn over three times more than they could then before entering the tax net. So much for Labour Party claims that we have treated these people unfairly.
Even allowing for inflation and related factors this represents real delivery for one of the most vulnerable groups in society. When commentators speak in absolute terms about some not benefiting from our sustained economic progress, they might consider such matters. I am not suggesting that everything is perfect but strides are being taken to alleviate the burden on taxpayers who can least afford to shoulder payment. Progress has been made by the Minister for Finance, Deputy Cowen, since he took up his portfolio.
I have long argued that anyone earning the minimum wage should be exempt from tax. If there is a minimum wage which an individual must be paid for his or her labour, he or she should not have to pay income tax on it.
Tax is an everyday feature of our lives and we all feel that the less we have to pay, the better. The Finance Bill 2007 is, I believe, another step towards achieving that noble aim by putting the provisions of the recent budget in place, including the reduction of the top rate of tax to 41 per cent and the exemption of the minimum wage from tax payments.
Again, we are casually accepting the reduction in the top rate of income tax. I mentioned previously that with a household consisting of seven dependants, as the sole earner, I paid 67% in stoppages in 1986 and 1987. That was my personal situation and I have no problem mentioning it to show the progress that has been made under these two Governments.
I believe that we must also continue to pursue the objective of removing all retired pensioners from the tax net. We can do this most effectively by increasing the thresholds to, say, over 65 years of age, then over 70 years of age and so on, in the same way that we give extra social welfare payments to those specific age groups. This allows for the fact that they will experience increased dietary and heating needs and so on. This concept should be extended to remove those over 70 years of age from the tax net.
The first time I suggested all pensioners should be exempt from tax, people went over the top and started suggesting it would benefit millionaires. That is rubbish as there are very few such people and an income limit could be set. Removing retired people over 70 years of age from the tax net should be an objective.
I compliment the Minister on several initiatives he has taken which are aimed at assisting older people, people with disabilities, part-time workers and other specific groups. I compliment him in particular on section 9 of the Bill, which 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.
This issue has been bandied around for some time and, under examination, the Chairman of the Revenue Commissioners estimated how much in unclaimed benefits might be involved. Figures of up to €1 billion have been suggested. Two things are certain: it is a very substantial amount and it belongs to the taxpayers involved. I say this despite the fact that the Office of the Revenue Commissioners has become more user friendly and has made dramatic changes in dealing with and facilitating the public. We must make greater efforts to ensure people receive their entitlements and there are thousands of cases where people have not claimed all the possible refunds and allowances.
I know from distributing my budget leaflets that people are not aware of many of the reliefs available to taxpayers and therefore they are not utilised. This aspect of the Bill is one that will be welcomed by most people. Up to this point, unless one was able to employ an accountant, one would struggle to figure out what was available.
One could not even afford that, given what they charge.
Present company excluded.
As I said, there are millions of euro in unclaimed taxes and the Government has taken unprecedented action to return the money, something previously not considered.
There are two thresholds for claiming relief for health expenses — €125 for one person and €250 for a family, and the aim is to rationalise these into a single threshold of €125. Again, in an effort to expedite the tax repayment process, a requirement that the taxpayer paying the medical expenses must be related to the person in respect of whom the expenses were incurred will be abolished.
These are issues that will cost money but they are fair. They are directed towards those who pay taxes and are meant to compensate the person who is not in receipt of allowances and social welfare. I compliment the Minister for Finance, Deputy Cowen, on taking this initiative. It will mean a great deal to many people and will mean less income to the State. However, the Minister has accepted that it is not our money and we wish to return it automatically.
Likewise, section 31 provides for deposit interest retention tax free interest to be paid automatically by financial institutions to taxpayers of 65 years of age and 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. I have no difficulty with upper limits being set to ensure there are not abuses of this leading to complaints similar to those relating to tax exemptions for artists. These measures are better features of what is usually described as the Big Brother approach, whereby the State takes a measure of control. However, in these cases it will be done to assist those people and we should welcome such measures.
In the same mould, section 10 extends indefinitely the special tax exemption for unemployment benefit paid to systematic short-time workers which had previously been renewed from year to year. This relates to specific areas and the first example I had of this issue was with dockers in Cork. Having this extended every year used to be messy as it is a matter of paying back money quickly. It has been extended indefinitely, however, so we need not worry about returning to it every year.
I welcome the fact that the Minister is looking at pensions in the context of tax treatment and so on. I know that the Minister for Social and Family Affairs, Deputy Brennan, has made great progress and has major proposals in regard to the social welfare aspect of pensions, but I believe that all other aspects of the matter must also be examined. Section 16 will amend the tax treatment of various pension products and approved retirement funds in a number of respects. An amendment to the legislation is also 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. This obviously affects a minority of people, but it is very important to that group. We should deal with such issues fairly quickly.
The more we can do to improve the entire pension structure and assist the voluntary contributors, the better. It was suggested to me this week by a retired civil servant, who makes proactive suggestions not for personal gain but to be helpful, that parents could be encouraged by way of the Finance Bill to contribute to a son's or daughter's defined contribution pension scheme, just as many parents assist a son or daughter if he or she is a first-time house buyer. We can argue over how this would pan out but if parents could benefit from an income tax reduction on their contributions, they would be willing to get involved.
The civil servant said the proposal could perhaps save the State from paying a non-contributory pension where the offspring, by virtue of disability or invalidity, would be unable to keep a job. He emphasised that an income limit should apply to parental income. If we had suggested an SSIA scheme before the bold Charlie McCreevy became Minister for Finance, such that savers would be given €1 for every €4 saved, our suggestion would have been rubbished. In this context, we need to examine pensions and take every possible step to help people out.
Increases in PAYE and personal credits, involving a top-rate reduction from 42% to 41%, widened tax bands and a doubling of the ceiling on which first-time buyers can claim mortgage relief are among the benefits that will accrue to taxpayers from the enactment of this Bill. These measures are to be welcomed by Members on all sides of the House.
A series of measures to target growth in small and medium-sized businesses will come into effect. My constituency colleague, the Minister for Enterprise, Trade and Employment, Deputy Martin, has already stated that the extension of the business expansion scheme until 2013 and the decision to include recycling firms underline the Government's commitment to supporting small companies and entrepreneurs. It is an exciting time for the sector and the elements I have mentioned are key features of the Bill. Those of us who have tried to help people in business will be aware of the difficulties that exist and of how necessary it is not to have Irish businessmen heading off to Poland or any place else. There are many challenges facing small businesses in an increasingly globalised economy and State assistance in this regard, particularly the cutting of bureaucracy by facilitating easier tax repayments and less complicated filing of returns, is surely positive and welcome.
Recent high-profile job losses underline the need for the continued growth and expansion of indigenous small and medium businesses. As I stated on television and as I genuinely believe, we can never create too many jobs. My mother — Lord have mercy on her — might have asked whether we thought we would never again see a poor day. People were becoming blasé about jobs but we can never create too many. As we know from experience, particularly in Cork, multinationals can leave at the drop of a hat in pursuit of cheaper options. Budget 2007 provided €272 million for small business and research and development and this Bill will trigger that investment, which is most welcome.
The Taoiseach recently launched the national development plan, which sets out ambitious proposals for our country's continued progress until 2013. The Finance Bill is a keystone of that plan in that a total of €7.7 billion will be invested in upskilling the workforce in order to maintain the highest standards of education and training for all.
Since 1997, more than €5 billion has been returned to Irish taxpayers. Social welfare and public expenditure have doubled in that timeframe, and the national debt has been halved. This represents intelligent financing and prudent management of the economy. Some will argue about this — it is obviously the job of the Opposition to oppose and the job of those in Government to promote and govern — but they should note that the macro figures I am outlining are factual. Others will squirm at these figures but they represent a major step in the right direction. The Finance Bill 2007 is underpinning our progress, although one can argue about the micro side of the equation and about how individuals might be affected by the Bill's provisions. We all represent such individuals.
There is a new tendency for media commentators to say those in Government sound like the Opposition when it suits them, but I have said the Opposition had no difficulty whatsoever in producing a huge pamphlet after the budget stating the Government was right, outlining citizens' entitlements and welcoming the increases in social welfare and health spending. It is as though the Opposition had sanctioned the increases itself, and this is the way it should be. There is nobody totally in Opposition and nobody totally in Government. None on this side will ever be in a position not to criticise, seek new benefits or make suggestions for improvements. It is never a case of taking just one side; there must be a mixture of approaches and that is why we are elected.
Deputy Naughten had a go at the Minister of State at the Department of Finance, Deputy Parlon, about his negotiations on land prices. Let me refer to this because, as the Acting Chairman knows, I vote on the Committee of Public Accounts. The Opposition has been referring very loudly to overruns in the cost of road projects, yet the much-lauded IFA agreement trebled the price of the land involved and automatically triggered overruns. I commend this excellent Bill to the House.
I wish to share time with Deputies Kehoe, Ring and McGinley.
Is that agreed? Agreed.
I will be speaking for eight minutes and the Acting Chairman might remind me when my time is concluding. I am delighted to have the opportunity to address the House on the Finance Bill. It will be my last opportunity to do so on any Finance Bill and therefore this is my swansong. I hope I will make good use of the eight minutes allocated to me.
I listened with interest to Deputy Dennehy, who stated everything he said was factual. His comments should carry a Government health warning because he said the national debt has been halved. It has not, it has increased over recent years. The remainder of the Deputy's script probably refers to a percentage of GDP or GNP, but he did not read that. He just said the national debt has been halved, which is totally untrue. I am just putting the record straight lest students read the Deputy's remarks and believe they can take them as gospel because they were said in the House.
I am very disappointed that the Minister did not manage to address a great anomaly in our tax code in so far as it impinges upon people's incomes. We have three different thresholds for deciding on people's income. On the basis of one's gross income, one's tax is decided by the Revenue Commissioners and one receives a certificate at the end of the year to state one earned X euro. If one's son or daughter requires a higher education grant from a local authority to go to college, one produces this certificate stating one's income — let us say it is €35,000. The local authority will look at the certificate and ask for one's accounts to confirm one's income.
If one has a number of occupations, perhaps as a taxi driver, farmer or whatever, one may have legitimate write-offs on leasing. The Acting Chairman will know about this from his profession. The local authority may say that because one is spending €7,000 a year on leasing a vehicle, the sometime taxi driver's real income is not the €35,000 the Revenue Commissioners said it was. The lease money must be added because the local authority does not recognise leases for the purposes of higher education grants. Suddenly the income level is €42,000 because the leasing figure has been added. That is to make a mockery of the decision by Revenue as to what is a person's income.
One might present a certificate to the Department of Social and Family Affairs indicating one has an income of, say, €20,000 and four children. In this case one believes one is entitled to family income supplement, FIS, because of the four children and the fact of being below the threshold. The Department of Social and Family Affairs will ask for the certificate of income and the applicant will show the document as produced by Revenue indicating the income last year was €20,000. He or she will be told, in the event, that this evidence is not acceptable because of the applicant being self-employed and the Department will not trust him or her, accordingly. It will not accept that the Revenue has done a good job in assessing the person's income. It will not accept the certificate because the person is self-employed and will not give him or her FIS. On the one hand Revenue decides what a person earns and confirms his or her income, while other arms of Government are saying, in effect, they do not believe the Revenue assessments and will not agree with them. That is absolutely ridiculous. Why did the Minister not put that right? Is it not time some Minister for Finance took on that issue and sorted it out?
I have heard so many Government people talk about our low tax regime and how we pay low personal tax. I concede, of course, that personal tax has gone down and people pay less now than they did before. Last year, however, for the first time in the history of this State, the money collected in VAT exceeded the amount contributed in personal taxation. Is this not dramatic and a major change in the collection of taxes? It means people are paying less in personal taxes but much more in indirect taxation by virtue of VAT and the like. Recently I looked at figures in relation to New Zealand, a country that is comparable to ours. It has approximately the same population and is highly dependent on agriculture, with much the same numbers of people at work. A goods and services tax imposed in New Zealand represents somewhere in the region of 10% of the amount taken in personal taxation. The country with a similar set-up to ours. We collect more in VAT than in personal taxes while New Zealand collects about 10% and we wonder why.
Another point I want to make relates to the individualisation of taxes. Take two couples living side by side in this country with a notional income of €60,000 per household. In one house both partners are working and they earn €60,000. In the other the income is the same but there is only one earner. Is it not dramatic that this Government will impose an additional tax of €120 per week on the household where there is one income? Is it not a disgrace that such an additional tax is imposed on the household with one income? On that sad note I rest my case as regards the Finance Bill 2007. Between now and June I am sure I shall have opportunities to talk about other issues.
In my short time of four minutes it is difficult to express my frustration to the House with this Finance Bill. I shall take the time to outline to the House the neglect of County Wexford over a long period of time, particularly over the last ten years of this Administration. Wexford has been left behind in terms of investment and infrastructure, foreign direct investment, tourism, education, agriculture and a wide range of other areas because of this Government's neglect of the county. If one takes the national development plan announced only two weeks ago, the only place Wexford got a mention in the document's 300 pages was on the map at the very back, along with every other county. The Government has totally neglected the infrastructure of County Wexford. To say it has not been highlighted sufficiently over the last number of years would be a lie. The gate to Europe is Rosslare Europort. We are still waiting for the Enniscorthy bypass. Hopefully we shall see the completion of the Gorey bypass over the next couple of months. We still await the New Ross river crossing. Now, we are being told we are being left behind because the Ferns bypass is to be completed at the same time as Enniscorthy work.
The CSO figures place County Wexford in 19th position and that is not a good placing for the county with the gateway to Europe. I am not a great fan of statistics. Nonetheless, if one compares Wexford to the BMW region, the south-east county is way behind. The Government has not created too many jobs in Wexford over the last ten years, but it has lost jobs there during that time. When one compares other counties to Wexford in terms of inputs from the IDA and Enterprise Ireland one sees that these agencies have not looked after the south east by any manner or means. This is something an alternative Government will do as has been done in the past. In the three-year period 1994-97, when the rainbow Government was in power, there was more investment in Wexford than in last ten years.
In the short time left to this Dáil I want to put on record the fact that Wexford has been left behind. However, the electorate there knows an alternative Government will look after the people of County Wexford. I ask the Minister for Finance, while he is looking after the Laois-Offaly area, to give Wexford its fair slice of the cake.
People pay a good deal of revenue to the State. They do not mind this, but they are upset as regards what is happening in the public service. People ring the Department of Social and Family Affairs, the council and the health board. It seems the biggest employer now in the country is voicemail. There is voicemail here, there and everywhere and one never gets a reply back from it. We are spending a fortune putting new executives into county councils, health boards, the Department of Social and Family Affairs and computer services and we are supposed to be more modern and yet when people pick up the phone the first thing they hear is voicemail.
I was disappointed I did not see a provision in the Finance Bill 2007 for Knock airport and on the BMW region and the underspend involved. I am disappointed that the western rail corridor will not be opened soon, rather than having to wait 25 years. I will have left the Dáil by then and I assure the Minister of State that we will never have the opportunity to use that service to come to the Dáil or anywhere else.
People feel let down. They are paying their taxes and their dues to the State, but the State and the public service are not doing their job. We are disappointed that we are not getting our fair share of the national cake in the west, including in my town. I received a letter from the NRA this morning, which is another body that is not accountable to anybody. Every Minister has handed over power to the NRA, the HSE and so on, and these bodies will not respond.
However, I got a letter back this morning regarding the N5 from Westport to Castlebar. Westport is a thriving tourist town, trying to do business and trying to employ people, yet there are tailbacks in the town every single day because the roads cannot deal with the number of cars coming into the town. When Fine Gael was last in government between 1995 and 1997, that was the first priority for Mayo County Council. However, this morning's letter from the NRA informed me that it is no longer a Government priority and that it was more concerned with developing roads into the cities. A number of roads on the east coast were named so the west will suffer again because the east coast must get a third round of Structural Funds.
It is time to call an election. The people are waiting for this Government. None of us likes elections, but I am looking forward to this one because we will be able to show the people what we delivered in County Mayo in two and a half years whereas nothing has happened in the past ten years.
They got a——
The Deputy should be quiet. He better enjoy his last days in this Dáil because we are targeting his seat. He is on the way out. Deputy Finneran announced a new road for Roscommon that was not in the national roads programme, was not in the county council programme and could not even be found in space when they went looking for the money for it. The Deputy said he was talking to the top man in the NRA. That top man must have gone to the moon because we could not find him when we asked for information on that road.
We are not looking for much. All we want is fair play. I support the Minister of State and my colleagues from the west regarding the road from Longford to Mayo. It is the biggest disgrace in the country. One cannot overtake a lorry when travelling from Longford unless one goes into the sea at Clew Bay. We have been talking about that road for 20 years. A small amount of money was provided for the N26 to Ballina. Now we are told there is another small amount to come because there is an election around the corner. Why can we not get an acceptable amount of money from the Government to do jobs, instead of getting a small bit now and again? Are we not entitled to get our share of the national cake? Are we not entitled to the same funding as the east coast? Are we not entitled to go to work on good roads and do business the same way as it is done on the east coast?
We got no jobs from this Government. IDA Ireland might as well be in Spain on holidays. It opened an industrial park recently in Castlebar and it paid €16,500 to put up a tree near the entrance.
The Deputy should conclude.
I will hand over to my colleague, to be fair to him, but I am sorry I could not finish the point I wanted to make.
Like the people on the balcony, I could continue listening to the Deputy with great pleasure.
The national plan was launched with fanfare and triumphalism some weeks ago and the only thing I wish to say about the launch is that it cost about €300,000. If it is anything like the last plan, there will be little for the BMW region. The Government took €600 million away from that area to finish the port tunnel and the Luas in Dublin. If the next plan is not more flaithiúil to the BMW region, God help us.
A golden opportunity has been missed in this Bill to do something logical for Donegal. I was here eight or nine years ago when the tax incentive scheme for tourism and development was introduced for the upper Shannon region. This covered some of the Minister of State's constituency. It covered all of Leitrim and part of Sligo and Roscommon. At that time, Leitrim was known throughout Ireland and the world as one of the backwaters of this Republic. The population of Leitrim was on a downward graph since the time of the Famine. The tax incentive scheme that was introduced for that region has turned around the economic and social history of Leitrim. There is investment in the county, with new industries, facilities and houses being provided. It is a pleasure to see it. I was glad the Minister for Finance introduced it in his constituency in the mid-Shannon region.
What better county to qualify for such a tax incentive scheme than Donegal? It is one of the economic backwaters of this Republic. We have lost 12,000 industrial jobs in the past seven years. These figures can be verified by questions that can be answered here in the Dáil. Jobs were lost in Fruit of the Loom, Hospira, Unifi, at Údarás na Gaeltachta industries and all over the county. The fishing industry is at a low ebb and we have the highest per capita unemployment in the country at four to five times the national average. That does not give the full story as many people are leaving to work in other parts of the country and abroad.
Donegal was an ideal location to receive this tax incentive. The only land border we have is with Leitrim so the incentive only needed to be extended to Donegal. People there are not looking for hand-outs or grants, they are looking for simple incentives to create flagship projects in the county. A few already exist, such as the Glenbeigh National Park, the Dunlewey outdoor centre and some others. However, we need far more of them to provide a boost to tourism in the county.
We can no longer depend on our industrial base as it has been corroded to the bone. The fishing industry and agriculture are at a low ebb. One part of our future is in tourism, but unless we receive this tax incentive in Donegal, we will continue on a downward slope. The Minister should accept an amendment on Committee Stage of this Bill to extend the tax incentive to County Donegal and redress the imbalance that exists.
I am pleased to have the opportunity to speak on the Finance Bill. I compliment the Minister and the Government on the Bill and on the major investment in the constituency of Roscommon and south Leitrim in recent years. I refer to the rural renewal scheme and decentralisation of the Land Registry to Roscommon, which is well on target with 36 of the 230 staff already there. I also welcome the decentralisation to Carrick-on-Shannon.
The Minister has brought in an innovative scheme to provide a tax break on tourism in the lower Shannon. I am extremely pleased that the south and mid-Roscommon area, including the town of Roscommon, is included in this scheme. It will be a major boost to economic activity along the River Shannon and the River Suck in County Roscommon. It will bring the major tourism developments which are necessary, such as marinas, health farms, restaurants and accommodation, to the lovely area between the two rivers. I compliment the Minister, Deputy Cowen, on this proposal. I also compliment the Roscommon county manager, Mr. John Tiernan, on the fine submission he made in support of this initiative in the lower Shannon area.
Was that area not included in such an initiative a number of years ago?
No, it was not included in the rural renewal scheme. This is exclusive of the rural renewal scheme. I compliment the Minister for Finance on this welcome and appropriate measure. I challenge the Opposition Deputies and Senators in the region to disown the comments of the main Opposition finance spokespersons in this House last night. They denigrated the proposed scheme in the lower Shannon region, which includes parts of the constituencies of Roscommon-South Leitrim and Longford-Westmeath.
The only thing we have against the proposal is that it does not cover a wide enough area.
I appreciate that we need to consider this matter on a regional basis. I do not doubt that the decision that has been rightly made to offer transatlantic flights from Knock Airport will be of major benefit to the region I represent. I understand that further announcements about the airport will be made in the near future.
When I see the economic activity and development in the BMW region, I am reminded that the main Opposition parties were opposed to the concept of a separate BMW region when decisions were being taken on the matter many years ago. The record of the House will show that some of the main players in the Opposition at the time made comments to that effect. The Government's decision to develop the BMW region was a positive one. While the full anticipated levels of investment may not have been made in the region, it seems likely that economic activity there will catch up with the activity in the other region. There has been an increase — of almost 9% — in the population of my constituency for the first time. I understand that the population of the west of Ireland as a whole has increased by approximately 7%. Those increases have resulted from the implementation in the region of the Government's policies.
I compliment the Minister for Finance and his team of officials on introducing the Finance Bill 2007. I refer to the Minister, Deputy Cowen, in particular because he has taken an innovative approach to the further development of the lower Shannon region. He is giving people an opportunity to invest in the development of tourism infrastructure along the Shannon corridor. This Bill will bring many benefits, including increased economic activity, to that area.
Like the previous speaker, I welcome the Finance Bill 2007. I compliment the Minister, Deputy Cowen, on the content of last December's budget and the positive Bill that is being debated by the House today. The budget and the Finance Bill demonstrate that the prudent approach of the Minister and the Government to the management of the economy is working. The effective policies which are being rolled out are benefiting the people of this country in real economic terms.
I listened to an Opposition speaker, Deputy Kehoe, say that nothing is being done for County Wexford. Deputy Ring made a similar point about his local area. In the south east, there has been an impressive increase in economic activity in all business sectors, such as the construction industry. If we are to assist home-grown businesses in the south east, which employ a significant number of people, we need to accelerate the rate of expenditure on the construction of new roads etc., in that region. A number of major projects have been delayed even though the money that needs to be invested is available. The National Roads Authority and the relevant local authorities need to ensure that all impediments are removed from the system, so that the necessary investment can be rolled out at a rapid pace. When developing such projects, we should bear in mind the need to achieve value for money and to ensure they facilitate the economic development of the south east.
It is no harm to mention the need for the development of a university in the south east. I hope the current analysis of Waterford Institute of Technology will lead to it being given university status. Those undertaking the analysis should look favourably on the development of a faculty in Kilkenny, which is synonymous with design. It is important for Kilkenny to have a third level facility that can deliver real courses which benefit the economy.
The creation of wealth in this country gives us an opportunity to assist those who are less well-off. We will be judged on our achievements in treating that sector of society. I refer to the care of the elderly, for example. Increased investment in social welfare schemes, health and education is made possible by the collection of so much taxation. We are directing those moneys in a focused manner at all areas which need support. We are financing schemes to help people to get back into full-time employment and education, for example. Such schemes help people to improve their lives and enjoy a better quality of life.
I would like to respond to what Deputy Paul McGrath said about the level of receipts from value added tax, as opposed to general taxation. People have substantially more money to spend because they are taking more money home. They can decide how to spend that money. The overall VAT take, which was mentioned by the Deputy, is increasing because more quality of life items, such as cars, televisions and various products for the home, are being purchased. This country's increased economic activity is helping people to enjoy a better quality of life. People are using their additional funds to enhance their quality of life by doing things they see as important, such as making improvements to their homes. It is a sign of the greatness of our economy that such purchases are generating taxes like VAT and stamp duty, which are redistributed as the Government has done over the last ten years. I accept the Government needs to make adjustments and provide for additional allocations in certain areas. It is a work in progress. If one understands what is happening in the economy, one can make certain changes each year in the budget and the Finance Bill. It is hugely important that the Government has the common sense to address these issues as they arise. This country's economic development has attracted some significant outside investors who are increasing the country's profile and adding to the market.
It is important to highlight the economic value of indigenous businesses. I support the position being taken by the Minister for Enterprise, Trade and Employment in response to ICTU's comments about the business expansion schemes. The schemes, which have created almost 800,000 jobs, were established to support the development of an enterprise culture in this country and are hugely beneficial to our economy. The Minister, Deputy Martin, has invited ICTU to discuss its concerns with him. I am surprised that ICTU has made a complaint to the EU. I hope it will reconsider its approach and withdraw the complaint so that the schemes, which are of great importance to the economy, can be implemented.
I urge the Ministers for Finance and Enterprise, Trade and Employment to examine the role of the county enterprise boards, which are of significant importance. The boards should be given sufficient front-loaded funds so they can help to develop a thriving local economy. Such an economy could be built on innovation in the area of information technology, for example. We need to ensure that investment is made in jobs at local level. The indigenous sector is very important. Many of the budgetary decisions which have been taken in this Bill will assist local businesses to develop.
It might not be any harm for the Minister to consider the possibility of developing the railway lines. Such lines could be built beside the main roads that are being constructed at present. That would ensure there is connectivity by rail throughout the country. To achieve this, some type of governmental investment vehicle could be created, such as was created for the SSIAs, so ordinary people could invest their money to generate a return in the context of rolling out a 21st century railway system that would connect everywhere in the country and, at the same time, would deliver financial benefits to those who invest in it.
I wish to draw the Minister's attention to another matter. A constituent wrote to me asking that the Minister extend the capital allowance regime to include the 112 registered caravan and camping parks in Ireland. Sam Harper of Nore Valley Park has made a strong case for this. In recent years capital allowances were extended to include hotels, guest houses, holiday hostels and holiday camps. For some reason the sector Mr. Harper represents was omitted. The argument has been made in a genuine fashion and has merit. I ask the Minister to ensure that, in view of the case made by Sam Harper, this sector is included by means of an amendment to the Finance Bill.
The section which deals with stamp duty on sports clubs and recognised sporting organisations states the changes will come into effect when the Bill is passed. Presumably, the Bill will be passed in March or early April. There is a case for putting forward an amendment to provide that the change should apply from the date of publication of the Bill, as is the case with other aspects of the Bill. Recognised sporting organisations, therefore, could benefit from the adjustment in stamp duty. This is most important and I ask the Minister to ensure the amendment is brought forward on Committee Stage.
In previous years I have made the case for the Comerama workers. It is a legitimate case and it should be made. I have availed of the debate on each Finance Bill to do this. A cynical exercise has been undertaken by some Members of the Opposition whereby they have brought this matter to the attention of the Committee of Public Accounts.
The cynicism is on the part of the Minister for Health and Children.
Deputy Quinn will have an opportunity to contribute to the debate. This matter has no place in the Committee of Public Accounts. That committee investigates State spending retrospectively. This involves money that was not spent by the State. It should be taken up by the Committee on Enterprise and Small Business or by the Committee on Finance and the Public Service.
The total amount of money involved is less than €1 million. The Leas-Cheann Comhairle has made the case for this, as has every Member of the Oireachtas from the constituency. To put it at its mildest, a genuine mistake or error was made at the time by the then Tánaiste. The workers decided to enter into the deal for the closure of Comerama in a genuine manner because of what they were told. As a result, they were left short in their payment from the State. The total amount involved is roughly €1 million. In the context of the budget it is small change.
The Finance Bill again offers an opportunity for the Government, in consultation with the Minister for Finance, to ensure the money is paid, either by the Department of Finance or the Department of Enterprise, Trade and Employment. There is almost a moral obligation on the State to honour the commitment that was given, regardless of whether it was given in error. The decision taken later by the workers hinged on what they were told at that meeting. I again appeal to the Minister to ensure this is done, whether it is through an amendment to this Bill or in some other way by another Minister. The workers who are asking to be heard should be allowed to come forward and put their case, either to the committee on finance or to the committee on enterprise.
The role of the Committee of Public Accounts in the context of the Finance Bill and the budget is most important. The legislation dealing with the remit of the Committee of Public Accounts must be changed. The committee must be given far more clout to ensure that wherever an overspend is identified and is debated by the committee, it does not just go into a report for the Minister for Finance. There should be some way of dealing with the issue and preventing the ongoing loss of money to the State with regard to the project.
An enormous amount of money has been spent on projects throughout the country and the Committee of Public Accounts has been examining that spend retrospectively. That is not really productive. Yes, problems are identified and corrections have been made with regard to contracts and how the Secretaries General of the Departments now approach their work in the context of accountability and transparency. However, more must be done. Members of the committee travelled to America some time ago and found many examples of how that could be done. It is not a case of inventing a new process. The processes are there and they only need to be adapted to this country.
We must put a value for money flag on Leinster House and make it clear to all and sundry that nothing short of the delivery of value for money for the taxpayer will be accepted. We must put on notice everyone who is engaged in business with the State that we are serious about our business and anxious to achieve the value for money which is so important in the context of what we spend. That change should be made as soon as possible. As I said earlier, there are plenty of examples available.
The Bill provides for other changes relating to credit unions, the minimum wage and so forth. All of them have a positive input into the development of the economy. It is essential we continue to manage the economy as we have done and that we get better at managing Government spending.
I accept the point made by Deputy Ring. We have a changing economy and there are now billions of euro to spend, where previously it was only hundreds of millions. We must ask if we have the mechanisms and skilled professionals in every Department not just to account for the money but to ensure it is spent wisely and properly. The Opposition blames the Ministers but the fact is that there are highly paid civil servants throughout the Departments and they have a responsibility to ensure the appropriate mechanisms are in place to monitor the spend and ensure we get value for money.
Deputy Ring spoke about answering machines. That is the first line of engagement with the general public and I believe it must be changed. There must be systems in place that not just deliver value for money but also deliver services in an efficient way. They should not only be accountable to the Committee of Public Accounts and this House but also at county or regional level. That is not happening. The way to open it up is to ensure every job opportunity within the service is open to applications from outside. That will require the opening up of the interview processes.
Currently, county managers interview county managers for vacant positions. It is the most ridiculous system I have seen in a long time. It will not attract those who are skilled and professional enough to take on the position of county manager or of director of services or any other position in the HSE. Just because one has come up through the grades does not mean one is a good administrator. If one has come up through the Garda Síochána, it does not mean one will be a good Garda Commissioner and administrator. We need to examine the structures and the qualifications of the people in them. Until recently, the NRA did not have an accountant. Given the amount of money it is spending, surely the first thing it should have done was ensure the accounts department and the valuations office were in place. I agree with Deputy Ring that there is a need to reform the Civil Service to ensure we get the best people in place to spend the billions of euro we currently push through the system.
I commend the Bill and the work the Minister is doing.
I wish to share time with Deputy Quinn.
Debate on the Finance Bill is one of those rare occasions when we have an opportunity of speaking about the state of the economy and the relationship of the economy to society. It is appropriate therefore, to seek to discern some of the values upon which Government policy is based and beyond that, how these values are influencing policy, in particular how that policy is implemented within the usual five years of Government. The first question must be to what extent has the behaviour of the budgets presided over by the Minister for Finance and the general finance policy been regressive or the degree to which they have distributed opportunities or distributed the fruits of economic growth.
Before we could begin to answer that question, we need to be realistic and honest about growth rates. The Tánaiste, Deputy McDowell, has issued a set of statements about the economy which rather sadly have no relationship to accuracy or to truth itself. I refer to the growth rates in the economy. The lowest growth rate in the last ten-year period was a figure of 2% when the Progressive Democrats had begun their contamination of the Fianna Fáil-led Government. The growth rate in 1989 was 4.7%; in 1990, 6.5%; in 1991, 2%; in 1992, 2.5%. I had the honour of being in the Cabinet with Deputy Quinn who was the Minister for Finance. I refer to the growth rates during his period of office. In 1993 when he took over the office, the growth rate was 3%; in 1994, 6.5%; in 1995, 8%; in 1996, 7.8%; in 1997, 10.3%. If the public were foolish enough to believe one word from the Tánaiste — this would be a great risk — they would realise that this is not the description of what he calls a "slump performance" in the economy. In 2002 the growth rate of GNP was 2.8%; in 2004, 3.9%; 2005,5.4%. Let there be an end to the myth-making about the economy and growth rates. I am far more interested in the fundamental question of whether the growth in the economy was used to lessen the gross inequalities in society or whether it exacerbated them. Differential access to income has an effect on inclusion and one's access to education, health, transport and so forth.
In the short time available to me I wish to deal with one other inaccuracy which is being floated around, namely the suggestion that low tax rates have been the major impetus towards economic growth. I have already factually corrected the statements about the growth rate made by the Tánaiste, Deputy McDowell. The increase in the growth rate, the increase in volume in the economy and in indirect taxes, has created a situation where there can be a higher tax take without expanding the net to capture taxes. I do not have time to develop this point. I recall the promise at the beginning of this Government that 20% of people would be paying the top rate of tax; as the departmental officials well know, the figure is 32%. We need not discuss these broken promises because I am far more interested in my fundamental question, namely, the degree to which the growth in the economy either did or did not assist the creation of a more decent society.
Figures about gross domestic product are a little suspect with regard to Ireland. They must be submitted to the criticism that the transfer pricing might artificially increase the gross figure so that when it is divided by the population this produces an inaccurate per capita figure. Using that caveat, it is interesting to note Ireland’s GDP. The United Nations report on human development ranked Ireland 16th out of 18 OECD countries in terms of income and equality. That report shows that despite phenomenal economic growth, Ireland has the third highest level of poverty in the developed world.
We have been told that we have the second richest economy. Last year some of the economists who were telling us we never had it so good were somewhat taken aback when Mr. Ulrich Kohli, the chief economist of the Swiss National Bank, poured scorn on the notion that since Ireland had surpassed Switzerland in terms of gross domestic product per capita or that Irish people were somehow better off than Swiss people. Mr. Kohli pointed to the huge deficits in Ireland in what economists call public goods. These are schools, hospitals, public transport, roads, public recreational amenities. Switzerland’s investment in these public goods is much greater than Ireland’s and whatever the GDP figures show, anybody who has visited Geneva or Zurich will know why these two cities are in the top two positions for the best places to live for quality of life while Dublin is ranked 23rd.
What has been quite scandalous is the manner in which direct taxation has been substituted by indirect charges, accurately termed stealth charges. Those families who are the most vulnerable in terms of education, transport and access to health care, have faced a whole series of indirect charges so their net disposable income is very little.
There is a malign element in this budget as there was in many others. Once again the gap has been widened between dual income families and single income families through this Finance Bill. The real test of an economy is its impact on society and what it achieves. If one does not accept this, one is speaking about some version of the depeopled economy of which I have often spoken. If people exercise a choice that they are unwilling to pay gross charges for a crèche, that they should not be forever sitting in traffic jams with long commuting distances, worn out and unable to participate voluntarily in their community, and if they exercise a choice that one of the parents will be involved in the primary tasks of child care, they are penalised yet again in this budget. That is what the tax structure has delivered. We need to move away from a depeopled economy that has little but regressive effects on society and move to one that distributes chances equally.
The need for gender proofing, poverty proofing and equality proofing which have characterised previous Government policy frameworks must now be met with a new addition, that of climate proofing. For those who do not already believe it, the recent Stern and IPCC reports have made it clear that we are facing the next great test of humanity. Climate change is happening and there is no longer any point in trying to deny it. There are only two options left, either ignore it or face the challenges head on and find innovative solutions to reduce our impact on the planet so future generations can survive.
Unfortunately, this Government, in its Finance Bill as in all its other legislation, has chosen to ignore the problem and leave it to tomorrow's leaders to deal with. Some people, like President Bush and the Tánaiste, Deputy McDowell, do not accept the overwhelming scientific evidence and do not see the imperative for action that is obvious to the rest of us. Even they, however, must still observe the economic arguments for action. Under the Kyoto Protocol, to which Ireland is bound, we must cut our carbon emissions significantly and failure to do so will cost us greatly in direct payments for carbon credits.
Addressing this matter in a serious manner gives us a great opportunity to be a carbon credit exporter. Surely one would expect a Government led by the Progressive Democrats, those champions of market solutions, to realise the potential in this area. Instead, they choose to ignore and evade. Rather than go slightly out of his way to make a difference, the Minister for the Environment, Heritage and Local Government, Deputy Roche, bought €270 million worth of carbon credits to keep us going for a few years. He also postponed implementation of the energy directive, which would require all vendors of new residential properties to provide, from 1 January this year, a building energy rating certificate with the title documents. The Minister changed the goalposts to ensure this obligation would apply only to residential buildings for which planning permission with effect from 1 January has been sought, thereby postponing an energy conservation mechanism for at least 18 months.
The cost of complying with the Kyoto Protocol will pale into insignificance with its successor after 2012. If Ireland has not reduced our carbon outputs to the prescribed levels by that date, we will be faced with an arduous struggle to meet the next set of targets. At minimum, these are likely to require a reduction to 1990 levels of emissions. There is, therefore, a financial imperative, even for those who ignore the environmental, ecological and moral imperatives for addressing climate change.
Just as in the past we moved to gender and poverty proof Government plans, we must start to climate proof them. That the Government would even consider issuing a national development plan — to be completed, coincidentally, at the same time as the Kyoto Treaty — without aggregating and costing its impact on the climate is irresponsible, reckless and incomprehensible. The increased carbon emissions caused directly and indirectly by the NDP could cost us billions of euro over the lifetime of the projects proposed. Despite this, the document and Government spokespersons, from Ministers to Deputies, are silent about its impact.
Ireland is particularly exposed to the consequences of climate change. Our ecology is strongly dependent on the Gulf Stream to keep temperatures a few degrees warmer than they would be otherwise. Without the Gulf Stream, we would experience harsh winters and cool summers and farming as we know it would be devastated. A change of just a few degrees in either direction in the temperature of the Atlantic Ocean or in its salt levels would be sufficient for such changes to occur. While it may appear otherwise to a Minister of State from the plains of Kildare, Ireland is an island nation with more than 80% of its population and all of its major cities in low-lying coastal areas. As such, it is among the countries most at risk from rising sea levels. Germany, France and other European Union member states do not face the direct and dangerous consequences we do if real action is not taken soon. Dublin is much more at risk from climate change than Paris, Berlin or Madrid. It is incumbent upon us not only to take action but to lead the rest of Europe and the world. The Government, however, after ten complacent years in office, has decided to ignore the problem.
Deputies know that the Fianna Fáil Party in Government likes to buy its way out of a bad situation, with elections it is about to lose being a key case in point. This time, however, all it is doing is buying time. Normally, when one needs to buy time, it is to allow serious action to be taken. That is not the case in this instance. The Government is buying time and the only plan it has down the line is to buy more time. Even a child could tell us that this approach is not sustainable because the financial bill imposed on this and successive generations will increase exponentially, as will the cost of meeting our commitments.
It is clear that Ireland needs to get back on track. This Government has neither the vision nor determination to deal with the problem of climate change. Only an immediate change of Government will result in it being addressed in a meaningful way. Fortunately, people will have a choice in about 100 days. They know where they can find a safe pair of hands for the economy, as my colleague, Deputy Michael D. Higgins showed in the figures he cited, and where they can find the vision, drive and commitment to address the challenges facing us. On the basis of the Bill before us and the national development plan launched with all the fanfare of a grubby election manifesto, the Government does not have answers to the problems we manifestly face.
I am pleased to have the opportunity to contribute, albeit briefly, on the third Finance Bill of the Minister for Finance, Deputy Cowen. It comes in the aftermath of the presentation of the Book of Estimates and a successful, balanced and well crafted budget.
The Minister has already set out the aims of the Bill, which places emphasis on the promotion of enterprise, jobs and investment, the removal of low earners from the tax net and the advancement of environmental and socially desirable objectives via the tax system. He is continuing the job of consolidating the enormous fiscal and economic progress made over the past decade, while at the same time laying the groundwork for continued growth, prosperity and fairness.
It is important that we do not take our economic environment for granted. Viewers of the special "A Week in Politics" programme broadcast on RTE at the weekend could not help but notice, as the American presenter did, that the focus group took the Government's present position of strength as a "given".
That is not a wonder given that the group included Fianna Fáil Party hacks. The Deputy should read today's newspapers.
While watching the programme I was reminded of a comment made on radio by a Fine Gael Party spokesman that a monkey could run the economy. The hard work, commitment, initiative and genius of the Irish people, operating in partnership with a government that has provided leadership, foresight and prudent management, has brought us to our current position. We should be loth to do anything that would unscramble that winning formula.
In the time available to me I will refer to two particular areas of concern. As a representative of the thoroughbred county in my constituency of Kildare South, I have a special interest in the bloodstock industry, as has my colleague, the Minister of State, Deputy Seán Power. The sector is the backbone of the rural economy in County Kildare and many other counties. Section 24 addresses tax arrangements for stallion stud fees, with new provisions taking effect from 1 August 2008.
I am conscious that not every Member of the House understands the importance of the stallion industry for the rural economy and in that regard it is useful to refer to the Indecon report. I will summarise the report's main findings on the bloodstock sector. Indecon estimated that total stallion fee income in 2002 was €85 million. After adjusting for costs, including wages and salaries, keep and related expenses, depreciation and financing costs, Indecon prudently estimated the total net value added produced by annual stallion income in 2002 at between €7 million and €16.4 million.
The report also suggested that 2,154 full-time equivalent jobs were supported by the stallion sector. The Minister for Finance indicated yesterday that this figure has since increased to approximately 2,500. The employment created by the operation of stud farms also generates substantial employment incomes, estimated by Indecon to total €44 million in 2003. Conservative estimates put total Exchequer contributions from the stallion sector, through PAYE and PRSI taxation paid on employment incomes and VAT and excise duties, at €22.4 million in 2003. Assuming a multiplier of 1.43 and based on a best estimate of total current spend by the sector, it was estimated that total contribution to the economy of expenditures undertaken in the stallion sector was of the order of €120 million.
Since the Indecon report was published in July 2004, the bloodstock sector has continued to grow to the point at which Ireland is now the third largest producer of thoroughbreds in the world. That, in itself, is quite a phenomenal achievement for such a small country. The industry is conscious of the significant support it has received from this and the previous Government. It is, I believe, understanding of the changes that are now proposed to the tax regime, on foot of objections from the EU Commission and some Opposition Members of the Oireachtas to stud fee relief. The Minister's proposal for a four-year write-off on the purchase cost of a stallion is welcome and will, I assume, be approved by the EU.
Moving on from a tax relief that is to be abolished, the Minister might consider a new relief in line with his own belief that some reliefs continue to be justifiable where they are targeted and likely to be productive for the citizen and taxpayer. It is appropriate that the Minister of State, Deputy Seán Power, is in the House to hear this suggestion. The Government is strongly committed to the implementation of the primary health care strategy, a key element of which is the introduction of an interdisciplinary team-based approach to primary health care provision. It is recognised that modern, well equipped and accessible premises are essential to the effective functioning of a primary care team and that such premises should provide a single point of access for the user, as well as encouraging closer co-operation between providers.
The primary care strategy group estimates that, at 2001 prices, a typical such facility would cost of the order of €2.5 million. Given that the group recommended that up to 600 special care units would be required up to 2011, a total capital investment of €1.2 billion would be needed. I am proposing the following suggestions in this regard. First, the Minister should consider the introduction of tax benefits like those for nursing homes, to be offered to groups of GPs, with a combined list size that is sufficient to fulfil the required numbers for a primary care team. These GPs would then proceed to develop primary care centres with both GP surgeries and areas for wider primary care team participation. This would encourage GPs to invest funding in primary care centres. It would provide the necessary capital investment for the primary care strategy, and would act as a real incentive for GPs to come together and join into primary care teams.
Second, I am proposing the introduction of a lease-back scheme, whereby the HSE would either lease back the area of development earmarked for the primary care team alone — leaving GPs to own their section of the development — or the entire development, so that once they had gained ownership of the building they would lease the GP section back to GPs at a reasonable rent.
The first of these options would attract GPs who want to retain ownership of their surgeries, while the second option would allow the HSE to have control in deprived urban areas, thus ensuring that new GPs would not face significant capital investment costs. Such a scheme should be severely limited. Tax incentives should only apply to the medical part of any development and only GPs involved in the primary care strategy should be entitled to avail of any relief. Such GPs would have to be in a team that is sufficiently large to justify the development in the first instance. Any new developments would require the agreement of both the HSE and the GPs.
The advantages of such an approach would obviate the long bureaucratic process whereby the HSE tries to obtain sanction for capital funding for each individual project across the country. In addition, because of the appetite among GPs for such developments, it is realistic to envisage such centres being developed much faster and more cost-effectively than via the public sector. It would also encourage GPs to expedite these developments by providing such tax incentives for a limited period of three to five years. The ultimate goal is to develop as many purpose-built, state-of-the-art, primary care centres as possible, both quickly and efficiently.
I strongly believe that these suggestions warrant consideration as a means to advancing the provisions of the primary health care strategy. I commend the Bill to the House.
I welcome the opportunity to speak on this legislation, which is probably the best ever Finance Bill to have come before the House. A vast range of reliefs, particularly tax reliefs, has been provided across the board. Those reliefs aimed at middle to low-income earners have been generally welcomed by the public. It was an excellent move to increase PAYE credits, which will ensure that those on the minimum wage will continue to be outside the tax net in 2007. In addition, increases in personal tax credits and bands will ensure that at least 80% of earners will pay less than 20% of their income in taxes this year.
Another particularly good step entailed doubling the ceiling on mortgage interest relief for first-time buyers, so they can reclaim that relief. I personally lobbied the Minister on that proposal. Before the budget there was much talk about tackling this matter in other ways. There were proposals to cut taxes and increase grants to first-time buyers, but such measures would not have helped them as the benefits would have been swallowed up by developers. I look forward to welcoming other such measures, akin to doubling the ceiling on mortgage interest relief for first-time buyers, in the future.
The Bill's proposals for the business sector are also welcome. These are particularly aimed at small to medium-sized enterprises. County Donegal relies heavily on such businesses, which are the backbone of the local economy, carrying the county forward by creating employment. Economic growth has been hard to achieve there at times, so this is a welcome move by the Minister for Finance.
The automatic repayment by the Revenue on entitlements such as health expenses, trade union subscriptions and age-related tax credits, represents another welcome step. Some may say it should have been done long before now, but I welcome the fact that the Minister has recognised the position and acted upon it.
The Minister has also introduced a consultation period for a review on car emissions and VRT levies. This is another welcome development given that, in recent weeks, there has been much debate on emissions generally in the context of global warming. It will be particularly welcomed by many vehicle owners.
The large package of measures unveiled by the Minister for Agriculture and Food, Deputy Coughlan, including farm retirement reliefs, has been very much welcomed by farmers. She is leading the way for farmers in the 21st century. They went through a tough period for a while but the Minister has taken them out of the doldrums. Given the modern nature of our economy, not all farmers want to continue farming but those who wish to will now be able to do so. Sadly, interest in farming is dwindling but the Minister, Deputy Coughlan, is doing her utmost to ensure that farming remains a priority sector.
The package of social welfare increases, proposed by the Minister for Social and Family Affairs, Deputy Brennan, has been welcomed across the board.
I wish to refer in particular to the opportunities for North-South development and co-operation that exist under the terms of the national development plan, as unveiled by the Taoiseach and his Government. For the first time a southern Government has recognised infrastructural needs in the Six Counties. We have heard many parties talk about republicanism and being the true republicans. This move is republicanism in its truest form. It provides €1 billion for infrastructure on a cross-Border basis, which is a massive and welcome move from the Government.
Donegal is perhaps the seventh Northern county and this investment is very welcome. Given its proximity to the fourth largest city, Derry, I feel good times are ahead for Donegal under the national development plan, as well as for Derry and the Border region. However, much hinges on getting the Assembly and devolved government up and running in Northern Ireland, which is something to which I greatly look forward. For too long there has been negative politics in Northern Ireland but, thankfully, times are changing. Politicians are seeing the light and showing leadership. I hope they continue to do so because the Six Counties and the Border counties would have much to gain. It is an exciting time for us all.
I thank the Government for delivering so much under the national development plan, which has created many opportunities. I have no doubt that if the institutions in the North are up and running, the Government will be prepared to negotiate with regard to infrastructure, whether road or rail, or perhaps even air infrastructure, given that the Government will also invest up to €10 million in City of Derry Airport, which is welcome. There are many opportunities ahead for the north-west and the Border region. I look forward to having the institutions up and running and having politicians in Northern Ireland get involved with us and approach infrastructure development and other Government matters on an all-island basis, as should be the case. When that happens, this country will be much the better for it.
I wish to share my time with Deputies Crowe, McHugh and Catherine Murphy.
Is that agreed? Agreed.
I note the Taoiseach, if I understood him correctly in the Dáil yesterday, said that yesterday's Cabinet meeting focused on climate change. I would love to have been a fly on the wall as the Taoiseach turned to his colleagues and said: "Lads, what has gone wrong? What is happening?" The Minister for the Environment, Heritage and Local Government would no doubt have replied: "Well, Taoiseach, the problem is we have an economy that is growing too quickly and we do not have nuclear power. That is why I am failing to do my job." Perhaps the Minister for Justice, Equality and Law Reform, taking George Bush's line, said: "Whatever you do, Taoiseach, do not do anything. The markets will sort this out." The Taoiseach might have looked to his Minister for Transport, Deputy Cullen, but no doubt he was out in his little hard hat, opening a road somewhere, and was not able to proffer a response. I can imagine the Taoiseach pulling his hair out and turning at last to his stalwart Minister for Finance, Deputy Cowen, and asking him what to do about climate change. I imagine the Minister for Finance's reply was "What is climate change?" because nothing in his budget, his Finance Bill or his national development plan prepared us for the future which is with us now.
The science is certain. The European Union has told us the new targets we need to abide by — either a 20% or 30% cut by 2020. As we will be 30% above the limits by 2010, we will have to cut our emissions by at least 40% in ten years or try the Minister for the Environment, Heritage and Local Government's approach and borrow our way out, which would cost us a prohibitive amount.
The remarkable aspect of the Minister for Finance's budget and this Bill is that there is a suggestion that we will simply think about changing VRT to take emissions into account, but we will do it after the election, next year, maybe. The cars purchased now will be on the road in 2020 when we will have to cut our emissions by close to 40% to be part of the international solution to this huge problem. I find this incredible.
It is unbelievable a Government can show so little foresight or interest in the big global issue of the day. It is bad for the economy. The level of Government inaction is putting us in a position where we will have to pay dearly, and we will not create the jobs we could otherwise create if we began to take this seriously. It is a major disappointment. The most remarkable aspect is that the Government is dressing its meagre efforts in a green label but it is doing nothing and is nowhere near meeting the challenge we need to meet.
I attended a debate on climate change in a university in the city earlier today. One of the questions I was asked was why the issue was not catching people's imagination. The common response was that the problem in this city is that people spend so much time trying to get the career and raise the income necessary to be able to afford to pay for a house, they are impeded from any form of social action, involvement or engagement. The Minister for Finance has failed to understand the urgency of that problem and has failed to put in place measures that might improve the situation.
For four years the Green Party has suggested a reduction in stamp duty for those who are trading down from a large property to a smaller property on the basis it brings major planning, environmental and economic benefits. If there is an incentive for the owners of large houses, perhaps with four or five bedrooms not being used, to trade down, those houses then become available for younger families trading up. Such houses are close to schools, shops and bus routes, and people living in them would take shorter journeys and reduce their emissions while having a better quality of life. However, there is nothing from the Government to encourage such co-ordinated, joined-up thinking and development.
It is interesting to listen to the Deputies opposite — I presume I would say the same in their position. This country is immeasurably better than it was 20 years ago, which we should all recognise. We should not be so stupid as not to understand that full employment has been a major boon. We should take pride in the success and achievements of our country. However, those in Government should also keep an eye to the future and not be so proud of our achievements and our momentary success not to understand what we need to do to guarantee that success into the future. It is that lack of forward thinking in the Finance Bill and the Government in general which I find particularly disappointing.
The Minister, Deputy Cowen, speaking on the Bill stated "the system of indirect taxes under this Government seeks to safeguard the lower paid. It is not regressive as some studies maintain". I take issue with that comment. I accept there are some anti-regressive features built into the VAT system, such as its non-application to certain very basic necessities. However, the Minister is entirely wrong to dismiss evidence of the impact of VAT and user charges on low income families. There is no question but that the extent of indirect taxes disproportionately penalises those on low income. Indirect taxes are inherently regressive because they are paid at a fixed percentage of a price and do not take into account the ability to pay. They also hit low income earners hardest.
Almost one third of the overall tax take is raised through VAT and more than 13% is raised by way of excise duties. The Combat Poverty Agency, the State advisory agency whose job it is to develop and promote evidence-based proposals to combat poverty, found that indirect tax payments for the lowest income households amounted to more than 20% of income; for the wealthiest households, it was just over 9%. The Minister's comments last night suggest he disputes these findings. In addition, there is a growing number of user fees and service charges for public services, which are also unjust as the public already pays for essential services, such as waste management, health care and road building and maintenance, through the general taxation system.
During his speech, the Minister made many claims about the Government's record to date, including the statement: "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." Surely the greatest indictment of the present Government is that the wealth generated over the past decade has not been used to deliver better public services nor has it been used to eliminate the scourge of poverty. The State is characterised by increasing inequality between the well-off and the low and middle income earners. Having a job and being poor are not mutually exclusive given the prevalence of low paid workers.
The Minister told us 845,000 low income earners are now exempt from income tax. One must be on or below the minimum wage, €8.30 per hour, to be exempt. It is a question of what has been done and what could have been done had the political will existed in a time of plenty when the revenue was available to make a decisive impact on the elimination of poverty. History will not absolve the Government for its failures, for presiding over growing inequality, for contributing to unprecedented deterioration in the quality of so many people's lives and for failing to use its record resources to ensure public service delivery. More than 80,000 children suffer consistent poverty and go to school hungry. Those on low pay join others left behind by the Government, such as the 40,000 households on social housing, the 62,000 households living in consistent fuel poverty, the 100,000 or more children who do not get proper food and parents trying to raise a family on far less than the Minister's expense account.
It is right to examine the Government's legacy as its second term in office comes to an end. Public services, health in particular, are in crisis. Those on low incomes hoping to have a roof over their heads must contend with costs of accommodation in the rental sector at an all-time high. Those on average incomes cannot afford to purchase a home, particularly first-time buyers in the greater Dublin region. Getting home from work is an increasing struggle because the Government has failed to prioritise the development of public transport. Despite the dire need for extra buses, funding for Dublin Bus has been held back. Low and average earners do not have the ability to cope with the range of economic pressures, including the rising energy prices and rising mortgage prices they now face.
In addition to all this, we have record levels of household indebtedness, over-valued property, an economy over-dependent on construction and a Government over-dependent on revenue from construction and consumption. People deserve better.
I thank the Chair for the opportunity to speak on the Bill. I welcome the proposals contained in the Bill for the introduction of a new tax incentive scheme for tourism facilities in the mid-west region, in particular for specified areas within a seven to eight mile corridor of the Shannon River. I welcome this not alone because it contains benefits for my constituency, but because in some small way it makes an attempt to spread tourism activity outside the traditional tourism locations.
East Galway has not had any significant benefit from tourism. Some small pockets have seen some activity, but in the main no tourism activity takes place. I welcome the initiative, not because it will do wonders for my constituency, but because when one comes from an area like east Galway that has seen a lack of effort from successive Governments, one realises that the crumbs from the table are better than nothing at all. We are accustomed to crumbs in east Galway, and from that point of view it is disappointing the Finance Bill did not contain any other initiatives for such areas or for the west as a whole.
As a result of the neglect of the region by successive Governments we need positive discrimination in favour of the region and other regions like it. The disgraceful outcome for the west under the national development plan cannot go unchecked. The Government must acknowledge we have a problem of major proportion and set about putting corrective measures in place to address the region's weaknesses. They need to be addressed in a positive, up-front way, not by lip service where we hear over and over how committed the Government is to the west. We do not want to hear any more on the issue, but want to see action.
The neglect of the west and east Galway could not be more manifest than through the saga surrounding the threatened closure of Seamount College in Kinvara, which is in my constituency of Galway East. Seamount College is an excellent all-girls' secondary school, but the Mercy sisters are pulling out of the provision of education there and no intake of students will occur in September unless the Department intervenes and saves the school. The Minister and her Department are dragging their feet on the issue. They are examining figures and projections, but in effect are doing nothing while the lifeblood of this excellent school is draining away. This is just one further example of the Government's neglect of the west.
The Finance Bill is underpinned by a certain set of values. It could have been an opportunity for change as society changed, but that opportunity was not taken. The Bill could have provided an opportunity to row back on the multitude of tax breaks aimed at investors in the construction sector, thereby freeing up finance for redirection to other sectors. It was important that we would make a real start in this direction this year because it would make a statement of intent and would be welcome, particularly prior to the general election. We know the power of the construction industry and the special relationship it has with Fianna Fáil.
Both in terms of the budget and the Finance Bill, the Government has missed the opportunity to respond to needs such as child care. We were told in the 2005 budget that because there was so much to be done, we would have incremental delivery on child care needs. However, we were hugely disappointed with the budget that followed in December 2006 because it failed to do anything meaningful in the area. I noticed in The Irish Times today that tax-free exemptions for people minding up to three children in their home will increase from €10,000 to €15,000. This amount is significantly less than the minimum wage and illustrates two facts for us. First, women are over represented in the lowest pay sectors and rate poorly in comparison to men in terms of the average wage. Second, it places a poor value on one of the most important jobs a person can do, namely, minding and rearing children. There was no take-up of the exemption last year and I doubt there will be any take-up of the €15,000 exemption.
In terms of the national development plan, the focus with regard to child care is on tax breaks to the private sector to provide facilities. However, affordability is as big an issue as provision. The Government could do more to encourage provision by dealing with issues such as the underlying cost of child care, low wages to staff in the industry and the low margin of profit. To offer benefits in terms of costs such as VAT and commercial rates would make a difference. It should also invest in the community sector to ensure better provision. Imaginative initiatives could be taken under proposals such as the Part V proposal, whereby some child care facilities could be provided in communities. If the builders and the babies competed for attention in the Finance Bill, the builders won hands down.
The issue of stamp duty for first-time buyers continues to be a major source of anger. In my area of north Kildare one would not get a house for €317,500, the point at which stamp duty kicks in. If the setting of that limit did anything, it increased the price of houses. Any changes made in this area must be made carefully. I am not against the idea of a threshold, but there should be tapering of the allowance as a significant group of people are badly affected by the current limit which makes housing very unaffordable for them.
Much could have been done in the Bill to make public transport more attractive. We have seen charges imposed at park and ride facilities, which increase the cost of public transport for people willing to use it. This is a retrograde step. We should have investment that will ensure these facilities are provided in a way that makes public transport as attractive as possible.
I listened to Deputy McHugh and others talk about the west and the national development plan. I can well understand that, from the perspective of delivering the NDP's capital side. However, there is also a very significant problem on the east coast and in rapidly developing areas regarding recurrent spending. For example, Kildare is the biggest net contributor of motor tax. For every €100 paid, €21.70 is spent outside the county, and that has an impact on the quality of services. It is the second worst county per capita regarding the receipt of local government funds. It also does exceptionally poorly when it comes to commercial rates and local government funds. Kildare is surpassed only by Meath, which employs 700 staff to run its local authority services, serving a population of more than 160,000 according to the last census. It has the nation’s lowest staffing ratio.
Kerry, on the other hand, with 30,000 fewer people, has double the number of staff to provide services. There is no doubt that a price is paid by people in such places as Meath, Kildare and Fingal in the quality of services provided. It is a total and absolute rip-off. If there is an understandable whinge regarding capital resources in the west, there is an absolutely unarguable case regarding the rip-off in developing areas. It has a direct impact on the delivery of such facilities as parks and playgrounds and community developments such as swimming pools and traffic calming measures.
A fund must be provided, and the local authority must produce a third to match the two thirds of Government funding with disabled persons' grants. Every set of figures shows those counties at a great disadvantage regarding the quality of their services, and that must stop just as much as the underdevelopment of the west from an infrastructural perspective. I present that argument as a counterbalance, since it is important.
I welcome the opportunity to speak on the Finance Bill 2007, regarding which I will raise several issues. I know that many points will be discussed in far more detail in the next few weeks before the committee that I chair.
Wearing that hat, I would like to raise certain issues that we addressed in 2006, requesting that they be dealt with in the budget and the Finance Bill 2007. We are happy to see that they have been acted on; while they may seem minor to some people, they are very important to others. The first example was an issue discussed in the committee last year, namely, VAT on meals-on-wheels services where provided through a company on a contract basis. Hitherto, they have had to charge VAT, whereas none has been levied on voluntary equivalents because they are not trading businesses.
As a result of the anomaly coming to light last year that the elderly would now have to pay VAT on their meals on wheels, which is not what the Government wishes for them, it is being dealt with in this and other legislation involving the Department of Health and Children, which will have to approve registered contractors who will be able to avail themselves of the facility. I am pleased that the issue has been acknowledged and is being dealt with, having been aired in the broadcast media several times.
I am delighted by the speedy and comprehensive response in the budget and Finance Bill 2007 to another issue mentioned in the committee in recent months. Businesses in their first year of trading were having to pay preliminary tax on the normal dates applicable to other businesses. A change announced a few years ago was to take effect within the last few months. It meant that some companies would have to make a preliminary payment of 90% of the year's company tax before reaching the end of the first year's trading. It was a severe burden for small companies just getting off the ground, and the rule due to enter force has been acknowledged as excessively onerous for small businesses, which are the backbone of the economy. I am pleased that the matter is being dealt with and will work its way through the House as part of the Finance Bill 2007.
A third issue to emerge in committee may be impossible to deal with specifically in the Finance Bill, as it concerns taxation, although it may be discussed on Committee Stage. I do not know whether there will be an amendment from any committee member on the topic. I speak of the dispute between opticians and the Revenue Commissioners regarding the VAT that they were charging. Hitherto the Revenue had insisted that they charge VAT on the full price of supplying spectacles and contact lenses, including the costs of fitting and supplying the spectacles and lenses. The opticians took their case to the VAT Appeals Commissioners, who ruled in their favour, stating that they had been wrongly instructed by the Revenue over the years to charge VAT to customers for the provision of services as opposed to the product being supplied. The Revenue had insisted that the full 21% be levied on everything.
Over the years opticians were forced to pay the VAT to the Revenue, and now they are entitled to a massive refund amounting to perhaps €50 million. As a spectacle-wearer, I feel that the VAT should be refunded to the customers who paid it in the first place. I know that it is a matter between the opticians and the customers, and the former may argue that they absorbed the VAT in their own margins and paid it pending the VAT Appeals Commissioners' ruling. Pigs do not fly, and it would be nonsense to think that opticians or any other Irish businesspeople were paying VAT out of their own margins without charging it to customers. No one could make that argument with a straight face.
Perhaps our committee will have to invite a delegation from the opticians' representative body to address us as the VAT was paid by their customers. Every optician has a good record of clients and knows who paid the VAT. As chairman of the Committee on Finance and the Public Service, I urge them to put in place arrangements to refund VAT to the customers who paid it. If they do not do so, industry representatives will appear before the committee to explain to the public why they feel that they are entitled to that €50 million bonanza when it is not really theirs.
I also wish to address certain aspects of the Bill that will benefit my constituency of Laoighis-Offaly. One is section 96, which inserts a new section into the Stamp Duties Consolidation Act 1999 to provide for an exemption from stamp duty for acquisitions of land by an approved sporting body where it will be used for the sole purpose of promoting athletics or amateur sports. The exemption will apply to instruments executed on or after the date of passing of the Finance Bill 2007. That is a fantastic provision and I, as a constituency Deputy, have been lobbied on this by sports clubs moving grounds or which have had to purchase a permanent pitch because they never had one. It is no secret that Portlaoise GAA club will be one of the principal beneficiaries of this change because it recently sold its current site for approximately €14 million and is buying a new site for €6 million. The club is providing many extra facilities and developing pitches with it.
The new site would have attracted a stamp duty rate of 9%, equivalent to €540,000, and the club will save that amount as a result of this change in legislation. The legislation has not been changed only because the Minister is from Laoighis-Offaly; the issue has arisen right across the country. I know of clubs other than my own which will benefit in due course around the country. I ask the Minister to consider one aspect of the provision. Perhaps the exemption could have effect from the date of the Finance Bill's publication, or some such date. The Bill will probably be passed in the middle of March and I am worried that we will then have to wait for commencement orders for individual sections.
Although I am not very familiar with commencement dates, we could find them to be at the end of the year and some clubs could inadvertently be caught out. They might believe themselves safe to complete a transaction immediately because the provision was announced on budget day; indeed most people, including myself, would have assumed it was effective from budget day. Other provisions in the legislation are effective from 1 February, when the Bill was published. I do not know why this is being put on the long finger and I would appreciate if the issue was examined.
Section 97 is also relevant to many rural constituencies. I have concerns about the section, although the logic behind it is fair and reasonable. It provides:
. . . that the transfer of a site from a parent to a child is exempt from stamp duty if the purpose of the transfer is for the construction of the child's principal private residence and the market value of the site does not exceed €254,000. The change being made limits the size of the site to 0.4047 hectare (i.e. one acre) exclusive of the area of land on which the child's principal private residence is to be constructed. The change applies to instruments executed on or after 1 February 2007.
That means it comes into effect on the day the Bill was published. Why is a restriction on stamp duty effective from 1 February, but in an instance where stamp duty is abolished it is not effective until a much later date? The Bill has one section after another with two different dates for coming into effect. I do not follow the logic and we are dealing with stamp duty in both cases. I have a concern about the particular wording. I understand there were abuses, where parents were transferring four or five acres to their offspring, with some of the large tracts of lands transferred free from stamp duty being commercial activities. I realise this must be captured in legislation, but my concern lies with the restriction to one acre.
In counties such as Laois, it was a requirement up to recently in the county development plans that where percolation and other factors were not of a satisfactory standard to be accommodated on a small site, the applicant had to provide a two acre site for the house. This has been relaxed in recent months in certain cases but many local authorities can sometimes still require a two acre site for the construction of a house. This section does not take such a requirement into account.
The legislation stipulates that the one acre is in addition to the area of land on which the child's principal private residence is to be constructed and the amount of land on which the residence is to be constructed could be quite small in terms of square yards or square metres. Perhaps an amendment could be included to reflect that amount of land being required for the purpose of building a private residence. If a planning authority stipulates the size is half an acre, so be it, but there should be a provision should the stipulation be two acres. If such a requirement exists from local government, we should not pass legislation that conflicts with some planning laws being operated democratically by local authorities throughout the country. The matter is complicated because there are different rules for different areas.
From a small business perspective, I am pleased about the arrangements for the VAT filing frequency for small traders. In order to reduce the compliance cost for small VAT traders, the frequency of filing VAT 3 returns for small traders is being reduced. For cases where the annual VAT liability is less than €3,000 per annum, such traders will be obliged to fill in VAT 3 returns only twice a year, a great improvement from the current six times a year. Cases where the annual VAT liability is between €3,000 and €14,000 per annum will be obliged to complete three VAT forms in the course of the year, a very welcome development.
Many small businesses could not cope with the bimonthly VAT returns in their own right, and the normal practice was to bring in an accountant to do the VAT return. I am an accountant myself but so be it. Some accountants might have appreciated the business of making at least six visits per annum to small businesses but it was an undue burden. There are cases where small employers can make their PAYE return once a year instead of monthly. I am pleased that this is a step in the right direction.
I will move on to some improvements for ordinary individuals under income tax changes etc. In particular I wish to highlight reliefs from the 2007 budget. That budget doubled the ceiling on mortgage interest relief for first-time buyers from €4,000 for a single person to €8,000, a 100% increase. The ceiling is also being increased from €8,000 per year for a married couple or widowed person to €16,000 per annum. The support applies to those receiving mortgage interest relief in the first seven years of their mortgage. The Government estimates that approximately 125,000 first-time buyers will benefit directly from this.
This translates into a single person gaining up to €800 per annum, which would help first-time buyers already in their home, as well as potential first-time buyers, without inflating house prices further. We are considering ordinary people so I will give an example. A couple with a joint mortgage of up to €379,000 over 33 years, at an interest rate of 4.25%, will be able to claim mortgage interest relief on the full amount of the interest on the loan, gaining up to €1,600 per annum, or €133 per month in relief. That equates to €1,600 per annum in cash into such a couple's pocket because of the change. The ceiling on interest relief for non-first-time buyers is raised from €2,540 for a single person and €5,080 for a married couple to €3,000 for a single person and €6,000 for a married couple. That will also help.
I will move on to how these changes and the Finance Bill will affect individuals. The budget is helping to reward work and cut taxes. The entry point to people paying income tax has increased to €17,600 per annum, meaning the first €17,600 of income is tax-free for PAYE workers. I remind the House that this compares to a figure of less than €5,000 in 1997. This will ensure those on the minimum wage will be completely out of the tax net. The threshold at which the top rate of income tax is paid is also increasing by €2,000 to €34,000 for a single PAYE worker. The 20% standard income tax band will be widened by €2,000 per year to €34,000 for a single person and €43,000 for a married couple with one earner.
The rate at which a single worker pays the top rate of tax is now effectively double that of 1997. This ensures workers on average earnings will not pay tax at the higher tax rate and any workers earning €480 or less per week will also be exempt from the health levy, another form of taxation. This builds on income tax policies over the past ten years which have favoured the less-well off. Hundreds of thousands of people who have been less well-off have been completely removed from the income tax net, meaning a tremendous burden has been removed.
I now want to refer to some of the tax credits addressed in the Finance Bill. There has been a major increase in many tax credits all of which are to be welcomed. These increases are considerably above the rate of inflation and there are one or two I want to mention specifically.
I suggest, if it is possible, that the Minister table an amendment on Committee Stage, or at another stage when it is appropriate to do so, to the allowance to an incapacitated person for employing a carer. Up until now there has been a generous allowance, where one can pay €50,000 per annum to a person who is providing care for an elderly person. The elderly person, if he or she has the income, can pay a carer and get the full tax relief at the top tax rate of 41%, which almost reduces by half the net cost, or sons or daughters can come together to employ a person to look after an elderly relative. In this context, it is the word "employ" which concerns me. The people who are doing this must register as an employer for PAYE purposes. That is a little offputting and I would like to see whether it is possible to introduce a mechanism whereby they could pay this on a contract basis to a person who would be responsible for his or her own tax returns. I would have no difficulty with providing that the contracts and the PPS numbers must be given to the Revenue Commissioners in advance for approval, but it would be a tremendous benefit. The current law requires the incapacitated person to become a registered employer for PAYE purposes, and that is a little severe. It would be far better if they could be allowed to engage a person on a contract basis rather than employ him or her directly. I ask that the matter be highlighted.
Another matter on which I congratulate the Minister is the massive increase in the incapacitated child credit. Up until this year it was worth €300 for taxpayers. Parents with a child who is permanently incapacitated, either physically or mentally, can claim for the child maintaining himself or herself independently in the long term. The Minister has doubled the cash value of this to a family, from €300 to €600, a 100% increase. It seems like a small sum, but people who heard about it in the budget and came in to my clinic over the Christmas period were shocked because they had never heard about it previously and now they will to get €600 per annum, even though they had been looking after their incapacitated child. I advised them to ensure they applied for a refund for the previous four years as well and they were happy to do so.
All in all, there is much good news. I will conclude because my time is up but I could continue for another hour outlining the excellent improvements in the Finance Bill. I look forward to further detailed discussion on some of the finer points of this legislation when it comes before the Select Committee on Finance and the Public Service later in the month, and to the smooth passage of the legislation and the implementation of these measures as quickly as possible.
I thank Deputies for the many interesting contributions to the debate on the Finance Bill 2007 and I look forward to a constructive and informed discussion on Committee Stage. In my reply, I will respond as far as possible to the points raised by the Deputies in their remarks on the Bill.
Deputy Bruton referred to the alleged anti-family bias in the Bill and in other aspects of Government services delivery. I do not go along with that. If one look at the facts, in 1997 a married one-earner family on €30,000 per year paid nearly 25% of its income in taxes and levies and this year the percentage will be 5%, or one fifth of the 1997 amount. On €20,000 per year, the figures for tax liability were 20.7% then and 2.7% now. The same pattern of reduction applies to married two earners. The simple fact is that we have championed the family by reducing and removing the tax burden, increasing child benefit substantially and introducing measures to help with the costs of child care.
The position is that the tax burden has reduced considerably for all earners in the past ten years directly as a result of the policies pursued by the Government. There are many more people at work than there were ten years ago and they are paying much less tax on what they earn. It is not correct to say, as was implied by Deputy Burton yesterday, that a single person on a wage of €34,000 with additional marginal earnings due to overtime or some other reason will pay tax at the same rate as very high earners with incomes in excess of €1 million. The effective tax rate of a PAYE person on €34,000 is less than 10% in 2007. If such a person earns, say, an extra €2,000 in overtime, his or her effective tax rate will be about 11%. A person who earns €1 million will have an effective tax rate of 40%. Even where a person with income of that magnitude seeks to avail of tax reliefs to reduce their tax liability to very low levels, and the number that do so is small, the horizontal measure, which I introduced in Budget 2006, will ensure that their effective tax rate will be not less than 20% in any one year.
This Government's approach has been all about keeping personal and business taxes low to strengthen and maintain the competitive position of the Irish economy, and we have been very successful in doing so. The reform of the tax structure over the past ten years has been one of the contributory factors in our economic success, which gives people money in their pockets and lifestyle choices which were not available in the past to previous generations.
Deputies Bruton and Burton may also wish to note that for a married one-earner couple with two children on average earnings, Ireland has the lowest tax wedge in the entire OECD area. In addition, when cash transfers from the State are taken into account, such couples face a negative burden in Ireland because they receive more in the cash transfers than they pay out in tax and social security contributions. Ireland is the only OECD country where this is the case.
Deputy Burton decries the effect of individualisation and claims that this measure was introduced in 1999 to increase the female labour supply. This is not the full story. The weakness of our income tax system at that time was how heavily it bore on single people because, in order to improve their position, we had to give double increases to married one earners and this used up scarce tax resources. If we want to go back on individualised tax bands, we will inevitably raise the relative burden on single earners for a given amount of tax relief. While I accept that people may make life choices at different times in their lives, I am not sure if we can turn the clock back at this stage.
I welcome Deputy Bruton's positive comments on the various "tax back" initiatives being taken by Revenue to help taxpayers receive the tax reliefs to which they are entitled. To recall what is being done, starting in 2007 credit institutions will be allowed to operate DIRT-free accounts for those over 65 and incapacitated persons; and all age-related credits and credit for trade union subscriptions will be given as far as possible automatically. Revenue is also looking at making arrangements so that the non-reimbursed amounts paid on prescribed drugs under the drugs refund scheme can be automatically refunded at the person's marginal rate of tax, and for 2008 the plan is to move to giving automatic repayments in respect of certain hospital and other medical expenses. Other automatic relief options, for example reliefs in respect of nursing home payments, are also being explored. I regret that Deputy Burton does not appear to share Deputy Bruton's positive view of these developments and is still calling for the establishment of a tax advocate's office. As I indicated previously to the House, I do not see the need for such an office. A robust internal complaints procedure already exists in Revenue for handling taxpayers' complaints and taxpayers can also ask the Ombudsman to review their case if they are still not happy. Given the comprehensive and accessible system already in place for complaints or appeals by any taxpayer who feels unfairly treated by the tax system, it is not obvious to me that there is a case for putting in place the additional layer of a tax advocate's office.
On a related point, a number of Deputies criticised the fact that since 2003 taxpayers can only claim tax rebates for the previous four years. The quid pro quo for this is that Revenue can only go back four years in seeking tax due, except where there is clear fraud on the part of the taxpayers. There is a symmetry in this measure which is perhaps overlooked.
A number of Deputies have referred to the mid-Shannon scheme. First, for the record, I never said that all property-based incentive schemes would end. In budget 2006, I made it clear that any proposals for the introduction of new reliefs should, as far as appropriate, be time limited and be subject to an assessment of costs and benefits prior to their introduction where relevant, and that full information of those availing of the scheme be made available to Revenue. This commitment has been followed in full in that scheme.
This scheme, which originated from a submission received from Shannon Development in the lead up to Budget 2006, was the subject of an ex ante evaluation by Goodbody Economic Consultants which I have had published on the Department’s website. One of the principal objectives of that evaluation was to assess the potential costs and benefits of the proposed scheme in advance of any implementation. In the view of the consultants: the Shannon region appeared to be relatively underdeveloped from the point of view of tourism; there was potential for a relatively small and targeted investment in tourism infrastructure in line with what they saw as the limited tourism potential of the region; and a subsidy to attract such investments would usefully redistribute economic activity to a relatively less well developed part of the country.
Accordingly I have introduced this time-limited pilot measure. However, while I appreciate Deputy Bruton's perceptive analysis of how the worth of such schemes should be assessed, cost-benefit analysis helps to inform the assessment but all such decisions on reliefs in the end come down to a matter of judgment. I note there is broad support in the House for this measure, when one listens to the wider spread of Deputies commenting on the Bill, and I welcome that.
To reassure Deputy Burton, the scheme does not apply to apartments or holiday homes and the environmental impact, according to the study I mentioned, should be limited. The scheme is aimed at promoting the development of tourist-related infrastructure in the region and the selection of projects will be carried out by an independent board in line with guidelines to be drawn up by the Minister for Arts, Sport and Tourism in consultation with me.
Deputy Cowley made a plea for tax relief for projects in Mayo, in particular for Knock, and Deputy Boyle referred to Cork. This was in contrast to Deputies Bruton and Burton who favour limiting the spread of such relief. We can discuss the merits of both of these courses further on Committee Stage.
Deputy Boyle asked what is so special about the horse industry. Jobs are what make the industry important — jobs in rural areas and jobs where no jobs might otherwise arise. I spelled this out in my Second Stage opening remarks. Deputy Boyle's concern regarding the sale of a stallion after the rolling over of the four year allowance for the cost of stallion acquisition is wide of the mark. In cases where the cost of a stallion is written down for tax over four years and the horse is subsequently sold, the stallion owner will be taxable on the full sale price rather than just the profit from the sale of the horse. Therefore, it is hard to see how the measures introduced in the Bill could encourage the widespread selling of horses for the purposes of rolling over the four year allowance along the lines described by Deputy Boyle.
Deputies Boyle, Burton and Bruton raised the challenge of global warming and looked for further measures to reduce our carbon footprint. My policy is to incentivise carbon reduction by fostering new technologies, encouraging alternative fuels and extending tax breaks such as the business expansion scheme, BES, to genuine recycling — wind farms and bio-fuels already being covered. There are other policy choices, for example, increasing the tax on coal, gas, electricity, oil, air fares and so on and if that is the Opposition's policy, in all fairness, they should tell the voters so.
Some Deputies have commented on the lack of green items in this Bill. However, the most significant tax item that this House has ever passed in respect of alternative energy was in last year's Finance Bill. Finance Act 2006 provided for excise relief of more than €200 million for bio-fuels over a five year period. This scheme commenced last November on foot of receiving the necessary EU state aid approval and has managed to successfully kick-start the domestic bio-fuels industry. The scheme will ensure 2% of the transport fuel market comes from bio-fuels by 2008. Significant additional non-fiscal measures which will increase this target are due to be announced shortly by my colleague, the Minister for Communications, Marine and Natural Resources, Deputy Dempsey.
Deputy Ó Caoláin wanted to know why we cannot proceed with vehicle registration tax, VRT, changes now on high CO2 emission vehicles. This is simply because we need to get this change right from the outset and to consult with both car dealers, car users and those concerned with the environment. Any system linking VRT to CO2 emission levels will need to be relatively simple, and capable of adjustment over time to maintain appropriate downward pressure on emissions. We also need to make sure we will be able to continue to get the €1 billion or so tax revenue, which, in the end, is the reason for VRT. Incidentally the closing date for receipt of submissions under the public consultation process is 1 March, so my officials will very shortly commence work on the design of the new system taking into account the views of submissions received.
On the more general point of our national climate strategy, my colleague the Minister for the Environment, Heritage and Local Government, Deputy Roche, has established a ministerial task force on climate change to oversee the preparation of a new strategy. He intends to publish this strategy by Easter, taking into account submissions received in the public consultation, policy developments in other sectors, in particularly energy, as well as commitments made in the budget.
Deputy Boyle's comment that the cost of carbon credits for this country will be of the order of €1 billion to €1.5 billion is completely inaccurate. Independent consultants retained by the Government have assessed the average price of credits to be €15 per tonne in the 2008-2012 Kyoto compliance period. Against Ireland's total credit purchasing requirement of 18 million tonnes this translates into a cost of €270 million.
Deputies Bruton and Ó Caoláin referred to our dependence on the property boom. In so far as stamp duties and capital tax reserves are concerned, this is not the case. We have not built the budget on expectations of continuing large increases in these sources of revenues. Our tax forecasts now, and in previous years, are modest, indeed cautious, on this score and we are as a result criticised for large overshoots. I should also point out that the main reason we are receiving more in tax is the significant growth in the economy. The tax and economic policies being pursued by this Government have put more money into the pockets of taxpayers and they are spending and investing that extra money as they see fit. This extra spending and investment yields extra taxes.
Deputies Connolly and Crawford expressed their disappointment at the stamp duty threshold for first time buyers on second-hand houses not being increased from €317,500 to take account of house price increases. They will, however, be aware that the Government decided to ease the burden for first time buyers by instead increasing their mortgage relief — doubling the ceilings on mortgage interest relief for first time buyers from €4,000 to €8,000 in the case of a single person and €8,000 to €16,000 in the case of a married couple or a widowed person. This initiative is aimed at putting the money straight into their pockets instead of into the pockets of sellers, which would probably happen if the stamp duty threshold was changed.
Deputy Burton has mentioned the use of company shares, where the stamp duty is 1%, to circumvent the stamp duty of up to 9% on acquiring land. This is claimed as some sort of special deal we gave to land developers when, in fact, the 1% stamp duty on company shares dates from 1951 when it was set by the then inter-party Government. It was looked at in 1996 when the rainbow Government sharply increased stamp duty on residential property to pay for the abolition of residential property tax, RPT, and local service charges, but was left unchanged. Contrary to what the Deputy claims, our fingerprints are not on this.
Deputy Bruton referred to the proposed renewal of the BES and associated seed capital scheme and the survey carried out by my Department during summer 2006. The aim of the survey was to identify the types of companies that generally avail of the scheme and to determine the nature and extent of the benefits of the scheme to companies that have availed of it in the past. Of the 1,391 companies surveyed, 491 responded, representing 35% of those to whom the survey was sent. This is a very good response rate for a survey of this nature and the survey clearly indicates that the BES has been good for manufacturing, good for jobs and good for investment in small firms throughout the country.
I would like to clarify for the House, however, that my decision to extend these schemes was not based solely on this survey. A thorough review was carried out by my Department in conjunction with the Department of Enterprise, Trade and Employment and the Revenue Commissioners and the results of this will be published shortly. The review took account of the findings of the report of the Small Business Forum, Small Business is Big Business, the survey of small and medium enterprise, SME, finance equity carried out by Forfas, and the PricewaterhouseCoopers, PWC, report Strategic Advisory Services, Enterprise Ireland's Seed and Venture Capital Funds Programme 2006, as well as a range of submissions from interested parties. The extension of the scheme was considered by the tax strategy group in the context of budget 2007 and the relevant papers will also be published in the normal way.
On the basis of all of this work, I concluded that there was a strong case for extending the schemes, given the clear market failure in providing equity capital for small firms in their start up and early development phase, the evidence of how vital the schemes have been in the past for such firms and the continuing needs in this regard, the potential return to the economy from indigenous Irish companies and the clear support for continuation from a large number of representative and other bodies in the public and private sector.
On a more macro-economic level, Deputy Bruton indicated that public spending was outpacing economic growth by 50%. This is not correct as growth in public spending, both current and capital, has been maintained at around 10% on average over the past five years, compared with average annual gross national product, GNP, growth of around 9% over the same period. This level of increase has allowed for major improvements in the level of public services with tangible impacts in areas such as education, roads and public transport. More resources are being allocated to strengthen front line public services such as health and justice and we have invested considerably in building up our economic infrastructure in a way that supports the growth potential of our economy.
The recent national development plan, NDP, provides a coherent framework for progressing this strategic approach to resource allocation into the future. Moreover, in making available the necessary resources, this Government has succeeded in keeping our public finances within sound and sustainable overall parameters, to the extent that Ireland's overall economic and budgetary position is now the envy of Europe. Our national debt is among the very lowest in Europe, we are running a healthy budget surplus, our economy is strong, and unemployment is low.
Naturally, it is not just a question of making available the resources, as we have done — good governance requires that we ensure that the public gets good value for money for every euro spent. That is why the Government has put in place a comprehensive value for money framework that addresses every aspect of public expenditure from the planning phase right through to implementation and delivery. This Government has made available the resources that are necessary for public services and for investment in our economy. We have done so in a way that is manifestly prudent and sustainable and we are taking very concrete and innovative steps to promote value for money and to link public expenditure with public service outcomes.
A number of Deputies mentioned the issue of farm taxation measures. I recognise the important contribution of the farming sector and I have included specific reliefs in the Bill for the farming community and, more important, for the rural economy in general via the mid-Shannon scheme and the replacement of the stallion relief scheme. This Government's commitment to support the vitality of the rural economy is not open to question.
Time does not permit me to respond on all the points raised but I look forward to Committee Stage which will offer an opportunity for a more detailed discussion.
- Ahern, Michael.
- Ahern, Noel.
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- Cregan, John.
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- Dennehy, John.
- Devins, Jimmy.
- Ellis, John.
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- Finneran, Michael.
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- Fleming, Seán.
- Gallagher, Pat The Cope.
- Glennon, Jim.
- Grealish, Noel.
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- Keaveney, Cecilia.
- Kelleher, Billy.
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- Lenihan, Conor
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- Kehoe, Paul.
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- McGrath, Paul.
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- Moynihan-Cronin, Breeda.
- Murphy, Catherine.
- Murphy, Gerard.
- Naughten, Denis.
- Neville, Dan.
- Ó Caoláin, Caoimhghín.
- Ó Snodaigh, Aengus.
- O’Dowd, Fergus.
- O’Keeffe, Jim.
- O’Shea, Brian.
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- Penrose, Willie.
- Perry, John.
- Rabbitte, Pat.
- Ring, Michael.
- Ryan, Eamon.
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- Sherlock, Joe.
- Shortall, Róisín.
- Stagg, Emmet.
- Twomey, Liam.
- Upton, Mary.