Finance (No. 2) Bill 2008: Report and Final Stages.

Amendment No. 1 in the name of Deputy Joan Burton is out of order and the same applies to amendments Nos. 2 to 4, inclusive.

Amendments Nos. 1 to 4, inclusive, not moved.

Amendments Nos. 9 and 10 are related to amendment No. 5. Therefore, amendments Nos. 5, 9 and 10 may be discussed together.

I move amendment No. 5:

In page 9, between lines 19 and 20, to insert the following:

2.—Marginal relief shall apply in respect of the income levy over €18,304 threshold and up to €25,000 in a manner to be prescribed by regulations made by the Minister for Finance under this section.".

I am very surprised at the Ceann Comhairle's decision to rule out of order the first amendments. Similar amendments to those have been allowed in previous years, to basically look at the impact on the taxation system of the various tax breaks and also in terms of having a taxpayers' advocate to ensure they get the refunds to which they are entitled.

The purpose of amendment No. 5 is to provide sliding or marginal relief in relation to the levy. This budget has proposed a very draconian income levy, which will apply to everybody with an income over €18,304. As it is a levy, anyone who earns less than that — just about on a level with the minimum wage — will be exempt. However, if someone earns €18,500, he or she will pay the full 1% on the whole of the income. For someone on an income just slightly above the minimum wage, it will mean that he or she will end up paying €185 a year to the Revenue Commissioners. This will be very difficult for employers, in terms of employment policy, because it means that someone on the minimum wage who gets a small piece of overtime or a little bonus for having done some extra work effectively will be pushed into having to pay the levy. What the Minister has done will act as a very severe incentive for hastening the return of the black economy in Ireland.

There are spiralling rates of unemployment at the moment with tens of thousands losing their jobs. The level of the levy is pitched very low and the fact that there is no sliding or marginal relief means that if, for example, somebody qualifies for overtime, there will be a major incentive for that to be dealt with under the counter. This is one way in which the return of the black economy will be heavily facilitated.

At present in Dublin and around the country, firms of accountants are suggesting to clients that they should split their income. If some of the income, for example, €17,900, is transferred to a wife, they will escape the levy completely. If they have income of €250,000 and were to split that among their family members in a family business, it will mean that the Minister's — and more importantly, the Taoiseach's — promise that people in the higher income echelons could not avoid the levy, and in fact would pay more, is set at nought. Tax experts and accountants are currently offering off-the-shelf schemes which allow income splitting for people in the upper echelons. The Minister and his officials know this. It is all over town that these arrangements are very easily made for the purpose of avoiding the higher rates of the levy. I will explain to the Minister how it is done.

If family members are employed in or are directors of a company, the income is split among them. People at the top levels, therefore, who are meant to pay 2% to 3% — the Minister was very proud of how progressive his legislation was — will have an easy avoidance mechanism. However, the Minister is not prepared to do anything for those at the bottom of the scale, the type of people who should be encouraged to go to work and not end up on social welfare or return to the black economy.

Since it took office, the Government has been seen to be all at sea. The Minister marched into the Dáil that day and said he was appealing to patriotism. Where is the patriotism in the very wealthy being able, and allowed, to split their income to avoid the higher rates of the levy — 2% and 3% — while people on lower incomes have no margin of relief? It would not cost the Minister very much to recover this lost income if he wanted to by simply applying the levy to those on the higher scale, while ensuring they had no avoidance mechanisms.

Later on, the Labour Party is offering him an opportunity in the Bill to secure and copperfasten anti-avoidance mechanisms. The Government seems bewildered, uncertain and unsure. However, when the levy comes out of the pay packets of those who will still have jobs at the end of January, they will be hit very hard. I do not know whether he quite appreciates the wave of reaction that will follow when employees see that levy taken out of their wage packets at the end of January and accumulating through February and March.

To be fair, there ought to be a marginal relief mechanism where somebody gets overtime or is paid a small bonus or facilitates his or her employer by working extra. I met a security guard in one of the shops in Blanchardstown town centre yesterday who earns €17,000 a year. He had a better job, which went, and now he is working as a security guard in one of the British chain stores, for which he is being paid the going rate. He will not be liable, technically, for this levy. On a zero hours contract, common in the retail trade, the worker usually has no choice if asked to do overtime.

Such a contract means that if an employer wants somebody to work 25 hours this week, because of another employee's absence through illness or whatever, he or she is obliged to accept the extra work. Normally, people are happy to accept the extra work because it does not worsen their overall financial position. However, if they accept the extra work, they get caught in a clear poverty trap where they are liable for the full rate if they go over the €18,304. This is an important and significant introduction of a new poverty and anti-employment trap. The Minister could easily address it, at little cost, by introducing some level of marginal relief.

I proposed amendment No. 9 to try to achieve a fairer taxation system or to take at least a small step in that direction. The threshold of €18,304 is an extremely unfair level at which to commence the 1% levy. The level of €37,000 is more in line with the average industrial wage. Surely somebody on an amount below the industrial wage should not have to shoulder the burden of the 1% levy.

In the case outlined by my colleague, Deputy Burton, if the security guard was due to go home at 6 p.m. but the colleague due to relieve him did not turn up in time and he was asked to stay till 7 p.m., he could suddenly be over the threshold. People do not become liable for that element of the 1%, but for the full amount and that is grossly unfair. This discourages the work ethic. Why would anybody want to be enterprising, seek overtime or get stuck into the job in order to enhance themselves or their employer when a penalty is about to be applied to them, a penalty that is exceedingly unfair?

Many of the points were made on Committee Stage, but it is worth pointing out again that this levy penalises families on low incomes and removes vital spending power from them. It will cost these families in excess of €500 per annum when the cumulative effect is taken into account. As the Minister did not change his mind on this on Committee Stage, I do not expect he will do so now, but let us hear what he has to say anyway.

I accept the Minister has improved the appalling proposal he announced in the budget by providing for some exemption limits and a more tiered structure. That is a step forward. I would accept the current proposal as not a bad outcome if there was a sunset clause on it, in other words, if we knew it was a temporary measure and would be withdrawn. Unfortunately, the history with regard to drawing income tax proposals of this nature to a close is not good. As mentioned, the income tax code was introduced as a temporary measure during some war in the 19th century and has survived two centuries.

It is for this reason that I cannot understand the reason the Minister does not adopt some of the structures of existing tax codes. We already have three income tax codes and now he is introducing a fourth. It has been called the "Lenihan levy", so, hopefully, he will be immortalised through that title. PRSI has both a threshold and an exemption limit, which provides fairness, particularly to those on low incomes. The health levy has an exemption limit set at €25,000, which is higher and closer to the suggestions being made for this levy. Income tax has a threshold of approximately €18,000 or €19,000 before a person must pay tax.

This levy is the least fair to people on low incomes and introduces poverty trap features that would cost very little to remove. The Minister said it would cost €60 million in total to remove them. The Minister should put that in place, even at the cost of recovering the €60 million somewhere further up the scale. People on this side of the House would accept that. It is not good practice to have a tax like this. An elderly couple, for example, on €40,000 would pay nothing, but on €40,001 would pay €400. Where is the fairness in that? Why, when the unfairness has been pointed out, would the Minister consciously and knowingly say that is the sort of code he will introduce? The Minister put a cost of €60 million on it. If he recovered the €60 million further up the scale, people would not quibble about it.

There are proportional scales in all the other tax areas. Regarding income tax, for example, there is marginal relief above a certain level of income. If the margin between the exemption limit and the amount of income is less than 40%, there is marginal relief. The same applies to PRSI where there is an exemption limit and people are taxed at 4% above that rate. Furthermore, the health contribution, unlike this levy, was for a specific purpose and people on an amount below €26,000 a year are exempt from it. The health levy was for health and the income levy was for youth employment.

The Minister should accept the reasonable proposals being made in these amendments as they are about providing relief at the lower end. They suggest relief on a scaled basis. It seems the Minister considers this levy an income tax, although he has called it a levy. If marginal relief is available for normal income tax, the Minister should consider the proposal I have put forward for some kind of marginal system at lower income levels.

I assume what Deputy Burton has in mind is an allowance of €18,304 for individuals with income up to €25,000 or some similar mechanism. This would have the effect of reducing the income levy payable by such individuals by €183 per annum. This would cost the Exchequer approximately €60 million in the full year and would add a considerable level of complexity to the system. If the Deputy believes that this amendment would solve the issue of the step effect, I would have to say it would not, but merely move the step up and cost €60 million in the process.

If I understand Deputy Bruton's amendment correctly, it would introduce a fourth rate of 0.5% to the income levy. It would mean that a levy of 0.5% would apply to incomes between €18,304 and €28,304 in the case of a person under 65 and for income between €20,000 and €30,000 in the case of single persons over 65 and between €40,000 and €60,000 for a married couple where one or both is aged 65 or over. This would also cost approximately €60 million in a full year and the maximum benefit to individual workers would be less than €3 per week. There would be considerable difficulties in payroll implementation.

Deputy Morgan's amendment proposes to almost double the exemption threshold. The cost of this measure would be €185 million in 2009 and €265 million in a full year. Aside from the significant cost of the measure, it would also mean setting a lower exemption threshold that is 7% above the projected average industrial wage for 2009. The cost of these amendments would have to be recouped from elsewhere.

With regard to Deputy Burton's point about income splitting arrangements, the transfer of assets to a spouse to avoid paying the levy at 3% would be of minimum benefit in that the spouse would also be subject to the levy in his or her own right. Transferring an asset to effect a saving of 1% or 2% of income levy would, in many cases, cost more in conveyancing and legal costs. Likewise, paying a spouse through the accounts of a business, where the spouse is not actually employed, would not be an expense which is wholly and necessarily incurred in the performance of the business. Therefore, it would not be allowed as a deduction.

Deputy Bruton rightly referred to the complexity of the income tax and other variable systems we have in place. In substance, the operation of PRSI, the health levy, income tax and this levy amount to an income tax system. I agree with Deputy Bruton on that and look forward to the proposals of the Commission on Taxation in that respect.

Deputy O'Donnell contrasted the treatment of marginal relief, income tax and PRSI with this particular proposal. Income tax is at a rate of 20% and PRSI is also substantially in excess of this sum. I do not believe the Deputy is comparing like with like in discussing marginal rates in the context of a 1% levy.

I find the Minister's approach very disappointing. When governments around the world are producing stimulus programmes for their economies, the strategy in this budget is not only to increase taxes, but to increase them in a counterveiling way. Much of the increased taxation in the budget is disastrous for the real economy.

Of the tax increases the Minister put forward in the budget, the levy means there will be a poverty trap because it offers no marginal relief. If people move from €18,304 to €21,000, €22,000 or €23,000, they will immediately incur an extra €183 in tax. These are the people at the bottom of the scale and they, more than anybody else, are the ones the Minister should wish to encourage to earn more income. Their earning more income has two important benefits. First, it gives a person who is on little more than the minimum wage an opportunity to have a much better standard of living. A sum of €183 per year will buy a lot of sliced pans, sausages and chips for families on very low incomes. These are the people whose children end up eating cheap food because they cannot afford expensive food. This measure is not without implications for people's lifestyles. A person on social welfare is exempt, correctly, from the levy. However, we are talking here about the working poor. In his scheme, the Minister proposes to tax the working poor and if they earn a little bit over the minimum, he will tax them even more. I know the Minister is not without compassion. All we suggest is a marginal scale of relief.

The tax increases, such as the 0.5% increase in VAT, are the worst signal the Minister could send out. He would have done better to send everybody free tickets to travel to Newry rather than raise the VAT rate by 0.5%. His tax increases are ill-thought out and do not produce any kind of economic stimulus, unlike measures taken by every other government in the world. Instead, they will make people want to keep their incomes low and, in the case of the VAT increase, will make them want to shop in Newry.

I call Deputy Arthur Morgan and I remind Deputies they have two minutes for their contributions in this part of the debate.

I appreciate the Minister's point that there would be an additional cost to the Exchequer were he to accept my amendment. However, I also sought to bring the 2% levy threshold to incomes of €100,000 instead of the current level of €150,000. In addition, I sought to introduce a 3% levy for incomes in excess of €200,000, on the basis that people with that level of income are in a position to afford such a levy. This is in complete contrast to people on lower incomes, who cannot afford to pay it.

In effect, the Minister is impoverishing, significantly, a substantial number of people on very low incomes. As we face into the economic downturn, the number of people involved will be ever growing. Although my amendment contains what the Minister might consider a negative implication, on the other hand, had he accepted my other two amendments, there would have been a significant positive implication because they sought to alter the thresholds for people on higher incomes.

I agree with the point made by Deputy Richard Bruton that at least income tax is fair, in that if there is a threshold, one's income up to that threshold is exempt. That is not the case here. Does the Minister not accept the point that there is, for example, a disincentive for people to work overtime? In certain cases, when employers might not have enough work to create a new position, they can give an existing employee a few hours of overtime. It is a more cost-effective way of dealing with the issue rather than going the other way. However, employees are now going to be taxed right back to the beginning and they will not accept it. What does the Minister think of that point?

I have nothing to add to what I already said. I remind the Minister that in the existing exemption thresholds, also at €40,000 and €20,000, there is marginal relief. This is not rocket science. We are not asking the Minister to invent something that has not been thought of before. It is already there in codes where an intermediary rate applies and there is an exemption threshold. It smooths the impact. The Minister appears to be persuaded by the arguments but he is waiting for the Commission on Taxation to tell him what to do. I honestly do not think that is a great answer.

I am not persuaded by the arguments or I would accept the amendments. The bottom line here is that €60 million is involved.

Deputy Burton referred to the need for a stimulus package. The capital programme in the budget is a substantial stimulus package. It involves in excess of €8 billion of borrowing that has been applied for investment purposes. That is a very substantial stimulus for the economy and is the type of package that most other small open European economies are adopting in the current economic circumstances. The type of stimulus package that Deputy Burton seems to envisage is one where tax, direct or indirect, is reduced in order to create more purchasing power in the economy. We know that such a measure in this country would lead to further imports. It is not clear that the decision of the United Kingdom Government to introduce such a stimulus will work.

It is working.

With regard to the question of the Commission on Taxation, I await its proposals on the reform of the complexity of our income tax system. However, in respect of the levy, I do not believe the amounts involved are such as to impose substantial, or any, hardship on individuals. I am amazed at the position taken by socialists in Ireland, such as Deputy Burton. They do not study the practice of their comrades in Scandinavia who believe that all income should be subject to income tax.

Is the Deputy pressing the amendment?

Amendment put and declared lost.

Amendment No. 6 in the name of Deputy Joan Burton is out of order. Amendment No. 7 arises out of committee proceedings.

Amendment No. 6 not moved.

I move amendment No. 7:

In page 9, between lines 19 and 20, to insert the following:

2.—For the avoidance of doubt, nothing in respect of relief from taxation in respect of remittance arrangements is intended to constitute relief in respect of the income levy.".

With reference to the Minister's last comment, this amendment will test which of us is closer to Scandinavia and which to the Cayman Islands.

The Minister re-introduced the remittance basis. In that measure he suggested that if high rollers in the banks, the financial services industry and in research and development who were to come into Ireland and who were important to the development of a business, were non-domiciled and from outside the EU area, they would be taxed from now on according to the rules. As I understand it, they would then get a refund of tax in respect of income of more than €100,000 which they had not remitted into this country.

On the night the levy was announced, I recall the Taoiseach saying it would apply to everybody, without fear or favour. As I understand from the information presented by the Minister concerning the return of the remittance basis and tax voidance for very high rollers, these people may not incur the levy, other than in respect of the €100,000.

I would like the Minister to clarify the following point. Will someone who is on the remittance basis and who has an income from their multinational of, say, €200,000 a year pay €2,000 or €3,000 on the levy, or will that person pay just €1,000 on the remittance basis of €100,000 a year? If that person is to pay the lower amount, it is obviously a very neat piece of tax avoidance and completely gainsays what was committed to in this House on the discussion of the budget.

The purpose of this amendment is to ensure we have complete clarity and that the levy arrangements apply to the whole of such people's income. The Minister is offering them a very generous avoidance of tax based on the arrangements he brought forward. He is taxing somebody on €18,500 at 1%. What is he doing to those who are, as the Minister said, very high rollers? What are the Minister's intentions in this regard?

The Minister referred to people not conveying assets in order to avoid the levy. I did not suggest that; I referred to splitting income. I know that conveying assets can be expensive but splitting income in a family-owned company is not expensive. As I understand it, the levy applies to income. To give an example, a couple has an income of €200,000. If one person in that couple earns the €200,000, he or she pays 1% on the first €100,000, which is €1,000, and 2% on the second €100,000, giving a total levy liability of €3,000. If the couple splits the income between a husband and wife, giving each €100,000, they would both pay a 1% levy, so each would pay €1,000 and, therefore, their total levy bill as a couple is €2,000. If they split it even wider among other family members, which is perfectly allowed for, they may be in a position to diminish it even further because they could pay each of their children €17,500 and no levy would arise at all in regard to that. This facility is contained in the legislation.

The Minister referred to the Swedish model. He will tax people on €18,500 at 1% of all income, yet he is leaving wide open the capacity for perfectly legitimate avoidance by making arrangements in regard to income. He has not told us or made clear what anti-avoidance mechanisms exist.

With regard to the scheme outlined by Deputy Burton, the person must earn the relevant sum in the income split. If, for example, the business is a family farm, the person must do the equivalent amount of work to split the income. One cannot notionally assign income to two or three different persons in a particular family. In the treatment of the accounts submitted, there must be a real value performed by the person in respect of whom the income is paid. There is ample power in the legislation to set aside such arrangements and, indeed, evidence through the levy of the existence of such arrangements might furnish a pointer to the commissioners in regard to when such operations were being carried out. I do not accept the Deputy's argument that this is a valid avoidance scheme but it does draw attention to the fact this levy, unlike the levy introduced when Deputy Burton was a Minister of State, has a progressive element to it and has 2% and 3% rates, not simply a flat 1% rate.

To return to the topic opened by Deputy Burton of the tax treatment of persons who are at or just above the minimum wage rates, we in this country must be real about this — that was my reference to the Scandinavian issue. According to the latest OECD data, Ireland has the lowest tax wedge in the EU for single persons, married one-income couples and married two-income couples on average earnings. A low tax wedge makes it easier for employers to employ staff. Ireland has the lowest tax wedge in the entire OECD for married one-income and married two-income couples on average earnings. Ireland derives the fourth smallest proportion of tax receipts from labour of the EU countries. Only Bulgaria, Cyprus and Malta have lower tax receipts from labour and, as we know, Malta has tax receipts from persons who want to claim tax benefits there. Employees in Ireland make very low social security contributions by EU standards. Only Lithuania and Estonia have lower employee social security contributions and employers in Ireland also have the third lowest social security contributions in the EU, just above Cyprus and Denmark. We in this country have to recognise these facts because we are in circumstances where we must have a real discussion about the relative balance we have between taxation, borrowing and expenditure.

On amendment No. 7, will the Minister outline the position of the levy charge on persons who are on a remittance basis?

Of course. I became waylaid, for which I apologise.

The Deputy's amendment proposes to insert a section in the Finance Bill which states that section 13 of this Bill, in providing for a repayment of tax where income is not remitted in particular circumstances, will not provide a relief from the income levy. Section 13 provides for a relief by way of repayment where income is not remitted other than exclusion of that unremitted income from the operation of PAYE. Therefore, the income in question will have been subject to the income levy in the same way as any other emoluments. The provisions of section 13 are solely a repayment of tax deducted and not a repayment of any other levy, health contribution or PRSI that would be payable in respect of an emolument paid to an employee. As the legislation already ensures there is no exemption from the levy provided in section 13 of the Bill, I do not see the need to state this and do not see any need for the Deputy's amendment.

The Minister has confirmed this is dealt with as a levy. The Minister himself referred to the lower income paid. The point being made is that the figure of €18,304 was picked because it is the exemption ceiling for PRSI. If someone is on €353 a week rather than €352 a week, that person will pay an extra €600 overall in levies per year. The simple overall point we are making is that the Government should be ensuring this measure is progressive. However, this means that if one earns an extra €1 per week, one will pay an extra €600 overall in levies per year, which is fundamentally flawed.

Is the Deputy pressing her amendment?

No, but when the new remittance system goes into operation, I will seek to establish that what the Minister says actually applies because I believe strongly that the section the Minister has drafted is open to avoidance and mitigation in respect of the levy.

Amendment, by leave, withdrawn.

I move amendment No. 8:

In page 11, line 19, after "emoluments." to insert the following:

"Notwithstanding the foregoing, capital allowances on investments undertaken in order to comply with government requirements would be allowed as a deduction according to the standard rules which apply for such an investment.".

I resubmit this amendment because on Committee Stage the Minister did not have an estimate of the cost of the concession sought. I am sure he has had the opportunity in the intervening time to work out its cost. The Minister argued against the amendment on Committee Stage on the grounds that by investing in environmental protection or other compliance requirements, one is enhancing the wealth of the owner. In fact, these compliance requirements enhance the common good and not the wealth of the owner. If the wealth of the owner were to be enhanced, there would be no requirement to have compliance rules and regulations, because it would be seen as a good investment.

The same problem applies in this case. There is no sunset clause on this tax. As a result, unfair elements, apparent to everyone, are being imposed and will take on a life of their own, perhaps not for perpetuity, but for a considerable period. We ought to take more care in this regard. I accepted the Minister's argument that we do not wish to see very high earners sheltering income and avoiding tax and that the levy should apply. However, the decision to rule out capital allowances is of far greater import than simply addressing the case of a small number of high net worth individuals who succeed in avoiding every tax. This goes to the core of what constitutes one's income before or after allowances are calculated, and what is needed for investment to keep the business in operation.

I am not happy with the caviller argument of the Minister to the effect that applying a system of levies which takes no account of people who plough money back into their business is fair, because a small number of high net worth individuals avoid every tax. If one wishes to tackle tax matters relating to high net worth individuals, I can provide many ideas. One could cap the aggregate of tax reliefs available from any source at a given figure. We previously suggested a figure of €100,000. There are many ways of getting at those individuals without creating a tax structure which is inherently flawed, which is the case in this instance.

Although they have attempted to do so, my officials find it difficult to put an exact figure on the amount that would be lost to the levy were capital allowances permitted. As Deputy Bruton is aware, the income levy has been introduced as a measure to re-establish tax revenues. It applies across all income streams and it is determined on an individual basis at progressive rates, depending on the financial circumstances of the individual. The amendment proposed by the Deputy would grant special treatment to those individuals who are obliged to invest in capital assets to satisfy requirements of the particular sector in which they trade. That would be contrary to the general thrust of the policies underpinning the income levy and would place certain taxpayers in a preferred position over others.

The tax system already provides reliefs in respect of such capital investments, allowing the investor to write off against income tax in full the relevant cost of the investment over a defined period of time. The capital investment referred to by Deputy Bruton can already be claimed against income tax and written off in full over the period of the investment. I fail to see how the 1% levy prejudices the person in question. It should be noted that the acquisition of assets for use in a trade normally results in an increase in the asset wealth of the business and the possibility of the owner disposing of this asset at a gain at a later date.

Deputy Bruton indicated on Committee Stage that the particular capital investments about which he was concerned and which prompted this amendment related to farming investments to comply with the EU nitrates directive. The Department of Agriculture, Fisheries and Food made generous grants available for many of these particular capital projects. The remainder of the cost of these projects can be written off in the normal way against income tax.

Amendment put and declared lost.

I move amendment No. 9:

In page 12, line 40, to delete "€18,304" and substitute "€37,000".

Amendment put and declared lost.

I move amendment No. 10:

In page 13, between lines 10 and 11, to insert the following:

"(d) in the case of persons whose income only exceeds the threshold set out in paragraphs (a) and (c) by €10,000, only half of the levy calculated under Part 18A will be payable.”.

Amendment put and declared lost.
Amendments Nos. 11 to 14, inclusive, not moved.

Amendments Nos. 15 and 16 arise from committee proceedings. They are related and will be discussed together.

I move amendment No. 15:

In page 38, between lines 10 and 11, to insert the following:

"8.—Where medical expenses claimed as a tax credit consist of or include IVF treatment, the expenses shall to that extent be allowable at the higher rate.".

I raised this matter with the Minister on Committee Stage. The Minister has proposed to flat rate medical expenses relief, which was allowed at 41% and to reduce the relief to 20%, save in the case of nursing home expenses, which will remain at 41% for some time. I drew the Minister's attention to an area in which I believe there is a particular hardship being inflicted. It applies to couples and persons undergoing a course ofin vitro fertilisation, IVF, treatments. I also raised this matter with the Minister for Health and Children and I have confirmed that IVF treatment is not available in the country.

Where a couple wish to have a child, have exhausted other possibilities and have undertaken a course of IVF treatment, it must be done on a private basis. It is not something for which medical insurance companies will pay, or for which they will make a substantial contribution. Normally, it must be paid for by the couple involved. For many such couples it may be the last opportunity to have a child and the treatment is, therefore, very important and significant for them and their wider families. These people experience a longing, hope and desire to have a child.

The process currently involves protracted medical investigations to see if the woman is suitable for the treatment. Then, if it is possible and recommended to undergo the treatment, one must provide for up to three or more courses of treatment. The initial investigation and each course of treatment can cost between €2,000 and €3,000. It is not unusual for a course of IVF treatments to ultimately cost at least €10,000 and I have heard of cases where it may cost up to €20,000. In such circumstances, the treatment must be carried out privately, because it is not available through any public treatment of which I am aware. In that case the medical taxation relief is remarkably significant and important for couples. Couples must fund the treatments and, in many cases, the preparation for the treatment, the investigations and the treatment itself often entail the woman reducing her workload or, in some cases, stopping work completely.

Not everyone who goes for IVF treatment is well-heeled. There are people in all circumstances who wish to have a child but cannot without the support of IVF treatment. Their families may come together to help with financial support. I asked the Minister to examine this matter. The Minister for Health and Children suggested she would examine the matter and introduce a scheme to recognise the difficulties arising for affected couples.

While statements have been made by parents who are taking their children for highly expensive orthodontic treatment, there is some level of provision through the public system for very severe cases. This is the reason IVF treatment is unique. I tabled this amendment again because the Minister had stated he would examine this issue to ascertain whether he could do something to assist. The Minister should indicate whether, having had some time to think over the matter, it is possible for him and his colleague, the Minister for Health and Children, to do something to assist couples who find this is the only way in which they may be able to have a baby. This is an extremely expensive option for which the State makes no public provision. Although the Minister spoke glowingly a few minutes ago of Scandinavia, one can get some assistance there from the state in respect of such issues. The Minister should indicate whether he has had time to think about this issue or to give some consideration as to how he might assist such couples.

Incidentally, I refer in particular to those who already have entered the treatment process. The ending of the higher rate health relief has taken them by surprise, as they have built up a budget that now has been increased by approximately 21% because of this unexpected change.

I wish to speak in support of these amendments. Deputy Burton referred to the point I wish to make in respect of orthodontic treatment. Public provision for orthodontic treatment is not great and is highly limited. Many parents have started their children on courses of orthodontic treatment that can take up to two or three years. They have committed to expenditure that is not of a type that one can incur before the end of 2008 to get relief at the marginal rate. Many of those affected are on relatively reasonable incomes and pay tax at the higher rate. If such treatment had started before an appropriate date, such as the date of the budget, consideration certainly should be given to extending marginal relief for a year. This would be a reasonable proposition regardless of the cost.

As for the over-70s, who are being caught by the 1% levy, their medical expenses as a proportion of their income are much higher than those of younger people and strong consideration should be given in respect of marginal relief. I also wish to make a general point on the 1% levy to which the Minister referred. While I am open to correction, the aforementioned levy is the first that is not for any particular purpose. Normally, a levy is granted for a purpose. For example, the health levy was granted for health expenditure and the income levy for youth. The new levy really is akin to another form of income tax. While one may call it a levy, effectively it constitutes income tax. For example, in the area of capital allowances, aside from the point Deputy Bruton made previously, people in small businesses who invest in equipment and who are paying no income tax will be hit with this 1% levy, which constitutes income tax. While the Minister may call it a levy, it is no such thing. I support the amendments and restate my two points in respect of orthodontic treatment where it has been started and the ongoing medical expenses of the over-70s, for whom relief at the marginal rate was a huge factor in their disposable income.

I wish briefly to discuss amendment No. 16, which I tabled, which pertains to people who are over 70. The Minister fails to appreciate the quadruple whammy this budget has administered to people in this category. If one is a retired person aged 70 or over and has an income that is just over the average industrial age, one will be obliged to pay the 2% health levy for the first time, as well as the new 1% levy, which one would not have paid previously. Moreover, one will lose one's medical card, which I conservatively estimate to be worth €2,000, as well as the medical relief one would have received at the marginal rate, which I estimate to be worth between €1,000 to €1,500. Through this budget, the Minister hit people in this category, with modest incomes and high medical expenses, for approximately €5,000. I refer to people with incomes of between €36,000 and €50,000, for whom this constitutes a 10% hit on their take-home position.

I simply do not understand the reason the Minister should decide that those who are 70 and over, whose income is greater than the magic figure of €700 per week, suddenly have become those who should shoulder a 10% burden. The burden is greater than 10% if it is taken from their after-tax income. I cannot discern the reason the Minister has decided to do this. This is the fourth measure to be targeted at them. The Minister has removed the medical card from them and has hit them for the health and Lenihan levies and now proposes to hit them in respect of their relief for medical offences. It is unfair and I cannot discern the rationale. The Acting Chairman, who has his ear to the ground, will share my wonder as to the reason this measure is being taken. This is the smallest of the concessions Members seek and the Minister should give it.

I am bound to note the Deputy should not draw the Chair into the business of the House.

I beg the Acting Chairman's pardon.

I call the Minister, who should note that three minutes remain before this business must adjourn

I will try to deal with the points raised. Deputy Bruton raised the issue of income earners aged 70 and more who did not qualify for the medical card and has suggested both here and on Committee Stage that they would be obliged to pay the health levy. This is not the case. The Health Act 2008 provides that all persons aged 70 and over will be exempt from the health levy, no matter what is their income or whether they have a medical card. This suggestion is incorrect.

This is one of the Minister's U-turns.

It is not a U-turn.

As for Deputy Bruton's amendment, I understand he envisages that higher rate taxpayers, who are 70 years old or more, should be allowed to deduct health expenses at their marginal rate. The biggest health expense that an elderly person may face is nursing home fees and I have introduced an amendment to ensure that such fees will continue to be deductible at the taxpayer's marginal rate.

Only 3% of elderly people are in nursing homes.

The majority of persons who are 70 years of age or more——

The bulk of elderly people are not in nursing homes.

This is the biggest single expense——

They face medical expenses in their own home.

The Minister should proceed.

Assuming that such people are insured, this is the biggest expense they face. The majority of persons who are 70 years of age or more have no liability at the higher rate and many are exempt from tax altogether. I am informed by the Revenue Commissioners that approximately 90% of all income earners over 70 do not have a liability at the higher rate and, therefore, would not be in a position to benefit from this amendment. The proposition that one should have a special regime based on age for higher taxpayers cannot be justified.

The Minister stated that only 5% would lose their medical cards.

As for Deputy Burton's point, higher rate relief is of no benefit to standard rate taxpayers who seek IVF treatment and the reintroduction of higher rate relief is not the answer in this respect. The Government must examine whether a scheme that will help both higher and standard rate taxpayers in the same way is feasible. An expenditure-based scheme would be required, were this to be addressed in current economic circumstances. I will raise this issue in that context with the Minister for Health and Children.

I remind Deputy Burton that less than one minute remains, after which I will ask her to adjourn the debate.

I am disappointed by the Minister's statement. He will be aware that a couple in which only one person works is subject to a much more penal tax code because of the absence on individualisation. I believe I explained that for a number of people who undergo IVF treatment, the process can be highly intensive and one may find that only one spouse works. Consequently, the Minister's remarks do not necessarily apply because single income couples enter the higher tax bracket much faster than do dual income couples.

Debate adjourned.