Finance Bill 2010: Second Stage.

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

The Finance Bill 2010 ensures that all sectors play their part in the critical task of stabilising the public finances. We know from our experience of recent decades that unless we restore order to the public finances, our economy will not recover. The extraordinary budgetary adjustments the Government has introduced during this economic crisis have halted the deterioration in the budget balance and boosted international confidence in our ability and willingness to put our house in order.

The benefits of these decisive actions can be seen in the sharp drop in our borrowing costs over the past year. Had we not taken strong measures in December's budget and convinced international markets of our determination to correct the public finances, we surely would not have escaped the jump in borrowing costs that some other euro area members have suffered over recent weeks.

We must remain steadfast on the path to fiscal correction set out in the budget. We are setting the seeds for economic recovery and new job creation. The unemployment rate will peak this year at just over 13%. This is less than projected last April but it is still unacceptably high. That is why we must continue to encourage employment growth through targeted measures that will build on our existing strengths and put us in the position to take advantage of the recovery that my Department and the Central Bank are forecasting for later this year. The Finance Bill 2010 does exactly that.

The Government remains committed to providing a pro-enterprise environment and to maintaining our relatively low tax burden on business. This will assist us in maintaining and enhancing our competitiveness. Unless we sharpen our competitive edge, we will be unable to return to the tried and tested strategy of export-led growth. With this in mind, the Bill extends the existing scheme of tax exemption on the income and gains of new start-up companies over the first three years of operation. It will now be available to companies which commence trading in 2010.

The Bill also contains measures to facilitate the development of Islamic finance in Ireland. Islamic finance covers any financing arrangement that is compliant with the principles of Sharia law. Islamic finance is the fastest growing sector of the international financial services industry and it is important that we be in a position to attract this new type of investment into Ireland. Under these provisions, the tax treatment applicable to conventional finance transactions will be extended to embrace Islamic finance.

I have received a number of proposals to establish a medium-term national savings product as an additional source of funding for capital investment. In the budget, I announced the introduction of a national solidarity bond. The Bill gives effect to that announcement. The national solidarity bond will be marketed by the NTMA to small investors over the next few months. Unlike some other NTMA long-term savings products such as savings certificates, the bond will pay interest on a periodic basis over its lifetime in addition to interest at the end of its lifetime.

In my budget speech, I promised to bring forward a package of measures to improve the effectiveness of the Revenue Commissioners in tackling the shadow economy, addressing smuggling and excise frauds, and dealing with tax avoidance schemes, all of which are a matter of acute current public interest and concern.

The Revenue Commissioners' experience from dealing with a series of investigations over the years is that offshore vehicles have commonly featured as a key element of the tax evasion process. In the context of the property-induced crisis with which NAMA is now involved, we are concerned that similar offshore vehicles have been used to evade tax. The Bill facilitates access by Revenue to information in the possession of NAMA about any offshore entities or vehicles involved in transactions that are now under its scrutiny.

There are a number of other Revenue powers or measures included in the Bill. One in particular will allow for a substantial increase in the fines that a court may impose on those convicted on indictment of certain offences under excise and custom law. These provisions will be particularly important in the fight against tobacco smuggling which has become a significant problem with serious implications not only for the health of our citizens, but also for the Exchequer.

While we continue to battle our way through these challenging economic conditions, we must remain aware of the longer term but perhaps even more difficult challenge posed by climate change. It is the responsibility of governments everywhere to change behaviour to reduce our greenhouse gas emissions. Accordingly, this Bill provides full details of the carbon tax I announced on budget day. The tax has already been applied to petrol and auto-diesel. It will apply to kerosene, marked gas oil, liquid petroleum gas, fuel oil and natural gas from next May and the application of the tax to coal and commercial peat will be subject to a commencement order.

As a result of the European Court of Justice's ruling against Ireland of 16 July 2009, the VAT legislation must be amended to allow public bodies, including local authorities, to be subject to VAT where they engage in activities that lead to a distortion of competition with private operators. Examples of services that will now be subject to VAT include waste collection, landfill and recycling; off-street parking; toll roads; the operation of leisure facilities; rent from certain lettings of commercial property; and the supply of staff and data. It should be noted that such services are already subject to VAT where they are provided by a private operator. This seems to have escaped comment in much criticism of this measure. The standard or the reduced VAT rates will apply as appropriate. The changes will apply from 1 July 2010. Education, health, water and passenger transport services will not, however, become subject to VAT arising from the judgment.

Business customers who charge VAT will not be affected by this change since they can claim for any VAT charged by a public body. The impact on private individuals, VAT-exempt entities and other non-registered bodies will depend on whether the VAT is passed on by the public bodies, which in any event should be limited somewhat since public bodies providing the affected services will have entitlement to deduct VAT on their inputs.

The Bill abolishes six tax reliefs, as recommended by the Commission on Taxation. This is in addition to the announcement in the budget that mortgage interest relief will be abolished on a phased basis and the removal of a number of property based reliefs in the health sector in the Finance Act 2009.

The effect of these changes has been to remove unnecessary costs and distortions from the tax system. I am committed to continuing this process. To that end, I will ask each of my colleagues in government to assess the effectiveness of tax expenditures within their sectors, with particular reference to those that the Commission on Taxation recommended should be removed from the tax code. My Department will review the outcome of that sectoral analysis and I will report to the Cabinet by the end of June 2010. This new approach will place the onus for objectively justifying the retention of any expenditure on the sector benefiting from the relief. My Department will then be in a position to present the Cabinet with an analysis on which to make well-informed decisions about the future of tax expenditures in good time for the 2011 budget.

I will now describe some of the main provisions contained in the Bill in the time available to me. Part 1 of the Bill covers the income levy, income tax, corporation tax and capital gains tax. My budget day announcement that an exemption from the income levy would be provided for certain capital expenditure incurred by farmers in meeting the requirements of the EU nitrates directive is in section 2. This section also makes a number of technical amendments to the income levy, including placing the levy on the same footing as income tax for double taxation agreements and cross-Border worker relief.

Two tax reliefs recommended for abolition by the Commission on Taxation are dealt with in section 4. It ends the tax relief for long-term care policies and the benefit-in-kind relief relating to the loan of certain art objects.

Section 5 contains a number of changes which will simplify the approval of qualifying health expenses for tax relief purposes. The requirement for approving medical institutions is removed. Instead, maintenance or treatment costs will now qualify for relief where they are necessarily incurred in association with the services of a practitioner or diagnostic procedures carried out on the advice of a practitioner. Nursing home fees will qualify for relief provided the nursing home concerned provides qualified nursing care on-site 24 hours per day. I am also amending the legislation to clarify that tax relief is available in respect of private contributions made towards the cost of the upkeep of an individual under the fair deal scheme.

Section 6 provides for the changes to the mortgage interest relief regime announced in the budget. To support those who bought their homes at the peak of the housing market, relief is being extended until 2017 for those who took out a qualifying home loan in 2004 or thereafter. To provide encouragement to those who may wish to purchase in the next three years, relief will be available at current levels until 2017 for loans taken out between 1 January 2010 and 31 December 2011. This is an extension of six months on my budget day announcement. It has been made because it is more convenient to have such a cut-off point at the end of a calendar year. A reduced rate of relief will apply for qualifying loans taken out after this date, but before the end of 2012. This reduced rate will be 15% for first-time buyers and 10% for non-first time buyers with ceilings of €6,000 for married couples and €3,000 for single individuals applying in both cases. Loans taken out in 2013 or after will not qualify for mortgage interest relief. Mortgage interest relief will no longer exist for the tax year 2018.

Section 9 enhances the current remittance scheme which provides an incentive for foreign employees to undertake an assignment in Ireland. The scheme is being extended to include European Union and European Economic Area nationals while reducing from three years to one year the amount of time they have to spend in Ireland.

Section 11 provides for the abolition of tax relief on service charges. This change is in line with the recommendations of the Commission on Taxation. Provision of such relief is inconsistent with the overall thrust of having persons meet the economic costs of the services provided. Relief can be claimed this year for service charges paid in 2009 and relief can be claimed next year for charges paid in 2010. There will be no relief on charges relating to the year 2011 which would have been claimed in 2012.

An anti-avoidance provision, section 12, tightens up the rent a room scheme.

Section 15 makes a number of amendments to certain pension-related tax provisions and introduces a requirement for the electronic delivery of certain information in respect of small self-administered pension schemes. Sections 16 to 18, inclusive, are designed to prevent abuse of certain types of share-based remuneration schemes for employees.

As I announced in my budget speech, the Government wants high earners availing of tax incentive schemes to contribute more in the current difficult economic circumstances. Therefore, I am abolishing, with effect from tax year 2010, the loss relief available to owners of significant buildings and gardens who are passive investors. Details of the changes are set out in section 20 along with some transitional arrangements.

The effective income tax rate paid by persons subject to the restriction of reliefs or horizontal measure is increased from 20% to 30% in section 22. I regard this provision as an important move in ensuring all parts of society play their part in addressing the difficulties facing the public finances. The windfall tax, a special rate of 80% capital gains tax, which was introduced as part of the NAMA legislation, is amended by section 24. The provision will ensure that material contraventions involving a rezoning are covered by the tax. The amendment also ensures that the sale of once-off sites below an acre in size and €250,000 in value are not subject to the windfall tax.

Section 25 provides for the termination of the scheme of capital allowances in respect of child care buildings. The scheme, which was previously open-ended, now has a termination date of 30 September 2010, unless certain qualifying conditions are met. This measure is in line with the termination of other capital allowance schemes in the Finance Act 2009. The abolition was also recommended by the Commission on Taxation.

Enhancing the attractiveness of Ireland as a location from which to conduct international business is an important theme of the legislation. The tax treatment applying to the new management company passport regime introduced by the European legislation, the UCITS IV directive, is clarified in section 27. The section also exempts investment undertakings from the requirement to obtain and maintain declarations of non-Irish tax resident unit-holders where the investment fund in question is not marketed in Ireland to address the disproportionate administrative burden this places on industry.

Under section 28, an existing provision which removes the charge to Irish tax on the profits of a trade exercised in the State where it is exercised through an independent Irish resident agent in certain cases is being extended to include companies authorised under the European UCITS legislation.

Finally, section 29 removes the requirement for non-resident companies receiving dividends from Irish resident companies to provide a tax residence and-or auditor’s certificate to obtain exemption from dividend withholding tax, DWT, at source. Instead, a self-assessment system will apply.

The legislation on deposit interest retention tax, DIRT, is amended by section 33 in a number of respects. First, it removes personal retirement savings accounts, PRSAs, from the scope of the DIRT regime. Second, it requires a relevant deposit taker to obtain the tax reference number of a person making a specified deposit; this will facilitate the introduction of the national solidarity bond announced in the budget speech. Third, financial institutions will make accelerated payments of DIRT tax to the Exchequer. Finally, financial institutions must automatically issue statements setting out the amount of DIRT deducted rather than on request as at present.

As a Government we must ensure that, in the face of a growing competitive threat from new emerging markets and the aggressive marketing of established centres, the Irish Financial Services Centre remains competitive in all areas. That is why section 35 of the Bill contains provisions which will help us to attract our share of the growing market of Islamic finance. In 2007, Islamic finance was estimated to be worth approximately US $700 billion and is estimated to be growing at approximately 10% per annum. The measures in the Bill will provide level playing fields for all commercial financial product providers to ensure the tax benefits that accrue to conventional financial products are also available to Sharia compliant products.

These changes are a first step towards providing equality of treatment to Sharia compliant financial products. I intend to work with the Muslim community, the banks and interested parties to investigate the market for Sharia compliant retail products in the context of future finance Bills.

Ireland's existing, but limited, arm's length pricing rules for manufacturing cease at the end of this year with the ending of manufacturing relief. The opportunity is now being taken to introduce general transfer pricing legislation in section 38. This will cover arm’s length trading between associated enterprises for cross-border and domestic transactions, but small and medium enterprises are excluded. The provisions will align Ireland’s tax code in this area with international norms, namely, the OECD transfer pricing guidelines.

A number of significant enhancements are being made to the scheme of tax relief for the provision of intangible assets introduced last year. The amendments in section 39 include additions to the list of specified intangible assets that can qualify under the scheme and a reduction in the period from 15 to ten years over which the assets must be held to avoid a clawback of the relief. The aim of these amendments is to increase the effectiveness of the scheme and to enhance its ability to attract international business to Ireland. Section 40 extends from seven to ten the categories of energy-efficient equipment eligible for the existing accelerated capital allowance scheme. The new categories included in this scheme are refrigeration and cooling systems, electro-mechanical systems, and catering and hospitality equipment.

My budget speech included an extension of the existing scheme allowing start-up companies three years' relief from corporation tax. Section 41 gives effect to this announcement by including companies commencing to trade in 2010. It is important that the annual Bill includes measures which ensure that Ireland can continue to attract internationally traded services. Three consecutive sections — 42, 43 and 44 — are aimed at this objective. Unilateral credit relief, in respect of royalty flows from residents in non-treaty countries, is extended to all trading companies. This relief, currently available to companies entitled to the 10% corporation tax manufacturing regime, expires at the end of 2010. The measure extends the relief beyond that date and to all trading companies. Unused credits in respect of foreign tax on branch profits will be permitted to be carried forward and credited against corporation tax in succeeding accounting periods. Finally, section 44 permits a company to carry forward excess losses of a foreign branch that were disregarded under section 847 of the Taxes Consolidation Act 1997.

Changes are proposed in section 46 to the current tax treatment of dividends received by companies here. The amendments involve charging tax at 12.5% instead of 25% on foreign dividends paid out of trading profits from countries with whom Ireland does not have a tax treaty; simplifying the arrangements under which foreign dividends are treated as sourced from trading or non-trading profits; and providing tax exemption to foreign dividends forming trading income received by portfolio investors, that is, companies with a holding or voting rights of less than 5%. I am confident that measures such as this will improve the international business environment here and help to encourage the creation of high quality employment in the economy.

Section 50 contains a number of changes to the existing research and development tax credit scheme. The main change deals with a position where a company or company group is carrying out research and development activities in different facilities in separate geographical locations and the activities in one of those facilities is permanently discontinued. Section 52 makes two amendments relating to the date of disposal and acquisition of an asset. The first amendment avoids a position where a person disposing of land under a compulsory purchase order could have been due to pay the liability before receiving compensation for the land. The second amendment ensures that the proceeds from a compulsory purchase order are liable to capital gains tax where the individual making the disposal dies before receiving the consideration.

I am aware that there has been some concern among farming organisations that the date of the disposal of lands for a CPO, rather than the date when the compensation was received, should determine the rate of tax applicable to the disposal. I am pleased to inform the House that the Revenue Commissioners have confirmed that the rate of tax which will apply to land acquired under a CPO is the rate when the land is disposed of, which in most cases will be the date when the acquiring authority enters on the land.

Part 2 of the Bill deals with customs and excise.

The legislation for the introduction of a carbon tax and for the consequential necessary legislative changes arising from this tax are set out in sections 60 to 83, inclusive. Section 84 confirms the budget day announcements reducing the rates of alcohol products tax. Sections 85 to 88, inclusive, provide for the updating of excise law provisions to reflect new European legislation on excises including the new computerised excise movement control system. Sections 89 to 96, inclusive, change the penalties applicable to certain offences under excise and custom law, increasing substantially the fines which a court may impose on persons convicted of such offences on indictment. Included here is section 92, which places on a clear legal footing the arrangements under which Customs can obtain information in respect of goods and passengers in advance of their arrival.

Vehicle registration tax, VRT, issues are dealt with in sections 97 to 106, inclusive, including, in addition to the VRT items to which I already referred, the introduction from 1 January 2011 of a revised classification system for the registration of vehicles in the State to reflect the broader European classification system. There will be the introduction of a new requirement for vehicle insurers to inform Revenue where they issue a policy to a foreign-registered vehicle for a period in excess of 42 days. This will provide a further tool to tackle VRT evasion by State residents who fail to re-register and pay the appropriate VRT on vehicles purchased outside the State. Sections 102 and 103 confirm budget day announcements introducing a scrappage scheme, extending until 31 December 2012 the existing VRT exemption for electric vehicles and the existing VRT relief of up to €2,500 for plug-in hybrid electric vehicles.

Part 3 deals with, value-added tax, VAT. Sections 107 to 126, inclusive, set out a range of changes to VAT including, as announced in the budget, the reduction in the standard VAT rate by 0.5% to 21% with effect from 1 January 2010; the application of VAT to services provided by public bodies including local authorities; the introduction of a margin scheme for second-hand means of transport and agricultural machinery; and changes to the VAT treatment of telephone cards and prepaid top-ups for mobile telephones. Sections 124 to 126, inclusive, make amendments to the Value-Added Tax Act to facilitate the introduction of a VAT consolidation Bill later this year.

Part 4 deals with stamp duties. Section 128 allows for the exchange of data between the Revenue Commissioners and the Property Registration Authority in a new e-stamping regime. A relief from stamp duty will be provided under section 131 to facilitate fund mergers enabling the re-organisation of funds into structures now permitted under recent European UCITS IV legislation. The levy on certain life assurance premiums will be amended by section 132 to exclude pensions and re-insurance business. The payment date for the levy will also be brought forward.

Part 5 deals with capital acquisitions tax, CAT. Provisions relating to a wide-ranging package modernising CAT are covered in section 139, the full details of which are outlined in the explanatory memorandum. Delivered on an Exchequer-neutral basis, the changes will deliver significant benefits to customers and their agents including the elimination of up to 75% of the current quantum of CAT documentation combined with the use of faster, simpler and more straightforward processes.

Part 6 covers miscellaneous provisions. Section 141 gives legislative effect to the domicile levy announced in the Budget Statement in which I highlighted the importance of improving the effectiveness of the Revenue Commissioners in addressing the challenges facing the collection of taxes including dealing with tax avoidance. The Bill contains several relating measures which aim to achieve this objective. Section 143 will enable information to be given to Revenue by the Taxi Regulator about persons operating and licensed in the taxi and hackney sectors. Section 144 will enable Revenue to apply to the Appeal Commissioners for consent to issue a notice to obtain information from third parties regarding a class of persons on the same basis as they have for financial institutions. Revenue will be able to secure information from NAMA on offshore vehicles under the provisions of section 145. Where summonses and other such notices are returned unserved by the Garda, Revenue will have the authority under section 146 to serve them. Section 147 adds to the list of taxes and duties which must be paid before a tax clearance certificate can be issued. Only taxes within the control of the taxpayer are included, such as the income levy and excise and customs duties.

Double taxation treaties are widely regarded as critical pieces of fiscal infrastructure for developing substantial bilateral trading and investment opportunities by reducing tax impediments that might otherwise deter cross-border activity. Since 2007 we have grown our network of tax treaties from 44 to 56. The provision in section 149 is the final step in the ratification process for new treaties with Bahrain, Belarus, Bosnia-Herzegovina, Moldova, Georgia and Serbia. Section 149 provides for the ratification of eight tax information exchange agreements with Gibraltar, Guernsey, Jersey, Turks and Caicos Islands, Anguilla, Bermuda, Cayman Islands and Liechtenstein. Section 152 provides for the introduction of a statutory scheme providing for voluntary deductions from members of the Judiciary to cover pension-related deductions.

At this stage there are still a small number of matters under consideration for inclusion in the Finance Bill that I may bring forward on Committee Stage. I will, of course, also give consideration to any constructive suggestions put forward during our debate today and tomorrow.

The economy faces its most serious threat ever. In the past 18 months we have lost 200,000 jobs, of which 90% were those of persons under the age of 30 years. They are the people to whom we look to create the dynamism for a knowledge economy and new enterprises for the future, the building bricks of our future economic success. We cannot afford, through the lack of Government ambition, to allow them to be faced with the bleak spectacle of unemployment or emigration. Unfortunately, that is what has already happened. They are the cream of our people who must be helped find opportunities. However, there must be far greater ambition than is displayed in this Finance Bill if we are to confront this huge underlying problem.

The Minister does not seem to appreciate the real danger that we will enter into a vicious cycle of cuts being undermined by rising interest rates and unemployment payments. This year the Minister admitted that of the €4 billion cuts he imposed, half will be whittled away by additional interest payments and the other half by the need to pay for the 75,000 jobs that he predicts will be lost in the next 12 months. That puts the economy in a vice-grip. It is as if we are running hard just to stand still. Last year, it was huge tax increases; this year, cuts in public service pay. We are asking people to make large sacrifices without the bigger picture of a strategy as to how we are going to get out of the hole in which we are.

My fundamental problem with the budget is that it lacks the ambition and a strategy in which people can believe. One key concern is that confidence is shot through in our community. John Maynard Keynes, an economist who has become fashionable again, once said, "If enterprise is afoot, wealth accumulates whatever may be happening to thrift; and if enterprise is asleep, wealth decays, whatever thrift may be doing". Our problem is everyone in our economy is caught in this move to thrift, this need to pull in their horns, to reduce their ambitions. That has a large knock-on effect on the rest of the economy.

We needed from this Finance Bill and budget something that would give people confidence and that it is time to think more positively. It needed to assure people to start getting money together for an investment project or spend on items they have postponed. That is part of the ingredient of a recovery that we have to envisage.

Fine Gael recognised this early on and put forward significant proposals, even in the taxation area, to address this. We wanted to cut employer's PRSI contributions, particularly at the low-wage level. We wanted the airport tax removed to strike a deal with airlines to bring more passengers into Ireland to kick-start the tourism sector. We wanted to have a once-off cut in low-rate, labour-intensive VAT rates to assure people not to postpone labour intensive decisions such as house repairs. That is the sort of confidence building that is needed.

While I welcome the Minister's commitment to a national solidarity bond, I miss the context in which it will be launched. Fine Gael, by contrast, has been very clear. We believe the public utilities, assets owned by the people, provide a platform for a tremendous economic revival. This is the time to say we do not need an electricity network that is bottom of the class in Europe, the most high cost, the most dependent on fossil fuels and the least developed in terms of renewable energy. Instead, this is the time to say we can build a platform for success if we build a smart grid fit for the 21st century. Similarly, this is not the time to content ourselves with broadband speeds and capacity that are perhaps 5% of best practice. This is the time to say, yes, we can develop those assets that we own to provide a platform for the growth of the knowledge economy. This is not the time to tolerate €500 million in water going down into the ground without ever reaching a household, a family or a business because of leaks and under investment in the water network. This is the time to say, we can do something with these State assets.

This takes some courage. It takes the willingness to say we can afford to let some assets go now, for example, we can afford to sell our generation capacity that is not mission critical to the recovery of Ireland. We can provide equity for this sort of investment and then one will have a State equity or holding company and the opportunity to start raise money from private pension funds and from private individuals. Then one will start to see a strategy in which the Government is saying it wants a platform of smart grids, smart broadband, a well-resourced water authority that can start to drive, both investment now and successful enterprises for the future. That is the key element missing here. There is no ambition. There is no understanding of the central employment crisis that we face.

It reflects also a lack of ambition in the recent budget to do anything with the public service itself to set an agenda of change. To give the Minister his due, he put in place the McCarthy process which churned up the ground for the first time and which stated we need to consolidate and to change our high-cost system. We cannot afford to be replicating grant-giving powers, administration structures, HR structures and finance structures in 850 different agencies. We simply cannot afford that anymore. We must develop the concept of centralised shared services where these agencies are obliged to source, which can be done so much more cheaply. We needed to see in the budget the kick-start of that exciting reform agenda. Instead, the Minister has set back that reform agenda by the sort of brinksmanship that went on with the social partners at the end.

There still is no ambition. I still have not seen the Government, either through the Minister or any of the other Departments, confirm it is taking up the McCarthy agenda, not the social welfare cuts which were taken up but the more difficult heavy lifting of cutting out quangos, closing down agencies, establishing shared services centres, forcing the knock-on changes and contemplating the need for redundancies.

The Minister needs to create the momentum for change. That is what this country is crying out for. People know this will be painful and it will not be pleasant, but they also know that we must go through that. Dr. Craig Barrett stated yesterday there are now 3 billion new capitalists out there. Some 3 billion people from China, India and Eastern Europe who, in our heyday ten years ago when we had a successful economy, were not players. Ireland could be very successful doing what we had and we could be quite smug in our success. People wanted to get into the bastion of Europe, for example, American companies wanted to get inside the walls and trade in Europe. Now that world is changed. On the model on which we built our success, we must realise that we face a much tougher and more competitive environment and the Minister must give people a sense that there is a purpose and a mission here.

I do not pretend for one minute it will not be tough. Effectively, we will have to mimic a devaluation of our currency. We will have to drive down costs across the board, not only public service pay costs but business rents, boardroom pay and the rip-off that has scarred this country. It must go right through the structure. It must be in public utilities and in the charges for which the Minister and his colleagues are responsible. Then we will start to hear people saying that there is a strategy here and that the Government is not just about hitting the little people; it is about doing something that is fair across the board. Later this evening the House will discuss exempting high-paid public servants from the impact of this, which is the wrong signal at a time when we are trying to achieve the change.

We now need big ambition from Government. There are tough measures to take but the big ambition, hope and belief is essential to getting through these difficult times. Instead, there is merely a tidying-up exercise in the Finance Bill. It falls so far short of motivating anyone to put his hand in his pocket to invest or to do something new to build confidence.

The Minister did not bring forward the ideas of his Commission on Taxation on its narrow range of proposals. It had interesting ideas. Its members wanted to help the unemployed get retraining and this was an area of tax relief that they proposed. That would start to give some people the opportunity to say that here is something coming back from the taxes they paid all those years.

They suggested that research and development which is supposed to be part of the feed into a knowledge economy should become allowable, not only against corporate tax but against pay related social insurance, and that such would bring a wider range of companies into thinking about research and development and about investing in the products of the future. That did not figure either. We do not see any such extension of the research and development credit.

They recommended to us that we should support not just start-up companies but sole traders, giving the sort of break that last year the Minister gave to companies. There are many people per force of circumstance considering starting up businesses. Why not give them the same break the Minister offered to companies?

Some of the commission's recommendations for some reason were ignored while the Minister sought others, which are not anything like as significant or which do not make an impact. I thank the Minister for the brief from his officials, but the bottom line was that all of these proposals put together would cost nothing. One cannot achieve a great deal of stimulus with something that costs nothing, and that is a problem here. This was a tidying-up exercise, with a little given there and a little taken back here. There was no attempt to say it is time to give people a leg up and a bit of confidence.

The Minister's non-domicile tax proposal is about as watertight as the string bag we, as kids, used to carry down to the shops in which one could not bring anything liquid back because it would gush out. I note comics such as "The Beano" are being revived and perhaps it could do a job on the Minister's non-domicile tax. The exemption is ridiculous. There is an escape hatch therein that is ridiculously wide. One must have Irish-located capital, excluding shares held in any company which carries on a trade, greater than €5 million. One would be caught only if one's private residence is worth over €5 million. It would not cost such a person much thought to transfer his or her stately home to his or her spouse, and suddenly with one bound this need not be paid. It is no surprise we got no estimate as to what this will raise. This will only get payments from persons who want to be seen to pay something. Maybe there are a few public-spirited people who would recognise that they ought to be paying something, but I just cannot see it working as a tax to put pressure on those who have been avoiding paying tax. The Minister would not find any of the new income levies he introduced last year having the sort of escape hatches for ordinary persons that are being built into this new tax.

The one measure people will see in this — it is no surprise that it was the headline that jumped out at everyone — is the application of VAT. The only notable measure, or one which one can get one's head around, is that the Minister has decided to extend VAT to a range of public services. He tells us that this is brought upon us by EU decisions but we are probably talking about €200 or €300 a year that will have to be stumped up by those affected, much of which will come from those who are on their knees and struggling.

This Finance Bill has followed its predecessor in the budget. It lacked the ambition needed for this very difficult time. We must take a tough approach to our public finances, implement cost-cutting across the board in the private and public sectors and become fit, lean and mean again. However, it had to have the other side. It had to show the State was willing to match with commitment and imagination the opportunities we have. We still have opportunities open to us. The successes that created the Celtic tiger, the enterprise that built up strong sectors, still exists and needs to be nurtured and encouraged. I am disappointed it has fallen short.

I refer to the extension of carbon tax to coal and peat. There seems to be a huge problem in terms of trade from Northern Ireland in these products. I understand that, effectively, no system has been developed by the Minister or by anyone else on how to keep out much dirtier higher carbon-content coal coming from the North VAT-free. In regard to this tax proposal for which the Minister is now taking enabling powers, although he is at least holding his hand in terms of the date of implementation, I do not see the corresponding enabling power on how he will police this and make it something which is not unfair to people trading in this space. Worse still, people will be bringing in more environmentally negative products to be used here. I do not see the solution that one needs. This tax needs a corresponding solution on the enforcement and compliance side to match it.

Not to be entirely negative, I welcome the Minister's decision in regard to mortgage interest relief. An extension for people who would otherwise have seen their mortgage interest relief disappear this year is welcome because many of those people borrowed in 2004 and in the following years and have been put to the pin of their collars. They paid at the top of the market and I welcome the relief for them.

I welcome a relief we discussed last year, namely, a break for people in the farming community who are trying to comply with the nitrates directive. Ignoring that as if it were part of their basic income and taxing them on it was very unfair.

I also welcome some of the decisions the Minister made to bring greater clarity to, and to open up, opportunities in the financial services sector which I hope are successful. At a time when the financial services sector has taken a hammering, people are encouraged to see there is still optimism and initiative. For example, people are looking at supporting green finance as a genuine opportunity to develop for Ireland. This is a growth sector — managing funds that want to concentrate on environmentally sound areas and supporting the markets in carbon trading. Ireland has developed back office skills. There is opportunity in these areas. These are sectors in which we need to sweat those opportunities. While we seek to rebuild our regulatory structure and to restore confidence, we must match that with a willingness to spot opportunity and to play to our strengths in key sectors. We still have key sectors and these must be the drivers of our long-term growth prospects.

I listened to Deputy Gilmore earlier when he asked questions about the smart economy document which has become a bit of an embarrassment to the Government. If it is serious about the smart economy document, it must have dates which must be driven. Commitments set out must be honoured and someone must have the sole authority to drive it and give us a sense that the Government is hitting milestones. People do not believe that is happening.

People viewed that document on the knowledge economy as putting a big bulldog clip around everything and saying this was our smart economy strategy. If it is a strategy, there must be deadlines, milestones and someone must be responsible for delivering them and if he or she fails, he or she must be accountable for failing. Deputy Gilmore put his finger on this and stated that there are milestones in the knowledge economy document and no one is paying any heed to what was said or what was to be delivered.

That goes to the core of why we are not succeeding on big strategy statements. Why did we not deliver on our climate change strategy after eight years? The reason is no one is put in a responsible position and no one is given authority or the budget and if things go wrong, no one is held responsible. We must move on that. If we are to believe the smart economy document is anything more than a cover for the Government's nakedness, we must see someone drive it, take responsibility and hit those deadlines. However, we have not seen that.

I look forward to Committee Stage which is always an opportunity to learn more about the individual proposals and to tease out the difficult aspects of tax law. I cannot say I always look forward to it with relish. It is a period in the dungeons when the only advantage is that the fourth estate is rarely there to disturb us. I look forward to engaging with the Minister, his colleague or whoever will handle the various aspects of the legislation.

I will be there.

With those few words, I reiterate my disappointment in the Bill but look forward to working on it on Committee Stage.

This year's Finance Bill is a product of a Government which has run out of ideas about how to restore the economy, get people back to work, get business moving or get credit flowing from the banks. This Finance Bill, which should mark a turning point in our economic fortunes, is devoid of any real economic plan. The Government remains locked in denial about the failure of its banking strategy, in particular in respect of NAMA to get credit flowing to businesses and individuals.

Jobs are being lost at the rate of 100 every day. Just today, 750 job losses were announced by Bank of Scotland Ireland which is closing down its Irish retail banking operation. I understand it has put forward proposals to the Minister and I would be interested to hear if he has had the opportunity to examine the proposals it has put forward to salvage at least some of the jobs in that company. Yesterday there were 175 job losses in Galway.

As unemployment crept to more than 435,000, 60,000 people also emigrated. However, Fianna Fáil keeps repeating its mantras that we have turned the corner, that we are on the road to recovery and that the economy has stabilised. Economists around the world have warned of the risks of repeating the mistakes made by the Hoover administration in the USA during the Great Depression, yet this Government seems more intent on following the lead of Hoover rather than Roosevelt.

While the Government has focused almost exclusively on the banks and its deeply flawed NAMA plan, the real economy of indigenous jobs and businesses continues to take a hammering of historic proportions. The Government seems to have a strategy that wage cuts as a substitute for deflation is the only recipe it has to offer. It made €4 billion in cuts in this budget. The parties in opposition, to support the country's international reputation, loyally gave the Government space to do that. However, the Government has said this is just the first of three such massive reductions. Although we gave the Government that space, nothing has been done by it in regard to job retention or job creation.

Once again the Finance Bill has little or nothing to offer in the way of a jobs stimulus or confident return to growth. Once again, the centre piece of the Bill is a series of new tax exemptions for the IFSC, which have been neither costed nor set out in detail, as was promised consequent to tax scandal after tax scandal. The Government is saying the same thing, namely, "Trust us, and here is a whole bag of tax exemptions and tax reliefs which we will not explain, cost or set out in detail". To hear the Taoiseach speak, one would think global finance and offshore banking is to be to the recovery in Ireland what the property bubble was to growth during the Celtic tiger era. He is seriously misled in that respect.

Last night I attended a lecture given by Dr. Craig Barrett on the importance of investing in education, science, research and development. It was interesting to note that Dr. Barrett, who is the former chairman of Intel, said that we in this country had to move from being average to being excellent. He said we went around the world boasting that we were in the top percentage of income, but if one examines our performance in critical areas such as education — in mathematics and science — one will find that instead of our performance being excellent, as our income levels would dictate, the Government has brought us down to a miserable average in a country which is famous around the world for its commitment to education. The Government, during its years in office, has reduced us to being average and not excellent in one of the areas in which Ireland has shone historically, in terms of its commitment to education and a whole generation of people who excelled in education, research and the sciences.

Dr. Barrett last night warned that the future lies in indigenous start-ups, using smart people and ideas and, above all, an environment conducive to innovation. What is this Government offering? It is offering massive support to the banks and very considered support to off-shore banking. What is in the Finance Bill for indigenous start-ups? What is in it for the thousands of those with PhDs who were coaxed back to Ireland by various scientific and research programmes, many of whom are in their 30s with young families, who bought houses at the height of the boom and who now, in many cases, will leave the country? When such people leave Ireland this time they will not return again. They can be burned once but not twice by this Government. That is the real loss caused by the kind of fumbling this Government has done regarding economic strategy and policy.

Dr. Barrett also said Ireland can no longer depend on inward flows of foreign direct investment. He is the former chairman of Intel, which carries out a rigorous procedure regarding the location of future investments on a ten to 15-year cycle. It was a clear and present warning from somebody who is a world expert on Intel locating in Israel versus Ireland versus Costa Rica and all of the different countries which are competing. He said there was a time when, on the 20 or so headings used by Intel, we were competitive on almost all of them, but we are now only competitive on the tax rate unless we decide to go back to growing the smart economy.

The Government seems to be all at sea on this matter. It does not seem to have any scientists, mathematicians or economists in its number who could come to grips with the nature of the dilemma facing this country. It has pseudo solutions which will not do very much for many people in this country.

For many ordinary families and businesses this Finance Bill means they will face additional charges on VAT, as it is applied by the Minister to a range of local authority services. He proposes to extend VAT charges, on foot of court judgments and European Union decisions, on services supplied by public bodies, including county councils, such as waste collection, recycling, off-street parking, toll roads and the operation of leisure facilities. Depending on the VAT rate charged for equivalent private services, local authority services will now attract a VAT rate of between 13.5% and 21%. This is a double whammy, in terms of service charges such as waste collection for ordinary families because the Bill will abolish income tax relief on those charges from next year.

In the December budget the Minister told us high earners must pay their fair share — it was one of the headings in his Budget Statement. However, as Minister he has side-stepped many of the reforms proposed by the Commission on Taxation, in terms of restricting tax avoidance measures used by the super rich to minimise their tax bills. For example, he has done nothing to curtail tax relief on investments in private hospitals which are now, in many cases, surplus capacity to what the country needs or can afford. He has not restricted mega pension pots.

It was abolished last year.

The tax relief on private hospitals was not abolished. It is like the tax relief which is proposed to be abolished regarding child care facilities. They all have end dates which, under qualifying conditions, can be extended. They carry a very long tail life in the tax system of a further 15 years. The Minister should not try to lecture me about what I know is in the tax code. The Department of Finance might not know but Revenue Commissioners know what is in the tax code and, according to the answer from the Minister's officials, the measures to which I refer cost us at least €400 million per year. At the height of the Celtic tiger we may have been able to afford that but €400 million is a lot of money now.

Fianna Fáil launched NAMA to a series of refrains, such as "There is no alternative", or "TINA", "The only game in town", or "TOGIT", and, most importantly, we were told it would get credit flowing. The revelations yesterday by Mr. Simon Carswell inThe Irish Times that the IMF told the Minister for Finance that NAMA would not lead to a significant increase in lending by the Irish banks and that the IMF was encouraged to refrain from making public its estimates of likely losses from the banking crisis indicate that the Government has consciously set out to mislead the House about the consequences of the NAMA project. When the Minister for Finance spoke at the launch of the debate on the NAMA legislation he said, “NAMA will strengthen and improve the funding position of the banks so that they can lend to viable businesses and households”. The Taoiseach said the Government’s objective in restructuring the banks was to generate more access to credit for Irish business at this crucial time.

At the same time the Minister was claiming the endorsement of the IMF in the House, it is now evident that it told the Minister in private that NAMA would not get credit flowing. He argued over and over again that the consequence of NAMA would be that a wall of money would come and flow again like blood through the veins of small and medium-sized Irish businesses. That is the scenario he painted for us and it has not happened. If the Minister asks any business people walking around on their uppers outside whether they are finding it easy to get credit from the banks they will tell him what the story is. He should ask many people, including low paid public servants who are currently trying to juggle their credit arrangements if they can be facilitated by the banks even though they have a permanent job, even at a reduced rate. He will find the banks will not reach accommodations with people which are reasonable unless they go through a lengthy procedure such as MABS, where they may wait for months to start to be able to address the complexity of their financial situation.

The comments quoted inThe Irish Times yesterday were made by a senior IMF official, Mr. Steven Seelig. He has been appointed by the Minister, Deputy Brian Lenihan, to join the board of NAMA in May. A serious element in yesterday’s article concerns the fact that a statement is attributed to the senior official in charge of banking in the Minister’s Department which warned against making public any official estimate for the losses faced by the banks, saying that the Department had not made this information public. The official is quoted as saying, “We naturally shared with the IMF team our informal views on the range of possibilities but would be uneasy about seeing these formalised”. It is a deeply disturbing revelation that both Government and at least some senior public officials in this country appear to hold the Dáil and the voters we represent in some contempt. If taxpayers around the country are to bear the losses of the collapse of the banking bubble and fiasco, the least they and their representatives deserve to be told is the truth. It is extremely disturbing too to find a publication of information which suggests that the said information was to be kept at all costs from this House and from taxpayers.

NAMA is an €80 billion project that was sold to the public on the premise that once the banks had been relieved of their distressed assets they would be ready to start lending again. The scenario the Minister painted is simply not the case. NAMA was designed as a bailout by Fianna Fáil for its friends in the banks and, particularly, for its friends, the developers. By acting——

That is defamatory.

——in such a partisan way and playing politics with the crisis in the banking system, the Government has left small and medium-sized enterprises out on a limb, hanging on by their fingernails for the flow of credit NAMA simply has not generated——

——and for which there probably is no hope of generation before the end of this year.

We were misled.

I go around the country, as does the Minister. I have met people from all kinds of businesses and walks of life and they cannot all be lying. Most of them are frank about mistakes they made and expectations that rose too high. They are very realistic but they cannot get money from the banks.

Is the Deputy suggesting the banks should lend at the rate they were lending?

I suggest the Minister delivers on his promise that when he got NAMA through the Dáil, the flow of credit would resume. He was told differently by the IMF——

The loans have not transferred yet. We were not told differently by the IMF. I am sorry but the Deputy is not correct.

The Minister's officials obviously knew differently and the Minister decided to keep this House and the taxpayers of Ireland in the dark because, as usual, Fianna Fáil thinks the rest of us are mushrooms that benefit from being kept in the dark. That is what the Minister wants to do — to treat the taxpayers of Ireland like mushrooms. If they are kept in the dark, they will be happy and leave the Government alone.

By acting with NAMA in such a partisan way, playing politics, the Minister has damaged the economy and the hope of recovery of live and viable indigenous businesses, of the kind Dr. Barrett spoke about. The Minister has damaged their prospects immeasurably. These are matters that ought to be made the subject of an inquiry, along with statements by the Minister for Finance and the Taoiseach in the House.

I note that the terms of reference of the Minister's inquiry specifically rule out material such as the IMF discussions and advice in respect of NAMA because he stopped the inquiry's remit from the beginning of September 2008. Fianna Fáil is so clever. Even when we have a so-called banking inquiry, it will not be empowered to examine these extraordinary revelations. They are truly extraordinary——-

There are no revelations. What revelations does the Deputy mean?

There was the freedom of information material. I ask the Minister to consider that. Sometimes he is too much the senior counsel who can sell something clever without actually understanding what it is about. Irish businesses are dying on the street because of what he has done, what Fianna Fáil did with regard to the property bubble and to NAMA and——

The Deputy would have let the banks collapse in 2008.

——and what the Minister did at the time of the bank guarantee. Irish households and small businesses are in the grip of a credit famine. Businesses are struggling to get their hands on the money needed to keep paying wages and suppliers. Families looking for a mortgage to set up a home now that houses are more affordable are finding the banks will simply not lend. The banks' reluctance to lend was confirmed in today's survey conducted by the Professional Insurance Brokers Association, just as by the many people who were in contact with me during the past year. NAMA was a €54 billion gamble that was supposed to turn on the tap of free flowing credit. I told the Minister at the time that it would never work. Clearly, the IMF told him at the time that it would not get a flow of credit going again. NAMA will not get credit flowing but Irish taxpayers are still expected to take on a supersized risk. It is time for the Government finally to face up to this reality.

I wish to refer to a related matter. Perhaps the Minister might confirm, during discussions on the Bill, that significant difficulty has arisen with NAMA in respect of the lack of proper title held by developers for properties used as collateral for the loans advanced by the banks. Ironically, stamp duty avoidance by developers, which was common at the height of the boom, resulted in many developers using licensing arrangements. Does the Minister remember all those schools in our constituency where sites were sold at ransom prices by Fianna Fáil developers to the Department of Education and Science? Does he remember all the licensing agreements? We are talking about mega-avoidance of stamp duty.

As a consequence, title was not passed on completely or comprehensively. In 2006, I raised the issue of property developers avoiding the payment of stamp duty by not taking proper title of the property under development and developing it under a licensing arrangement. The loophole was estimated to have cost €251 million in 2006. It was not chickenfeed. The estimated loss to the Exchequer was €36 million resulting from the Irish Glass Bottle site deal alone. Mr. Bernard McNamara and the other co-investors were the chief beneficiaries of that piece of tax avoidance. Time and again, I raised this issue with the Minister's predecessor, now Taoiseach, Deputy Brian Cowen. In 2007, he appeared to relent, inserting section 110 into the Finance Bill of that year. With this section on the Statute Book the loophole should have been closed but the Taoiseach, Deputy Cowen, caved in to pressure from the denizens of the Galway tent. He never signed the commencement order for section 110 which, to this day, remains in abeyance.

With the stroke of a pen the taxpayer would have been in for a bounty of tens if not hundreds of millions from the period after the tax loophole was closed down.

This is not stupid. If the Minister knew anything about tax, this is one of the most famous cases of tax avoidance during the height of the Celtic tiger. The Minister's predecessor, the Taoiseach, Deputy Cowen, commissioned a special study by a firm of stockbrokers which came up with the figure of €252 million in cost for one year alone. This is not something I researched on my own but is a matter I pursued in the House month after month for several years.

A few hundred million euro might be a drop in the ocean when it comes to closing a €20 billion deficit but it would keep special needs assistants in our children's classes or would restore the traditional Christmas welfare payment. It is highly ironic that the Taoiseach's and Fianna Fáil's decision not to close the loophole has come back to bite the ordinary taxpayers yet again as this and other tax loopholes now frustrate the operations of NAMA, the passage of loans and underlying properties and titles. The Minister must make a clear and honest statement to the House on this matter.

Sections 55 and 56 of the Finance Bill are anti-avoidance measures to target what is described, properly, as aggressive capital gains tax avoidance schemes where no real economic loss has occurred. Much as I hate to say to the Minister that I told him so, I could not help but notice the banner headline in theSunday Business Post last weekend. This tax loophole cost the Exchequer €400 million in lost revenue. The Department of Finance seems to have realised that investors were exploiting weaknesses in Irish law to generate fictitious losses against which they could set off actual capital gains from their investments in shares, property and other assets. This complex manoeuvre involved the creation of back to back derivative contracts linked to the value of Irish Government bonds. As the gain and the loss cancelled each other out, there was no net loss. The gain was not taxable but the loss could be set off against gains on other investments.

These transactions have no legitimate rationale and were designed for the singular purpose of avoiding tax. With €400 million already down the Swanee as a result of this loophole, closing it in this Finance Bill is a case of shutting the stable door after the horse has bolted. Due to the fact that property and share prices have been sharply down over the past two years, there is now little need to manufacture fictitious losses to avoid paying capital gains tax. This loophole was closed off in the UK some years ago and was, therefore, well flagged to the tax authorities in Dublin. However, Fianna Fáil took no action to save ordinary taxpayers from being ripped off by people who specialise in helping very wealthy people to avoid tax, while taxes and levies on people on the lowest level of income are significantly increased by the Government. Few people are showing profits these days, as evidenced by each month's Exchequer returns. The question the Minister must answer is why he has waited until the loophole is largely defunct before closing it off. All loopholes are not treated in an equal manner. Not all have been closed off, only the ones that can no longer be used to avoid tax. Talk about a joke.

Following a long campaign by the Labour Party on the issue, the Minister has finally delivered a levy of €200,000 on tax exiles. However, it remains to be seen how many of the almost 6,000 tax exiles, as identified by the chairperson of the Revenue Commissioners when she appeared before the Committee of Public Accounts, will be affected by this. I have read the two pages of the Bill dealing with the definition of domicile. However, as an accountant, I suggest the section offers wide scope for the use of professional advisory services to mitigate its likely impact.

The introduction of tax structures to facilitate Sharia law-based lending is largely a measure designed to facilitate activities in the IFSC. This is one of a number of measures to make investing in the IFSC more attractive from a tax point of view. If the Minister is doing this, it behoves him to ensure adequate regulatory arrangements are in place, given the destruction of our reputation as a result of what happened in the case of Depfa Bank. It had a significant number of non-executive Irish directors on its board up to the time it was sold to Hypo Bank.

The episode concerning this particular bank and the losses it sustained caused tremendous damage to our reputation in Germany. These losses were subsequently incurred by German taxpayers and the German Government had to bail out the bank. With regard to the Minister's proposals for the IFSC, where are the corresponding regulatory arrangements that will ensure that what happened in the case of Depfa Bank, and subsequently Hypo Bank, which has been so damaging to our reputation, will not happen again? Is the Minister sending out or willing to send out a broad signal that the IFSC is not specialising in some kind of tax avoidance, but that it wants to specialise in legitimate and lucrative financial services?

We should bear in mind that hedge funds and international financial institutions are involved in a major shorting exercise against the euro, in an effort to weaken it and many eurozone economies as a consequence. Therefore, we need to discuss how we will balance legitimate commercial advantage to draw businesses to Ireland against our regulatory reputation as not being a fly-by-night location or, as described byThe Wall Street Journal some time ago, the wild west of international finance capital down on the Liffey. The Government has not yet addressed that issue.

Section 24 is the major Green Party input to the Bill. It provides that the windfall tax, introduced as part of the NAMA Act, will be extended from just rezoned land to cover land subject to material contraventions by a local authority. In almost all jurisdictions, an 80% tax is a joke. If people are subject to a significant tax rate of 80%, they are usually rich enough to be able to pay tax advisers to mitigate, if not totally avoid, the 80% rate. Given the state of the property market, this provision is purely notional. I am interested to know whether the Minister anticipates any tax flow from this measure. Hypothetical, punitive tax rates are a joke. This measure is a joke and is, obviously, the fig leaf for the Green Party in the Bill.

In contrast, the thorny issue of the significant tax losses being accumulated by banks and property developers as a result of the property crash, which they can set off against future tax liabilities, is not addressed at all in the Bill. In the debates on the previous Finance Act, on the budget and on several other occasions, the Minister promised he would address this issue.

I addressed it in the NAMA legislation.

No. The Minister has sought to ensure that some banks will pay a minimum amount of tax, but they will be entitled to set off their full losses, whatever way they value them, as will developers. Therefore, for many people in that situation, it may be 30 or 40 years before they ever pay tax again, other than nominal amounts they choose to pay under the arrangement the Minister set out previously.

In contrast with administrations around the world, there are no proposals from the Minister to introduce tax curbs on the supersized remuneration packages of top executives or those working in financial services. Nowhere does the Bill contain measures to crack down on the dubious remuneration schemes that incentivise short-term risk taking or maximising lending. It is quite clear the Government has failed to learn from the mistakes of the past. Barack Obama and Gordon Brown are getting tough on bankers and speculators who are determined to carry on as if the financial crash never occurred. By contrast, this Finance Bill will introduce incentives for senior executives to trade Wall Street and the City of London for the banks of the Liffey. This is something that needs to be spelled out in some detail. What are the advantages to us and what are the costs? What are the implications for our reputation and for tax revenue?

Section 152 relates to the levy on judges and is structured in a way which provides that judges can make a donation to the Government. I repeat what I said before. Why does the Minister not legislate in this regard? He could then let the judges who object to being treated like their fellow citizens take a court case. There is nobody better to take a court case and they have done so in the past. If the Minister legislated, that would mean judges, as citizens, would be treated as all other citizens have been treated.

It is good to see a Fine Gael Deputy in the Chair after two and a half years of this Government. Perhaps the past 24 hours have brought some little transformation within the Fine Gael Party. Ironically, I just met the Chair's former colleague, George Lee, outside and wished him well. I never doubted the tenacity of Meath men and Deputy Richard Bruton to hold his own.

I am delighted to have the opportunity to speak on this important issue. Despite what we have heard from Deputy Joan Burton, there are many positive aspects to this Bill. I mention in particular the section on nursing home fees. Relief on fees is now allowable for bona fide nursing homes providing 24-hour care. I am aware from my constituency work that the Nursing Homes Support Scheme Act was welcomed. It is working extremely well and I doubt any Member of the Oireachtas would have a bad word to say with regard to its operation and the benefit it brings to ordinary people. I welcome the fact the Minister has gone even further in terms of this tax relief, because this is an issue that involves every family in the country. I also welcome the extension on mortgage interest relief up to 2017. For those couples who purchase, it will be of major benefit and it will also give a fillip to our flagging house building industry. I congratulate the Minister in this regard.

I welcome the increase in tax credits the Minister has given in regard to private health insurance premiums. As the levies have increased, the tax credits for which the Minister is providing are very welcome, particularly for those over 80 years of age.

I welcome the domicile levy of €200,000. I have no doubt that wealthy Irish people want to contribute to the Irish taxation system and to our country, particularly at a time when finances are a little strapped, to say the least. The proposed measure is certainly a step in the right direction.

I welcome the measure in regard to the disposal of family sites. The Acting Chairman will have dealt with the same issues with which I have dealt for my rural constituents in Dublin North. The measure applies to sites of less than an acre and valued at less than €250,000. Everybody in the country will welcome the change and recognise it as a necessity. Very often, families who own land are handing over sites to their children. It would be totally unfair to tax them, particularly at a time when they are experiencing financial difficulty. Well done to the Minister. The measure will be welcomed across the country.

Deputy Burton referred to the new financial services measure. The Minister's plans are welcome. If one analyses the Irish Financial Services Centre, one will find it has been an outstanding success, a huge employer and a development that has brought great credit to Ireland Inc. This is an area where we can grow our business and keep the Irish flag flying in the international sphere.

With regard to CPO lands, the Minister has proposed that, from 4 February, capital gains tax would be paid only when the seller of the land is in receipt of funds. The Acting Chairman will have had representations asking why people should be penalised up front, particularly in cases where they have not willingly sold their land and where the State authorities insist on buying. It was a double blow for people to find they could not get their money up front. At long last, we are recognising that unfairness. I congratulate the Minister in this regard.

To move to the issue of excise duty, I have received a number of representations from those wholesalers who were taken aback that the Minister had reduced duty because they had bought in huge quantities. They are suffering as a result, although I recognise it was a bad commercial decision and that, if the position were reversed and they had made gains, they would not be giving back the money. However, in the context of the current business climate where it is not easy to make a profit, some recognition might be given in this area. If the opposite had happened, these people would have pocketed the money; we live in difficult times and many companies are experiencing trading difficulties. If consideration of this issue were to stave off job losses, it would be worthwhile. I would like the Minister to comment.

I have spoken to the Minister about the position of the commercial golf courses and hotels which are paying VAT on golf green fees. Many of these businesses are experiencing a severe downturn in trading, with many struggling to survive. The suggestion of a temporary zero VAT rate has been made for income up to €37,500, similar to what applies in respect of the private member golf clubs. A temporary period of perhaps two years would assist these organisations, of which there are 52 involved in the Irish Golf Course Owners Association. They employ 4,000 people, strange as that might seem to some, and an investment of more than €700 million is involved. I sincerely hope the Minister will give consideration to this issue.

These organisations are at a complete competitive disadvantage compared to the private golf club. I am a member of a golf club, as the Acting Chairman may be. While some clubs might be put out by what I have said, there are jobs involved and we should do anything we can to maintain jobs and boost tourism. Many of these organisations are involved in good tourism promotion, which the Minister should also consider.

The carbon tax will be a direct cost added to the running expenses of haulage companies. A number of these companies have approached me to ask whether the Minister would consider applying the measure in the same way as the plastic bag levy, whereby the end user pays. If transport companies can pass on the charge to their customers, it will enable them to trade more profitably than they are at present. The transport business is going through major difficulties, as the Acting Chairman will be aware. Effectively, the new carbon tax will impose higher charges on such businesses which they cannot currently apply to the end user.

The point has been made to me that if this new regulation were implemented, local purchasers would look closer to home in terms of dealing with companies that are nearby because the cost would be reduced. It is probably an unusual request but it is worth considering. When the plastic bag levy was introduced and the end user was forced to pay, people decided to use paper bags rather than plastic bags. Due to the carbon charge, a person living in Cork would have to decide whether to purchase from a company in Donegal in preference to one in Limerick. I hope some change might be considered in this regard.

To return to a point raised by Deputy Burton in regard to judges and the courts, I am on public record on a number of occasions as stating that I regard it as unfair that judges should not pay their fair share, the same as all other workers. While I welcome the fact the Minister has now incorporated the voluntary payments system, it is regrettable that 15 months later more than 25% of judges have not seen fit to pay the levy. The Constitution should be amended to allow the Government of the day to dictate the salaries and income of judges. Judges are well paid and they enjoy a good expenses regime. As such, they are in as good a position as anybody to pay their fair share. It is hoped that the Government will in the future endeavour to bring about change in this regard. I note Fine Gael has taken up my previous public utterances in terms of its introduction of a Private Members' Bill to deal with this issue. I am glad to note that I influence Fine Gael from time to time.

We welcome Deputy Kennedy's input.

I thank Deputy O'Donnell. Deputy Burton's 30-minute contribution did not contain one positive comment, which is not surprising because rarely does she utter anything positive.

The reality is that we as an institution should be showing leadership and talking things up rather than down. This is our country and it is our children, parents and relations who are suffering job losses and reductions in their salaries. To come in here and speak in a negative tone day in day out is doing nothing for public confidence or the confidence of business people. I welcome Deputy Burton back to the House——

Deputy Kennedy is talking about Deputy Burton.

——on whose negative contribution I am commenting.

The Deputy should stick to the issue before us.

Perhaps Deputy Kennedy will repeat his remarks for Deputy Burton.

Saving the taxpayer €260 million is a pretty positive contribution——

All that we hear from Deputy Burton and, to a lesser extent from the Fine Gael side, is NAMA——

——but the Deputy's side did not have the intelligence to pick it up.

Deputy Burton, please.

Fianna Fáil is too stuck into its developer friends. The developers of Ireland own Fianna Fáil, lock, stock and barrel.

There is a crock of gold at the end of most of our rainbows.

If Deputy Burton could come up with an alternative to NAMA as has Fine Gael——

We did on the night.

The Labour Party offered absolutely no alternative to NAMA——

Deputy Kennedy is endorsing many of our policies tonight.

——other than to nationalise the banks——

It is the best idea.

Let us look at the idea of nationalising the banks.

Let us look at Anglo Irish Bank, the Government's bank. Let us look at Fianna Fáil's bank, Anglo Irish Bank.

The banks assume €60 or €70 billion of——

Deputies, please. Members are making my job very difficult.

Deputy Kennedy is going off script.

If I am off-script, Deputy Burton never got on it, which is the reason I am referring to her contribution. I remained on script.

The Deputy will have to be sent back——

On nationalisation, what happens in nationalisation——

What happened in Sweden? It recovered.

The Government of the day assumes responsibility for €60 billion, €70 billion or €80 billion of debt and must inject major capital, hard cash——

The Government has only injected €11 billion in hard cash so far.

Perhaps Deputy Burton will say from where the Government could get this cash.

It has yet to inject another €12 billion or €13 billion.

(Interruptions).

I ask Deputy Kennedy to address the Chair and refrain from responding to Deputy Burton.

The IMF says €35 billion is needed for the Government's package.

The only ones against NAMA are the Labour Party and some members of Fine Gael. Eminent people including Mr. Alan Dukes, the former leader of Fine Gael, Mr. Peter Sutherland, a well known and respected financier who has——

He is a banker, why would he not support it?

——Fine Gael leanings, the IMF, which we all know keeps a close eye on financial matters here, and the European Central Bank have all backed NAMA.

That is not true.

We all know there are difficulties.

(Interruptions).

Please allow Deputy Kennedy to continue without interruption.

We will learn their conditions from the Commission on ECB in due course.

Deputy Kennedy has only three minutes remaining.

On the confidence issue, people believe they should not spend money. Bank savings are at an all time high. People are also keeping money under their mattresses and in boxes. Small amounts of money when spent can have a major impact in terms of assisting retailers, job retention, VAT receipts for Government and so on. We need to send out the message that it is okay for people to spend 5% of their income. There are people who are suggesting we should not do so. I am not suggesting we return to the wild days of the Celtic tiger. However, there is nothing wrong with people changing their car or renovating their homes.

Most people cannot afford to change their cars.

They cannot get a loan to do that.

Many people can afford to do so. We, as an institution should be instilling confidence in people and encouraging them to spend a little of their money.

That is what the Government did during the building boom and look where we ended up.

This will assist job creation and will result in tax income for the Government.

People need the banks to lend.

I accept that the banks need to resume lending.

They cannot do so under the Government formula.

The Deputy has only one minute and a half remaining.

The people who have money stored in their savings accounts——

The banks will not lend.

——should be encouraged to spend it on changing their cars and so on and not be ashamed of doing so.

They should call in to their local friendly bank for a loan.

Reference was made to Mr. Gay Byrne frowning upon the 47 people who opted to change their cars at a particular garage at Christmas time. What is wrong with them?

They assume people are driving a 2010 registered car.

People are entitled to spend their earnings, on which they have paid their taxes, on a meal in a restaurant or on a few pints on a Friday or Saturday night.

Has Fianna Fáil introduced laws to prevent them doing so?

They should not feel guilty for doing so.

Despite much of the negativity we have heard this evening, this Bill deals adequately with the relevant issues. We need the continued guidance of the Minister for Finance, Deputy Brian Lenihan, and the Government to get this country moving again.

I welcome the opportunity to contribute to this debate. The Minister referred to the role of Government as being to create a pro-enterprise environment, a point with which I fundamentally agree.

This Bill contains many good measures in terms of tax avoidance and multinational companies, which I also welcome and with which I will deal in greater detail at a later point. However, it does not include measures to deal with the SME sector, the section of the economy which drives growth. What is important is that we have confidence, credit and competitiveness. Without confidence, people will not spend. Without credit, businesses cannot function and without competitiveness we cannot compete on world markets. We are a small open economy. We are all agreed that our return to growth must be export driven. To do this, we must be competitive. While our competitiveness has improved, we remain extremely uncompetitive in a range of areas. We must, in terms of the export market, bring about a devaluation of our currency by becoming competitive across a range of areas. I do not see measures in this regard in the Bill.

In terms of the small business sector, I welcome that the Minister has extended the relief in corporation tax for three years. Why did he not go a step further and extend this to sole traders? I will explain why. Most people who set up in business do so as sole traders rather than as companies. Prior to the introduction of the 12.5% tax relief, there was a 10% manufacturing relief at the normal rate. Many people went into companies straight away for that relief but now the 12.5% rate applies to all small companies, regardless of their activity. Most people set up as sole traders and when their tax liability moves them into the higher marginal rate, they normally decide to take the incorporated limited company route. They need relief in the early years. It is very welcome for trading companies, but small businesses face the cost of incorporating when setting up. If they are not making significant money, there is also the cost of salaries, whereas they could have a situation where they pay PAYE and PRSI, but not corporation tax. It is a recommendation of the Commission on Taxation and it would be a practical measure.

We must get an entrepreneurial culture going. I always advise clients to set up initially as sole traders and to see how they go. If the business takes off, they can then incorporate. It is a more tax advantageous way to do it and it is a simpler route. If people create limited companies initially, it can create major constraints in dealing with the Companies Office and other bodies. The Minister should bear this in mind.

Section 50 contains provisions for research and development, which we will examine in depth. Research and development should be available for offset against PRSI. Currently it is available for offset against corporation tax, but not PRSI or PAYE. It would further that high-end value economy, thus bringing about changes in that whole area.

To give credit where it is due, the Minister has brought in many changes regarding tax avoidance, which I welcome. In addition, he has amended sections dealing with capital allowances, particularly in technology and similar areas, which I also welcome. The Minister has brought in a situation where, effectively, mergers will not trigger any tax balancing charge and that is welcome.

The only way we will restore confidence is if we reduce growth in the live register figures. In the past two years alone, an extra 250,000 people have joined the live register. That 150% increase is staggering. We are probably going to breach the 500,000 mark this year. The only way to deal with that problem is to provide jobs, so we must find measures to do so. The Bill's measures concerning multinationals are to be welcomed, but the SME sector will be the major driver of our economic recovery. Small and medium-size enterprises will provide employment and will be the multinationals of tomorrow. We already have an entrepreneurial culture, but it needs to be fostered so that people link in with universities. We must move to the high-end market because we can no longer compete in the low-end market. Steps should have been taken much earlier concerning Dell in my constituency. We cannot compete on a cost basis in terms of wages so we must go to the high-end market.

We have an enormous opportunity for the SME sector to become the multinationals of tomorrow as regards export growth, but we must create the environment for it. One of the key costs for a small business is wages. We put forward a budgetary proposal to cut employer's PRSI, half at the lower end and 2% at the top end. That would have reduced the cost of employment to the employer without affecting employees' take-home pay.

In 2001, our industrial prices for electricity were at the EU average but, from 2001 to 2008, our industrial energy costs rose almost 50% higher than the EU average. Can the Minister explain that? Ireland has the second highest energy costs in the EU, which is a huge burden on both the SME and multinational sectors. Government regulation must be examined in this respect.

Credit flow to small businesses is another problem. What do the IMF and the former CEO of AIB have in common? They both believe that NAMA will not bring about a flow of credit to the economy. Mr. Eugene Sheehy appeared before the Committee on Finance and the Public Sector, of which I am a member. He stated emphatically that he expected NAMA would not bring about a flow of credit, and the IMF said likewise. Are banks going to take NAMA bonds, go to the ECB, get funds and reinvest them in Government stock? NAMA still has not been signed off on by the European Commission. Our methodology for the national recovery bank was a simple formula whereby it would serve two purposes. First, it would bring about a flow of credit through a wholesale bank to existing retail banks and, second, it would have a form of risk-sharing mechanism in place.

Recently, the Tánaiste came to the House and flew a kite indicating that she may put a bank guarantee scheme in place. A bank guarantee has been in place in the UK for the past year and it has worked. It would not require a huge amount of funding. In the UK, they put in €1.3 billion which benefited 9,000 business and saved many jobs. There is now a need for a national recovery bank with a guarantee scheme in place that will bring about a flow of credit.

We must have deadlines for particular Government projects. The Government launched the e-Government strategy which cost taxpayers a fortune through malfunctioning areas. No deadline dates have been set for the smart economy. The public want to see that what the Government is providing is fair. We will soon have a debate on public servants' remuneration, concerning the exemption from pay cuts of higher level public sector employees. During finance questions last week, the Minister indicated that a Government decision was taken — I presume at Cabinet level — prior to 18 December when the emergency Finance Bill went through the Seanad. On what precise date was that decision taken by the Government? The IMF informed the Minister that it had reservations about NAMA concerning credit flow, but he did not make that public during the debate.

It had no reservations about NAMA at all.

We got it under a freedom of information request, although the Minister may not like to hear what they are saying. Furthermore, a Government decision was made concerning higher public servants' pay, yet when that measure was going through the House the Minister did not make it public. He brought it through in a circular on 23 December and he will now ram it through under a specific section in the Bill before the House.

The Bill as presented does not deal with what I feel is now required, which is an entrepreneurial culture to foster the SME sector. The Minister could simply extend the exemption for the first three years for sole traders as well as companies. That would be a practical and welcome measure. The Minister should also allow research and development tax credits to be offset against PRSI and not just corporation tax. That would provide an environment for high-end development towards the export market. It would also reduce the employers' share of PRSI costs.

Debate adjourned.