Amendment No. 2 is consequential on amendment No. 1. The two amendments may be discussed together.
Finance Bill 2010: Report Stage.
I move amendment No. 1:
In page 13, line 5, after "ACT" to insert the following:
"TO MAKE PROVISION IN RELATION TO A TAXPAYERS ADVOCATE OFFICE,".
The purpose of this amendment, which I have proposed on previous occasions, is to have the remit of the Office of the Ombudsman extended to provide for a report in regard to taxpayers' rights and to have what exists in many countries, namely, a taxpayers' advocate. While the Revenue Commissioners' job is to bring in tax to the best of their ability, nonetheless, in many jurisdictions, there is a counterbalancing office the function of which is to ensure, as far as possible, that taxpayers also avail of their rights.
Since I introduced this proposal some years ago, I acknowledge that the Revenue Commissioners have vastly improved their systems of information to taxpayers on their rights and entitlements. However, by and large, unless taxpayers claim their allowances under the tax code within a four-year period, they lose their entitlements in regard to certain types of allowances such as medical expenses, refuse charges, trade union subscriptions and a variety of other deductions which taxpayers can legitimately claim against their income tax payment. On the other hand, as we know to our cost in regard to the banks and developers who have companies or who are trading as individual developers, they are allowed to carry forward indefinitely all of their losses and to carry back the losses for one year against, for instance, tax paid in 2008 and 2009. Therefore, it is unlikely that banks or most developers in this country will pay tax for at least a decade because they are allowed to carry forward all of their entitlements regarding tax-based losses until such time as they have exhausted all of those losses against future profits.
However, the individual ordinary taxpayer has only a four year period in which to claim entitlements in respect of expenses in certain areas which may be offset against income tax, but they must do so within a four year period unless there is a specific legal provision. This is one area which, when one compares the world of the banker and banks and developers as companies or sole traders, there is a total imbalance between the manner in which the Revenue Commissioners deal with the banks and their entitlement to write down and claim back credit against losses they have incurred, and the entitlement of an ordinary taxpayer to claim for expenses he or she has incurred. A relatively limited number of expenses can be offset against income tax. We have a completely different way of treating the individual citizen who does not have tax advisers and accountants and a powerful banking corporation or individual who is the chief executive or the member of a board of a bank.
Today, we have seen public records regarding extraordinary levels of expenses which were paid to departing bank chief executives, which makes most ordinary taxpayers groan and say, "Here we go again". The people in the golden circle depart with enormous golden handshakes. They have the wherewithal to employ tax advisers and get the maximum advantage possible out of their tax situation. The proposal from the Labour Party is that an advocate be established to argue on behalf of individual taxpayers, in particular those who are not rich, are in ordinary employment and do not have the wherewithal to employ tax advisers and accountants.
I am at a loss to understand why the Minister and Department of Finance have chosen to turn their faces against this proposal which would bring a level of entitlement and right in the pursuit of a fair and just tax system for ordinary taxpayers. Instead, our tax system trains every fibre and muscle to benefit the people who can afford professional advice, can buy into property-based tax breaks and those in the banks who will not be paying tax for a decade or two to come because everything they have lost can be carried forward indefinitely and written off against their future tax liabilities. In the case of people in the PAYE system, unless they submit a claim in a particular year, it very often dies in our tax code.
The proposal for an advocate for taxpayers would introduce more fairness, equality and remedies into the tax system for the ordinary person who does not have the kinds of resources which the golden circle and wealthy in our society have and enjoy, in terms of tax matters. Were the Minister to take a hard approach to the golden circle and the wealthy bankers and developers regarding the generous tax regime which they have enjoyed and which, in many ways, has brought this country to the edge of financial ruin and beyond, one could say at least there was a consistency in what the Minister proposes. However, he is not doing that.
In the limited measures of the Bill regarding tax exiles, the manner in which the measures are drawn up are an accountants' or tax consultants' dream because such a wide interpretation is available, in terms of the statute which is being introduced. We will have to wait and see how it works but I strongly suspect tax advisers will have no difficulty in advising clients how to significantly mitigate the measure. The taxpayers' advocate would deal with the ordinary man and woman who pays tax. I do not understand why Fianna Fáil has turned its face, in successive years, together with officials in the Department of Finance, against a small measure of a more level playing pitch and equality for the ordinary taxpayer.
There is an Ombudsman in the State. Since the inception of the Office of the Ombudsman, significant numbers of taxpayers have exercised their right to make complaints to it. The Ombudsman, Ms Emily O'Reilly, has carried out a number of special investigations on her own initiative under the Ombudsman Act 1980, such as that into the operation of schemes for disabled drivers and the repayment of tax to certain widows. In the past, when calls were made to establish a taxpayer advocate, the then Ombudsman drew attention to the duplication of role and responsibilities which such a development would involve. That is apart from the other avenues which are available within the Revenue Commissioners and, on appeal, to the Appeal Commissioners to deal with these matters.
I cannot let pass the obvious misstatement of Revenue practice and law made by Deputy Burton regarding banks, individual taxpayers and companies. As far as the position related to tax reliefs is concerned, the four year look-back period for claiming tax reliefs applies to everyone, including companies, banks and corporations. Everyone is under the same limit. There is no inequality regarding claiming back tax reliefs. Everyone has the same period of entitlement, that is, four years. It applies to everyone, from the multinational to the individual. It also applies to Revenue in seeking back taxes. There is also equality between Revenue and the taxpayer.
Deputy Burton has introduced a different concept, that is, losses incurred by individuals and companies. Individuals who trade on their own account can incur losses, as can companies. Such companies can include banking institutions or developers, but as companies and individuals losses can be carried forward until relieved. There is nothing unique about that in Ireland. It is common to many countries. If Deputy Burton wishes to table an amendment on that, we can examine it and discuss the issues involved.
There is no equation between the two circumstances because losses incurred can be carried forward indefinitely until relieved. That is the position of any company or individual who trades on its, or his or her, own account. It is a completely separate aspect of Revenue law and practice from the question of Revenue refunds on foot of tax reliefs where there is a four year period in operation which applies to the taxpayer and the Revenue Commissioners.
On the financial institutions which are participating in NAMA, there has been a recognition of a restriction in the losses made in the legislation. Therefore, it is not accurate to state banks can indefinitely claim their losses in ten years' time, because the banks which are participating in NAMA have already had their losses restricted. I wanted to correct the record for the sake of completion.
I advise the Minister to read his legislation. In the case of a restriction on losses, they can be carried forward indefinitely but there is a cap on the amount which can be utilised in any one year. That is the form of restriction which the Minister has introduced. It is not the loss, ultimately, of any losses for tax purposes which will arise. It is a restriction on the amount of the loss and this is also so in regard to the requirement that people with very high incomes would pay a minimal rate of tax. This follows the revelations I brought to the floor of the Dáil in regard to millionaires who were paying no tax because Fianna Fáil had set up an incredible structure of property-based tax breaks that they could particularly enjoy.
When the Minister talks about taxation, I wish he would take the opportunity to read his own legislation and understand what exactly Fianna Fáil has done in terms of that legislation. As the Minister's officials will confirm for him, losses at present for companies can, broadly, be carried back for one year against tax paid one year ago. Last year, according to information from the Department of Finance, hundreds of millions of euros were paid in refunds in respect of developers, banks and financial institutions. While we do not yet have a full figure for all of the refunds paid last year, the belief is that between last year and the hangover into this year, the totality of refunds in regard to banks and developers is likely to be well over €1 billion when they are all processed. In addition, if there are losses which have not been used, they can then be carried forward indefinitely while the institution continues. It may be that the only reason some institutions are sold on is to take advantage of their tax losses.
The legislation the Minister introduced was to ensure banks are required to pay a minimum contribution of corporation tax, even where they have very large tax losses brought forward. Despite this, unused losses continue to be allowed to be brought forward indefinitely. It would be interesting if the Minister or his officials have a calculation of the total amount of tax losses which will be carried forward in the tax system in respect of banking, financial institutions, developers and builders for the indefinite future. My view is that the overhang in regard to these amounts is extremely significant.
This is disappointing at a time when taxpayers have been asked by the Minister to make sacrifices. Last year, the total adjustment in the Minister's December budget cuts was €4 billion, which is exactly the same figure he put into Anglo Irish Bank from current resources. The Minister does not like the €4 billion bailout of Anglo Irish Bank last year to be compared with the €4 billion sacrifice that people throughout Ireland, but particularly in the public service, contributed through significant cuts in their wages and restrictions in regard to their entitlements. The fact is that those two sums of €4 billion are related. Some €4 billion went into Anglo Irish Bank and I understand the Minister is planning to come back to the House shortly to ask for untold further billions to put into that bank.
Even after those billions go into that bank and the other banks, there will be no requirement for the banks to pay tax for a very long time, except at 50% of the 12.5% corporation rate, or 6.25%, which will be roughly the rate of tax they will pay because of their accumulated losses. While we do not know this for certain because we do not yet have the work-outs for any of the banks, when they return to profitability, their likely rate of tax, where they are likely to pay any tax at all, will be at a maximum of 6.25%.
I am surprised the Minister made outlandish claims in regard to the taxation burden the banks are bearing. He is entirely wrong. I invite the Minister to read his own legislation so he can check the actual situation.
As I do not have the figures Deputy Burton has, I am not in a position to state whether I——
Deputy Burton does not have any figures. She is speculating.
I am reading the legislation.
I have a sense of what she is advocating here, which is why I am instinctively inclined to support her amendments Nos. 1 and 2. The State should not seek to take in any more tax than people are obliged to pay.
As I said on Committee Stage, and it is worth repeating, when I have occasionally dealt with the Revenue Commissioners, I found them extremely fair and reasonable. The same applies to the various sections of the Department of Social and Family Affairs and also to Bord Gáis. These are my three favourite bodies to deal with because one tends to get an answer fairly quickly and they tend to cut to the chase. They also tend to want to deal fairly and openly with constituents, which is brilliant in cases where it occurs.
Why does the four-year period apply? Is there any reason it is closed after four years rather than after five or six years? The Minister might respond on that issue.
The Taoiseach invited me on the Order of Business to raise with the Minister for Finance the statutory instrument relating to NAMA which the Minister put on today's Order Paper. It appears to be an amended version of what we saw in the Act. It specifies a particular risk discount of 1.7% risk rate discount, which seems an extraordinarily low discount to apply to the flows of income projected in respect of these highly risky property ventures. It also builds in the estimated €7 billion long-term economic value that the taxpayer is being asked to pay over and above the market valuation by NAMA.
This deserves a debate in the House. It would appear to have been amended to some degree following the Minister's discussions with the European Commission. When I asked the Taoiseach, he suggested I should wait until the Minister arrived to see whether there would be an opportunity to debate this. He seemed to suggest this would be the appropriate time to do this — I am not sure whether he was promising beyond his entitlement.
This is a significant document. It is the rules of engagement under which NAMA will acquire the property. There are technical assumptions contained in it and we need to understand the implications of what we are signing off on. I see it was signed by the Minister on 3 March, so it is relatively fresh off the printing press and was just tabled on the Order Paper today.
We have strayed far from the section under consideration. That said, I appreciate the Deputy wishes to have an opportunity to discuss it. I presume the normal procedure is to make the request through the Whips. I am not sure whether the Deputy wishes to debate it in the finance committee or on the floor of the House.
As appropriate. It would probably be easier to discuss it in the finance committee than in the House.
I am happy to offer an official briefing to the Opposition spokespersons, which might be helpful in the first instance.
That would be helpful.
My understanding is that it does not increase the concept of long-term economic value.
One offsets the other.
There may be an issue that one may offset the other. However, it certainly will not increase the amount of the long-term economic value. In the first instance, it might be of value to arrange briefings on the subject. I will certainly undertake to do that.
The Minister might deal with amendments Nos. 1 and 2.
The Taoiseach has varied the Order of Business for the Chair. I had better deal with the issues raised in the discussion.
The position on the bank losses in the NAMA legislation is as follows. The provision in the 2009 Act limits the amount of relief that can be claimed by participating institutions for losses carried forward from earlier years. It will limit the set-off of carried forward losses against trading income of a participating institution, and all other participating institutions in the same group, to no more than 50% of that income. The net effect of the provision is that the income of a group of participating institutions cannot be reduced by more than 50% by set-off of losses carried forward.
Does the Minister agree that if the rate of corporation tax is 12.5%, it means that the highest rate of corporation tax that they will suffer is 6.25%?
The rate of corporation tax is 12.5%. It will be a minimum of 50% but it is based on a criterion of trading income. Corporation tax in Ireland is a matter of national policy and it is set at 12.5%. A minimum of 50% of trading income of any year will continue to be chargeable, notwithstanding claims for relief for losses carried forward into that year. The issue of the rate of tax for banks is no different than for any other company in the State. In that context, however, and uniquely, banks have to pay tax on half their tradeable income, irrespective of what losses they have incurred in the past. That was the balance struck in the 2009 legislation and this can be revisited if we wish and the issues can be evaluated.
I wish to confine myself to the proposal before the House, which is the proposal for an advocate for taxpayers. The McCarthy report proposed that all the offices of Ombudsman should be combined into a single office and here is what is in substance a request for a tax-specific Ombudsman. I do not think it is a wise way to go to set up another organisation. The Revenue Commissioners have done marvellous work in improving their internal practices. An appeals procedure and an Ombudsman are already in operation with jurisdiction to examine all these issues and in my view, this is adequate in this context.
Deputy Burton has a right of reply on amendments Nos. 1 and 2.
Ordinary taxpayers on the top marginal tax rate now pay well over 40% and well over 50% when PRSI is added and the pension levy, if they are public servants. The Minister is saying that whenever the banks begin to return to profitability out of the NAMA debacle, that only 50% of their profits will be subject to tax where they have accumulated losses. This is the kind of statement that makes ordinary people so angry. The effective rate of corporation tax — which is already low — was agreed to by all parties because it attracts foreign direct investment. However, the Minister proposes to mitigate this tax by 50% for the banks. This does not arise at the moment because the taxpayer is bailing out these banks but whenever and if ever these banks return to profitability, they will have a special bonus while the rest of us, particularly public servants when the pension levy is included, will pay higher and higher marginal rates of tax. This is why people feel such anger.
I put it to the Minister that in the future there will be this great unevenness between the favoured treatment given to the banks compared to the individual ordinary worker. Now more than ever, he should give serious consideration to a taxpayers' advocate who would point out these anomalies. Taxation is based on consent, the consent of the governed. In this case, because of the special treatment enjoyed by the banks, most ordinary taxpayers will be of the view they have done enough for these people and will question why they now have to give them indefinitely a 50% mitigation of their low corporation tax rate when and if they eventually return to profit.
I move amendment No. 2:
In page 13, between lines 11 and 12, to insert the following:
TAXPAYERS' ADVOCATE OFFICE
1.—The Ombudsman shall include in her annual report a special report on the overpayment of tax by PAYE taxpayers, and on the take up of credits by such taxpayers, and the branch of her office dedicated to ensuring that the take up of credits is readily available to all taxpayers, and refunds made as rapidly as possible where this arises, as well as ensuring the availability of a ready mechanism for informing taxpayers of their rights, shall be known as the taxpayers' advocate office.".
I move amendment No. 3:
In page 13, between lines 11 and 12, to insert the following:
COST BENEFIT ANALYSIS OF TAX EXPENDITURES
1.—The Minister shall within one month from the passing of this Act prepare and lay before Dáil Éireann a report on a cost-benefit analysis of tax expenditures provided for by this Act, setting out the costs of tax foregone, and the benefits in terms of job creation or otherwise.".
The purpose of this amendment is simple. It is to require the Minister to prepare a cost-benefit analysis of tax expenditures provided for by the Finance Acts, setting out the cost of tax foregone and the benefits in terms of job creation or otherwise. I remind the Minister that this is a promise introduced by his predecessor, Deputy Brian Cowen, as a result of the scandal of widespread tax avoidance and mitigation by very wealthy people in Irish society, by means of the use of property-based reliefs. This debate went on from approximately 2003 until special studies were commissioned and carried out, one by Indecon and another by the Department of Finance, into the property-based reliefs, pension reliefs and the newly emerging relief for investment in private hospitals. If there is a contributory factor to the build-up of the Celtic tiger bubble economy and the subsequent horrible collapse of the Celtic tiger, with the significant consequences for job losses, loss of fortune and loss of pensions by people all over the country, then these tax breaks and the refusal of Fianna Fáil to cost them but to simply give them to their favourite supporters, particularly those in the development and construction business, was a catastrophic error of historic proportions. It is one for which taxpayers will not easily forgive Fianna Fáil nor should they.
We do not know what is the overhang of the tax foregone for which we still have a liability. I am reliably informed that the property-based breaks will account for at least €2 million to €3 million. Pension-based breaks cost at least €2 million a year and a significant proportion of the tax breaks for pensions are availed of by the higher paid people in particular. The Government has recently issued a Green Paper suggesting that this might be changed.
There is also the separate issue of private hospitals and the co-location initiative which was driven by the ideology of the now politically defunct Progressive Democrats but which still runs riot over the provision of health facilities in this country and which, both now and in the future, is absorbing an unfair proportion of the tax forgone. This is wrong. It is simply in existence to concede to a political ideology of free market extremism and far-right ideology as put forward by the Progressive Democrats and by the Minister for Health and Children, Deputy Mary Harney.
I draw to the attention of the Minister an article published today inThe New York Times, written by the Nobel prize-winner, the economist Paul Krugman. People will remember the shock in Ireland when, at an earlier stage in the banking crisis, Professor Paul Krugman wrote about Ireland in an article entitled “Erin Go Broke”. Today, in an article entitled “An Irish Mirror for the Crisis”, he made an interesting argument. He analyses what led to the crash, stating that “Ireland's bust wasn't a tale of collateralized debt obligations and credit default swaps; it was an old-fashioned, plain-vanilla case of excess, in which banks made big loans to questionable borrowers, and taxpayers ended up holding the bag.” Why did the banks make the big loans to questionable borrowers? It was because most of those big loans were for construction-driven activity and that activity was egged on and boosted by the extraordinary plethora of construction-based tax breaks.
He goes on to state that there was "irrational exuberance" in Ireland. I do not regard normally the Department of Finance or the Revenue Commissioners as organisations that suffer from "irrational exuberance" but that is what characterised the property-based tax breaks. Those tax breaks were introduced to target areas where there was no activity. They were supposed to be time limited but they became open-ended and unrestricted in terms of amount and the projects to which they applied.
He also describes how the key players in the boom had an incentive to take risks because it was "heads they win, tails someone else loses". Guess who the someone else was — it was the ordinary PAYE taxpayer, who is losing because he or she must carry the burden of what was done by a Government out of control in terms of recklessness, greed and risk taking on behalf of the wealthy elite.
He continues that "In Ireland this moral hazard was largely personal: ‘Rogue-bank heads retired with their large fortunes intact.'" I have seen, and perhaps the Minister could confirm this, a frequently published list of the ten developer-property companies that have been identified for transfers to NAMA. One particular name that has appeared from time to time also appeared in the newspapers last weekend because of a personal dispute outside a pub in Ranelagh and a subsequent party. That individual was able to take people in a private plane to Marrakesh, with huge figures quoted for the cost of the weekend; some of the newspapers claimed this cost €80,000. If some of our developers can afford an €80,000 weekend in Marrakesh, as reported in the newspapers, how can the Minister stand over their being bailed out by NAMA? Could he not have a word in their ear?
Before Deputy Bruton proceeds, the individual referred to made clear in a statement last summer that he is paying all of his obligations to his banks and paying his loans in full. The Deputy is perfectly well aware of that.
We have had a saga in our newspapers about people running off for expensive weekends at a time when the industry consists of many companies involved in the NAMA process — there are no individuals at this point, it is mostly companies involved in the process. All I am saying is that if people can afford such weekends, I hope neither they nor their companies are in receipt of recourse from the taxpayer. That is what most sensible people think. We are no longer in the Celtic tiger, some modesty might better become some of these individuals and the country might be better for it.
I am quoting Professor Krugman that the key players had an incentive to take big risks because it was heads, they win, tails, someone else loses. We have heard of others of this select band of developers who have taken up residence abroad, and others still who are hanging out permanently in the properties in their spouses' names in places like Marbella and other locations that are not quite as cold as Ireland.
The Minister appreciates the degree to which ordinary taxpayers are outraged about having to pick up the bill at a time when many of the individuals who are associated with the collapse in the property market and the bubble, if they are bankers, are walking off with vast pensions and golden handshakes, while if they are developers they seem to be able to maintain their houses abroad with extensive interests in their spouses' names. In some cases they are making public announcements that from now on they will be tax resident abroad. The 400,000 people who have lost their jobs feel they are at a significant disadvantage compared to these individuals. I do not blame people for making that assessment.
Professor Krugman also stated: "In Ireland, regulators looked the other way, in part because the country was trying to attract foreign business, in part because of croneyism: bankers and property developers had close ties to the ruling party." That is what one of the most eminent commentators on economics in the United States has to say about us.
The purpose of amendment No. 3 is to call for a cost-benefit analysis, promised by the Minister's predecessor years ago, to set out the costs and benefits of the various tax breaks that are still integral to our system of taxation. What is the legacy of the cost of these tax breaks to be carried into our tax system over the next seven to 15 years?
We have already had a report from Dr. Peter Bacon on hotels, which states that because of the tax break for construction of hotels, there is a serious over-provision of hotel rooms and the continuation and unlimited nature of the tax break has led to traditional family hotels that have been in business for generations faced with competition from those who are in business for the purpose of the tax break. This is an example of tax breaks gone mad, where they are doing far more harm than good.
The same phenomenon is starting to develop for private hospitals, where much of the private hospital building is not about health and healing the sick, but construction-focused development that qualifies for a tax break. Right around the State there are private hospitals that are entirely reliant on public sector hospitals for their income under the National Treatment Purchase Fund. The logic of their existence relates entirely to the development of the tax breaks created by the Minister's predecessor but one, Charlie McCreevy.
The Minister for Health and Children has plans for between ten and 12 private co-located hospitals around the country. In the current climate, few investors are prepared to take up these opportunities but she nevertheless appears to have advanced plans for at least four such hospitals regardless of our financial situation and the fact that we are oversupplied with private hospitals. We cannot get any information on these projects. Co-located hospitals are the stamp of the Progressive Democrats Party's ideological drive in Government.
As we approach St. Patrick's Day, 23 Ministers will fan out across the world to sell the message that Ireland is a good country in which to invest. However, the most eminent economist in the United States has written a warning article about the Irish mirror, greed gone mad and a plain old-fashioned burst caused in part by tax breaks. If the Minister wants to recover Ireland's reputation for financial probity, which is at the core of the damage done to this country, why does he not commission a cost-benefit analysis of all the tax breaks and their long legacies? Although Fianna Fáil has formally announced the closure of a number of breaks, in practice they are re-opened whenever someone lobbies for them.
We also need a specific statement from him on what has happened to the hotel industry and the likely impact of hospital tax breaks on funding the health service in a context of scarce resources. He may copy his predecessor, Charlie McCreevy, who said, "If I have it, I spend it", and blow any money that comes into the economy on tax breaks for developers and bankers. That was then and this is now, however, and I advise the Minister to commission immediately a study of the €7 billion to €8 billion in outstanding breaks which Irish taxpayers will have to fund.
Will he come before us at the end of the month to seek further funding for the banks, the package for which may already exceed €14 billion? We are hearing estimates of €6 billion for Anglo Irish Bank, €1 billion for Irish Nationwide, €500 million for EBS and €3 billion for each of AIB and Bank of Ireland. All we know is that the figures involved are very high. Are we going to offer tax breaks at a cost of up to €8 billion while at the same time asking ordinary taxpayers to bear the full brunt of recapitalisation? If he wants to sustain confidence in democracy in Ireland, he needs to come forward with a detailed costing of outstanding tax breaks and their cumulative legacy.
I welcome the opportunity to express my support for this amendment. I would like the Department rather than an outside consultancy firm to carry out a cost-benefit analysis on the budget in particular. The Commission on Taxation reported that 250 of these tax reliefs should be abolished and while I am aware this is in the pipeline in respect of some of them, we have long known about the abuse of, for example, section 23 provisions and the gross oversupply of hotels.
The growth of private hospitals is undermining the health services. The Taoiseach has stated that he would spend whatever was necessary to bail out the banks. One might say fair enough but what is wrong with bailing out people of poor health? What is wrong with improving our health systems, which over the past 25 years have gone downhill rapidly? The health service we had 25 years ago was better than the current one. The concept of making the taxpayer fund 100% of the construction costs of a private hospital over a seven-year period is bizarre in the extreme. I would welcome a cost-benefit analysis of this policy as compared to the provision of proper public health services.
Setting the banks to one side for the moment, surely people should be able to get proper medical attention regardless of whether they are rich or very poor. Why are public hospitals not being supported? Why are the banks able to write their own cheques at a time when hospitals are on their knees and in some cases have experienced cuts of as much as €30 million? For these reasons I support Deputy Burton's amendment and I look forward to the Minister's reply.
I do not propose to accept this amendment. Deputies will be aware that the issue of cost-benefit analyses of tax expenditures was considered by the Commission on Taxation but it was of the opinion that tax expenditures should be the subject of ongoing evaluation and appropriate and timely cost-benefit analyses to ensure they are both economically efficient and that parliamentary oversight can be well informed. They will not be surprised that I am entirely in agreement with the commission's guidance.
However, for me to make a report as suggested, both my officials and those of the Revenue Commissioners would require that the necessary data be available and this in turn would require the appropriate tax returns. I agree with the commission that such a requirement would add complexity and volume to the standard tax return forms and increase compliance costs for taxpayers. I also agree that the ongoing monitoring and evaluation required to ensure that tax expenditures remain fit for the purpose for which they are designed and continue to be economically efficient are highly desirable. It could be argued that it is reasonable and proportionate that people who are availing of tax expenditures should supply the appropriate information to the Revenue Commissioners. However, Deputies will understand that given the current economic situation I do not believe this is an appropriate time to introduce additional complexity and cost for hard-pressed taxpayers.
As I noted in my Second Stage contribution on the Bill, I intend to ask each of my colleagues in Government to assess the effectiveness of tax expenditures in their respective sectors with particular reference to those the Commission on Taxation recommends should be removed from the tax code. My Department will review the outcome of the sectoral analysis and it is my intention to report to Cabinet on progress by the end of June 2010. This new approach will place the onus for objectively justifying 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 from which to make well-informed decisions about the future of tax expenditures in good time for budget 2011.
A wide range of matters was introduced under this heading in Deputy Burton's amendment. I am not sure I want to deal with all of them but Professor Krugman's suggestion that Ireland has gone broke has proven wide of the mark in the period since he wrote his article. He was either misinformed or else he made a false prognosis about our prospects and he was wrong in that regard.
That was the fundamental thesis of his article, to which the Deputy referred. He indicated during the course of last year that Ireland had gone broke. Ireland has not gone broke; far from it. As a result of decisive action by the Government, in the teeth of opposition from the Deputy's party, we do not find ourselves in the same position as the Greek republic because we took timely action when action had to be taken.
The Deputy's economic analysis consistently and persistently misinterprets and misrepresents the issues facing the people. Unfortunately, the excesses in which we were engaged related not only to the banking sector, but to the whole structure of public expenditure and to the fact that we had the highest unit labour costs and welfare rates throughout the eurozone. All these matters weighed heavily on our performance, along with a poorly regulated banking sector and I quite accept the burden of some of the Deputy's criticisms in that regard. However, I do not accept for one minute the suggestion made and Professor Krugman is highly misinformed if he believes there was collusion of any shape in these matters between myself or my party and the various interests to which the Deputy refers. It is my practice to act in the public interest and that is what I have always done as Minister for Finance as a member of the Government.
As I recall it, next week will be the first anniversary of an interview the Minister gave to theFinancial Times while in London on and around St. Patrick’s Day last year. The visit formed part of a tour of financial centres to discuss the situation in Ireland. The Minister will recall his interview with the Financial Times. He referred to the issue of cronyism in Ireland and the fact that Ireland, to use Peter Bacon’s phrase, had a crony capitalist structure. These were the Minister’s words to the Financial Times and they were quoted on the billboards of the Financial Times. The Minister received some kudos at the time——
I did not locate myself and my party as part of that structure.
The Minister did not locate himself or his party? Which is the party of the developers? What political party do the developers support? To a person, they are almost all Fianna Fáil supporters. What was their principal bank? It was Anglo Irish Bank. Personalities in very senior positions associated with that bank were almost exclusively and publicly identified as Fianna Fáil supporters. Some were such friends with the then Taoiseach, Deputy Bertie Ahern, that the diminutive of their names was used by Deputy Ahern. As I recall, he could refer to the chairman and former chief executive of the bank fondly as Seanie, a privilege few in the Opposition parties would have been accorded.
The Minister referred to crony capitalism in Ireland and Professor Krugman identified this crony capitalism in Ireland in very sober and restrained academic language. He stated that "bankers and property developers had close ties to the ruling party". There have been guests in office with it from time to time, but the ruling party for the past 12 years has been Fianna Fáil. This is what the good professor was referring to and this is what the Minister referred to in his interview with theFinancial Times one year ago.
I refer to the matter of private hospitals and hotels. At the moment, the owners of many private hospital groups are requesting that staff take fairly significant cuts in salary on foot of parallel cuts in the HSE. By law, employers cannot arbitrarily reduce an employee's wages. I understand industrial action may take place in several of these hospitals, including Mount Carmel Hospital in Dublin and the Aut Even Hospital in Kilkenny. A similar dispute took place in the Mater Private Hospital and several other hospitals in Dublin, but I understand they are owned by different companies and they came to a negotiated agreement with their staff. The difficulty for nurses working nights and an array of other staff in these private hospitals is that the terms and conditions to which they signed up by contract are being reduced very significantly. Since they bought these hospitals at the height of the boom, the owners, investors and developers may have used the investment in the hospital as leverage in respect of financial transactions in some cases.
In this country, private hospitals used to be largely not-for-profit structures but with the boom and the availability of tax breaks, they have become largely for-profit structures. What is the situation in this regard? The Department has neither the time nor the inclination to do a cost-benefit analysis. The Minister referred to what has been taking place in this country as though he had no knowledge of the 400,000 people currently unemployed or of the various businesses which cannot get credit, but yet he will not carry out a cost-benefit analysis that might help to restore the economy. This is ideology gone mad by Fianna Fáil.
I made it clear in my contribution that we are doing a cost-benefit analysis within the Department and not, as suggested by Deputy Morgan, involving outside consultants.
I suggested it should not be done by outside consultants.
That is what I am saying. We are doing it within the Department. As set out in my Second Stage speech, I intend to ask each of my colleagues in Government to assess the effectiveness of tax expenditure within their sectors, with particular reference to those the Commission on Taxation recommended should be removed from the tax code. My Department will review the outcome of that sectoral analysis and it is my intention to report back to Cabinet on progress by the end of June 2010 such that proper decisions may be made in advance of the budget. There is no question of not carrying out a proper cost-benefit analysis of tax reliefs or of my Department taking a lax attitude in this regard; quite the contrary is the case. We have announced our intention of engaging with Departments. It was not some crony circle that argued for these particular tax reliefs.
That was the Minister's phrase. He put crony capitalism in the international lexicon in respect of Ireland.
As the Deputy is well aware, I was speaking in the context of the banking position in Ireland. However, in respect of the matter under discussion here, the greatest resistance to removing these tax reliefs comes from Departments that view them as a form of expenditure within their own remit. There must be a detailed engagement Department by Department well in advance of the budget such that these tax expenditures are viewed in the same way as any voted expenditure within the Government system. That is how to make practical progress on this issue, not by recourse to generalised rhetoric about the current economic position or a generalised targeting of individual begrudgery about certain individuals or companies operating within that system. Let us hold such a rational cost-benefit analysis to determine what Departments can throw up in favour of these reliefs and the Government can make a collective decision on them.
Serious issues arise in respect of restricting the tail of reliefs because, as the Deputy is aware, there are private hospitals near our constituency and hotels in our constituency the future viability of which would be totally prejudged were one to simply cut off the tail in an arbitrary way and everyone realises as much.
While he is on his feet, can the Minister indicate why he introduced the term crony capitalism into the lexicon when he spoke with theFinancial Times? That went around the world and that was the language he used to describe Ireland.
I will tell Deputy Burton why. I was speaking of the banking sector. An inquiry into banking is under way, which I welcome and which will be productive. The Joint Committee on Finance and the Public Service had an opportunity to meet Mr. Regling and Professor Honohan. I have had an opportunity to meet Mr. Regling and I meet Professor Honohan on a regular basis. I believe they will do outstanding work in this scoping inquiry which will inform the debate which, I hope, the joint committee will have on the causes of the banking crisis.
However, it was clear to me, as Minister, that the fact that the various actors within the banking and regulatory system knew each other well in a small country did not help in maintaining a proper regulated banking structure. The new regulator, Mr. Elderfield, has already made a tremendous impression in the short period of his appointment. It is certainly the legislative intention, in the context of the Central Bank legislation, to put him in a position of unquestioned independence. I believe very much in respecting that independence, in letting him make his own independent judgment on the important questions that face us, including the question of what capital will be required in the banking system as a result of the acceleration of losses which take place through the operation of NAMA. He will have to make a determination on the capital question and I will accept that determination, and we will have to act upon it as a State. Those are the choices that face us in the weeks and months ahead. They will be taken so that the banking system and structure in this State is reformed and repaired and put in a position, as Deputy Burton correctly states, to support businesses and to ensure that jobs are created in this country.
It is all too easy in the context of banking to have recourse to populist argument. The reality of the position is that the Government has had to deal with a very difficult position since September 2008 and has done everything in its power to prevent that system from becoming imperilled. Everything we have done has been to protect the financial stability of that system. Were the stability of that system not maintained, we would have a far greater loss of jobs and businesses in this country than we have already seen. What we have seen, as Deputy Burton correctly states, is serious enough.
When the Minister is carrying out this cost-benefit analysis within the Departments, might I suggest that the Department of Finance lay down the criteria so that there would be consistency between all the Departments in how they carry out the reviews and that there will not be different forms of evaluation?
The Minister strayed into other territory and made a comment on regulation in the future. The Irish Stock Exchange was before the Oireachtas Joint Committee on Economic Regulatory Affairs today because it came to notice that in all transactions since 1 November 2007 no one was regulating complaints being made against stock brokers by non-consumers, which would be organisations with greater than €3 million in turnover, typically credit unions. The MiFID Act does not fit that criteria and I wonder if the Minister was aware of that fact. Certainly, it has left a vacuum, at least since February 2008, when the Irish Stock Exchange indicated to the Financial Regulator that it felt it did not have powers in this area.
It is a little off limits, but I will look into the matter. I have had numerous meetings with the credit union movement.
Is the Minister aware of the point I made?
No. They have a number of concerns. It has not been among the concerns they have raised, but I am sure they will be raising it now and I will have it examined.
In June the Minister is to get the report on the data he has requested various line Ministers to produce. Will he agree to publish the information and to publish the data in full at that time because there is no calculation of the overhang, except the various guesstimates of €7 billion to €8 billion?
I ask the Minister to confirm he now suggesting that it will be for Professor Patrick Honohan to decide and offer a figure to Government of the required level of bank recapitalisation which the Minister just stated he is committed to accepting in advance. That means, in effect, there will be little room for debate. For example, if Professor Honohan comes forward with a figure of €6 billion or €10 billion, either immediately or over a longer period, in the case of Anglo Irish Bank, is the Minister stating that he is committed to accepting that view from Professor Honohan and bringing it to this House for implementation? Last year, we put €4 billion into Anglo Irish Bank, the same amount as the total adjustment sought so painfully in the budget. We took that, as the Minister well knows, from current resources. Is the Minister stating that he now has a device for Professor Honohan to bring forward the level of bank recapitalisation in the case of each of the covered institutions and he will accept that figure, and that there will be no room for bipartisanship in this House as to whether those figures are appropriate? I understood that Professor Honohan was involved in the process and I agree with the Minister that he has brought many valuable insights and a high-quality reputation to the role of Governor of the Central Bank, but I am surprised to hear that the Minister will now accept in total whatever figures for recapitalisation are put forward by the professor.
I understood the Taoiseach to say that after he returns from the United States after St. Patrick's Day, and sometime towards the end of the month, he intends to bring forward proposals on bank recapitalisation. Is the Minister now saying that these, essentially, will be Professor Honohan's proposals and that the Government will merely be the messenger to this House and to the taxpayers as to what the amounts will be?
First, that is a completely inaccurate characterisation of the process. As I understand the position, we are talking about regulatory capital, which, in the first instance, is a matter for the Financial Regulator, not for Professor Honohan. However, the regulator works closely with the Governor of the Central Bank and also consults with me and discusses these matters.
Ultimately, if our regulatory system is not to belong to the world of crony capitalism, the regulator must be manifestly seen to make an independent and objective call on these issues and cannot be subject to the kind of political pressures that Deputy Burton was deploying a few moments ago. That is the purpose of having an independent regulatory system.
One of the functions of an independent regulatory system is to prescribe an appropriate level of regulatory capital for the institutions. The implications of prescribing such a level are a matter for the Government, and for this House to which the Government is accountable, but the issue of what is an appropriate level of regulatory capital is a matter for the regulatory system.
Deputy Burton cannot have it both ways. If she wants us to have a robust, good international reputation, then we must have a regulator who can act in a good, robust independent way. The regulator must not be seen to be subject to endless political pressures. That is the one thing one cannot have the regulator doing, and that is essential in the context of any announcement we will make in this area. That should not be a matter of bipartisanship or tripartisanship. That is surely a lesson we should have learned already at this stage of the banking crisis. That is the position on that particular issue.
Deputy Burton also raised the question of the review the Government is conducting. I would be quite happy to provide the data, but the arguments made by particular Departments are part of the Government process and should be treated as such as part of the preliminary process for the making of Cabinet decisions on these matters. It is important that the necessary frankness and candour of discussion, which one wants to see in memoranda on this subject, should be present in any documentation. I appreciate the Deputy is anxious to see what figures and estimates are available in this context. I will examine what can be produced in that regard.
Amendments Nos. 4 and 5 have been ruled out of order.