Dáil Éireann debate -
Thursday, 9 Jun 2011

Vol. 735 No. 1

Finance (No. 2) Bill 2011: Committee and Remaining Stages

NEW SECTION

Deputy Michael McGrath

I move amendment No. 1:

In page 3, before section 1, to insert the following new section:

"1.—The Minister for Finance shall within two months from the passing of this Act, and every two months thereafter, prepare and lay before Dáil Éireann a report setting out the number of jobs created as a result of each taxation measure provided for by this Act and the number of jobs created as a result of the levy on pensions schemes provided for in section 4 of this Act.”.

One of the weaknesses of the jobs initiative announced by the Government is the lack of a specific jobs target. We are all aware of the crippling unemployment situation in the country. The latest live register figures show that at end of May 443,200 people were unemployed, an unemployment rate at a record high of 14.8%. We all hope that the jobs initiative will result in the creation of jobs. However, it is important we can identify the jobs created as a direct result of the measures introduced in the jobs initiative, in particular the taxation measures, including the reduction in VAT, and can separate them from jobs which may be created in the economy by an expected upturn and, it is hoped, some economic growth this year.

I know the Government wrote in April to many employers around the country asking them how many jobs they expected would be created by the different initiatives contained in the jobs initiative. I understand the employers were to respond in this regard by 29 April. I am asking that the Government publish the feedback it has received thus far from employers in regard to what jobs are expected to be created and that the House be informed on an ongoing basis of the impact of the measures introduced. The jobs initiative is being funded by a harsh and unfair pension levy which will result in pensions being cut, higher contributions being paid by workers and may well result in the closure of some pension schemes.

Deputy Pearse Doherty

I support the amendment, although I believe the two month criteria may be a little excessive. It is important we examine all of the decisions taken in relation to finance to see if they have resulted in the creation of jobs, extra revenue to the Exchequer and are supporting sections of society that are vulnerable or under immense pressure at this time. Many of the initiatives announced in the jobs initiative are subject to review, which is to be welcomed. I understand that a review will take place after one year. However, what criteria will be used to measure if discontinuation of the airport or travel taxes has resulted in increased passenger numbers? It would have been easy to measure this initiative had the Government kept to its initial promise in the programme for Government that continuation of this measure would be subject to the re-opening of closed routes. However, it is evident from the Minister's speech in regard to the jobs initiative that the criteria by which these will be measured is additional passenger numbers.

It is important we look at the number of jobs created as a result of each of the taxation measures. I acknowledge it will be difficult to pinpoint the particular number of jobs created this year because the Government is attempting to create the environment to foster employment. However, there needs to be some type of criteria against which these initiatives can be measured in terms of whether they are worthwhile or should be continued or discontinued.

As I have stated on previous occasions, the report on the Department of Finance by external experts argued that this type of information should be available to the Opposition and open to public scrutiny. I do not believe any Minister for Finance should have anything to hide in this regard. I am sure the current Minister has nothing to hide. However, Government should make available to the Opposition and others the analysis and differing opinions within the Department in regard to whether particular initiatives are good or not and identifying the risks contained in implementing them. This would ensure as wholesome and as informed a debate as possible.

I welcome the proposal contained in the amendment. I remind the Minister, if he needs reminding, that this type of amendment is similar to one proposed by parties in government when in opposition. If we are to have a new way of doing business in this House we should be able to find a mechanism which provides that we do not have to wait one year to have a review. We could have a review twice yearly and that information could be laid before the House. The Government could then set out whether the initiatives are working and the results in that regard or, to the contrary, whether they are not working to its satisfaction and need to be tweaked, discontinued or enhanced. I support the amendment.

Minister for Finance (Deputy Michael Noonan)

I thank Deputy Michael McGrath for tabling this amendment, which makes an interesting suggestion. Unfortunately, however, it is not possible for me to implement it owing to the limitations in data available to the Department of Finance.

The Central Statistics Office produces employment data four times a year in the quarterly national household survey. While this data set provides employment information on a broad sectoral basis, it is only available on a net basis. It does not provide information on job creation and losses, which make up the net figure. While the new job churn data set produced by the CSO will allow such a distinction in the future, it does so only on an annual basis and with a significant lag. It currently only has data available up until 2009. Accordingly, it will not be possible to determine how many jobs are created directly as a result of the measures announced in the jobs initiative.

These measures are expected to support recovery in the labour market by improving our competitiveness position, stimulating demand and improving confidence. We cannot escape the fact we do not have the resources available at present to fund large-scale policy initiatives to help to generate economic activity. I emphasised this when I launched the jobs initiative and the point was reiterated by the Minister of State, Deputy McEntee, in his contribution to the debate on Second Stage. This means the direct stimulatory effect of the current package of initiatives will be modest and I make no extravagant claims on their behalf. What these measures principally represent are the first steps by the Government to providing the conditions which will better facilitate the return to work of those who are currently unemployed. These first steps will be followed by further movement towards the objective of rebuilding a prosperous and productive economy.

Deputy Michael McGrath

I thank the Minister for his reply. The key question is how, if additional jobs are created, as we all hope they will be, one separates whether the additional employment created is directly as a result of the initiatives in this Bill or whether it is attributed to a general economic upturn, which we hope manifests itself here and throughout Europe this year and into next year. One can point to the monthly live register figures and to the quarterly national household survey published by the CSO but that does not provide quality information as to the impact of the measures we are implementing. The Minister said on Second Stage he would reassess the impact of the VAT reduction at the end of 2012 in the context of 2013. The question is how the impact will be measured. The Minister might point to additional jobs being created but we will not know to what extent their creation is directly attributable to the measures in this Bill.

What response did the Government receive from leading employers? I understand it was the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, who wrote to put the question directly to such employers as to how many jobs they expected would be created as a result of the initiatives that were announced, and that the employers were to return that information by the end of April. The Minister, Deputy Noonan, might give us an indication in that regard, if he is not in a position to accept the amendment.

Deputy Pearse Doherty

As I said earlier, the two-month criteria would be almost impossible to meet given the data that would be available, and the Minister responded to this effect in his answer. However, we should look to have some type of report or review carried out on an interim basis, and we should not have to wait for the full review. An opportune timescale would be to have a six-monthly report prior to budget 2012. We should be analysing what effect these measures are having on employment and the other categories to which I referred.

I say this in support of many of the measures contained within the Bill. As I indicated, we have major issues with the pension levy but the other measures are to be welcomed. I am not arguing for this review on the basis that we should have one so we can prove this does not work. We are all hopeful that there will be increased employment and tourism and all of the other spin-offs for the economy as a result of these measures. However, the principle should be that we would review the decisions we make on a continuous basis, within reason, and this should be carried on to other measures and decisions taken by Government in regard to financial issues, and should be central to Government decision making. Although the amendment refers to a period of two months, that could be extended to six months so we would have some type of interim review based on the best information available to us as to the effect of the measures in the Bill.

The Minister has stated a number of times that he makes no extravagant claims, as none of us in the House would, that this jobs budget will result in a huge upturn in employment. We all know from the CSO that since the Government took office, unemployment has risen. It would be very unfair of me to attribute that to those on the Government benches as it is a legacy the Government has inherited from previous Administrations. Nonetheless, the trend is for increased unemployment. Given the fact the Government indicated its intention is to create 100,000 jobs, and the Minister argues that this jobs initiative will see a modest number of jobs created, I am interested to know if the Minister can indicate, if not the exact figure, a range or ballpark figure in terms of what "modest" means. Out of the 100,000 jobs to which the Government is committed to creating, does the Minister expect it to create five, 500, 5,000 or 50,000 jobs? We need some kind of measure.

Deputy Michael Noonan

While I do not disagree with much of what has been said, the CSO does not have the data to enable me to accept the amendment and to give two-monthly progress reports on job creation. Modern, open economies such as Ireland's are very intricate in the way they interact. It is very difficult to say what particular policy instrument either created or cost jobs because everything is so intertwined and the influences abroad are probably stronger than the influences at home. It is probably true to say that if there is a general rise in trading activity worldwide, trading activity in Ireland goes up and jobs are created; if it goes down, we will respond to that. The intention behind this initiative is to do specific things which in our political judgment and on the advice of people in business will have a job creation effect.

It is not correct to suggest, as Deputy Michael McGrath did, that it is possible to separate jobs being created by the jobs initiative from jobs that might be created by a general uplift in the economy. One of the primary purposes of the jobs initiative is to lift morale and confidence, which are also intertwined issues.

One of the principal ideas in the initiative is the reduction in the VAT rate from 13.5% to 9%. The approach of the Government and myself is that we look at the economy sector by sector and if we believe there is potential in a sector, we will try to do something to encourage further activity in it. We know that manufacturing industry is going very well at present, exports are increasing extremely well and jobs are being created in that sector. We know farming is going well and, although agriculture inside the farm gate is a small enough proportion of the economy, outside the farm gate the whole agri-food industry is going very well also. We want to encourage that because again, it is export-led and jobs are being created there.

The tourism industry is totally underachieving and has fallen in value terms over the past three years by approximately 32% with regard to the UK alone, and in terms of overall numbers it has fallen 30%. If we were to even restore it to its previous position in the coming years, there would be a huge impact on job creation in the tourism industry and the wider hospitality industry throughout the country. That is the purpose of the reduction in VAT. Members will know from their own constituencies that this initiative has been warmly welcomed by the tourism industry.

How do we measure the effect of the cut in the VAT rate, as Deputy Pearse Doherty asked? The reason we provided for it on that basis was first, that we do not know how long we will be able to afford the reduced VAT rate, so we are signalling that there are aspects to the jobs initiative that are temporary in nature and which will be subject to review in due course. That particular position is not related to whether they are creating jobs but is simply a revenue issue. The other reason it is included is that we want the reduction to be passed on. If it is not being passed on, thereby making the industry more competitive, that will be one test of whether the measure is proving effective. It will not be the only test but it will be a serious one. If it simply runs to the bottom line, if the industry does not pass on the VAT reduction to make itself more competitive and create more activity, in turn creating more jobs, we will look very clearly at this measure. If it is not effective the rate will be again increased to 13.5%.

We will make a certain assessment. The macro impact of the jobs initiative will be assessed to some extent in the wider medium-term economic outlook when we publish the pre-budget outlook later this year. I do not say the Deputy's idea is not valid but we simply do not have the data to implement it in the way he suggests. In so far as we have data, however, we will attempt to see what the overall macro effect is, particularly in the pre-budget statement.

Deputy Michael McGrath

I welcome the Minister's commitment to having some commentary on the impact of this initiative in the pre-budget outlook, particularly of the VAT reduction. This is important. I had intended to ask the Minister what internal reporting mechanisms he would have to assess this on an ongoing basis. Whatever about publishing formal reports, I am sure the Department will assess the impact of this measure on an ongoing basis and examine whether it is being passed on to the end consumer, which is the key issue. When can we hope to have the first indication of any such impact assessment?

On the basis of the Minister's commitment to having some commentary on the impact to date of the measures, particularly that of the VAT reduction, in the pre-budget outlook, I am happy to withdraw the amendment.

Amendment, by leave, withdrawn.

An Leas-Cheann Comhairle

I am informed that amendment No. 2 is out of order.

Amendment No. 2 not moved.

SECTION 1

Question proposed: "That section 1 stand part of the Bill."

Deputy Pearse Doherty

My point concerns section 1. The Minister made an interesting comment on the application and duration of the reduction in VAT, stating the reason the review is built in is that we may not be able to afford — I paraphrase — the decrease to the new VAT rate of 9% until the end of 2013. However, that was not what he led us to believe when he announced the jobs initiative in the House. At that time he led us to believe the review was to ensure the sector was benefiting from the new rate which would run until 2013. There was no issue then about the cost to the State of this reduction. I am very interested to hear why he now states — he may correct me if I am wrong — the reason the review is built in is that we may not be able to afford the reduction in the years ahead.

We are introducing a pension levy to come up with the money necessary to pay for the reduction. Therefore, I do not understand the basis of the Minister's comment. I understand the idea of interim reviews; I welcomed it. The idea of having a review to ensure the sector is benefiting from a reduction in VAT on specific, targeted, focused areas is welcome but the Minister has now led us to believe the reason for the review is that we may not be able to afford to continue this measure. That does not make sense to me given that we are to apply a 0.6% levy on pensions to fund the measure in the first place.

Deputy Michael Noonan

I make a general point. The national finances are in a fraught situation. A fiscal correction of €6 billion is underway in 2011 and so far we are on target. We are slightly under profile on tax collection but are also under profile on expenditure. As we go through June, facing the end of the first half year, we are on target to achieve the fiscal correction of €6 billion. Next year the commitment under the programme is a correction of €3.6 billion. Over the two years, therefore, we will approach a correction of €10 billion, a huge amount of money. In those circumstances I will not rule out any tax initiative, increase or reduction. I say this at a level of principle. I have nothing in mind.

The Deputy referred to the fact that we are funding the jobs initiative through the pension levy. Yes we are, but that levy is temporary. We are writing into the Act that it is for the years 2011-14, inclusive, and therefore the funding for the jobs initiative through the pension levy will end in 2014. Obviously, if we are to continue with these initiatives there will have to be another source of funding. I signal that now.

Whether the VAT rate is passed on is the precise and focused issue but there is also the general issue every Minister for Finance faces of how to meet one's fiscal targets and pay for the country on an ongoing basis. I do not say anything new. This is always there as an issue.

It is also true to state, as Deputies will know from their own constituency experience, that passing on the VAT reduction is not the only issue. I have met people in the food business who claim they have been run off their feet for the past two years and needed two more people to run their business but could not afford them. Now they say they can afford to hire two extra people and are taking them on. That is job creation but they are not passing on the reduction. There are other situations where the very fact that 4.5% is being taken off the bottom line is keeping places open. We might not be creating jobs but we are saving many. We shall see how the summer goes in the tourism industry.

It is not exact, as all Deputies know. One has to use political judgment, take the best advice one can rely on from the sector and see how things work out. That is the position.

Deputy Michael McGrath

I have one brief question. The Minister stated that given the scale of the budgetary adjustment required this year and next year, he will not rule out increases in any form of taxation. Does that include income tax?

Deputy Michael Noonan

We are moving away from the content of the Bill. If the Deputy refers to the programme for Government that will give him the principles on which we will base our tax approach. I will not recite them now in the middle of Committee Stage of a Bill which is focused on other issues.

Deputy Michael McGrath

That contradicts what has been said.

Deputy Michael Noonan

The Deputy is widening the debate beyond——

Deputy Michael McGrath

The Minister opened it up.

Deputy Pearse Doherty

At the start of Committee Stage on the Finance (No. 2) Bill, the Minister has landed an almighty bombshell in the middle of the debate. He stated that a review of the biggest ticket item of this Bill, the reduction of the VAT rate to 9% which will cost €350 million in a full year, is built in because we may not be able to afford the measure in the future. The review is to be completed before the end of 2012 in order to inform the Minister's decision in regard to budget 2013. However, the levy being imposed on people who have saved will carry on until 2014. The Minister is trying to sell this issue, namely, the pension levy, whereby this Government will tap into the savings of hundreds of thousands of people, as a quid pro quo for creating jobs. He did not say that the initiative may be suspended before its time. Most likely it will continue until 2014. However, the idea a reduction in VAT for specifically focused tourism sectors may be abolished in 2012, or whatever date, is not what the Minister stated in his jobs initiative; I have that script here. It was very clear that the review would be carried out to ensure the sector was benefiting from that decision, not because we might not be able to afford the measure in future.

Will the Minister give a guarantee that the pension levy is linked to the VAT reduction? If the Government decides following the 2012 review that it will discontinue the 9% VAT reduction in specific sectors, will the pension levy no longer exist? The Government is trying to tell the public that this is all about jobs. It is asking people why they should not relinquish 0.6% of their pensions, given that the money will be used to create jobs in towns across Ireland. When the Taoiseach has spoken about this, he has pulled on the heartstrings of the 450,000 people who are unemployed. It now seems that the pension levy could be used to fund other mechanisms. It is possible that the initiatives announced could be reversed while the pension levy remains in existence. I am asking a genuine question. Will the Minister clarify the position? As he has emphasised on many occasions, these initiatives had to be fiscally neutral. We cannot allow the Government to overturn its decision to reduce the rate of VAT that applies to the tourism sector, while at the same time continuing to tap into the private pensions of individuals. The moneys gathered from that source cannot be used to pay some of the State's other deficits. We all know the State will have to make an annual injection into Anglo Irish Bank, for example. That is not right. I ask the Minister to clarify his initial statement this morning.

Deputy Michael Noonan

On the day the jobs initiative was announced, I said "to ensure that the sector is delivering, the effects of the changes announced today will be assessed and the measures reviewed before the end of 2012 in the context of preparing Budget 2013". My approach to this morning's Committee Stage debate is that I would like to give the Opposition as much information as I can. Committee Stage is usually quite relaxed. It involves an interchange of information. It does not need to be contentious. I want to set out the background thinking informing our approach to this difficult fiscal situation. If the provision of extra information is fuelling a series of ill-founded allegations from Deputy Pearse Doherty and others, I will go back into the burrow that was inhabited by my predecessors and stick closely to the text of the Bill without departing from it. If the Deputies opposite want a full and frank discussion, we will have it. If it sparks off many ridiculous accusations, why should I engage in such a discussion? That is my position.

Deputy Willie O’Dea

I would not recognise the Minister for Finance if he engaged in anything other than "a full and frank discussion". I would like to pick up on the question asked by Deputy Michael McGrath. The programme for Government includes a fairly specific commitment that income tax rates will not be interfered with and that income tax bands or credits will not be narrowed or reduced. The indications in the Minister's response to Deputy McGrath seemed to depart from that, however. My reading of his reply is that it did not close off the possibility of such changes.

I would like to speak about this section of the Bill in general. I am aware of the Minister's fiscal difficulties and I understand the financial situation facing the country. The Minister will be aware that there is huge competition between different countries to attract investment in research and development. He will have received submissions from IBEC and other bodies about improvements that could be made to the research and development tax system. The use of 2003 as a base year is apparently having adverse effects on certain businesses. A strong case has been made to me and others — I am sure the Minister has heard about it — to the effect that the outsourcing limit of 5% should be expanded to bring it into line with some of the Government's other industrial and commercial policies. If I recall correctly, the programme for Government contains a commitment to provide that the base year test will not apply to companies that spend up to €100,000 on research and development. In other words, such businesses will be given full credit for that, and amounts slightly over it, at a marginal rate.

While I appreciate that the Minister is dealing with financial difficulties, I suggest these things would more than pay for themselves. The IDA Ireland figures indicate that we have had a fantastic record in attracting such investment over the past four or five years. Is the Minister giving serious consideration to including the provisions I have mentioned in the next budget and the next finance Bill?

Deputy Michael Noonan

The purpose of the research and development tax credit scheme, which is open to companies of all sizes, is to encourage research and development here and thereby improve the economy and increase employment. A credit of 25% of incremental spend on research and development is available for this purpose. The scheme has been enhanced in most years since its introduction to improve its effectiveness. The latest amendment to the scheme, as provided for in this Bill, represents a further enhancement. It was sought by Deputy O'Dea, who suggested that it could be above or below the line.

Deputy Willie O’Dea

Yes.

Deputy Michael Noonan

As an accountant, he is familiar with the issues that have given rise to this amendment.

Deputy Willie O’Dea

Absolutely. I welcome it.

Deputy Michael Noonan

It is clear from the fact that IDA Ireland secured 79 new investments from existing clients in 2010 — some 37 of which, or almost 50%, were in the area of research and development — that the tax credit scheme for research and development has proved very effective since it was introduced in 2004. The value of the investment in Ireland arising from these new research and development projects is approximately €500 million. It also involves a considerable number of jobs.

When the scheme was originally introduced, it was intended that the base year would be the year three years before the year of claim. It was planned that 2003 would be taken as the base year for the first three years of the scheme, until 2006. There have been substantial improvements in the position since then. In the Finance Act 2007, the use of 2003 as the base year was extended for a further three years of claim, up to and including 2009. In the Finance Act 2008, the use of 2003 as the base year was extended for a further four years of claim, up to and including 2013. In addition, the rolling base year rule was changed so that, in relation to a year of claim after 2013, the base year was fixed as the year corresponding to the year of claim, but ending ten years before the year of claim. It was proposed that the base year for 2014, for example, would be 2004. The Finance (No. 2) Act 2008 fixed 2003 as the base year for all future accounting periods.

An incremental approach, as opposed to a volume approach, was deliberately chosen to encourage companies to increase their level of research and development. Companies are therefore incentivised to carry out additional research and development activities, over and above their level of such activity in the base year. Where research and development remains static, or is reduced when compared to the base year, no tax credit is due. In the case of companies that commenced research and development activities after the end of 2003, the threshold is zero. As the threshold amount is the actual amount of expenditure incurred in 2003 rather than an indexed amount, the effect of the retention of 2003 as a base year has moved the credit closer to a volume-based amount.

The Deputy is right to acknowledge the tight fiscal position of the Government. When one does not have big sums of money to throw at problems, one has to start thinking outside the box and to try to get the maximum effect from a minimum amount of expenditure. Government and Opposition Deputies need to think smart. I will give an example of what I am talking about. I am not saying this in a contentious way. It was announced in the 2010 budget that employers' PRSI would be charged on share option schemes. The Deputy is familiar with how they work. They are given to an employee and perhaps vested for five years later. When this measure was announced, it seemed that it would be retrospective. It was provided for in the Finance Bill in January of this year.

When I came into office, I learned that the proposal had been the subject of a great deal of lobbying on the part of investors, who thought it would make life difficult. An adverse view of it was taken, particularly in North American boardrooms. They thought it was a huge imposition. When I consulted the Revenue Commissioners, they found that as drafted it could not be made retrospective — it could only apply from 1 January 2011 — and that the yield to the Exchequer would be less than €2 million. As part of my jobs initiative announcement, I said I intended to drop it. It has already been confirmed that as a result, an investment here which had been held up is to go ahead. It involves a €50 million construction project and, when the construction has been completed, the creation of 100 research and development jobs. It will deliver more tax than the Finance Bill measure, which was included in good faith, would have done in 20 years. I am not making a political point; I am just mentioning it as an example of what can happen when one tries to tweak these things.

In reply directly to Deputy O'Dea, there are other changes I wanted to make on research and development but we had not time to consider them fully for this Bill. We will consider them in advance of the 2012 budget.

Deputy Pearse Doherty

Maybe we got off to a bad start on Committee Stage. With respect, I am not making any allegations against the Minister or the Government and I ask him to clarify what he means by that statement.

We are seeking information and I acknowledge he is imparting information here in a genuine and open way. However, it was he who stated that the purpose of the review was not to ascertain how many jobs were being created because that is the amendment we were discussing but that we may not be able to fund such a reduction. I am asking is that the case because this is a different approach to what was announced in the jobs initiative and this legislation gives effect to the measures announced in that initiative, and the question still stands. The Minister stated the review is built in to the reduction of VAT rates to ensure the sector was delivering. In a genuine way without making any accusations, I am asking him to clarify whether the purpose of the review is to see if the sector is delivering or, as the Minister stated earlier, that it may be that we cannot afford such a reduction in the periods after the review. If the latter is the case, if there is a potential that we would suspend or reverse the decision to reduce the VAT rate, which costs €350 million per year in a full year, at the same time as continuing this levy, it is simply wrong and it is pushing through legislation under false pretences. Today the Minister gave the information that may be the case and I am giving the Minister an opportunity to clarify if, as he stated earlier, that potential exists.

An Leas-Cheann Comhairle

On the same issue, Deputy Michael McGrath.

Deputy Michael McGrath

Deputy Doherty is touching on an important point, the principle of a linkage between the retention of the pension levy and the retention of the initiatives announced by the Government, including the VAT reduction. Is the retention of the pension levy for the full four years linked to the retention of the VAT reduction? Is the Minister ruling out using the funds from the pension levy to fund other initiatives? If the Minister decides towards the end of next year that the VAT reduction is not working and abolishes it, will he reduce by a corresponding amount or eliminate the pension levy or is he retaining the right to use the funds that will be raised from the pension levy to fund other initiatives or to contribute towards reducing the deficit? In fairness to Deputy Doherty, there is an important principle.

Deputy Arthur Spring

If it is the case that we will link it to VAT, is it applicable that the Minister will link it at all times, for example, if he were to reduce VAT further like the Greeks have done in reducing it to 6%, so we would have to increase pension levies that we are putting in place? Would it work both ways?

Deputy Michael Noonan

I am setting out a general position. The Deputies know why it is important that we review how effective the VAT reduction is and whether it is delivering on jobs. I thought, where we started a while ago with Deputy Michael McGrath's amendment, that it was something along those lines he was looking for, that every two months we would assess whether it was effective in terms of job creation. Now the wheel seems to have spun around where a review in two years' time is not acceptable to the Opposition but it wants reviews every two months. That is not really logical either. One could talk oneself in all directions with that.

We are saying it will be reviewed to encourage the industry to use the VAT reduction effectively so jobs are created and there will be more activity in the industry. That, if one likes, is an encouragement hanging over the tourism industry.

We are also saying, and it is written into the Bill, that the pension levy will continue for four years. I hope we can continue the VAT reduction for the same period but there are no circumstances, if I am Minister for Finance, in which the pension levy will continue beyond four years and if we are to continue the VAT reduction beyond the life of the pension levy, we must find another means of funding it. Everybody is familiar with the fiscal constraints and I am simply saying we will have to look at the matters in due course. Obviously, if the tourism industry takes off and the VAT reduction can be shown as one of the main levers that really drove it forward, then I would be very reluctant to bring it back up. That is the position.

We are really talking forward and much of what we are saying is speculation. I am trying to give Deputies the fullest information possible. It is difficult to see forward at present. It is difficult to see from here to January next. We have a programme that we will implement. In general terms, we have an economic approach that we will pursue but there are all sorts of strange things happening in the world.

Deputy Pearse Doherty

That is not what the Minister stated earlier and I welcome the clarification. Would he consider accepting an amendment on Report Stage which would link any reversal of these initiatives, particularly in VAT because it involves €350 million and is the big ticket item? Would he consider accepting an amendment on Report State that would link the pension levy and a reversal of the reduction in VAT? The spirit of this provision is important. We all understand the constraints the Government is under. We have heard time and again that this had to be fiscally neutral but it is not right to have legislation where there is potential that it will not be fiscally neutral in two years' time with the pension levy funding other aspects of running the State and the deficit. A way of creating support for this, if such can be created, is to ensure, as is the stated intention of the Government, that the pension levy is to fund job creation initiatives. The way to do that is to consider an amendment at Report Stage that would link any outcome of the review which would reverse the VAT rate with a reduction in the pension levy. We can do that by allowing the Minister the discretion, by order, to reduce the percentage of the pension levy and with a stated commitment from him that the outworkings of this legislation would have that effect, that he would issue such orders if such a review deemed the VAT rate were to increase to the original rate.

Deputy Michael Noonan

I would not be disposed to accepting such an amendment. I am not in favour of any sort of ear-marked taxes which, I think, are bad practice. There must be discretion for the Government to decide where it will apply the yield from the tax system. It is not good practice to tie the yield to a particular ear-marked activity.

I made my position clear. I have given assurances which, I believe, would be accepted by the generality of the House. Trying to tie me or a future Minister for Finance in with an amendment along the lines Deputy Doherty suggests does not really tie anybody in because anything that seeks to bind in law can simply be untied by an appropriate amendment in law when the time comes, and therefore is ineffective anyway.

Question put and agreed to.

SECTION 2

An Leas-Cheann Comhairle

Amendment No. 3 in the name of Deputy Michael McGrath is out of order.

Amendment No. 3 not moved.

Question proposed: "That section 2 stand part of the Bill."

Deputy Michael McGrath

On the empowerment of the Minister to revoke the travel tax, the thrust of the amendment which I put forward and which was ruled out of order was to seek a reassurance that the ministerial order revoking the travel tax is issued on the basis of a clear commitment from the airlines, first, that the abolition of the travel tax will not be offset by an increase in fares, in other words, that the reduction will be passed on to customers by way of a reduced overall fare price and, second, that the abolition would be directly linked to a commitment entered into by the airlines with the Minister that they will increase the capacity and the number of passengers they bring to Ireland, which is the purpose of the proposal to abolish the travel tax. I seek reassurance from the Minister that the tax will not be abolished without any subsequent benefit materialising.

Deputy Pearse Doherty

I wish to make a general point because I would have supported the proposed amendment. We must consider the issue of the Opposition putting forward amendments to finance Bills. It is ridiculous. We sit down and draft amendments about laying reports before the House but amendments are ruled out of order. I do not question the rulings of the Chair but we must deal with the issue that we cannot propose such amendments. The Minister had this difficulty when he was in opposition, as had previous Opposition parties. The idea that the Opposition cannot propose an amendment that would save money for the State, increase taxes or reduce taxes is ludicrous if we are to have a proper exchange.

We tabled an amendment that was ruled out of order relating to the restoration of the minimum wage. It is an amendment the Minister would agree with because it has exactly the same text which the Government included in the Social Welfare and Pensions Bill. The reason we put it in the Finance (No. 2) Bill is because there is no reason or rationale for it to be in a social welfare Bill. The only reason it is in the Social Welfare and Pensions Bill is to help get some of the Labour Party backbenchers into the "Yes" lobby to support the increase in the pension age, the equivalent of a 15% reduction in pension entitlements to a person in that age bracket. It should be in the Finance (No. 2) Bill.

The reduction in the minimum wage was brought in as part of the emergency finance Bill in December last year and the restoration of the minimum wage should be in this legislation. That being said, it has been ruled out of order because it is outside the scope of the Bill. Perhaps we will attempt to change the scope of the Bill later on. The idea that we cannot bring forward amendments is unsatisfactory. The Government rightly challenges the Opposition to bring forward credible solutions and proposals. We get the odd opportunity to argue and articulate those proposals in the Chamber and through the media. However, it is through amendments that the Government should be able to scrutinise the Opposition view, including what is in the text and what the effect of our policies will be. Today, for the Finance (No. 2) Bill, Sinn Féin has put forward proposals to restore the minimum wage.

An Leas-Cheann Comhairle

This is on section 2 and the travel tax. Will the Deputy deal with the travel tax?

Deputy Pearse Doherty

The proposal would get rid of the pension levy but bring forward another mechanism to fund the jobs initiative to the same amount. We have put forward proposals to abolish the universal social charge and other measures that would replace the money that would be lost to the Exchequer as a result. All of these measures and amendments are ruled out of order. I welcome the Government challenging the idea, principle, theory, politics or accuracy of the numbers behind any of these initiatives but we cannot discuss these today. That is a more general point.

I have stated before that I welcome the Government initiative on the travel tax. The concern is that there has been a dilution of the stated objective of the Government. The programme for Government stated that it would abolish the travel tax as part of a deal with airlines to restore lost routes. That is the text of the programme for Government. When the jobs initiative was announced, it dealt with additional passenger numbers and the idea of restoring lost routes was gone. That may be a textual error. Is the Finance (No. 2) Bill subject to additional passenger numbers or is it subject to additional routes? I realise the effect of the amendment is not subject to either because the Minister can decide at any time to issue the order. Is the theory or principle behind it to do with additional numbers or restoration of lost routes, as the programme for Government states? I believe it should relate to the restoration of lost routes because it will be difficult to quantify additional passengers, the effect it will have on them and the commitments necessary from the airlines.

What happens with the order? The Government has made the order conditional on responses from the airlines. What happens if Aer Lingus agrees to do X, Y and Z to increase additional passengers and target such an amount of additional passengers but Ryanair says "No, go and sod off"? What happens then? Naturally, the positions could be reversed as well. Do we hold all the tourists and airlines to ransom because a certain airline decides not to play ball with the Government? I am genuinely curious as to the rationale.

It is a good negotiating tool of the Government to say the change will only be enacted when lost routes are restored. If that is the commitment the Government intends to live up to, it is a stance worth taking. However, in opposition the Minister proposed an amendment to the finance Bill in January to get rid of the travel tax. It was a worthy amendment and one Sinn Féin supported. We sought to go further and reduce it further. What happens if one airline agreed to do it but another does not? What is the commitment from the Government? Is it the programme for Government commitment which refers to the restoration of lost routes or is it the statement made at the launch of the jobs initiative which relates to additional numbers? How do we measure those?

Deputy Michael Noonan

I do not believe there is any contradiction between the two positions because the initiative is to get extra tourists into the country. If one restores routes that were cancelled, one is trying to get extra people into the country and the measure of that is how many extra people come and the way to do that is to encourage extra passengers. It is really a different way of saying the same thing.

Section 2 amends section 55 of the Finance (No. 2) Act 2008 and provides for the appointment by ministerial order of a day on or after which passenger departures would not be subject to the air travel tax. This measure is subject to an agreement being reached with the airlines to bring in additional passenger numbers. While the air travel tax in itself is primarily a matter for the Minister for Finance, the Government's motivation towards making an adjustment is to ensure there are no impediments to Ireland maximising the number of visitors to these shores. Consequently, the Minister with responsibility for tourism and transport is taking a lead role in the negotiations in this area.

The Minister for Transport, Tourism and Sport and his officials have held discussions with the Dublin Airport Authority and the main Irish airline is about to propose suspension of the air travel tax. The proposal is part of a three-pronged strategy to encourage inbound tourism that the Minister announced as part of the jobs initiative. It also includes a new growth incentive scheme that has been introduced by Dublin Airport Authority which involves more targeted co-operative marketing of new routes from key source tourism markets by Tourism Ireland, Dublin Airport Authority and the airlines to encourage more tourists to fly into Ireland. I understand the Minister has also written to the other airlines operating services to and from the State airports about these initiatives. The Minister for Transport, Tourism and Sport has made it clear in all contacts with the airlines that the Government is only prepared to commence the latest provision to suspend the air travel tax if the airline proposals will deliver real benefits.

The Minister, Deputy Varadkar, has advised that certain proposals for additional capacity and new routes have been put forward and his Department is currently examining these with the aid of external consultants to assess their potential for increasing inbound tourism and the impact the proposals may have on the airports and their financial position. I understand the assessment is expected to be completed by the end of the month.

The Government cannot create jobs but it can create the conditions and environment which allow for more jobs to be created. This is the basis for any moves the Government may make in this area. As I stated previously, a review of the measure will be conducted before the end of 2012 and if it is considered unsuccessful the air travel tax will be reapplied. That is if it is reduced by order in the first instance.

Deputy Pearse Doherty

I welcome the Minister's clarification. However, I would contend there is a substantial difference between restoration of lost routes and additional passengers. For example, we might see an airline reaching capacity on existing flights but not restoring routes. There is a difference there and when dealing with legislation one word can alter the whole spirit of particular provisions.

I also contest the Minister's assertion that the Government cannot create jobs. Governments in the past have created hundreds, thousands and tens of thousands of jobs, and this Administration could do the same tomorrow morning by recruiting more nurses or teachers. Nevertheless, I welcome this proposal and hope it works well. I still have concerns in that we are asking an entire sector to agree and there is a question mark about what will happen if one operator does not agree. However, I am sure common sense will prevail and we will review the provisions in due course.

Question put and agreed to.

SECTION 3

An Leas-Cheann Comhairle

Amendments Nos. 4 and 5 in the name of Deputy Michael McGrath are out of order.

Amendments Nos. 4 and 5 not moved.

Question proposed: "That section 3 stand part of the Bill."

Deputy Michael McGrath

In regard to the amendments ruled out of order, I hope I will learn by experience which types of proposals conform with the rules. The Government's promise to reduce the lower VAT rate from 13.5% to 12% was welcomed not least because it would be applicable to the VAT payable on electricity, gas and fuel. The Government has since changed its mind, however, and decided instead to target a particular sector of the economy by reducing the lower rate of VAT for that sector only by 4.5%.

Under EU VAT rules, as I understand it, fuel, electricity and gas are categorised as "parked items" in respect of which the VAT rate can be reduced no lower than 12%. Moreover, under EU regulations, it is not permissible to have more than two lower VAT rates, so there is a difficulty in reducing VAT on fuel under the existing arrangement. This is a disappointment for many people who, on the basis of the promise to reduce the lower VAT rate to 12%, had expected a modest but welcome reduction in their household utility bills. I accept that the Minister is constrained by the EU VAT rules, but does he intend to revisit this issue in order to devise some mechanism for providing additional supports to people who are experiencing fuel poverty?

Deputy Willie O’Dea

If the Minister had decided, within the terms of the appropriate European legislation, to reduce the VAT on fuel to 12%, how much would that have added to the cost of the VAT reduction on an annual basis? In view of the pervasive problem of fuel poverty in this country, if it is possible to reduce the 13.5% rate on fuel then serious consideration should be given to it. It is easy to hide behind European law in saying it cannot be done because 12% is the lowest level at which the rate can be set, but something should be done.

A reduction in the VAT rate on fuel from 13.5% to 12% is small in the overall scheme of things, representing a reduction in the cost of a bill from €113.50 to €112, for example. Nevertheless, it would provide some alleviation for hard-pressed consumers, particularly the poorest in our society who are in extreme difficulty. There are many such people in my own constituency, which I share with the Minister, and Members from all parts of the State will be familiar with the difficulties people are experiencing in this regard. There is an expectation that some action would be taken in light of certain commitments made by the Government in regard to alleviating fuel poverty. I accept this would be only a small aspect of an overall strategy, but I would appreciate if the Minister could provide the figure.

Taking into account the additional cost of a reduction in the VAT rate on fuel from 13.5% to 12%, if the Minister wants to retain the revenue neutral character of the budget he might be able to adjust the 9% rate very slightly, perhaps upward to 9.25%, for instance, in order to retain the benefit for the targeted sector while also affording some degree of alleviation for people who are genuinely suffering. We all understand the constraints under European VAT law and so on, but it seems rather perverse that we are substantially reducing costs for people going out to spend €100 or €150 on a meal while nothing is done for people who cannot afford to heat their homes and who look ahead to next winter with great trepidation.

Deputy Pearse Doherty

I am pleased that Fianna Fáil Deputies seem to have discovered there is an issue of fuel poverty which has existed for many years, given that their party made the problem worse in previous budgets by reducing social welfare payments and increasing fuel prices through carbon taxes. The proposal to address the issue in this legislation has merit. The amendments have been deemed out of order, but I appeal to the Minister to address the issue in the context of budget 2012.

The Government is committed to increasing carbon taxes, but there should be a proper analysis of the impact of such increases on those struggling to heat their homes on a daily basis. We all heard the horror stories on radio programmes last winter. It is incredible, as we sit in this Chamber, to think there are people who have endured very cold, wintry days and nights without any heating or with heat being rationed to a severe extent. I ask for some type of analysis to inform decision making in regard to the commitment the Government has given, as part of the EU-IMF programme entered into by the previous Government, to increase carbon taxes and the effect thereof on fuel poverty. This assessment should be published so that we can make an informed decision in the context of the finance Bill that will give effect to budget 2012.

Deputy Michael Noonan

Deputy Michael McGrath explained the constraints placed on us by the European VAT directives and the difficulty of moving below a rate of 12% on some items because to do so is specifically forbidden. He also referred to the constraints in terms of the permissible number of lower rates. I am informed by my advisers that if VAT on fuel were to be reduced to 12%, then all other VAT items at 13.5% would, under the directives, have to come down to 12% also. The cost of that would be €230 million.

I remind Deputies that our focus here is on creating jobs rather than the broader agenda of alleviating the burden on poor families in terms of the cost of gas, electricity or heating oil. That is a matter for a different set of proposals either through a finance Bill at budget time or through a social welfare Bill. It is not something properly dealt with as part of a jobs initiative. However, the principal reason it is not included in this legislation is the difficulty presented by the VAT directives and the limits they place on our freedom of action in processing matters such as this.

There is a type of contradiction emerging between attempts to reduce the VAT rate on fuel while at the same time, as a result of the Green Party participation in the last Government, we have a situation where carbon taxes are increasing significantly. To increase one while reducing the other certainly gives the impression one does not know what one is doing. However, I take the Deputy's issue. The social welfare code appears to be a more appropriate way to alleviate fuel poverty than the tax system because of the constraints on the latter.

Deputy Willie O’Dea

To clarify, is the Minister stating that were the VAT rate on fuel to be reduced to 12%, it would then be necessary to reduce all other items within the 13.5% range, even though it obviously has been possible previously to reduce some items to a rate of 9%?

Deputy Michael Noonan

The briefing note I have to hand states that while these items could in theory be reduced to a 12% rate, that could only be done if all the items remaining on the 13.5% rate were reduced to the 12% rate, as under the European Union VAT directive, a member state may only have two reduced rates and Ireland's now will be 9% and 13.5%. Furthermore, such a reduction from 13.5% to 12% of all items that will remain on the 13.5% rate would be very expensive and would cost €230 million. It is a combination of not being able to go below 12% for certain items in the directive and then only being allowed two lower VAT rates. Consequently, reducing the VAT rate for the hospitality industry to 9% creates one lower VAT rate, while the 13.5% rate, as distinct from the rate of 21%, constitutes the other lower VAT rate. The problem is that to maintain the commitment to only two lower VAT rates, one would be obliged to eliminate the 13.5% rate and put everything on a rate of 12%.

Question put and agreed to.

SECTION 4

An Leas-Cheann Comhairle

Amendments Nos. 6 and 7 in the names of Deputies Pearse Doherty and Michael McGrath, respectively, are out of order.

Amendments Nos. 6 and 7 not moved.

An Leas-Cheann Comhairle

Amendments Nos. 8 and 16 are related and will be discussed together.

Deputy Michael Noonan

I move amendment No. 8:

In page 5, lines 36 and 37, to delete "section 784" and substitute "section 784 or 785".

Section 4 deals with the pension levy and I wish to make some introductory remarks because I propose to make quite a number of amendments to it. I wish to provide Members with the overall information first, after which the amendments can be debated singularly as we go through them.

Before speaking on these amendments and given the number of official amendments included on the list that will be debated in various separate groups, for the benefit of the committee it might be useful for me to provide a brief outline of what the amendments are designed to achieve in their entirety, as compared with the proposed structure of the pension levy in the Bill as published. During the course of the committee's consideration of the amendments, it will be seen that some of my proposed changes are substantive. Some are technical in nature and are required to give greater clarity to certain provisions in the Bill as published, while others reflect minor consequential changes and drafting errors. The amendments reflect, to a large part, the useful discussion my officials, as well as officials from the Revenue Commissioners, have had with representatives of the pension industry since the publication of the Bill on the administrative and operational aspects of the levy. In this regard, I acknowledge the constructive engagement of the industry with the officials in seeking to make the levy work as efficiently as possible.

The key changes I propose to make through the amendments to the published provision are, for the most part, considered necessary to facilitate a more efficient implementation and collection process for the levy and to minimise the administrative cost burden on the industry while collecting the levy. I propose to summarise them. First, I am providing a single valuation date in respect of most pension funds' assets for each of the four years of the levy, as compared with the choice of valuation date provided for in the Bill as published. In addition, I propose to push back the valuation date to 30 June in each of the four years. Linked to these changes, there will be a single payment date of 25 September for all years, as opposed to the two payment dates in each year as originally envisaged. I am also providing for the delivery of both the levy statement and the levy payment by electronic means. In line with the proposed single payment date, the rate of the levy will be at 0.6% of the chargeable amount, as opposed to two payments of 0.3% each. I am also expanding the definition of contracts of assurance to make clear that it includes not only contracts of assurance linked to the pension business undertaken by pension schemes with life assurance companies but also encompasses policies or contracts of assurance linked to what is called investment-only business with such companies. This will mean that for the most part, the chargeable person in respect of contracts of assurance will be the insurer rather than the administrator of the scheme.

I also propose to strengthen the published provision and make it clearer as regards the rights of administrators to dispose of or appropriate assets of the pension scheme for the purposes of paying the levy and with a view to protecting them against any possible legal challenge in that regard. This reflects a concern that administrators with responsibility for calculating and deducting the levy could be placed in an untenable position if the trustees who engage them were to instruct them not to pay the levy. The amendments also will put beyond doubt that the chargeable persons and the trustees of the scheme are both jointly and severally liable for the payment of the levy.

Finally, I am providing greater clarification as to the circumstances and manner in which benefits payable under the scheme may be adjusted by insurers and trustees on foot of payment of the levy. In that regard, I am also giving the Revenue Commissioners authority to review any case in which assets are disposed of by the administrators or trustees to pay the levy in order to ensure that any such disposals are in keeping with or needed to pay the levy. In addition, Revenue will have an oversight authority to review instances in which the benefits are adjusted as a result of the payment of the levy to ensure that any such adjustment is made in accordance with the requirements of the levy legislation. In respect of the latter, Revenue will be able to consult whatever expert it deems necessary to assist it in that task.

I will now revert to amendments Nos. 8 and 16. The purpose of these amendments is simply to clarify a number of definitions in the provision as published. Amendment No. 8 makes clear in the definition of "administrator" that references in the provision to "administrator of a scheme" include, as regards retirement annuity contracts, insurers who provide annuity contracts in respect of death in service benefits under section 785 of the Taxes Consolidation Act 1997, as well as insurers who provide annuity contracts in respect of retirement benefits under section 784 of the aforementioned Act. Amendment No. 16 expands paragraph (b) of the definition of the scheme again to ensure that it includes annuity contracts or trust schemes provided by the Revenue Commissioners under section 785 of the Taxes Consolidation Act in respect of death in service benefits. There also are older deferred annuity contracts in which the annuity becomes payable automatically as part of the contract, as opposed to an open market purchase option that applies in more modern annuity contracts. The amendment clarifies that once an annuity is vested, which in most cases arises when the tax-free lump sum is taken, it no longer is subject to the levy. I commend both amendments Nos. 8 and 16 to the committee.

As I stated, these amendments arise from extensive consultations with the industry in order that what was intended will be done and that no undue consequence will occur.

Deputy Sean Fleming

The Minister might advise Members as to the identities of the organisations, companies and representative associations with which officials from his Department and the Revenue Commissioners met specifically to discuss these issues between the Bill's publication and the present, as well as whether the Minister was personally involved or has been briefed on an ongoing basis. He should provide Members with a background to the discussions to establish who had access to the Department during that time and whether many people who sought access to make representations were not facilitated with such meetings.

Deputy Pearse Doherty

The Minister should inform Members as to whether any of his proposed amendments will have an effect on the net yield from the pension levy. Will the yield increase, decrease or remain the same as the amount presented in the jobs initiative?

Deputy Michael Noonan

My officials have been in contact with a wide number of interested parties in both the public and private sectors, including the Pensions Board, about the practical, logistical and other issues surrounding the introduction of the levy. I met two groups of representatives of the pensions industry; the Deputy will know it is divided into two different groups. I had long discussions with both groups but it was on the general principle of the levy. The technical work was done at official level but I was kept informed of the process and of the type of Committee Stage amendment that was coming along from the discussions.

The organisations, the IIF, the IAPF, the Pensions Board, the Department of Social Protection and representatives of trustees of pension funds were the people involved on the technical side with the officials.

Deputy Pearse Doherty

I was posing the question about the amendments proposed by the Minister today. Is there any change to the yield to the State from the pension levy? Do any of the amendments increase or decrease the yield or will the yield stay as the original estimate envisaged and as announced in the jobs initiative?

Deputy Michael Noonan

My understanding is that the amendments do not really extend the scope of the levy significantly. Any change in yield would be marginal and would be within the margin of error of the calculation of what it will yield.

Amendment agreed to.

Acting Chairman (Deputy Seán Kenny)

Amendments Nos. 9, 11 to 13, inclusive, 15, 19, 20, 22 and 23 may be discussed together.

Deputy Michael Noonan

I move amendment No. 9:

In page 6, to delete lines 3 to 32 and substitute the following:

" ‘chargeable amount', in relation to a chargeable person and any assets, means the aggregate market value of the assets (other than an asset that is land, in which case the market value of the land shall be taken as not including the amount of any outstanding borrowings used to acquire the land)—

(a) on 30 June for the year 2011, 2012, 2013 or 2014, as the case may be, or

(b) where the assets are not contracts of assurance and are held for the purposes of a scheme of a kind described in paragraph (a) of the definition of ‘scheme’ that is a defined benefit scheme or a one member scheme and the chargeable person so decides, and where accounts are prepared to an appropriate accounting standard, on the last day of the accounting period of the scheme ended in the period of 12 months immediately preceding 30 June of the year 2011, 2012, 2013 or 2014, as the case may be,

and in respect of which the chargeable person is the administrator or insurer on the date concerned;".

I am providing in amendment No. 9 for a single valuation date in relation to most pension funds assets for each of the four years of the levy, as compared with a choice of valuation date provided for in the Bill as published. In addition, I propose to push back the valuation date to 30 June in each of the four years. Linked to these changes, amendment No. 12 also provides for a single payment date of 25 September for all years, as opposed to the two payment dates in each year originally envisaged when amendment No. 13 simply deleted the definition of a first due date which is now superfluous.

Amendment No. 20 provides for the delivery of the levy statement by electronic means. In line with the proposed single payment date, amendment No. 22 sets the rate of the levy at 0.6% of the chargeable amount, as opposed to two payments of 0.3%.

In summary, therefore, assets held in the form of contracts of assurance and all defined contribution occupational pension schemes assets will be valued for levy purposes on a fixed date of 30 June in each of the years 2011, 2012, 2013 and 2014. The levy will be due and payable at the rate of 0.6% of the asset values on 25 September in each of those years. The exception to the fixed valuation date will be the retention of a choice between the valuation of scheme assets on 30 June in each year and their valuation at the most recent scheme accounting date in the preceding 12 months but only for the assets of defined benefit occupational pension schemes and small self-administered schemes where these schemes do not hold their assets in the form of contracts of assurance. This is at the request of the industry, obviously.

The definition of defined benefit scheme and one-member scheme are included in amendments Nos. 11 and 15, respectively. These changes reflect the discussions with the pensions industry and are considered necessary to facilitate a more efficient implementation and collection process for the levy and to minimise the administrative cost burden on the industry from collecting the levy.

Amendment No. 11 expands the definition of contracts of assurance to make it clear that it includes not only contracts of assurance linked to the pensions business undertaken by a pension scheme with life assurance companies, but also encompasses policies of contracts of assurance linked to what is called investment-only business with such companies.

Many retirement benefit scheme trustees, particularly in relation to smaller pension schemes, insure the risks associated with the scheme in whole or in part with life assurance companies. Apart from this specific pension-type business, where the insurance contract corresponds with particular liabilities of the scheme, trustees of pension schemes may as part of their investment portfolios invest directly in assets such as equities and Government stocks or in unit link funds operated by investment managers, including insurance companies. With a view to ensuring that there is clarity as to who the chargeable person is in relation to contracts of assurance generally, it is considered that the responsibility for paying the levy in respect of investment-only type business with insurers should also fall within the responsibility of the life companies rather than the pension scheme trustees or administrators. Amendment No. 11 puts this beyond doubt. The only exception to this is in relation to one-member small self-administered schemes who hold trustee investment plans with life offices. The case has been made to me that in such cases the trustees of the scheme should remain responsible for the levy.

Following on from the foregoing, amendment No. 15 includes a definition of one-member scheme, as already mentioned, and expands the definition of pension fund in relation to an insurer to include investment-only business.

Amendment No. 19 includes a definition of valuation date which is required later in connection with amendment No. 30.

I commend amendments Nos. 9, 11 to 13, inclusive, 15, 19, 20 and 22, to the Committee. Amendment No. 23 is to be moved by Deputy Sean Fleming.

Deputy Sean Fleming

I welcome the opportunity to speak on this group of amendments. I will discuss amendment No. 23 which is in my name. I acknowledge the rationalisation of the payment dates as proposed in the Minister's amendments. I had tabled two amendments to do with payment dates but these were ruled out of order. I am still wondering as to the reason.

The first payment date was scheduled to be 25 July this year and the second payment was to be 25 October, followed by dates of 25 March and 25 September 2012. On Second Stage I made the point that two years' payments would be made within the next 14 months which in my view was very severe, given we are now halfway through the year. The Minister proposes to change the payment dates to September of each of the years and I agree with the proposal for a single payment date as it makes it simpler. He will still get a full year's payment for this year even though we are well into the year but I will not oppose that proposal. In a way I consider it to be a retrospective levy in that the Minister is introducing a levy in relation to funds. I refer to what the Minister stated in his speech introducing the jobs initiative. He stated it would be based on the value of the funds on 1 January and then when he produced the legislation he stated it would be at the end of March and now today he states it will be the end of June. I welcome the clarification and the bringing forward of the date to the end of June——

Deputy Michael Noonan

Even the industry kept changing the date.

Deputy Sean Fleming

I welcome the fact that the valuation has been moved to the end of June because I had a problem with basing a levy this summer on a date that had passed several months ago and that is the reason I regarded it as a retrospective levy based on a valuation date that had since passed. However, the Minister has made the change and it is not an issue.

I am pleased there will be a single valuation date. It may not be possible to quantify but I find it difficult to accept that there is no significant difference between a pension levy based on 1 January this year and six months later on 30 June. On the basis that, hopefully, over the course of this levy, we will see some growth in the economy and growth in valuation, I would expect the pension levy to increase over and above the target figure of €470 million, which the Minister indicated would be approximately 6% per year. These were the figures on which the jobs initiative was based. Even if there is a modest growth over the period of the next few years at 1% or 2% or 3%, the contribution from the pension levy each year will exceed the €470 million per year mentioned here when the jobs initiative was announced in the House. I ask the Minister to consider a Report Stage amendment to cap the payment per annum to a maximum of €470 million because if the value of the fund increases the Minister will increase it.

When I spoke on Second Stage on this issue I noted it would exceed €470 million per annum. The sum of €1.8 billion projected for this month may transpire to be approximately €2 billion at the end of a four-year period due to rising values. While pension funds might begin to improve and be restored to what they were earlier, the amount of money that will be taken out of them will increase as the years go by due to increasing valuations.

I welcome the rationalisation of the dates which is good for the industry. Most of the amendments are technical and administrative to clarify definitions of defined benefits and single-member funds.

I want to deal with amendment No. 23. Deputy Doherty referred to how complicated this area is and it is difficult for the Opposition to draft an amendment on a levy. I had to do some reverse thinking. My amendment states:

In page 9, line 13, after "subsection (2)" to insert the following:

"or at a per cent chargeable on annuities which have been purchased with an insurance company or Approved Retirement Schemes (ARFs), whichever is the lesser".

I cannot ask that approved retirement funds from the Opposition side be included in the levy scheme because it would mean that a Member of the Opposition would impose a charge on the people. Given that a charge is not being imposed on the people, the same pension levy should be charged to everybody else as would be charged on approved retirement funds, which is zero. If the Minister is not putting a 0.6% levy on approved retirement funds he should not put a levy on anyone. That is where I am coming from.

I wish to discuss approved pension funds. Not only do 99.999% of the public not know what we are discussing, a proportion of the House is not far off that figure. When we discuss these matters we lose the general public. I want to explain my position. I welcome the 0.1 % of the membership of the Dáil, Deputy Mathews, to the debate. He might understand what I am talking about.

I want to explain to people what we are discussing. I do not want to table an amendment on approved pension funds and have people ask what it means. I do not know whether the Minister will accept the amendment. I want the Government Deputies, in particular Labour Party Deputies, to know what they are voting for if they do not support my amendment. I want people to understand what we are debating because there was a lot of debate on pension levies. This is the main issue I want to deal with today.

Pension funds are taxed in Ireland. Contributions and the gains to a fund are usually exempt, but they are taxed on draw down or pension treatment. When a person retires he or she has the option of investing his or her accrued pension fund. For clarity I am only referring to people in the private sector. The investment options include an annuity, a fixed sum of money paid to someone each year, typically for the rest of his or her life. Another option for people is an approved retirement fund, to which I will refer. A third option is an approved minimum retirement fund which is very similar to an approved retirement fund. The primary difference is that no withdrawal can be taken from the initial capital investment until the retiree has reached 75 years of age. Withdrawals can be taken at any time from investment gains made within the approved minimum retirement fund and they automatically convert to an approved retirement fund when the retiree reaches 75 years of age. We will not worry too much about that.

I want to discuss approved retirement funds because they are important. If the Government will not include the amendment the people should know who it is exempting from the levy. I object as a matter of principle that people who have what I consider to be a big pension pot will be exempt. That the new Government is creating a new loophole to exempt some of the pension pots of some of the wealthiest people while everybody else in the country will pay for it is fundamentally wrong. I do not think Members of the House should go along with that.

An approved retirement fund is a personal retirement fund where the retiree can keep his or her money invested after retirement as a lump sum. Everything I am discussing refers to amendment No. 23, to which I am specifically speaking, and is part of the group of amendments scheduled for discussion purposes. Every single sentence I say will be relevant to the amendment. Some people may think my contribution will be a little bit long but it will be absolutely relevant and there will be no repetition.

The person can withdraw from such a fund regularly or give himself or herself an income on which he or she will pay income tax and Government and income levies when he or she withdraws from it. Any money left in the fund after the death of the person can be left to his or her next-of-kin. Investing in an approved retirement fund may be an option for four main groups — a self-employed person; a proprietary director; people who have PRSAs; and people who have defined contribution plans which were introduced in the Finance Act 2011.

What are the advantages of these funds? Why would the groups to which I referred avail of them? They do so because the retiree keeps control of his or her retirement money. It is not in the hands of an agent, trustee or anyone else. It may be important if the person is in poor health and wants to leave the money to his or her dependants after his or her death. The retiree has flexibility in terms of when and at what rate to draw down funds from the approved retirement fund.

The retiree can choose how to invest the approved retirement fund and select the type of investment that suits his or her needs and attitudes to risk. Any growth in the approved retirement fund is tax free but income from it is taxable. The retiree can always use his or her approved retirement fund to buy an annuity at a later date and if he or she did so he or she would be captured under the pension levy. As the Bill is currently drafted, such a person is outside the pension levy. Such a person may decide to buy an annuity to secure a regular income for the future.

By waiting the retiree may be able to get a higher annuity rate on his or her lump sum as he or she would be older. There are very attractive terms for passing on approved retirement funds to beneficiaries. The transfer of an approved retirement fund into the name of the deceased person's spouse does not incur income tax or capital acquisitions tax. If the fund is passed on to a child under 21 years of age he or she is exempt from income tax. A person aged over 21 will pay income tax but only at the standard rate. It is a tremendous scheme.

Who would put their money into such a fund? One would want to be wealthy, not wish to access it and want to leave a lump sum for one's family or next-of-kin when one passed on. Such a person would obviously have other sources of income and he or she would not necessarily need to draw on the approved retirement fund during its existence. Such a fund is specifically for a set group of people.

I have a number of other points. I mentioned tax implications. The Department of Finance conducted a review of tax and pension schemes and found they were being used by some high net worth individuals as a tax avoidance scheme. That is the official view of the Department. In subsequent years amounts not drawn down from approved retirement funds were taxed at 1% which increased to 3%. I understand the rate is now 5%, even if no money is withdrawn.

I referred to the 2006 report of the Department of Finance. It did not reveal the names of the individuals who had accumulated very large pension funds. I tabled a parliamentary question to the Minister last week on how many of these funds are in existence, their value and potential yield. An official from the Department said he would not have that information because it is private sector money.

After a discussion, I received an answer from the Department from a competent official with whom I spoke and whose name I do not remember. I understand from his comments that the Minister does not know the value of the pension pots held by wealthy individuals which will not be covered by the levy on pension funds.

I will refer to other aspects of this issue which are in the public arena. As I noted, the Department of Finance did not reveal the names of the holders of approved retirement funds, ARFs. However, subsequent reports in the media suggest that the individuals in question include executive directors of some of the banks and building societies. Many people will be familiar with the book, Banksters: How a Powerful Elite Squandered Ireland’s Wealth, which was written by D. Murphy and M. Devlin and published by Hatchette Books in 2009. It reports that an estimated pension of €13.5 million was transferred from Anglo Irish Bank into a separate pension scheme in 2005, which was before Seán FitzPatrick stood down as chief executive. Writing in The Irish Times on 9 October 2010, the respected journalist, Colm Keena, citing Mr. FitzPatrick’s statement of affairs and related court documents, stated that Seán FitzPatrick had an approved retirement fund amounting to €9.1 million in November 2009. The Irish Nationwide Building Society reported in its published accounts for 2008 that on 12 January 2007, pension obligations to its chief executive officer, Mr. Michael Fingleton, were settled by transferring €27.6 million outside the control of the group. It is understood these moneys are in an approved retirement fund. As part of public accounting, all public companies in the non-financial sector are legally obliged to include details of pension payments to directors and chief executive officers in their annual reports, as do Bank of Ireland, Allied Irish Banks, Anglo Irish Bank, Irish Life and Permanent, the Educational Building Society and Irish Nationwide Building Society. These details are, therefore, on the public record.

The simple question that arises in this connection is whether individuals holding pensions in approved retirement funds will pay the pension levy. Having argued on Second Stage that the levy will apply to ARFs, I hope the Minister will provide a positive response and ensure the House does a good day's work. Given the highly technical nature of the legislation, it is possible that the Bill already provides for the proposal in amendment No. 23. The amendment we discussed earlier related to sections 784 and 785 of the Taxes Consolidation Act. My party was constrained in the amount of research it was able to do before tabling the amendment which essentially provides that all payments from approved retirement funds will be covered by the pension levy.

Deputy Michael Noonan

I propose to provide some context by responding to Deputy Fleming's contribution before other Deputies contribute. I will first read the briefing note, which covers some of the points the Deputy raised, before addressing other issues that are not covered by the briefing note.

On amendment No. 23, the intention behind Deputy Fleming's proposed amendment appears to be to have the levy applied at an unspecified rate to annuities and approved retirement funds, ARFs. I assume the rate the Deputy had in mind was the 0.6% to be applied to other pension funds.

Deputy Sean Fleming

Yes, I had in mind the rate proposed by the Minister.

Deputy Michael Noonan

Approved retirement funds do not come within the scope of the pension levy regime. In common with annuities purchased by pension funds in the name of individuals who have retired, or by individuals from the proceeds of retirement annuity contracts or PRSAs, they are outside the scope of the regime. This is because such annuities and ARFs are not pension funds. An annuity is essentially a pension in payment, that is, a stream of income purchased by a pension fund or an individual from the proceeds of other pension products from a life assurance company for a capital sum generally at the point of a member's or individual's retirement. ARFs are essentially investment options into which the proceeds of certain pension arrangements can be invested, again generally on retirement. They are designed to provide a stream of income to their owners in retirement in the same way as annuities. Approved retirement funds were introduced as an alternative to annuities but with more flexibility and control for the beneficiaries over the funds involved. Unlike the assets of exempt approved pension funds, which have historically been allowed to cumulate on a tax free basis in the fund, the stream of income provided by way of annuity is already subject to a tax at the annuity holder's marginal rate. Drawdowns from ARFs are similarly taxed at the ARF owner's marginal tax rate.

Much of the value of the pension funds is attributable to the rolled up value of the tax relief to which I referred. The temporary levy on pension funds will allow recipients of this ongoing tax relief to make a contribution from their pension funds and other pension arrangements to assist those who are seeking employment.

I emphasise that if drawdowns are not made from the approved retirement fund, a notional or imputed drawdown amounting to 5% of the assets in the ARF is deemed to take place each year. The notional drawdown is liable to a tax at the ARF owner's marginal tax rate. Unlike the pension fund levy, which is temporary, the 5% notional distribution requirement, which was increased from 3% by Deputy Fleming's Government in the previous budget and implemented in the Finance Bill introduced in January of this year, is a permanent imposition.

To explain the position in simple terms, approved retirement funds are held by wealthy people, some of whom do not draw down from their ARF. If an individual does not draw down from his or her ARF, a drawdown of 5% of the fund is imputed each year and tax is applied. As I noted, the previous Government increased the imputed drawdown from 3% to 5% in last year's budget. The tax applied to the imputed drawdown is the marginal rate of the individual who holds the ARF plus the universal social levy and PRSI, giving a tax rate of 52%. When one does the sums — "the math" as Americans say — this amounts to the equivalent of a levy of 2.5% as opposed to the 0.6% levy on pension funds. According to the calculations done in the Department, the taxes applied to ARFs amount to the equivalent of a 2.5% permanent levy rather than one lasting for four years. It is not true, therefore, that holders of ARFs are not subject to tax or the proposed levy.

It is not the case that ARFs are not taxed. They are taxed in a different way and I do not want to mix up two tax systems by adding a levy to the notional drawdown which is taxed at the marginal rate of 52%. If the argument is made that ARFs are not sufficiently taxed, I am prepared to examine the matter in the forthcoming budget. Deputy Fleming's Government raised the notional drawdown from 3% to 5% in the previous budget. If I decide to act in this matter, I will do so by adjusting the existing tax formula.

There is a widely held perception that the option to access approved retirement funds or alternative approved minimum retirement funds on retirement is available to a wealthy chosen few. That is not the case. The previous Government extended the provisions in the Finance Act 2011 to all defined contribution pension arrangements in respect of the main benefits from such arrangements. Members of such schemes and defined benefit schemes always had the ARF option in respect of additional voluntary contributions to pension saving arrangements. Following the extension of this arrangement by the previous Government, it is no longer the exclusive option of the wealthy few.

The arguments advanced by Deputy Fleming have merit. This is, however, a complex matter as evidenced by the Deputy's contribution and my reply. I do not propose to accept the amendment as I am not prepared to apply the levy to approved retirement funds which are taxed in a different manner. I would like to do some further research on the incidence of tax and ARFs across the system before deciding to take further action in respect of taxing ARFs. I give the Deputy a commitment that in the preparation for the December budget and 2012 finance Bill, we will examine this issue to ascertain if any inequalities arise or if these types of schemes will bear more tax.

The Deputy also talked about whether the yield on the levy might increase in future. Money is going in and out of funds all the time, so it is hard to measure yield on pension funds in advance. Having had talks with the pension industry, I know it has many concerns which are wider than the levy. It has other issues about what rate of tax will apply to contributions going forward. I want to have further discussions with the industry about those matters. It would obviously be easier for me to meet some of the pension industry's concerns if the Deputy was correct in saying that there is an additional yield from the levy. I am not making a commitment to that but I am signalling that I am aware of some of the pension industry's concerns. If there is a big additional yield there are plenty of places to put it at present, but I would talk to the pension industry to see if anything can be done to alleviate the concerns they have in areas other than the levy.

The Deputy also mentioned putting a cap on the fund, but the Revenue Commissioners say that is not possible because they are not sure what the yield would be. One would therefore be trying to put a varying cap on a varying amount, but it is not technically possible to do that. I understand what the Deputy is saying, and we do not want to take more than is intended. If we take more than is intended, however, we will carefully examine what we will do with the additional yield, and we might be able to meet some of the concerns of the pension industry in other areas of that industry. I want to make it clear that is not a commitment, but the commitment is that I will examine the possibility.

Deputy Willie O’Dea

It is a promise rather than a commitment.

Deputy Sean Fleming

I thank the Minister for his response. As regards the latter point, the maximum cap of €470 million might mean that if more was collected the Minister might have to give a refund, which would be a complicated exercise. I understand that. If I was in the Minister's position and got a bit more than the €470 million, I would take it. I am concerned, however, because some people will say it is starting at €470 million and will ask whether it will rise.

Deputy Michael Noonan

The Deputy and I did our FÁS course together on the Committee of Public Accounts, does he remember?

Deputy Sean Fleming

Yes.

Deputy Michael Noonan

We learned a lot over there.

Deputy Sean Fleming

We did. To come back to what we were discussing earlier, there is a simple way of handling approved retirement funds or ARFs. The Minister could table an amendment to increase the 5% tax to 6%. The Minister said that the rate that went to 5% in the last budget is taxed at a person's marginal rate and is effectively the equivalent of about 2.5% at the top rate of tax after the universal service charge. Therefore, if the Minister wants to get approximately another 0.6% in line with the income levy, he could increase the existing levy on the approved retirement funds by 1%. Does the Minister have the yield figures from the tax on these funds over the last couple of years? They came in at 1%, then went to 3% and later to 5%.

Deputy Michael Noonan

I will send them to the Deputy because I do not have them here.

Deputy Sean Fleming

In fairness, every time we ask for a breakdown of a particular tax it translates itself down the road into changing taxation form No. 11. It adds another page to what is already an ever-expanding document. Every time we seek the cost of various allowances, pages keep getting added on. It is a pity we do not have another way of getting the information, but I know that in order to obtain the data the question must be asked on the form. That makes it far more complicated and while people are facing a mountain of paperwork, there is a balance to be struck. Somebody must intuitively have some feel for it, even if they are only estimates. It went from 0% to 5%, so somebody must have felt it was worthwhile to do this. I would like to know the rationale and thinking behind it.

The approved retirement funds are not taxed at the point of entry, but there are situations where the beneficiaries will not be taxed. If they draw money out of the fund, like everyone else in the country, they will pay income tax, levies and the universal service charge. I would not make a virtue of the fact that they are paying tax, but one of my main reasons for posing this question is that I do not know what the financial yield is. Even the Department of Finance is in the dark in this respect, but maybe there is something out there that is worth going after. There is something inequitable about bringing in a new pension levy, however. The Minister will remember that the outgoing Government increased it to 5% in the last budget because we felt it was worth doing, in its own right, as regards the ARFs. It was considered necessary and appropriate to do so.

We are now moving on to a new pension levy amounting to 0.6% per year for four years, which will be about 2.4% or 2.5% at the end of that period. The public will be outraged, however, when they hear that they will all have to pay the pension levy, but that Seanie FitzPatrick is getting off scot free again. It concerns the politics, equity and integrity of this House if we pass legislation to bring in a pension levy for everyone in the country, except Seanie FitzPatrick and Michael Fingleton. I am using their names because they have appeared in the public media on several occasions. I have sourced the names and, in addition, some of the figures were in the annual accounts. It will be a bad day's work for this Dáil, however, if this happens. The Minister may rightly ask whether we have learned nothing in the past, but we have learned not to do a thing like that again. It would be a very bad day for the Government, however, to vote through this pension levy thus allowing a situation that applies to everybody except the Seanie FitzPatricks and the Michael Fingletons. I really do not believe the Minister thinks it is a good idea that they should be getting off on this specific measure that will affect everybody else in the country.

It will not be long until the December budget and I am glad the Minister is open-minded in considering the levy. He does not want to mix up the 5% tax with this new levy. It is well within the ability of the Department of Finance and the Revenue Commissioners to operate two levies on the one fund because we already have income tax, pension levies, the universal service charge and income levies. Most earners are used to four or five categories of tax, so it is unacceptable to offer a defence that an imputed tax will be complicated to calculate because adding a pension levy to that would mix up two taxes. Everybody's payslip has a mixture of four or five taxes and their net pay is a very sad thing as a result. We cannot accept the argument therefore that it would be somewhat complicated to mix those two issues in relation to Seanie FitzPatrick and Michael Fingleton.

I cannot understand why the Minister has not agreed to this on the grounds of equity. If the new Government's first finance Bill is to create a specific exemption from the levy for Seanie FitzPatrick and Michael Fingleton, the public will not understand it. That position is supported by the Minister for Social Protection, Deputy Joan Burton, and the Labour Party generally, so it beggars belief how they will vote for this measure. The mind boggles.

I would like the Minister to explain the politics, equity and fairness of this. How is it that the first finance Bill of this new Government will pass a levy for everybody in the country, yet exclude Seanie FitzPatrick and Michael Fingleton? If the Minister can explain that, he is a better man than I am. I do not think the Minister should do it. Nobody in the House thinks it is the right thing to do. The Minister has until 5.30 p.m. to propose a one-line amendment to deal with this matter. I do not think there are another four hours in this debate, so it can be adjourned to allow the Minister to come back before Report Stage. We will facilitate that if the Minister wants to adjourn the debate for an hour or two. It would be worth the Minister's while to capture Sean FitzPatrick, Michael Fingleton and all the other people like them, in this levy.

Deputy Alex White

How many more times is the Deputy going to mention it?

Deputy Brian Hayes

Is it Michael or Sean?

Deputy Sean Fleming

I am mentioning it so loudly because the Chamber is almost empty. Many Labour Party Members who come here later today to vote on this measure will not know that they are passing legislation to give a specific exemption for Michael Fingleton, Sean FitzPatrick and others. I hope I have made my point. The Minister should take an hour this afternoon to draft an amendment to capture those people. It will be a bad day's work if the new Government exempts them, following the massive political changes and the Government's overwhelming electoral victory. It will mean there is one law for the rich and one law for the poor, but that is not how the Minister should be remembered for his first finance Bill.

Deputy Pearse Doherty

There is very little to add what has been said because Deputy Seán Fleming has made the argument very well. It is worth listening to what he said. His party has experienced the wrath of the public for similar exemptions, similar mistakes in the past, as he acknowledged. This is a big mistake the Government is about to make. I agree with the Deputy that many people are unaware of why approved retirement funds, ARFs, will not be subject to the levy or a similar taxation measure that would have the same imposition as it would on other private pension holders. While listening to the Minister's response, as he read from his briefing note, I was expecting to hear some reason as to why we could not do that. I understand the position in terms of the imputed tax.

The Minister can correct me if I am wrong but I understand that in the case of a person who has drawn down from his or her pension funds, no different tax is imposed on him or her as against a person who has drawn down from another fund that will be subject to the levy. The Government is about to make an unequal imposition. We have heard the names who have been referenced on many occasions in the Dáil and that strikes a chord with the public. There is a great deal of anger among the public at the activities of individuals in the banks. This is not just about getting at Seanie FitzPatrick or anybody else who was partly responsible for wrecking the economy. The Government Chief Whip used the term "the biggest gangster in Ireland" or something similar on the floor of the House. The Government is exempting from this type of fund those people, about whom the Government Chief Whip made that accusation under privilege on the floor of this Chamber.

This is not about exacting vengeance or getting back at those people. The reality is that the country is "banjaxed", to borrow a phrase. We need money. The Government has decided to tap into the savings of many low to middle income earners who have put aside money for a modest pension and it is about to exempt the high net worth individuals from this same type of initiative. This is about fairness and who can best afford to take this hit.

I do not agree with the pension levy. The Minister will note we have an amendment tabled proposing the deletion of the section. If the levy is to be imposed, at a bare minimum it must be extended to include those who have ARFs. There are ways to do that.

From the Minister's comments, it seems he is at least disposed to looking at that in the context of the finance Bill that will give effect to the budget but there is no reason we cannot do it now. If it is not to be done today, this Bill will go to the Seanad and an amendment can be proposed to it at that stage.

Deputy Michael Noonan

This is a money Bill.

Deputy Pearse Doherty

Yes, I was wrong about that but there are ways to do this. I understand today is the publishing date for the Finance (No. 3) Bill. We can amend the legislation again. That finance Bill will go through this House in about two weeks time. There is a need for at least a statement, if not an amendment today, to the effect that it is the Government's intention within days to include those high net worth individuals in terms of being subject to this levy, whether by way of imposing the levy on ARFs or increasing the imputed tax rate. That must be done at a bare minimum.

This is not about getting at the Labour Party. I know its members do not like to be reminded of this but if we have learned anything from the past, this House cannot vote through a legislative measure that will exempt those people from this levy. It is incredible that a Government could think of doing something like this, particularly given that the Minister said that he is open to the idea of dealing with this issue. Let us deal with it now. Let us avoid all the wrath of the public to the effect that the Government is no better than the last shower and all the rest of it.

Let us get this right. I am sure that many, if not all, Government Deputies who will support this legislation would like to see ARFs subject to this levy. There is scope to do this. I do not know why such provision was omitted in the first place. I thought there was some technical, legal reason that it could not be done. We are legislators, we introduce laws and the Minister has clearly said that this is something he would examine. Today is the day that we should examine it. It should not have been left this late to do so. I appeal to the Minister to listen to the pleas from this side and to include this provision in the Bill.

Deputy Michael McGrath

I have one comment on the issue of ARFs. Can the Minister get access to information on the total value of ARF funds in Ireland? A call to the Pensions Board or to the industry might elicit that information. It would be helpful for all of us to put in context the total value of ARFs in Ireland.

Amendments Nos. 9 and 12 deal with the payment date and the chargeable date as such for the imposition of this levy. The Minister is factoring in that a sum of €470 million will be received each year and there is an even figure put in place for each year. Has he any information that as a consequence of the levy being enacted in this legislation it will result in a pattern of behaviour emerging which could have an impact on the amount that will be received, and by pattern of behaviour I mean the behaviour of individual scheme members and the behaviour of pension funds? For example, persons who are in a position to access their pension fund and draw it down may now do so ahead of time. People who have the option of converting their pension fund to an ARF may choose to do so now. There is also the possibility of pension funds being moved abroad. Clearly the amount to be received in September of this year is based on the valuation from June, but is there any evidence from the industry or concern on its part that the yield may be less in subsequent years as a result of certain behaviours that may emerge following the levy?

Deputy Willie O’Dea

I am totally bemused. I sat on the opposite benches for several years since the banking crisis came upon us and listened to Deputy Joan Burton on this side of the House mentioning certain names ten or 50 times a day, including Seanie FitzPatrick and everybody else and now we are being chided by the Labour Party for having the temerity to mention Seanie FitzPatrick and Michael Fingleton in the House.

Deputy Alex White

The Deputy has done so twice in ten seconds.

Deputy Willie O’Dea

It is an extraordinary volte-face, to say the least.

I do not fully comprehend the Minister's logic in his defence of exempting ARFs from the scope of the levy. This is the first time we are imposing a levy on pension funds. The imputed or actual tax on ARFs exists; it is a fact of life. That is only right because we are dealing with some of the wealthiest people in the country who, as Deputy Fleming rightly said, have extremely large pension pots. That tax has been in place for some time. Now for the first time we are imposing a tax on private pension funds but we are exempting the ARFs.

Deputy Michael Noonan

The previous Government taxed them in January. Would the Deputy propose we hit them twice in the one year?

Deputy Willie O’Dea

This will be lost on the public because as the Minister will appreciate, in politics perception is about 99% of what matters and the truth is sometimes a troublesome trespasser. I am sure the public will see this in a very bad light.

On a technical point, from my recollection of the section dealing with ARFs, is it the case that the imputed income only kicks in when somebody has reached the age of 60? Could a situation arise where people who can afford to retire early but who have not reached the age of 60 will manage to avoid the imputed tax? My recollection may be incorrect about that but I would like clarification on it.

Deputy Michael Noonan

The Deputy is giving me a lot of food for thought with his advocacy. Deputy Fleming spoke about the complexity of the pay slip. I know at least one Deputy in the House who as a form of protection takes his pay slip in his inside pocket when he is going for a pint. If anyone accuses him of earning too much, he produces it and shows how little money he is surviving on to the amazement of the whole pub. Deputy Seán Fleming should try it sometime.

Approved retirement funds, ARFs, are taxed in a different way. No levy was applied to pension funds before this measure was introduced but there was a tax on the imputed draw-down of ARFs. In January, the imputed draw-down was raised from 3% to 5%. I would very much like to see whether there is more scope to raise the imputed draw-down percentage.

I cannot vary the 52% marginal rate, which is the combination of the marginal rate of tax, the universal social charge and PRSI. It is fixed because it applies to everyone, so it is not a possible variable. I am unsure as to whether there is potential scope. The difficulty is that the outgoing Government increased the notional draw-down from 3% to 5% in the last budget. This provision was introduced in January's Finance Bill and the instructions were transferred to Revenue to collect the amount. I do not know whether it has already been collected on some ARFs. Varying the charge mid-year would be difficult technically, since the instruction has been given to the Revenue Commissioners. However, I will consider the suggestion in the context of 2012. I do not know whether the Deputy would be interested in tabling an amendment to the Finance Bill 2011——

Deputy Willie O’Dea

2012.

Deputy Michael Noonan

——to increase the imputed draw down from 5% to, for example, 6%.

Deputy Arthur Spring

Hear, hear.

Deputy Michael Noonan

We could discuss that idea later this afternoon.

Deputy Alex White

Seconded.

Deputy Sean Fleming

Will the Minister repeat himself?

Deputy Michael Noonan

Since the Deputies have ownership of the issue at the moment——

Deputy Sean Fleming

I have tabled an amendment.

Deputy Michael Noonan

Yes. It was the Deputy's technical way of putting the issue on the Order Paper. Is he considering an amendment on Report Stage to raise the imputed draw-down from 5% to 6%?

Deputy Sean Fleming

No.

Deputy Michael McGrath

We would not be allowed to do that, as the Opposition cannot impose a charge.

Deputy Michael Noonan

Yes, the Deputies would be ruled out of order——

Deputy Michael McGrath

The Minister could table it.

Deputy Michael Noonan

——but what is the nature of the amendment they are considering?

Deputy Sean Fleming

I will be helpful. The amendment I have in mind is a simple one, namely, to include ARFs in the definition of what is covered under the scheme. I could not have tabled that amendment because I would then be levying a charge on ARFs, which a member of the Opposition cannot do. I needed to take a roundabout way to raise the issue on the floor.

I do not want to touch the imputed tax. The argument seems to be that an imputed tax of 5% has been levied on those funds since 1 January. That they are taxed at the marginal rate could result in an effective 2.5% tax. The Minister now seems to be saying that Michael Fingleton and Seanie FitzPatrick are paying 2.5% anyway, that it is enough and that asking them to pay a further 0.6% would be unfair. I do not accept that the 2.5%, the effective tax rate at the higher end — I do not know the domiciled statuses of some of the people in question, but that is another day's work — that is levied on large pension pots of €10 million to €20 million would get sympathy from anyone or be viewed by anyone as being even half enough. Many people would say more tax should be paid.

My amendment was to include ARFs with annuities and PRSAs in the definition of what is captured by the levy. It is a one-liner. I do not want to revisit last year's budget. If the Minister approached the matter from the other direction, the public would still view him as giving people special treatment because they would find some loophole to get out of it. In the interests of equity, their pension pots should be levied at the same rate. It could be argued that they should be levied much more, but let us at least get them to pay the same rate as everyone else.

ARFs should be included within the scope of the legislation but I could not word my amendment in that way, as doing so would have been out of order. There is time before 5.30 p.m. to do so. We would facilitate it. I would prefer the Department of Finance and the Bills Office to draft the amendment because the House would not accept an amendment from me. Since the Opposition would be out of order if it tabled such an amendment, the provision can only come from a Minister.

Deputy Michael Noonan

Deputy Michael McGrath raised additional issues. From my discussions with the industry, there are no indications of a change in behaviour on the part of people with pension funds, that is, moving their funds out of the country. There is no fear that such a thing will happen. The industry is facing other issues, many of which relate to the marginal rate of tax that would apply to contributions. There are some other less relevant issues. I cannot accept the amendment.

Deputy Willie O’Dea

Will the Minister clarify the point about the imputed draw-down not kicking in if someone is under 60 years of age?

Deputy Michael Noonan

There is a view on my right-hand side that the Deputy is probably correct, but we need to check the provision.

Acting Chairman (Deputy Seán Kenny)

Is amendment No. 9 agreed?

Deputy Pearse Doherty

No. The Minister claims he cannot accept it. Without labouring the issue, it is a central question pertaining to the fairness of the legislation. I take it from the Minister's comments that there are two reasons for his inability to accept the amendment. It is not that he cannot accept it — he will not accept it. First, the imputed tax was increased in January. Second, it would be difficult for the Revenue Commissioners to collect the money. I disagree fundamentally that these reasons are sufficient excuse for the Government to exempt high earners with massive pension pots from the levy.

The arguments articulated by the Government in support of a pension levy have been two-fold. First, there should be a solidarity tax to help people return to work. Who should show more solidarity than the FitzPatricks and the Fingletons, the people who have millions of euro stashed in pension pots, if we are to help people who are sitting on unemployment benches? We should ask them to show a bit of solidarity. Second, those putting money into pension pots that are subject to the levy have benefited from significant tax breaks under previous budgets and previous Governments. This is a statement of fact. Those who have invested in ARFs have also benefited from the same tax breaks.

The Government's request for solidarity with the unemployed should equally apply to the highest earners. On these grounds, there is no justification for not imposing a 0.6% levy on people with the sorts of massive pension pots about which the rest of us can only dream. It is not credible that Revenue would not be able to collect a pension levy this year. We have changed the taxation code. Under the Minister's amendment and as opposed to having two dates, is the new date for collection in September? We change taxes every year. Two years ago, we had a budget mid-stream. Situations are constantly changing. Revenue could deal with this issue. If we tapped into the millions of euro the Government is going to exempt, it would be worth the paperwork and the extra effort.

The Minister is unlikely to change his position on the matter. A major flaw of this legislation is that the Government is exempting high earners from the pension levy. It is incredible that there are no Labour Party Ministers in the House. The Government is exempting these people from the levy in respect of which there is not a word from the Labour Party in terms of how unfair or unjust this is. We heard all of the outbursts and hysterics from members of the Government when on this side of the House in relation to decisions by the previous Government which allowed high income earners get away scot free while those struggling to get by were being penalised time and again.

This levy will affect those who have pensions and as such have invested in their futures. I ask that the Minister reconsider allowing these people to get off scot free. The amendment before the House deals with the matter. I do not believe acceptance of the amendment would require considerable redrafting of the legislation as it relates only to definitions, although I could be wrong in that regard. I am sure there exists in the Department the expertise to deal with this issue. I presume the Department officials have already considered including approved retirement funds, ARFs, in the scheme but have decided against it. I presume that those issues have been examined by the Department. I encourage the Minister to bring before the House before 5.30 p.m. today some type of wording to address this matter.

Deputy Alex White

On Deputy Doherty's stated position on section 4, as I understand it even if the Minister were disposed to introduce an amendment along the lines proposed by Deputy Fleming, Deputy Doherty would in any event vote against it because he is opposed to section 4.

A not unreasonable point has been raised by Deputy Fleming in relation to ARFs. There has been a useful discussion on the matter. I am prepared to take the Minister on faith in relation to there already being embedded a track of taxation in the treatment of ARFs and that he faces a different situation with mainstream pension funds that are subject to the levy. The Minister has indicated to the House that he is prepared to look at this issue in the context of the forthcoming budget and new finance Bill. As I understand it, Members have indicated they would be willing to support him were he to address it in some measure in the forthcoming finance Bill. I believe, notwithstanding that a fair point has been raised about ARFs, that the Minister's preparedness to look at this issue in the autumn addresses the issue far more convincingly than does the amendment before us.

At the risk of extending the issue to people's names being raised in the House, my reaction to the repeated references to the individuals concerned was borne out of a sense of amazement at Deputy Fleming's conversion to the point of view that these people should be the subject of derision, which is new coming from his quarter.

Amendment agreed to.

Acting Chairman (Deputy Seán Kenny)

Amendments Nos. 10 and 25 to 29, inclusive, are related and will be taken together by agreement.

Minister of State at the Department of Finance (Deputy Brian Hayes)

I move amendment No. 10:

In page 6, lines 43 and 44, to delete "subsection (6)" and substitute "subsection (9)".

Amendments Nos. 10 and Nos. 26 to 29, inclusive, introduce consequential changes to references in the Bill as published as a result of the introduction by amendment No. 25 of three new subsections. Amendment No. 25 introduces a number of changes to the Bill as published with a view to strengthening it and making clear the rights of administrators to dispose of or appropriate assets of the pension scheme for the purposes of paying the levy and with a view to protecting them against any possible legal challenges in that regard.

This reflects concern that administrators with responsibility for calculating and deducting the levy could be placed in an untenable position if the trustees who engage them were to instruct them not to pay the levy. Amendment No. 25, therefore, introduces three new subsections to section 125B of the Stamp Duties Consolidation Act 1999. The new subsection (5)(a) gives a chargeable person the right to dispose of or appropriate scheme assets for the purposes of meeting the amount of the levy payable. The new subsection (5)(b) provides that where a chargeable person who is not a trustee, for example, a life officer in respect of insurance contracts held as assets of a scheme, pays the levy through the disposal or appropriation of scheme assets, the trustee must also allow that course of action and the charge of a person is acquitted and discharged of as regards such disposals. The new subsection (6) protects a chargeable person from any court action by reason of having paid the levy by way of disposal or appropriation of scheme assets. The new subsection (7)(a) puts beyond doubt that the chargeable person and the trustees of a scheme are both jointly and severally liable for payment of the levy. The new subsection (7)(b) provides for the same joint liability in the particular circumstances of small, one-member, self-assessed administrative schemes. I commend the amendments to the House.

Amendment agreed to.

Deputy Brian Hayes

I move amendment No. 11:

In page 6, to delete lines 45 to 47 and substitute the following:

" ‘contract of assurance' means—

(a) any contract of a type described in section 706(3) of the Act of 1997, and

(b) any other policy or contract of assurance made by an insurer with a person or persons having the management of a scheme of a kind described in paragraph (a) of the definition of ‘scheme’, other than a one member scheme;

‘defined benefit scheme' has the meaning assigned to it in section 2(1) of the Pensions Act 1990;".

Amendment agreed to.

Deputy Brian Hayes

I move amendment No. 12:

In page 7, to delete lines 1 and 2 and substitute the following:

" ‘due date' means 25 September of the year 2011, 2012, 2013 or 2014, as the case may be;".

Amendment agreed to.

Deputy Brian Hayes

I move amendment No. 13:

In page 7, to delete lines 31 to 35.

Amendment agreed to.

Amendment No. 14 not moved.

Deputy Brian Hayes

I move amendment No. 15:

In page 7, to delete lines 46 to 48 and substitute the following:

" ‘one member scheme' means a scheme of a kind described in paragraph (a) of the definition of ‘scheme’ in respect of which approval of the scheme by the Commissioners requires the person or persons having the management of the scheme to deliver annual scheme accounts to the Commissioners;

‘pension fund', in relation to an insurer, shall be construed in accordance with subsection (2) of section 706 of the Act of 1997 and as if the business referred to in paragraph (a) of that subsection includes policies of assurance referred to in paragraph (b) of the definition of ‘contract of assurance’;”.

Amendment agreed to.

Deputy Brian Hayes

I move amendment No. 16:

In page 8, to delete lines 25 to 29 and substitute the following:

"(b) an annuity contract or a trust scheme or part of a trust scheme approved by the Commissioners under section 784 or 785 of the Act of 1997 or, as the case may be, under both of those sections of that Act, other than an annuity contract or trust scheme or part of a trust scheme so approved in respect of which a lump sum, to which paragraph (b) of section 784(2) of the Act of 1997 applies, has been paid to the individual entitled to an annuity under the contract, trust scheme or part of a trust scheme, as the case may be, or”.

Amendment agreed to.

Deputy Brian Hayes

I move amendment No. 17:

In page 8, line 40, to delete "available" and substitute "available to the PRSA contributor".

This is a technical amendment to paragraph (c) in the definition of “scheme” which relates to PRSAs. It simply clarifies that the lump sum referred to is a lump sum that has been paid or made available to the PRSA contributor.

Amendment agreed to.

Amendment No. 18 not moved.

Deputy Brian Hayes

I move amendment No. 19:

In page 8, to delete lines 41 to 46 and substitute the following:

" ‘valuation date' means the appropriate date as determined for the purposes of paragraph (a) or (b) of the definition of ‘chargeable amount’.”.

Amendment agreed to.

Deputy Brian Hayes

I move amendment No. 20:

In page 9, to delete lines 1 to 8 and substitute the following:

"(2) A chargeable person shall in respect of the due date in each of the years 2011, 2012, 2013 and 2014, and not later than the due date concerned, deliver to the Commissioners a statement, in such electronic format as the Commissioners may specify, showing the chargeable amount for that year in respect of the chargeable person.".

Amendment agreed to.

Amendment No. 21 not moved.

Deputy Brian Hayes

I move amendment No. 22:

In page 9, line 10, to delete "0.3 per cent" and substitute "0.6 per cent".

Amendment agreed to.

Deputy Sean Fleming

I move amendment No. 23:

In page 9, line 13, after "subsection (2)" to insert the following:

"or at a per cent chargeable on annuities which have been purchased with an insurance company or Approved Retirement Schemes (ARFs), whichever is the lesser".

Amendment put.

The Committee divided: Tá, 32; Níl, 82.

Tá

• Boyd Barrett, Richard.
• Browne, John.
• Collins, Joan.
• Colreavy, Michael.
• Cowen, Barry.
• Doherty, Pearse.
• Donnelly, Stephen.
• Ellis, Dessie.
• Ferris, Martin.
• Flanagan, Luke ‘Ming’.
• Fleming, Sean.
• Fleming, Tom.
• Healy, Seamus.
• Higgins, Joe.
• Kirk, Seamus.
• McConalogue, Charlie.
• McGrath, Michael.
• McLellan, Sandra.
• Moynihan, Michael.
• Murphy, Catherine.
• Ó Caoláin, Caoimhghín.
• Ó Cuív, Éamon.
• Ó Fearghaíl, Seán.
• Ó Snodaigh, Aengus.
• O’Brien, Jonathan.
• O’Dea, Willie.
• O’Sullivan, Maureen.
• Pringle, Thomas.
• Ross, Shane.
• Smith, Brendan.
• Tóibín, Peadar.
• Troy, Robert.

Níl

• Bannon, James.
• Barry, Tom.
• Breen, Pat.
• Broughan, Thomas P.
• Burton, Joan.
• Butler, Ray.
• Buttimer, Jerry.
• Byrne, Catherine.
• Byrne, Eric.
• Carey, Joe.
• Coffey, Paudie.
• Collins, Áine.
• Conaghan, Michael.
• Conlan, Seán.
• Connaughton, Paul J.
• Coonan, Noel.
• Costello, Joe.
• Coveney, Simon.
• Creighton, Lucinda.
• Deering, Pat.
• Doherty, Regina.
• Donohoe, Paschal.
• Dowds, Robert.
• Doyle, Andrew.
• Durkan, Bernard J.
• English, Damien.
• Farrell, Alan.
• Feighan, Frank.
• Ferris, Anne.
• Fitzpatrick, Peter.
• Flanagan, Charles.
• Flanagan, Terence.
• Griffin, Brendan.
• Hannigan, Dominic.
• Harris, Simon.
• Hayes, Brian.
• Hayes, Tom.
• Heydon, Martin.
• Howlin, Brendan.
• Humphreys, Heather.
• Humphreys, Kevin.
• Keaveney, Colm.
• Kehoe, Paul.
• Kelly, Alan.
• Kenny, Seán.
• Kyne, Seán.
• Lawlor, Anthony.
• McEntee, Shane.
• McFadden, Nicky.
• McHugh, Joe.
• McNamara, Michael.
• Maloney, Eamonn.
• Mathews, Peter.
• Mitchell, Olivia.
• Mulherin, Michelle.
• Murphy, Dara.
• Murphy, Eoghan.
• Nash, Gerald.
• Naughten, Denis.
• Neville, Dan.
• Nolan, Derek.
• Noonan, Michael.
• Ó Ríordáin, Aodhán.
• O’Donovan, Patrick.
• O’Dowd, Fergus.
• O’Mahony, John.
• O’Reilly, Joe.
• Perry, John.
• Phelan, Ann.
• Phelan, John Paul.
• Quinn, Ruairí.
• Rabbitte, Pat.
• Reilly, James.
• Ryan, Brendan.
• Sherlock, Sean.
• Spring, Arthur.
• Stagg, Emmet.
• Stanton, David.
• Tuffy, Joanna.
• Varadkar, Leo.
• Walsh, Brian.
• White, Alex.

Tellers: Tá, Deputies Aengus Ó Snodaigh and Seán Ó Fearghaíl; Níl, Deputies Emmet Stagg and Paul Kehoe.

Amendment declared lost.

Deputy Brian Hayes

I move amendment No. 24:

In page 9, to delete lines 14 to 18 and substitute the following:

"(4) The duty charged under subsection (3) on a statement delivered by a chargeable person pursuant to subsection (2) shall be paid, by such electronic means as the Commissioners may specify, by the chargeable person on delivery of the statement.".

Amendment No. 24 expands the existing subsection 4 to provide that the payment of the levy is to be made by electronic means. The Revenue Commissioners are providing for the filing of the statement and the payment of the levy through its Revenue online service, ROS. This will allow for the efficient and effective filing and processing of such documentation. It is the Government's policy that, as far as is practicable, electronic means of business are used to the greatest extent possible. This requirement fits in well with this policy. I commend this amendment to the House.

Amendment agreed to.

Deputy Brian Hayes

I move amendment No. 25:

In page 9, between lines 18 and 19, to insert the following:

"(5)(a) A chargeable person who, in relation to the assets of a scheme, being a scheme approved by the Commissioners, is liable to pay the duty charged under subsection (3) on a statement delivered by the chargeable person pursuant to subsection (2) shall, for the purposes of payment of the duty, be entitled to dispose of or appropriate such assets of the scheme as are required to meet the amount of the duty so payable and the scheme shall not cease to be a scheme approved by the Commissioners as a consequence of any such disposal or appropriation by the chargeable person.

(b) Where in pursuance of this section a chargeable person who, in relation to the assets of a scheme, being a scheme approved by the Commissioners, is not a trustee of the scheme, pays the duty charged under subsection (3) by the disposal or appropriation of such assets of the scheme as are required to meet the amount of duty so payable, then the trustees shall allow such disposal or appropriation and the chargeable person shall be acquitted and discharged of any such disposal or appropriation as if the amount of duty had not been so paid, and the scheme shall not cease to be a scheme approved by the Commissioners as a consequence of any such disposal or appropriation by the chargeable person.

(6) Where in pursuance of this section a chargeable person disposes of or appropriates an asset of a scheme in accordance with subsection (5)(a), then no action shall lie against the chargeable person in any court by reason of such disposal or appropriation.

(7) (a) Where, in relation to the assets of a scheme, being a scheme approved by the Commissioners, the chargeable person is not a trustee of the scheme, then the chargeable person and the trustees of the scheme shall each be liable for the payment of the duty charged under subsection (3) on a statement delivered to the Commissioners by the chargeable person pursuant to subsection (2) and their liability shall be joint and several.

(b) Where, in relation to the assets of a scheme, being a scheme approved by the Commissioners, that is a one member scheme, the chargeable person is a trustee of that scheme but is not a member of that scheme, then the chargeable person and a trustee who is a member of that scheme shall each be liable for the payment of the duty charged under subsection (3) on a statement delivered to the Commissioners by the chargeable person pursuant to subsection (2) and their liability shall be joint and several.”.

Amendment agreed to.

Deputy Brian Hayes

I move amendment No. 26:

In page 9, line 19, to delete "(5) In the case" and substitute "(8) In the case".

Amendment agreed to.

Deputy Brian Hayes

I move amendment No. 27:

In page 9, line 39, to delete "(6) Where before a" and substitute "(9) Where before a".

Amendment agreed to.

Deputy Brian Hayes

I move amendment No. 28:

In page 10, line 40, to delete "(7) The delivery of" and substitute "(10) The delivery of".

Amendment agreed to.

Deputy Brian Hayes

I move amendment No. 29:

In page 10, line 48, to delete "(8) The duty charged" and substitute "(11) The duty charged".

Amendment agreed to.

Acting Chairman (Deputy Olivia Mitchell)

Amendments Nos. 30 to 37, inclusive, are related and may be discussed together.

Deputy Brian Hayes

I move amendment No. 30:

In page 10, to delete lines 53 and 54 and in page 11, to delete lines 1 to 21 and substitute the following:

"(12) Notwithstanding any provision of any enactment (including this Act), or any rule of law, or anything contained in the rules of a scheme, being a scheme approved by the Commissioners, or the terms and conditions of any contract, being a contract approved by the Commissioners, if under this section—

(a) a chargeable person who is an insurer pays an amount to the Commissioners in respect of the duty in relation to a contract of assurance, the amount shall be deemed to be a necessary disbursement from the pension fund of the insurer and the insurer may adjust accordingly any current or prospective benefits or guarantees under the contract, and any such adjustment of benefits or guarantees by the insurer shall not result in the contract ceasing to be a contract approved by the Commissioners, and

(b) a chargeable person who is an administrator pays an amount to the Commissioners in respect of the duty in relation to the assets of a scheme, or where an amount in respect of the duty in relation to the assets of a scheme has been paid to the Commissioners by any other chargeable person, the aggregate of the amount of duty paid by the administrator and the other chargeable person shall be deemed to be a necessary disbursement from those assets, and the benefits payable currently or prospectively to any member under the scheme may accordingly be adjusted by the trustees, but the diminution in value of those benefits shall not exceed the amount disbursed from the assets attributable at the valuation date to the scheme’s liabilities in respect of that member, and any such adjustment of benefits by the trustees shall not result in the scheme ceasing to be a scheme approved by the Commissioners.

(13) For the purposes of subsections (5) and (12), the Commissioners may, where they consider it appropriate, review any such disposal or appropriation of an asset as is referred to in subsection (5), or any such adjustment of benefits as is referred to in subsection (12), to ensure that any such disposal, appropriation or adjustment, as the case may be, is in keeping with the requirements of this section, and for the purposes of subsection (12) the Commissioners may consult with such other persons as, in their opinion, may be of assistance to them.",".

Amendments Nos. 30 to 37, inclusive, are all concerned, in one form or another, with adjustments by insurers and administrators to benefits payable as a result of the payment of the levy. Amendment No. 30 is designed to provide greater clarification regarding the circumstances and manner in which benefits payable under a scheme may be adjusted, where considered necessary by insurers and trustees, on foot of the payment of the levy. The amendment, which involves the insertion of a new subsection (12) and a new subsection (13) initially provides for the overriding of any provisions of legislation or rule of law or anything contained in the rules of a scheme or the terms of a contract which might otherwise prevent or restrict the adjustment of benefits payable under a scheme.

The new subsection (12)(a) permits a chargeable person who is an insurer the option of adjusting any current or prospective benefit or guarantees under contract of assurance on foot a payment of a levy. The new subsection (12)(b) provides a similar option to scheme trustees to adjust benefit payable currently or prospectively to any member under the scheme on foot of the amount of the levy paid in respect of assets of the scheme, both by the scheme administrator and other chargeable persons, such as, for example, an insurer with regard to scheme assets that are contracts of assurance. This provision also ensures that should the option of reduced scheme benefits be taken, it must essentially be applied in an equitable fashion across the different classes of scheme members, which could include active, deferred or retired members. In no circumstances may the reduction of an individual member’s or class of member’s benefits exceed the member’s or class of member’s share of the levy.

The new subsection (13) gives the Revenue Commissioners authority to review any case where assets are disposed of by administrators or trustees in order to pay the levy. This is to ensure that any such disposals will be in keeping with or will be needed in order to pay the levy. This new subsection also gives the Revenue Commissioners oversight authority to review instances where benefits are adjusted as a result of the payment of the levy in order to ensure that such adjustments will be made in accordance with the requirements of the levy legislation. Furthermore, it assures compliance with the provisions of the new subsection (12)(b), which stipulates that in respect of any member of a scheme the adjustment must ensure that any diminution in the value of the benefit shall not exceed the amount of the levy on the assets attributable to the scheme’s liabilities in respect of that member. The latter function will also allow the Revenue Commissioners to consult with appropriate experts where necessary. I commend amendment No. 30 to the House.

Deputy Michael McGrath

I wish to speak to amendments Nos. 31 and 34, which are tabled in my name. The levy on pension funds is deeply unfair and represents a direct attack on people's savings. This is not a tax on interest and neither is it a tax on income. It is, rather, a tax on people's savings and their capital. This may appear to be a clever political ploy because the money involved is beyond people's reach — they can neither see it nor touch it. What is proposed is similar to accessing people's savings and deposits. That is the principle the Government is introducing.

As the Minister of State is aware, IBEC recently carried out a survey of employers. The clear conclusions reached on foot of that survey are that as a result of the imposition of the levy pensions payable to members will be cut, that higher contributions will be required from workers and that some defined benefit schemes will close down. In addition, 46% of respondents anticipated that the levy will trigger a cut in benefits for current employees, some 29% forecast reductions in payments to existing pensioners and almost 25% anticipated that they will be obliged to wind up their defined benefit pension schemes completely. These are the views of employers who know something about the pension schemes involved.

It is quite incredible that the Government did not consult the Pensions Board prior to making the decision to introduce the levy. In a reply to a parliamentary question I tabled, the Minister for Finance indicated that the Pensions Board was consulted on the logistics of implementing the levy but not on the decision to impose the levy in the first instance. The Minister of State will be well aware of the regulatory role of the board. Among its functions is a requirement to protect the interests of pension scheme members. The board was established to ensure that defined benefit schemes are adequately funded. As the Minister of State knows, the vast majority of defined benefit pension schemes are already in the red and are not in a position to meet their obligations.

Employers and employees throughout the country have been negotiating in order to restructure or change defined benefit pension schemes. I would like the Minister of State to indicate why the Pensions Board was not even consulted with regard to the imposition of the levy. Why have a statutory pensions body in place if the Government can make a unilateral decision to introduce a levy of this nature without seeking the views of that body?

Will the Minister of State clarify the position regarding auto-enrolment into pension schemes? As he will be aware, this was included in the national pensions framework. The introduction of auto-enrolment could be viewed as a means of herding even more people into private sector pension schemes. The latter would, of course, be of benefit to the Government because it would increase its take from the pension levy. A later amendment in the name of Deputy Doherty deals with tax relief and we can speak to that matter when the amendment is moved.

It was disingenuous of the Government, when asked how the levy will impact on pensioners and members of pension schemes, to issue a statement to the effect that:

How the pension fund levy will be paid will be a matter for individual pension scheme trustees and administrators... It is open to the pensions industry to decide how and whether to pass on the levy.

Of course the pensions industry will pass on the levy. The Minister of State and everyone else present is aware of that fact. The Minister for Finance and others have referred on many occasions to the exorbitant fees imposed by the pensions industry. If that is the case and if that is what the Minister genuinely believes, then why is he not insisting that the industry should absorb the cost of the levy? Why is the industry not being prevented by law from passing on that cost to its members by way of reduced benefits? Amendments Nos. 31 and 34 in my name suggest that a provision to prohibit scheme administrators and trustees from passing on the cost of the levy to the members of pension schemes by way of reduced benefits be included in the Bill.

Deputy Brian Hayes

Perhaps I will frame my remarks in the context of amendments Nos. 31 to 35, inclusive, with were tabled by Deputies Healy and Michael McGrath. Amendments Nos. 32 and 35 in the name of Deputy Healy seek to deny the treatment of the pension levy paid in respect of a pension scheme as a necessary disbursement from that scheme. A provision of this nature is important if the levy is to be effective. Without it, there is no clear statement with regard to where the legal instances of the tax fall. The omission of this part of the provision would seriously undermine the levy and render it inoperable. As a result, I do not propose to accept amendments Nos. 32 and 35. Amendments Nos. 31, 33, 34, 36 and 37 seek to deny an insurance company or pension scheme trustees the option to adjust current or future benefits of the pension scheme, or contract of insurance, to take account of the levy paid to this option. It is up to the trustees and administrators to decide whether, and how, the levy should be passed on, upon whom it should impact and to what extent, given the particular circumstances of the pension funds or pension plan for which they are responsible.

In the amendments I propose concerning this particular provision I seek to provide, in so far as I can, that where the option to reduce benefits is taken by the trustees of a pension scheme the imposition of the levy is not carried out in a disproportionate way. I referred to that in my discussion of amendment No. 30 and it is in so far as we can, given the practical difficulties concerned.

I indicated to the House and to the pension industry representatives that I take the view there is scope for the industry to absorb the impact of this temporary levy by way of a reduction in fees and charges made on these schemes. On Second Stage this matter was raised in a comprehensive way by my colleague from Dublin South, Deputy Peter Mathews, who referred to the fact that much of the imposition of the 0.6% levy could be absorbed by existing management fees which are often a multiple of that figure. It is a valid point. I wrote to the industry representatives in this regard and await their response. However, each pension scheme is different and it is a matter for the trustees of each scheme to determine the appropriate manner in which the levy will be paid. In the circumstances I cannot accept amendments Nos. 31 to 37.

I refer also to the Deputy's question about why the Pensions Board was not consulted about the introduction of the levy. I am informed that officials from the Department of Finance have been in contact with a wide number of interested parties in both the public and the private sector, including the Pensions Board, about practical, logistical and other issues surrounding the introduction of the levy. Those consultations and discussions have occurred and, along with discussions with the pensions industry, have helped form some of the amendments the Minister and I introduced today.

Deputy Shane Ross

Deputy Healy has authorised me formally to move his amendments, as required, if that is in order.

I welcome that the Minister has acknowledged the extent of the management fees. When I raised this issue on Leaders' Questions some weeks ago, the Taoiseach responded very positively and stated the matter would be looked at. It is very welcome that many Members have taken up this issue. However, I am disappointed it has not been taken up in a formal way in the Bill. In other words, no initiative has been taken by the Minister or the Government to force the funds to take this out of the hands of the trustees and instead to take the levy from the administrators and fund managers. If it is left to the administrators and fund managers I do not believe they will take this action, for reasons that are obvious and partly to do with the incestuous nature of the financial world in which we live. Unfortunately, we will find that out when these fees are taken from the pockets of pensioners and the pot — net of fees rather than before fees are charged.

The Minister speaks about the pensions industry and of talking to that industry but I am very suspicious of the people who represent that industry. I doubt they represent the actual contributors to the pension scheme though whether they know that themselves is a different issue. Had the pensions industry been representing the contributors and subscribers to the pension funds its representatives should have come to the Minister and said, "The source of your funds should not be the pot. The source of your funds should be the managers". It is not only the managers — there are very many vested interests with their hand in this particular pot, and not only investment managers, who charge God knows what. I shall return to that presently.

Administrators and custodians charge fees and there are legal and all sorts of hidden charges. If the pensions industry was efficient, transparent and honest it would have agreed that area should be the source of the funds and that we should forget about the people who put in their money every week and every month. That latter area is where the levy will come from and we have seen masses of surveys that show benefits will be down as a result. Deputy Michael McGrath read a statement from IBEC indicating benefits will be down. I am not sure about this because I have not read the statement but it indicates that some pension schemes will even go into deficit as a result of this levy. That would not happen if the Minister went to the managers and the people with their hand in the pot and took the money from them.

The pensions industry is an untapped and untouched gravy train; a sacred cow. There are still areas in the financial services industry which are untouched and lucrative, a mystery to the rest of the world, and the pensions industry is one of those. However, we can be sure of one or two elements. Those who live in the industry live very well out of it. Pension fund managers are a kind of mysterious elite in the financial world. Most of them are answerable to banks; most of the principal managers are owned by banks. Most of them become extraordinarily rich and hand out large fees to the Bank of Ireland, AIB, Irish Life and all the usual suspects. That is where the money should come from but the easy option has been taken and will have a tangible and immediate effect on hundreds of thousands of individual people.

That is why I support Deputy Healy's amendments. He wants to ensure the administrators and trustees are not allowed to pass this levy on to those people who have already been crucified. I do not believe it was mentioned in the part of the debate I listened to that many of the people who contribute to the pension funds have already lost huge amounts of their pensions. Whether in defined benefit or defined contribution, they have already been cut back and will be cut back further by this cheap raid. I understand better than anybody the Government's need to bridge this massive deficit and the desperation with which it faces it. I sympathise with the Government. However, this option is short-sighted and immoral. It is also lazy. It is very easy to look at all these pension pots and say, there is that amount of money, we will get €480 million if we do it that way. No doubt it will.

The figure of 0.6% seems to come up in several contexts at present. Perhaps the Government has an obsession with it. However, there is one problem about going in and taking out 0.6% which is that this figure is close to what appears to be the average management fee. It is very difficult to find out what that fee is; one will not find it out because people charge different amounts to different institutions and pension funds. I did some work on this in recent days, however, and it seems that among the big pension fund managers the average management fee is approximately 0.6%. It is not a precise figure — some charge more, some less, but it is approximate. It is an awfully large average management fee. We are talking about billions of euro being managed. I shall give one example which the Minister might be interested in because the Government virtually owns the bank in question, the Bank of Ireland. It does not own it quite yet, but might own it next week. Bank of Ireland Asset Management, which has been taken over by State Street, got €5.8 million in management fees from a particular pension fund in a single year. The fund in question happens to be the Bank of Ireland's own pension fund. What does the fact that its own pension fund handed €5.8 million to the bank tell one about the incest between the Bank of Ireland and those it is charged with looking after? It is an awful lot of money to be taking from one's own pensioners, subscribers and contributors.

What does it do to get such money? When I had a look at the performance of Bank of Ireland Asset Management in recent years, I found it has been pretty dreadful. Over five years, it lost 2% per annum. Over three years, it lost 4% per annum. It ranked itself 11th, 8th, and 12th in the asset management league in those years. Its consensus fund, which uses a computer that takes an average of other funds rather than the super brains of the fund managers, beat the managed fund every single year. It does not matter if the figures are examined over a ten-year, five-year, three-year or one-year period. I have seen the figures up to the end of last year. The consensus fund, which is a fund without a brain, beat the managed fund, which charges more, every single year. It does not use any expertise, but instead makes its decisions by means of a computer. The bank has charged over €5 million for managing a fund even though it would have been better to have left it to a monkey.

That is the reality of these pension fund managers. These are the guys we are not touching in this Bill. That pattern does not just apply to Bank of Ireland Asset Management — it also applies to AIB and Irish Life. I tend to over-generalise, but I can say it applies to nearly all of the fund managers. The pattern tells us that these guys are raping the pensioners of money. The pensioners are getting absolutely nothing back. In fact, they are getting a negative back. They would do better if they made their own investments by sticking a pin or getting a monkey to throw darts at a target. Why does the Minister not do something about the people who are protected by this Bill? The Taoiseach responded positively on this matter and perhaps the Minister will respond even more positively this afternoon. The Government should make it clear that it intends to demand forensically that the pension levy be paid by the fund managers, the custodians and everyone else who is milking this industry. They are useless. They are parasites. The industry would be better without them.

The Minister spoke eloquently about his intention to talk to representatives of the industry, but I am not quite sure who they represent. My guess is that many of the people in this industry are far too close to the managers and not nearly close enough to those who make monthly or weekly contributions to pension funds. That is where the money is. There is no transparency in this industry. It is almost impossible to find out what these guys' real charges are. They have all sorts of hidden charges, including bid office spreads, which they do not reveal. Such charges cannot be seen in the prospectuses they issue. It is almost impossible to get a total expense ratio, which sets out how much it costs to run these funds. One can be charged management fees, but there will be absolutely nothing about such fees in the tables that are issued. These people are right to disguise the fees so extraordinarily well because they make so much money from them.

Stockbrokers' fees are buried in this as well. Stockbrokers have wonderful cosy arrangements with these guys. Some of the stockbrokers who have been involved in recent years — not so much now — have been owned by the banks that own the same fund managers. Inevitably, all the pension fund dealings go through the stockbrokers who are owned by the parent bank, which also owns the fund managers. Stockbrokers' fees are absolutely exorbitant. I suggest those two pillars of this industry could probably contribute the full amount just as easily, because they are making hay with the pensions of the people of Ireland. They are making fortunes out of them and doing virtually nothing for it. That is why I find it so offensive that this pension levy is being imposed. It is an easy option. There is another option. I was a stockbroker, so I know how this works. I have seen that it works in a most iniquitous fashion in the case of people who do not perform properly and do not deliver the goods. The evidence of the performance of pension funds is clear in every table one examines.

I would like to make a final point. I do not think it is scaremongering to suggest that the psychological effect of this legislation will be that savings are seen as fair game. I know the Minister will assure us that this measure will last for four years and no longer. I accept that is his intention. I was alarmed by his responses to Deputies Pearse Doherty, Michael McGrath and O'Dea. He failed to assure them that this money will be ring-fenced. The distinction between what people put into pension funds and what we traditionally call deposit savings or other savings is a pretty thin one. It comes out of their wages or monthly pay packets and it goes into future savings. I do not really see the difference between future and present savings, except that future savings are not accessible. We have now found that the future savings ordinary people are making are not accessible to them but are accessible to the Government, which is worse. I do not think that principle should be breached. I oppose this section for that reason.

Deputy Thomas Pringle

I want to comment on amendments Nos. 32, 33, 35 and 36, in the name of Deputy Healy. The aim of the amendments is to limit or restrict the extent to which the pension funds can pass on the levy in a way that would decrease the benefits pensioners receive. I suggest they should not be allowed to pass the levy on at all. The Minister said earlier that his intention in tabling amendment No. 30 was to ensure pension funds do not pass on these costs in a disproportionate way. I do not think that goes far enough. As I understand it, if a pensioner is part of a group scheme and is receiving a pension of €20,000 per annum, his or her scheme will need to have a value of over €600,000. If the 0.6% levy, which in this case would amount to €3,600, were passed on to the pensioner in full, his or her annual pension would drop to €15,400. That would be an 18% reduction in his or her annual pension. Some of the pension firms will probably absorb some of the costs but it is expected that pensioners will see an 8% to 9% reduction in their benefits on an annual basis because of this levy which is something that has not been highlighted or heard in any of statements by the Government.

The Taoiseach stated that the levy is merely 60 cent in every €100. That might be the case but the outworking and impact of it for individual pensioners will mean they will see an 8% to 9% reduction in their pensions on an annual basis. These proposed amendments are an attempt to ensure that pensioners are protected from this levy and that they do not see such large reductions in annual income through their pensions. I would urge the Government to be stronger in terms of its amendment to ensure that the pension companies cannot pass on this levy in full to their pensioners and those who benefit from the schemes. It is not enough to state that the attempt is to ensure that it is not passed on disproportionately. Some companies will be ruthless and will try to pass on as much as possible with the result that pensioners will see significant reductions in their income.

Deputy Paschal Donohoe

I want to make three points to the Minister on the amendment. The first one relates to the general environment within which pension funds will operate across the period in which this temporary levy will be in force. They have been operating in an environment where equity markets are rebounding where there is a significant amount of value to be gained and good value to be sought in Government bonds and debt for reasons of which we will be aware. The wealth figures produced by the Central Bank last week showed an increase in household wealth over the past number of years and one of the factors to which it attributed that increase was that pension funds were beginning to grow again in value. Surely, in the cycle into which we are moving there is an opportunity for pension funds to do more to absorb a levy like this.

My second point is a suggestion to the Minister. Has either his Department or any of the bodies involved in the pension industry any way of naming and demonstrating the performance, or lack thereof, of the different organisations in passing on different percentages of the levy to their clients? This would enable a league table of some form to be produced to allow people to understand how different organisations are handling the levy.

The third point is the consequence of the application of the levy. The venture fund industry in Ireland, which is healthy and large by European and international standards, depends on private pension funds to contribute to its funds which are then passed on to organisations that invest in seed capital. Of the venture fund industry in Ireland which is worth €770 million, approximately €110 million comes from private pension funds. A potential consequence of the application of the levy is that the stream of funding from pension funds that is then invested in start-up companies here in Ireland could be reduced or choked off. I would ask the Minister whether this is a matter to which he has given consideration, has any representation been made on it and whether it would be possible in the latter stages of the application of the levy that if pension funds are contributing to seed capital funds and business angel funds, some of that contribution could be offset against the application of the levy.

Deputy Michael Noonan

I thank the Deputies for their contributions some of which were listened to by the Minister of State, Deputy Brian Hayes, who left me notes.

If I could revert to the topic of the ARFs we were discussing when I left for half an hour, I wish to inform the House of my position. I intend to examine as part of my preparations for budget 2012 in December next how best to increase the percentage national distribution for higher value ARFs while ensuring that more modest ARFs are protected. It is not true to state that ARFs are only availed of by wealthy people. Many people have ARFs with modest amounts in them and they are modest savers.

An ARF is not a pension, it is an investment. If we make changes, as well as trying to take an additional tax take we will consider applying a cap below which the additional imposition would not apply. Any increase would apply to 2011 asset values because the measure applies to the previous year, which is one of the reasons we could not do it this year, and the tax due will generally be paid by the end of February 2011. If we made changes in next year's Finance Bill, the tax would be due in February, immediately after the Finance Bill, and it would be based on the asset value of the ARFs in 2011. Consequently, we cannot make it retrospective by introducing it now in a hurry. That is my thinking on it. I will be disposed to take this course of action. Of course, I must discuss it and obtain the agreement of my Cabinet colleagues for any such change but we will be working on it.

Deputy Brian Hayes was asked whether the Pensions Board was consulted about the introduction of the levy. My officials have been in contact with a wide number of interested parties in both the public and private sectors, including the Pensions Board, about the practical, logistical and other issues surrounding its introduction. I listened with interest to Deputy Ross, who raised this on Leaders' Questions with the Taoiseach one morning. Deputy Ross's views on fees across the financial services industry, particularly in the pensions industry, are well known. It is difficult to find out what the management fee is and what additional charges are made on top of the management fee, for example, whether there is a distinction between commission and management fee. There seems to be such a distinction in some of the funds. My information, the accuracy of which I cannot vouch for, is that management charges were caught at a rate of approximately 1.5% rather than at 0.6% as Deputy Ross states.

I mentioned previously that the reaction of the pensions industry was quite hypocritical because its members were predicting ruin and devastation and the sky would fall down if a levy of 0.6% was imposed. This, when some of them were taking charges of one sort or another which amounted to three times that sum and had no impact on the fund, apparently such charges were not a problem. If, however, the State imposes a stamp duty of 0.6%, the sky falls down. They are not living in the real world. Those of them who participated in debate were not frank because they did not tell their own stories, yet they have laid charges of an exaggerated kind.

Arising from the Deputy's conversation with the Taoiseach here one morning, I wrote to the representatives of the pension industry who I had met advising that in the first instance they should endeavour to absorb the levy within their own cost base, and I intend pursuing that. They might not absorb it all. Even if we got them to absorb some, if we got them to tighten up a little, everybody in the country is tightening up and managing with less. I do not see why pension fund managers should be exempt. I do not know how much progress I will make. We have a little time on this and if we do not get it in the first round of the levy, we might get it in the second round of it. I intend pursuing it. Of course, it is important to have information in the first instance.

I take Deputy Pringle's point and his concerns. We have introduced the Revenue Commissioners as a kind of monitor in case there are raids on pension funds, in effect, by their own management. We want to ensure there is a mechanism in place to prevent anything like that happening and also to ensure there is a link into the payment of the levy. We have that protection in place also.

The concept of the levy arose from a consideration of how to pay for a jobs initiative which would cost a certain amount of money and where the money was used principally to get the tourism industry back on track. Over the past three years the tourism industry has fallen by 30% in volume terms, that is, in terms of the number of people coming into the country. From the UK alone it has declined by 32% in value terms. We knew the President of the USA and the Queen were coming so we took the view that if we timed an initiative on VAT three or four weeks in advance then we could get quite a good effect. It seems to be coming through but it is difficult to quantify these things. One gets a fine weekend and there are tourists all over the place but if it rains one sees no one. However, the people representing the business seem to take the view that there is an increase in tourists this year and that there has been a significant increase in inquiries.

Then, we went to try to fund it. It is a simple principle of economics that if one spends money but takes the equivalent amount out of the economy, the effect is pretty neutral. Certainly, there is no demand stimulus effect. We identified the pension industry of which, according to my information, 94% is invested abroad. Through the levy we are bringing the money back into the domestic economy and it is paying for the jobs initiative. We also justify it on the basis that the pension pots, especially the larger ones, were built up with very generous tax relief at a marginal rate of 41%. This is a bit of a clawback of generous tax relief that was given in the good years of the economy, or, at least, when we thought things were good. These generous reliefs were in place at the time. We are taking a bit back from it but it is modest enough. I do not believe the alarmist talk from those in the pensions industry. The House will note how quiet they have become since I started calling for them to offset it against their charges. The debate ended just like that. There has not been a whisper since. Deputy Ross stood up here one morning and one could nearly benchmark the debate from the morning he spoke about charges and the Taoiseach replied to him and the steam went out of it.

It would damage the industry if it went on for the next 30 years, of that there is no doubt. All Deputies are aware of the way pensions are constructed. Most people paying into pension funds have no expectation of drawing from them for a long time. If we kept it going on an actuarial basis there would be a difficulty as we go along. However for four years, the industry can take it, especially if some of it is absorbed in the charges. I have stated in the House that I am committed to talking to the pensions industry. The Government has not yet decided how we will handle the tax relief on contributions to pensions in future.

The IMF-EU troika maintain the relief is far too generous, totally out of line with what is happening elsewhere in Europe and one of the great generosities of the Irish pension system which is no longer affordable. They want it pulled back to the standard rate. We will consider other options but I am unsure whether we can afford them. Certainly, there is a strong argument in principle to continue to encourage people to make provision for their retirement through contributions to pensions schemes. Traditionally in Ireland the principal encouragement was to give tax relief. I am unsure of the way to engineer it in future but it is something we will consider carefully as we go through the autumn. I was missing for some of the early part of the debate but I hope I have replied to everyone who raised a specific point. I will come back again if I have to.

Deputy Willie O’Dea

I wish to comment on something the Minister said. He explained that the jobs initiative had to be revenue neutral and that to get the money to fund the jobs initiative he has targeted the pensions industry. The reality is that he did not target the pensions industry, he targeted pensioners and those who have saved. The point Deputies Ross and Michael McGrath have made is precisely that the pensions industry should be targeted. We can have all the good intentions we like but there is nothing in the Bill to make the people the Minister correctly refers to as the administrators contribute in any way, shape or form. If what the Minister stated is correct, that is to say, some of these people are charging three or four times the levy, that is the most convincing argument I have heard to compel them to play their part and take their share of the burden.

The Minister repeated an argument made earlier to the effect that people built up their pensions with the aid of generous tax relief at a high marginal rate, which is true. Unfortunately, the position is that the people who devised these tax relief schemes, those in successive Governments, recognised the fact that with an ageing population there will be a great level of dependency here in the not too distant future and the purpose was to encourage people to save because there is no way the State will be able to carry the burden and the Government was obliged to encourage people to provide for themselves. If a Government puts it to people that provided they put so much into contributing and providing for themselves they will be afforded tax relief and then people come forward in good faith and make the decision to save in return for the tax relief, the Government cannot turn around 20 years later and say they are sorry about it but they gave too much tax relief in the beginning and now they wish to claw back some of it.

Deputy Michael Noonan

That happens all the time with the income tax code. The Deputy should look at what his party did in the last budget.

Deputy Willie O’Dea

The Minister also made the point that much of this money is invested abroad. All I can say is that with approximately 80% of defined benefit schemes under water at present it is just as well it is invested abroad. Anyway, the Government can change the rules. The trustees are bound by a specific set of rules relating to where they can invest. It is not a question of people being unpatriotic or taking money out of the country and that bringing in this levy will somehow make them more patriotic by bringing some of it back forcibly.

The other interesting point raised by the Minister related to the future of tax relief. I have heard the Taoiseach on at least two, if not three, occasions answering questions on the Order of Business. I noted carefully what he has said on this topic. He stated that the pensions industry approached the Government — as I understand it, it approached the last Government — and stated this was a preferable way to get revenue from that source rather than changing the tax relief.

Deputy Michael Noonan

It approached the main Opposition, not the Government.

Deputy Willie O’Dea

Whoever it approached, this was what the quid pro quo was supposed to be. Is the Taoiseach now taking the position that as a result of the fact that we have taken the offer to bring in the levy, no changes to tax relief will be made and the present tax relief regime will stay in place? It was presented by the Taoiseach as a choice and he made the choice. Does this mean the tax relief regime will remain untouched?

As I stated, some 80% of defined pension schemes are under water at present. Those of us in the Houses of the Oireachtas are the beneficiaries of a defined pension scheme but we are in the public sector. This thing is specifically aimed at defined pension schemes in the private sector. The Minister and others may hold that this will not have much of an impact in practice etc. However, let us consider the wording of the amendment No. 30 12(b), which states “the diminution in value of those benefits shall not exceed the amount disbursed from the assets attributable at the valuation date to the scheme’s liabilities in respect of that member”. To a certain extent that gives the game away when one considers how much of the funds’ assets are attributable to what is payable to a member under a defined benefit scheme.

The experts tell us that for someone to get a pension of €10,000 per year, which is no fortune, the fund necessary to produce that is approximately €150,000. Some people maintain it is more but let us assume the figure is €150,000. Deputy Michael McGrath reckons that in 50% of cases — I believe it will be more — everything will be passed on directly and there will be no money to meet the levy from the members' funds unless the employer wishes to contribute voluntarily and thereby endanger more jobs or increase the cost of employing the people in place. If the entire levy is passed on, let us consider how this will operate in practice. Some 0.6% of €150,000 is €900. Let us consider a person on €10,000, which is the pension attributable to that amount. The pension of that person goes down from €10,000 to €9,100 in the first year and decreases a further €900 in the second year to €7,200 and so on.

That person will finish up with a pension of approximately €6,400, which means one third of the pension is lost as a result of the four-year levy. The loss would be 50% if the higher figure of €200,000 is taken into account.

Unfortunately, in most cases, the levy will be passed on practically in its entirety to the beneficiaries and will have a devastating effect on pensions. The fund managers of many defined benefit pension schemes have unilaterally changed the terms of the schemes, with the principal change in most cases being the loss of indexation for inflation because it is simply not affordable. A person on a fixed pension of €10,000 a year to whom the levy is applied on the basis that the defined benefit scheme must pay out in full and must ask its members to make the full contribution is facing a very serious imposition. We are not talking about extremely wealthy people like the owners of some the pension pots under approved retirement funds, ARFs; we are talking about people on fixed pensions of €10,000 a year. They have received tax relief on their contributions but would still have had to save long and hard to secure that pension entitlement only to be subjected to this type of treatment.

This will bear hard on people. On Second Stage I remarked that the 1988 budget was the nearest any Government came to attempting something similar when the then Minister for Finance, Ray MacSharry, sought to impose a tax on the capital gains from pension funds. The scheme was designed to yield €15 million, which it did, and was applied for only one year. At that time the Minister, Deputy Noonan, was Opposition spokesman on finance and seemed to believe the sky would fall in because of €15 million. Now he proposes taking €1.8 billion out of pension funds which are already struggling. We are told it is acceptable because some pension administrators are earning three or four times that amount. If that is true we should go after them and find some way of obliging them to play their part in this. The levy proposal may be politically clever but its effect will be to take money out of the economy by reducing demand. Reduced incomes will leave many people living from week to week. It may be politically clever but it is economically and socially unsound.

Deputy Paschal Donohoe

The Minister did not refer in his response to two of the issues I raised. First, will it be possible to produce some type of evidence regarding the portion of the levy that is passed on by the different pension funds in order to track how different people are doing? Second, will the Minister indicate whether he has considered the impact of the levy on the flow of money from pension funds to local businesses via investment and whether any measures are under consideration in that regard?

Deputy Thomas P. Broughan

I thank the Minister and his departmental officials for their work on this Bill and on the jobs initiative. In response to the points raised by Deputy Ross, the Minister remarked that opposition within the pensions industry has evaporated with a click of his fingers. However, many ordinary citizens on modest defined benefit pensions are still incredibly apprehensive about this proposal. There is a profound interest in the revival of the economy and in efforts to stimulate job creation, but there is grave concern among people who have worked for 30 or 40 years and who will find in the next two or three years that their resources will be further reduced as they face into a winter where energy prices will almost certainly rise in conjunction with the general and ongoing upward escalation of the cost of living which is evident despite the flatlining of the economy.

Amendment No. 37 in the name of Deputy Seamus Healy corresponds closely with my own views on this aspect of the Bill in its proposal that the levy should be directed primarily or even entirely at the industry itself rather than the beneficiaries. The Bill incorporates a sunset clause of sorts in that this provision is designed to operate only until 2014. Is there merit in looking at the jobs initiative in terms of very precise cost benefit targets year on year? In that context, is it possible to look at the annual returns from the levy on a year by year basis in order to see what is being achieved? For example, I am still not clear as to how we will measure how well airlines, restaurants and hostelries have delivered in response to the reduction in VAT rates and the travel tax. The Minister may recall that I was the first Deputy in the House to oppose that tax. How will we measure that precisely on a quarterly or annual basis? Would there be merit in including a type of sunset clause whereby information would be presented to the Dáil this time next year showing how the levy has panned out in terms of the creation of jobs and the amount of additional taxation it has brought to the economy? It would also be an opportunity to review the pain the levy will undoubtedly inflict on workers, retired workers and workers about to retire who have given great service to this economy in very demanding jobs, in many cases for 30 or 40 years.

Deputy Seamus Healy

I thank Deputy Ross for moving the amendments in my name. I am not convinced that we should be going down the road of imposing a levy on pensions. However, if it is to be done, the objective of these amendments is to ensure the charge is borne by the managers of pension funds rather than the beneficiaries. There is adequate information available to suggest that significant profits are being made at that level and that there are, for example, large differences in the percentage charged in Britain, where it can be as low as 0.5%, when compared with Ireland, where it can range as high as 1.5%. If the levy must be introduced it should be raised from the source which enjoys adequate income.

We must protect people on modest pensions from further reductions in income. They are already subject to the universal social charge and many other taxes. The Minister observed that people with ARFs are subject to other taxes, but that is also the case for people on modest pensions. Beneficiaries of pensions are already seriously taxed and the universal social charge is a significant burden on them. If the levy is passed on to beneficiaries it will represent a significant imposition on their already reduced incomes. Similarly, I believe this levy should not apply to contributors. My point is it should apply to the fund and not to the beneficiaries or the contributors.

Deputy Pearse Doherty

Like Deputy Healy, I have stated previously that I am opposed to funding the jobs initiative through the pension levy and I share some of the concerns expressed by Deputy Broughan. Previously, Members have argued about linking the pension levy to the jobs initiatives that have been announced and the measures giving effect to them that are being enacted in this Bill. Putting this to one side, a valid issue requires clarification, namely, the Taoiseach's continual insistence that this was an either-or option. I watched him state, in a live studio appearance on the six o'clock news, that faced with the option of imposing a levy or reducing tax reliefs, the Government opted for the former. As the Minister has made a statement on these matters, I seek clarification. Is it still the Government's intention, as it was of its predecessor, to reduce tax reliefs on private pensions? The original proposal was for a 7% reduction each year over the next three years until the rate of 20% has been reached. I am aware of other proposals to not reduce the tax relief rate to 20% but of having a rate of perhaps 30% instead. Is the reduction of tax reliefs on the Government's agenda and will this happen? Is it the case, as the Taoiseach suggested, that this is an either-or option? Alternatively, was he simply referring to this point in time and that the tax relief issue will be tackled in December? I seek clarification on this issue.

I believe the reduction of tax reliefs is the best way to proceed in this regard. While all Members are aware of the issue of incentivising people to invest in pensions for the future, the reliefs were overly generous and came at great cost to the State. Based on figures presented by the Department of Finance, the standardisation of private pension tax relief would yield the State approximately €1.1 billion. Moreover, the ESRI report produced in 2009 on the private pension industry and the breakdown of tax relief found that €616 million of tax reliefs went to the top 10% of earners. If I recall correctly, 82% of all tax reliefs went to the top 20% of earners. Consequently, one can clearly discern who benefits from these tax reliefs.

Deputy Healy's amendment has merit. If I may be so presumptuous as to second-guess the Government's desired outcome, I believe that in common with all Members, it would like this levy to be absorbed by the industry itself and that nothing would be passed on. However, this Bill offers the scope to realise that intention. The Minister might argue and might have figures to hand following his consultation with the industry that there is not enough fat to absorb the levy, despite all the observations from this side of the House. I believe the Bill should contain such a provision, which could be reviewed subsequently if a need to so do arose.

After a short absence, the Minister has returned to the Chamber and has made a statement with regard to approved retirement funds, ARFs. While it is welcome that he has gone further than he did this morning, I still believe such a provision should be included in this legislation. As I stated, Members probably will be debating another Finance Bill within two weeks and at the least, such a provision should be included in that legislation. I acknowledge that not all approved retirement funds are for the super-wealthy. I note a number of them have appeared in the past on the Members' register of interests in these Houses and I am sure that people who are prudent have also invested in them. However, the Minister has argued in respect of a limit whereby the new measures would not apply to those in a lower income bracket and who have such approved retirement funds. Why is a similar model not being considered for the levy the Minister is imposing on private pensions? One problem associated with the proposed levy on the pensions is that a low, modest or middle-income earner who has invested in his or her future is being hit by the same rate as is a high earner who has invested in a similar type of pension. In other words, the 0.6% rate is indiscriminate in respect of a person's income.

If I understood the Minister correctly regarding the proposal on approved retirement funds he intends to bring forward, he will make sure it will not discriminate against people at different levels. Consequently, why is this not being done for this levy? Few if any people with approved retirement funds are of low or middle income as they generally have higher incomes. The explanation for this, which pertains to being unable to tap into the funds at a certain given time, has already been recited in the Chamber. Consequently, why is it not possible to ensure that at the least, the levy would not be passed on to some of those whose pension funds are below a certain value and that the industry would at least be obliged to absorb that part of it?

However, I wholeheartedly support the amendments tabled by Deputy Healy, the acceptance of which would go a long way towards dealing with the real concerns expressed by those who have invested in pensions. I am sure that each Member of the House has been lobbied by people who genuinely are worried about their future. Enough stuff is coming down the track and enough stuff already has been imposed. Deputy Ross noted that the value of such pensions has collapsed dramatically in recent years and people are genuinely worried. They had been looking forward to their pensions in the knowledge that the pension pot was in place and this Government raid on that pot is not right. If there is fat, as I believe the Minister has acknowledged, measures should be included in this Finance (No. 2) Bill to ensure the impact of these measures is absorbed by the industry and not by the individuals themselves.

Deputy Brian Walsh

Deputy Pearse Doherty appears to be speaking out of both sides of his mouth. In one of his earlier contributions, he suggested that a 0.6% levy on the pension fund would discourage people from saving and consequently would place a greater burden on the State in the future because people would not save for their own pensions. However, in his latest contribution, he has suggested the tax relief available on pensions should be amended, as if to suggest that such a measure would not discourage people from investing in their pensions. This is a small measure that is being introduced on a temporary four-year basis and I note these are people who have benefited from highly lucrative tax relief in the past. For example, last year the marginal tax rate was at 41% and consequently, for every €1,000 that an individual invested in a pension fund, he or she received tax relief of €410. The Government now proposes that for the next four years, it will recoup an element of that, namely, €6 per annum from each €1,000, which is a total of €24 over the four-year period, whereas for one year's contribution of €1,000, people will have received €410 in relief. Consequently, it is fair that those who benefited from generous tax reliefs in the past are now asked to contribute a minor sum to support those who are unemployed and to assist in the jobs initiative.

I agree with Deputy Healy's suggestion that pension fund managers be asked to assist in contributing to this levy and I ask the Minister to consider holding discussions with the pension managers to achieve progress in that regard.

Deputy Pearse Doherty

For the benefit of the debate, I have not argued that the 0.6% levy would constitute a disincentive to investment in pensions.

The argument is that if tax reliefs are reduced on pensions it would allow people to decide. I have argued that the problem with imposing the levy is that these are people who put money aside and now they are being targeted. I never said the levy would be a disincentive for people in the future to invest in pensions.

Deputy Catherine Murphy

We all know about the existence of a pensions time bomb. It is crucial we do not discourage people from investing in pensions, even though there is a need for a radical overhaul of the pensions system. I remember temporary measures such as the AIB and the insurance levy introduced in the 1970s or early 1980s and if I am not mistaken it might be still there. I acknowledge the levy will be in place for a set number of years but these kinds of charges have a habit of being extended once there is some level of acceptance.

I support Deputy Healy's amendment No. 37. I had hoped that any legislation from this new Government would signal a change in the way things were done and a change in culture. We saw too much of the outsourcing of decision-making in the past, with an element of self-regulation in everything from alcohol advertising to financial services and this levy falls into the same category. We need to do things differently if that culture is to be changed and legislation should be used to set parameters. We should be prescriptive about where the fund will come from and that should certainly not be from the savings of those who have invested in pensions but rather from the exorbitant fees charged on those pensions. Amendment No. 37 is good and I support it.

Deputy Michael Noonan

I thank all Deputies for their contributions. We are covering some of the ground already covered this morning but that is the reason we are here so everyone can have a say. A Deputy on this side of the House gave a very good example when he suggested that a person with €1,000 in a pension fund was given tax relief of €410 and is now being asked to pay €6 back by way of the levy to help the unemployed. That is a modest enough figure and when it is confined to four years it amounts to €24 out of a tax relief of €410. I think some people — not here in this House but outside — with vested interests, have completely exaggerated the impact of the levy. Other people genuinely misunderstand what the impact will be, even people with the training in accountancy and law of Deputy O'Dea. I refer to the example he gave in which he talked about a very modest pension fund of €150,000 and he said a levy of 0.6% on that would be €900. He said it would be reasonable to expect that a small fund of €150,000 would throw up a pension of €10,000. He then went on to say that one would lose €900 off the €10,000, which is €9,100 and after four years it would have nearly disappeared, like the cat that kept going around in circles. What one is losing is the potential earnings on the amount that is taken by the levy. If one does the sum again, €10,000 out of €150,000 is slightly over 7% and if €900 is the levy, 7% of that sum is €63. One is therefore not losing €900 but rather €63 and that is the worst case scenario where a completely impaired pension fund was forced to reduce the payment to people on pensions, which is a totally extreme case because in the generality of pension funds, those at work continue to pay and they sustain the payments into the future of those who have retired. There is a lot of misunderstanding about this. I know Deputy O'Dea was genuine but he slipped into that little arithmetical error and I saw Deputy Seán Fleming smiling at him when he was reciting it so I knew there was something wrong and I decided to check the figures. I note Deputy O'Dea has returned and he will note that his €900 has been reduced to €63 in his absence from the Chamber.

Deputy Pearse Doherty

It is another levy.

Deputy Michael Noonan

We have representations from the venture capital industry and they are talking about more potential to invest in the country because their current level of investment is very small. Between 6% and 7% of Irish pension funds are invested in Ireland for good and sufficient reasons. They operate under rule and they are obliged to spread their risk so I am not for a moment saying they are doing anything improper or unpatriotic but there is scope for further investment in Ireland from Irish pension funds and it would be good if they expanded in the venture capital area. As I understand, the submission to my Department is that rather than saying that the amount they put in would be diminished by the levy, they argue that they should be given more scope by the Government to invest in venture capital. We are putting together a micro-investment fund for investment in small industries, small IT, for the most part.

Deputy O'Dea also suggested a league table of how the levy would affect different pension funds. I do not think it would be possible to do this by means of legislation but perhaps one of the consumer organisations might take that up as it would be appropriate for a consumer organisation.

There has been much argument that the fund managers and the industry itself should bear the burden of the levy rather than the funds themselves and in my view there is scope for this. It is a question whether they will be able to bear the full burden of the levy or part of it but there is certainly scope for the industry to absorb some of the levy. The very fact we are talking about these things and that people such as Deputy Ross is writing in such a wide-circulation newspaper about these matters, makes the investors very aware. For the first time investors are looking at their charges and they will be putting pressure on their managers to reduce their charges so this is one resultant benefit.

I have written to the representatives of the two groups whom I met and who lobbied strenuously. I have written to express my view that they should absorb some or all of the levy and I hope they will reply with a positive response.

Deputy Thomas P. Broughan

The Minister could make them absorb it.

Deputy Michael Noonan

This levy is running for four years. If we had full information we might be able to make them absorb it but there is an absence of information. However, this is the opening position for legislation because it will run for four years.

Deputy Doherty asked if the ARFs were being capped why would we not also cap the levy. The ARFs, as they apply to small investors, are operating in a curious way and they are under pressure. I am informed that when it comes to the notional 5% assessment of drawdown, the insurance industry which provides these ARFs to small investors is making it an actual drawdown and the pension funds are pushing for the 5% to be withdrawn. The small investor is faced with a situation of an actual 5% drawdown every year on which marginal tax is paid at 52%. Over a number of years there is a fear that people who are pinning their income for their retirement on smaller ARFs will find their capital has disappeared over a short period of years. There is a distinction between the individual ARF for the small investor and the general pension fund that usually covers a group of people.

Deputy Catherine Murphy talked about a pensions time bomb and a necessary overhaul. I agree work has to be done in the pensions industry and some work is being undertaken by the Pensions Board. Deputy O'Dea and Deputy Michael McGrath mentioned it as well. With the changing demographics there is an increasing number of elderly people in our communities. It is not as imbalanced as it is across continental Europe. We seem to be about 20 years behind its age profile. We still have a fairly balanced age profile across the age groups but there is a pensions issue which we must examine very carefully. The time limit on the levy is absolute and has been written into the Bill. When it is enacted, it will effectively be a sunset clause and will end at the end of 2014. It is not intended that we would resile from that.

Deputy Broughan referred to the levy being absorbed by the industry and I have given my views on that. He spoke about cost-benefit targets on a year-by-year basis. The household surveys produced by the CSO provide an annual estimation in a detailed way of employment trends and we have it to match it to. A year is too short a period to see the effect of any jobs initiative, especially an initiative such as this. Its primary intention, as I said on a number of occasions, was to build up confidence in one particular sector and reduce its cost base by bringing the VAT rate down from 13.5% to 9% in order that businesses would be encouraged to bring more people in, do more business and employ more people. It obviously has to be measured.

The Deputy also raised the issue of the travel tax. He was one of the first people in the House to oppose its introduction a number of years ago. If we enact the Bill today and it goes before the Seanad, it will be set at zero, subject to the order of the Minister. I want to give the Minister, Deputy Leo Varadkar, a negotiating position when talking to the airlines. If we do not make progress with the airlines in terms of the commitments we want them to make, I will not sign the order to reduce the tax to zero and it will stay as it is.

As we are reducing it to zero rather than striking it out as a tax, it remains in the tax code and, as a result, it can be reinstated very easily in a future Finance Bill if the carriers do not play ball. I know they are currently in discussion with the Minister, Deputy Varadkar, and he has made some progress. He has some other initiatives as well and we will wait and see how it works out.

Deputy Healy's amendments seek to enshrine in law what many people would like to see happening, namely, that the industry rather than the funds would absorb the levy. I have given him my position on that. I do not want such a provision written into the Bill but I hope that funds would make a contribution.

In its advertising and promotional literature from last year and this year the industry referred to figures of 6% capital gains, which is an average rule of thumb in the industry. The 6% capital gains goes into the fund base. A levy of 0.6% if one is building in a figure of 6% capital gains over four years, leaving out all sorts of clawbacks in terms of income tax relief, seems to be totally within the competence of the industry to absorb without any particular effect on people in pension schemes.

Amendment agreed to.

Amendments Nos. 31 to 36, inclusive, not moved.

Deputy Seamus Healy

I move amendment No. 37:

In page 11, between lines 21 and 22, to insert the following:

"(c) charges or impositions on any scheme or financial instrument or private pension plan proposed in this Bill may not be passed down to contributors to such schemes, private pension plan or instruments.”,”.

An Ceann Comhairle

Is the amendment being pressed?

Deputy Seamus Healy

Yes.

Amendment put.

The Committee divided: Tá, 36; Níl, 81.

Tá

• Collins, Joan.
• Colreavy, Michael.
• Cowen, Barry.
• Crowe, Seán.
• Daly, Clare.
• Doherty, Pearse.
• Dooley, Timmy.
• Ferris, Martin.
• Flanagan, Luke ‘Ming’.
• Fleming, Sean.
• Fleming, Tom.
• Healy, Seamus.
• Higgins, Joe.
• Kelleher, Billy.
• Kirk, Seamus.
• Kitt, Michael P.
• Mac Lochlainn, Pádraig.
• McConalogue, Charlie.
• McGrath, Michael.
• McLellan, Sandra.
• Moynihan, Michael.
• Murphy, Catherine.
• Ó Caoláin, Caoimhghín.
• Ó Cuív, Éamon.
• Ó Fearghaíl, Seán.
• Ó Snodaigh, Aengus.
• O’Brien, Jonathan.
• O’Dea, Willie.
• O’Sullivan, Maureen.
• Pringle, Thomas.
• Ross, Shane.
• Smith, Brendan.
• Stanley, Brian.
• Tóibín, Peadar.
• Troy, Robert.
• Wallace, Mick.

Níl

• Bannon, James.
• Barry, Tom.
• Breen, Pat.
• Broughan, Thomas P.
• Bruton, Richard.
• Butler, Ray.
• Buttimer, Jerry.
• Byrne, Catherine.
• Byrne, Eric.
• Cannon, Ciarán.
• Carey, Joe.
• Coffey, Paudie.
• Collins, Áine.
• Conaghan, Michael.
• Conlan, Seán.
• Connaughton, Paul J.
• Coonan, Noel.
• Costello, Joe.
• Creighton, Lucinda.
• Deering, Pat.
• Donohoe, Paschal.
• Dowds, Robert.
• Doyle, Andrew.
• Durkan, Bernard J.
• Farrell, Alan.
• Feighan, Frank.
• Ferris, Anne.
• Fitzpatrick, Peter.
• Flanagan, Charles.
• Flanagan, Terence.
• Griffin, Brendan.
• Hannigan, Dominic.
• Harris, Simon.
• Heydon, Martin.
• Howlin, Brendan.
• Humphreys, Heather.
• Humphreys, Kevin.
• Keaveney, Colm.
• Kehoe, Paul.
• Kenny, Enda.
• Kenny, Seán.
• Kyne, Seán.
• Lawlor, Anthony.
• Lyons, John.
• McEntee, Shane.
• McFadden, Nicky.
• McHugh, Joe.
• McNamara, Michael.
• Maloney, Eamonn.
• Mathews, Peter.
• Mitchell, Olivia.
• Mitchell O’Connor, Mary.
• Mulherin, Michelle.
• Murphy, Dara.
• Murphy, Eoghan.
• Nash, Gerald.
• Naughten, Denis.
• Neville, Dan.
• Nolan, Derek.
• Ó Ríordáin, Aodhán.
• O’Donovan, Patrick.
• O’Dowd, Fergus.
• O’Mahony, John.
• O’Reilly, Joe.
• O’Sullivan, Jan.
• Penrose, Willie.
• Perry, John.
• Phelan, Ann.
• Phelan, John Paul.
• Quinn, Ruairí.
• Reilly, James.
• Ring, Michael.
• Ryan, Brendan.
• Sherlock, Sean.
• Spring, Arthur.
• Stagg, Emmet.
• Stanton, David.
• Tuffy, Joanna.
• Varadkar, Leo.
• Walsh, Brian.
• White, Alex.

Tellers: Tá, Deputies Aengus Ó Snodaigh and Catherine Murphy; Níl, Deputies Emmet Stagg and Paul Kehoe.

Amendment declared lost.

Deputy Michael Noonan

I move amendment No. 38:

In page 11, subsection (1)(b)(ii), line 34, to delete “person” and substitute “section”.

This amendment is to correct a drafting error in the Bill as initiated. Section 126B of the Stamp Duties Consolidation Act 1999 provides for the making of an assessment by the Revenue Commissioners in circumstances where either a statement has not been delivered to them or they are of the opinion that the statement that has been delivered is incorrect.

This amendment corrects the reference to "specified person" in the Bill as published to "specified section". I commend the amendment to the House.

Amendment agreed to.

Question proposed: "That section 4, as amended, stand part of the Bill."

An Ceann Comhairle

Is section 4 agreed to?

Deputy Pearse Doherty

No.

An Ceann Comhairle

I call Deputy Pearse Doherty.

Deputy Pearse Doherty

We have thrashed out this Bill over the past couple of hours. Section 4 imposes the pension levy which will have an effect on those holding pensions. We have discussed the issue whereby the likes of Seán FitzPatrick are being exempted from this legislation. There is a cost-neutral alternative, however, in the form of discretionary tax reliefs at the lower rate of tax. These would actually bring in more than the proposed levy. On that basis, I am opposing section 4 and will be pushing it to a vote.

Question put.

The Committee divided: Tá, 82; Níl, 37.

Tá

• Bannon, James.
• Barry, Tom.
• Breen, Pat.
• Broughan, Thomas P.
• Bruton, Richard.
• Butler, Ray.
• Buttimer, Jerry.
• Byrne, Catherine.
• Byrne, Eric.
• Cannon, Ciarán.
• Carey, Joe.
• Coffey, Paudie.
• Collins, Áine.
• Conaghan, Michael.
• Conlan, Seán.
• Connaughton, Paul J.
• Coonan, Noel.
• Costello, Joe.
• Creighton, Lucinda.
• Deering, Pat.
• Doherty, Regina.
• Donohoe, Paschal.
• Dowds, Robert.
• Doyle, Andrew.
• Durkan, Bernard J.
• Farrell, Alan.
• Feighan, Frank.
• Ferris, Anne.
• Fitzpatrick, Peter.
• Flanagan, Charles.
• Flanagan, Terence.
• Griffin, Brendan.
• Hannigan, Dominic.
• Harris, Simon.
• Heydon, Martin.
• Howlin, Brendan.
• Humphreys, Heather.
• Humphreys, Kevin.
• Keaveney, Colm.
• Kehoe, Paul.
• Kenny, Seán.
• Kyne, Seán.
• Lawlor, Anthony.
• Lyons, John.
• McEntee, Shane.
• McFadden, Nicky.
• McHugh, Joe.
• McNamara, Michael.
• Maloney, Eamonn.
• Mathews, Peter.
• Mitchell, Olivia.
• Mitchell O’Connor, Mary.
• Mulherin, Michelle.
• Murphy, Dara.
• Murphy, Eoghan.
• Nash, Gerald.
• Naughten, Denis.
• Neville, Dan.
• Nolan, Derek.
• Noonan, Michael.
• Ó Ríordáin, Aodhán.
• O’Donovan, Patrick.
• O’Dowd, Fergus.
• O’Mahony, John.
• O’Reilly, Joe.
• O’Sullivan, Jan.
• Penrose, Willie.
• Perry, John.
• Phelan, Ann.
• Phelan, John Paul.
• Quinn, Ruairí.
• Reilly, James.
• Ring, Michael.
• Ryan, Brendan.
• Sherlock, Sean.
• Spring, Arthur.
• Stagg, Emmet.
• Stanton, David.
• Tuffy, Joanna.
• Varadkar, Leo.
• Walsh, Brian.
• White, Alex.

Níl

• Collins, Joan.
• Colreavy, Michael.
• Cowen, Barry.
• Crowe, Seán.
• Daly, Clare.
• Doherty, Pearse.
• Dooley, Timmy.
• Ferris, Martin.
• Flanagan, Luke ‘Ming’.
• Fleming, Sean.
• Fleming, Tom.
• Healy, Seamus.
• Higgins, Joe.
• Kelleher, Billy.
• Kirk, Seamus.
• Kitt, Michael P.
• Mac Lochlainn, Pádraig.
• McConalogue, Charlie.
• McGrath, Michael.
• McLellan, Sandra.
• Martin, Micheál.
• Moynihan, Michael.
• Murphy, Catherine.
• Ó Caoláin, Caoimhghín.
• Ó Cuív, Éamon.
• Ó Fearghaíl, Seán.
• Ó Snodaigh, Aengus.
• O’Brien, Jonathan.
• O’Dea, Willie.
• O’Sullivan, Maureen.
• Pringle, Thomas.
• Ross, Shane.
• Smith, Brendan.
• Stanley, Brian.
• Tóibín, Peadar.
• Troy, Robert.
• Wallace, Mick.

Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Aengus Ó Snodaigh and Seán Ó Fearghaíl.

Question declared carried.

Amendment No. 39 not moved.

Sections 5 and 6 agreed to.

Title agreed to.

Bill reported with amendment and received for final consideration.

Question proposed: "That the Bill do now pass."

Minister for Finance (Deputy Michael Noonan)

I thank the Deputies who contributed to the debate. We had a very constructive Committee Stage debate and I would like to put that on the record.

Question put:

The Dáil divided: Tá, 82; Níl, 37.

Tá

• Bannon, James.
• Barry, Tom.
• Breen, Pat.
• Broughan, Thomas P.
• Bruton, Richard.
• Butler, Ray.
• Buttimer, Jerry.
• Byrne, Catherine.
• Byrne, Eric.
• Cannon, Ciarán.
• Carey, Joe.
• Coffey, Paudie.
• Collins, Áine.
• Conaghan, Michael.
• Conlan, Seán.
• Connaughton, Paul J.
• Coonan, Noel.
• Costello, Joe.
• Creighton, Lucinda.
• Deering, Pat.
• Doherty, Regina.
• Donohoe, Paschal.
• Dowds, Robert.
• Doyle, Andrew.
• Durkan, Bernard J.
• Farrell, Alan.
• Feighan, Frank.
• Ferris, Anne.
• Fitzpatrick, Peter.
• Flanagan, Charles.
• Flanagan, Terence.
• Griffin, Brendan.
• Hannigan, Dominic.
• Harris, Simon.
• Heydon, Martin.
• Howlin, Brendan.
• Humphreys, Heather.
• Humphreys, Kevin.
• Keating, Derek.
• Keaveney, Colm.
• Kehoe, Paul.
• Kenny, Enda.
• Kenny, Seán.
• Kyne, Seán.
• Lawlor, Anthony.
• Lyons, John.
• Mathews, Peter.
• McEntee, Shane.
• Maloney, Eamonn.
• McFadden, Nicky.
• McHugh, Joe.
• McNamara, Michael.
• Mitchell, Olivia.
• Mitchell O’Connor, Mary.
• Mulherin, Michelle.
• Murphy, Dara.
• Murphy, Eoghan.
• Nash, Gerald.
• Naughten, Denis.
• Neville, Dan.
• Nolan, Derek.
• Ó Ríordáin, Aodhán.
• O’Donovan, Patrick.
• O’Dowd, Fergus.
• O’Mahony, John.
• O’Reilly, Joe.
• O’Sullivan, Jan.
• Penrose, Willie.
• Perry, John.
• Phelan, Ann.
• Phelan, John Paul.
• Reilly, James.
• Ring, Michael.
• Ryan, Brendan.
• Sherlock, Sean.
• Spring, Arthur.
• Stagg, Emmet.
• Stanton, David.
• Tuffy, Joanna.
• Varadkar, Leo.
• Walsh, Brian.
• White, Alex.

Níl

• Collins, Joan.
• Colreavy, Michael.
• Cowen, Barry.
• Crowe, Seán.
• Daly, Clare.
• Doherty, Pearse.
• Dooley, Timmy.
• Ferris, Martin.
• Flanagan, Luke ‘Ming’.
• Fleming, Sean.
• Fleming, Tom.
• Healy, Seamus.
• Higgins, Joe.
• Kelleher, Billy.
• Kirk, Seamus.
• Kitt, Michael P.
• Mac Lochlainn, Pádraig.
• McConalogue, Charlie.
• McGrath, Michael.
• McLellan, Sandra.
• Martin, Micheál.
• Moynihan, Michael.
• Murphy, Catherine.
• Ó Caoláin, Caoimhghín.
• Ó Cuív, Éamon.
• Ó Fearghaíl, Seán.
• Ó Snodaigh, Aengus.
• O’Brien, Jonathan.
• O’Dea, Willie.
• O’Sullivan, Maureen.
• Pringle, Thomas.
• Ross, Shane.
• Smith, Brendan.
• Stanley, Brian.
• Tóibín, Peadar.
• Troy, Robert.
• Wallace, Mick.

Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Aengus Ó Snodaigh and Seán Ó Fearghaíl.

Question declared carried.

An Ceann Comhairle

This Bill, which is certified to be a money Bill in accordance with Article 22.2.1° of the Constitution, will be sent to the Seanad.