Financial Resolution No. 9: Income Tax

(1) THAT section 470 of the Taxes Consolidation Act 1997 (No. 39 of 1997), as it relates to relief for insurance against expenses of illness, be amended with effect from 1 January 2013 in subsection (1), in the definition of “relievable amount”, by inserting "and credit due (if any) under a risk equalisation scheme (within the meaning of the Health Insurance Act 1994)" after "section 470B(4)" in each place.

(2) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act 1927 (No. 7 of 1927).

The purpose of Financial Resolution No. 7 is to ensure individuals earning more than €60,000 per annum will be subject to the full rate of universal social charge. At present, individuals aged 70 years or over pay a maximum rate of 4%, regardless of their level of income. From 1 January 2013, any of these individuals who have income exceeding €60,000 will pay the full rate of universal social charge. Individuals aged 70 years or over who have income that does not exceed €60,000 will continue to pay a maximum rate of 4% on their income. Separately, individuals who have a medical card or an entitlement to a medical card under community regulations pay a maximum rate of 4%. In framing this provision it was generally accepted that it would only apply to low income taxpayers. It has since been established that a number of high income earners are able to avail of this provision as they have an entitlement to full eligibility for services under Part IV of the Health Act 1970 as a result of the community regulations. To address this anomaly, the capping of the universal social charge at a maximum rate of 4% for medical card holders will apply only where the individual's total income does not exceed €60,000. These changes will take effect from 1 January 2013. I commend this Resolution to the House.
Resolution No. 8 relates to the specified rate used to calculate the taxable benefit to employees. Where an employee receives a loan from his or her employer at a rate below the specified rate, the employee is chargeable to tax on the benefit-in-kind reflected by the difference. The specified rate which differentiates between home loans and other loans is reviewed annually in the light of the average market rates provided for the Department of Finance by the Central Bank. This resolution provides for a decrease from 5% to 4% in the specified rate used to calculate the taxable benefit to employees from home loans provided by their employers at preferential rates of interest. The resolution provides also for an increase from 12.5% to 13.5% in the specified rate used to calculate the taxable benefit to employees from other non-home loans provided by their employers at preferential rates of interest. The purpose of the resolution is to keep pace with the changes in interest rates in the market in the past 12 months. The overall yield of €1 million cited in the budget book is tentative. Revenue statistics do not provide a figure specifically for taxation yielded by this measure
Financial Resolution No. 9 confirms the level of health insurance premium that will qualify for tax relief under the tax relief at source scheme operated by the Revenue Commissioners will be the amount of the premium paid by an individual after deducting the amount of any age-related tax credit under section 470B(4) of the Taxes Consolidation Act 1997 under the current interim scheme or any credit to which the individual is entitled under the new risk equalisation scheme being provided for in section 15 of the Health Insurance (Amendment) Bill 2012. The permanent risk equalisation scheme is being introduced to replace the interim scheme under which an individual provided for by the age related tax credits in section 470B and, therefore, an individual should only have an entitlement to one or other credit at any time. Section 470B only applied in respect of policies with an authorised insurer that were renewed or entered into after 1 January 2009 but before 1 January 2013. Section 470B only applied in respect of policies with an authorised insurer which were renewed or entered into after 1 January 2009 but prior to 1 January 2013. The Health Insurance (Amendment) Bill 2012 was considered on Committee Stage on 27 November and Report Stage on 4 December. While it is likely to have passed all Stages by the time the Finance Bill is enacted, reference has been made to the risk equalisation scheme as it will be inserted into the Health Insurance Act 1994. This is not a budgetary matter but a consequential measure arising from the Government's decision to replace the interim risk equalisation scheme with a permanent risk equalisation scheme and the age related income tax credits with risk equalisation credits from 1 January 2013. The Finance Bill 2013 will give effect to the new rates of the health insurance levy under the new risk equalisation scheme.

Three Financial Resolutions are being discussed together. Fianna Fáil supports two of them but opposes one, which means we must vote against all three because the resolutions will be grouped in the vote.

Fianna Fáil opposes Financial Resolution No. 7 on changing the universal social charge for people over the age of 70 years on the basis that it is too timid and does not go far enough. Our budget proposal was to increase the universal social charge for those earning more than €70,000 and increase it even more for those earning more than €100,000. One of the biggest flaws of the budget is that it does not increase taxes for high earners. I know the Government did not want to touch tax rates, but it could have touched the universal social charge. It could have obtained extra revenue from those earning very high salaries and in receipt of very high pensions. It picked on one particular group of elderly persons. I agree that this should be done and support what has been proposed, but I must vote against it because I do not believe it is sufficient. The Government had an opportunity to further increase the universal social charge for persons on much higher incomes and on this basis it is too timid and does not go far enough. It lets high income earners off.

The Deputy would not have done it if he was in government.

Financial Resolution No. 8 changes the rules on interest rates on benefit-in-kind loans from employers to employees. I hope this is a reflection of the fact that the Minister for Finance expects a reduction in interest rates for other mortgage holders during the coming year. The specified interest rate will be increased from 12.5% to 13.5% for benefit-in-kind loans other than home loans. This will yield the token amount of €1 million. We would not oppose any change in taxation on benefit-in-kind measures.

With regard to Financial Resolution No. 9, last week the House dealt with the new risk equalisation scheme for private health insurance. We all know that the system has changed.

There have been various attempts at that legislation in the past. The new regime is in place. People were getting standard rate tax relief on their health insurance premiums net of the age related equalisation credit. That has now gone and it has been replaced by a new risk equalisation credit under the legislation. The standard rate of tax relief should continue on that basis, and I would support that.

Fianna Fáil supports Financial Resolutions Nos. 8 and 9. We support the contents of Financial Resolution No. 7 but we oppose it on the basis it is far too mild and does not do enough. We oppose Financial Resolution No. 7 on the basis that the Government should have done more on the universal social charge.

I welcome Financial Resolution No. 7. However, it is really disappointing what has happened in this respect in that, clearly, Fine Gael won the battle in the debate in terms of the wealthy paying their fair share.

My party put three proposals to the Government, as the Tánaiste and Minister for Foreign Affairs and Trade, Deputy Gilmore, will be aware. The first was a 1% tax on assets worth more than €1 million that would have yielded €800 million.

Who costed that? Deputy Mac Lochlainn should table a parliamentary question.

The second was the third rate of tax, at 48%, which would have raised €365 million. The third was the standardising of discretionary tax reliefs that would have raised approximately €969 million. Those were the three options given to the Government.

If the Government wants to dispute what the wealth tax raises, it should apply it in and let us see what it raises. The Government could have tested it and seen how many hundreds of millions it would raise, and not relied on the international benchmark of 0.5% of GDP. This is now the mainstream trend in Europe. In France, Spain and Iceland, there is the issue of a wealth tax. In Germany, the sister party of the heckling Labour Party is considering a wealth tax. This is the challenge. Do we tax wealth or do we tax homes? Unfortunately, it is clear that Fine Gael has won this battle and has put in place this resolution. The resolution is welcome, but it is very disappointing. That is the reality. For my party, it is a half-hearted vote in that respect.

I seek clarification on Financial Resolution No. 8. The Tánaiste describes those concerned as employees. Are those who would benefit from that reduced rate directors or employees of companies? My party would have some concerns. We welcome Financial Resolution No. 9.

Fianna Fáil is a funny party.

It would want a big tin of Brasso for sure.

I have sympathy with the Government here. Whatever deficiencies there might be in the failure to address the issue of incomes in excess of €100,000, it is not a reason to vote against what is a progressive measure. There are genuine questions about the other two resolutions and I would appreciate explanations. I support this measure because to be hit with this extra level of universal social charge, a person would have had to have earned during his or her working life approximately €120,000 a year and be getting a generous pension of €60,000. The idea that one would be brought up to the same level of universal social charge as somebody who is working and earning that money is reasonable and the measure is at least a move in the direction of wealth redistribution. Although not a reason to vote against it, the measure, if the Government can do so, raises the question of why it cannot raise the income tax level for those earning more than €100,000 a year. I do not understand it.

In response to the Deputies from the Labour Party who were heckling on this matter, whatever dispute there might be about how much can be raised from a wealth tax, we certainly acknowledged in our submission that there is a dispute about it. We do not have accurate figures on wealth and assets and therefore it must be estimates. We accept that fully.

The budget must be accurate.

Similarly, it is also true to say that there would have to be some deep scrutiny of how much one would gain from corporation tax, etc., although one would certainly be talking about billions of euro if one enforced the effective 12.5% rate.

On the issue of increasing income taxes for those earning €100,000 or more, there is no dispute about how much it could raise. It merely depends what rates one imposes, and we have the tables. Our proposal was that the effective rates, from €100,000 up to the very top of €8 million to €10 million, inclusive, should go from the current levels of 31.3% to 46% and from to 33% to 62%, respectively, and that would raise €2.5 billion according to the tables.

What is the yield?

On the yield, one would be taking approximately €1 million a year off somebody who is earning €3 million to €4 million a year. I do not have a difficulty with that.

How many of them are there?

There are approximately 120 of them, according to tables we received from the Department.

What would Deputy Boyd Barrett do the second year?

What I do not understand is, if the Government can do what is proposed in this resolution, which is a progressive measure, why could it not have increased to some degree, if not as much as we wished, the income tax for those earning more than €100,000 on some sort of progressive increasing scale?

I have genuine questions for the Tánaiste and Minister for Foreign Affairs and Trade, Deputy Gilmore. Is there an issue on the loans employees may receive? I have no difficulty with employees getting loans from their companies and being giving some relief to them on that basis, but I ask the Tánaiste in his response to allay my concern that this is a method through which directors and executives could lend to themselves and get tax relief on it. It summons up images of certain families in this country who helped bring the country to its knees who played all sorts of games with their companies and siphoned wealth out of them. I seek assurance that this scheme could not be abused by such people.

The measure on risk equalisation seems reasonable although I would appreciate elaboration on who is likely to be affected by it and how it would translate. I would like to vote for these, but I seek clarification on them. Perhaps the Tánaiste would also answer why, if the Government could implement the measure on pensions in excess of €60,000, it could not do so on earnings in excess of €100,000.

I call Deputy McCarthy, and then Deputy Kevin Humphreys.

This is a progressive measure. This is one of the measures in this budget that taxes wealth. I cannot reconcile any party which pretends to be or thinks it is left wing which opposes taxation of wealth and-----

I stated we would support it.

Deputy Boyd Barrett stated they would support it. Is Deputy McCarthy speaking of Fianna Fáil?

Deputy McCarthy has the floor.

The Government is not doing enough.

One hears ideological reasons being put forward in opposition to a measure which are based on economics which, to say the least, do not stand up, because those who support that economic school of thought are amateurs. Not one individual to the left of my party went to the Department of Finance to cost his or her proposals.

We tabled parliamentary questions.

There is too much at stake in this country-----

(Interruptions).

-----to return to the economics of former taoisigh, Mr. Brian Cowen or Mr. Bertie Ahern. This is a game that requires serious politicians with serious figures, not a bunch of amateurs who table parliamentary questions and use the basis of that to pitch party policy.

That is where it is at in the Department of Finance.

It is comical in the extreme.

Deputy McCarthy is likening the Department of Finance to amateurs. That is what he is doing. It is terrible.

The stakes are too high.

Deputy McCarthy should withdraw that comment.

The stakes are so high that when the live wire act is going on, the clowns should stay out of the ring.

He is now calling the Department of Finance officials clowns.

Any reasonably minded left-wing politician should have his or her figures done and should support this measure based on those.

Amateurs and clowns in the Department of Finance. The Minister for Finance, Deputy Noonan, might have to come into the House to make a statement.

I support this progressive resolution. I welcome Deputy Boyd Barrett's genuine submission. Fianna Fáil's contribution on the other hand is an absolute joke, saying "Do more", when they were in government for 14 years. It is hilarious.

We brought in the universal social charge. That is why we are over here.

Deputy Kevin Humphreys without interruption.

Parliamentary questions do not constitute a budget. A budget has to be assessed in its entirety. Asking questions to elicit answers is not putting forward a budget proposal. What Fianna Fáil and Sinn Féin did was a joke; they formed a budget based on a number of parliamentary questions.

They did not submit it to the Department of Finance, as every other political party has done going back years. It is a joke and they know it. They are sitting there and are embarrassed by it.

I am embarrassed by Deputy McCarthy referring to Department of Finance officials as clowns and amateurs.

Could we please have some respect for the speaker? I call Deputy Ciarán Lynch.

In making any negotiations, the starting position is to enter the process or get out of it. During the general election campaign Sinn Féin had an economic policy that meant we would run out of money on 1 July 2011. I thought they would have matured since then and that we would have engaged in a reasonable economic debate in terms of their budgetary proposals. Members of this House have said they have put parliamentary questions to the Department of Finance and it is a fact, but they have done so on a very selective basis. They have not undertaken a comprehensive examination. The only way that can be done on a budgetary proposal is by engaging with the service the Department of Finance facilitates. In answer to a parliamentary question, the Minister for Finance told my colleague, Deputy Arthur Spring, that no Opposition party had availed of that service. That is an irrefutable fact and I challenge anyone on the Opposition benches to deny it. I see Opposition Deputies have become silent.

That is because the Leas-Cheann Comhairle told us to shut up.

It is amazing. I wish to paraphrase my colleague, Deputy McCarthy, who spoke about the circus. When I was a young lad, when the circus came to town they always rolled out the clowns first and I am glad to see that Deputy MacLochlainn is following in that tradition this evening.

You should do stand-up. You are brilliant. I would pay to see you.

We saw him first here.

One positive outcome of many in this budget is that every opposition party will avail of the service provided by the Department of Finance next year because they were found out this year.

I would like to respond to that. I have spent a lot of time looking at numbers and analysis. The no-change budget was released by the Department of Finance last Saturday. One cannot put a balanced budget together without that. Therefore the proposal that people on this side of the House can put a budget together and submit it to the Department of Finance - which can come back to say whether or not it will work - is nonsense. The only way one can put a balanced budget together is the way the Department of Finance does it, which is to look at the no-change budget. It is only when one sees the Estimates for 2013, for what would happen with no budget, that one can say "These are the things we are going to do".

The headline figure was €3.6 billion.

It was only on Saturday that we found out the gap that had to be closed is €2.5 billion. One cannot put a balanced budget together without that.

You can if you have a party leader's allowance of €80,000.

Deputy Donnelly has the floor.

It cannot be done. The Deputy may not understand. I will explain it to him afterwards; it is not that complicated. It cannot be done.

I do not know how we managed before Deputy Donnelly came in here.

I will tell the Deputy what he has been doing - he has been submitting nonsense.

The Deputy was not even elected to a county council before coming in here.

It cannot be done without a no-change budget. The notion that the Deputy would not understand that after the amount of time he has spent in here absolutely baffles me.

Deputy Donnelly has become a populist.

Please calm down. Deputy Donnelly has just a few minutes left.

If the Government wants members of the Opposition to submit proposals based on what would happen if nothing changed, and then they put in a budget to say that these are the things they would change, one has to have a no-change budget. Under the EU directives, we will have to submit no-change budgets to the EU in November because - contrary to the heckling - that is what their analysts need in order to examine the budget.

The Deputy should address the motion instead of lecturing us. Smart Alec.

Next year, the Tánaiste might consider releasing the no-change budget three months in advance, as is standard practice all over the world.

I call on the Tánaiste to reply and can we please have silence from other Deputies?

I do not know what we did at all before Deputy Donnelly was elected.

You destroyed the country.

No, not us. The Deputy is wrong about that. The people who destroyed the country are sitting a lot closer to him. They destroyed the country because they pursued an economic policy which is closer to what Deputy Donnelly has been advocating than what we have advocated.

You tried to outbid them in every budget.

Let us deal first with the issue of preparing alternative budgets. I and my colleagues spent 14 years in opposition from the time of the defeat of the then rainbow Government in 1997 until our re-election to Government in 2011. In that 14 years we prepared, each year, alternative budget proposals. We did so seriously. We went to the Department of Finance and asked it to cost various options. We did not do it on the back of an envelope based on replies to parliamentary questions. There is a facility which has been available for many years in the Department of Finance whereby Opposition parties' budgetary proposals are examined and costed. The departmental officials will give advice and say what one can or cannot do. Interestingly, and quite rightly so, when in opposition we were repeatedly asked by the media about our budget proposals. They scrutinised them and examined the money to see if it stacked up. It beggars belief that none of the Opposition parties, and none of the Opposition Independents it would appear, went into the Department of Finance to do any kind of serious examination of their budget proposals in advance of this budget.

I met them several times.

That is confirmed in reply to a parliamentary question tabled by Deputy Spring last week. Coming in here at this late hour and offering us very erudite reasons it could not be done and one could only do it from last Saturday is a load of old nonsense. The fact of the matter is that none of the Opposition parties took the job of opposition seriously enough to do a serious job of preparing proposals and having them properly costed.

I regret that because it has also diminished the quality of the budget debate today. It means, for example, that Sinn Féin announced that it could raise €800 million through a wealth tax. However, somebody spotted that they announced the same last year and proposed that it would include pensions. It does not apparently include pensions this year, but the figure is still €800 million. Yet we have no explanation as to how it is done with pensions one year and without them the next.

The Tánaiste is bluffing and blustering. He is only fooling himself and his choir.

It also explains why we get proposals from Deputy Boyd Barrett who seems to think that the entire €3.5 billion budgetary adjustment can be made up by planting some additional taxes on multinational companies. Of course, it fits the kind of juvenile approach that Deputy Boyd Barrett has to politics and to economic proposals.

Multinationals are bad. They are big, bad capitalist entities and if one could only get more tax from them, it would solve all our problems. Such analysis is without any regard to what would be the impact on investment and on job creation in this country. It is daft. I acknowledge that some Members, including Deputies Sean Fleming and Deputy Catherine Murphy at an earlier point, made reasonable contributions, as did Deputy Ó Cuív.

The establishment closes ranks.

Is Deputy Catherine Murphy now a member of the establishment?

While some reasonable proposals have been heard, Members also have heard commentary in this Chamber, passing for critique of this budget, which has been positively ridiculous. To be frank, colleagues should treat their membership of this House a bit more seriously. They were sent here, as were all Members, by the people who elected them to take seriously what they must do here. They were sent here to do some homework and research and if they have budget proposals about which they are serious, to at least have them tested and examined by the Department responsible for them.

Where is the Government's poverty impact assessment?

They should not come into this Chamber with half-baked proposals half-worked out on the back of an envelope-----

What an absolute bluffer.

The Tánaiste has nothing. Where is the Government's poverty impact assessment?

Why is the Tánaiste raising his voice?

The Government does not have one, does it?

-----where they cannot even be consistent from one year to the next.

Please now, we are almost out of time.

I must reply to the questions on the particular resolutions. On the issue of the universal social charge, USC, and in response to Deputy Sean Fleming, the Government is eliminating a relief established by Fianna Fáil in government. When it introduced the social charge, it put the 4% USC on incomes of more than €60,000 in respect of certain pensioners. The Government is eliminating that relief and it will apply at the 7% rate.

As for risk equalisation, the purpose of the risk equalisation scheme is to implement the Government's commitment to community rating, the purpose of which is to ensure that the permanent health insurance system is fair to older and more ill members of the health insurance schemes. In that respect, I might also note the preferential loan rate is not a benefit. It is a benefit-in-kind tax imposed on employees who get cheap loans from their employers. Deputy Boyd Barrett may misunderstand its purpose but it is a tax to prevent employees from getting beneficial loans and will generate some revenue for the State.

As the time allowed for the debate has expired, I must put the question in accordance with the order of the Dáil of this day.

Question, "That Financial Resolutions Nos. 7 to 9, inclusive, be agreed to", put and declared carried.

I move the following Financial Resolutions: