I understand some discussion had taken place on the amendment.
Finance Bill 2013: Report Stage (Resumed)
We thrashed out the issue on Committee Stage, but I wanted to air it again.
I repeat, for the sake of continuity, that the ARF options were later extended to all holders of additional voluntary contributions. Today, retiring individuals in defined contribution pension arrangements still have the option to purchase an annuity, but as an alternative they can draw down their remaining pension pot, after taking the tax-free retirement lump sum, by way of a taxable lump sum, or invest it in an approved retirement fund, ARF.
I will continue now with the briefing note. Withdrawals from ARFs are liable to income tax at the ARF owner's marginal income tax rate and to universal social charge, USC, in the same way that regular pension income from an annuity is so liable. The options to invest in an ARF or take a taxable lump sum are subject to conditions. These are that the individual must be over 75 years of age or, if under that age, he or she must have a guaranteed level of pension income in payment for life at the point of retirement. The level of this guaranteed pension income was set at the equivalent of €12,700 per annum on the introduction of the ARF option in 1999. If an individual cannot meet the guaranteed pension income requirement and does not wish to purchase a pension annuity, he or she must invest in an approved minimum retirement fund, AMRF. The amount required to be invested in an AMRF was set, on the introduction of the ARF option, at the lower of €63,500 or the remainder of the individual's pension pot after the tax-free lump sum has been taken. In essence, an AMRF is a very restrictive type of ARF in that, once invested, the capital in an AMRF cannot generally be accessed until the individual reaches 75 years of age or meets the guaranteed pension income requirement before then, at which point the AMRF automatically becomes an ARF. Income generated by the AMRF investments can be drawn down and the capital in an AMRF is available at any time for an individual to purchase a pension annuity should he or she wish to do so. These arrangements are all about giving individuals choices depending on their particular circumstances.
The Finance Act 2011, as well as extending the ARF option to members of defined contribution pension schemes in respect of their main benefits from those schemes, also increased the guaranteed pension income requirement for ARF purposes from €12,700 to the current value of €18,000 currently and the maximum set-aside amount for AMRF purposes from €63,500 to the current value of €119,800. As mentioned, these limits had not been changed since the introduction of the ARF option in 1999.
As these changes were introduced with immediate effect from the passing of the Finance Act 2011 on 6 February 2011, they had an impact on individuals retiring after that date by requiring them to meet a higher guaranteed pension income threshold for ARF purposes or, where they did not meet the guaranteed pension income test, invest a higher amount in an AMRF. The impact of these changes was felt much more severely by those with modest pension pots. By way of illustration, it is much more onerous for an individual with a pension pot of, say, €200,000, who, after taking a 25% tax-free lump sum of €50,000, must place almost €120,000 in an AMRF to be locked away until he or she reaches the age of 75 in order to be able to place the remaining €30,000 in an ARF than it is for an individual with a pension pot of, say, €1 million to comply with the same requirements.
As mentioned during the Committee Stage debate, I received many representations, including from the Pensions Ombudsman, about the fact that these changes were introduced without the provision of adequate transitional arrangements. It has been put to me that it is unfair that many individuals who had been planning for retirement based on the original requirements of the legislation were suddenly faced, and indeed continue to be faced, with having to meet much more stringent conditions without any time to prepare for them. That is the reason I have decided to reinstate the old limits of €12,700 and €63,500 in respect of ARF options exercised on or after the date of the passing of the Finance Act 2013. It is intended that the higher guaranteed pension and set-aside limits introduced by the Finance Act 2011 will be put in place again in three years' time, which will give individuals preparing for their retirement after that period time to adjust to these more stringent higher requirements.
In addition, to ensure that individuals who were affected by the higher limits in the period since the passing of the Finance Act 2011 - that is, since 6 February 2011 - are not disadvantaged, I am making two other changes in subsection (6) of section 17. First, I am providing that where such individuals have guaranteed pension income of at least €12,700 on or after the date of the passing of the Finance Bill, any AMRF they have immediately becomes an ARF, and second, even if they do not have a guaranteed pension income of that amount, if they have set aside in an AMRF a capital amount greater than €63,500, the amount above €63,500 immediately becomes an ARF. Similar provisions are made to deal with situations in which an individual retains his or her pension pot in a vested PRSA rather than exercising the ARF option. Deputy Pearse Doherty's amendments Nos. 6 to 10, inclusive, would deny these changes and are a natural consequence to his amendment No. 5, which seeks to retain the more stringent ARF access amounts. For all these reasons, I cannot recommend these amendments.
We dealt with this on Committee Stage, but the Minister mentioned that the Pensions Ombudsman had indicated to him that it was unfair that there were no transitional arrangements in place, and the Minister said it was his intention to put in place the more stringent criteria in three years' time. There is no guarantee that the Minister will be sitting in that chair in three years' time. My point is that the legislation does not provide for that. Unless I have missed it, the legislation does not state that this is a transitional arrangement; the Minister might point to such a statement if I have missed it. In three years' time, if a finance Minister does not do what the Minister has indicated is the intention, there will be no transitional arrangement and we will be back at square one. Can the Minister reassure me that that is not the case?
What is enacted by law can be reversed by law. To include a commitment that something will be done or something will automatically happen in three years' time does not meet the needs of the House. Three years is a long time and, as the Deputy said, it is unlikely that I will be sitting here then. There could be a change of Government or a change of personnel. It is important that in important situations the House exercises its will by way of primary legislation.
I do not want a situation where one arrangement falls out and another falls in on the basis of a line in a Bill. The record will show what the intention was when we made the provision. The Department of Finance will have it on file and the incoming Minister in three years time will be advised. It will then be up to the next Administration to decide whether it will do what we committed to do. One cannot tie in subsequent Administrations by a legislative provision.
I dispute that as would the Minister's own Finance Bill. We have dealt with such sections within the Bill. Provisions on the taxation of third level fees deal not only with taxation this year but consider the policy of the Government to increase fees incrementally over the next number of years. The Minister has allowed for that in the Bill even though that policy has not been implemented. I raise this matter because we are in dicey territory. There was a reason the limits were set and the Minister appears to agree with them as he has indicated an intention to bring them back to the same level in three years time. He said it was unfair in terms of the transition which I can understand. I do not dispute that people got a shock. My point is about provision in legislation for a sunset clause. We all know that such clauses are included in legislation time and time again. It is not just a statement. If I was out there next year and was unaware of the conversation that took place here or on Committee Stage and started to look at the situation with PRSAs, I would see what the limits are. I would not see that the limits will only be the limits for 2013, 2014 and 2015. That is what is missing. If a Minister for Finance makes the adjustment in 2015 or 2016 to increase this, one will have the exact same situation regarding the ombudsman that no transitional arrangements were put in. There was a statement from the Minister but no transitional arrangements are made. It is an area of concern. I highlight it again.
It is something that will have to be revisited whether in the Bill before us or in a future finance Bill. While the amendment proposes to leave the limits as they are, we should at least provide to bring them back to the original level. It would be up to a future Government to decide to reduce them once again, if it so wished. If the intention is to increase them to that point, that should be stated in the Bill through a sunset clause or a specific reference.
The intention is to make matters easier for people on lower pensions who had this bounced on them last year without adequate notice. I am providing them with notice now that the higher limits will return in three years time. It provides rational people with the opportunity to plan to make provision for their pension schemes. A future Minister may change that. Deputy Doherty drew a parallel with the taxation of the student contribution for higher education. In respect of that provision, I was merely following the policy decision made by the Minister for Education and Skills who carried it forward to 2015. It was therefore appropriate for me to carry it forward on the tax treatment to 2015 also.
I move amendment No. 11:
In page 49, between lines 27 and 28, to insert the following:
"(3) The Minister commits to examining and reviewing the Employment and Investment Incentive and Seed Capital Scheme in advance of Budget 2014, in particular with regards to its effect on employment levels and new jobs created.".
The amendment relates to the employment and investment incentive and seed capital scheme and calls for a review thereof prior to budget 2014. Yesterday and today, the House has debated a Sinn Féin motion on job creation. It is one of the major issues which must be resolved to get our people back to work. Schemes like this one can play a central role to provide opportunities for businesses and for people to get back to meaningful employment. This scheme originated from similar schemes which first surfaced in 2003. Certificates must be issued in respect of all schemes. In respect of these schemes, 335 certificates have been issued. There is clearly an issue with all of the schemes. There have been reviews and evaluations of previous schemes but there is also an issue with this one. Sinn Féin has spoken to people at the coal face including on county enterprise boards who are unaware that the scheme exists. We are not seeking to have the scheme scrapped but rather to examine it to see what are its deficiencies, where we can strengthen it, how to get the best out of it and to determine if it is fit for purpose. The scheme is being extended in the Bill in small areas but before we look at it further we need a proper review. Given that the scheme commenced in 2011, sufficient time will have passed in the next year to have an evaluation to ground an informed decision as to how and where the scheme should be improved.
The new employment and investment incentive and revised seed capital scheme came into operation from 25 November 2011. I do not have a full year's statistics available on the impact of the incentive. Last year, I reviewed the film relief scheme and on foot of that made substantial changes to the operation of film relief in the Bill. My Department has commenced a review of the research and development tax credit this year. The review will consider the design and structure of the credit and the contribution of research and development to productivity and growth. The employment and investment incentive and seed capital scheme will be reviewed in due course. It is too early for it to be subject to a review now. I draw the attention of Deputies to the economic impact assessment which was completed by my officials before the new incentive was introduced. The review is available on the Department of Finance website.
When introduced, the incentives retained the original expiry date for the business expansion scheme of 31 December 2013. The extension of the incentive is subject to State-aid approval by the European Commission. In that regard, it is important that the application for the extension of the incentive be made without delay. My Department will commence the application process shortly. A review would, of necessity, delay such an application. I do not consider it appropriate to include a commitment to examine and review any incentive in the legislative base as reviews are normally completed as part of the annual budget and Finance Bill process. For these reasons, I cannot accept the Deputy's proposed amendment.
A review of the type I suggest would not delay the application to the European Union. My request is to carry out the review in advance of budget 2014. It is a scheme which has seen only 335 certificates issue since 2003. Any companies applying must have a clearance certificate from Enterprise Ireland. It is not a massive scheme. Its parent schemes have not worked and we do not know if this one is working. The Minister will have sufficient information by autumn 2013. I am not asking for bells and whistles. The scheme could play a part in getting people back to work.
We teased this issue out on Committee Stage. Not only should the Government have access to information, the Opposition should also have access to it. I ask the Minister to carry out an analysis on the strengths, weaknesses, deficiencies and possibilities of the investment incentive and seed capital scheme before 2014 in order that we can measure how best to deal with it in next year's finance Bill if the need arises. The Department carried out reviews of the film relief, but that is not the type of review we are talking about. The amount of tax forgone is nothing near that. It is a different type of review. I am not opposed to the scheme, but there is a problem with its parent schemes and there is potentially a problem with this scheme given the lack of knowledge about it.
I am not opposing a review, any more than Deputy Doherty is opposing the scheme. However, it is too soon to have a review. Many investors will make a return of income for 2012 in October 2013. The data would be unavailable if we were to do a review in this calendar year.
Amendment No. 12 has been ruled out of order because it involves a potential charge on the people.
Amendments Nos. 12a, 13, 14a and 16 are related and may be discussed together.
I move amendment No. 12a:
In page 67, to delete lines 34 to 37 and substitute the following:
“ “(n) for the purposes of a trade which consists of—
(i) the maintenance, repair or overhaul of aircraft used to carry passengers or cargo for hire or reward, or
(ii) the dismantling of aircraft of the kind referred to in subparagraph (i),for the purposes of the salvaging or recycling of parts or materials,”,”.
These amendments relate to section 31 of the Bill as passed by the Select Sub-Committee on Finance. Section 31 provides for a scheme of accelerated capital allowances for the provision of facilities for the purposes of the maintenance, repair and overhaul of commercial aircraft, and it is intended to apply for a five-year period, commencing by ministerial order. These capital allowances, in the form of industrial buildings allowances, will allow for the write-off of qualifying expenditure over seven years and will be subject to the normal conditions and restrictions that apply to the use of such allowances by investors in projects of this type. This is a targeted relief and has the potential to encourage a very promising industrial sector from the perspective of long-term high-quality job creation. During the debate on Committee Stage, I undertook to consider whether this relief could be extended to the area of aircraft dismantling for the purpose of salvaging and recycling of aircraft parts and materials, in addition to the activities already allowed under the legislation as drafted. This is referred to as parting out in the industry. A strong case was made by Deputies Mulherin and Naughten that such an extension would be of benefit, particularly to Knock airport. Having considered the matter, I am satisfied that an extension of the capital allowances relief to this sector would be beneficial. For these reasons, I am proposing amendments Nos. 12a and 14a to section 31.
The extension is to apply generally and will not be restricted to Knock airport. There are two amendments, the first of which provides for the extension of the relief. The second allows for commencement by ministerial order of the different elements to be done at different times. During the debate on Committee Stage, it was put to me that the various restrictions on the use of such allowances should be relaxed for this relief in order to make it more attractive. I indicated during the debate that I was not disposed to agree to that, and I repeat that point. This is a generous relief and there is no need to make it any more generous. I commend the amendments to the House. I trust Deputy Naughten will consider amendment No. 13 to have been dealt with.
Deputy Pearse Doherty wishes me to report to the House within three months of the coming into operation of the section on its impact on regional airports and rectify any distortions to competition that it may have caused. The Government regularly examines supports for all sectors of the economy as part of the annual budget and finance Bill process. The relief provided for in the section is available for these activities at any airport. Nothing in the legislation restricts the relief to any particular airport. The amendment I have introduced widening the scope of the relief to salvage operations will also be available without restriction to any of our airports. It is not necessary to put into legislation commitments of the kind suggested, certainly not in advance of the section's coming into operation. The legislation is framed in such a way as to avoid the kind of competitive distortion that Deputy Doherty is concerned about. I do not anticipate such a problem at this stage but I intend to keep the relief under review over the period of its operation to ensure it operates properly. In that way, I can make whatever changes seem necessary and there will be an opportunity for any such proposals to be debated in the House. I am not prepared to accept amendment No. 16.
I seek clarification on amendment No. 12a. Deputy Michelle Mulherin has been pushing the issue and is to be commended. It is a useful amendment. Why is the amendment structured in this way, in contrast to the amendment I submitted? The objective behind it is to ensure that if Ireland West Airport wanted to build, for example, a hangar to dismantle end-of-life aircraft, it could do so and avail of the incentive. Up to now, the legislation was drafted in such a way that it would not facilitate this. The Minister has broken the section into subparagraphs (i) and (ii) and has made provision for the subsections to be implemented at different stages. The original intent of section 33 was to be an incentive to Shannon Airport, and it was constructed in such a way that only Shannon Airport could avail of it. Deputy Mulherin and I asked the Minister why that should happen, and the authorities of Knock airport have also written to the Minister and explained the difficulty with the structure of section 33. In light of the reasoning behind the original incentive - to support Shannon Airport - it seems the way in which the amendment is structured will allow the Minister to tell Shannon Airport to construct its hangars for maintenance, repair and overhaul of aircraft while holding off on the second element, the dismantling of aircraft, until a future date. Subsection (2) facilitates such phasing. Why has the Minister decided to go down that road rather than accepting the all-encompassing amendment I proposed so that the overall maintenance of aircraft and the dismantling of aircraft were provided for in the same order? Is the objective of this to treat all airports equally? The Minister said the reason for the inclusion of aircraft dismantling was to facilitate the request made by Deputy Michelle Mulherin and articulated by her in respect of Knock airport. Why has the Minister taken this approach?
Amendment No. 15, which deals with Ireland West Airport, has been ruled out of order, but the sentiments are expressed in amendment No. 16, tabled by Deputy Pearse Doherty.
A concern has been raised by Ireland West Airport, Knock, about the way in which this section is structured. I agree with the Minister that it is a generous amendment but that is only the case if an airport has a substantial income in the first place. Given the change in the structure and ownership of Shannon Development, Shannon Estates will now come under the control of Shannon Airport. There is a substantial landbank there and Shannon Airport has a substantial rental income on an annual basis. The way in which this amendment is drafted facilitates Shannon Airport. I have no difficulty in facilitating Shannon Airport. We want to see a thriving airport in Shannon; it has always been a linchpin of tourism development in our region. However, what we seek is a level playing field.
A commitment was given at the time the original announcement was made regarding the restructuring of Shannon Development and Shannon Airport that any incentives that would be made available would be accessible on an equal basis to all airports. However, the difficulty is that the way in which this section is structured does not allow Knock airport to avail of the incentives. In order to avail of them, an airport must have a substantial rental income in its own right. As Knock airport does not have a rental income and is servicing a debt of €10 million, which it is doing successfully, it is not possible for it to raise the necessary capital to invest in its hangars. It cannot offset such investment against rental income in the way Shannon Airport can. To put it in plain English, if tomorrow morning Shannon Airport were to invest €7 million in the development or refurbishment of hangars at a 4% interest rate over a seven-year period, that would constitute a direct subvention of €1.75 million to the airport. It would set Ireland West Airport at a strategic disadvantage compared to Shannon Airport in attracting in that type of investment. I would welcome such investment coming into Shannon, but all we are looking for is a level playing field.
The Minister made the argument on Committee Stage that he did not want to establish an incentive scheme that could be exploited, as has happened in the past. I believe we would all agree that is not the way we want to go. This provision is specifically for aviation facilities and therefore it cannot be exploited to any great extent. Credit needs to be given to Ireland West Airport, which has increased its passenger numbers by 350% during the past decade, thereby supporting some 900 jobs in the region with very little Government subvention to date. It seeks a slight change in the legislation as it is currently proposed which would allow unused capital allowances to be made available against an investor's other income, specifically in regard to aviation facilities, as outlined in the legislation. That would ensure that Knock airport would be treated on an equal basis to Shannon Airport and that it too could attract investment.
I ask the Minister, when responding, to address two further issues. One is the correspondence he has received from Ireland West Airport, Knock; I ask him to specifically outline the Department's position on that. The other is the Government's position on a development plan that was submitted by Knock airport to the previous Government, which failed to act on it, and which is now on the desk of the current Minister for Transport, Tourism and Sport. This needs to be acted on. It could potentially create 500 new jobs in a region that is an unemployment black spot. This ties in with the amendment tabled by Deputy Doherty.
Gabhaim leithscéal leis an Teachta Naughten. Bhí sé ar mo chúl agus ní fhaca mé é.
Sílim go bhfuil léargas maith ó thaobh na ceiste seo curtha os comhair an Aire ag an Teachta Naughten agus ag an Teachta Mulherin as Contae Mhaigh Eo.
Bíonn daoine ar fud an iar-thuaiscirt ag déanamh freastail ar an aerphort seo. Cé go bhfuil aerphort againn i nDún na nGall fosta bainimid go leor usáide as an aerphort i gCnoc Mhuire. Ba mhaith linn, in iar-thuaisceart na tíre, cinnte a dhéanamh go bhfuil gach deis ag an aerphort fás san todhchaí agus nach mbeidh sé curtha ina míbhuntáiste mar gheall ar rud ar bith atá istigh i mBille Airgeadais na bliana seo.
Cosúil le Teachtaí eile, fuair mé litreacha ón aerphort ag iarraidh orainn leasú a chur síos ar an mBille. Ní aontaím le gach rud atá ráite ins na litreacha sin. Like other Deputies and the Minister, I have received correspondence from Ireland West Airport, Knock. In terms of some of the issues it has asked to be considered, I am not 100% sure that what is proposes is the best approach. However, what I am sure about is that this section should not disadvantage Ireland West Airport, Knock. That is the reason I asked that a review or report be commissioned to examine this section to ascertain whether it places Knock airport at a disadvantage. The case was put very well by Deputy Naughten.
I heard what the Minister said on Committee Stage - namely, that this section was devised for Shannon Airport because there is a market there that we need to grasp. I raised concerns about the aviation sector on Committee Stage and said that we need an in-depth examination of the sector to establish whether we are getting bang for our buck. I spelled out the position with regard to the aviation leasing sector to the Minister of State, Deputy Brian Hayes, on Committee Stage. Some 50% of aviation leasing occurs in this State. The value of the aviation leasing sector to the State is €80 billion. The sector has a stock of 3,000 commercial aeroplanes, yet it employs only 1,000 people. It is not a labour-intensive sector. The question is whether we are getting bang for our buck.
What we have in the Bill is a specific identification of another market this country can grab, so to speak, in the same way we grabbed the aviation leasing sector. That is to be welcomed, but we must make sure we get a return. We must make sure also that we do not disadvantage other airports. I have nothing against the Government's having a policy position that identifies niche areas for different airports. In some respects, that is a positive development - for example, if there is a certain area into which an airport should develop.
I welcome the Minister's amendment on the end-of-life treatment and dismantling of aircraft, where a niche can be found for Ireland West Airport. The major issue, however, is that this is an add-on, and the amendment is amending a section that is tailor-made for Shannon Airport to try to benefit Knock airport in respect of this area of activity. The section is specific to Shannon Airport and has been designed in the knowledge that Shannon has income in its own right, which Knock airport does not have.
The Minister is indicating that is not the case. He might correct me on that because one of the issues Knock airport has brought to my attention is that it does not have that additional income, and the way in which this section is devised means it will be unable to benefit from it. Section 23 relief needs to be consigned to the State's history books, but there must be other ways to ensure that Knock airport can benefit from this section. That is the reason I have proposed in my amendment that a report be completed on section 31, with a focus on its impact on regional airports, examining whether they are at an unfair disadvantage, and that the Minister consider proposals to rectify any distortions in competition.
I heard what the Minister said about this being subject to state aid rules; therefore the European Commission will adjudicate on distortions in competition. There are, however, other areas with which the report can deal, specifically all of us in the House want Ireland West Airport and all our regional airports to flourish. Are there other tailor-made solutions or can we tweak this section a bit more to benefit the airport, recognising that the Minister has brought forward an amendment that possibly can benefit that airport?
My amendment on this issue was also declared out of order. I support Deputy Naughten and commend the Minister for the changes he has made. Deputy Mulherin has also put a great deal of work into this. The difficulty is that there is no fair play. It was always my contention that the deal announced for Shannon Airport before Christmas was going to put Ireland West Airport at a disadvantage. This amendment, and the Minister confirmed this to the Oireachtas Select Sub-Committee on Finance last week is motivated in the first instance by the prospect of revitalising Shannon Airport through having these services. Knock is in a position to do the same but it is not in the same development position. As well as handing the advantages of this amendment to Shannon Airport we have handed it a rent roll through the former properties of Shannon Development. It can use the rental income-----
This is all fantasy.
It would have been good if the Minister could have clarified all of that in his remarks. An amendment was brought in to facilitate Shannon Airport. That is welcome.
The Minister said that to the committee. That is welcome. We have a chance to open up an industry here. Shannon is so much further developed than the other regional airports that they need to be given the status to get there too. None of us wants to go back to the days of section 23 but surely it is within the knowledge of the Department of Finance to come up with a scheme that will assist in aviation development and maintenance and create employment at any airport that has the skills to do so. There are very few airports that have the runways and space for this kind of operation. Knock happens to be one. As it has a 25 hectare site and the requisite runway size, it does not involve massive development. A few weeks ago the Taoiseach, the Minister for Transport, Tourism and Sport, the Minister of State for Transport, Tourism and Sport, Deputy Ring, and Deputies Mulherin and O'Mahony came down in a blaze of glory to the airport. Deputy O'Mahony has been tasked with preparing a report. For Deputy Naughten's information I want to clarify that a report was prepared at the behest of the last Government. It targets aircraft maintenance and was presented to the last Government at the end of its term. It could be acted on straightaway. The Minister might clarify his contention that Shannon will not get an advantage.
Would he consider giving a commitment that he will not commence this section until such time as the report on the future of Ireland West Airport, Knock, being prepared on the Taoiseach's wishes, is delivered some time in May? Then we can see what options that report outlines for developing employment and other industry around Knock Airport and if the section has to be further amended at that stage then surely we can do so. To commence this scheme and allow further advantage to another airport would be wrong in that vacuum.
I thank the Minister for taking on board the proposal that the dismantling of aircraft is more comprehensively covered within section 30. I also acknowledge the contributions of Deputies Naughten and Calleary and other colleagues who support Knock. Already Knock has some small business in this area. It wants to grow that and build more hangars. Knock has been growing in leaps and bounds and we should pay heed when it identifies areas of concern that put future growth at risk and areas where it needs some State support. We definitely get value for money when anything is put into Knock. The evidence is there in its growth in spite of the odds, including at times political odds.
Some of the amendments to this section have been disallowed. I support the spirit of Deputy Naughten's amendment although I understand that it cannot be considered. Deputy McGrath proposed that there be a report. I do not feel there is any great need for a report because that might just be procrastination. We need action.
The Minister said on Committee Stage that this section was first drafted in the context of the development at Shannon Airport joining up with Shannon Development and the new company being formed so we know that Shannon was to the fore in the Minister's mind. He then acknowledged that it applies to all airports. The reality is that there will be no great benefit to other airports if they do not have the same profile and rental income as Shannon. I know the Minister will clarify this point. I have tabled several parliamentary questions which satisfy me that Shannon has rental income of approximately €6 million per annum with the potential to rise to between €10 million and €13 million. By virtue of that and the way this provision is structured the airport will be able to set off capital allowances in full against rental income on properties in the domain of Shannon Airport over a seven year period to its benefit. Knock Airport, because of its financial structure cannot get a loan to build hangars will not be able to avail of this provision so it is looking to outside investors. Knock tells us in its submission that it needs this provision to be more attractive to outside investors. That is our point, investors would be incentivised.
On Committee Stage I put forward several proposals, one of which was a section 23. I can understand why the Minister would have reservations about that. There were other minor amendments which would be in keeping with the provision, which could be attended to, would be beneficial and fulfil Knock Airport's request. Parking the section 23 relief I asked that the Minister would consider this when he brings the Bill to the Seanad where he would have another opportunity to amend it. The Taoiseach is aware of this. I have written to him to suggest that the tax relief be available against other income and that the unused capital allowances would not be restricted to the life of the building but could be carried forward until used up. The capital allowances would not be deemed specified relief, which is used by high income individuals. These are not very far-reaching amendments. Shannon Airport has been accommodated but we do not want to be accused of favouritism. We should try to help Knock Airport. Now is the opportune time.
The Minister has explained to us that this particular tax relief has to be approved by the European Commission. Now is the opportunity to amend it and forward it to the Commission. There is legitimate cause for concern because of the package put in place for Shannon and the potential adverse impact of this competition on Knock Airport following State intervention in another airport. I would like to see the amendments I have described made to this Finance Bill. They would assist the case. There is universal support for these amendments. Sinn Féin, Fianna Fáil, and Independent Deputies support such a change. If we do not take some action in this sphere we are compounding the problems facing Knock Airport and throwing away an opportunity. I urge the Minister to consider this when the Bill comes before the Seanad.
There is a total misunderstanding of the original provision in the Finance Bill. This has been built up to a degree where claims are now made which are in the realms of fantasy. There is no measure in the Bill that has been specifically designed to help Shannon Airport.
The Minister said there was on Committee Stage.
I did not. The Deputy was not even at the committee.
I have the transcripts.
The Deputy has a transcript. I will tell him what I said. Any of the provisions in the Bill can be used by any airport. There is a tax break for any airport to build hangars and the apron outside a hangar. There is no tie-in with Shannon Airport. There is no suggestion the new Shannon Airport Authority will be the investor. This is a provision for private investors who might go to Shannon or any other airport to build hangars for aircraft refurbishment. It is a tax break for private investors. All this rigmarole about Shannon Airport having rented buildings around the airport has nothing to do with this. It would not be applied to rented buildings which represents income for the day-to-day running of the place because it had no other income for years. This is about private investors coming into airports. If Knock, Dublin, Cork or any other regional airport can attract the activity of refurbishment of aircraft as a business, wants to build hangars and aprons to facilitate this activity and if it can get investors to invest in it, it can do so. It will be on exactly the same basis as Shannon Airport. The only advantage Shannon Airport has is that historically it has had a small refurbishment industry which it is now trying to expand in its new circumstances where it has been separated from the Dublin Airport Authority and is receiving a mandate to secure its own future. If Knock Airport wants to build hangars and can attract the activity of aircraft refurbishment, it will receive the same tax breaks. There is no Shannon Airport-specific measure. This measure applies to all airports.
The Minister's time has concluded.
How am I going to explain all of the changes made in two minutes?
As the Minister moved the amendment, he will make the final contribution on it.
For another two minutes?
There is no limit on the final contribution.
I thought the Leas-Cheann Comhairle had called on me to conclude.
The other Members have an opportunity to contribute further, but it will be only for two minutes. The Minister will then conclude and there is no limit on that contribution.
If that is the ruling, that is the ruling.
It is a real pig in a poke because specific questions were put to the Minister and it would be nice to receive answers to them before we are asked to make a further contribution.
I was answering the specific questions asked.
I agree the arrangement does not make sense. I had a specific question on how the amendment would be implemented. Will the Minister come back to it when he is wrapping up? It seems the first phase could benefit one airport over another. I accept the point the Minister has made on private investors. The section, as drafted, is aimed at structuring it for private investment in an airport. Has the Minister been given an indication that there are private investors willing to invest in this incentive as structured, or is this a speculative amendment in the hope there will be investment on that basis? Knock airport's concern is that it would not be able to attract private investors on the basis of the provision as structured. It believes the only airport that can avail of this incentive is Shannon Airport.
To correct the record, on Committee Stage the Minister made the point that this section was motivated by the intention to revitalise Shannon Airport.
If I had had a chance to reply, I would have explained what I meant.
It is important that all airports be on a level playing field. I seek clarification on the first amendment.
I am in the same position as I would have liked to have heard the Minister's whole contribution. In fairness, on Committee Stage the Minister explained the incentive would be universally applicable to all airports, but he also stated it was designed specifically for Shannon Airport or that the airport would benefit potentially from it. Is there not a concern that Shannon Airport can do this on its own and does not require investors? Accordingly, the problem is that Ireland West Airport would need an investor, while Shannon Airport can do it on its own and use the capital allowances against its income. Will the Minister address that issue in his final reply?
It would be beneficial for everyone involved if the Minister responded to the letter he has received from Ireland West Airport and then place it on the record of the House ahead of the debate on the Bill in the Seanad next week. That would allow us to know where he is coming from and we could prepare a response accordingly.
Do I have two minutes again or do I have time to explain this amendment?
There is no limit on the final contribution.
If any Member can point out to me any part of the section that refers to Shannon Airport, I would be pleased to hear it. There is nothing in the section that refers to a specific airport. The motivation for it was an incipient industry at Shannon Airport which the authority thought it could develop further. The second largest Russian airline, Transaero, has acquired an Aer Lingus hangar at Shannon Airport and is doing work in it. The company will go further under certain circumstances and it is a potential investor. However, it has made no commitment as yet. The aircraft refurbishment industry at Shannon Airport has the potential to expand. In that context, it is possible other investors will come in also. IDA Ireland has stated there is quite a lot of interest in this provision. It did not state, however, there was quite a lot of interest in locating at Shannon Airport. Instead, there is quite a lot of interest in locating in Ireland.
This provision will apply at Dublin, Cork and Knock airports because I presume if one is flying in aircraft to refurbish them, one requires runways of a certain length. Accordingly, opening such a facility at a small regional airport would not be viable.
Members know my position on development. With the difficult economic state in which we are, if there are ideas that have the possibility of creating investment and jobs, I am prepared to try them out. I want to try them out in a fair way that would not disadvantage anyone. There is no disadvantage in this provision for Knock airport. If it can attract an industry that refurbishes aircraft, it will receive the tax break to develop the hangars and pads, the same as any other airport.
When the debate on this issue started on foot of correspondence from Ireland West Knock Airport, Deputies Michelle Mulherin and Denis Naughten, supported by Deputy Pearse Doherty, brought up the issue of another suite of proposals which would be specifically for Knock airport. It was a whole load of stuff to do with section 23, with which we are familiar, such as write-offs against rental income elsewhere. I am not introducing section 23 measures for Knock airport or any other place in the country.
Another amendment was proposed which I thought was interesting. The case was made by Deputies Michelle Mulherin and Denis Naughten that the section restricted the refurbishment activity to the repair and overhaul of aircraft. That is what is happening where the industry has commenced at Shannon Airport. The intention of the work being carried out on the aircraft at Shannon Airport is that they will fly and carry passengers again.
It has been pointed out that there is an opportunity for breaking down and recycling aircraft as well. In such cases the intention would be not to fly them again. There is an interest in establishing that operation in Knock and that is why we included the dismantling provision.
Deputy Naughten asked why I did not accept his amendment and why I did it this way. It is normal enough that an idea comes from an Opposition Deputy and the Minister picks it up. Then he gets advice from his Department and from the drafting services. The Minister relies on that advice and rather than accepting the amendment as drafted he tries to ensure it is absolutely legally sound and drafted properly.
I accept that but that was not my question. My question is why it was broken in two. It could be implemented at different times.
It is broken in two because that was the drafting advice we got. There is no intention to commence them at different times; my intention is to commence them at the same time. The issue of the commencement order is to allow both of them to get through state aid provisions in Europe before they are commenced. I could try to commence them now but they do not have state aid permission and such a move would be quasi-legal if not downright illegal. I have to get them across the line in Europe before they become operational. I assure Deputy Naughten that any commencement order or orders will be numbered (I) and (II) and whether I need one or two it will be done on the same day. There is no issue with this.
There is absolutely no discrimination. I wish Knock airport every success and I hope it is successful in attracting industry. The only advantage for those in Shannon is that they have an industry up-and-running in a small way and they are keen to build it up further. They believe they may have the potential to do so.
The relief would involve consortia of investors. The high earners restriction will apply, the limit on sideways setting of capital allowances will apply and the termination of unused capital allowances will apply. Deputy Mulherin asked why I was putting in these restrictions. The reason is that I do not want tax reliefs abused in the way they were abused in the past. I do not want tax reliefs applied to an airport but used for buildings somewhere else in the country by means of a transfer of rental income for tax relief accrued at the airport building. I want it absolutely focused in order that the tax relief delivers on the purpose for putting it in our tax law in the first place. That is why these restrictions are in place. I am not going to introduce any section 23 incentives which would give rise to something west of Ireland Deputies should be familiar with, that is to say, all those buildings on the upper Shannon unused and empty. They were driven by tax breaks that were badly focused and I am not going down that road. I will help Shannon in any way I can-----
We know the Minister will help Shannon.
-----but I will help Knock in any way I can as well. That is the business we are in. The west needs special assistance for development and if we can do it this way, well and good. However, a state aid issue will still arise.
Several other questions arose about the leasing companies here. Deputy Doherty by implication questioned how much benefit they were to the economy. The leasing companies manage 20% of the world's passenger airplanes. Some 3,500 commercial aircraft are managed from Ireland and they are valued at more than €80 billion. There are 1,000 direct Irish jobs in aviation leasing and between 500 to 1,000 indirect jobs. SMBC Aviation Capital is based in Ireland and is the world's fourth largest aircraft leasing firm. ICBC Leasing Ireland, a subsidiary of Industrial and Commercial Bank of China, the world's biggest bank by market capitalisation, manages €1.5 billion worth of aircraft assets from Ireland.
The aviation sector generally contributed €4.1 billion or 2.6% of GDP and accounts for 26,000 direct jobs and 16,000 indirect jobs here. Ireland hosts Aviareto, the international registry body for aircraft, and it will remain here until 2016, further proof of Ireland's acknowledged leader status in the aerospace sector. IDA Ireland has indicated that there is considerable interest in companies establishing in Ireland and there is ongoing discussions with these companies. It has further advised of considerable interest in the air traffic control proposal coming from Ireland.
The contribution of the aerospace industry to the economy in Ireland is significant. In 2007 the total corporation tax contribution from the industry was approximately €300 million. A further €135 million was injected into the economy in the form of expenditure on professional services and physical infrastructure, including rent, telecommunications and day-to-day expenditure. The expenditure generated approximately €4.9 million in VAT receipts. Clearly, there is a benefit to the economy. The refurbishment industry is likely to be more job-rich. If we could get the refurbishment industry going then there would be considerable engineering and technical employment, which is usually reasonably highly paid like other heavy industries, and it would be of benefit. If some business could be attracted to Knock I would be delighted and I hope there are plans in Knock to deal with it.
There is one matter of concern which I do not wish to over-stress but I will mention it while Deputy Calleary is here. His colleague, Senator Marc MacSharry, lodged a complaint with the competition directorate in the European Commission in January following the measures announced in the budget for the aviation sector. He is basing his complaint on possible unfair treatment for Knock airport. Will Deputy Calleary deal with it privately or should I go to Deputy Timmy Dooley with it?
The Minister could have raised it privately with the Senator.
The Minister could have raised it privately with the Senator and I would have expected him to do so. He has legitimate concerns and I will discuss them with the Minister again. If the Minister addresses the legitimate concerns about favouring one airport over another I would more than happily deal with Senator MacSharry. Deputy Mulherin shares the same concerns. The Minister could have directed his remarks to her as well.
There is no favouritism being shown towards any of our airports. Deputy Calleary may regard fair treatment as ensuring that an industry which has started in Shannon is closed down but I do not regard that as fair treatment. Let everyone do what they can to develop their own space. There is nothing in law-----
I regard fair treatment as a level playing pitch.
It is a level playing pitch. I challenge Deputy Calleary to point out anything in the legislation that cannot apply equally to Knock airport and Shannon airport. The threat to Knock is not from Shannon and the threat to Shannon is not from Knock. The threat is that those in a larger airport such as Dublin will use this and attract the refurbishment industry, and the best of luck to them because they have many advantages that the west does not have. That is where the threat comes from but it does not arise from anything we are putting into law. The law is treating all airports equally. What is going into law is applicable to all the airports. The airports must get out and try to attract investors in and, if they do, the best of luck to them, but it is a level playing field.
I seek clarification on one issue. Were the statistics and metrics for the aerospace leasing industry from 2007 or 2011?
The first statement was current. The second statement on corporation tax and so on was from 2007.
Are there no more recent statistics?
There may be but I do not have them.
I was unsure whether I heard it right.
Since amendment No. 12a is agreed amendment No. 13 cannot be moved.
Amendment No. 14 is out of order.
Amendment No. 14a has already been discussed with amendment No. 12a.
I move amendment No. 14a:
In page 69, to delete lines 24 and 25 and substitute the following:
“(2) This section comes into operation on such day or days as the Minister for Finance may by order or orders appoint and different days may be appointed for different purposes or for different provisions.”.
Amendment No. 15 is out of order.
Amendment No. 16 has already been discussed with amendment No. 12a.
I move amendment No. 16:
In page 69, between lines 25 and 26, to insert the following:
“32.—The Minister shall within three months of the passing of this Act, prepare and lay before Dáil Éireann a report on the effect of section 31, with a focus on its impact on regional airports in particular, examining if they are at an unfair disadvantage because of it and to accordingly bring forward proposals to rectify any distortions in competition.”.
I move amendment No. 17:
In page 76, between lines 31 and 32, to insert the following:
“34.—The Minister shall within 1 year of the passing of this Act prepare and lay before Dáil Éireann an analysis of the tax expenditures included in this Act, setting out their incurred cost to the State and the impact they have had on job creation, volume of new start-ups, preventing job losses and other such impacts.”.
Before speaking on the amendment, I want to respond to the Minister's suggestion that I supported colleagues in calling for section 23 type reliefs.
No; I referred to general supports for development.
I am very opposed to the type of relief mentioned. Amendment No. 17 provides for an analysis of the cost of tax expenditures and their impact on job creation, the volume of new start-up companies and the prevention of job losses. We have been looking for a provision of this nature for quite a while because it is appropriate that we examine the larger tax reliefs, in particular, to determine their cost to the State and whether they offer value for money and provide jobs. Not all tax reliefs provide jobs because some are focused on bringing in revenue. We need to get a proper picture of tax reliefs and whether they are working.
I refer to the example of the special assignee relief programme, SARP, for which figures are not yet available one year later. It allowed high earning individuals coming from abroad to discount 30% of their income, up to €500,000, for tax purposes and provided a tax relief if they sent their children to private schools in the State. The programme remains in operation even though we do not know whether it has worked. After an appropriate period of time it is important that the cost of a tax relief be estimated. For all we know, 2,000 of these individuals could have landed in the State to have their children educated free in private schools. It is not that significant, because we would have heard about it otherwise, but as a substantial measure which the Government has linked to job creation, we should be able to evaluate its impact.
I spoke earlier about the aviation leasing sector. There was a long discussion on this issue on Committee Stage and I am very supportive of the State's efforts to capture activity in that sector. Successive Finance Bills have provided incentives to the sector, including a measure contained in the Bill before us to which nobody in this House objects other than on the basis of achieving a level playing field. If we need to offer an incentive to attract jobs, let us do so. However, given that the leasing sector is valued at €80 billion, or 61% of GNP, the question arises of whether we are getting bang for our buck. Can we tweak the incentives to get a bit more from the sector without jeopardising what we already have or scaring off further investment?
We need to know how much these tax expenditures cost. The Minister makes the argument that certain reliefs are so insignificant that they do not need to be costed, but a substantial number are not costed. When introducing a tax we have to find out, after a period of time, how much it is costing the State, because otherwise it is back-of-the-envelope stuff. We cannot afford to do that any longer.
I proposed a period of three months in my Committee Stage amendment, but I appreciate that three months may not be appropriate, given the need to allow sufficient time to elapse. When the information becomes available after the following tax year, there is no reason the cost and impact of a tax expenditure should not be set out. We need to make a proper evaluation of tax expenditures. This is not an argument to get rid of all tax expenditure, because I hope I have made it clear that we have to incentivise certain sectors. However, we also have to know that the incentives are working and are not being abused. If we had had such a measure in the days of section 23 tax reliefs, perhaps we would not be dealing with the disaster of all the empty houses in County Leitrim and the Shannon basin. The Government of the day might have been able to hear the alarm bells. This amendment is tabled in good faith and I hope the Minister will give an undertaking that he will move in this direction.
I support Deputy Pearse Doherty's sensible amendment. He has increased the period of consideration from three months to one year. I would not have gone as far as him because it would be useful to have the information in advance of the next budget to allow the Dáil to decide whether the tax expenditures stack up.
The Minister is a proponent of evidence-based policy-making. As a leading Opposition Member he spent many years interrogating Government policy in finance and other portfolios. The only comparative analysis on this issue that I could find is a study of OECD budgetary processes, which indicates that Ireland's budgetary process is the second worst after South Africa's. Two scores caught my eye in particular. On the amount of time Parliament is given to interrogate a budget in advance of its introduction, we scored zero out of ten, and on the amount of information given to Parliament to interrogate a budget, we also scored zero out of ten. I acknowledge, however, that the Minister for Public Expenditure and Reform is making a genuine effort to provide additional information and transparency on expenditure and the process is slowly beginning to improve. When Deputy Pearse Doherty proposed his earlier amendment on Committee Stage, the Minister, Deputy Michael Noonan, rightly pointed out that our job as parliamentarians is to hold him to account and interrogate legislation on behalf of the people. He went on to say that we get the analysis three months after the budget. However, that is the heart of the problem. We are only provided with some analysis - not enough - three months after the budget has been introduced. The study on budgetary processes included a bar graph which set out when parliaments got information on budgets. Generally, this varied between one month and six months before the budget. In only one country, Ireland, the Parliament got the information subsequent to the budget. We are a complete outlier in this regard.
Deputy Mary Lou MacDonald and I asked for a regulatory impact analysis to be carried out prior to the introduction of the budget, including equality-proofing, gender impact analysis and poverty impact assessments. These are the types of analysis carried out in other developed democracies. The Minister agreed to investigate the Scottish model for equality budgeting, which is held up as good practice by boffins in this area. As a first step, I ask him to accept this amendment. It is a small and reasonable request that the Dáil should at least consider the impact of changes to tax law.
In his amendment Deputy Pearse Doherty has drawn attention to job creation costs for the State, which are very important. He includes in his amendment the words "and other such impacts", which I believe is equally important. We need to look at the poverty impacts of these tax breaks or changes. We also need to look at an analysis of their gender impact and to consider the revenue and cost implications for the State.
There are two other issues I would like the Minister to think about. Other Parliaments have their own budgetary office, staffed by analysts and this practice seems quite successful. Obviously, the Cabinet gets its advice and analysis from the Civil Service and the Minister gets his from his officials. Many other parliaments have a budgetary office and I suggest this as a possibility. I do not say this lightly. I appreciate hiring more people for our Parliament in the current environment is very difficult. However, it is certainly something that should be considered.
Second, something I imagine has caused the Minister no lack of frustration over his career in politics is the part of the Constitution which says that nobody except the Minister can table an amendment that produces a charge on the State or has a tax implication for a citizen. The amendment I put forward concerned maternity leave. In good faith I tried to table something that would achieve what the Minister stated he wanted to achieve, but which did not have negative effects. However, my amendment was ruled out of order for some reason such as it fell between two Departments. The Government has plans for various referendums, but it seems that one of the things that hampers this House doing its job is the clause that means the majority of proposals we would like to make cannot be made, although I know there are ways of playing games with them, such that we can include something that would counter the cost.
It would be great if the Minister could accept Deputy Pearse Doherty's amendment, or something very like it. I would love the Minister to consider changing the Constitution in order that we could do what we are meant to do - interrogate the legislation and propose sensible amendments.
I strongly support this amendment. We had a discussion on this issue on Committee Stage and I appeal to the Minister, on the grounds of transparency and the public's right to know how public money is being spent, to consider the amendment favourably.
It is interesting that when we look at the cost of any of the social welfare schemes, we know exactly the number of claimants and exactly what the scheme is costing us. However, when it comes to tax provisions, there is a veil of secrecy around a number of them. From experience during the years, I know that often when one puts a question on the cost of various tax schemes to the Exchequer, the response is regularly to the effect that the data are not collected in a format which allows the Minister to answer the question. It appears very convenient that it is not collected in that format.
A number of cases come to mind. Deputy Pearse Doherty referred to the special assignee relief programme, SARP initiative, and we still do not have information on that. We do not have information on the grounds for the introduction of that initiative initially. Was there, for example, any kind of cost-benefit analysis done on it? It still strikes me as strange that in spite of introducing that preferential treatment for executives coming from abroad, the argument is still made on a regular basis that we cannot have a third rate of tax because it would frighten off executives coming in from abroad. There is no consistency on that issue. I would expect we would have some data available for 2012 at this stage, the third month of 2013, on the basic numbers claiming SARP relief and some estimate of the cost of it to the Exchequer.
There are several other examples of areas where information is lacking, for example, pension tax relief, an area costing almost €3 billion. There is major public debate on the cost of child benefit and the possibilities for making savings there, yet it is different when it comes to pension tax relief. We know from ESRI estimates that approximately 80% of pension tax relief goes to the top 20% of earners and we know that in the case of child benefit, it is paid for every individual child. The pension tax relief allocation is deeply unfair and very difficult to defend from the point of view of equity. However, when we look for the data on pension relief, we must rely on ESRI estimates. During the years, when we looked for data on who was getting that tax relief or the numbers of claimants within different income bands or on the size of pension pots on which relief was being granted, Revenue and the Department stated they did not collect the data in that way.
I find it incredible that the Minister for Finance is continuing with a regime where between €2.5 billion and €3 billion is spent on pension tax relief, yet he cannot produce the data giving a clear picture of that massive expenditure. I appeal to him that, on grounds of transparency, the public and public representatives are entitled to that information. How does the Minister know whether he is getting value for money? How does he know whether there is any equity about the situation if he does not produce that basic information? I appeal to him to look at this again.
The Minister should also look at who is claiming tax relief on health expenditure. There is no breakdown available on this for the public. Again, in the case of landlords and the tax reliefs they get, there is no breakdown of the data. In the past few days, I sought data regarding tax relief for educational institutions and sporting bodies, but again, the claim was that on the grounds of confidentiality that information could not be provided. We know what the various Departments and the social services cost. There is infinite detail available on that. Tax breaks and reliefs can be considered similar expenditure and we should be entitled to information on them.
I strongly support Deputy Pearse Doherty's amendment and urge the Minister to give a commitment here that he will request Revenue to collect data in a way that will allow people to make a judgment on whether we are getting value for money from the various tax relief schemes.
The Minister and the Minister of State, Deputy Brian Hayes, will remember that during Committee Stage discussion I urged that both Revenue and the Department would streamline the collection and assembly of information into meaningful management accounting type information. If they did, we would be able to make better policy decisions, no matter who was in charge of the ship of State. It is important to know where revenue is generated, the costs that apply to that revenue, the taxation applicable and where growth or contraction is happening in various industries and sectors. This makes sense and will help us to organise our thoughts better coming up to budget time. It is something that needs to be done immediately.
Deputy Pearse Doherty and I had a reasonable discussion on this on Committee Stage. At that stage, when talking about what happens in Scotland, I made a commitment that one of my political advisers would examine this without prejudice and we would see where we could go. I will include this matter also and ask him to examine it and see if we can go forward on it. As a general proposition, I agree that things must change. The budgetary rules will change anyway, driven by the European Union, and our budget will be earlier this year, sometime in the middle of October. I will take proposals to the Government on how we move towards that and will keep in mind what the Deputies have said.
It can be frustrating to be in opposition at times and it is very hard to get data on certain occasions. At other times one is swamped with data. With the little help that Opposition Deputies have, making sense of data is often a problem in itself. With regard to the Revenue Commissioners answering parliamentary questions or saying they do not have the data accumulated in a particular way or a way that can be released, that is not my experience. I clear my written parliamentary questions personally, a couple of hundred of them every week.
It is very seldom that I do not have a full answer. I would not come across such an instance each day. I might come across one each week. Usually, my answer is that the information requested is not to hand because not enough time has been available to put it together. I generally say I will put it together and communicate it to the relevant Deputy by letter. Some Deputies such as Deputy Pearse Doherty table many questions to help them with their research. The Deputy can vouch that I usually give very full answers and that I communicate by letter subsequently if the data are not compiled within a short period of time. I think the data are available now. Details of personal and company taxation cannot be revealed because they are confidential. When somebody tables a question seeking details about a specific taxpayer or a small group of taxpayers in a way that would make an individual identifiable, he or she does not receive these details. That is the way the Revenue Commissioners operate. We might return to this issue. I will get the political adviser I have in mind to call Deputy Pearse Doherty to discuss what he wants and we will see where we can go. I agree with him in principle that the way we do our business is unsatisfactory. While I would not say there is no proper scrutiny, I accept that frequently the Opposition is not given sufficient information to do the job it is supposed to be doing.
The Minister of State, Deputy Alex White, will now take over from me. I ask Deputies to excuse me, as I have to leave.
This is one of the amendments I am disposed to push to a vote. I genuinely and passionately believe we need to change things in this regard, although I welcome the Minister's statement that he intends to get his political adviser to contact me. I reiterate that I welcome the position he outlined on Committee Stage about looking into the Scottish model of equality-proofing. As I have said in this House previously in my capacity as finance spokesman, since the Government took office, I have seen a marked improvement in the transparency of the information given by the Department of Finance in response to parliamentary questions. I cannot say the same for other Departments because I am not as familiar with them. I remember that when I tabled two very similar questions to two Ministers in the Government, I was able to obtain the information from the Department of Finance but not from the other Department. I will say, however, that there has been a marked improvement. While I agree with the Minister that we can have an overload of information, I do not think information should scare anybody. It is up to people to decide what to do with it. As we move in that direction, we should take the lead and embrace it, rather than having to be dragged there kicking and screaming.
I would like to make a quick suggestion. The Minister might consider bulking up the specific library and research team that deals with these issues. In the current environment it is probably not appropriate for us to set up a full budgetary office in this Parliament. The library and research team does a phenomenal job in trying to give us neutral and robust analysis. I ask the Minister of State, Deputy Alex White, to bring the idea of employing a small number of extra people with expertise in finance and economics as part of the library and research team to the Ministers, Deputies Michael Noonan and Brendan Howlin. The team that is already in place is phenomenal, but it is massively under-resourced. I think it has one person with a background in economics. It used to have two. The hiring embargo means it now has just one. If the number was increased to four, it is possible there could be a step change in the analysis available to the Members of this House. I ask the Minister of State to take this suggestion back for consideration.
Does the Minister of State wish to respond? He does not have to.
I am quite happy to do so. I will take Deputy Stephen S. Donnelly's suggestion on board. I have an appreciation of the issues being raised, having served not too long ago as Chairman of the Joint Committee on Finance, Public Expenditure and Reform. I heard the well made points of Deputies Stephen S. Donnelly and Pearse Doherty and others when I followed the debate on my screen earlier.
I move amendment No. 18:
In page 109, to delete lines 15 to 41.
This amendment relates to the increase in the price of tobacco products and I will not tear the backside out of it. The House passed the resolutions on budget night and we have debated the matter since. This Report Stage debate follows our previous consideration of the Bill on Second and Committee Stages. I have tabled this amendment to reiterate that the increase in the price of cigarettes which I do not oppose has nothing to do with the promotion of public health. The problem is that the market is flooded with illegal cigarettes, or contraband cigarettes, to use the proper terminology I learned from Deputy Peter Mathews the last day, that can be bought in any town or village for €4. If the Government was serious in this regard, it would ring-fence some of the huge profits the State brings in from the imposition of duty on cigarettes to deal with the sale of cigarettes on the black market. I have tabled this amendment to ask it to do so. I am not opposing the price increase; I am saying it should be done in a genuine manner. I am only opposing it in so far as I do not believe it is about public health. It could be argued that the increase in the price of cigarettes will dissuade people from buying cigarettes. That may be a valid argument, but my view is that the price increase will push people into buying cigarettes for €4. In such circumstances, the State receives no tax and people smoke more because they are getting cigarettes for half the price. This issue needs to be considered in a genuine manner. Television documentaries have exposed the lack of scanning equipment and facilities available to be used when lorries arrive in this country. The black market activity is an issue. If the Government was proposing to increase the price of cigarettes to bring in €50 million - that is not the accurate figure in this case - and promising to use that money directly to tackle and stamp out the illegal sale of cigarettes, I would support it.
This section of the Bill confirms the budget increases in the rates of tobacco products tax. When VAT is included, the increases amount to 10 cent on a packet of 20 cigarettes with pro rata increases on other tobacco products, with an additional 50 cent increase on a 25g pack of roll-your-own tobacco. As a result of the budget increases, the price of a packet of 20 cigarettes in the most popular price category has increased to €9.30. The excise duty component of this price is €5.57. The total tax, inclusive of VAT, is €7.31. In the case of roll-your-own tobacco the increase in total tax, inclusive of VAT, amounts to approximately 60 cent per 25g pack. The excise duty component of this increase is 49 cent. This measure is expected to raise €25 million in a full year.
I listened to what Deputy Pearse Doherty had to say about the black market. While he made some fair points, I do not think I was entirely in agreement with him when he said the increase was not about public health. I have to suggest, based on what I know from my day job as Minister of State at the Department of Health, that it cannot seriously be argued that price is not a relevant factor in one's decision to smoke cigarettes. While it might not be the only factor, as the Deputy outlined, it is certainly relevant. It cannot seriously be argued, therefore, that price issues have no bearing on public health.
Revenue has achieved considerable success in combating smuggling. In 2012 it seized 95.6 million cigarettes, with a retail value of €43 million. In the same year, it obtained 57 convictions relating to cigarette smuggling, with fines of €93,500 and 26 custodial sentences, of which seven were suspended, being imposed.
In addition, there were another 75 convictions relating to the sale or keeping for sale of unstamped tobacco products, resulting in 21 custodial sentences and fines of €153,000.
The overall strategy being employed by Revenue to tackle the illicit trade is multifaceted and includes ongoing analysis of the nature and extent of the problem; developing and sharing intelligence on a national, EU and international basis; ongoing review of operational policies; development of analytics and detection technologies; optimum deployment of resources at point of importation and inland; intelligence-based operations and random checks at retail outlets, markets and private and commercial premises; and multi-agency operations, particularly in regard to large maritime importation and checks at markets. There is a good deal of activity being pursued by Revenue in this regard, which I am sure the Deputy will acknowledge.
Any success by Revenue in this regard is to be welcomed. I have a lot of respect for Revenue and believe its resources should be increased, as I have argued in our alternative budget and as Revenue has also argued when suggesting it could make a net gain of some €94 million for the State if it was allowed to hire additional staff to deal with black market activity and compliance.
The point I am making is that the motivation behind this measure is not public health. As I said, increasing the price of cigarettes will deter some people but others will just go into the hands of the black market. While I do not have the figures for how much is spent by Revenue on trying to curtail black market activity in regard to cigarettes, I would not think it is a huge amount. If the Minister announced today €25 million had been raised from the suggested provision, this would not just have the benefit of hopefully deterring some people from smoking cigarettes because the price is beyond their reach, but would also mean a possible doubling of the fund to deal with the issue. Any success by Revenue is to be welcomed but we just have to look around us to know contraband cigarettes are all over the place. The figure was given at the last meeting of the committee that one in three or one in four cigarettes are contraband. The market is flooded and the situation is out of control.
If this were a genuine public health issue, I am sure the Minister of State in his day job would welcome the provision of serious resources in this area. At the end of the day, the Government's intention is that nobody would smoke, which would be great for public health, although that is easier said than done. That said, the State will lose a huge amount of revenue, given it gets something like €5.77 from every packet. I would put it up to Deputy White, as the Minister of State at the Department of Health, that if we are genuinely serious about this, we would be not just putting money in our pockets in terms of increasing the amount we are taking in, we would be tackling the area where we are losing out. If the Government wanted to look at this selfishly in terms of increasing revenue and forget about the public health aspect, given people who are addicted to nicotine will always pay the higher price anyway, this measure would see a benefit in terms of additional revenue which could be then put into dealing with the issue of public health promotion and other preventative measures in trying to encourage people to come off cigarettes.
The increase in the price of cigarettes is not something to which we in Sinn Féin are opposed but we are opposed to the motivation behind it and the fact the Government is not using the resources to actually deal with the problem, which is widespread at this stage.
Having listened to the discussion, I suggest this can be netted down to getting into gear the will to do something about it. Deputy Pearse Doherty is correct that the scale of the contraband or black market is huge. The only way this will be grasped with any effectiveness is by providing resources for Revenue, Customs and Excise and the Garda, and that needs to be done. We know, for example, that the number of young women who are smoking is rising, we know very few older people give up smoking and we know the volume market for cigarettes is constant, if not rising. The black market criminals are gaining in volume terms because the cost to them of importing and distributing the cigarettes is very low, even when compared to a price of €4 a pack.
We have to grasp this. With all due respect to the Minister of State, dancing around the edges with advice sheets and statistics on how many criminals were apprehended, got custodial sentences and all the rest is nearly irrelevant. We have to gear up and get the equipment to do it. We should find out who are the shipping agents and shippers for the containers that come in, and give them the hefty fines, rather than those who are caught with the cigarettes in their possession. That will force them to find out what is in the containers.
The issues that have been raised about public health are very fair. Several public health initiatives are being taken in the area of cigarette smoking. The Minister for Health has made a number of announcements and I support very much, as I am sure we all do, the measures it is intended to take in regard to cigarettes, in particular with regard to packaging. Cigarette smoking is a public health concern and, in particular, a concern of mine, of the Minister for Health and of the Department of Health. This has been made very clear and Members will see more on this in the coming period. Legislation has been proposed by Members of the other House in respect of where cigarettes can and cannot be smoked. There is a major concern and priority attached to the issue of cigarette smoking as a public health imperative by the Minister and the Department of Health.
I agree with Deputy Pearse Doherty to the extent that he makes the point, as I would, that public health has to become a whole-of-government concern and not just simply be packaged into one Department. Health and public health is more important than practically any other consideration in government. It is far too important to be left to the Department of Health. It has to encompass and comprehend efforts across the board, including across all Departments and the wider public administration.
On the question of whether there is a will, I indicated earlier the achievements that have been made by Revenue. I was reading from the advice sheets to which Deputy Peter Mathews took such exception, but I am simply giving information to the House as to precisely what has been achieved.
The time is up. The Minister of State may have another opportunity to speak on this later. Does Deputy Pearse Doherty wish to speak again?
No, although I would have liked to have heard the rest of what the Minister of State had to say.
Amendments Nos. 19 to 23, inclusive, are related and may be discussed together.
I move amendment No. 19:
In page 112, between lines 6 and 7, to insert the following:
“(e) a person who holds a Community Licence within the meaning of Regulation (EC) No. 853/2004 of the European Parliament and of the Council of 29 April 2004, and a business transporting its own goods;
(f) a person who holds a Community Licence within the meaning of Regulation (EC) No. 1/2005 of the European Parliament and of the Council of 22 December 2004;”.
Although there is a group of amendments being taken, I want to speak specifically to amendment No. 19. I raised this issue in detail when I spoke on Second Stage and if the officials present today were here on that day, they will know what I was talking about and will hear it again to some extent. I was originally dealing with section 49 of the Bill, as initiated, and it has now become section 51 following the amendments on Committee Stage. Section 51 deals with the mineral tax rebate on auto diesel for haulage and bus operators, and I welcome this provision. However, the section has a number of unintended consequences and the two paragraphs of amendment No. 19 are designed to deal with these unintended consequences of what is otherwise a very good provision.
As I said, the section deals with haulage operators and I am not referring to the bus transport issue. The essence of the question is who is eligible for the fuel rebate, which comes back to the question of who is a qualified road transport operator. Section 51 defines a "qualifying road transport operator" as a person who holds a national road haulage operator’s licence or an equivalent EU licence, or a person who holds a national or international road passenger transport operator's licence or an equivalent EU licence.
They are the people who will benefit from this fuel rebate, which is what the Minister intended. However, there are people in the haulage business who, because they do not have one of these licences, do not qualify as road transport operators. This amendment aims to include these people. The first paragraph of the documentation by the Department of Transport, Tourism and Sport to guide applicants for road haulage licences contains a section on who needs a road freight carrier's licence. It states that a licence is required when goods are carried for hire or reward. That is the essence. The documentation goes on to clarify matters. We are giving a fuel rebate but it is based on the definition coming from the Department. The officials in that Department probably understand more about this issue than staff in the Department of Finance, but I am sure the latter Department has checked it, and I am sure it consulted the Department of Transport, Tourism and Sport before drafting section 49 when the Bill was originally published.
The documentation goes on to discuss the hire or reward issue. Hire or reward haulage arises when one is paid for carrying someone else's goods. If a person only does work on his or her own account - that is, carries his or her own goods in his or her own vehicles, driven by himself or herself or his or her employees - he or sh e does not need a carrier's licence. The Minister of State can see the anomaly right away. If a business is transporting its own product, it does not require a licence. If it does not have a haulier's licence, it does not qualify for the fuel rebate, even though it is in the transport business. The word "not" is heavily underlined in bold in the documentation from the Department of Transport, Tourism and Sport. Many companies in the transport business do not have a road freight haulier's licence because the Department specifically says they do not need one if they are drawing their own goods. The second stage of this document lists a number of other people who are exempted and do not require a freight carrier's licence. The first page of the Department's documentation on the road haulier's licence lists a group of people who do not require a licence. Page 2 lists another group of people who are exempted from requiring a licence. Do not ask me the difference between the two, but the Department has listed them separately. I am using the Department's phraseology when I am speaking here today. It states that a number of categories of person carrying his or her own goods do not require a licence and then states the categories that are exempted, mainly in the agricultural area. It states that one is exempted from the requirement for a carrier's licence if one proposes to carry any of the following commodities in the State only: cattle, sheep, pigs or turf; milk to a creamery or a cream-separating station; milk containers to or from a creamery or cream-separating station; livestock by farmers for neighbours locally; and newly harvested wheat, oats or barley during the period 1 August to 30 November each year from a farm to a place of storage, assembly or processing. Again, the documentation underlines the fact that these categories are exempt. There seems to be an exemption from the requirement to have a road haulier's licence for people in the transport business who are collecting milk from farms, delivering it to creameries, delivering from creameries to processing plants, collecting grain and transporting animals from farms to marts and from farms to factories. There are quite a large group of people who are either not required to have a licence or exempted from having a licence, but because they do not have a licence, they cannot get this fuel rebate, even though they are as much a part of the transport business as everybody else. The purpose of this amendment is to include such persons in that category.
Many companies in the agricultural area have their own transport lorries and do not subcontract their haulage out to independent contractors. As a result, they do not have road haulage licences and, therefore, cannot avail of this rebate. I am asking the Minister to widen the definition of those eligible for this measure to include the two categories from the Department of Transport documentation to which I have just referred.
I welcome section 51 of the Bill. The legislation will force companies to contract out their transport. The tax rebate incentive can be granted to a subcontractor but not to a company carrying its own product. I accept that this is an unintended consequence. However, if two lorries are drawing from a factory, bakery or other business and one is owned by the company while the other is owned by a licensed haulier, it is most unfair that only one will be eligible for the fuel rebate. I ask that this be examined, which is the essence of the point I made here on Second Stage. People might find the wording of the amendment unusual but, having consulted with people in the industry, I found it was the only way we could come up with a formula of words to capture those who are exempt, primarily in the agricultural area. All of the products I have mentioned in the agricultural area are part of the food industry. Amendment No. 19 provides for the following people to be added to the list of those eligible: a person who holds a community licence within the meaning of Regulation (EC) No. 853/2004 of the European Parliament and of the Council, a business transporting its own goods, and a person who holds a community licence within the meaning of Regulation (EC) No. 1/2005 of the European Parliament and of the Council. Regulation (EC) No. 853/2004 lays down specific hygiene rules for those who are carrying foodstuffs. The people about whom I am talking are in the business of carrying foodstuffs. Regulation (EC) No. 1/2005 deals with the protection of animals during transport. Those two regulations deal with the carrying of foodstuffs such as milk and grain, as well as livestock. People involved in that industry who are carrying those commodities cannot operate without complying with those regulations, and the fuel rebate should be extended to them.
The amendment also includes a reference to businesses transporting their own goods. The Minister will be aware of this. I am conscious of representations made and delegations received in the Department of Finance recently. There are many large employers that are doing their best to keep employment here and that have their own fleets of lorries on the road. Let us be clear: we are talking about lorries, not taxis or small trucks or vans. I do not know about double-axles or vehicles weighing 7.5 tonnes. We are talking about big lorries. I am conscious of one company that employs 400 people, whose representatives met with the Department of Finance to make the case that because it is running its own trucks - as it is trying to keep jobs in-house, look after the people who work for them and keep them in jobs - it cannot avail of this fuel rebate, whereas if it had subcontracted its transport business, sold off its trucks and asked an external haulier to handle transport for it on a contract basis, the haulier would get the fuel rebate because, as a licensed haulier, it would meet the definition.
The real difficulty is that the Government now putting small to medium-sized businesses that transport their own goods at a disadvantage compared with other businesses that use registered hauliers to transport their goods. Some of the bigger companies will have contracted out their transport and will get all the benefit, while the smaller businesses that have tried to keep transport functions in-house are put at a financial disadvantage. I sincerely ask the Minister to take into account of those people who in normal circumstances would have had a road haulage licence and would have been eligible for this fuel rebate but do not have it solely because the Department of Transport, Tourism and Sport has said that because they carry their own goods instead of somebody's else's they do not need a licence, because the haulier's licence is only for those who carry goods for hire and because that Department specifically exempted agricultural businesses carrying food and livestock. This could be because, traditionally, there is much transport in that area and the Department possibly felt that to include all of those businesses as registered hauliers would have been an undue cost burden on that industry.
It is now to their disadvantage. They are not allowed to benefit because they do not have a road haulage licence. The Minister of State could respond by suggesting these companies should apply for road haulage licences in order that they would be eligible for the fuel rebate. I consider this to be fraudulent taxation practice and think Revenue would take a very dim view of it. It would not be a valid approach to tell people who up to now have not had a licence to apply for one in order to receive the tax rebate. I would not expect that to be part of the Minister of State's response. A person who may not understand the intricacies of taxation law and the complications it might cause for a company taking that advice might be tempted to do so. However, it would not stand up in a court of law if Revenue were to take action.
I did not receive a response on these specific issues when I raised them on Second Stage. I may have taken a lot of time to complete my contribution, but I do not think my points were ventilated to this extent before. I ask the Minister of State to consider the case I have made.
I support the amendments the merits of which have been articulated very well by Deputy Sean Fleming when speaking on the issues of agricultural contractors transporting either foodstuffs or livestock and businesses hauling their own goods. These groups should not be left at a competitive disadvantage. They have to meet certain licensing requirements relating to the transportation of foodstuffs and livestock set by the Department of Agriculture, Food and the Marine. Therefore, it should be fairly easy to ensure they are not exploited. It is a fact that fewer businesses are hauling their own goods and many of them are sub-contracting out this work. We should not be encouraging businesses to lay off drivers.
It is a pointless exercise applying for a licence, even if it is feasible to do so, which it may not be, and which they do not require. I do not know how such an application would be dealt with by the Department of Transport, Tourism and Sport, but we should not encourage people to go down that road. A very limited number of individuals are in these categories. Businesses in both categories are struggling, in particular, those involved in supplying the agricultural community. The CAP proposals and the proposals for a reduction in funding currently on the table will make matters far worse. A reduction in funding to farmers would have a direct impact on those supplying services to farmers.
Businesses hauling their own goods will be left with two legal choices, either to attempt to struggle on at a financial disadvantage compared to competing businesses which have sub-contracted out this work or else to lay off their drivers and incur the financial burden of redundancy payments to staff who would probably be recruited by the sub-contractor or set up as self-employed hauliers to haul the same goods. Many companies struggling to keep their heads above water will be faced with a significant financial burden. Cashflow difficulties are common. The amendments are, therefore, commendable and I hope the Minister of State can accept them.
I welcome and add my support to the amendments, as articulated by Deputy Sean Fleming, on behalf of Deputy Michael McGrath who crafted them. What we are trying to achieve is containment or a reduction in the costs of transport and haulage for industries and businesses in the agricultural, manufacturing and distribution sectors. We are not attempting to rebalance and change the competitive forces within existing industries. It is a matter of trying to introduce fairness into how the rebate scheme is applied. What has been put together would achieve its objective. In case there might be a temptation for haulage businesses to carry goods for others, I suggest it should be stated it only applies where they carry their own goods exclusively.
I am replying to amendment No. 19, although I am aware that a number of amendments have been grouped together.
Amendments Nos. 19 to 23, inclusive are related.
I signal that amendments Nos. 20 to 23, inclusive, will not be moved.
I thank the Deputy. A "qualifying transport operator" for the purposes of the repayments scheme, as Deputy Sean Fleming has outlined, is defined in subsection (1), by reference to the provisions of national and EU law, under which transport operators are required to be licensed. The proposed amendment No. 19 would add two EU regulations, as outlined by Deputy Sean Fleming, in the areas of food hygiene and livestock transport, to the provisions referred to. The amendment is not required because even though these regulations set down requirements for the transportation of animals and food products, they do not provide for transport licensing requirements. The transport licensing requirements, as they stand, are adequate and comprehensive for the purposes of the section.
The amendment also provides for the extension of the relief to own account operators. In introducing this rebate of excise duty on auto-diesel the Minister was seeking to reduce costs in respect of export-led growth for small businesses and to assist the tourism industry in the year of The Gathering. He is very conscious of the costs involved to the Exchequer and the extent to which such a scheme could be open to abuse. Accordingly, one means of facilitating compliance is to restrict access to the scheme to tax-compliant and licensed operators. In providing the relief it is not believed own account operators are, for the most part, in competition with hire and reward operators, as most are, by their nature, providing transport services for their own products. In this regard, while the Minister appreciates that companies have reduced overheads as far as possible, own account operators do have a greater facility to incorporate transport costs within the overall cost of the product.
As the Minister stated on Committee Stage, his main concern in this area is to ensure the risk of fraud around the rebate scheme is minimised and the need to hold an operator's licence from the Department of Transport, Tourism and Sport, or an equivalent licence recognised under EU law, is a significant element of the compliance regime in this regard.
I thank the Minister of State for providing that response, but it is not satisfactory. I do not believe it reflects commercial reality to say a company carrying its own goods is not in competition with registered hauliers. They are in competition. Every company has to look at its costs which will include the cost of transport. Whether a business transports its own goods or sub-contracts this work, it is a financial decision. Every company running a fleet must bear in mind what the cost would be in sub-contracting out the work to a registered haulier. Every business has to keep its costs down in order to be competitive. It will always consider the cost of using external hauliers. I, therefore, reject the premise that small businesses are not in competition when carrying their own goods compared to registered hauliers. The price comparison between the two is fundamental to every business. We want to keep own account operators rather than have the work contracted out to external hauliers, many of whom may not be based in Ireland.
I have never driven from Portlaoise to Dublin or vice versa during the past two years without encountering one of that company's trucks. The company in question is not Irish. Small local businesses which carry their own goods are in competition with some of the multinational transport companies, some of which are not based in the State.
I am disappointed by the Minister of State's reply. I accept that making the change at this stage was probably too much of an ask, particularly in view of the number of people involved. However, the point we are making is, in essence, extremely fair. There should have been a fuel rebate for those involved in the transport industry. The way in which the rebate, in the context of the definition, is restricted in the Bill has led to the exclusion of many who transport their own goods. These individuals may now be of the view that they have no option other than to let their employees go and hire in external contract hauliers to do work previously done internally.
How stands amendment No. 20?
I will not be moving the remaining amendments in this group because a number of Deputies, including my party's transport spokesperson, Deputy Timmy Dooley, and the Minister, Deputy Michael Noonan, engaged in a very good discussion on the matter on Committee Stage. As the issues were well ventilated, I will not be moving the amendments.
I move amendment No. 24:
In page 121, to delete lines 21 to 46 and in page 122, to delete lines 1 to 20.
This is the Minister of State's moment. He has put up the posters, distributed the leaflets and taken out the advertisements and can now announce that the €1 increase in the price of a bottle of wine is no more. He is sitting in the chair that matters and should not allow Fine Gael to bully him anymore. He can accept the amendment and live up to the commitment the Labour Party gave to the electorate just two years ago. That is the sum total of what I have to say. The Minister of State knows that it was wrong to increase the cost of a bottle of wine by €1. The Labour Party led the campaign on this matter and I ask him to respond appropriately.
I notice the Deputy has offered no suggestions as to how we might circumvent the greatest difficulty in this regard, namely, the fact that the expected yield from the increases in question is €180 million in a full year. If there is a serious proposal to the effect that these increases should be removed, there would have to be at least some marginal effort on the part of the Deputy - the House and the Minister would ultimately have to become involved - to explain how the resulting hole of €180 million in our finances could be filled. As the House is aware, section 58 confirms the increases in the rates of alcohol products tax announced in the budget. When VAT is included, these increases amount to 10 cent on a pint of beer or cider, 10 cent on a measure of spirits and €1 on a bottle of wine, with pro rata increases in the case of other products. It is not proposed to accept the amendment.
Is this, perhaps, the NAMA wine lake?
The Minister of State is well aware that there is a raft of alternative proposals and measures which could bring in similar amounts of money. If we are to believe the media, his party has argued for the introduction of some of these measures in order to bring in additional revenue.
I was being genuine when I made my opening comments. What is being done is simply wrong. I refer, in particular, to the €1 increase in the price of a bottle of wine. That is a massive increase which will affect those who have been hit really hard up to now. The increase is also disproportionate. For someone with a large income who can afford to spend €20 or €30 on a bottle of wine, an increase of €1 does not constitute a major burden. However, for a person who likes to drink wine on a special occasion and who can afford to spend €7 to €10 on a bottle - as, in the light of the pressures they are under, is the case for the majority of people in the country - this is a 12% increase. That is just wrong and I cannot support the measure. This matter has been well ventilated, but I still find the Minister of State's defence of the €1 increase in the price of a bottle of wine quite amusing.
In technical terms, can vinegar be categorised as wine?
Notwithstanding any election promise, I do not have a major problem with the price of alcohol being increased. I hope further proposals in this regard will be forthcoming from the Minister in the near future. Such proposals are very much overdue. Will the Minister of State address the issue of claims made for VAT rebates in respect of below cost sales of alcohol? In effect, the State, through the Department of Finance, is subsidising the low cost of alcohol. That low cost is giving rise to so much trouble in society. It should not be beyond the wit of the Department to bring forward proposals, whereby the big multiples, in particular, could be prevented from claiming VAT rebates in respect of below cost sales of alcohol. I understand the grounds on which VAT rebates are allowed in cases where, for various market reasons, products are being sold below cost. However, the multiples have made a conscious decision to sell below cost - this is a marketing tool - and they should not be allowed to claim rebates in respect of this. The State should certainly not be subsidising the sale of cheap alcohol through VAT rebates. Will the Minister of State raise this matter with the Department and request that the serious loophole to which I refer and which is contributing to much of the damage being done in society be closed off?
We all agree that the below cost sale of alcohol must be addressed. The challenge we face is how to go about addressing it. I ask the Minister of State, particularly in the context of his portfolio in the Department of Health, to consider a proposal made by the vintners before Christmas in respect of the introduction of a lid tax. That proposal has a great deal of merit. The Department of Finance has indicated that because of EU law, it is not possible to proceed with a lid tax, but I do not believe that is the case. Such a tax could allow us to circumvent the challenges we face in the below cost sale of alcohol. It could also allow us to circumvent some of the challenges relating to minimum pricing, while bringing in additional revenue for the Exchequer. There is huge merit in the proposal to which I refer, about which I spoke on the night the budget was introduced. I am disappointed that provision has not been made in this regard. I would like a detailed justification to be provided as to why the proposal was not progressed. It may not be possible for such a justification to be provided now, but I would like the officials from the Department to indicate at some point exactly where the challenges and difficulties relating to the proposal lie.
I am very aware of the VAT issue to which Deputy Róisín Shortall refers. I suspect that she and I are quite close in our views on the matter. I am very interested in pursuing this issue. I am standing in for the Minister for Finance, but, in my capacity as Minister of State at the Department of Health, I assure the Deputy and the House that I am aware of and propose to pursue this important and serious issue.
In the context of Deputy Denis Naughten's point, I am advised that the Minister for Finance met those who brought forward the proposal on the introduction of a lid tax. The matter was considered and I understand significant legal obstacles came to light. I do not believe the door is entirely closed on proposals of this nature. It is an interesting proposal, but it is probably not workable in its current form. An opportunity to re-examine it may arise in the future.
The officials might come back to me with a briefing note on it in terms of where the barriers are.
Does the proposer of the amendment wish to speak again?
Amendment No. 25 is in the name of Deputies Michael McGrath and Pease Doherty.
I move amendment No. 25:
In page 122, to delete lines 36 to 38, to delete page 123 and in page 124, to delete lines 1 to 30.
This issue was debated on Committee Stage, but it is so important it should be raised on the floor of the House. It involves extending the carbon tax to solid fuels. The issue of major concern relates to the purchase of coal, in particular, but also briquettes. As the Minister is well aware, this is a poverty related issue. It is a fact that the poorest families in Ireland, even if they are fortunate enough to have central heating, cannot afford to turn it on. Increasingly, families are turning to solid fuel and this increase which is being phased in from 1 May onwards to May 2014 will eventually add about €2.50 to the price of a bag of coal. That is a significant increase which, when multiplied by the number of bags of coal families use over the course of a year, represents a major imposition. The truth is that there are many people who cannot afford even to light a fire.
During the debate on Committee Stage the Minister made the point that there were environmental issues to be considered and that this was part of an overall strategy. I care about the environment as much as the next person, but I care even more about an elderly person at home tonight - it is a very cold night - who may not have the money to light a fire. The fuel allowance has been restricted in recent years and people are feeling the effect. I know the Minister of State does not have the authority to reverse this decision in the House tonight, but I felt the need to highlight again that it was the wrong decision. It is cruel and will affect the very poorest.
We discussed the issue of fuel poverty on Committee Stage. I agree with Deputy Michael McGrath that this is a poverty issue. Some people will not be impacted on by this increase in the price of a bag of coal or a bale of briquettes, but others will. They do not have a range of options such as being able to fill their tank with oil and turn on the heating. As I said at the finance committee, even those who have central heating - not every house does - may not have thermostat controls to allow them to turn off the radiators in different rooms. They cannot afford to keep all rooms warm or even at a reasonable temperature. That is what it has come down to for many individuals.
In recent days I have been talking to people in my constituency and others. I was on the campaign trail with Darren O'Rourke yesterday in Meath East where I advised a person to apply for the winter fuel allowance rebate from Britain as a result of the European Court of Justice ruling that anybody in receipt of a British pension, including a partial pension, could avail of that allowance, which is between £100 and £300, as long as they submitted the application before the end of March. I am aware there is anger in Britain that the Irish can keep their homes warm as a result of funding from its Exchequer, as well as people in France, Spain and elsewhere, but that is the ruling and of what people can avail. It has come as a huge relief to people because keeping their homes warm this winter is a source of serious concern for them. We have a fuel allowance for people in receipt of social welfare payments, but in Britain there is just one simple payment in the winter period.
If we take the example of somebody who heats his or her house for just half the year using two bags of coal per week, the increase on a bag of coal as a result of this measure will be €2.50, or an extra €5 per week for the person concerned. That amounts to €130 for half the year. We should not forget that they may have to heat their home during the spring and summer. This means that if they had a budget for heating their house last year and only have the same budget this year, they will have to go without heat for four and a half weeks. That is the impact of this measure. As I said, some people will be able to absorb it without blinking an eye, but others will have to do with less heat. That is the reality.
This is not about changing behaviour because people have cut their expenses to the bone; they are rationing the coal they put on the fire and cannot afford to install a different type of heating system in their homes. There are supports available from the State, some of which are very good in terms of the grant required to carry out the work, but one has to spend a substantial amount of money before one can avail of the grant and that is beyond their means.
This tax is wrong and was not poverty proofed. It would have been common sense and the right thing to do to poverty proof this measure. An impact assessment should have been made to determine how this measure would contribute to fuel poverty and the impact on people's health and well-being. At a very minimum, there should have been compensatory measures to deal with that part of it. This is dressed up as a carbon tax that will be good for the environment and so on, but it is a serious issue because when the price of fuel and the cost of heating one's home is increased, fuel poverty kicks in. This is a live issue. Those of us in this House may not understand it with the salaries we are on, but it is an issue that affects people across our communities the length and breadth of the State and this measure will exacerbate it.
I support the amendment from a different perspective. It would be a tax incentive to encourage people who, unfortunately, have turf banks on designated bogs, mainly in the west, to go out and cut them this year. The Government is stating that if they go out and cut turf on a turf bank, they will not pay the tax, but if they buy a bale of briquettes, they will pay the increased rate of VAT. It has been telling people not to cut turf and entire regions of the country were sterilised because of this, which was a stupid move in the first place. There was a lack of joined-up thinking in that regard. Now, through the Finance Bill, we are saying that if they comply with the law and purchase solid fuel, as they are being asked to do, we will tax them. What message will this send in my constituency and every other affected by this measure?
In my part of the country up to 50% of some communities rely solely on solid fuel as their only source of heat. On a county basis, 37% of homes in County Offaly rely on solid fuel alone. The figure is slightly less than that in my constituency, but it is a significant proportion of the population. There is a direct connection between a large proportion of the population using solid fuel and access to turf banks. Sadly, the National Parks and Wildlife Service has decided to designate the many parts of the country where turf banks are located and sterilise these bogs. What is going on does not make sense and I ask the Government to reassess this measure.
On the one hand, we ask people not to cut turf and say we will pay compensation or provide alternative sources of fuel. In some cases, people are still arguing with the Department to have a decision made. On the other, we are introducing a tax they will have to pay when they comply with the law, regardless of whether it is an ass. It does not make sense and I ask the Government to reconsider.
Like other Members, I come across people who have a stark choice to make between heating their homes or putting food on the table. It is a choice not everybody faces, but it very stark for those who do. The issue of fuel poverty must be examined when proposals like this are brought forward. I accept the point that in some parts of the country people do not have a choice about the type of fuel they use, but where they do, it is often the case that they choose solid fuel because they can control their expenditure. If a person switches on a button, he or she cannot see where the money is being eaten up. Elderly people choose solid fuel for that reason. One has to ask if there is any cost saving in circumstances in which being cold in one's home brings on medical problems. Where there is a saving on one side, there may be a cost on the other. A lot of pain is associated with this issue for some groups. Poverty proofing of the measure is, therefore, essential.
The measure is not a carbon tax, it is a general tax. If it was a real carbon tax, the proceeds would be ring-fenced and set aside for retrofit programmes and the generation of renewable energy sources. As they are not ring-fenced, it is impossible to point to where the money will be spent. There is a great deal of resentment from people who would otherwise have goodwill towards a tax that would provide supports for people to increase the level of insulation in their homes. The Minister for Communications, Energy and Natural Resources told me in reply to a parliamentary question that the number of people availing of the retrofit scheme had all but collapsed. That is because supports have been removed. Let us not call this a carbon tax when it is a general tax. The Government will lose any goodwill there is towards measures which change behaviour if people cannot see a relationship between the tax charged and the benefits on the other side.
I support the amendment. Whatever about the principle of a carbon tax, this provision impacts disproportionately on poor people and those on low incomes. The application of the tax as a blunt instrument means it takes no account of ability to pay. We already have a significant fuel poverty problem. If the Government was serious about the issue and took any account of ability to pay, it would have introduced compensating measures on the welfare side. Unfortunately, it has not done so. Like so many other provisions in the recent budget and in keeping with the main thrust of budgetary policy in recent times, it is an across the board measure. Significant and growing numbers of people are under immense presssure to keep body and soul together in current circumstances. They cannot afford the extra burden this measure imposes. There will be an increased problem of fuel poverty and more and more people will not have sufficient heat in their homes, with the attendant consequences for health and premature deaths. It is completely unacceptable that this blunt instrument will be used in this way.
In recent years there was a commitment to poverty eradication and the equality proofing of new taxation measures. I ask the officials, through the Minister of State, Deputy Alex White, if there has been any such proofing on a measure which will have a significant impact on people who simply cannot afford any more taxes and cannot, as it stands, afford to heat their homes. It will also impose significant additional costs on organisations such as the Society of St. Vincent de Paul which is already under enormous pressure to help the growing numbers of people who do not have the wherewithal to survive with basic dignity. Has any ruler been run over the measure to gauge its impact from an equality or poverty eradication point of view? I appeal to the Minister of State, given his ministerial role in the Department of Health, to reconsider the measure which will have very negative impacts on a group of people who are already under severe pressure.
I contribute to add emphasis to some of the points raised. This tax will hit larger numbers of poorer, older and vulnerable persons. Aside from the heat generated by an open fire, there is the companionship and psychological benefits it provides. The hearth was the heart of a house. In these times of severe financial strain and difficulty, it is one small corner of cheer and warmth in a house. A tax at the rate suggested on such an important element of the home is something we should rethink. I would hate this tax to become the thoughtless tax.
The section the Deputies seek to have deleted makes a number of changes in preparation for the introduction of a solid fuel carbon tax from 1 May 2013. The section provides for the application of the carbon tax to solid fuels as announced in the budget. It is the last element outstanding in the application of the carbon tax. To alleviate the impact on lower income households, the tax will be applied in two phases - €10 per tonne of CO2 emitted from 1 May 2013 - therefore, it will not take effect until next winter - and a further €10 per tonne of CO2 emitted from 1 May 2014. This brings the carbon tax on solid fuels into line with the tax on all other fossil fuels.
A number of further amendments will be required to clarify the scope of the tax. Any person who first supplies a solid fuel product in the State is an accountable person for the purposes of liability and payment of the tax and any such person must register with the Revenue Commissioners. Where solid fuel is supplied as a raw material for the manufacture of a solid fuel product, the tax will be charged on the first supply of the manufactured product in the State. The section before us comprises part of the revenue raising element of budget 2013 and, accordingly, the proposed amendment must be rejected.
I heard the point made about whether this was truly a carbon tax. I respectfully say to the House that it is a carbon tax and that it is about sending a price signal that there is a cost associated with the consumption of fossil fuels to the detriment of the environment. Solid fuels have the highest carbon content of all fossil fuels. As they are considered the dirtiest fuels, it is important from an environmental impact perspective that we tax them.
Deputy Róisín Shortall asked about the extent to which these measures are assessed. I assure her and the House that taxation measures such as this are very carefully considered by the tax strategy group. The impact of taxes and tax changes is very carefully considered by the Government in the context of budgetary measures.
It is important to point out that the fuel allowance payment under the national fuel scheme to assist with home heating, payable to people in receipt of long-term social welfare payments, will continue to be made at €20 per household per week for a 26 week period from October to April. The budget for the fuel allowance in 2013 is estimated at €210 million. Since 2000 over €115 million has been paid in grant support towards 270,000 upgrade measures in 110,000 homes under the better energy, warmer homes scheme. It is acknowledged that the carbon tax on solid fuels will have an impact on households. That is why the Government chose to wait until after the winter period to introduce the tax and introduce it on a phased basis across this year and next. This is a carbon tax which has been directed at a particular end, but it has not been done in a way that is oblivious to the impact on families, particularly, low income families.
I understand why the Government decided to wait until after the winter to introduce the measure. When is winter in this country is the subject of another debate. At the same time as the tax is being introduced which will affect one third of households in my county and one in four in counties such as Galway and Leitrim, the Government is trying to ensure compliance with the law on turf cutting. The turf cutting season starts at the same time as the tax is being introduced. This displays a lack of joined-up thinking on the approach being taken on the issue of turf cutting and the impact of fuel poverty. This applies particularly in the parts of the country in which people are dependent on solid fuel. A substantial cohort of the population faces this additional tax. That fuel allowance is not increasing is one aspect, but many families are not eligible for it. They are struggling to meet their fuel bills and may not have been able to avail of the energy efficiency incentives. This is putting the cart before the horse.
I understand this measure has been poverty proofed, as indicated by the Minister of State. I ask him to arrange to make available to Opposition Members the relevant data, including the number of people on which this tax will have a negative impact. I would appreciate it if the Minister of State gave an undertaking to make the material available.
Does the Minister of State accept that there is a significant problem with regard to fuel poverty? Most of the groups working in the area claim it is a significant problem. Does the Minister of State accept this point? Does he accept that, by introducing additional taxes, the problems will be exacerbated? If it does not happen this winter, it will happen next winter. The number of people grappling with the problem of fuel poverty will increase. If the Minister of State accepts this, will he give an undertaking to address the point? Poverty eradication is a whole of government issue. Will the Minister of State give an undertaking to raise this point with the Minister for Social Protection with a view to introducing a counterbalancing measure prior to next winter?
I have nothing to add.
Therefore, there are no answers.
I move amendment No. 26:
In page 125, to delete lines 15 to 51.
I appreciate that the Minister of State is filling in for the Minister for Finance. I had hoped the Minister would be in the Chamber, but I understand he cannot be here.
The figures for car sales came out last month. The sector is in serious difficulty, as the figures show. The amendment concerns increases in VRT imposed under the relevant section. The country is in trouble as is reflected in the figures for the sector. This is an unfair burden to place on people. I teased out this point in detail with the Minister who suggested he was open to examining some proposals. That is the reason I had hoped he would be present in the Chamber and I tabled the amendment to ventilate the issue. The increase in VRT is not the right thing to do, as motorists are being screwed left, right and centre on transport issues.
I come from County Donegal where we do not have the option of jumping on a Luas tram. There is not one inch of rail in the county and the public service busses are something we see on television. People must, therefore, jump into their cars. After the increases in fuel prices which have happened consistently in recent years, VAT and motor tax as a result of budgetary measures, we now see an increase in VRT. There must be some relief and a reprieve.
The Deputy mentioned the risk of penalising families required to purchase family sized cars on Committee Stage. He believes such vehicles are, in the main, in the higher tax bands. The Minister has examined the matter further since Committee Stage and discovered a range of vehicles, including hybrids for which there are tax concessions, that satisfy the family requirement and are in the lower CO2 bands.
Try buying them.
I hope that helps Deputy Pearse Doherty. The issue he raised on Committee Stage has been examined and an answer has been provided.
Does the Minister of State have the price tag?
I do not think the Minister for Finance is in that business.
I move amendment No. 27:
In page 141, to delete lines 20 to 43, to delete page 142 and in page 143, to delete lines 1 to 23.
This amendment concerns the health insurance levy. Since publication of the Finance Bill one month ago, 6,000 people have left the private health insurance sector which is haemorrhaging policy holders because of the spiralling cost of health insurance. Something must be done urgently to keep younger, healthier people within the sector. My proposal concerns lifetime community rating, a concept which has been on the Statute Book since 2001 without anything being done to make it happen.
In this respect I am specifically concerned that people would shop around for health insurance. We are told by the regulator that they are being encouraged to do so. The difficulty is that the legislation, as worded, will penalise anyone who shops around after renewing his or her health insurance policy. Many of the health insurance companies have offers of discounts or free cover for children at different times of the year. There is an advantage for health insurance subscribers, especially if they pay their premium on a monthly basis, in switching from one provider to another, but based on the legislation there will be an in-built disincentive to switch health insurance providers because subscribers will be liable to pay the levy on a second occasion. We sought clarification on this issue on Committee Stage and the Minister said this would not happen. I seek clarification in the House that no subscriber will have to pay the levy a second time within the year covered by his or her policy as opposed to wa calendar year. If a subscriber renews his or her policy on 1 April, I seek clarification that in the following 12 months the subscriber will not have to pay the levy a second time. My understanding is that while the Department of Finance has given a commitment that it will issue guidelines to the Revenue Commissioners, the statute will have to be changed because, as it stands, it is flawed. Why was the statute not changed on Report Stage to correct the anomaly in the system, rather than leaving it for 12 months during which perhaps a problem might arise resulting in subscribers having to retain uneconomic health insurance policies and being forced into a situation where they would have to cancel their policy rather than switch provider?
Most of us wish people did not have to feel there was a need to have health insurance. However, with the queues for treatment in the health system, many believe there is a requirement to have health insurance. I believe in the principle of community rating and that cross-generation solidarity is required in terms of health insurance premiums. Was any calculation made of the fallout from this proposal in terms of the number who were likely to fall back on the public heath system and the pressure this would place on the system, or of the ratio of young people who would withdraw from the system as people reviewed the expenses on which they could cut backs? What analysis, if any, was made of the pressure this would place on the public system while waiting for a more general system to be put in place?
Deputy Denis Naughten's amendment proposes the deletion of section 83 which provides for the new rates of health insurance levy to pay for risk equalisation credits which were introduced under the Health Insurance (Amendment) Act 2012. These credits replace the previous system of age-related income tax credits which were in place from 2009 to 2012 and which were temporary arrangements. If the rates of health insurance levy provided for in the section were not in place, sufficient money would not be available to fund the risk equalisation credits. That is the reason it is essential that this be done. On that basis, the Minister cannot accept the amendment proposed by the Deputy to delete section 83. However, I propose to deal more generally with the issue of community rating and risk equalisation.
Under the principle of community rating which all sides of the Oireachtas supported when the Bill was introduced - we dealt with it as recently as last week and I have forgotten precisely the stage it is at, but it is at an advanced stage and there is wide support for it in the House - everyone is charged, under such a scheme, the same premium for a particular health insurance plan, irrespective of age, gender and current or likely future state of his or her health. Community rating, therefore, means that the level of risk a particular consumer poses to an insurer does not directly affect the premium paid.
The pricing of risk across the community of insured persons clearly requires robust mechanisms to share costs when there are several insurance companies in the market. The standard transfer mechanism to support community rating is called risk equalisation. Perhaps we might return to the more general background to risk equalisation later in the debate. It is an indispensable requirement in the overall scheme for the funding of health services that we have risk equalisation. The scheme being put in place by the legislation achieves this and I regard it as essential in respect of where we will take health services and their funding. There are many issues we are addressing and that will be required to be addressed in the future, but it seems that risk equalisation and the necessity for it is a settled issue politically across the board. It is an indispensable provision in terms of where we are headed and where we need to go.
In 2012 the age-related income tax credit for insured persons aged 60 years or older was increased significantly in order to keep down the cost of health insurance for older people. Without this support, health insurers would have had a strong financial incentive to segment the market by offering policies targeted at young people to the disadvantage of older customers.
With effect from the end of March 2013, the risk equalisation credits will increase substantially over 2012 levels for higher risk groups, particularly men aged 70 years and above. For example, the risk equalisation credit for a 75 year old male with advanced cover has increased by €400, or 20%, from €2,025 in 2012 to €2,425 in 2013. The risk equalisation credit for an 85 year old male has increased even more.
Each year the Minister for Health makes a recommendation to the Minister for Finance in regard to the stamp duty required to support the scheme. The risk equalisation system is designed to be self-financing. The stamp duty receipts are set at a level to fund the risk equalisation credits. The level of stamp duty required, therefore, is reflective of a number of factors, including market ageing and claims inflation. Claims inflation across the health insurance industry impacts on the cost of increasing risk equalisation credits for older and less healthy insured persons.
The levy increase, effective from 31 March, represents an increase on a non-advanced product of €5 for a child or an adult. In the case of an advanced product, the increase is €25 in the case of a child and €65 in the case of an adult. "Non-advanced cover" means, broadly speaking, health insurance policies for public hospital cover only. "Advanced cover" means policies covering both public and private hospitals. The full definitions of both terms are provided in the Health Insurance (Amendment) Act 2012.
I am conscious of the time remaining, but in fairness, I should deal with the issue Deputy Denis Naughten raised as it is specific.
It is fundamental.
I can indicate to the Deputy and the House that my information is that where a person moves from one operator to another, a second levy is chargeable. This issue relates to the payment of levies by the insurance companies, not the insured person, in order to enable the community rating system to work. It is important that this be clarified for the House.
Are we proposing to conclude the debate now?
No, but I am required to move to Private Members' business at 7.30 p.m.
The Minister for Finance has agreed rates with the Minister for Health which seek to strike a balance between supporting older and less health people and sustaining the private health insurance market. The rates set must also take account of the ageing market profile and claims inflation. I am pleased to note in this regard that the Health Insurance Consultative Forum, having been established by the Minister for Health, has been tasked with driving savings in the market, the effect of which should be to minimise the need for increases in premiums. If the risk equalisation rates are set too low, the risk equalisation scheme will be ineffective and result in higher premiums for older and less healthy members. As I have indicated, as that would break community rating, we must prevent this from occurring. There is no increase in costs in the market. The levy is recycled into risk equalisation credits for those who need support in the overall context and in the spirit of community rating.