Finance (No. 2) Bill 2013: Second Stage

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

As I bring this Finance (No. 2) Bill 2013 to the Dáil it is perhaps appropriate to remind ourselves of some of the objectives of the recent budget. Looking first at the economic backdrop against which the budget was set, although we experienced a difficult first quarter, the Irish economy returned to growth in the second quarter and more recent figures such as purchasing managers’ indices provide room for optimism for the remainder of this year. On foot of these developments my Department is projecting a pick-up in growth over the second half of the year, with growth set to average 0.2% for 2013 as a whole. Looking to next year, a more supportive external environment and a continuation of the recent positive domestic developments should allow for more robust growth, with economic output expected to grow by 2% in the year.

The impact of the patent cliff which has weighed on goods exports this year should also ease in 2014, supporting a return to export growth. Domestic demand is expected to pick up next year and once again contribute positively to GDP in the year. Continued improvement in the labour market should act to boost household disposable incomes and, in turn, drive personal consumption, while the stabilisation in domestic activity should support continued improvement in investment spending.

Turning to the fiscal side, budget 2014 targeted a general Government deficit of 4.8% of GDP. While all targets under the excessive deficit procedure have been met to date, 2014 will be the first year in which we will be actively seeking to over-achieve the target. This over-achievement will form a prudent buffer to allow for any possible external shock to the economy and reassure the markets of Ireland’s steadfast commitment to restoring the sustainability of the public finances.

The year 2014 will also mark the first time since the crisis began that Ireland will have achieved a small primary surplus. This means that, excluding debt service costs, revenues are sufficient to meet expenditures. This is a key metric in assessing the underlying sustainability of Ireland’s public finances and a necessary first step towards lowering our debt levels. With over 90% of the required consolidation achieved, the deficit continues to track towards less than 3% in 2015. Furthermore, with continuing growth in employment and the wider economy, we can have cause for optimism as we approach our exit from the EU-IMF programme of financial assistance.

Turning to the Finance Bill, I would like to make a few points. As I said in my Budget Statement, while the Government has in the past two and a half years focused on implementing and ultimately exiting the EU-IMF programme, we have also been following a parallel programme to support businesses, create jobs and get people back to work. I am under no illusion that considerable work remains in getting the elevated number of unemployed back to work. However, I am pleased by the response of the private sector to a number of the budget measures designed to support job creation.

First, the positive response of the construction industry to the home renovation incentive, HRI, scheme is welcome. It is especially welcome to see contractors seeking to brand their services under the home renovation incentive label. I am also pleased by the response of the banks to the HRI, with both Bank of Ireland and Permanent TSB announcing that they have established funds to allow their customers to either extend their mortgages or take a personal loan to finance work under the HRI scheme. It is positive to see banks actively seeking to provide finance for their customers to allow them to invest in their homes.

I am also heartened by the response of Ryanair to the reduction in the travel tax to zero, which has seen it commit to bringing an additional 1 million extra passengers to Ireland, with 11 new routes already announced for Knock and Shannon airports. Employment growth in the hospitality sector was an objective that the Government targeted from the beginning of our time in office. The measures in the jobs initiative proved to be a real success and I am sure that the travel tax measure will be positive for job creation throughout the country.

I would like to highlight two particular measures contained in the Bill which have seen changes since their announcement in the budget. First, the HRI, to which I have referred, is being introduced. Tax relief will be granted at a rate of 13.5% on qualifying expenditure on home renovation up to a maximum of €30,000, exclusive of VAT. The minimum expenditure must be €5,000, exclusive of VAT. The scheme will run from 25 October 2013 until 31 December 2015. Works carried out in 2013 will be deemed to have taken place in 2014 and credit will be awarded in 2015 and 2016.

Second, the start-your-own business incentive will provide an exemption from income tax up to a maximum of €40,000 per annum for a period of two years for individuals who set up a qualifying, unincorporated business. In my Budget Statement I said the individual must have been unemployed for a period of at least 15 months prior to establishing the business. However, on further consideration I have decided to reduce the qualifying period of unemployment to 12 months. This will be dealt with in an amendment on Committee Stage.

I would like to highlight another critical aspect of the Bill, that is, the provisions relating to corporation tax. As I said on budget day, Ireland’s corporation tax policy is based on the 3 Rs – rate, reputation and regime. Our policy on the rate is clear, but it is no harm to reiterate the Government’s commitment to the 12.5% corporation tax rate. A country’s tax reputation is also important in attracting foreign direct investment. That is why the Bill will amend Ireland’s company tax residence rules to ensure an Irish-registered company cannot be stateless in terms of its place of tax residency. The competitiveness of Ireland’s broader corporate tax regime is also important and the Bill will implement the recommendations of the review of the research and development tax credit published on budget day.

I will take Members through the Bill and describe the main provisions contained therein. Deputies will appreciate that in the time available to me I will not be able to describe every section in detail. Sections to which I make no reference mainly cover minor or technical issues.

Section 2 ensures grants paid to employers who are participating in the JobsPlus scheme, administered by the Department of Social Protection, will not be subject to tax. Section 3 provides that tax relief for acquiring an interest in a partnership will be withdrawn on a phased basis over four years. Relief will not be allowed for new loans taken out after 15 October 2013. The relief will be reduced by 25% annually until its eventual total abolition in 2017. Existing claimants will retain the relief on a reducing rate basis until 1 January 2017.

Section 4 provides for the budget day announcement of the abolition of top slicing relief for ex gratia or discretionary lump sums paid on or after 1 January 2014. There has been some confusion about this measure since it was announced and I would like to make it clear to the House that it will have no impact on lump sums payable from occupational pension schemes. The existing exemptions for discretionary lump sums are also being retained. It is only the concessionary rate of tax that may apply to any taxable element of such lump sums that is being abolished.

Sections 5 and 6 deal respectively with the home renovation incentive and the start-your-own business measure I have already described.

I announced the abolition of the one parent-family tax credit and its replacement with a new single parent child carer credit in the budget and section 7 of the Bill provides for this change. Since the announcement was made, I have listened carefully to the views of Deputies and will be bringing forward an amendment to this section on Committee Stage which will allow the credit to be used by a non-primary carer in situations where the primary carer has no tax liability.

Section 8 provides for the budget day announcement of the new ceilings of €1,000 per adult and €500 per child on the amount of medical insurance premiums that will qualify for tax relief. I will be bringing forward an amendment on Committee Stage to provide that, where a student is being charged a full adult premium, the adult ceiling for relief will apply. The current scheme of relief requires a defined relationship between the policyholder and the individual insured in order for the tax relief to apply to premiums paid on behalf of others. I have decided to remove this requirement through an amendment on Committee Stage.

Section 10 provides for an exemption from income tax for the annual allowance, intended to cover out-of-pocket expenses paid to reserve members of the Garda Síochána. In section 14 an anti-avoidance measure is being introduced to prevent individuals who have received a refund of fees from the third level institution from claiming the relief having withdrawn from the course at the institution.

Section 15 extends the retirement relief for certain sports persons so as to allow it in cases where a sports person retires in another EU or EFTA country. This extension is required to address European Commission concerns that the existing relief was not consistent with the free movement of workers.

Section 16 provides that the employment and investment incentive will be removed from the high earners restriction for a period of three years in the hope it will stimulate investment in SMEs.

Also, capital allowances for plant and machinery used in manufacturing trades that are claimed by passive investors in a leasing trade will be included as a specified relief for the purposes of the high earners' restriction.

Section 18 contains a technical amendment to ensure that tax relief on spouses' and children's contributions deducted from the retirement lump sums of public servants who retired under the incentivised scheme of early retirement operates as intended. This section also relates to section 782A of the Taxes Consolidation Act 1997 and strengthens the override provision introduced to enable access to additional voluntary contributions without the need for changes to be made to pension scheme rules or trust deeds. Finally, this section provides for the reduction of the maximum allowable pension fund on retirement for tax purposes, the standard fund threshold, SFT, from €2.3 million to €2 million from 1 January 2014, with protection arrangements for individuals with pension rights valued above the reduced threshold at that date. In addition, the current single valuation factor of 20 used to place a value on defined benefit pension rights for SFT purposes is replaced from 1 January 2014 with a range of higher valuation factors that vary with the age at which the pension rights are drawn down.

Section 21 will increase the amount of expenditure eligible for the research and development tax credit without reference to the 2003 base year from €200,000 to €300,000. This section will also increase the limit on the amount of expenditure on research and development outsourced to third parties from 10% to 15% of the total amount of expenditure on research and development qualifying for the credit in a given year. It also amends the key employee element of the research and development tax credit, in conjunction with section 13 of the Bill, to ensure that the company, not the individual employee, will be liable for any claw-back of relief where a company makes an incorrect claim for the tax credit.

Section 23 makes a number of changes to deposit interest retention tax, DIRT. The main change is the increase of the rate to 41% with effect from 1 January 2014. The section brings dividends paid or credited to regular share accounts of credit unions within the deposit interest retention tax regime from 1 January 2014. The previous exemption from DIRT for certain interest paid on special term accounts offered by banks and building societies and special term share accounts offered by credit unions has been discontinued as and from budget night, 15 October 2013. Such accounts opened before budget day will continue to have the exemption for the term of the account. The exemption which previously applied to these accounts was on annual interest up to €480 for medium-term accounts, which had a minimum term of three years, and €635 annually for long-term accounts, which had a minimum term of five years. On budget night, it was incorrectly stated that the exemption limits applied for the full term of the account rather than annually, and I wish to correct any misunderstanding that may have been caused by that error. The section also provides for a number of consequential amendments to Part 8 of the Taxes Consolidation Act 1997.

Section 24 gives effect to the budget day announcement extending the definition of "eligible individual" for section 481 film relief, to include non-EU talent. This is subject to EU state-aid approval and a commencement order.

Section 25 provides for the withholding tax that will apply to payments made by companies qualifying for film relief under section 481 of the Taxes Consolidation Act 1997, to performing artists who are resident outside of EU and EEA member states.

Section 28 makes three separate amendments to provisions relating to the granting of double tax relief for foreign tax in TCA Schedule 24.

Section 29 amends sections 37 and 607 of the Taxes Consolidation Act 1997. These sections provide that interest on securities issued by certain commercial semi-State companies may be paid without deduction of tax, and that such securities will not be chargeable assets for capital gains tax purposes. The section adds Irish Water to the list of bodies which benefit from such exemptions.

Section 30 introduces a single rate of exit tax of 41%. This applies to payments and deemed payments from life assurance policies and investment funds, in place of existing rates of 33% and 36%. The higher rates applying to investments in personal portfolio life policies and personal portfolio investment undertakings have also been increased. The rate changes are to be introduced with effect from 1 January 2014.

Section 31 of the Bill extends the scope of the living city initiative to include residential properties, in certain designated areas, constructed up to and including 1914. There are also a number of technical amendments. This initiative is subject to EU state-aid approval and a commencement order. I announced in budget 2014 that the initiative would be extended to certain designated areas in the cities of Cork, Galway, Kilkenny and Dublin. The areas to be designated have not yet been decided. This will be done in conjunction with the relevant local authorities and other Government agencies.

Section 33 provides for the removal of the 50% restriction on the amount of prior year trading losses a NAMA participating institution can set off against trading profits. This should protect the value of deferred tax assets at the banks, improving capital ratios under the new Basel III rules and enhancing the valuation of the State's equity holdings in AIB and Bank of Ireland.

In light of recent rulings from the Court of Justice of the European Union, section 35 provides for an option to defer payment of exit tax in cases where a liability arises following migration of a company's residence to another EU or EEA member state.

Section 38 makes the necessary amendment to the company tax residence rules contained in section 23A of the Taxes Consolidation Act 1997 to ensure that an Irish-registered company cannot be stateless in terms of its place of tax residency.

Section 39 of the Bill amends section 29 of the Taxes Consolidation Act 1997, which sets out the persons chargeable to capital gains tax and the extent of the charge. Individuals who are resident or ordinarily resident but not domiciled in the State are only taxed on non-Irish chargeable gains in respect of amounts derived from those gains that are remitted to the State. This amendment clarifies changes made to the provision in Finance Act 2013 for chargeable gains made on or after 24 October 2013.

Section 40 restricts the extent of losses that may be claimed for capital gains tax purposes in situations where a loan or part of a loan relating to the purchase of the disposed asset has been forgiven or written off by the lender.

Section 41 extends capital gains tax retirement relief to disposals of leased farmland in circumstances where, among other conditions, the land is leased over the long term, the minimum lease being five years and the subsequent disposal is to a person other than a child of the individual disposing of the farmland.

Section 42 provides that the incentive relief from capital gains tax, in respect of the first seven years of ownership, for properties purchased between 7 December 2011 and 31 December 2013 is being extended by one year to include properties bought to the end of 2014.

Section 43 provides for a capital gains tax incentive to encourage entrepreneurs, in particular "serial" entrepreneurs, to invest in assets used in new productive trading activities as announced in the budget. Commencement of this measure is subject to receipt of EU state-aid approval.

In section 44, some minor technical changes are being proposed to the section dealing with the auto-diesel repayment scheme introduced in budget 2013. This section also provides that the diesel concerned must be purchased either as a bulk supply to the transport operator or by means of a fuel card approved for that purpose by the Revenue Commissioners.

The section amends the provisions for licensing of mineral-oil traders and those for the liability of persons in certain circumstances for the excise duty on an excisable product by introducing a provision aimed at addressing the problem of supply and delivery of marked-gas oil for laundering.

Section 45 addresses the liability of persons in certain circumstances for the excise duty on excisable products where those excisable products have been knowingly or recklessly supplied for use in the fraudulent evasion of excise duty.

Section 46 introduces a new section to general excise law to provide that alcohol products held for sale on an unlicensed premises are liable to forfeiture where the premises remains unlicensed because the person who should hold the licence does not qualify for a tax clearance certificate.

Section 47 amends section 138 of the Finance Act 2001 which provides that a persons suspected of an offence of dealing in or with unstamped tobacco products must provide information to a Revenue officer or a member of the Garda Síochána. It also provides that a Revenue officer or garda may search any bag or receptacle which he or she reasonably believes to contain tobacco products that are concerned in the offence.

Section 48 amends the provisions of general excise law to clarify that a Revenue officer may, while assigned to the Criminal Assets Bureau, continue to exercise the Revenue powers, functions and duties that have been delegated to that officer. This section also provides that appeals against excise decisions may now be made directly to the Appeals Commissioners with the exception of VRT matters, which will still be made to the Revenue Commissioners in the first instance.

Section 49 provides for the introduction of a relief from solid fuel carbon tax for solid fuels with a high biomass content. The relief will be limited to the biomass element of the finished solid fuel.

Section 50 gives effect to the increase in the rates of tobacco products tax which came into effect on budget night and which are estimated to raise €15.4 million in 2014. Section 51 gives effect to the increase in the excise rates of alcohol products tax which came into effect on budget night and are estimated to yield €148 million in 2014.

Section 56 provides for the retention of the 9% VAT rate on tourism-related services. Sections 57 to 60 contain VAT anti-avoidance measures.

Section 61 increases the VAT cash receipts threshold from €1.25 million to €2 million with effect from 1 May 2014. This change will assist small to medium businesses in the critical area of cash flow and reduce administration.

Section 62 increases the farmer's flat-rate addition from 4.8% to 5% with effect from 1 January 2014, as announced in the budget. Section 63 provides that the VAT rate applying to the supply of horses and greyhounds and to the hire of horses is increased from 4.8% to 9%, in compliance with a judgment of the European Court of Justice. I intend for this increase to be introduced by ministerial order. The 4.8 % rate will continue to apply to livestock in general and to horses that are intended for use as foodstuffs or for use in agricultural production. In addition, all insemination services for all animals will apply at the 13.5 % reduced rate.

Section 65 amends section 81AA of the Stamp Duties Consolidation Act 1999 to extend the relief from stamp duty on transfers of agricultural land, including farm houses and buildings, to young trained farmers. Three courses are being added to the list of qualifications in Schedule 2B, any one of which must be held to obtain the relief.

Section 66 provides for an exemption from stamp duty on the transfer of stocks and marketable securities of companies listed on the Enterprise Securities Market of the Irish Stock Exchange. The exemption is subject to a commencement order. Section 67 provides for an additional 0.15% stamp duty levy on pension fund assets for 2014 and 2015.

Section 68 applies a levy to certain financial institutions, set at 35% of the DIRT paid in 2011. The levy will operate for a period of three years and will be payable on 20 October in each of the years 2014, 2015 and 2016. The levy is projected to raise a sum of €150 million per year.

Section 71 clarifies requirements where a chargeable person is seeking a repayment of tax arising out of an error or mistake in the filed tax return. Section 73 is intended to ensure that ex gratia payments to women who were admitted to and worked in Magdalen laundries will not be subject to tax.

Section 74 amends section 1065 of the Taxes Consolidation Act 1997, to update the mitigation powers of the Revenue Commissioners and the Minister for Finance, in relation to various fines and penalties. Section 75 amends section 960R of the Taxes Consolidation Act 1997, which gives the Collector-General power to require tax defaulters to provide a statement of affairs. Section 76 amends section 851A of the Taxes Consolidation Act 1997 to ensure that external service providers who may be engaged by the Revenue Commissioners for the purposes of carrying out work relating to the administration of taxes and duties, are subject to the same confidentiality rules, as regards non-disclosure of taxpayer information, as Revenue officers. Section 78 sets out additions to the list of double taxation agreements and tax information exchange agreements between Ireland and other jurisdictions.

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

I thank the Minister for his contribution on Second Stage of the Finance Bill. Like the Minister it will not be possible for me to deal with all the issues in the Bill but I look forward to a constructive discussion on Committee Stage. This Bill is a component part of the taxation elements of the budget and it does not deal with expenditure measures such as medical cards, telephone allowance, bereavement grant, for example. Most of the pain in this budget lies in the expenditure area. However, there are also some pretty unpalatable measures on the taxation side. The Minister referred to the state of the economy, the expectation of growth this year of 0.2% and 2% next year. Certainly some of the metrics indicate that there is a fragile recovery under way in the economy and this is welcome. I refer to the purchasing managers index figures which were released yesterday. The unemployment picture appears to be improving albeit very modestly and gradually but going in the right direction. We can argue about the driving forces behind that improvement such as emigration and activation measures. The headline measures are certainly going in the right direction and this is welcome.

Owen Smith, a consultant oncologist in Our Lady's Hospital for Sick Children, Crumlin, has said that children with cancer are experiencing delays in the delivery of chemotherapy and the chief executive officers of four of the largest hospitals in the country have written to the chief executive officer of the HSE to point out that cuts to their budgets are threatening patient services. These statements puts this debate in context. Is this really the situation we want, that young children with cancer cannot get treatment in a timely fashion? Despite talk of economic recovery and positive indicators we need to remember what is happening in reality.

Although there are signs of recovery in Dublin in particular, it is a different story elsewhere around the country. I am concerned that we are seeing the beginning of a two-speed economy not with regard to exports versus the domestic economy but with regard to Dublin versus the rest of the country. The Minister visits provincial towns and villages and he will know that the economic recovery has not reached those places yet, by any stretch of the imagination. This is a key concern.

The Finance Bill is the final instalment of a deeply unfair budget which provides no clear vision and no sustainable solutions to the major challenges Ireland faces. This is neither a pro-jobs budget nor a genuinely pro-jobs Government. I will substantiate that claim in the course of my contribution.

The overriding concern for the Government seems to be what it can get away with on a political level. Measures such as raiding people's private pension savings or hiking deposit interest retention tax, slashing tax relief on private medical insurance, are considered acceptable on the basis that the full extent of the damage from these economically dubious policies will not fully exposed for many years. Exiting the bailout on 15 December has become a mantra for the Government to the extent that it has lost sight of the consequences of the policies it is pursuing to get there. I have referred to some of those consequences.

The Government has made much of its €500 million jobs package. However the economic and fiscal outlook accompanying the budget projects employment to increase by just 1.5% in 2014 and that the unemployment rate will remain above 12% for a considerable period.

While welcoming the progress that has been made, we all accept that figure is still far too high and a great deal more work needs to be done in the area of jobs and enterprise.

Most of the 25 pro-jobs measures the Minister signalled in the budget, some of which are provided for in the Bill, are either minor or a re-announcement of previous initiatives. The vast bulk of the packages include property incentives or an extension of the 9% lower VAT rate, a decision which I believe the Government was forced into when it was shown that it was not spending hundreds of millions of euro from the pension levy in the manner originally promised. While there are some welcome announcements in terms of our international tax strategy and research and development tax credits, many businesses will be clobbered with increased costs arising from changes to pensions, the expiry of the reduced 4.25% rate of employer PRSI, which has not received anywhere near enough commentary in the post-budget analysis, and changes to the sick leave scheme.

There is only a token mention of the credit crisis affecting small businesses, with no targeted measures to help businesses that cannot access bank credit. I note the announcement yesterday of the €125 million initiative for SME lending. It is welcome but it is only a drop in the ocean in terms of the requirements of businesses for credit in the economy at this time.

In regard to the decision on the pension levy, the U-turn the Minister announced on budget day was breathtaking. His justification raises more questions than it answers. Following the budget he told an audience in Limerick that the industry, which gave very detailed figures, did not fulfil its side of the bargain. He said that when it comes back to him and delivers he will take away the levy. In a reply to a parliamentary question from me yesterday he indicated that when he announced changes to pension tax relief last year, he had been informed by the industry that this would save about €400 million. He said he had included a much more conservative figure of €250 million in the budget last year but that in reality, when he examined it in detail, the figure he could stand over in the budget a few weeks ago was €120 million. That is all very fine, but I do not believe we can base budgets, in the manner that was done last year, on an estimate such as that given by the industry. The Minister said he was told it would save €400 million. He pencilled in €250 million, but it now transpires that it is €120 million, and he is linking that directly to the decision to increase the pension levy next year and to keep it in 2015. It raises the question of what was the bargain with the pensions industry to which he referred. I can only assume it relates to the issue I have highlighted which the Minister indicated in his reply to me yesterday in a parliamentary question. I have to assume that the Minister's assertion does not stand up to scrutiny and that he is looking for cover for what is nothing more than a further raid on people's private pension savings.

In his Budget Statement on budget day the Minister said he was extending the levy "to continue to help fund the jobs initiative and to make provision for potential State liabilities which may emerge from pre-existing or future pension fund difficulties." This would appear to refer to the impact of a European Court ruling under which the State was held liable for pension payments to former Waterford Crystal employees. This is even more alarming because his words leave open the possibility that the levy may become permanent. The question that people who are currently in receipt of a pension payment or those who are saving for a pension will ask is whether the Minister can be trusted. He promised in 2011 that it would end in 2014. He reiterated that promise a number of times since, including in last year's budget speech, yet he has now reneged on that promise. A fair and legitimate question is whether people can believe that the levy will end in 2015.

Given the justification he gave for retaining the levy to provide for potential future State liabilities that may emerge from existing or future pension fund difficulties, why should the beneficiaries of €30 billion under defined contribution pension schemes pay some form of insurance payment for something from which they can never benefit? The Minister is attempting to pull the wool over their eyes. It is important to recognise that private pension savings are not a luxury. It is Government policy and has been for many years to support and encourage people to provide for their future retirement. These are the savings that hard-working families have carefully put away over the years in order they can look after themselves in their old age rather than merely rely on the State. The Government is systematically stripping away the benefits of older people. We have never had a greater need for people to save for their retirement. Instead of incentivising them, the Minister is doing the opposite; he is penalising them. Essentially, the Minister is saying that any time he is short of money his first stop will be to dip into people's pension savings. This is going to do massive damage to people's confidence in the pension system.

According to information prepared by the Irish Brokers' Association, the levy means a person aged 50 this year and earning €60,000 a year will lose €870 from his or her pension pot next year, assuming he or she has paid into the pension from the age of 25. Adding up the tax since 2011, the Government will have taken almost €2,500 off that worker over the four years from 2011 to 2014. From listening to Tara Mines workers and the ESB pensioners, we have heard that the impact of the levy is not just in respect of people's pensions this year or next year; in many cases it results in a permanent reduction in the pension payment they receive. Around 80% of defined benefit pension schemes are currently in deficit and will not be able to meet liabilities without taking remedial action - either higher contributions by employees or the cutting of benefits - which is what has happened in many cases. Quite simply, the continuation of the levy is making a bad situation much worse.

The Government is putting short-term considerations ahead of the long-term need for secure pension provision. In years to come we may look back at the pension levy as a major reason for pensioners to see their retirement incomes slashed.

The reduction in tax relief for medical insurance is another example of seriously flawed policy formulation. The Government said this change would affect what it called gold-plated policies. The Minister used that term on budget day. Of course, nothing could be further from the truth. The Government now admits that more than half of those with private medical insurance will be affected by this change and industry sources indicate that in its view, perhaps up to 90% of those with medical insurance policies will be affected by the change. The bottom line is that customers will end up paying more for their health insurance because of the change in tax relief. More people will be driven out of the private health insurance market despite the Government's stated intention of creating a system of universal health insurance. This is counter intuitive, because the whole policy of Government to have universal health insurance in the future is only sustainable if as many people as possible retain their private health insurance, and then the State will subsidise the health insurance for the remainder of citizens. What is happening in reality is that the number of people managing to hold on to their health insurance is declining. That pattern will accelerate because of this change, and the Government's objective of universal health insurance is moving further away. More younger, healthier customers will choose to forfeit their private health insurance. This will further destabilise the health insurance market in Ireland, which is already in crisis. Only a Cabinet fixated on short-term political needs could draft such a policy. While I do not expect the Minister to withdraw the proposal at this stage, I will ask him to consider an amendment I will be tabling on Committee Stage providing that the €1,000 limit be at least indexed-linked annually in line with medical inflation as measured by the CPI.

As if the pension levy and medical insurance changes were not enough, the measures in respect of DIRT, which now amounts to 41% - plus in many cases an additional 4% PRSI, giving a total of 45% - show further evidence of a lack of joined-up thinking on the part of the Government. In delivering his Budget Statement, the Minister made a commitment to an Ireland that "plays fair" and always acts with integrity in the conduct of its international tax policy. However, it would seem the same does not apply to domestic taxpayers. The Government has increased the tax on deposit savings by a massive 14%, with an additional 4% PRSI applying if the unearned income is a little in excess of €3,000. This is a punitive tax on people who have prudently saved money from their after tax-incomes. Any single pensioner earning more than €18,000, or €36,000 for a couple, is liable for DIRT at the full rate of 41% even if he or she is only subject to income tax at 20%. For low-income families under 66, the thresholds are even lower.

The Department of Finance appears to believe that engineering an environment of low returns on savings will prompt consumers to increase spending in the domestic economy.

However, this strategy severely penalises people who put money aside for expected future expenses, including children's education, medical costs and nursing home care. The increased DIRT rates take no account of people's income level. Low income earners who have put aside some savings pay the same rate of DIRT as millionaires. Many young couples are trying to save to buy a house and banks require a large deposit from them before giving them a mortgage to buy a property. In effect, they are being penalised by losing almost half of the interest they earn on their savings. I am interested to hear what the Minister will say when the banks come knocking on his door to ask the Government to get the NTMA to reduce its savings rates over the coming months for State savings schemes.

Fianna Fáil will oppose the change to the one-parent tax credit. The manner of the change will discriminate against fathers in particular, as the new single-parent tax credit will only be available to the recipient of child benefit, which is typically the mother. I note the Minister's comments about his proposed amendment to allow for the transfer of unused credit from one parent to the other. The details will be important in terms of whether the consent of a parent will be required in order to transfer the credit to the other parent and how it will work in practice. In many cases the primary carer may not have sufficient income to avail of the tax credit. The Minister has now recognised that fact. The removal of the credit and the reduction in the lower rate band will cost many parents just under €2,500 a year. Even a person earning the average industrial wage of approximately €37,000 will be hit to the extent of up to €2,500 a year. I am not aware of any other income category that will be affected by the budget to the same extent. It is a savage cut for those people.

As the Minister is aware, this move is a cause of considerable anxiety and distress to many lone parents who are already struggling to meet the costs of supporting their children. The yield of €25 million does not justify the hardship it will inflict by implementing the measure in this manner. It makes a mockery of the Government's claim that it supports working parents. According to the Department, up to 15,700 people will lose out as a result of the measure. There are significant additional costs associated with parents who live apart and share parenting responsibilities. The restriction of the one-parent tax credit fails to recognise the reality. The nature and extent of the financial implications of the provision could lead, in many cases, to a reduction in the level of maintenance payments or a reduction in the quality and quantity of time children will be able to spend with both parents. That will have a negative impact on children throughout the country. The bottom line is that children will bear the brunt of the cut in tax relief.

Research from Trinity College points to the fact that in 97% of separation cases in the State the courts deem the child's mother to be the primary carer, even in cases of 50:50 access. To that end, the proposed measure, although gender-neutral in wording, will have a grossly disproportionate adverse effect on one social group by reason of gender. Indeed, it has been suggested that it may be contrary to the Equal Status Act 2004. Many fathers rely on the value of the tax credit to assist them in supporting their children. To take away this vital support will inevitably lead to more child poverty. As a party we do not have an issue with the credit being withdrawn where one parent does not make any contribution in terms of time or financial support to the upbringing of his or her children. However, we believe the Minister has not fully thought through the implications of this proposal and he should not proceed with it in the form proposed.

I welcome the decision to retain the lower 9% VAT rate in the tourism and hospitality sector. At this stage I do not believe the Minister has indicated whether it is a permanent policy commitment or if we will have to go through the same process every year. There is no doubt that a factor in this was the highlighting, prior to the budget, of the fact that a large portion of the proceeds from the pension levy had not been used for the jobs initiative, along with intense lobbying by the industry to retain the lower 9% rate. Unfortunately, the Government has undone much of the benefit to the hospitality sector through the significant excise hikes which will have an impact on the same industry. The lower VAT rate certainly seems to have had some success and, I hope, on the back of the decision, 2014 will be a strong year for the tourism and hospitality sector.

We support the arrangements announced by the Minister with regard to the modification of the current standard fund threshold, SFT, of €2.3 million for pension pots in such a way as to impose an effective €60,000 tax cap on pensions, with effect from 1 January 2014. However, I wish to see equality of treatment. In the course of the budget debate a few weeks ago I sought and received assurances from the Minister that the restriction on tax relief on contributions to large pension pots would apply equally to workers in the public and private sectors. It now seems that is not the case and favourable treatment will be available for some of the highest paid public servants in the country. It is important that any changes are evenly applied and that no one category - however important it might be - is singled out for special treatment. I will listen to the Minister's explanation of the provision when the Finance Bill is on Committee stage. My concern is that, similar to what happened previously under the remit of a former Minister for Finance - the late Brian Lenihan - those with the Minister's ear have been able to secure a special deal for themselves while everyone else bears the full brunt of the budget. We will debate the issue in full on Committee Stage.

I put the Minister on notice that we will oppose any move to bring the pay and file deadline forward to June. Forcing small firms to submit tax returns just seven months after this year's deadline would create huge cashflow problems for businesses and significant problems for their professional advisers as well. While I accept that the Department of Finance wishes to have visibility about what to expect in terms of tax returns from the self-employed, that could be achieved by setting an earlier filing date, with the tax owed being paid at a later date. To be clear, the self-employed people to whom I have spoken, and their professional advisers, do not want to see any change to the pay and file arrangements. I urge the Minister to take fully on board the various submissions being made during the public consultation being undertaken by the Department in respect of this measure.

I welcome the home improvement tax credit initiative. We made a similar proposal in the recent submissions we made to the Department. However, the scheme seems unnecessarily cumbersome in the manner in which it has been designed and, accordingly, I am concerned that take-up might be limited. It would be more effective if the relief was available in the year the work was carried out or at very least in full in the subsequent year. It could be argued that the stipulated €5,000 minimum threshold is too high for many small businesses. For example, someone in the business of supplying and fitting windows, doors or fireplaces could come in well under €5,000 per job. Such work would not be incentivised in any way by the initiative. A large number of legitimate small companies that often compete against people working for cash are excluded from this measure. We propose that a lower threshold of approximately €2,000 should apply.

The capital gains tax, CGT, relief for entrepreneurs is quite restrictive, and the fact that the second company must be involved in an activity "not previously carried on" by the entrepreneur or an associate may well exclude many people from potential benefit under the measure. It is disappointing that the relief will not be available to so-called angel investors who provide capital for new businesses without taking on executive roles. Our proposal was for a more general relief from CGT for entrepreneurial investors regardless of whether they invested in a new business. That would create a clear distinction between enterprise and passive investment. Currently, only 8.5% of people in Ireland aspire to be entrepreneurs, according to the Global Entrepreneurship Monitor's 2011 study. That is one of the lowest rates in the OECD. In a budget that is top-heavy with property-related incentives, the Minister could have done more to incentivise entrepreneurs.

Section 38 amends section 23A of the Taxes Consolidation Act 1997 and seeks to ensure that an Irish-incorporated company cannot be "stateless" in terms of its place of tax residence as a result of a mismatch between Ireland's company residence rules and those of a treaty partner country. That is a welcome development and is a practical demonstration of our commitment to follow best practice on corporate tax policy. I do not believe that to be the thin edge of the wedge in terms of heralding further changes to the Irish tax system, and there is no reason for it to create uncertainty among international investors.

With regard to the bank levy, as I said on budget day, there will not be too many people crying over the fact that the banks are being asked to pay a levy of €150 million next year. However, it is somewhat ironic, even if unconnected, that within a few days of the announcement of the levy two banks decided to exit the retail market in this country.

These decisions are a blow to hopes of real competition for consumers and businesses in the financial services sector. Having fewer banks means higher borrowing rates, increased fees and charges and reduced deposit rates for both business and personal customers. According to Ms Fiona Muldoon, no institution has applied for a banking licence since she joined the Central Bank. We really need to take notice of the lack of competition which will become an increasing problem, not only for individual customers but also for SMEs. It is open to question what impact a bank levy will have on the ability to increase competition in the sector, but it is unlikely to be positive. I repeat my call for the Government to bring forward a White Paper on banking. Five years since the onset of the crisis, the Irish banking sector is still not fit for purpose. It is imperative that the Government have a strategy for competition and regulation and that it not simply react to each development as it unfolds.

It is hard to see how our tax offering relative to that of our nearest neighbour and single biggest competitor - the United Kingdom - has improved as a result of the budget. The UK authorities have been absolutely unequivocal in their determination to develop an enhanced framework to assist in the development of financial services companies. We can see this by looking at the UK investment management strategy which was published by the UK Treasury in March. Improving UK tax competitiveness is not something the UK authorities have started this year. Since 2008 they have offered a 10% rate of CGT on gains from entrepreneurial activity. A similar incentive is offered for share options in early stage companies. The focus being placed on our corporation tax regime should not deter us from being innovative in our overall tax strategy, particularly in terms of how it compares with that of the United Kingdom. Doing nothing is not an option; there are plenty of countries queuing up to take business from us and we must be constantly vigilant to this threat.

I will touch briefly on other items included in the Bill. We very much welcome the development on research and development tax credits. The Minister is adopting the key recommendations of a Department of Finance report on research and development tax credits, including increasing the qualifying amount, irrespective of the base year, increasing the limit on outsourcing and improving the ability of companies to surrender research and development tax credits to key employees involved in research and development activities. The Minister should now move to phase out the base year limitation and in so doing substantially enhance Ireland's overall attractiveness to compete effectively for global research and development projects.

The Minister announced the abolition of the air travel tax, which is to be welcomed. We hope the Government lives up to this commitment on this occasion. The abolition was announced previously in 2011 but did not happen subsequently.

The Living City initiative was originally introduced in the Finance Act 2013, but I understand it has yet to actually get off the ground. The idea in itself is good and should help to promote inner city living and provide employment in the construction sector. The Minister might indicate if he would be amenable to extending the scheme to include residential properties constructed after 1915 - for example, up to the 1930s in the designated areas.

Traders whose turnover is below the current threshold of €1.25 million are entitled to account to Revenue for VAT on sales when they are paid rather than when they issue sales invoices. This threshold will be increased to €2 million which is very good news. Ultimately, it is simply a cashflow issue for businesses. At a time when cashflow is so tight, the measure will certainly be of significant benefit to them.

The consanguinity or blood relative relief for stamp duty on non-residential properties which is particularly relevant in the case of agricultural land reduces the rate of stamp duty from 2% to 1% on the transfer of land between close relatives. This relief will apply only until the end of 2014 and will be abolished completely from 1 January 2015. This gives farmers only a very brief window of opportunity in which to act if they wish to minimise their tax liability resulting from the transfer of the family farm. Given the generally accepted need to improve the age profile of the farming population, I encourage the Minister to look at some longer term mechanism in this regard in order that people can plan for the future.

Many sports organisations may be concerned by the changes to tax relief for professional sports players, as included in the Bill. Under the current law, athletes have to spend the last year of their career in Ireland to qualify for tax relief on their career earnings. The proposed amendment will allow players to finish their careers anywhere in the European Union, as well as in Iceland, Norway, Switzerland and Liechtenstein. The Minister may wish to indicate if he has been lobbied on the issue by sports bodies and the extent to which the Government fought against the measure which he claims was brought forward by the European Commission. It will undoubtedly cause difficulty for domestic sports organisations, particularly the IRFU, in trying to retain sports stars in Ireland.

Last year the Government announced an initiative for early access to pensions such that for a three-year period only employees who had made additional voluntary contributions, AVCs, to their pensions would have one-off access to take back up to 30% of these contributions. Draw-downs have been very limited, as the Minister knows. We call on him to extend the application of the measure in order that more people could benefit.

Let me address the local property tax issue. The Minister met the chairman of the Revenue Commissioners a few evenings ago and she is to appear before the finance committee tomorrow to discuss the issue. I urge the Minister to consider a very simple amendment that the Revenue Commissioners could implement in practice and which would provide that no money would be taken from any individual in respect of his or her local property tax liability until the calendar year to which the liability related. That is all people are asking for in this debate. Many people have already paid and their debit and credit cards have been hit. If the change I propose cannot be made this year, I ask that it be made in the future in order that there would not be a repeat of the recent debacle.

The Minister knows my views on the bailout and I recognise that he has met all of the key stakeholders. Fianna Fáil's view is that we should, in principle, sign up to a precautionary credit line. That would be the prudent approach. It depends on the conditions attached which the Minister is best placed to assess. I do not know what the conditions are, but I am concerned about the risks we may face in going it completely alone, even if factors entirely outside our control go against us. In the next 12 to 18 months we certainly do not want to end up back in a formal programme. I look forward to the Committee Stage debate.

It is with a heavy heart that most of us who are opposed to the current austerity strategy practised by the Government in the past three years, whose strategy is similar to that of the previous Government, read this Bill. It presented an opportunity to rectify the biggest errors made in the budget announcement last month. I refer also to the austerity measures included in previous finance legislation. The Government has refused to listen very clearly to the public's anger and is proceeding with the regressive Finance Bill based on a regressive budget.

Two weeks ago we watched the embarrassing spectacle of a fearful Government rushing through cuts affecting young and old people and the very vulnerable in a very harsh social welfare Bill. This week we debate the Finance Bill that makes more of the wrong choices on how the country should be proceeding. One month has almost passed since the announcement of the budget. In that time the Government should have noted the public's anger and changed track. Instead, it has ploughed ahead. Sinn Féin has produced a costed alternative to the budget that would have been fair, reduced the tax burden on ordinary families, protected jobs and public services and closed the deficit. This would have been achieved without damaging the domestic economy. Many groups working with the vulnerable and representing workers and the unemployed have proposed an alternative vision in addition to that of Sinn Féin. However, as the Government was not for turning, we are, therefore, debating another austere finance Bill clearly written to satisfy the troika, not the people.

I say we are debating the Bill, but, in reality, we are simply talking about it. A big problem every year when discussing the Finance Bill and other financial legislation is that Opposition Deputies are precluded from making meaningful amendments under the rules of the House and within constitutional restraints. Consequently, any attempt by my party to make real, substantial changes to the Bill that would help struggling families throughout the State will be ruled out of order. There has been much talk about political reform. The Government spoke about it and there has been considerable debate on the issue. However, the truth is that unless we address the problem whereby Opposition members cannot table meaningful amendments to any finance legislation, we will not really be tackling the issue properly and there will be a mock debate.

Sinn Féin is for positive engagement.

At a recent meeting of the finance committee, Sinn Féin was the only party that tabled amendments to the Credit Reporting Bill, some of which were accepted by Government, while others were accepted in principle. During the debate on the last Finance Bill we put forward amendments on real estate investment trusts, known as REITs, the contents of which were accepted by the Minister for Finance. However, we are limited in what we can do, and the Minister is well aware of that, because when he was on this side of the House he had the same shackles placed on him.

In recent months I drafted a Bill that would make Irish-registered non-resident companies tax-resident here if they did not prove tax residency anywhere else in the world. However, because of the rules, I am precluded from introducing that Bill in the Houses of the Oireachtas. The Bill was written and published four months ago and its contents appear in the Finance Bill today, which I welcome. I am surprised that the provision is here because when I tried to raise this issue at finance committee meetings I was heckled by members of the Minister's own party and shouted down by Deputy Dara Murphy in particular. I welcome the move on corporation tax and we will tease out the details at Committee Stage. I welcome it as a symbol that the attitude has shifted. In recent times, for better or worse, our corporation tax policy has come under the spotlight, but the response to this has been wrong. We cannot ignore the issue or spin our way out of it. Nobody defends Irish economic sovereignty more than Sinn Féin, but we cannot pretend that we have a transparent system when the Department cannot even say how many companies in Ireland are registered here but are not tax-resident here or anywhere else in the world. We had a farcical situation in which the sub-committee set up to examine the issue was afraid to call in the multinationals, and any time I tried to raise the contents of my Bill, now contained in the Finance Bill, I was heckled by some of the Minister's own party colleagues.

That was because the Deputy wanted to talk about a particular company. He was naming one specific company.

Not at all. The Minister had no problem, before he introduced this measure, sitting down with various multinational companies - including the same one that Deputy Murphy is afraid to mention in this House - to discuss this measure in the Finance Bill.

If this is a move that represents a more mature and fair corporation tax policy, Sinn Féin will support it. It is an intolerable situation at present in which SMEs here are paying the full whack of corporation tax while some large multinationals are paying only a tiny percentage. The Minister has spoken about the importance of our reputation with regard to tax matters and I fully agree with him. That is why the Government must stop claiming to have a transparent corporation system and instead start building a system that is actually transparent.

The biggest wave of anger sparked by the financial aspects of the budget introduced by the Minister for Finance, as opposed to those measures introduced by the Minister for Public Expenditure and Reform, which also prompted huge anger, relates to the changes to tax credits for single parents. The change has angered single parents themselves, as well as those who know single parents who are trying to support their children as best they can. It is a mean move that is targeted to save €25 million in a year. The logic that fathers - and in most cases we are talking about fathers - do not bear the cost of children who stay with them for weekends, on holidays or even for five months and three weeks of the year is absurd. We all know that Christmas is approaching and those single fathers and single parents will provide for their children as much as any other parent. When they have their children in their homes, whether that is at weekends, during summer holidays, on alternate weeks or through some other arrangement, they provide for their loved ones. The Department's latest estimate is that 14,500 people may be affected by this cut. While I acknowledge the amendment the Minister has introduced, I argue that the number of people affected is at least double the Department's estimate because that figure only refers to the adults. It is not just the individual fathers or mothers who will be affected by this. Their children will be affected and for every adult we are talking about at least one child. It is an unfair move. There have been other suggestions with regard to how money could be saved in a fairer way, through, for example, linking the tax credit to the payment of maintenance. That is something the Government should examine. It must also examine the unfair and mean nature of this cut, which ultimately affects the welfare of the children of separated parents.

The Living City initiative is wrongly named. I say that because to be a living scheme, it would have to exist. What the Minister has done in the Finance Bill is to announce an extension to a scheme that has not come into existence yet. Recently, in response to a parliamentary question, the Minister listed a range of measures as long as my arm that were announced in budget 2013 or previously and that are still on the desk of someone in Brussels awaiting approval. Among these is the Living City initiative. As I said last year, I have concerns about how this scheme will actually work and who will benefit from it. In some ways, it harks back to and smells of the old property reliefs that contributed to the bubble. If we go down this road, we should tread very carefully indeed. It is worrying that the Minister is announcing an extension to a pilot project that does not even exist. He is broadening the area and the scope of the project without any experience of how successful it may or may not be. A pilot project is about testing the waters, but with this extension the Minister is plunging in feet first.

Since coming to office, this Government has concentrated on supporting the elites in Irish society. It has failed to take on high earners and continually targets groups on the margins. This year's Finance Bill is just as conservative as last year's. The Minister stated on budget day that he was introducing 23 measures that would contribute to job creation. Given that job retention and creation is a key plank of Sinn Féin policy, I welcome the Government's comments on jobs. Unfortunately, however, they have been nothing more than comments. The Government's jobs policy can be described as all launch and no action. The net jobs that have been created in the economy, after 176,000 people have emigrated on this Government's watch, were created in spite of Government policies rather than because of them. I want to see taxation measures that contribute to support job creation, and in that context I am particularly interested to see if the home renovation scheme delivers dividends. Indeed, this is something that my party examined and I will speak about it again later in the debate. However, I wish to flag the fact that I believe the threshold in the scheme is far too high. The aim is to deal with black market activity, but those who have spoken to me about this have pointed out that the people who are carrying out renovations up to the value of €30,000 are not operating in the black market. It is those undertaking jobs worth €1,000, €2,000 or €3,000 who are in the black market. In that context, we need to consider meaningful amendments to the Bill.

It is only right and proper that the banking system carry its share of the burden. We know that the banks were reckless in the past and that they are refusing to engage seriously with the mortgage crisis now. The detail of the proposed levy is less encouraging than the principle of this section of the Bill. Why is the Minister lifting the limit on what losses incurred by banks can be carried forward and what will be the effect of that? The lifting of those limits could actually mean that this levy will yield very little, if any, revenue. Is this really a levy on the banks or is it just a charge that will be passed onto customers? We know that the Government has been impotent in standing up to the banks, particularly in the context of fee hikes, interest rate increases and so forth. We also know all about the smoke and mirrors surrounding the Mercer report in the context of the pay of senior bankers.

In the interests of full public disclosure, I wish to make an important statement on the Anglo Irish Bank tapes. Within the last number of weeks, Sinn Féin was anonymously sent a copy of secret recordings involving senior officials at Anglo Irish Bank. The majority of these recordings, which are not currently in the public domain, cover the period between February and September 2008. On the advice of senior counsel, we have taken the decision not to release the tapes at this time. I have made them available to the Garda Commissioner and the Governor of the Central Bank.

I personally hand delivered them to Garda headquarters and the office of the Governor of the Central Bank this morning. We have also retained a copy of the tapes with my solicitor with a view to publishing them on a future date.

Pity the Deputy would not hand information on the disappeared to the Garda also.

As the publication of these secret conversations would be in the public interest, the Government must move speedily towards the establishment of a banking inquiry. There is a public demand for the truth and to know what was going on in the banks, as well as the contacts between senior bankers and the then Fianna Fáil Government in the run-up to the bank guarantee.

Will the Deputy hand information on the disappeared to the Garda also?

It has always been my view that the then Fianna Fáil Government had more information on the bank prior to the guarantee than it has previously disclosed.

Debate adjourned.