Finance Bill 2014: Second Stage

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

The economy is growing at the fastest rate in the European Union; the public finances are under control and our debt is on a downward trajectory. Budget 2015 was designed to sustain this recovery, broaden it throughout the country and continue the prudent and safe management of the public finances that has got us to this point.

The Finance Bill outlines the details of the budget measures. The budget has been designed to reduce our deficit to 2.7% in 2015 as a next step on the road to a balanced budget. The 2.7% deficit is inside our Stability and Growth Pact target of under 3% and highlights the Government's commitment to stable and prudent economic policies. The 2.7% deficit forms a prudent buffer to allow for possible external shocks to the economy and will reassure the markets of Ireland's steadfast commitment to restoring stability in the public finances.

A debt stabilising primary balance is forecast for 2014, an important metric in assessing long-term debt sustainability. Our debt is now on a downward trajectory and our debt ratio will drop below 100% of GDP in 2018. The cost of our borrowing continues to fall and this afternoon the National Treasury Management Agency successfully raised €3.75 billion in a new 15 year bond issuance at the rate of 2.487%, an historic low for a 15 year bond issuance by Ireland. This is the first time the State has issued debt of such length since 2009 and there was strong investor demand, with €8.4 billion offered. The yield achieved of 2.487% is a record low and provides a major vote of confidence in Ireland by investors. By comparison, the yield on the 15 year bond issued by the NTMA in October 2009 was 5.472%.

The policies the Government has pursued and the sacrifices of the people have got us to this point. The fiscal policy must aim at maintaining sustainable growth. As I said on budget day, there will be no return to the boom and bust model of the past. The people have made major sacrifices and the Government will not take risks with the recovery. While the majority of people will not see the full benefits of the budget until they open their pay packets in January next year, for the first time in several years they will see an increase in their take-home pay which will provide a further boost for households and the domestic economy.

For example, a working family with three children where both parents earn €50,000 each per year will have approximately €100 extra per month in their pockets.

A fair, efficient and competitive income tax system is essential for economic growth and job creation. I have long said the burden of the income tax system in Ireland is too high and acting as a disincentive for work and investment in Ireland. The income tax measures in the Bill are the first stage of a three year plan to reduce progressively the marginal tax rate on low and middle income earners in a manner that maintains the highly progressive nature of the tax system. As I outlined in the budget, my Department estimates a three year reform plan along these lines could boost employment levels by as much as 15,000 jobs when the full impact of the changes has taken effect in the economy.

The Bill provides for a reduction in the top rate of income tax from 41% to 40%. It also extends the standard rate band in which income tax is chargeable at the lower 20% rate by €1,000. Together with the accompanying reductions in the two lower rates of universal social charge, USC, and the extension of the threshold at which USC becomes payable, the budget announcements provided for in the Bill will ensure all those who currently pay income tax and-or USC will see a reduction in their tax bill next year. In addition, as a result of the reduction in the higher rate of income tax from 41% to 40%, the marginal tax rate has been reduced for all income earners who currently earn under €70,000 per year and pay income tax at the higher rate and remains unchanged for PAYE and self-employed workers earning over €70,000 per year. For example, a self-employed person earning €100,000 per year faced a marginal tax rate of 55% in 2014 and will continue to face a marginal tax rate of 55% in 2015.

Ireland already has one of the most progressive income tax systems in the developed world. To enhance its progressivity, the Bill also contains USC measures which have the effect of limiting the maximum benefit from this package of tax measures. Those on very high incomes will only benefit to the same extent as those with more modest income levels. As a result, in 2015 the top 1% of income earners will pay 21% of all income tax and USC collected. In contrast, the bottom 76% of income earners will pay 20% of the total.

The Bill also provides for the retention of the exemption from the top rates of USC for medical card holders with incomes that do not exceed €60,000 per year. These individuals will now only be liable to pay a USC rate of 3.5%, down from 4%. This reduced rate will also apply to the over 70s with incomes that do not exceed €60,000 per year, again down from 4%. These changes are designed to ensure work pays, help the transition from unemployment and remove potential barriers that may be deterring part-time workers from taking on additional hours of employment. The resulting increases in take home pay will have follow-on benefits for businesses and jobs in the domestic economy.

In the budget I announced a number of corporation tax changes as part of a strategy to "play fair and play to win." These changes have given certainty to companies and investors and been broadly welcome by companies, representative groups and international organisations such as the Organisation for Economic Co-operation and Development, OECD. I reaffirmed the Government's commitment to the 12.5% rate of corporation tax and published independent research commissioned by my Department from the Economic and Social Research Institute, ESRI, confirming the importance of the 12.5% rate to the economy. I have also published a "Road Map for Ireland's Tax Competitiveness" which contains a comprehensive package of competitive tax measures to provide the foundations for Ireland to maintain and expand as a thriving hub for foreign direct investment.

I will now outline the provisions of the Finance Bill. Deputies will appreciate that in the limited time available I cannot describe every section in detail.

Part 1 of the Bill deals with the universal social charge, income tax, corporation tax and capital gains tax. Sections 2 and 3 provide for the income tax and USC changes I have outlined.

To stimulate the supply of affordable rental accommodation, the threshold for exempt income under the rent-a-room scheme is being increased in section 8 from €10,000 to €12,000 per annum for 2015 and subsequent years.

Recognising the success of the home renovation incentive in stimulating activity in the legitimate construction sector and the need to increase and improve the housing stock, section 11 extends the incentive to include rental properties the owners of which are liable to income tax to encourage them to carry out renovations, repairs or improvements to their rental properties. It will apply to works carried out from 15 October 2014 until 31 December 2015. As is the case with principal private residences, the qualifying work must cost a minimum of €5,000, including VAT. While there is no upper limit on the cost of works, the tax credit will only be given in respect of a maximum expenditure of €30,000, excluding VAT.

As part of a range of measures forming the roadmap to secure Ireland's place as the destination for the best and most successful companies in the world, section 13 extends the special assignee relief programme for a further three years, until 31 December 2017. In addition, the upper salary threshold of €500,000 per annum that currently applies is being removed. The residency requirement is being amended to only require Irish tax residency. The exclusion of work carried out abroad is also being removed and the period of time for which an employee is required to be employed abroad by the relevant employer prior to his or her arrival is being reduced from 12 months to six.

To further support small and medium enterprises, SMEs, and other companies to grow their businesses and diversify into new and emerging markets, the foreign earnings deduction is being extended and enhanced for a further three years until 31 December 2017 in section 14. The list of qualifying countries is also being extended.

Section 17 provides for tax relief to be given for certain pension contributions of current and former fixed-term contract employees of National University of Ireland Galway, NUIG, to which they would have been entitled had there been no delay in the implementation of some aspects of the Protection of Employees (Fixed Term Work) Act 2003. The section will also close off a number of tax avoidance schemes which use approved retirement funds, ARFs, and other post-retirement funds. The section reduces from 5% to 4% the imputed distribution rate for ARFs and vested personal retirement savings accounts, PRSAs, beneficially owned by individuals aged between 60 and 70 years, where the value of assets in these products is €2 million or less. The section also introduces an annual draw-down option of a maximum of 4% for approved minimum retirement funds. The section provides for a more equitable sharing of any chargeable excess tax in cases involving pension adjustment orders, where the maximum allowable pension fund at retirement for tax purposes is exceeded.

Section 18 makes a number of amendments to the tax treatment of farmers to give effect to some of the changes announced in the budget following recommendations in the agri-taxation review. It increases the period of income averaging from three to five years for the years of assessment from 2015 onwards; it provides for the averaging of farming profits where a farmer or his or her spouse carries on another trade, provided that the trade relates to on-farm diversification; it provides for a 50% increase in the amounts of income that can be exempted for the purposes of qualifying long-term leases taken out on or after 1 January 2015; it introduces a fourth threshold for lease periods of 15 years or more, with income of up to €40,000 being exempted; it provides for the removal of the lower age threshold of 40 years for eligibility for the long-term leasing tax relief; it provides that a company can be an eligible lessee, provided it is not connected to the lessor; it adds a new third level course to the list of approved courses for eligibility by young trained farmers to claim 100% stock relief. Following the increase in the EU limits for de minimis state aid, it provides for an increase in the maximum amount of stock relief allowable for registered farm partnerships to €15,000 over three years. A number of other measures arising from the agri-taxation review are dealt with in later sections of the Bill.

Section 20 provides for refunds of deposit interest retention tax deducted from interest earned by a first-time purchaser of a house or an apartment on deposits of up to 20% of the purchase price of such a house or an apartment in the 48 months prior to the purchase. The provision will apply to purchases made up to the end of 2017.

Section 23 deals with the research and development tax credit and provides that the base year restriction will be removed fully for accounting periods commencing on or after 1 January 2015.

Section 24 makes a number of amendments to the legislation providing for the employment and investment incentive. First, the rate of relief is being aligned with the revised income tax rates from 1 January 2015. Second, the minimum required holding period for shares is being increased from three to four years. Third, the limits on the amount of finance that can be raised by a company annually and in a lifetime are being increased to €5 million and €15 million, respectively. Fourth, the incentive is being amended to include medium-sized enterprises in non-assisted areas, the management and operation of nursing homes and internationally traded financial services where they are certified by Enterprise Ireland.

Section 27 provides for the end of the 80% rate of income tax on windfall profits attributable to certain planning decisions and the equivalent rate of capital gains tax on any gain from disposals of land also attributable to certain planning decisions. Normal rates of income tax, corporation tax and capital gains tax, as appropriate, will apply to such profits or gains from 1 January 2015.

Section 28 makes changes to the living city initiative. It provides for an expenditure cap on the amount that can be claimed under the commercial element of the initiative. The cap will be €1.6 million of expenditure for companies and €400,000 of expenditure for individuals who invest in eligible commercial properties under the initiative. This change means that the initiative comes under EU de minimis state aid rules. There will be no expenditure cap on the residential element of the initiative.

Section 33 extends to the end of 2017 a scheme of accelerated capital allowances contained in section 285A of the Taxes Consolidation Act 1997 which has been designed to encourage companies to invest in energy efficient equipment.

Section 34 extends to the end of 2015 a measure that provides relief from corporation tax on trading income and certain capital gains of new start-up companies in the first three years of trading. This will allow for a review of the operation of the measure to take place in 2015, with a view to ensuring it meets its policy objective of encouraging start-up businesses and creating employment.

Section 35 provides for additional enhancements to section 291A of the Taxes Consolidation Act 1997 which provides capital allowances for expenditure incurred on the provision of certain intangible assets for use in an Irish trade. It removes the current cap on the aggregate amount of allowances and related interest expenses that may be claimed and amends the definition of intangible assets which may qualify for the relief to specifically include certain customer lists.

Section 38 will amend Ireland's company tax residence rules to provide that all companies incorporated in Ireland will be automatically tax resident here, unless otherwise determined under a bilateral tax treaty which supersedes domestic law. The change will come into effect for new companies from 1 January 2015, while a transition period will apply until the end of 2020 for existing companies. This change will bring Ireland's rules into line with the rest of the OECD jurisdictions and should address the reputational damage arising from the use of a corporate structure commonly referred to as the "double Irish". I have always been clear that the double Irish is not part of the Irish tax offering. It is just one example of the many international tax planning arrangements which have been designed and developed by tax and legal advisers to take advantage of mismatches between the tax rules in two or more countries. It is not claimed that this change will bring an end to international tax planning, as this requires co-ordinated action by many countries working together. However, the change will address the reality that Ireland's company tax residence rules have not kept pace with international developments and being associated with the double Irish is damaging Ireland's reputation.

Section 42 deals with the return of value made by Vodafone plc to its Irish shareholders earlier this year. Where the return is for an amount of €1,000 or less, it will be treated as a capital receipt for tax purposes, unless shareholders specifically opt to have the payment treated as income. This will mean that those Vodafone shareholders who are shareholders on foot of an original investment in eircom will have no tax liability on the capital receipt as the amount received is less than the cost of the original investment.

Section 43 extends the period within which the first transaction, that is, a sale, purchase or exchange of farmland in a farm restructuring, is to take place for the purposes of the capital gains tax relief from the end of 2015 to the end of 2016.

Section 44 amends capital gains tax retirement relief for farmers in a number of respects arising from the agri-taxation review. The amendments provide, respectively, for an increase in the total period for which land can be let immediately prior to disposal from 15 years to 25 and, in the case of disposals of farmland outside the family, that land let under conacre arrangements and disposed of on or before 31 December 2016 or which is leased for a minimum period of five years before that date can qualify for capital gains tax retirement relief on disposal, provided the lands were farmed by the farmer for a minimum of ten years prior to letting.

Section 45 gives effect to the commitment I made earlier this year to provide for an exemption from capital gains tax on any chargeable gain arising on foot of the disposal by farmers of payment entitlements under the single farm payment scheme, where these entitlements were fully leased out and the farmers concerned had no choice but to sell their payment entitlements due to changes in Common Agricultural Policy regulations.

Section 46 amends the capital gains tax entrepreneur relief which I introduced in last year's budget and the subsequent Finance Act and allows for the commencement of the relief from the beginning of 2014. The section also includes amendments to allow the relief to operate more effectively on the ground.

Part 2 of the Bill deals with excise. Section 48 provides for a deferral of the collection of excise on mineral oil, bringing it into line with the other excisable products. This amendment is subject to a commencement order.

Section 49 provides for the application of mineral oil tax, including carbon tax, to natural gas and biogas when used as a transport fuel and sets the excise rate at the minimum rate allowable under the EU energy tax directive.

Section 50 provides that to apply for or hold a mineral oil trader's licence the applicant or holder must comply with excise law in respect of all aspects of operating a business in the area of mineral oil trading.

Section 52 provides for the budget day announcement of the increase in the annual excise relief production ceiling for micro-breweries from 20,000 to 30,000 hectolitres.

Section 54 removes the requirement that, in respect of a disabled passenger, the cost of vehicle adaptation must consist of not less than 10% of the value of the vehicle, excluding tax and excise duty.

Section 55 provides for the extension of vehicle registration tax reliefs available for electric and hybrid electric vehicles to 31 December 2016.

Part 3 of the Bill deals with value added tax. Section 60 increases the farmer's flat-rate addition from 5% to 5.2% with effect from 1 January 2015, as announced in the budget.

Section 63 extends the VAT exemption to the management of defined contribution pension funds and green fees charged by member owned golf clubs, both changes resulting from decisions of the European Court of Justice. The section also extends the VAT exemption to all fostering services and the zero rate of VAT on unprepared tea to include herbal and fruit teas.

Part 4 of the Bill deals with stamp duties. Section 66 provides relief from stamp duty on a lease of land for a term not less than five years and not exceeding 35 that is used exclusively for farming carried on by the lessee on a commercial basis and with a view to the realisation of profits. Section 69 provides that, for a period of three years, consanguinity relief will be available in respect of transfers or conveyances of farmland where the person by whom the land is transferred or conveyed is not over 65 years of age and the party to whom the land is transferred or conveyed is a farmer who farms the land on a commercial basis and with a view to the realisation of profits for a period of not less than five years and for not less than 50% of the farmer's normal working time. Sections 66 and 69 arise from recommendations in the agri-taxation review.

Section 70 adds an additional qualification for the purposes of the young trained farmer relief, the BSc (Honours) in sustainable agriculture.

Part 5 of the Bill deals with capital acquisitions tax. Section 73 relates to the exemption from capital acquisitions tax of normal and reasonable payments made for the support, maintenance or education of children by their parents. The section restricts the exemption for payments made by living persons for these purposes to children up to the age of 25 years if in full-time education and also extends the exemption in the case of payments made from a trust set up by deceased persons to orphaned children up to the age of 25 years if in full-time education, where such payments were up to now exempt only if made to minor orphaned children.

Section 74 also arises from the agri-taxation review. It amends the definition of "farmer" for the purposes of the relief from capital acquisitions tax on gifts or inheritances of agricultural property in order to target the relief at individuals who will actively farm agricultural property themselves or who will lease such property on a long-term basis to active farmers.

Section 75 amends the relief from capital acquisitions tax applying to the gift or inheritance of business assets which is intended to encourage the inter-generational transfer of businesses.

Part 6, the final part of the Bill, covers miscellaneous provisions. Section 79 and Schedule 1 amend the general anti-avoidance legislation in the Taxes Consolidation Act 1997. As a transitional measure, it also provides that a person who entered into a tax avoidance transaction on or before 23 October 2014 and who, before 30 June 2015, makes a full disclosure and full payment of all tax due to the Revenue Commissioners, will not be subject to the surcharge provided for in section 811A. Also, any interest payable in cases covered by the transitional measures will be capped at 80% of the interest otherwise payable.

Section 80 and Schedule 2 introduce a number of changes to the mandatory disclosure regime. Among these is a provision that where the appeal commissioner makes a determination relating to a tax avoidance transaction under section 811C in relation to one of the specific anti-avoidance provisions or in relation to a transaction that was a disclosable transaction under the mandatory disclosure regime, the Revenue Commissioners may issue a payment notice to that taxpayer requiring payment of tax due on foot of the determination of the appeal commissioners.

Section 88 sets out additions to the list of double taxation agreements and protocols to double taxation agreements between Ireland and other jurisdictions.

At this stage, there is still a small number of matters under consideration for inclusion in the Finance Bill that I may bring forward on Committee Stage. I will, of course, also give consideration to the constructive suggestions put forward during our debate this week. I commend the Bill to the House.

I welcome the opportunity to speak on the Finance Bill 2014, which gives effect to the measures announced in budget 2015. It is just three weeks since the budget was introduced, though it must seem like a lifetime ago for many Ministers given that they have been mired in controversy over water charges since then. Anyone who watched the news on RTE today could not but conclude that the handling of water charges and Irish Water is becoming a bigger shambles day by day. Confidence is ebbing away, not just in the handling of water charges but in the Government, and it has now become a defining issue for the Government in terms of whether it can get to grips with the issue of water competently and comprehensively. What the Tánaiste said today represents a shift from the stated position of the Government.

We were told the Commission for Energy Regulation set the prices and that a family comprising two adults and two grown-up children living at home would receive a bill of €483. The Government said it had no influence over the rates, yet today the Tánaiste told the House the bill would be less than €200. Even deducting the €100 tax relief from the €483 charge still leaves a bill of €383. The Tánaiste is, in effect, signalling that the bill will decrease by more than half. Let us wait and see what happens when an announcement is made in the next week or so. The window of opportunity for the Government to get to grips with this issue is narrowing by the day. It has now become a defining moment for the Government.

The Minister was quite perceptive drawing up his Finance Bill when he decided not to include tax credits in regard to water charges. Given that it has already been suggested that the proposed €100 tax credit would be available to all taxpayers regardless of the size of their bills and the likelihood that further changes are set to be announced, it is distinctly possible that the final package will be considerably different from what was originally proposed. In fact, I count that there have now been eight changes to the water charges regime since the original charging structure was announced on 8 May. We will probably get to double figures before the issue is finally resolved.

When the Minister does get to bring forward his proposals on Committee Stage in respect of this Bill, and assuming water charges have not been abandoned completely by then, I would suggest that he make provision for the water charges tax credit to be deductible at source, as already happens with mortgage interest relief and private medical insurance. Irish Water is already a bureaucratic nightmare. We do not need to tie up the Revenue Commissioners' time with a massive administrative task in respect of water charges tax credits. I note that the latest suggestion coming from sources within the Labour Party, in particular, seems to be that the Revenue Commissioners should be given complete responsibility for the collection of water charges. I am opposed to that and I cannot see how it can happen, given that Irish Water has been set up as a commercial State company which has no direct relationship with the Revenue Commissioners. It is not open to the Revenue Commissioners to start collecting charges for the ESB, Bord Gáis, Irish Water or any other utility company. That is not its function. When it was first announced that tax relief would be given in respect of water charges I was suspicious that it could become a stepping stone to the Revenue Commissioners' taking over responsibility for the collection of water charges. When one listens to some comments from Government sources in off-the-record briefings, one would have to wonder if that is where this will end up. The Government knows that people respect and fear the Revenue Commissioners in equal measure. I cannot see how an entity such as Irish Water, which is off-balance-sheet, can have its bills collected for it by the Revenue Commissioners. It is not there to collect bills on behalf of third parties.

The Government needs to clarify the issue. The Minister for the Environment, Community and Local Government, Deputy Alan Kelly, did not rule out such a move when asked about the matter today. It seems to be incompatible with the current structure of Irish Water. The Government should be absolutely clear regarding its intentions for the future role of the Revenue Commissioners in regard to water charges, because people are becoming increasingly suspicious.

I repeat the view I expressed on budget day - namely, that the Government has been somewhat premature in its decision to swerve from a planned €2 billion adjustment to a €1 billion giveaway in budget 2015. I would, if I had had the opportunity to do so, have introduced an essentially balanced budget.

The Government's income tax package is a mishmash. It made significant play in recent months about cutting the marginal rate. We were told that high marginal tax rates were impeding foreign direct investment, but it has increased the rate of USC by 1% on salaries over €70,000 to offset the 1% reduction in the marginal rate. It is speaking out of both sides of its mouth on the issue. What is even more significant is that the income tax package is skewed towards higher earners. A minimum wage worker on €17,500 will pay €174 less tax and USC, while an employee on the average wage of €36,000 will pay €406 less. By contrast, an employee on €70,000 or more gains by €746 per annum. In simple terms, the higher one's income, the more one gains - up to four times more than those on the minimum wage. According to the Minister's figures, only one in every six income earners will get a "triple benefit", the USC changes combined with the rate and band changes focused on the higher rate of income tax.

Lower income workers must make do with the cut to the USC. There was no change to the PAYE or personal tax credits. When the Minister was raising taxes, he decided to introduce flat rate tax increases. The abolition of the PRSI allowance, for example, took €264 from the pocket of every worker, regardless of whether on €20,000 or €200,000 a year. Now that the Government is cutting taxes, with an eye to the next election, it is devoting the lion's share of the benefit to those on above average incomes.

As I mention the abolition of the PRSI allowance, I would like to make reference to the impact of the step change in how PRSI is applied. The Government created an anomaly whereby, at a certain income level, a person can be worse off than a person with a lower income. While someone earning €18,304 per annum pays an effective tax rate overall, between tax and PRSI, of 5.25%, someone who is paid €1 more will pay an effective tax rate of 9.25% as all that person's income becomes subject to PRSI. This is a disincentive to employers to increase wages or for employees to accept extra hours of work or a promotion. Over 120,000 employees who earn between €17,000 and €20,000 a year are potentially affected by this problem. The way to tackle the situation is to allow a partial PRSI refund for people earning just above the current level at which employee PRSI becomes payable so as to offset the impact of this anomaly. This would remove the current anti-work provision which this Government introduced. The Minister for Finance should address this issue with his colleague, the Tánaiste and Minister for Social Protection.

The Minister seems to have abandoned his previous concerns about the treatment of one income couples. One of the glaring anomalies of the budget is that a couple with one spouse earning €41,000 per annum is better off by just €174 or 0.4% of their income while, as I noted previously, a single person on €70,000 is better off by €746 or 1.7%. Quite a few years ago the Minister told Charlie McCreevy at the time individualisation was introduced, "You are forcing women to go out to work...you are changing the kind of Ireland we have known and changing it for the worse."

In 2007, the current Tánaiste said that while de-individualising tax entirely would be too expensive, other measures could be introduced, such as raising the home carer's credit, which was then €770 per annum, up to the level of the PAYE credit of €1,760. She noted that to do this in one year would cost up to €100 million. She said she believed it would be money well spent and that it would allow couples more space in which to decide what was best for them and their children and that it would allow greater options in lifestyle, particularly for families struggling to care for two or three young children in their early years. I have sympathy with the views the Tánaiste held previously. However, it is disappointing that in deciding how to divvy up the money it was making available for tax cuts, that families with a stay at home mother or father were effectively at the bottom of the Government's list of priorities.

Individualisation was one of the most significant changes ever made to the personal tax code, but we have remarkably little data on its societal impact. I heard John Fitzgerald on the radio at the weekend on the occasion of his retirement from the ESRI. He noted that, as well as its ongoing activities, the ESRI receives funding on a case by case basis to undertake certain studies in the public interest. I suggest that 15 years on from the introduction of individualisation, now would be a good time for the ESRI to be commissioned to examine how individualisation has impacted in practice and how it can be tweaked.

On corporation tax, issues only partially addressed in the Finance Bill are the closing off the "double Irish" regime and instituting a "knowledge development box" in its place. I said on budget day that the Minister had initiated a major change to Ireland's corporation tax regime. What is even more significant is that he is doing it pre-emptively. The BEPS process is still under way and unlikely to be concluded for at least another year. Let me be clear, I would not have made any unilateral changes which could undermine Ireland's corporation tax offering to multinationals. In this Finance Bill, the Minister is abolishing the "double Irish", but is not providing in legislation for the knowledge development box.

There appears to be a mixed message coming from the Government. It has put significant emphasis on preventing reputational damage to Ireland and closing off the "double Irish" to new entrants was a key part of that strategy. However, we read at the weekend in The Sunday Business Post that, essentially, shelf companies can be registered between now and the end of the year under the "double Irish" structure and these can then be purchased by other firms in future years, allowing them to avail of the advantages it conveys. I am interested in hearing the Minister's views on this and whether he considers it an attempt to circumvent the stated intent of the legislation.

Now that the Minister has decided to end the "double Irish", any substantial investment that was in the pipeline which was structured along these lines should be allowed to proceed. However, we should absolutely rule out a trade in shelf pre-2015 companies. The Department has experience of catering for projects that were already substantially progressed when introducing new rules. If necessary, this should be specifically provided for in the Bill. On budget day, I expressed some scepticism regarding the nature of the successor regime the Minister was putting in place, not least because announcements of much less consequence, such as the living city initiative, remain in abeyance long after they were originally put forward to the European Commission.

I note that Wolfgang Schäuble, the German finance Minister, has been quoted as saying that he was confident an agreement would be reached at the G20 summit in November on patent box tax incentives and that he was optimistic that G20 leaders would adopt the so called "Nexus approach" which is predicated on there being a link between research and development expenditure and the income arising from the patents developed. However, I understand the introduction of a "gateway" approach, which would be much broader in its application, is favoured by the UK. The outcome of the G20 summit and OECD meeting on harmful tax practices in Paris on 17 to 19 November will be an important stage in how the patent box issue evolves. Our aim should be to have a best in class regime and, importantly, a rate that is competitively below the UK rate of 10%. I await developments in this regard with interest.

I welcomed the announcement of a rebate on DIRT tax for first-time buyers when it was announced on budget day. In the meantime, I have had a chance to study the proposal in greater detail. According to the information I have received from the Department of Finance, it estimates that approximately 9,500 first-time buyers will benefit to the tune of an average €294 in 2015. While any help is welcome, the actual benefit will be a fraction of what first-time buyers previously got from mortgage interest relief and in most cases will be less than the annual property tax bill. This is only a drop in the ocean in terms of the costs of affording one's first home. As the Minister knows, first-time buyers can no longer avail of mortgage interest relief. The proposal has all the hall marks of a plan cobbled together to counteract the negative reaction to plans to impose new deposit restrictions on first-time buyers.

I welcome the consultation process that is under way and hope the Central Bank has a genuinely open mind on the subject. However, I find the intervention of the Taoiseach in recent days - when speaking about a deposit insurance scheme - to be unhealthy. The consultation process has a few more weeks to run and the Central Bank has outlined the rules it expects to introduce. If the Government disagrees with these, it can make a submission through the Department of Finance and seek to persuade the Central Bank of its view, just as I and others will do. The Taoiseach should not try to circumvent the policy of the Central Bank with an alternative initiative.

If the 20% deposit rule is too high, I believe the place to make that case is through the Central Bank consultation. We cannot have conflicting national policies in operation.

It is disappointing that the Minister has not reviewed the thresholds on inheritance tax. The level at which an individual has to pay capital acquisitions tax on a gift or inheritance from a parent to a child has been reduced by 60% in recent years to €225,000, which reflected the very significant fall in house prices and asset values generally. The Government also increased the capital gains tax rate to 33%. Parents want to be able to pass on the benefit of their hard work to their children and grandchildren. Whether this is in the form of the family home or savings, it is very important to parents that they are able to provide for the future financial security of their family. In my view, there is an urgent need to review the present thresholds so they more accurately reflect current house prices. The reality is that, unless the thresholds are changed, many people who are far from wealthy will end up having to sell a property they inherit in order to meet their capital acquisitions tax bill.

The Minister could also have taken the opportunity to deal with the upcoming property tax bombshell that his backbenchers have been warning him about. The Government included a provision in the local property tax legislation which provided for a revaluation of properties in 2016. The previous valuation date of May 2013 was close to the point at which property tax values hit their lowest level. Since then, property prices have been rising steadily. According to October's CSO data, house prices in Dublin have risen by 29% in the 16 months since the last valuation date, while apartment prices have risen by 32%. Nationally, prices have risen by 15% since May of last year.

Even if there is a slowing in the current rate of growth in property prices, it is likely that the next valuation date will see many homeowners having to revise the valuation basis for their property tax declaration by 20% or more, and, for some Dublin residents in particular, it could be over 50%. For most properties, the effect of rising by one band valuation is an extra €90 per year. Many homeowners could see their home values rise by three or even four valuation bands, adding up to €360 to their annual bill. I will be tabling an amendment on Committee Stage to deal with this issue and I look forward to the support of those vocal Fine Gael backbenchers who have expressed concern on the subject.

One other area in respect of the local property tax where the Minister had promised action is in allowing the local property tax to be a deductible expense for landlords. He has previously signalled his intention to do so but has not brought forward proposals in this regard, including in this Finance Bill. It would be helpful if he could indicate what the cost of allowing this deduction would be and when he intends to proceed with that.

In replies to some parliamentary questions, the Minister had given some hope that he would tackle the problems of people I would call accidental landlords. A combination of falling incomes, rising personal taxes and changed family circumstances mean that tens of thousands of people are living in homes that no longer meet their needs. Negative equity is preventing many of them from being able to sell their homes. In such circumstances, the only option may be to rent their homes and, in turn, rent new properties for themselves to live in. Anyone who takes this course of action faces an array of charges, including income tax, universal social charge, fees to the Private Residential Tenancies Board and PRSI on rental income. They also face losing their mortgage interest relief and their tracker mortgage rate, if they are lucky enough to have one.

In practice, thousands of families are in significant financial difficulty, having to subsidise mortgages on their homes as well as facing significant income tax bills. A family with a €300,000 mortgage on an apartment earning rent of €1,200 a month could face a tax bill of up to €2,000 on an annual basis. What I have put forward is a simple change to the income tax code which would allow people who bought their houses between 2000 and 2009, and who have now moved out and are themselves renting, to offset this rent payment against rental income for a period of three years. This would substantially reduce or eliminate the income tax bill on their rental income.

I would like to mention the taxation treatment of alcohol. It is generally accepted that alcohol consumption in moderation does not pose substantial health risks and is an undoubted part of socialising for many. Ireland is currently seeing an increase in alcohol consumption in the home. One of the reasons often cited for this trend is the significant price differentiation for alcohol products between on-trade and off-trade establishments. Not only has this discrepancy affected social behaviour by discouraging people from consuming at public houses, it has also been cited as a contributing factor in the rise in binge drinking and underage drinking. There is an opportunity to establish a greater degree of fairness within the alcohol sales market and to raise revenue for the State by introducing a levy directed towards the sale of below-cost alcohol in supermarket multiples in particular. These supermarkets are pricing alcohol aggressively and using it as a loss leader to drive footfall into their premises. The introduction of a levy to level the playing field somewhat would also be beneficial to society as a whole, since the regulation of alcohol taxes is one of the most common ways to combat alcohol-related problems, especially within European societies. The Minister has previously stated in replies to parliamentary questions that such a measure would be contrary to EU regulations. I have been provided with legal advice that states it would be permissible. In this context, we made a suggestion prior to the budget that an all-party committee be established to look at this question. There are significant employment issues to be considered as well, given that the on-trade is much more labour-intensive. I would welcome a commitment from the Minister to engage with Opposition parties on the subject, as has been done separately on the subject of alcohol sponsorship in sport.

In regard to the enterprise measures included in the budget, the best description I can give of them is that they are hit and miss. While there are some welcome developments, domestic entrepreneurs and SMEs are still very much the poor relation when it comes to Government attention when compared to their multinational counterparts. I would have liked the Minister to expand the entrepreneurs' capital gains tax relief. As currently envisaged, the incentive works by offering relief to individuals who have recently paid capital gains tax and subsequently invest in a new business, before selling that new interest no earlier than three years after the investment date. The capital gains tax due on this sale is reduced by the lower of either the capital gains tax paid on the original disposal or half of the capital gains tax due on the new sale. This is quite restrictive and the second company must be involved in an activity "not previously carried on" by the entrepreneur or an associate. Our proposal is for a 15% rate of capital gains tax for entrepreneurial investors, regardless of whether they have invested in a new business, up to a limit of €5 million. This would create a clear distinction between passive investment and entrepreneurial activity.

The self-employed will again be disappointed that there has been no improvement in their relative tax treatment. In so far as possible, the tax system should treat people in an equitable manner. Self-employed people lose under the current regime because, while they receive personal tax credits, they cannot claim PAYE tax credits, which are worth €1,650 per annum. This has a particularly stark impact at lower levels of income. For example, a self-employed single person on an income of €15,000 pays almost six times as much income tax and PRSI as an employee on the same level of income. There is a strong case for addressing the unfair treatment of the self-employed, particularly those at a lower level of income.

I would like to have seen greater action to deal with the issue of lack of credit, which is affecting SMEs, particularly through the introduction of tax relief for individuals making loan capital investments to SMEs. We proposed a pilot scheme on crowd financing, similar to that supported by the UK Government, in order to give a new source of finance to smaller start-up companies, and it something that is due to come up again tomorrow during Oral Questions on finance.

I welcome the changes to the research and development tax credits, which, in my view, will enhance the offering we are making to companies. It can be a significant gateway to real investment and real jobs in this economy.

I also welcome the changes to the special assignee relief programme, SARP, which is an attractive regime for mobile talent and clearly improves the attractiveness of this location when a company is deciding where to invest. Similarly, for companies seeking to expand their export business, the foreign earnings deduction improvements will be welcome.

In conclusion, this budget has been a disappointment to the general public. The Minister had a real opportunity to use the scarce resources that have become available in a socially progressive manner, focusing, for example, on improving access to child care, increasing mortgage interest relief, reducing medical costs for families and providing a meaningful increase in the living alone allowance for older people. Instead, they have been frittered away. There has not even been an electoral dividend for the Minister's party, not to mention an economic one.

The enterprise measures in the budget lack imagination. The economy has become dangerously lopsided with areas outside Dublin being left behind in the economic recovery. Hopefully, the Minister will heed some of the messages and take the suggestions on boards in the time ahead. I look forward to a more detailed debate on the Bill on Committee Stage.

Debate adjourned.