I would like to pick up on the point on which Deputy Michael Creed left off, in regard to the potential for a dialogue of the deaf. While it may seem like that, I have attended this debate over the past three days and I believe it has largely been a constructive engagement. It was unfair of Deputy Róisín Shortall to suggest that Government Deputies did not participate. The list of speakers indicates differently. We have had a constructive debate, and the comments made by Deputies Michael Creed and Paul J. Connaughton last night that there is no monopoly on wisdom are fair. Deputy Paul J. Connaughton suggested that people on this side of the House tend to think that everything is wonderful while people on the other side think everything is dreadful. Perhaps the truth lies somewhere in the middle.
Neither I nor the Government advocates that this Finance Bill or budget 2015 is a panacea for all the challenges faced by this country. As every Member and citizen knows, we have had several extremely harsh budgets over a number of years involving difficult decisions that have had a negative impact on the lives of all people living in this country. This budget was the first that allowed us to try to give something back. However, I hasten to add that what has been given back has been modest and limited. The budget and the Finance Bill need to be viewed in that light.
A wide range of issues have been raised in the past three days and it will not be possible to deal with all of them in the time available. While all of the issues raised do not relate directly to the Finance Bill, I understand and appreciate how these wider issues arise. It is unsurprising that the issue of water charges has featured strongly in contributions. A number of measures were announced on budget day in regard to the Finance Bill and what we are discussing now to approve the overall affordability of water charges. The objective of these supports is to assist households that pay their water bills. Following on from the announcement on budget day, officials from the Department of Finance are working closely with their colleagues in other relevant Departments and agencies on the development of processes that will be employed to deliver the relief. As the Minister for Finance stated on budget day and subsequently, we will design the measure as broadly and efficiently as possible to ensure the relief reaches all households that pay their charges. As Members know, the Government is expected to make an announcement on this and related matters in the near future.
On the issue of tax progressiveness and fairness, a number of Deputies have asserted that the income tax package was skewed towards higher earners. However, the maximum benefit from this tax package is achieved at incomes of €70,000. The new USC rates on incomes above that level act to cap the benefit in order that those with incomes greater than €70,000 achieve only the same benefit in monetary terms. People come into this House and make disingenuous comments about millionaires getting so much, but the benefit flatlines after €70,000. It may not sound as appealing to a millionaire to say the maximum benefit is achieved at €70,000. That point should not be lost if we are to have an honest debate. The highest proportionate benefit, as a percentage of net income, from the budget tax changes occurs at an income level of just over €12,000.
Since the Government came into office, some 410,000 people no longer pay the USC. Now, following this budget, a further 80,000 will be removed from the USC net. Some 33,000 people have been removed from the top rate tax band. These are people on incomes of approximately €32,800. The band has been increased by €1,000 to €33,800. These people are not millionaires or wealthy people. They are normal people who get up, go to work and earn a relatively modest income but who were paying the higher rate of tax. We have had debate in the media in the past few months about how people here start paying the higher rate of tax at a low income. The budget makes an honest attempt to begin to rectify this, because this entry point to the marginal rate of tax is a disincentive to people who choose to work harder and accept promotion or move from part-time to full-time work. I concede that we have raised the band by only €1,000 in this Bill, but some 33,000 workers who were paying the higher marginal rate of tax will benefit and will no longer pay that rate.
In the lifetime of the Government, we have restored the minimum wage. The availability of social housing is an issue in all our communities, certainly in mine, and we have had significant discussion on this. The budget represents a massive effort to invest in social housing. As a country, we stopped building social housing and moved to a model of private rental, a model that caused significant difficulties in terms of social cohesion. People ended up renting a house for a year, not knowing where they would be the following year or where their children would go to school. They could not become embedded in their communities. We must get back to a situation in which we are building local authority housing, and this budget will help us start on that. I have alluded to housing issues because of the concerns raised in this debate.
Concerns were also raised regarding access to front-line services. While this issue is not directly related to the Finance Bill, it should be noted that the Government announced through the budget the ending of the blanket moratorium on recruitment. This moratorium was a blunt instrument which was implemented absolutely. Sometimes it is necessary to use a blunt instrument when in the midst of a crisis. However, the moratorium led to a situation regarding access to front-line services. In all communities we see its effect. With the ending of the blanket moratorium, we will have a situation in which local managers, paid to manage, will have to act within their employment budget. They will make the decisions in regard to how they spend that budget. I believe this is a better and fairer way to deal with front-line services in terms of closeness to the community.
It is unfair for Deputies to suggest every new job created has been a low-paid job. I have responsibility for the international financial services sector and when I visit companies and meet people working there, the assertion is not borne out by the facts. It is also not borne out by our tax take. The Government has given a commitment to a low pay commission. In regard to getting people to move from social welfare to work and providing supports for people who are trying to move, the Tánaiste has announced that these people will be allowed to retain the qualified child payment when transitioning from lone parent allowance. These important measures are worth noting if our debate is to remain in context.
In response to some of the specific issues raised, Deputy Michael McGrath suggested the abolition of the weekly PRSI allowance two years ago affected all taxpayers equally.
However, I must correct the record because that is simply not the case. Those who did not earn more than €18,304 were unaffected as they were not liable to PRSI.
As regards individualisation of the tax system, the position is that this issue was considered by the Commission on Taxation which, as Deputies will know, recommended no change be made to the current system. As regards the self-assessed and the fact they do not have access to PAYE tax credits, the reasons for this are historic. There have, of course, been changes during the years, with the result that the self-employed now pay tax on a current year basis, for example, and that the PAYE allowance has become a tax credit. However, the Government has signalled its intention to introduce a programme of tax reform. Budget 2015 is for the first year of that programme and I hope we can look at such tax reform issues in subsequent budgets.
With regard to progressivity, it is important to indicate that Ireland has one of the most progressive income tax systems of the EU members of the OECD and the second most progressive of all members of the OECD. The changes introduced in the budget will reinforce this progressivity such that the top 1% of income earners will pay 21% of all income tax and USC collected in 2015, up from 19%. In contrast, the bottom 76% of income earners will pay only 20% of all income tax and USC collected, down from 21% before the budget. I heard Deputy Róisín Shortall describe the Government statistics as contrived, but they cannot only be contrived when they are uttered from this side of the House. These are statistics and they are the facts. We can look at and debate the analysis, but let us also debate the facts.
A number of Deputies spoke about the SARP provisions in the Bill. While the take-up of the SARP to date has been very low, the Minister believes the enhancement of the SARP will help to improve our offering in attracting companies and mobile talent. Companies that avail of it are required to report to the Revenue Commissioners on the number of jobs created or retained that can be attributed to the existence of the scheme. This is a job creation measure. There has to be a linkage between jobs created or jobs retained by virtue of an individual being in this country and availing of the scheme. The Minister will be watching these reports closely in regard to the statistics for the uptake of the scheme.
There was a discussion about the so-called double Irish. I disagree with those who assert that the Minister's announcement on budget day on Ireland's rules on company residence and the so-called double Irish placed Ireland at a competitive disadvantage internationally. I argue the opposite is the case. Industry expects certainty and we are partaking in an OECD BEPS process. Why would anyone wait to arrive at a destination when he or she could have what I describe as a first-mover advantage? Let us get out there and let investors know where we intend to go with the tax code and various regimes we have in place. That is what we have done. This change is very important for the State. It is a small part of a much broader initiative which is set out in the new roadmap for Ireland's tax competitiveness which contains a comprehensive package of competitive tax measures to provide the foundations to maintain Ireland as a thriving hub for foreign direct investment.
Deputy Pearse Doherty asserted that the Minister had misled the Dáil on the issue of the so-called double Irish. That is, obviously, an assertion I reject. The Minister has always been very 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 rules in two or more countries. Obviously, it is something we are putting beyond doubt as a result of the budget announcement.
There has been a discussion about the amount of tax paid by multinationals. It is an important discussion to have; discussions on all tax issues are extremely appropriate to the Finance Bill and the budget. However, it is also important to have the discussion in the context of some of the documentation and reports published on budget day. I refer Deputies to the report issued on budget day on the effective tax rate paid by companies in Ireland and also the ESRI report on what would have happened, hypothetically, if the corporation tax rate in this country had been increased from 12.5%. A substantial body of work was done by the ESRI and its report has been published. It builds a good foundation for a debate on the matter in the House and I am sure it is an issue to which we can return.
The issue of tax competition was raised and there were questions about who benefited from this practice. Questions were also raised about evidence that supported a low corporation tax rate in Ireland. Again, it is important that these questions be considered in the context of the ESRI's report and the report on the effective tax rate published by the Department of Finance.
Reference was made to the provision of tax relief for crowd funding and loan capital. The Minister has no plans to introduce such tax relief, but investors can, of course, avail of tax relief for qualifying investments in SMEs through the employment and investment incentive.
Reference was made to increasing the tax-free thresholds that applied under CAT legislation to gifts and inheritances, depending on the relationship between the giver and the beneficiary on foot of the increase in property values. While asset values, including property prices, have been recovering in recent times, it is unlikely they have recovered to previous levels or uniformly in all areas of the country. This is a threshold the Minister will keep under review.
On the need to encourage domestic entrepreneurs, a point raised by Deputies Dara Calleary and Michael McGrath and others, section 45 of the Finance (No. 2) Act 2013 provided for capital gains tax relief for entrepreneurs who reinvested the proceeds from the disposal of assets made on or after 1 January 2010 in certain charitable business assets. Commencement of the legislative provisions had been made subject to EU state aid approval. A number of changes are being made to the capital gains tax entrepreneur relief provisions in this Finance Bill in order that the relief will satisfy new EU regulations introduced earlier this year, thus obviating the need for formal EU approval of a relief from a state aid perspective. I hope that in time this is something that can be of significant benefit to domestic entrepreneurs.
There was a significant discussion and, it is fair to say, concern on all sides of the House about the definition of "an active farmer". Concerns were expressed about the revisions to the definition in dealing with CAT relief on agricultural property. I am pleased to inform the House that the Minister will examine these concerns which have also been expressed by others and will see if further amendments are required on Committee Stage. This is clearly an issue that needs to be looked at and I am sure we will be returning to it on Committee Stage.
Quite a few Deputies referred to the abolition from next year of the windfall tax provisions. I would like to restate the rationale behind it. The Minister has done so because the tax is an impediment to the proper functioning of the property market at this time. Such profits or gains will in the future be taxed at normal rates of capital gains tax, corporation tax or income tax, as appropriate. The Minister will keep developments in the property market under very close review and, if it is found that transactions on the sale of land for development are leading to abuse or increased development costs, in particular in providing housing, he will not hesitate to introduce whatever measures are open to him to correct the situation.
It was extremely regrettable that Deputy Róisín Shortall referred to one representative body which the Minister had consulted, as outlined in the course of a reply running to a page and a half to a parliamentary question. The Minister consults widely; the budget process is open to pre-budget submissions and such submissions are received from far and wide and considered in the context of the budget. It is appropriate to do so. To suggest in a slur that some of the representative bodies named by the Deputy in this Chamber were responsible for the economic mess in which the country finds itself is not to recognise the reality that many of these organisations are responsible for significant economic and business activity. For example, Chambers Ireland was among the group of bodies listed. It is very appropriate for the Minister for Finance of the day, whoever he or she may be, or whoever is in government, to consult widely with all stakeholders and participate in an engagement process. We need to make sure that when we get to the stage of introducing a budget, we have engaged with as many stakeholders and heard as wide a variety of views as possible.
There were some queries about the first-time home buyers' issue. First-time home buyers will be entitled to a refund of DIRT paid on savings used to purchase a home, on up to 20% of the purchase price in the 48 months prior to purchase, up to the end of 2017.
Deputy Pearse Doherty referred to the proposal to amend the general anti-avoidance legislation. There are significant numbers of cases involving transactions which have already taken place and which Revenue is challenging. However, pursuing these cases through the courts is slow, the outcome can never be certain and the process ties up significant Revenue resources. That is the reason a settlement opportunity is being provided. Let me be clear: at an absolute minimum, the taxpayer has to pay the tax due and, where interest is relevant, 80% of it also has to be paid. The measure is strictly time-bound. Tax evasion is illegal; tax avoidance is not. Nonetheless, Revenue challenges aggressive tax avoidance schemes and the unintended use of legislation.
There was a discussion during the course of the debate of a proposed levy on alcohol sales in off-licence premises. As the Minister has previously pointed out, EU Directive 92/93 which governs the structure of alcohol taxation does not provide for differentiation in tax treatment based on the location in which an alcohol product is sold. As Deputies on all sides of the House will be aware, however, the broader issue is being looked at in terms of a whole-of-government approach.
Deputies Michelle Mulherin, Denis Naughten and John Paul Phelan raised the issue of petrol stretching. This is a very serious issue about which we have heard a significant amount in recent times. I assure the Deputies that it is being taken very seriously by the Revenue Commissioners and that investigations into the matter are ongoing. To date, 48 premises nationwide have been tested, with samples referred to the State Laboratory. Where the examinations indicate the presence of illegal stretching agents, the Revenue Commissioners will take action and pursue prosecutions against offenders, where possible. I reiterate a call I made previously during Topical Issue debates that anyone with relevant information pass it on immediately to the Revenue Commissioners. There is a section on the Revenue Commissioners' website to enable people to pass on this information.
Deputy Pearse Doherty asked about the VAT treatment of Government funding for the 1916 centenary commemorations. As Government funding is outside the scope of VAT, there will be no VAT liability on the receipt of funding by groups commemorating the 1916 Rising. The Deputy also asked for clarity on the different VAT treatment of Irish dancing and ballet classes. The EU VAT directive, with which Irish VAT legislation must comply, provides for a public interest exemption for education. Ballet schools are regarded as providing VAT-exempt education of a similar kind. This is because, in general, recognised ballet schools are run by qualified ballet teachers who teach to an externally examined syllabus. That was one of the more niche issues raised, but it was also an important one.
A number of Deputies referred to the pension fund levy, which will be very significantly reduced next year and end after that. Other Deputies welcomed the retention of the 9% VAT rate on tourist-related activities. As the Minister for Finance said in his Budget Statement, without the pension levy fund, there would have been no VAT reduction, but he has now outlined very clearly how he intends to wind it down.
I have tried to answer as many questions as I can. No doubt, there will be an opportunity to tease out these issues further on Committee Stage. In his opening statement to the House the Minister mentioned that there were still a small number of matters under consideration for inclusion on Committee Stage.
I will end where I began. The Finance Bill is not a panacea for all of the challenges faced by families. It is simply not possible to do this in one budget after the significant economic crisis from which the country is emerging. We now have the fastest growing economy in Europe, with the expectation that this will continue into 2015 and 2016. We also have one of the fastest growing employment rates in Europe. The budget was the first opportunity we had to try to give something back in a small and modest way. I hope it is something on which we can build in future budgets. I think the message that needs to go out is that the firefighting in the economy is over and that we now need to do all we can to create more jobs, continue to reduce the unemployment rate, increase investment in the country and deliver the public services on which all of our constituents and every citizen in the country depend. I commend the Bill to the House.