Finance Bill 2016: Second Stage

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

As I said in my 2017 Budget Statement, the country has overcome significant challenges which many thought were insurmountable. The lessons of this challenging period must not be forgotten. There is a need to manage the public finances effectively and fairly for the benefit of all. In the programme for Government we decided to favour investment in services over tax changes on a two to one basis in favour of public services. We have also listened to the need for reform of how we do our business. This Finance Bill is focused primarily on implementing the main tax changes announced on budget day. As there are limited resources available for taxation changes, we have sought to make progress, where possible. The budget made changes to USC rates and this is another step in bringing us nearer to phasing out this charge. The changes to the capital acquisitions tax, CAT, thresholds and capital gains tax, CGT, entrepreneur relief are a step forward in moving towards the programme for Government commitments. The Bill, for the most part, reflects the objectives set out in the budget. I am conscious of the need to support the wider business sector, given its importance in terms of employment creation and investment. These budget measures are a good start in how we will help business to deal with Brexit. They are only a start and we recognise that we will have to do more in the future.

First, the Government has retained the reduced VAT rate for the tourism and hospitality sector. Other measures are included in the Bill to extend the special assignee relief programme and the foreign earnings deduction until the end of 2020; to extend the start-your-own business scheme for a further two years; and to improve the revised entrepreneur relief I introduced in budget 2016 by reducing the 20% rate of capital gains tax to 10% on disposals of qualifying assets up to a limit of €1 million in chargeable gains. The Bill also provides for an increase in the earned income credit from €550 to €950 per year. This credit is available to self-employed individuals who do not have access to the PAYE credit and provides support for entrepreneurs and small business owners generating employment and economic activity across the country.

The universal social charge was introduced in 2011 as a measure to broaden the tax base to address the fiscal crisis. Since that time, significant progress has been made in broadening the income tax base in other ways through the curtailment or abolition of reliefs and exemptions. This allowed me to begin to reduce the USC in the last two budgets and now allows me to continue that process in this Bill which provides for the reductions in the three lowest rates of USC announced in the budget.

A Programme for a Partnership Government acknowledges that higher personal tax rates discourage work and jobs. For the third year in a row, the measures introduced in this Finance Bill will reduce the top marginal rate of tax on incomes up to €70,044 per year. Subject to the passing of the Bill, this marginal rate will stand at 49% from January 2017.

From 1 January next year, the Bill will reduce the three lowest rates of USC by 0.5% each. The 1% rate will fall to 0.5%; the 3% rate to 2.5%; and the 5.5% rate to 5%. This will decrease the rate of USC applying on all incomes up to €70,044 in a year, fulfilling our programme for Government commitment to focus tax reductions on low and middle income earners. The Bill also makes a small increase in the ceiling of the band on which the reduced 2.5% rate of USC will be payable to €18,772. This will ensure the salary of a full-time worker on the minimum wage will remain outside the top rates of USC following the increase in the national minimum wage from €9.15 to €9.25 per hour. I am maintaining the threshold for entry into the USC at €13,000. This will maintain the breadth of the income tax base and ensure over two thirds of income earners will continue to contribute towards the provision of public services and social supports for all citizens.

The Bill also provides for an increase in the home carer tax credit to €1,100 per annum to support families where one spouse works primarily in the home to care for children or other dependants. This credit is of benefit to over 80,000 families annually.

The help-to-buy initiative included in the Bill aims to assist first-time buyers of new homes to fund the deposit required under the Central Bank's macro-prudential rules. It takes the form of a rebate of income tax paid in the previous four tax years as a contribution to the deposit needed to fund the purchase of a new home. The amount rebated will be up to a maximum of 5% of the purchase price of a new home up to a value of €400,000, while no rebate will be available for new purchases costing more than €600,000. The amount of rebate available to an applicant is calculated based on his or her total income tax paid in the previous four years. To qualify, the property must be a new build and purchased or self-built as the applicant's principal private residence. By restricting the initiative solely to new builds and new self-builds, it is anticipated that the resulting increase in demand should encourage the construction of such properties.

The help-to-buy scheme as announced on budget day limited it to persons who had mortgages with a minimum 80% loan-to-value ratio. The Central Bank has indicated to the Department of Finance that a sizeable number of first-time buyers take out a mortgage with a loan-to-value ratio of less than 80%. I have, therefore, decided to amend the scheme in order that first-time buyers do not feel compelled to borrow larger amounts in order to qualify. I have set a minimum loan-to-value ratio for the scheme at 70% in the Bill.

As I announced in the budget, the Bill will implement measures in respect of section 110 of the Taxes Consolidation Act 1997. Concerns were raised about the section 110 regime being used by investors in a manner which was never intended. I am, therefore, moving to restrict the use of the regime where transactions involve loans secured on and deriving their value from Irish property. Ireland has always protected its right to tax profits arising from property in the State, as is the international norm. This measure reinforces our taxing rights and will ensure the Irish tax base is appropriately protected, while simultaneously ensuring the section 110 regime will be maintained for bona fide securitisations. The proposed amendment to section 110 applies to profits arising from the holding of financial assets that derive their value from Irish land and property from 6 September 2016 and does not permit the section 110 companies to "mark to market" or revalue their assets at that date. The final proposal, however, does include exemptions which relate to bona fide securitisations such as collateral loan obligations, residential and commercial mortgage-backed security transactions and loan origination businesses.

In a further move to assert our taxing rights over Irish property, I am introducing a new tax regime for Irish funds holding Irish real estate.

Irish real estate funds are investment undertakings, as defined, where 25% of the value of that undertaking is made up of Irish real-estate assets. Where an Irish real estate fund holds 25% or more of its value in Irish real estate assets, the IREF must deduct a 20% withholding tax on certain property distributions to non-resident investors. The withholding tax will not apply to certain categories of investors such as pension funds, life assurance companies and other collective investment undertakings. The proposal will ensure that the Irish tax base will be protected where Irish property transactions are taking place within collective investment vehicles. The amendment will apply to accounting periods beginning on or after 1 January 2017.

Therefore, in terms of the treatment of section 110 and of funds, I think that the changes in the Bill represent the most appropriate balance that can be achieved. I recognise that there may be issues of a technical nature, in particular with regard to Irish real estate funds, which if necessary can be addressed on Committee Stage.

I am conscious of the difficulties in the farming and the agrifood sector driven by changes in world prices, the immediate impact of a fall in the value of sterling arising from Brexit and the difficult weather. Some of the tax changes for the self-employed will also accrue to this sector. The sector will benefit from the following specific tax measures. The flat-rate addition for farmers will increase from 5.2% to 5.4%. Farm-restructuring relief is being extended to 2019. Farmers will be able to step out of income averaging and pay only the tax due on a current-year basis with any deferred tax liability becoming payable over subsequent years. The scheme of accelerated capital allowances for investment in energy-efficient equipment to sole traders is being extended to all non-incorporated businesses and will help businesses in the farming and marine sectors to invest in energy-efficient equipment and receive the full allowances in the first year. An income tax credit is being introduced for fishermen. The €1,270 annual credit will shelter income of up to €6,350, which is the equivalent value of the seafarers' exemption.

In budget 2017, I announced that I was increasing the capital acquisitions tax group A tax-free threshold which applies to gifts and inheritances from a parent to their son or daughter to €310,000. The Bill also allows for an increase in the group B threshold to €32,500 and the group C threshold to €16,250. These increased thresholds are effective from 12 October 2016 and further threshold increases will be considered in the context of the 2018 budget.

I will now go through the Finance Bill measures, but Deputies will appreciate that in the limited time available to me I cannot describe every single section in detail. Part 1 of the Bill deals with universal social charge, income tax, corporation tax and capital gains tax. Sections 2, 3 and 4 provide for the income tax and USC changes that I have just outlined. Section 5 provides for a new tax credit for fishermen to assist the viability of the fishing sector. This will allow those who spend at least 80 days fishing at sea in a tax year to claim an additional income-tax credit of €1,270 per annum.

Section 6 makes a technical amendment to the sportspersons' relief to provide that contributions to PRSAs are treated in the same manner as other pension products. The extension of the home renovation incentive for a further two years is provided for in section 7. Deputies will be aware of how successful this incentive has been to date with more than €1 billion worth of works undertaken on almost 47,000 properties so far.

Section 8 gives effect to the help-to-buy incentive scheme. Section 9 extends the special assignee relief programme until the end of 2020. This programme was due to expire at the end of 2017, but this extension is being announced now in order to provide certainty for the foreign direct investment sector in the context of Brexit.

Also in that context, section 10 provides for the extension of the foreign earnings deduction until the end of 2020. It adds Columbia and Pakistan to the list of qualifying countries and reduces the minimum period required to be spent abroad from 40 to 30 days to ensure that the scheme is more accessible to smaller businesses.

Section 11 extends the start-your-own-business tax relief for new applicants for an additional two years until the end of 2018. This scheme assists long-term unemployed individuals to start a business by giving them an exemption from income tax on profits of up to €40,000 for two years and mirrors that available for corporate start-ups.

An increase in the ceiling for tax-free income under the rent-a-room scheme from €12,000 to €14,000 is provided for in section 12. Deputies will be aware that this incentive aims to encourage homeowners to rent out additional vacant rooms, thereby providing extra residential accommodation.

Section 13 relates to personal retirement savings accounts, PRSAs. Revenue has brought to my attention certain tax-planning opportunities entailing PRSAs that were not envisaged by the legislation. The section will close off the opportunities concerned by amending the legislation to ensure that all PRSA benefits are deemed to commence on the PRSA owner's 75th birthday; it is deemed to become vested PRSAs on that date regardless of whether the benefits commence on that date or at all.

PRSAs which become vested in these circumstances will come within the imputed-distribution regime that applies to vested PRSAs, be treated as a benefit-crystallisation event for standard fund threshold purposes and, on the death of the PRSA owner, pass to a surviving spouse or civil partner under the rules applying to approved retirement funds. Where PRSA owners have, to date, maintained their PRSAs intact beyond their 75th birthday, these will be deemed, subject to transitional arrangements, to vest on the date of passing of Finance Bill 2016.

Section 14 amends the living-city initiative. These changes are being brought forward following a review completed by my officials in consultation with the city councils and others. The changes include the removal of the restriction on the maximum floor size of properties that can qualify, the removal of the requirement for the residential element of the initiative that the property must have been previously used as a dwelling and changes to the minimum amount of expenditure needed to qualify. It also extends the availability of the initiative to landlords in respect of the renovation of rental accommodation in the designated living-city areas.

Section 15 provides for the phased restoration of 100% interest deductibility for landlords of rented residential property over the next five years, the first stage of which will be an increase from 75% to 80% deductibility in the year 2017. This is one of ten housing market support measures announced in budget 2017 to complement the structural measures in the action plan for housing and homelessness.

Section 16 extends the scheme of accelerated capital allowances for energy-efficient equipment to make it available to farmers and all sole traders in addition to corporates.

An amendment to the income averaging regime that allows a farmer's taxable profits to be averaged out over a five-year period is provided for in section 17. The amendment will allow farmers to step out of income averaging in a single year of low income and will be available for the current tax year.

Section 18 and section 27 relate to fishing vessel decommissioning. The Department of Agriculture, Food and the Marine has allocated €16 million in funding under the European Maritime and Fisheries Fund for a vessel decommissioning scheme to remove excess capacity from the Irish fishing fleet. This is intended to meet the Common Fisheries Policy requirement to balance a national fishing fleet with the fishing opportunities available to that fleet.

As part of the policy to encourage decommissioning, an amendment is being introduced that will extend the terms of CGT retirement relief for those receiving compensation under this scheme and will also lengthen the time over which they can pay balancing charges for capital allowances on vessels. These amendments are subject to a commencement date.

Section 19 provides for a technical correction and amendments to the employment and investment incentive, EII, to ensure that the Revenue Commissioners may continue to publish information relating to the companies who raise investments under the incentive. It also retains EII outside the scope of the higher earners restriction. Section 20 provides for the reduction in the rates of deposit interest retention tax, DIRT, from 41% to 33% over a four year period. Section 21 deals with amending section 110 and section 22 introduces the legislation for Irish Real Estate Funds, IREF. Section 23 makes some minor technical amendments to our existing legislation on country-by-country reporting for large multinationals. Section 24 implements EU Directive No. 2015/2376, which is known as DAC 3, into Irish law. The directive extends the automatic exchange of information with other EU member states to include information about taxation rulings and advance pricing arrangements issued by tax authorities.

Section 25 relates to changes to entrepreneur relief. Section 26 seeks to bring sections 579 and 579A of the Taxes Consolidation Act 1997 into line with European Union law. These sections are anti-avoidance provisions designed to prevent the establishment of non-resident trusts for the purposes of avoiding tax. The EU Commission’s Directorate General for Taxation and Customs Union has expressed doubts about the compliance of both sections with European Union law, in that they see them as meaning that the beneficiaries of such trusts are treated less favourably than the beneficiaries of Irish trusts. Section 27 relates to fishing vessel decommissioning, which I referred to in section 18. Section 28 is concerned with farm restructuring. A capital gains tax, CGT, relief for farm restructuring was introduced in budget 2013. It is granted where a more efficient farm holding results from the sale and purchase of land. I announced in budget 2017 that I was extending the deadline for first transactions by three years from end 2016 to 31 December 2019.

I will now turn to section 29. The EU Commission requires Ireland to carry out restoration works on raised bog special areas of conservation and raised bog natural heritage areas. This will require access to certain land, and compensation for this access will be paid to the landowners and the holders of turbary rights on such land. Payments under the scheme will be exempt from CGT. Compensation paid under the scheme from 1 October, 2016 will enjoy this exemption. Sections 30 to 33, inclusive, clarify the requirements for authorisation to operate as a consignor or consignee for excisable products. This section also strengthens the power of the Revenue Commissioners to refuse or revoke authorisation where certain requirements are not met. Section 34 clarifies the powers of Revenue officers to take samples of excisable products while executing search warrants in the investigation of excise offences.

Section 35 gives effect to the increase in the rates of tobacco products tax which came into effect on budget night. This measure is estimated to raise €5.7 million in 2016, and €65 million in a full year. The excise duty on a pack of 20 cigarettes has been increased by 50 cents, including VAT, with a pro rata increase for other tobacco products. This public health measure will bring the price of cigarettes in the most popular price category to €11. Section 36 is a provision for micro-breweries. I am increasing the qualifying ceiling from 30,000 hectolitres to 40,000 hectolitres. The relief remains available on the first 30,000 hectolitres released for consumption in Ireland, but the increased ceiling allows micro-breweries to grow and take advantage of export markets.

Sections 37 to 39, inclusive, set the excise rate at the minimum rate allowable under the EU energy tax directive when applied to natural gas and biogas used as a transport fuel. Sections 40 to 42 give effect to the budget announcement of providing a full carbon tax relief on fuel inputs used in combined heat and power plants to create highly efficient electricity. This section also amends the repayments periods and deadline for claiming the relief. This is subject to a commencement order. Section 43 provides for the extension of vehicle registration tax, VRT, reliefs available for electric vehicles to 31 December 2021 and for hybrid electric vehicles to 31 December 2018.

Part 3 deals with value-added tax, VAT. Section 45 updates the rules regarding VAT deductibility apportionment in relation to VAT inputs relevant to both taxable and non-taxable activities, making it more in line with the EU VAT directive. Section 46 increases the farmers’ flat-rate addition from 5.2% to 5.4% with effect from 1 January 2017, as announced in the budget. In addition, a new anti-avoidance measure is being introduced into the flat-rate farmer scheme.

Part 4 deals with stamp duties. Section 48 will provide an exemption from stamp duties on the conveyance, transfer or lease of land to the National Concert Hall in connection with its functions under the National Cultural Institutions (National Concert Hall) Act 2015. Section 49 refers to the extension of the bank levy. The levy has been in place for the years 2014 to 2016, inclusive, with an anticipated yield of €150 million in each of those years. The current levy is calculated at 35% of an institution’s liability for deposit interest retention tax, DIRT, in 2011. This ensures that the levy relates to the size of an institution’s Irish operation. I announced in my 2016 Budget Statement that I proposed to extend the levy out to 2021, subject to a review taking place of the methodology used to calculate the levy. This section provides the statutory mechanism to achieve this extension and maintain the annual yield. From 2017 the levy will be based on DIRT payments made in a base year which will change every two years. Between 2017 and 2021 the levy is expected to raise €750 million.

Part 5 deals with capital acquisitions tax, CAT. Section 51 relates to changes to CAT tax-free thresholds, which I have already described. Part 6 of the Bill deals with miscellaneous matters. Section 53 is essentially an administrative change relating to the tax treatment of jointly assessed taxpayers. I am always conscious of the need to improve Revenue powers to deal with tax evasion. Based on advice from Revenue, section 54 proposes to amend the existing legislation relating to penalty mitigation and publication so as to exclude any disclosure made in connection with relevant foreign accounts, assets or income, from being a qualifying disclosure where such disclosure is made on or after 1 May 2017. In my budget speech I also advised of my intention to introduce a new strict liability criminal offence to facilitate the prosecution of serious cases of offshore tax evasion. My officials and Revenue are consulting with the Office of the Attorney General on the best way to progress this.

Lastly, section 55 proposes a number of primarily administrative changes in respect of the publication of tax defaulters. There are still a small number of matters under consideration that I may bring forward on Committee Stage. Clearly the process of completing the Bill may be more complex this year, and I will, of course, also give consideration to the suggestions put forward during our debate here over the next few days and in the context of the Finance Bill process and discussions. I commend the Bill to the House and I thank colleagues for their attendance and kind attention.

I call Deputy Michael McGrath, who is sharing time with Deputy Dara Calleary.

I welcome the opportunity to speak on the Finance Bill 2016. When we reflect on the results of the general election earlier this year we can see the Irish people wanted to see a new direction in Irish politics. It was clear they wanted a move away from the budgets of the previous Government. They wanted a fairer, less divided and more inclusive Ireland. The core message of our party's campaign was that priority should be given to investment in the provision of better public services for people when they need them most. We received significant support for this message at the ballot box. Subsequent to the election we tried on three occasions to provide an alternative to a Fine Gael-led Government. We did not receive any support from outside our party, and faced with this reality we recognised our responsibility as the second largest party in the House to ensure the country had a Government. While others walked away and sat comfortably on the sidelines, we played our role to ensure a Government could be formed, not the Government we wanted, but a Government that deserved to be given a fair opportunity to govern.

In my view, ordinary hardworking Irish people do not want to see election after election, as is the case in some European countries. They want us to sit down and work together where we can to run the country responsibly and fairly. It was, and still is, the responsible thing to do. It is against this backdrop that we were able to negotiate a confidence and supply agreement that provided for a budgetary policy with a split of at least 2:1 in favour of public expenditure over tax cuts. In the weeks before budget 2017 was announced by the Government, we sought progress on our core policy priorities. Let me be clear, we certainly did not get everything we wanted. However, we did help to secure an overall shift in budgetary policy, with the ratio of public expenditure to tax cuts coming in at 3:1.

What this means in reality is that more and better public services can be provided with the limited resources available. Achieving this split in resources allowed the debate to take place on where priorities lie around services, including more home care packages, more supports for children with special needs, extra resources to tackle hospital waiting lists and more supports for those caught up in the housing crisis. The confidence and supply agreement went further than setting a ratio between investment in public services and tax cuts. It outlined areas of focus that would make Ireland a fairer and, fundamentally, a more decent society. It stipulated that changes in the universal social charge would need to be directed at lower and middle income earners and ensured there would be improvements in services and supports for older people. It focused on creating decent jobs and supporting enterprise. It placed emphasis on cutting costs for families. These areas were clearly outlined as priorities in our election manifesto. The budget is undoubtedly influenced by the agreement we entered into. As a result, it is in stark contrast to the five regressive budgets of the previous Fine Gael and Labour Party Government. According to the ESRI, budget 2017 is close to distributionally neutral overall and additional resources were targeted towards those on the lowest incomes. The gains are very modest, and no one should overstate them, but at least they represent some progress.

The budgetary process in Ireland is simply not fit for purpose. While the Committee on Budgetary Oversight has done very good work in a short period of time, an independent budget office needs to be established as a matter of urgency, as is the norm in many other countries. It is simply unacceptable that a few days before the budget is announced the available fiscal space increases by 20% or €200 million. How can the Irish people be confident in our budgetary process when it is subject to such large last minute changes?

Budget 2017 comes at a time where there is great uncertainty facing our country. The decision by the people of the United Kingdom to exit the European Union in June of this year represents the single biggest challenge facing our island. This issue has serious political and economic consequences for the Republic and the North. Ireland imports up to 90% of our energy from the UK; €1.2 billion worth of goods and services are exchanged between our two countries every week; and 40% of Ireland's agrifood exports go to the UK. Crucially, 30% of all employment is in sectors which are heavily reliant on UK exports. We do not know the future relationship the UK will have with the European Union. It is our belief that a hard Brexit would be beneficial to nobody, but as costly as a hard Brexit might be, as I said on budget day, it does not mean that it is not going to happen. A hard Border between the Republic and Northern Ireland is a possibility, as is the reintroduction of tariffs and customs and the restriction of the free movement of people. None of us hope any of this happens.

When negotiations on Article 50 formally begin next year, we will need a Government that will be very clear on what we seek to achieve. Given our unique position in this debate, we need a Government that will fight our corner tooth and nail. Unfortunately, the response so far from the Government has been woefully inadequate. There are, of course, measures we welcome, but in the main, they are existing measures that are being extended, such as the retention of the 9% VAT rate for the tourism and hospitality sector. We do not need Article 50 to be invoked to know the depreciation of sterling is hurting business and damaging jobs today. We do not need Article 50 to be invoked to know Irish SMEs heavily dependent on the UK market need help to diversify their export markets in a post-Brexit landscape. The budget represented a unique opportunity to address some of these issues, but it was sadly lacking. I welcome the Minister's statement that he recognises more will need to be done in time.

The Government talked in advance about the budget being Brexit proof. Of course this was never achievable. No budget could fully insulate the country from the effects of Brexit, many of which are still unknown. However, the measures that were announced fall far short of what was expected. Schemes that are already in place were extended and dressed up as being part of a Brexit package. The special assignee relief programme and the foreign earnings deduction scheme have had little impact so far, so it is hard to argue their extension will be a game changer for businesses struggling to cope with the fallout from Brexit. At present, sterling is trading at £0.89 to €1. This means our goods and services being exported to the UK are 16% more expensive than they were back in June when the referendum was held. Hedging against currency fluctuations is a difficult and costly process and most SMEs simply lack the resources and expertise to engage in it. The Minister has completely ruled out any form of a hedging strategy, where even just support and expertise could be provided to SMEs. Many SMEs desperately need to diversify their trade to other countries and Enterprise Ireland needs to be given extra funding in this respect. Unfortunately, all we have seen from the Government in the budget is an extra €3 million for the agencies involved.

The improvement to the entrepreneur capital gains tax relief is welcome, but it hardly puts us on a level playing field with the UK. The €150 million cashflow support fund for farmers with an interest rate of 2.95% is welcome, but what about thousands of SMEs around the country in dire need of such an initiative? Where is the credit line for them at cheap interest rates? The implications facing the Border region are particularly stark. A hard Border between the Republic and Northern Ireland would be a huge step backwards in the process of building peace and reconciliation on this island. A return to a hard Border could spell the end for many businesses in the Border region. Deputies on all sides representing Border counties are already spelling out the impact the sterling depreciation is having on businesses in their area.

While Brexit will bring negative consequences, there are also opportunities. We have a strong, qualified, English-speaking workforce. This is attractive for foreign companies, but we cannot take for granted that we will benefit. IDA Ireland does a terrific job of attracting companies to Ireland, but in light of Brexit it needs more resources so it can take advantage of the opportunities that exist. Deep in the expenditure report for budget 2017 we see no provision for extra funding for IDA Ireland to attract foreign Brexit-affected companies. While we do not want to be in the business of simply taking jobs from other countries, we have to be realistic. Make no mistake, cities such as Paris and Frankfurt are making moves to attract business and investment from London and the UK generally, particularly in the area of financial services. If we are not proactive in this area, we run the serious risk of being overlooked, and this would represent a missed opportunity for our country. Regrettably, the budget is wholly inadequate in taking advantage of Brexit as well as facing up to the challenges presented by it.

Fianna Fáil believes that home ownership is essential in building and maintaining a prosperous society. Many people dream of building a family around a family owned home. Regrettably this dream is being pushed further and further away by the housing crisis.

Nearly every report on the subject to date has indicated that the supply of houses has not matched demand. I agree with the views of many experts that the help-to-buy scheme announced on budget day is a demand side initiative. Earlier today, Davy stockbrokers said this scheme is likely to "add to the momentum in house prices in 2017 with a limited supply response". In a written reply to a parliamentary question last week, the Minister confirmed: "Given the critical nature of the housing crisis and the urgency with which a governmental response was required, there was insufficient time to commission an independent impact assessment in relation to this measure." Given our experience of interventions in the property market by Government, I find this truly extraordinary. Given the nature of this scheme in providing assistance to people in meeting the deposit requirements, one would have expected the Central Bank to have been consulted as to the likely effects it would have on house prices and the housing market. It is clear from the reply issued by Governor Lane to Deputy Pearse Doherty and myself yesterday, the Central Bank was not consulted on the overall merits of this scheme.

Fianna Fáil does not believe the scheme is the right policy at this time. We will not bring down the Government on this, but we will engage on some of the key issues on Committee Stage. We remain of the view that the €600,000 threshold is exceptionally high and does not properly target limited taxpayer resources. People building their own homes are unfairly treated under the terms of the scheme provided for in the Bill. If any part of their mortgage is drawn down before 19 July, they will be denied the benefit of the scheme, irrespective of when their home is completed, which is unfair. The drawdown date of the final portion of the mortgage should determine the relevant cut-off. We will also propose that an independent impact assessment of the scheme be carried out after 12 months of its operation. This assessment would need to consider whether the scheme was having a beneficial impact on the supply of new homes and also what impact it was having on property prices. Supply is the predominant issue with the current market, however, and we need to find out why building new homes is currently not viable in many cases. In that respect, we will propose that the Government carries out a detailed analysis of the cost of delivering a new home in Ireland, including the taxes and charges, and identifies options for reducing that cost, without compromising the quality of the home. This is where the solution to the current crisis lies. Separately, Fianna Fáil has proposed to the Central Bank, that, under its mortgage deposit rules, second-time buyers should be treated the same as first-time buyers, and that first-time buyers should be rewarded for having a strong rental history.

People work hard all their lives and they naturally wish to pass on any wealth they have accumulated to their children and other family members. In 2015, the largest category of inheritance tax cases was to people other than a child. To increase the group A threshold while leaving groups B and C unchanged, as was the intention in the programme for Government, would be unfair to those who wish to provide for loved ones outside the parent-child relationship. We welcome the increase in the thresholds in budget 2017.

In our election manifesto, we made a clear commitment to support enterprise. As the SME sector is one of the main drivers of employment and growth in our economy, we welcome some of the initiatives in this budget. As outlined in our manifesto and in the confidence and supply agreement, we committed to providing a supportive tax regime for entrepreneurs and the self-employed. Entrepreneurs must be rewarded for the risk they are taking and they should not be penalised by the tax credit system for starting their own business. As a party, we are committed to bringing the earned income tax credit up in line with the PAYE tax credit of €1,650, and the further move in this budget is a step in the right direction. We want to encourage entrepreneurship and the lowering of CGT rate from 20% to 10% for entrepreneurs will be of help in this respect, along with the extension of the start-your-own business relief.

The agrifood industry is not only one of the most important indigenous industries, employing more than 175,000 people; it is also the bedrock of many rural communities throughout the country. We made a commitment in our manifesto to support farms and our fishing industry. We are glad that measures were introduced in the budget in this respect. We welcome the fact the flat rate addition for farmers not registered for VAT will be increased from 5.2% to 5.4% and the ability for a farmer to "step out" of income averaging for an exceptionally poor year will prove helpful to smaller farmers, in particular. However, we desperately need a food ombudsman to ensure small suppliers are treated fairly and lawfully. Fianna Fáil has published a Bill in this regard and we urge the Government and other parties to support it.

A key part of the State's industrial policy is a corporation tax rate of 12.5%. This has received a great deal of attention recently. As a country, we need to be clear about our position on corporation tax and our tax system generally. We are not a tax haven. We welcome the moves in the budget to clamp down on offshore tax evaders, which bring us closer to the commitments made under the OECD's base erosion and profit shifting initiative. We also welcome the appointment of Mr. Seamus Coffey to undertake an independent review of our corporation tax system. We have to defend our sovereignty in setting our own tax rates and we must defend our 12.5% tax rate. We must be able to compete with other countries to attract and retain foreign direct investment, which sustains almost 190,000 jobs directly across the Republic. This week, the European Commission is yet again set to publish new proposals, which could potentially result in tax harmonisation by the back door. We urge the Government to engage constructively with the Commission but to also be prepared to stand strong against attempts to undermine our tax sovereignty. We cannot be caught off guard again, as we were with the Apple case.

There was a great deal of discussion in the lead-up to the budget about the taxation of vulture funds using section 110 companies. Section 110 was initially set up to attract to Ireland foreign financial services funds investing in foreign assets. Section 110 and other loopholes were used by foreign funds to earn huge profits on Irish property and mortgages on a tax free basis. Every Irish citizen must pay taxes on income and capital gains and these funds, and other tax structures, which are targeted by the measures set out in the Bill, should do the same. We need regular monitoring from the Revenue to make sure other loopholes are not being exploited in this manner. Concerns have been raised that many investors will be reluctant to move to Ireland as a result of this move. It is important that the relevant sections of the Bill are closely examined on Committee Stage. We need to be clear that we are still an attractive place to do business in the financial sector. This is now ever more important in light of Brexit and the opportunities associated with it. Our position is straightforward. If any fund earns Irish profits from Irish assets, it should pay Irish taxes, similar to every citizen and, indeed, company in Ireland. We will engage co-operatively on Committee Stage in the technical examination of the measures that have been proposed.

We welcome the gradual reduction in the USC for lower and middle income workers in line with the confidence and supply agreement. The gains are modest but any reduction in the burden of the charge is welcome. The 0.5% cut in the three lower rates provides a good spread of the benefit across income earners. We reiterate our position, however, that the abolition of the USC in the lifetime of this Dáil is not achievable or, indeed, desirable. Further reductions in the USC can be delivered in future budgets provided the economic recovery is maintained.

Savers need to be rewarded for the interest they earn on those savings. Since 2008, people have been double taxed in one sense as they faced a collapsing interest rate and a doubling of DIRT tax. The modest reduction in DIRT is a move in the right direction but more needs to be done. The current change will discriminate against life assurance policyholders. Individuals, many of whom do not pay marginal rate income tax, and who have saved over a number of years in a life assurance policy, will face an exit tax of 41%. This will not change in line with the DIRT changes outlined previously. This exit tax brought in €247 million last year, up more than 600% in recent years and it penalises a certain type of saver over another. The State should encourage people to save for times they have a sudden loss of income or other life crises and I will bring forward proposals on this on Committee Stage.

The increase in the home carer tax credit is modest but welcome. It is only right that the work of all home carers should be recognised and we would like this credit to be increased much further in the future.

Rental prices increased considerably over the past number of years, particularly in Dublin and the other major cities, as the number of people seeking rented accommodation has increased while the number of properties available to let has decreased. The increase to 80% interest relief for landlords and the extension of the rent-a-room allowance to €14,000 will encourage people back to the rental market and, thus, hopefully have an impact on the out of control escalation in rents.

In conclusion, we will honour our side of the agreement in respect of this budget. It is our intention to facilitate its passage.

The confidence and supply agreement has made this budget better and fairer. Another election would add more uncertainty in a deeply uncertain time. This would cripple our recovery, hurt the economy and cost jobs. While many will attack us, Fianna Fáil firmly believes it is the responsible thing to do. We did not write this budget and it certainly is not perfect. We look forward, however, to the opportunity of participating constructively on Committee Stage when we will bring forward amendments in an effort to improve this Finance Bill.

In the context of a Finance Bill debate and given the role played by our late colleague, former Deputy Brian Lenihan, over several years in such debates, I send our sympathies tonight to the Lenihan family on the death of Mrs. Ann Lenihan, a lady of great courage and determination in the face of huge adversity over recent years.

As Deputy Michael McGrath said, the spirit of this budget was not set by the programme for Government but the confidence and supply agreement where the Minister agreed that any budget package carried out for the next three years would have a two-to-one split in favour of investment in services and social protection versus taxation cuts. That this budget went to three to one is a testament to the strength of that confidence and supply agreement, as well as the strength of some of the provisions and determinations contained in it. We will continue to support budgets which reflect that trend, as well as reflecting the need to continue to invest in services and people who need more resources.

The Finance Bill is modest. Deputy Michael McGrath has expressed his concerns about the home buyer’s initiative and there are many areas in which this can be improved. Will the Minister engage with people over the coming weeks before Committee Stage to ensure the scheme will be as advantageous as possible to the first-time buyers who he seems to want to assist?

I welcome sections 5 and 27 with provision for a seafarer’s allowance and the decommissioning provisions for the fishing community. I caution, however, that there seems to be a deadline of 2022 with the seafarer’s allowance. Why is that in place? Will the Minister engage with the fishing community over the coming weeks to ensure this scheme is as effective an allowance as possible to a community which is under enormous pressure at the moment? It must be accompanied with capital investment in our ports and facilities for fishing communities, particularly in the context of Brexit and the opportunities that may emerge for the fishing industry with the extension of quotas and new markets across the world.

Section 17, amending the income averaging regime for farmers, is to be particularly welcomed. Farming is in crisis. The danger is that as it cries wolf so often, when a real crisis comes, as has now, it can be ignored. The collapse of sterling is impacting on farm gate prices, while the pressures on prices for beef and tillage are also having major impacts. The summer’s weather conditions have meant crop yields are not what they normally would be. I reiterate the call for greater support for our farmers, particularly legislative support in competition. Sections 17 and 28 are of no good if farmers have no place to sell their goods or face an uneven playing pitch. As long as we let large retailers and beef operators continue with the practices in which they are currently engaging, these sections will come to nought.

Section 14 introduces several welcome changes to the living city initiative programme announced last year. The programme has not worked, a point acknowledged by many people including the Minister’s local newspaper, the Limerick Leader. These changes will assist the programme. However, without an opening for finance vehicles to access the programme, it will not work. Why is the Minister ignoring the potential role of credit unions in housing provision? The living city initiative is all about the reinjection of communities into our cities and towns. It is about the reinjection of families into the unused premises over offices and shops. Nothing says more about community than our credit union movement. It has €8.5 billion worth of members’ funds available for social housing projects. It is beyond me why the Government ignores the potential role credit unions can play in dealing with our housing challenge.

Given that the Minister for Arts, Heritage, Regional, Rural and Gaeltacht Affairs, Deputy Heather Humphreys, has a town and village renewal scheme, is it not time to link it with the living city initiative? The town and village renewal scheme is about putting minimal infrastructure into towns selected by county councils. Partnering it with a similar scheme, such as the living city initiative, would encourage people to use the infrastructure provided. It is time to have a conversation about the use of state aid rules which are handcuffing us, preventing us from giving the kind of investment we need for our regional and city communities which have not seen improvements. The state aid rules around airport provision, in particular regional airports, are hampering investment in Ireland West Airport Knock and other airports which need investment to the rate of 90% to fulfil their economic role. In the context of our recovery and being at the front line of Brexit, it is important a challenge is made about state aid rules and off-Government balance sheet investments.

As Deputy Michael McGrath said, the change to the capital acquisitions tax is not, as portrayed by some commentators, for rich people in certain parts of Dublin. My office has been hit by cases of people affected by sibling transfers. Older siblings can be left a large tax bill at a late stage in life which forces them to sell a family home to pay the settlement. Not enough was done to deal with sibling tax until this change. It is not the wealthy who will gain from it but ordinary people who get an inheritance late in life because of an unmarried sibling. I had one case of a gentleman who lives in London in social housing who cannot move home to a house left to him because of a tax bill associated with it. These are the kind of people affected by lowering the threshold, not just the wealthy in certain parts of Dublin city.

Next year’s budgetary process has to be considerably different. The role of the independent budget oversight office will be crucial in this respect. The one reason for the need for an independent budgetary oversight office is the lack of an impact assessment for the help-to-buy scheme. The fact the Minister made some desktop analysis around the scheme and tried to fly it off with Central Bank endorsement is absolutely wrong. This House needs an independent budget office to assist Members prepare for the budget and ensure we have the backup and independent guidance to stop something like what happened with this scheme from happening again.

Next year’s budget will have to be different too in the context of Brexit. This budget could have been written before the Brexit referendum due to the lack of initiatives and focus on the issue. Brexit is hampering and hitting our communities. Our mushroom, beef and other food industries, as well as our retail industry, face a very difficult number of weeks ahead at what should be a prime time of the year for them. Yet, as Deputy Michael McGrath said, there is little in this budget for them, a budget which was supposed to be Brexit-proofed but seems to be Brexit-irrelevant.

The €3 million which IDA Ireland and Enterprise Ireland have received to assist in accessing Brexit opportunities is a mere drop in the water. It will only pay for salaries, never mind the programmes the Government is trying to launch. Today, the Minister made announcements about attracting various bodies to Ireland. They will not come unless we have office and residential accommodation. There is very little in this Finance Bill which will help supply in these two areas. We need a serious Brexit budget the next time around because it will be real by then. Brexit will be impacting on our ability to get the plans we want for this country’s growth. This budget has failed the Brexit test and I get no sense from the Government that it understands that.

The budgetary process was new, difficult and challenging for us. It was the first time an Opposition party signed a confidence and supply agreement. It seems it is catching on if one looks at recent developments in Spain. Fianna Fáil could have walked away and ran to the hills, turning its back on the responsibility it was given at the end of February. We decided not to do that. Instead, we decided to influence the process through confidence and supply. As I said on the day of the Budget Statement, we have not achieved everything. The most important point, however, is that we steered the Government along a path it would not have gone without our input in the confidence and supply agreement. That is the path of fairness, as well as investment in services and people.

I welcome the opportunity to speak on the Finance Bill 2016. I am not one to defend the Minister for Finance, Deputy Noonan, but in regard to Fianna Fáil's justification of its confidence and supply arrangement and its repeated statement since budget day that its biggest achievement in that regard is that it got Government to agree to a 2:1 ratio in terms of spend and tax cuts, I refer Fianna Fáil to Mr. Fiach Kelly's article of 25 January in regard to the Minister having said on record that the spend would be 70:30, 70% on spending and 30% on tax cuts, or to the article by Fiachra Ó Cionnaith on 1 February in the Irish Examiner on the long-term economic plan, which shows that the figures are the same. Fianna Fáil proposed more net tax cuts in its manifesto than Fine Gael had done. I make that point because it seems the justification is that all that is in the budget came about because of Fianna Fáil. It appears that Fianna Fáil is trying to wipe out the fact that Fine Gael in government had already embarked on this course. The other interesting one is the help-to-buy scheme. It is important that the House would look at the two different versions of the help-to-buy scheme. Deputy Michael McGrath was the instigator of this scheme at the Fianna Fáil Ard Fheis.

It is totally different.

I acknowledge that it is different - it is available for all to see on the Fianna Fáil website - particularly in terms of the huge mansion tax it proposed. The Government scheme deals with house purchases of up to €600,000. Fianna Fáil did not go with a €600,000 threshold in its scheme. It is available to individuals regardless of the price of the house. Fianna Fáil's proposal is the ultimate mansion tax in that a person can purchase a new build or an old house for €1 million or €1.5 million and still be able to avail of its version of the scheme. Fianna Fáil rightly makes the point at this late stage in the day that this scheme will push up house prices. The Government plans to put €40 million per year into a scheme that I believe will fuel house prices. Fianna Fáil did not plan to make €40 million or €50 million available: it proposed to make €105 million available, which was more money for investors. It did not want the scheme restricted to first-time buyers. It wanted it to be available to every house purchaser. In the words of many commentators, including the Central Bank and others, the people who benefit from this scheme are the builders, not the buyers. Is it any wonder that Fianna Fáil was proposing a scheme that provided twice as much money, had no upper limit and would have cost the taxpayer €500 million over five years as opposed to the €150 million that the Government scheme will cost. There is a wee bit of honesty needed in this debate. Anybody can check out the Fianna Fáil scheme on its website. The Fianna Fáil scheme would have done the same as the Government scheme but Fianna Fáil would have thrown more cash at it to fuel house prices.

It is two weeks since we listened to the budget announcements. It was too much to hope that in the meantime some sense would have been seen. Then again, this budget was never, in my view, about sense. It was a carve-up and it was about reverting to type, back to the bad old habits. Vision and sense are not words that should ever be used to describe budget 2017 or this Bill. I say that while also acknowledging that there are some things that Sinn Féin called for that are provided for in the Bill and will be, hopefully, passed into law. In terms of what underpins the budget in this Finance Bill, I believe that budget 2017 was a missed opportunity. We could have put the country on the right track but the Government failed to do so. The right track is one on which we would be investing in our public services and infrastructure. Instead, we have an old style budget, merging the two worst instincts of two deeply conservative political parties.

The Finance Bill that has emerged is as expected: regressive and as short-sighted as the budget. In its small print are major tax breaks for a small number of people. What is missing tells the real story. This is one of the most important Bills of the year, of any year, which, as legislators, we all know. It provides us with an opportunity to stop and think and get rid of some bad ideas or ideas that did not work and replace them with good ideas. Abstaining on the Finance Bill is like sitting out an all-Ireland final. We have heard Deputy Micheál Martin say that Fine Gael has gone too right wing. I reject right wing politics and right wing policies. I do not abstain on them. My party rejects ideas that we know will be a disaster for working people. We reject ideas that we know will push up house prices. We do not sit on our hands and we do not just give about these ideas. Sinn Féin opposes, amends and votes on proposals. Fianna Fáil is sitting this one out. It is sitting on its hands and will not oppose what it believes are bad policies that will damage the economy.

The Finance Bill is the time when we get to shout "stop" in terms of law-making. No speeches or rhetoric will stop a right-wing Bill or policies that are badly designed. Section 2 deals with the meat of the Bill in that it deals with the cut to the three bands of the USC. The Minister reiterated in his speech that this is about phasing out of the USC. I agree with Deputy Michael McGrath that the abolition of the USC is not desirable or achievable in the lifetime of this Government but Deputy McGrath needs to stand up and say whether Fianna Fáil supports the proposal to cut €2.7 billion from the USC. It is not acceptable to just say that Fianna Fáil does not support the Government but it really wants to go close to where it is. We need a bit of honesty on what the Fianna Fáil Party stands for. Perhaps it has changed its position on this issue. That would be welcome. There is no such thing as a popular tax. There are taxes that are necessary and taxes that are fairer than others. The USC is both. The only reason €330 million is being cut from the USC is because at some point, weeks before the election, a bright spark in Fine Gael printed up posters calling for the abolition of the USC. It flopped as a message, as we know. People could see with their own eyes the issue of homelessness ravaging through our cities and how our health service is struggling on a shoe string. Ultimately, the choice must be between cutting taxes and protecting or improving public services. We are squeezed into an arbitrary fiscal space so we must prioritise. We must make choices. Politics is about making choices. Sinn Féin set out in its alternative budget what in its view those choices should be. We did that by way of a costed budget. We did not sit on the sidelines. Sinn Féin is willing to be questioned on what it stands for. For the first time ever the largest opposition party in this House did not produce an alternative budget. That is unbelievable. Fine Gael has allowed that and it now finds itself in a situation of its own making. As I said, this is only phase one in terms of cuts to the USC. We know that this reduction would have been far more drastic were it not for the fact that Sinn Féin exposed the short-sightedness and recklessness of hacking away at the USC. We will continue to oppose that despite the fact that the benefits in that regard are small. One might think that a €330 million cut is small but the point is that, as the Minister said, this is only part of a plan to abolish the USC over a number of years. We oppose cuts that disproportionately benefit those at the higher end.

As I said earlier, the help-to-buy scheme is a bad idea. It is wrong and we all know it. Every commentator who is worth his or her salt on this issue knows that and has said so. The Central Bank knows it, in my view. Changing the deposit requirement from 20% to 30% did not make it a good idea. Changing the upper threshold from €600,000 to €500,000 or €400,000 will not make it a good idea because this is fundamentally a bad idea. Listening to the Minister trying to defend this in the past couple of weeks has been painful. He has tried to imply that this is a supply-side solution. He has tried to imply that the builders who talked him into this scheme have the national interest at heart. This is a shockingly bad idea that must be stopped and stopped now. Two weeks ago the Minister told us in this House that he had discussed the proposed scheme with the Governor of the Central Bank and that he had agreed that the rebate received under the scheme will be reckoned in full in the calculations of the deposit required to be eligible for a mortgage under the Central Bank's macroprudential rules. The following day he spoke to Sean O'Rourke on the national airwaves.

When asked if the Governor of the Central Bank had misgivings about the scheme, the Minister said "No, he is on side". Now we know how on side the Governor of the Central Bank was. Now we know the only thing the Governor of the Central Bank was actually consulted about was a technical issue as to whether the tax rebate to be provided could be used as part of the deposit under the mortgage lending rules. It is clear from the letter he sent to me and the version he sent to Deputy Michael McGrath that the Governor of the Central Bank did not know the details of this scheme. It is very clear that the Minister did not consult him in line with the commitment in the programme for Government to work with the Central Bank to introduce a help-to-buy scheme. The Governor of the Central Bank rightly points out that in the absence of increased building and development, this scheme could have the impact of pushing up house prices with the benefits going to builders instead of borrowers. This has been stated consistently by many of us.

The Government consciously and carefully tried to mislead the Dáil and the public into believing it had engaged in detail with the Central Bank on the merits of this scheme. We now know that no such thing happened. Is it any wonder? Like any other respected body when asked its opinion on this scheme, the Central Bank has pointed out that it could increase prices and benefits to builders not buyers. Of course, we all know that. As with the "Abolish USC" battle cry, Fine Gael has made commitments which are reckless but it does not have the political courage to back down. Deputy Michael McGrath referred earlier to the Davy report. Davy has made it very clear and the Minister of State should listen to the experts out there. I questioned the Taoiseach last week as to when he was going to listen to the evidence on the scheme. Davy has no axe to grind here, but it issued a report to its investors today in which it has revised house price inflation upwards to 7% in 2017. What does that mean for the average punter out there? It means the person who is thinking about buying a €300,000 house next year will see the price of that house increase to €321,000. Davy does not stop there. It says it will be 6% the year after and 5% the year after that. It points out that one of the factors contributing to this increase is the Government's flawed help-to-buy scheme. The €300,000 house of today will cost €357,000 within the next three years. That is what is happening here. Who is going to benefit? It will be the builders.

The Minister has referred to this as a supply-side solution. Does he think we came down in the last shower? No new building is going to take place for at least the next 18 months which is not already planned. It is impossible. One cannot throw up a house. This scheme lasts for three years yet the benefits are already there for people who bought from 19 July 2016. No new houses that are not already planned will be available for sale for at least a year and a half. If people have to go through the planning process, they will not even be on stream before the scheme has come to its end.

The Minister stood up here and said the Government was going with a loan-to-value ratio of 80% because people with a loan-to-value ratio of less than 80% could obviously afford the deposit and, as such, did not need the help. As a result of the Central Bank's intervention to protect its position, however, the Government has now gone with a loan-to-value ratio of 70%. What does that mean in practice? Somebody who is buying a €400,000 today would need to have a deposit of €58,000 under the Government's macroprudential rules. Under the Government's scheme to provide a €20,000 tax rebate, a person would need a deposit of €120,000 to buy that €400,000 house. As such, he or she already has the deposit anyway. If a person is on a loan-to-value ratio of 70%, that means he or she already has €120,000, which is twice what is required under the Central Bank rules. At a time when we have so many expenditure crises and hear time after time from Minister after Minister that we do not have the resources to deal with long waiting lists for orthodontic treatment, patients on trolleys, a housing and homelessness crisis which is out of control, the number of people, including children, in poverty or to pay our young public sector workers the right wages, why under God is the Government giving €20,000 of the State's money to people who already have a deposit of €120,000? They do not need the support to meet the Central Bank's rules if they can bypass those rules by nearly 100%. It makes no sense and it shows that the proposal is ill thought out and flawed.

I was obviously naive in thinking that we had ended the practice of making policy on the backs of envelopes when Fianna Fáil was kicked out of office. I thought there was going to be a new approach and that we would have evidence-based politics. Where is the analysis? Where is the report that backs up this policy and the expenditure of at least €50 million of our money? It will be at least €50 million because it is a demand issue. If there are more people, it will cost us more money. Where is the report that says this measure will not provide money to individuals who would have purchased new houses anyway and will lead to new building that would not have been provided in any event? That is something that has to be published. I do not believe the Government has that report, but if it does, it should be published before we deal with this on Committee Stage.

On funds and property, I am glad to see the Government has accepted my proposal for a withholding tax on distributions from funds to non-resident investors relating to Irish property investments. It is something for which I have called a number of times. We have spent a lot of time on this in my office where Eolan de Búrca has drilled down into the accounts of some of these qualified investor funds and ICAVs. One can see how blatantly they were boasting. Kennedy Wilson's accounts included the boast that it paid no withholding tax here, 20% on property funds in Britain and 25% on funds in Spain. There was absolutely no tax to be paid on the millions in profit it was making from rental income in Ireland. Other funds' accounts set out how they are the biggest landlords in the State. They have paid absolutely no tax up until now notwithstanding the fact that among their largest tenants is the State itself. It is unbelievable. As such, I welcome the acceptance of my proposal for a 20% withholding tax. I went with 20% because I thought that if the Government was to be persuaded to move on this, that was a figure it could at least start with. However, it has failed to deal with the major issue of large scale tax avoidance by non-resident holders of Irish property through vehicles like qualified investor alternative investment funds and ICAVs. That is because the Government has built into the system a loophole which will allow tax-free gains to be made by non-resident investors when they hold Irish property for more than five years.

The Government has introduced a withholding tax, which is exactly what I wanted, but now it has said that if vehicles or funds hold property for five years, they will not have to pay capital gains tax on the uplift. Given that qualified investor funds and ICAVs are estimated to own approximately €10 billion to €12 billion of Irish property, failing to apply any tax to gains they have made on the vast bulk of that property will result in massive losses to the Exchequer. That is particularly so in light of the exponential uplift we have seen in the value of Irish property holdings over the past number of years. Those funds that bought into the office sector in central Dublin last year saw increases of approximately 22.4% in 2015 alone. There is absolutely no economic justification for allowing non-resident investors to transfer gigantic gains from Irish assets offshore and tax free while ordinary Irish citizens and SMEs pay full Irish taxes. In Dublin, residential property prices have risen by an average of 42% from their lowest point in mid-2012. Outside the capital, the average has been 32% since the end of 2013. The proposed five-year window will allow these funds to leave town tax free. That there is a 20% withholding tax, which we welcome, is the headline. However, because they do not have to pay any capital gains on the huge uplift they are getting, the 20% withholding tax will not apply. That part is completely exempt.

Debate adjourned.