Finance Bill 2016: Report Stage

I move amendment No. 1:

In page 5, between lines 14 and 15, to insert the following:

“CHAPTER 2

A Millionaire’s Tax on Wealth

Study on Introduction of a Millionaire’s Tax on Wealth

2. The Minister for Finance is to order a study to be carried out on introducing a millionaire’s tax on net assets exceeding €1 million and is to report to the Dáil within six months of the enactment of this Act on the findings of the study.”.

A core demand of the AAA-PBP and a key part of our budget statement is the idea of a millionaire's tax. This is a tax on net assets worth in excess of €1 million. Based on our figures, which come from the Central Bank's report on total wealth and the CSO report, we estimate that a 2% millionaire's tax could raise €2.92 billion. This is more than enough to fund full public pay restoration and pay equality for all. The Minister of State may have a problem with our figures, and that is fine, because that is the point in calling for a study.

The rich got substantially richer during the crisis. The bottom 50% of people control less than 5% of total wealth in the economy and the amount of wealth held by the top 10% has increased substantially. We are proposing a study on introducing a proper wealth tax on the top 5% of the population, those with net assets exceeding €1 million in value. That the Government would even oppose such a study illustrates how it represents the richest in our society and is not interested in taxing the massive wealth created.

I support the amendment. I hope to hear from the Department tomorrow on the tax policy conference, the data for wealth concentration that we were told would be presented there and how that process could take us closer to considering a comprehensive wealth tax on net assets worth more than €1 million, which is a proposal that Sinn Féin outlined in a Bill that I published a number of years ago. It had certain exclusions and differs from Deputy Paul Murphy's broader suggestion.

Given the fact that some data will be presented tomorrow at the tax policy conference, having a report in six months' time is a reasonable request. It would allow us to have a debate based on available factual data. In his usual way, the Minister for Finance, Deputy Michael Noonan, made remarks on Committee Stage nearly a fortnight ago to the effect that we had somehow dropped the wealth tax. In every alternative budget that I have proposed, we have argued that the Government should introduce a net wealth tax. Not only have we done so, but we have published the legislation that would allow for it.

One area I will not go into in terms of the Government-Opposition argument every year is what we can achieve and how much money we can bring in from such a wealth tax. That is the type of data we need tomorrow to inform us about where wealth is concentrated and if we were to apply a wealth tax what suggestions or estimates the Department would have on a particular type of wealth tax. I acknowledge that wealth tax is like income tax. It all depends on what rates are involved and what exclusions apply. There are many models. One has been proposed by the Irish Congress of Trade Unions and others by other think tanks. We in Sinn Féin have put our idea into black and white in the form of proposed legislation. That was in order to spark a debate, but there is a need for it to go to another level in terms of a report by the Department, and in my view for it to do so within a six-month timeframe is a reasonable request.

From my party's point of view, if the Finance Bill were to be amended to make provision for such a report to be prepared it would send a very negative and indeed damaging signal in terms of investment in Ireland. It must be stated we have already very high capital tax rates in Ireland of 33% on capital gains tax and capital acquisitions tax. We have relatively high income tax rates in this country and we have a local property tax also. We must bear in mind the mobility that now exists in regard to investment and assets and while I am sure the intention of the amendment is to look at persons who are tax resident in Ireland and examine, irrespective of where their assets are located, how they would fall within the net of this wealth tax, from my point of view it is very much about having an environment in Ireland that is pro-investment.

Many of the people who are fortunate enough to be millionaires in net terms are the very same people who choose Ireland as the place to invest. They are the employers in many cases and they run very successful businesses, which is to be commended. Everyone should pay their fair share of tax, but to have a tax which in itself is designed to deliberately target net assets which have already been taxed through income tax and capital gains tax would not send out the right signal for Ireland and for that reason we oppose the amendment.

I thank the Deputies. The Government has no plans to introduce a wealth tax, although all taxes and potential taxation options are, of course, constantly reviewed.

Wealth can be taxed in a variety of ways, some of which are already in place in Ireland. Capital gains tax, CGT, and capital acquisitions tax, CAT, are, in effect, taxes on wealth, as they are levied on an individual or company on the disposal of an asset in the case of CGT, or the acquisition of an asset through gift or inheritance, in the case of CAT. Deposit interest retention tax, DIRT, with similar taxes on the income from financial investments is charged at 41%, with some limited exemptions. It is intended to reduce the level of DIRT to 33% over a four-year period in this Finance Bill. There is a stamp duty levy on the transfer of shares which yielded €424 million in 2015. The local property tax, which was introduced in 2013, is a tax based on the market value of residential properties. The domicile levy introduced in budget 2010 also constitutes a form of wealth tax. It is aimed at high wealth individuals with a substantial connection to Ireland, whether they are tax resident or not, to ensure they make a tax contribution to this country in a year of at least €200,000. In 2014, a total of 12 individuals paid the levy yielding €1,986,858.

Comprehensive data for household wealth in Ireland, including assets and liabilities, were published for the first time in 2015 by the CSO. These data have been collected across the entire eurozone according to a standardised methodology. These data indicate that wealth inequality in Ireland for 2013, as measured by the Gini coefficient, is lower than the eurozone average. The results also show that wealth is less concentrated at the top of the distribution here than the eurozone average. Central Bank analysis of the data also indicates that while wealth inequality has increased since 2011, it is actually lower than in 2006, the earliest period for which data are available. It should be noted that the data gathered by the CSO as part of the household finance and consumption survey, HFCS, were not collected for the purposes of calculating the potential yield from a wealth tax, but to collect general information on the financial situation and behaviour of households.

As part of the joint research programme agreed between my Department and the Economic and Social Research Institute, ESRI, covering macroeconomic and taxation issues, a research project involving detailed analysis of household wealth distribution and taxation has been undertaken. This research project, based on the HFCS published by the CSO, is nearing completion and the results are to be presented at the annual tax policy conference hosted by my Department, to which Deputy Pearse Doherty alluded. This year’s conference is being held in Dublin Castle tomorrow, 23 November. I expect that all interested parties will attend this conference and engage in the debate.

The Department of Finance will monitor and consider any additional information and data that come to light and will continue to examine potential taxation sources on an ongoing basis. There is no doubt in my mind that there would be significant difficulties in determining the base, the types of assets to be included, the potential yield and more importantly broad acceptance for such a tax from the wider public. As the Deputies will appreciate, it is easy to propose the introduction of new taxes but it is often more difficult to achieve wider acceptance for the introduction and operation of such taxes.

Given that research on wealth tax is being carried out by my Department and the ESRI, I do not consider that it is necessary or appropriate to have another parallel stream of work as suggested by the Deputies in terms of the preparation of an additional report. Therefore I do not propose to accept this amendment.

Deputy Michael McGrath summed it up in terms of the approach of the Government - Fianna Fáil and Fine Gael - by saying we want to have an environment that is pro-investment and that it would send the wrong signals to even have a study about a millionaire's tax. In effect, what is contained in that statement is the core strategy of the establishment political parties in this country economically, which is about a strategy of being "pro-investment" and providing a corporate tax haven. The problem is that even since this Finance Bill debate has started, the prospects for that strategy have worsened dramatically. They had worsened already because of Brexit, which lessens the space for the Government to have such an approach inside the European Union, as it creates competition from Britain which is already clear and then there was the victory of Mr. Trump. What is going to happen with Mr. Trump and Apple, the repatriation of companies and everything else? That model is finished whether one chooses to accept it.

The reason the Government does not want to carry out a study and to provide more figures on this is it would be devastating. Let us look at the figures from the Central Bank and the CSO so far. They indicate that in the top 5%, 90,000 households have a collective net wealth of €236 billion. If one takes €1 million per household off to make it a net figure, one still has €146 billion in net assets exceeding €1 million held by the top 5%. That is an enormous amount of wealth held by a very small section of the population. The question is whether that wealth could be put to better use in the interests of society and the economy as a whole and create an environment that is absolutely pro-investment but a core factor of that is the question of public investment. There is more than enough money there to give full pay restoration to public sector workers and to eliminate the shocking pay inequality that is still evident.

We are not going to see eye to eye on this issue but investors know that if we put this measure into the Finance Bill it will not scare the horses. They know the political make-up of this Dáil. They know that Fianna Fáil will protect the wealthy at all costs, and indeed their partners in government will do the same. Therefore, as long as the two main parties carve up power in the State it is unlikely that we will see a wealth tax, which was applied here previously. There was one in the early 1970s and it was abolished due to the cost of collection. It was a time when people did not make payments by electronic means and it was not possible to gather information in the way it is today.

There are wealth taxes in other jurisdictions. There are different ways to introduce and structure a wealth tax. From my point of view a wealth tax should do two things. First, it should either bring in additional revenue to the State or, second, it should lead to behavioural changes within the State. That is why in our legislation we had excluded investment in private trading companies and business assets that led to employment generation from the calculation of the wealth tax. I agree with Deputy Michael McGrath that if people who have wealth invest it into businesses in this State then of course they should not be taxed again. What we want to do is make sure the wealth is being used for productive means, and if it is not, it should be taxed for the benefit of individuals within the State. Therefore, a tax can do two things. It can collect revenue or lead to behavioural change. If a wealth tax did not bring in anything but made sure non-active wealth in the State was channelled into enterprise, business and investment in the State that would be a win in itself.

That is the type of model we have outlined in our explanatory note and the legislation we published a number of years ago.

I reject the slur Deputy Pearse Doherty threw across the floor about our motivation and that we are there to protect the wealthy at all costs. I remind the Deputy and his colleagues in Sinn Féin that far more ordinary people vote for Fianna Fáil than for his party. That is the reality. We, as a party, represent all sections of society. If one looks at the opinion poll data, which has been quite consistent, we are the party with the best spread of representation in terms of support across the social strata. That is not the case for no reason. It is because people see that we stand for a fair and decent society but we regard ourselves as being a party that is pro-enterprise and that wants to create an environment where investment is facilitated, supported and rewarded.

We can have the over-and-back all we want but on the substance of it, to my way of thinking, the net wealth that is there in Ireland is already net of tax. Income is taxed, income in respect of investments is taxed and assets are generally built up through after-tax income; therefore, to come forward with another tax which is fundamentally about taxing assets that have been generated through after-tax income is not fair and does not send out the right signal. I reiterate our position on it.

There are already a number of taxes on sources of wealth, as I outlined in my initial contribution. If we did not have an environment that was pro-investment, people would not invest. That is how the Government plays its role in trying to create jobs for our citizens. In response to Deputy Paul Murphy, Ireland is not a tax haven. Nobody knows the future but it is precisely because of the uncertainty we have at the moment that we do what we can to protect the investments that are here and to encourage future investments. I reiterate that work has already been done in this general area and a conference tomorrow will speak to that. I encourage Deputies to attend.

I restate that we are only looking for a study. I agree with the point made by Deputy Pearse Doherty. If Fianna Fáil was to change its mind and we were to pass this amendment so that there was a study on this, I do not think there would be a run on the banks tomorrow morning. It gets to the heart of the difference in politics in this country. There are those who are happy to load austerity taxes on working people, one of them being the so-called property tax or family home tax. This tax was dressed up and the left was told: "There you go, there's a wealth tax but sure you are opposed to it." When we come with a proposal for an actual wealth, a wealth tax on millionaires, there is not even acceptance of the idea of a study of it.

There are wealth taxes in Europe; therefore, it is not as outlandish as the Minister of State and Fianna Fáil would like to suggest. It is the idea that at a time when workers are still suffering from austerity, etc., those who have the most should be taxed in terms of the massive wealth that has accumulated over the course of the crisis. In respect of Ireland being a tax haven, the mantra is that we are definitely not a tax haven but I re-emphasise the point, which will be a theme throughout this debate, that the walls are closing in on that strategy. Another example is what happened in Hungary over the weekend. I think Hungary is talking about going for a 9% corporation tax rate. Obviously, that relates to discussions we will have about corporation tax but it illustrates the point that the fortunate set of circumstances for the establishment in this country that led to the Celtic tiger are now ending and the opposite will be the case in terms of a difficult international scenario. It points precisely to the need for a fundamentally different model - a socialist industrial policy. Part of that is a serious approach to progressive taxation of wealth, profits and high incomes and using them to transform the economy in a socialist and green direction.

7 o'clock
Amendment put:
The Dáil divided: Tá, 26; Staon, 0; Níl, 91.

  • Barry, Mick.
  • Broughan, Thomas P.
  • Burton, Joan.
  • Collins, Joan.
  • Cullinane, David.
  • Daly, Clare.
  • Doherty, Pearse.
  • Ellis, Dessie.
  • Healy, Seamus.
  • Kelly, Alan.
  • Kenny, Gino.
  • Mitchell, Denise.
  • Munster, Imelda.
  • Murphy, Paul.
  • Ó Broin, Eoin.
  • Ó Laoghaire, Donnchadh.
  • Ó Snodaigh, Aengus.
  • O'Brien, Jonathan.
  • O'Sullivan, Jan.
  • O'Sullivan, Maureen.
  • Pringle, Thomas.
  • Ryan, Eamon.
  • Sherlock, Sean.
  • Smith, Bríd.
  • Stanley, Brian.
  • Wallace, Mick.

Níl

  • Aylward, Bobby.
  • Bailey, Maria.
  • Barrett, Seán.
  • Brassil, John.
  • Breen, Pat.
  • Brophy, Colm.
  • Browne, James.
  • Bruton, Richard.
  • Burke, Peter.
  • Butler, Mary.
  • Byrne, Catherine.
  • Byrne, Thomas.
  • Cahill, Jackie.
  • Canney, Seán.
  • Cannon, Ciarán.
  • Carey, Joe.
  • Casey, Pat.
  • Cassells, Shane.
  • Chambers, Jack.
  • Chambers, Lisa.
  • Collins, Michael.
  • Collins, Niall.
  • Corcoran Kennedy, Marcella.
  • Coveney, Simon.
  • Cowen, Barry.
  • Creed, Michael.
  • Curran, John.
  • D'Arcy, Michael.
  • Daly, Jim.
  • Deasy, John.
  • Deering, Pat.
  • Doherty, Regina.
  • Donnelly, Stephen S.
  • Donohoe, Paschal.
  • Dooley, Timmy.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Farrell, Alan.
  • Fitzgerald, Frances.
  • Fitzpatrick, Peter.
  • Fleming, Sean.
  • Griffin, Brendan.
  • Halligan, John.
  • Harris, Simon.
  • Haughey, Seán.
  • Heydon, Martin.
  • Humphreys, Heather.
  • Kelleher, Billy.
  • Kenny, Enda.
  • Kyne, Seán.
  • Lahart, John.
  • Lawless, James.
  • Lowry, Michael.
  • MacSharry, Marc.
  • McConalogue, Charlie.
  • McEntee, Helen.
  • McGrath, Finian.
  • McGrath, Mattie.
  • McGrath, Michael.
  • McHugh, Joe.
  • McLoughlin, Tony.
  • Madigan, Josepha.
  • Martin, Micheál.
  • Mitchell O'Connor, Mary.
  • Moran, Kevin Boxer.
  • Moynihan, Aindrias.
  • Moynihan, Michael.
  • Murphy O'Mahony, Margaret.
  • Murphy, Eoghan.
  • Murphy, Eugene.
  • Naughten, Denis.
  • Naughton, Hildegarde.
  • Neville, Tom.
  • Noonan, Michael.
  • O'Callaghan, Jim.
  • O'Connell, Kate.
  • O'Donovan, Patrick.
  • O'Dowd, Fergus.
  • O'Keeffe, Kevin.
  • O'Rourke, Frank.
  • Phelan, John Paul.
  • Rabbitte, Anne.
  • Ring, Michael.
  • Rock, Noel.
  • Ross, Shane.
  • Smith, Brendan.
  • Stanton, David.
  • Troy, Robert.
  • Varadkar, Leo.
  • Zappone, Katherine.

Staon

Tellers: Tá, Deputies Paul Murphy and Mick Barry; Níl, Deputies Regina Doherty and Tony McLoughlin.
Amendment declared lost.

I move amendment No. 2:

In page 5, between lines 16 and 17, to insert the following:

“2. The Minister for Finance is to order a study to be carried out into the impact of USC on ensuring a socially just distribution of income and is to report to the Dáil within six months of the enactment of this Act on the findings of the study.”.

It has been put about that the universal social charge, USC, is a progressive tax and that those on the left should be in favour of the USC charge. The purpose of this amendment is for a study to see the facts of this. In reality, for us the USC is a tax hated by many workers who see it, correctly, as something that was introduced in the context of the crisis and the bank bailout. We oppose the USC, are for the abolition of the USC and want to replace it with a new high income social charge which would apply the current marginal rates of USC on income over €90,000 which, according to the Minister for Finance, Deputy Michael Noonan, would raise €750 million, together with the introduction of new higher marginal rates of income tax on income over €100,000 with a number of bands - €100,000 to €140,000 at 50%, €140,000 to €180,000 at 55%, €180,000 to €250,000 at 60% and €250,000 plus at 65%. This would be a progressive tax system which we believe would mean taking the vast majority of workers completely out of the USC. We request a study of the impact of USC on the distribution of income.

Deputies will be aware that this amendment was put forward on Committee Stage and, while it was not discussed, relevant points were touched on in relation to the discussions we had around the USC. The Deputies' request refers to a report specifically relating to the impact of the USC on a socially just income distribution. However, an analysis of the impact of one taxation measure in isolation would be misleading. The taxation and welfare systems work in tandem to redistribute income between individuals in society and it is, therefore, appropriate to consider the system as a whole, rather than on an item-by-item basis. It is unclear from the text of the amendment proposed by the Deputies what specifically the term “socially just distribution of income” would encompass. The Deputies will be aware of the term Gini coefficient, which is the most commonly used summary measure of income inequality. It is a measure of the distribution of income, ranging from zero, which represents a situation where all households have an equal income, to 1, where one household has all national income. A common method of analysing the distributional impact of taxation measures is to compare the change in Gini coefficient between market incomes and disposable incomes, being, respectively, income before and after the redistribution of income through the taxation and social welfare systems.

The latest data from the OECD for 2013 shows that Ireland had the largest absolute reduction in the Gini coefficient between market and disposable income for the OECD countries for which data are available. A reduction in the Gini coefficient means that the distribution of income has become more equal. The Irish tax and welfare systems combined reduced the initial market Gini coefficient from 0.58 to a disposable income Gini of 0.31. The report also shows that more than one quarter of the reduction was attributable to the tax system, a proportion exceeded in only seven other OECD countries. The data also indicate that the absolute reduction in Ireland’s Gini coefficient due to the welfare system was the largest in the OECD. It shows that, compared to other countries, the Irish tax system is strongly progressive and that the tax and welfare systems combined contribute substantially to the redistribution of income and to the reduction of income inequality. When looked at over a slightly longer time period and taking a more limited sample of countries for which data are available, it is evident that Ireland’s tax system has consistently reduced the Gini coefficient, meaning that it has increased the equality of income distribution to a greater extent than is the case with tax systems in other OECD countries. Of interest is the finding that, both for Ireland and the OECD as a whole, the absolute contribution of the tax system to reducing market income inequality has been increasing since 2004.

With regard to reports, the Deputies will be aware that my Department has published a large volume of material this year, including the income tax reform plan which provided detailed information on the distribution of the USC, with an analysis of many other aspects of the income tax system. Taking these factors into account, I am not minded to expend resources on the production of the report requested by Deputies Paul Murphy and Richard Boyd Barrett and, therefore, I cannot accept the proposed amendment.

The Labour Party has proposed a standing commission on taxation. Many of the amendments to the Finance Bill 2016 recommend various studies. I am sure the Minister is aware that the reason for these proposed amendments is that it is extremely difficult to get information on a regular basis from the Department of Finance with regard to the different elements of the tax system, some of which are very complex and others on which the data may have been collected some years in arrears. Having information on the tax system is critically important particularly at a time when Ireland is facing so many challenges from Brexit and from a new political leadership in the United States of America. We would serve ourselves well to have a standing tax commission. In many ways frustration is the reason that the Minister is facing so many proposals for studies. As the Minister knows, it is not possible to amend a Finance Bill with regard to its measures in case they represent a charge, positive or negative, on the Exchequer.

That is the how the legal structure of the House works in dealing with Bills.

When the ESRI issued the original papers on the USC, it described it as a universal social contribution as opposed to a universal social charge. Therefore, with the idea of a universal social contribution came the idea that in return people would receive something of value for their contribution, either in services or payments by the State at points when they might need them. Of all the glaring anomalies in the system, the biggest in the longer term is that we have so many people who are inadequately provided for in terms of pensions. If, in fact, the Minister was open to having a standing tax commission or individual studies, as unsatisfactory as I suspect many of them would turn out to be, we could look at how we could use existing payments in the tax system to fund in what will be an increasingly challenging time for the system not just the State retirement pension, whether contributory or non-contributory, but adequate pensions.

When Minister for Social Protection I left in place a template. We were not able to reach agreement with our partners in government, despite long discussions. The Minister should not dismiss an examination of the USC if we are to resolve the issue of what various apocalyptic articles in the newspapers describe as the pensions bombshell or the pensions hole and if we want people to be able to retire on an income approaching somewhere near 50% of their earned income while in work, given that a decreasing number of employers, particularly in the private sector, are providing for well funded pension schemes, together with their employees' contributions. While the Minister may be rejecting it now, as a society, we need to think about pension provision. We have people in all sorts of family arrangement. In some cases, people will be able to work for all of their working lives, while in others, many women and fathers may have to forgo working for significant periods of time to provide care and attention for their children or elderly relatives. While the Minister may say "no" now, it indicates a serious lack of foresight not to look at this issue and the way in which we can provide pensions for people.

During the course of office of the previous Government, many lower paid workers were taken out of the USC net and the impact of the USC was reduced significantly for lower paid workers. That was good. I know that not everyone in the House agreed with it, but in further reform of the USC how it could be used to contribute to necessary area should be looked at. Others might well make a case that some of the money should be devoted to, for instance, health services, similar to the old health contribution made through the parallel PRSI system, but it would be wrong to pass by any consideration or examination of the USC. Without a doubt, it has been a heavy lifter in raising significant amounts of tax in the State. Therefore, the things people want, whether it be health, education and social services or investment, could be wholly or partially funded from USC revenue.

When the debate on the Finance Bill is over, I would like to return to an examination of the USC to see what we could do in a positive way, particularly to provide for pensions in the future which we will all need. We will need significantly in excess of the current level of the State retirement pension. Make no mistake about it, many people at work and, for instance, in rural Ireland, unless they are in public service jobs, may be earning a low income. They may be self-employed or employed in an SME. These employers and those who are self-employed are not generally in a position to make the type of pension provision made in the public service through contributions made by the Government and employees or which larger private sector firms used to make for pension entitlements.

The amendment asks that we look at a study of the USC. It speaks about a socially just distribution of income. The key issue is that there be a study of USC. For whatever reason - I have my own views - some political parties have adopted the position that the USC should be abolished. Fine Gael has a very clear view that it should be abolished, to be replaced by some charge for higher earners. Fianna Fáil's version of the same policy is to abolish it for 90% of income earners in the State. The Labour Party's policy is to abolish it for a little less than 90%. What the Minister has done in the budget, which is underpinned by the Finance Bill, is a wake-up call for us all, without all of the other alarm bells ringing, including the concentration on corporation tax, the threats posed by Brexit which include a hard border and tariffs, the fact that there is an uncertain future for certain trade elements because of Donald Trump's election and because of other measures he could introduce that would impact on investment taking place in the State.

There is the idea that we continue, in Finance Bill after Finance Bill, stripping away - under this Bill the cost will be €390 million in a full year - USC income and not put down on paper what the benefits are, if any, in terms of what the USC provides for, it being a progressive tax and how it catches all of the income of many people, in particular high net worth individuals who are able to use the income tax code to reduce their tax liability. That needs to be put down on paper. The idea that Fine Gael want to abolish the USC 100%, supported by Fianna Fáil which wants to go 90% of the way, in the process eroding what is one of the most sustainable bases in the tax code, is not acceptable.

Whatever the reason for producing a report - I agree with the amendment - we need the information in black and white. We need the Department to do this. Obviously, the Minister has the authority to do it, but it is not prudent to decide to strip away €5.4 billion in annual income to be achieved by 2021 without it being underpinned by a departmental report on the potential consequences and effects and indicating whether it would be the socially just and right thing to do.

The Government's policy for a period of years has been to provide for reductions in the USC. The biggest benefits of the reductions, in the way the Government has provided for them, have gone to those earning more than €70,000. It has been part of reframing by the Government and Fianna Fáil what a middle income earner is, when the reality is that 93% of workers earn less than €70,000.

The Government states there is less income inequality here than in other countries but comparing the overall share of income in the 1980s with what it is now shows that the top 10% have increased their share from 42% to 54%, including throughout the course of the crisis.

A myth is repeatedly stated, to the point where it becomes accepted as fact, in the shape of the idea that we have a very progressive tax system. This claim is based simply on the income tax code which is the progressive element of the tax system. As for the tax system in the round, including both indirect and direct taxes, a study conducted by Micheál Collins of the Nevin Institute found that the top 10% and the bottom 10% paid the same portion of their income in tax. Those who are less well off make most of their contribution through indirect taxation, while those who are better off make it in direct taxes. We are simply requesting a study, as having information enables us to make policy decisions, but the Government does not even want us to have that information.

I appreciate the difficulty Opposition Deputies have in framing amendments that will considered to be in order, the device of looking for a report on a particular topic being the way around it. I do not object to this, but one never knows on this side of the House whether an amendment is being tabled to seek an opportunity to debate a topic or whether its objective is actually to seek a report. I have no problem with producing reports and we have had a series of them. A report on farming in the agrifood sector led to many tax reforms, while a report on the marine and fishing industries led to many reforms in that area. We had a report on corporation tax in 2014 and on budget day I announced that we would have another report because of the changes that had taken place in the corporation tax code as a result of the OECD's agenda. Mr. Seamus Coffey is in charge of that report.

Many of the issues raised by Deputy Pearse Doherty such as US exemptions, the tax basis and distributions are dealt with in the income tax reform plan published in July this year and there is not a lot we do not know about the USC. We know the rates, the categories and tranches of income to which the rates apply, the yield for each year and the estimated yield up to 2021, all of which information has been published. We know that, post-budget 2017, the top 1% of income earners who are earning over €200,000 will pay 24% of total USC and income tax revenue; the top 6%, those earning over €100,000, will pay 49% of total USC and income tax revenue; the top 26%, those earning over €50,000, will pay 83% of total USC and income tax revenue. There is not an awful lot we could learn from a further report on the USC, but there is validity in what Deputy Joan Burton said about the use to which any tranche of income tax or USC revenue could be put and this issue could be examined.

I agree that there is a need to address the absence of universal pensions and that there are glaring gaps in social provision, although it would not be the Department of Finance that would take the lead role in that regard but the Department of Social Protection, in which Deputy Joan Burton was Minister for five years and which Department has a lot of information on how pension provisions would apply. We can come back to this issue again, but I am not committing to producing a full report. I would, however, welcome a debate on pension provisions and where the resources could be found.

Amendment put and declared lost.

Amendment No. 3 is not relevant to the provisions of the Bill as read a Second Time and must be ruled out of order in accordance with Standing Orders.

Amendment No. 3 not moved.

I move amendment No. 4:

In page 6, between lines 18 and 19, to insert the following:

“Exemption in respect of certain expense payments for resident relevant directors

3. The Principal Act is amended by inserting the following section after section 195C:

Exemption in respect of certain expense payments for resident relevant directors

195D. (1) In this section—

‘civil servant’ has the meaning assigned to it by the Civil Service Regulation Act 1956;

‘company’ has the same meaning as it has in section 4;

‘director’ has the same meaning as it has in section 770;

‘relevant director’, in relation to a company, means a person holding office as a non-executive director of that company—

(a) who is resident in the State, and

(b) whose annualised amount of the emoluments from the office for the year of assessment 2017 and for each subsequent year in which the person is a relevant director of the company, other than payments to which this section applies, does not exceed €5,000;

‘relevant meeting’ means a meeting in the State attended by a relevant director in his or her capacity as a director for the purposes of the conduct of the affairs of the company;

‘travel’ means travel by car, motorcycle, taxi, bus, rail or aircraft.

(2) This section applies to payments made by a company to or on behalf of a relevant director of that company in respect of expenses of travel and subsistence incurred by the relevant director, on and from 1 January 2017, solely for the purpose of the attendance by him or her at a relevant meeting.

(3) So much of a payment to which this section applies, as does not exceed the upper of any relevant rate or rates laid down from time to time by the Minister for Public Expenditure and Reform in relation to the payment of expenses of travel and subsistence of a civil servant, shall be exempt from income tax and shall not be reckoned in computing income for the purposes of the Income Tax Acts.”.”.

Section 114 of the Taxes Consolidation Act 1997 provides for a tax deduction in respect of expenses of travel which are necessarily incurred in the performance of the duties of an office or employment. In the case of an executive director or employee, this means that expenses of travel incurred in travelling from his or her normal place of work to attend board meetings will generally qualify for a tax deduction and an employer may pay or reimburse such expenses free of tax. However, in the case of a director who has no executive or other duties within a company, this means that expenses incurred in travelling to attend board meetings in the State did not previously qualify for a tax deduction.

In the Finance Act 2015 I provided for an exemption from tax in respect of such expenses for non-resident, non-executive directors. However, the case has been made for this exemption to be extended to include resident non-executive directors. As I stated on Committee Stage, l undertook to examine the position for this cohort of individuals. I am now introducing an amendment to exempt payments made to resident non-executive directors in respect of expenses of travel and subsistence incurred in attending board meetings in the State. To take account of concerns aired by Deputies on Committee Stage about the proposal to exempt such payments where directors are in receipt of large fees, I am limiting the scope of the exemption to directors whose annualised income from the office does not exceed €5,000. It will also only apply to meetings held in the State and it will only apply to amounts up to the Civil Service approved rates for mileage and subsistence.

Deputy Michael McGrath moved an amendment on Committee Stage and while I have not taken it totally on board, I have incorporated its spirit in this amendment. Other Deputies raised issues around whether excessive tax breaks might be given. That is why I have provided for two caps. I think this meets the consensus on Committee Stage.

I welcome the amendment. I raised this issue on Committee Stage. In the previous Finance Bill the issue was dealt with for non-resident non-executive directors who were given an exemption from taxation in respect of the reimbursement of expenses but a different regime continued to apply to Irish resident non-executive directors. It is important to be clear that we are talking about the reimbursement of expenses incurred in attending board meetings. We are not talking about people making a profit. I could not understand the logic in somebody being taxed on expenses incurred in travelling to board meetings.

The Minister has provided for a number of appropriate conditions, namely, a €5,000 limit and a stipulation that the amouints be in line with Civil Service rates. My intention in putting forward the amendment on Committee Stage was not to facilitate high rollers earning €70,000 or €80,000 in non-executive fees as members of the board of an Irish PLC, as some suggested. The Minister has made an appropriate change which I support and which sends a positive message to those who are prepared to lend their expertise to small and medium-sized enterprises, in particular. That is in keeping with the spirit of what I proposed on Committee Stage.

I also make the point that there are many types of organisations that are incorporated as a company, as a body corporate. We are talking not only about for-profit businesses; this measure will also be of benefit to a wide range of organisations that are incorporated and rely, in many instances, on pro bono expertise provided by people who bring considerable experience to board membership. This is a positive change, one that I can support.

On Committee Stage in dealing with Deputy Michael McGrath's original amendment I highlighted the many provisions which would have allowed high rollers to benefit from it. The origins of this measure lie in an institute, one of the members of which sat on multiple boards and was paid substantial fees. To pick up on Deputy Michael McGrath's point, the reality is that the expenses of many PAYE workers are taxed. That is the key point. What we are doing here is different. While I am not satisfied with the introduction of the amendment, I recognise that it is at least limited in its scope with respect to what was originally contained in the Bill in two key respects. There will be a €5,000 threshold, while the amounts paid will be in line with what is laid down by the Minister for Public Expenditure and Reform. I welcome that part of the amendment.

I welcome the amendment. A point was raised about non-executives who worked for charities and non-profit organisations and it is particularly welcome that the amendment appears to help them.

I have a question about the so-called high rollers, whatever number they constitute. In the case of a non-executive director of a company who earns any amount above €5,000 - let us say he or she earns €20,000 a year in that role - who has to travel to attend a board meeting in Cork and is put up in a hotel, I understand he or she will be taxed on the cost of staying in the hotel. If a civil servant who earns €80,000 or €100,000 has to attend a meeting in Cork, he or she will also have the cost of staying in the hotel paid, but he or she will not be taxed. Will the Minister explain the rationale behind this measure? I want to welcome what he has done, but I am still unclear as to the reason the amount of money one is paid by a company impacts on the principle. If someone is doing something for his or her business, be it helping a charity or working for a business, and there are legitimate business costs incurred, be it travel expenses or the cost of staying in a hotel or having dinner, in principle, why is the Minister keeping him or her within the provision? Perhaps there is a reason for it which I do not see it, but I still think it violates the principle, in that if it is a legitimate cost and there is no gain to the person, he or she should not incur a liability. The Minister might explain why that is the case.

I will deal first with the Deputy's question about charities and non-commercial boards. An exemption already applies in such cases under section 195A of the Taxes Consolidation Act 1997. That section exempts from tax the reimbursement of expenses of travel and subsistence to certain members of non-commercial bodies in both the public and private sector in respect of attendance at meetings of such bodies. "A member" means a person holding office as a member of that body who has no other duties in relation to that body. To qualify for the exemption, a member's annualised emoluments, excluding the expenses to which section 195A applies, from the body must not exceed €24,000 per annum in the case of the chairperson and €14,000 in the case of other members. The exemption covers expenses up to the Civil Service rate. "A non-commercial body" means a body organised solely for purposes other than profit, that, in fact, operates other than for profit, the activities generated income of which is used by the body to assist it in achieving its purpose and it does not distribute, or otherwise, make available any of its income for the personal benefit of any officer or employee or member or connected person other than as wages, salaries, fees or honorariums for services rendered. The gap was really for non-executive directors because others were getting tax relief, as were non-resident non-executive directors.

I have material on Civil Service rates. The Deputy's precise point was that civil or public service rates would not be subject to tax. Is that the point the Deputy was making?

My question was about the principle, with which I am struggling. I understand that in the amendment the Minister has capped the total amount at €5,000 for anyone in a non-executive role. If a person, regardless of what he or she earns from his or her non-executive role, breaches the cap included in the amendment, such costs are taxed. In the case of a person who has to travel to attend a meeting and has to pay €70 or €100 for his or her hotel room for the night, which cost is paid for by his or her company, meaning that there is no gain for him or her as it is a legitimate work expense, I understand he or she is taxed on that sum. I do not understand why it would ever become taxable income. That is my question. Why would the Minister insert a cap?

Does the Minister have a likely costing for this measure in the first three years? That might clarify some of the issues involved.

The reason I am including the cap is that I am not quite sure what the overall cost might be. I am also responding to the points made by Deputy Pearse Doherty and others that it should not provide for a bonanza for non-executive directors who were non-executive directors in a variety of boards and whose directors' fees and expenses could amount to very significant sums of money which would not be taxed. That was the consideration behind it.

I would not object to revisiting this provision next year when we receive some data from the Revenue Commissioners on how it is working out. It is something new. I do not know how many people are non-executive directors, how many of them travel distances and how many of them are required to stay overnight in attending board meetings; therefore, I am proceeding cautiously. The Civil Service rates cannot be exceeded. It is a measure to prevent possible abuse. That is what the note I have been handed states, but that does not tell Deputy Donnelly an awful lot more than he already knows.

Amendment put and declared carried.

I move amendment No. 5:

In page 6, to delete lines 21 and 22 and substitute the following:

“(a) in paragraph (a), by substituting “€1,100” for “€550”, and

(b) in paragraph (b), by substituting “€1,100” for €550”.”.

We dealt with this matter on Committee Stage. The Government is moving in the right direction in terms of equalisation between PAYE and the self-employed tax credits. It went one third of the way in addressing the issue last year in introducing a tax credit of €550 for the self-employed. It was clear that this would happen in a three-year period. In our alternative budget we argued that the second phase should take place this year, which would have meant that the tax credit would have been increased to €1,100. Unfortunately, the Government has not gone that far and has instead increased the figure to €950. Therefore, the amendment proposes to provide for the entire second stage instalment in the three-stage approach to ensure equalisation for the self-employed and PAYE workers.

If we were to increase it by one third each year, the amount would be €550 each year.

The reason I brought the figure back to €400 this year is twofold. First, there are very limited resources available. As the Deputy knows, we had to spread thinly what we had available in the budget for tax reductions or anything to do with tax. As well as this, there was a fairness test, something I always like to apply to budgets. When I looked at the income distribution for PAYE workers who were getting €7 or €8 a week in USC reductions and then for self-employed persons who were getting an increase in the earned income credit, as well as availing of USC reductions, there was a very wide discrepancy in the benefit per week for a self-employed person as against that for a PAYE worker. As such, I had two reasons for it.

I can appreciate that, but when we talk about equalisation, at its core is the word "equality". If we believe there should be equalisation, we need to believe there is inequality at the heart of the system at this time. When the Minister is addressing an inequality, he should not pit one person against another. While I take his point about how it looks on a spreadsheet, this is about having equality for the self-employed. On Committee Stage, we talked about the challenges facing those who were self-employed and I am sure the issue will come up again. We have talked about the fact that they cannot rely on some State supports when things do not go their way, they fall ill or their companies do not work out in the way they had intended. The Minister has talked about there being limited resources, an issue about which we can have a debate. We can talk about all of the different tax cuts and which are the most appropriate or beneficial, but I ask the Minister to address the cost of increasing the figure from €950 as proposed by the Government to €1,100 as proposed in the amendment.

There is general agreement across the House that there should be equal tax treatment for the self-employed. An important start was made last year and a further step has been taken this year. Obviously, from our point of view, we would have liked to have seen the figure brought up to two thirds in accordance with the three-year plan laid out the previous year. As such, I ask the Minister if it remains the policy objective of the Government to provide the full €1,650 credit for the self-employed in a three-year period. Budget 2018 represents part three of that instalment. It is important to welcome, allied with this increase in the earned-income tax credit, the partial extension of social protection benefits by way of invalidity pension and the dental and optical benefit scheme to the self-employed. That is an important breakthrough because it is something about which we have all heard from self-employed persons many times. Deputy Pearse Doherty alluded to it. While it is only a start in accessing vital social welfare supports, it should be acknowledged and welcomed. My key question is about whether the policy objective within the three-year timeframe remains in place.

I was a strong supporter of the previous Government's move to extend the PAYE income tax credit to the self-employed. I do not particularly know why there was a move from the implied but perhaps unstated policy of providing for equal relief in each of the three years. I suspect it might have had a lot to do with some of the arithmetic for the budget and the need to make savings, or shavings, in relatively small amounts as the bill increased, not least for Fianna Fáil's part of the budget, but also for that part of the budget pertaining to other members of the Government. I want it to be clear that one of the reasons I am so strongly in favour of the extension of the income tax credit to self-employed persons is that there are a lot of people in the system who we should acknowledge are self-employed but not by choice. They are self-employed as a result of the employment practices of their employers. We have talked about things to discuss on another day. There are young people in their 20s who do not mind being contractors because it does not seem as if the day will come when they will need a pension. By the time they are in their 30s, however, and have family responsibilities, it might be very difficult to be self-employed, particularly on a low wage and because of the lack of protections.

There is bogus self-employment to a great extent. I asked the Minister about this before and was told that a further review was being carried out by the Revenue Commissioners in conjunction with the Department of Social Protection of bogus self-employment in the Irish system. We are all familiar with people on bikes in Dublin city with "Deliveroo" printed on a box on their backs. While we do not really have data in Ireland, it is apparent from information from the United Kingdom that the people making these deliveries may be earning well below the minimum wage. While they may be very happy to have part-time work because they are students, for that reason we need to be very aware of the changes in work patterns which are taking people out of traditional employment. Their terms and conditions are very much those of employees, but they are ending up as self-employed persons on low wages, perhaps below the minimum wage. Consequently, their social welfare entitlements are important. They include an entitlement to pensions, maternity and paternity leave and other social protections. There will be an extension of these entitlements next year, but the people concerned do not have an entitlement to unemployment benefit or assistance in the event that they lose their self-employment because, of course, they are not employed. This is an issue with which we have to grapple.

I suspect this provision has more to do with the budgetary arithmetic than some big policy decision in the Department and that the money simply was not available. However, I hope the Minister will commit to completing the reform process next year and prioritising it. He said before that the report on bogus self-employment and the work being done by the Revenue Commissioners and the Department of Social Protection and others would be published quite soon. Does he have further information on the date it will be available?

It is the Minister's final reply. I ask him to bear in mind that the debate is to be adjourned at 8 p.m.

Deputy Pearse Doherty's amendment would cost an additional €12 million to implement in 2017 and €22 million in a full year.

To answer Deputy Michael McGrath's query, the commitment in A Programme for a Partnership Government is to increase the earned income credit to €1,650 by 2018 as part of a Government objective to provide a supportive environment for entrepreneurs and the self-employed. I have never argued on the basis that this is a measure to promote equality between self-employed persons and those in the PAYE system because the systems under which each group is taxed are different. I have argued on the basis of fairness. I thought it had become unfair that there was an allowance for PAYE workers of €1,650 which was not available to the self-employed.

It is an issue of fairness rather than inequality. However, the commitment in the programme for Government remains and has not been amended in any way.

Amendment put:
The Dáil divided: Tá, 30; Staon, 33; Níl, 54.

  • Barry, Mick.
  • Broughan, Thomas P.
  • Burton, Joan.
  • Collins, Joan.
  • Collins, Michael.
  • Connolly, Catherine.
  • Daly, Clare.
  • Doherty, Pearse.
  • Donnelly, Stephen S.
  • Ellis, Dessie.
  • Ferris, Martin.
  • Funchion, Kathleen.
  • Healy, Seamus.
  • Kelly, Alan.
  • Kenny, Gino.
  • Martin, Catherine.
  • Mitchell, Denise.
  • Munster, Imelda.
  • Murphy, Paul.
  • Ó Broin, Eoin.
  • Ó Caoláin, Caoimhghín.
  • Ó Laoghaire, Donnchadh.
  • Ó Snodaigh, Aengus.
  • O'Sullivan, Jan.
  • O'Sullivan, Maureen.
  • Pringle, Thomas.
  • Ryan, Eamon.
  • Sherlock, Sean.
  • Smith, Bríd.
  • Wallace, Mick.

Níl

  • Bailey, Maria.
  • Barrett, Seán.
  • Breen, Pat.
  • Brophy, Colm.
  • Bruton, Richard.
  • Burke, Peter.
  • Byrne, Catherine.
  • Canney, Seán.
  • Cannon, Ciarán.
  • Carey, Joe.
  • Corcoran Kennedy, Marcella.
  • Coveney, Simon.
  • Creed, Michael.
  • D'Arcy, Michael.
  • Daly, Jim.
  • Deasy, John.
  • Deering, Pat.
  • Doherty, Regina.
  • Donohoe, Paschal.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Farrell, Alan.
  • Fitzgerald, Frances.
  • Fitzpatrick, Peter.
  • Flanagan, Charles.
  • Griffin, Brendan.
  • Halligan, John.
  • Harris, Simon.
  • Heydon, Martin.
  • Humphreys, Heather.
  • Kyne, Seán.
  • Lowry, Michael.
  • McEntee, Helen.
  • McGrath, Finian.
  • McHugh, Joe.
  • McLoughlin, Tony.
  • Madigan, Josepha.
  • Mitchell O'Connor, Mary.
  • Moran, Kevin Boxer.
  • Murphy, Eoghan.
  • Naughten, Denis.
  • Naughton, Hildegarde.
  • Neville, Tom.
  • Noonan, Michael.
  • O'Connell, Kate.
  • O'Donovan, Patrick.
  • O'Dowd, Fergus.
  • Ring, Michael.
  • Rock, Noel.
  • Ross, Shane.
  • Stanton, David.
  • Varadkar, Leo.
  • Zappone, Katherine.

Staon

  • Aylward, Bobby.
  • Brassil, John.
  • Browne, James.
  • Butler, Mary.
  • Byrne, Thomas.
  • Cahill, Jackie.
  • Casey, Pat.
  • Cassells, Shane.
  • Chambers, Jack.
  • Chambers, Lisa.
  • Cowen, Barry.
  • Curran, John.
  • Gallagher, Pat The Cope.
  • Harty, Michael.
  • Haughey, Seán.
  • Kelleher, Billy.
  • Lahart, John.
  • Lawless, James.
  • MacSharry, Marc.
  • McConalogue, Charlie.
  • McGrath, Michael.
  • McGuinness, John.
  • Martin, Micheál.
  • Moynihan, Aindrias.
  • Moynihan, Michael.
  • Murphy O'Mahony, Margaret.
  • Murphy, Eugene.
  • O'Callaghan, Jim.
  • O'Keeffe, Kevin.
  • O'Rourke, Frank.
  • Rabbitte, Anne.
  • Smith, Brendan.
  • Troy, Robert.
Tellers: Tá, Deputies Pearse Doherty and Aengus Ó Snodaigh; Níl, Deputies Regina Doherty and Tony McLoughlin.
Amendment declared lost.
Debate adjourned.