I wish members a happy new year and hope 2005 will be a productive year for the committee. Apologies have been received from Deputies Ó Caoláin and Ned O'Keeffe.
The first item on the agenda is the minutes of the last committee meeting of 15 December. Draft minutes have been circulated. Are the minutes agreed? Agreed. Are there any matters arising out of the minutes?
There is a reference to a monthly report on the progress of decentralisation. Is this correct?
Yes, we have asked for a monthly report.
Is the second report due?
The second report is imminent but we have not received it.
I intended to raise this issue. It is unsatisfactory that the report is imminent. "Imminent" means late. We have made it clear that we do not want a report of ten pages. We simply require a three-line report that details places, numbers and situations. This is not an attempt to create extra work for those hard-working people in the relevant Department. The objective is that the committee can create a monthly graph which indicates progress made for that month. It is not a major deal. We are not looking for a six-page document but rather a few lines.
I presume this information is being collated internally for the Department's own purposes. It should be.
I take nothing for granted and assume nothing. It is likely the Department is not particularly enthusiastic about our decision in this regard.
We have formally requested the monthly report and will pursue the matter. Members' points are taken in this regard.
I wish to raise another issue. All Departments were asked to submit a report on the legislation within their province that comes under the remit of the freedom of information legislation. The Information Commissioner expected to receive these reports last autumn, after which she intended to present a report to the committee for consideration as to whether various items of legislation should be included in the freedom of information provisions.
At the last meeting, three or four Departments had not yet supplied this report, as a consequence of which I wrote to the relevant Ministers. I understand only the report of the Department of Transport is now outstanding. As this is a new Department with little experience of the process, the report is taking a little longer. The Department has indicated it will be several weeks before it can supply the report. Subsequent to this, the Information Commissioner will present her report to the committee. That is by way of information.
The next item on the agenda is correspondence, and there is a large number of items.
As guest speakers are due to attend this committee, are we going to go through all correspondence?
I met the IFSRA delegates outside and told them we would take half an hour to go through correspondence. They are having a cup of coffee upstairs. We should dispose of the correspondence or we will end up with a backlog the week we return. We can hold on to anything particularly contentious. However, I would prefer to dispose of routine correspondence.
The first item of correspondence is item 2004/46. The Joint Oireachtas Committee on Foreign Affairs Sub-Committee on European Scrutiny has sent a list of documents and proposals considered and decisions taken at its meeting on 16 December 2004. The sub-committee has drawn our attention to one proposal in particular but has not recommended we scrutinise it. This relates to item SEC (2004) 15511/04 FIN567 (Council Number), which is a proposal to use the flexibility mechanism to fund the PEACE II programme, decentralised agencies and external aid to Iraq. It is proposed that, in line with the recommendations of the sub-committee, this proposal does not warrant scrutiny by this committee. Is that agreed? Agreed. It is also proposed that no other proposal considered by the sub-committee on 16 December 2004 warrants scrutiny by the committee. Is that agreed? Agreed.
Five statutory instruments have been received from the Department of Finance. Under orders of reference, this committee has the power to consider such statutory instruments made by the Minister for Finance and laid before the Houses as it may select. The time limit within which the Houses can annul a statutory instrument is often limited by statute to 21 sitting days after it is laid.
The first, SI 757/2004, makes a small number of amendments to certain existing legislative provisions governing the business expansion scheme, BES, and seed capital scheme, SCS. It contains nothing of significance, however I propose we note it. Is that agreed? Agreed
SI 758/2004 is a commencement order bringing the BES and SCS, as amended by SI 757/2004, to which we just referred, into effect on 5 February 2004 until 31 December 2006. It only refers to a commencement date, so we will note it.
SI 760 changes the commencement date for the new requirements regarding credit union loan arrangements from 1 January to 1 April 2005. I recommend that we note this. Is that agreed? Agreed.
SI 814/2004 provides for the commencement of changes in respect of tax relief for film production as provided in section 28 of the Finance Act 2004. I propose that this be noted. Is that agreed? Agreed.
SI 853/2004 proposes to give effect to the main provisions of the marketing and supply of financial services to consumers under the organised distance marketing scheme. I propose we note this as it contains nothing of great concern.
The next item refers to consideration of a travel report from Deputy Burton who attended the ESRI budget perspective conference in Dublin in October, details of which have been circulated. It is proposed to note this.
The next item is correspondence in respect of Tralee Beef and Lamb. A letter from Anglo Irish Bank has been received following our invitation to the bank to meet the committee to discuss the receivership of Tralee Beef and Lamb. In the letter, Anglo Irish Bank states the debt has been cleared and it is no longer directly involved. The receiver has indicated that he acted in accordance with the legislation and has discharged his function since February 2004. This leaves the liquidator and the farmer creditors, as represented by the Irish Farmers' Association, as the two key groups involved. The committee might wish to meet representatives of the farmer creditors, as was proposed at an earlier meeting. Otherwise will we hold off on such action? It is an issue in which we do not have a particular role, but some committee members asked that we follow up on this item of correspondence. Will we defer the matter until there is a full meeting, or will we agree to take no further action?
In fairness to Deputy Ned O'Keeffe, we should defer.
We will defer the matter.
An e-mail has been received from IFSRA regarding the publication of a consultation paper on their review of remuneration structures and transparency. I propose we note the letter. Is that agreed? Agreed. This committee has asked IFSRA to send it copies of all documentation it issues in the public arena. We receive these on a regular basis.
The next item refers to a review of tax relief and exemptions for high earners. A letter has been received from the Minister for Finance regarding a public consultation process inviting submissions on tax relief and exemptions for high earners. Members will recall this issue was raised at our meeting with the Institute of Chartered Accountants in Ireland and the Chairman of the Revenue Commissioners in November 2004. I am pleased to note the early progress in this area by the Department of Finance. This item is also in our work programme for 2005. It is a topic to which we will return early in the year as part of the programme. Does the committee specifically request to make representation as part of this consultation process?
I am happy to return to the issue. Can the committee receive clarification from the Minister's office? It appears he is including in his review the termination date for the allowances he has already announced. Most people expected that property-based allowances, which he had decided to eliminate, would not be back in the frame again. We should seek clarification as to the status of the commitment to end these reliefs, as such a measure sends a mixed signal.
As Chairman of this committee, I would like to clarify the issue. There is a complete misunderstanding about those particular property reliefs. I will give a more accurate position. The closing date for new entrants to enter those schemes is mid-2006. With regard to many of the property reliefs, one can claim a certain tax relief in year one. One can also claim a certain amount of the investment over the subsequent 13 years and up to 13 years. I have checked the details. Some of the property reliefs, which the public thinks are being discarded in 2006, will continue to give tax relief until 2019. We will stop new entrants in 2006, but there is no intention to close down the reliefs. They should be examined in that context. There is a view that they are being closed down, but that is not the case.
Is the Chairman saying it is open to the Oireachtas to close down concessions already granted that had, for example, a ten-year lifespan? Would that not be bad faith, considering that someone might have been told they could invest under certain terms and they did so legitimately at the time? It would be quite a change of policy and a surprising approach to take if the Minister is thinking of retrospectively changing the terms under which people invested. We should have clarification from the Department that it does not intend, by this advertising, to open up the possibility of people saying that schemes which are now closed should be reopened. I do not think that was the intention.
The Department did not make that suggestion. However, I made that exact point to Department officials here last autumn. Perhaps the Deputy was not here that day. They raised his concerns in that it would represent a bad breach of faith to change the regulations now. However, I pointed out that most of us who took out mortgages a number of years ago did so on the basis of a certain amount of tax relief and knew we would have the mortgage for the ensuing 20 years with an expectation of such reliefs. Those reliefs, however, have been changed several times. People assume that tax reliefs will continue indefinitely, but they could be changed by the Government. The mortgage interest relief is one example. However, we will seek the clarification which the Deputy requires.
The examination being conducted by the Minister is not about tax relief. It is specifically geared towards excessive use by high income earners to reduce their tax liability. The gist of the review is the possible over-use of these tax reliefs. To examine this matter, they must examine the tax relief. However, there is a clear emphasis on high income earners who have been paying no tax.
On that last point, there were two issues of clarity. The Minister said he would deal with people who use tax exemptions to the point of paying no tax whatsoever. He said he would review all current schemes. It is important not to give the message that we think every tax exemption is a bad idea. That is not where we are coming from. We are talking about equity and fairness, and we want that all schemes are examined so that everybody pays a share of tax. This is what we hope to see coming out of the review.
Is there any particular point of clarification which Deputy Bruton seeks?
With regard to tax schemes announced or terminated by the Minister, I would like to know whether he is opening the review to consider restoring those he has already decided to terminate. That is the real question.
Most people believe that continuing to provide tax relief relating to a construction industry that has been booming for many years is inappropriate and adds to difficulties in the economy rather than having a beneficial effect. It is not merely that some individuals pay no tax. There is also the inappropriateness of continuing to use taxpayer's money to fuel an industry that clearly has difficulty in meeting existing demand.
What surprised me was that schemes whose termination date has already been announced appear to be back on the list. Perhaps what is being considered is changing the rules retrospectively. I simply want clarification.
Before we leave this, I would like to make it clear where I am coming from. I believe there is a case for some of these reliefs. The problem we had previously related to how they were abused and lacked focus. For instance, there was much abuse regarding hotels. However, I could name a number of towns in Ireland, including Kilbeggan, Ballinrobe, Kilrush and so on, that do not have hotels. I would have no difficulty with a tax break that allowed hotels to be built in places like that in order to create something new in their centre. The problem was the lack of focus and the all-embracing nature of these reliefs in the past.
This was announced on budget day and it is most welcome. We will all be the wiser when this examination is complete.
Deputy Bruton is concerned that we are reopening schemes whose completion dates have been announced. However, for various reasons Ministers have in the past extended closing dates, even though they were already announced. Perhaps it would be no harm to examine all of them. Then, if there is good reason for extending a scheme whose termination has been announced, it can be done in an informed way and with the benefit of a full examination. An examination might also indicate whether the decision was wrong in the first instance. There are swings and roundabouts. If a review will provide information it should be welcomed.
I agree with Senator O'Toole. There is much good in such schemes. Many areas that would not otherwise have got any investment have benefited from them.
I received a letter, and I suspect all Oireachtas Members have received a similar letter, from people looking for a new tax break in the Finance Bill to be introduced this year in respect of the construction of hospitals that provide psychiatric services. In the past couple of years the Finance Bill has specified a menu of facilities that a hospital must provide to obtain tax relief, and psychiatric service was specifically excluded. We know there are no proper in-care hospital facilities for youngsters and adolescents in difficulty. Most of them must be sent to Britain for assessment, with the exception of a few in Galway. I would support a tax incentive if it solved that problem. The committee is not against tax incentives per se. The issue is overuse, people paying no tax, and some tax incentives.
I wish to seek clarification. We are examining the tax incentive schemes that have been in use over the past few years, not only the current ones. A crucial issue for me is the regressive decision to do away with particular tax breaks for people producing alternative energy. Airtricity suffered badly from drawbacks. We have certain responsibilities under the Kyoto agreement to produce alternative energy. Some of the incentives relating to that are gone. I would like to have those examined as well in the context of what other speakers have said.
It will be one of the early items in the work programme this year.
It is important to clarify that the document issued deals with the appointment of consultants, who are examining specific reliefs. There are 11 scheduled there. The Department itself is reviewing all reliefs and tax exemptions and has sought the assistance of consultants to deal only with particularly complex ones. The Department is doing an internal review on a number of them and will be making submissions on those. What we have here are the ones being farmed out to consultants. That is the document we see here and it is important to note that it is not an exhaustive list of what is being examined by the Department. That probably deals with the point Senator O'Toole raised. We will come back to this topic as part of our work programme in terms of making a submission on this whole area because the committee will want to discuss it.
The next item was reference No. 053. A letter has been received from the Chairman of the Revenue Commissioners following our meeting with him in November 2004 when we discussed various tax issues. The Chairman has now provided information which I requested at the meeting. I propose we note that and the appendix attached.
I want to make a few comments on this because I made a comment or two on it once the documentation was received. First of all it deals with the level of relief being claimed by artists. The figures here include a short tax year in 2001. Those figures show that 2% of the artists claiming the relief are obtaining 58% of the relief, and it is an average of €2.2 million per annum for each of them. That is an example of overuse. We all agree that people at the lower end of the scale should be able to claim that relief.
The second point I want to mention specifically is really a nugget of information that gives a whole new concept to non-residency rules. When we asked for information on stallion fees exemptions, the Chairman of the Revenue Commissioners and his officials were not in a position to clarify the memorandum produced by their office and said they would come back to us with further detail. They have now done so and that further detail makes it very clear that there is a concept enshrined in Irish law of the non-resident stallion, to use a layman's term. That is what confused us here when the committee last met. None of us had any awareness or knowledge of this. It is clear from this memorandum and the appendix from the Revenue Commissioners that the income generated by a stallion that is ordinarily kept on land outside the State, in other words, a non-resident stallion anywhere in the world, can be exempted from income tax in Ireland if the part-owner or member of a syndicate that owns such a stallion is involved in the bloodstock industry in Ireland and the stallion was acquired for the purpose of servicing mares owned by that consortium or syndicate. It is extraordinary and unbelievable that this is enshrined in Irish law. I have no idea whether it has been used. I suspect it worked its way in there for a very good reason. When reviewing reliefs, that is one that must be examined. Giving tax relief to the bloodstock industry is bad enough, but giving it on stallions in America and Australia as well is extraordinary. It is a revelation to most people that this has been in legislation for years.
The information is revealing of the extent to which there has been no serious scrutiny of what is provided here. In the context of artists' relief, a small number of individuals, 28 in all, share between them income of €46.6 million that is exempt from tax. It means that a small number of millionaires are effectively exempt from tax under that code. I do not believe that was the intention. It was aimed, I would have thought, at struggling artists trying to get established. The concept of a cap on the extent to which reliefs can be availed of by individuals is something the Minister is considering. It certainly is relevant.
I too noted that the notion of getting tax reliefs on activities outside the State is fairly bizarre. It encourages manipulation of residency for the purpose of getting relief. The OECD has a definition of harmful tax competition. This looks like harmful tax competition that would fall foul of some of the OECD rules. There are issues in this correspondence that the committee needs to examine seriously.
We are on correspondence. Deputy Burton is aware of the document. We are dealing with artists' relief and non-resident relief.
I apologise for my late arrival but the President was attending a function in my constituency.
Did the Deputy forsake Ireland for her constituency?
I felt obliged to go out of respect.
I found the letter from the Revenue Commissioners very interesting. This is like the dance of the seven veils. Slowly but surely Revenue lifts a veil every time the committee asks a question. Mr. Daly should be offered an opportunity to return to explain this in detail because the modifications to the stallion scheme were made to provide tax relief on stallions not at stud in Ireland. A number of studs may place stallions inAustralia or elsewhere for a period during the year but we need to hear from Revenue in more detail how this has worked and its implications. For instance, it would be useful if information was provided on the number of studs claiming stallion relief, the number availing of the offshore element of the tax break and its value to different operations.
This must apply to the larger operations, in particular, but we do not have an indication of the cost forgone by the Exchequer. It is important to establish this. Deputy Bruton referred to the European Commission inquiry into the complaint made about the scheme. Two years ago during the debate on the Finance Bill the then Minister for Finance, Charlie McCreevy, gave us to understand that he was calling on the bloodstock industry to be required to provide accounts in the interest of transparency and the development of a fairer tax system. It has emerged, however, that was a response to a complaint made to the European Commission about this tax break being unfair in trade terms. The Department could not even reply to the Commission regarding the loss of tax revenues and the value of tax assistance.
Revenue should be invited to appear again before the committee in order that a series of detailed questions can be put. For instance, small operations may have only one stallion while this is a multi-million euro industry for large operations and the tax breaks are significant. We need to know what we are talking about. The requirement to provide accounts relates to the year ending 31 December 2004. Revenue may be able to indicate the amounts involved. Mr. Daly should be recalled to reveal a little more.
We all agreed the question of tax breaks, incentives and high income earners would be one of the first items in our work programme for the year. The Deputy has mentioned one element of that discussion. As she pointed out, nobody had information on this. The tax forms issued for 2004 asked for the first time about such tax breaks. The letter will be noted to require consideration when we deal with this item.
The next letter relates to charges for ATM services. A letter dated 13 December 2004 was received from IFSRA in response to the committee's request for a briefing note on significant variations in the charges made for ATM services provided, on the one hand, in banks and, on the other, in commercial premises and the way such charges are regulated. There has been correspondence on the letter which I propose to note.
A study by the Competition Authority of the non-investment banking sector and a copy of a covering letter sent to me were circulated last week. At our meeting in December it was agreed the committee would make a submission to the authority in the context of its examination of bank charges and interest rates last year. One option is to submit a transcript of our meetings with the various financial institutions. That is the easiest and most practical way of making a submission, unless we want to put a report together.
That would be a cop out. We would be better doing nothing than sending a bulldog clip on heaps of paper. We should draw conclusions and make recommendations or forget about it. I propose that recommendations should be made.
I agree. With all due respect to the number of persons with PhDs who produced the report, I am not sure what purpose it serves. Nothing was discovered that members did not know. We should proceed with our own report, as there was little in the Competition Authority report to add to what has been thrashed out before the committee and in the public domain.
We should, therefore, publish our own report early in the year.
We could meet the authority's deadline for submissions but there would not be broad support for at least one recommendation, namely, dropping the provision for notification of charges. We ought to express a view on whether the banking system has reached a point where this regulation could be removed. However, the system has not reached a point where we would have the confidence to do so. The committee should make a report to the authority because its findings will carry weight with the Government. It would be sensible to dovetail the two and aim to complete our report before the submission date set by the authority in order that our comments on the banking sector would be part of the submission which would conclude our study of the issue.
The deadline is 14 February which is tight but I am sure the authority will accept a report from the committee, even if it is not submitted by the deadline. Will we aim to put together a report during February? Other committees have brought in consultants to draft reports which saved a great deal of time. All the information obtained was assimilated and a report drafted. The committees then got involved at the recommendation stage. The Finance Bill 2005 will be before the committee soon and I am worried that it would be impossible for the clerk to the committee to take on such a report. I seek permission to contact consultants who have worked for other committees to make submissions on budgets, time and so on. The committee has a budget to appoint consultants. Is that agreed?
: The study was conducted on non-investment banking and I would like to know the reasons for this. We are examining problems with pension funds but the scam is the cartel operated by investment fund mangers who all manage to finish within 4% or 5% of each other every year and make sure nobody is left out in the cold. They are working together. This should be examined. I would like to see a report on the churning that occurs when people are advised to sell Bank of Ireland shares and buy AIB shares or vice versa and to move funds around to allow fund managers or their associate companies to claim commission. I would like to know the reason we cannot have investment fund managers who are paid commission on their gross yield or earnings rather than on the amount of money in various funds. There are many actions the Competition Authority could take, given the pensions crisis Ireland faces in the next 15 or 20 years. There are real issues to be addressed in investment banking services involving fund and pension management, in particular. I honestly believe there is a cartel operating.
Our report will not be confined to the issues being examined by the Competition Authority. Our discussions will be broader and our report can be sent to the authority subsequently. We will proceed on the basis mentioned.
The next item of correspondence is a reply received from IFSRA on a point raised by Deputy Timmins during a meeting of the committee with the authority on 20 May 2004 on the value of uncashed bank drafts in the banking system. IFSRA contacted the clerk to advise that the information supplied may be incorrect. The situation will be clarified by it as soon as possible. I propose that we set aside the letter we have received and await clarification of the information provided. Is that agreed? Agreed.
An invitation has been received from the Institute of European Affairs to attend a seminar on better aviation regulation on Tuesday, 8 February 2005. I propose to note the invitation. It is not particularly within our remit to attend.
A letter has been received from Senator O'Toole concerning a report by the High Court inspectors on National Irish Bank. The Senator proposes to invite representatives of NIB to meet the committee to examine the issues raised in the report. As we have representatives of IFSRA waiting to discuss the issue with us today, I propose to defer a decision on the Senator's proposal until after the meeting. After we hear from IFSRA, we can talk about the letter. Is that agreed? Agreed.
Item No. 3 is our discussion with the chief executive and officials of IFSRA.
