I move:
That Seanad Éireann welcomes the movement towards equity in the recent budget as a first step in the reform of the public finances.
The purpose of putting down this motion at this time is to provide Seanad Éireann with an opportunity at this early date of expressing their views on the contents of the budget and enabling the Members on all sides of the House to express their views to the Minister so as to have some input from this House before the Finance Bill is drafted. In previous years, for technical reasons, that was often not possible. Naturally, being on this side of the House, I will be emphasising the positive aspects of this budget. No doubt, others will be emphasising the negative aspects of the budget. As far as my seconder and I are concerned, those views are as welcome as our own views, as we primarily have in mind presenting Seanad Éireann with an opportunity of expressing their views on this important topic prior to the drafting of legislation.
In general, trying to sell to people the concept that a budget which imposed considerable extra taxation is a step in the reform of public finances and a movement towards equity is a difficult task. But because it is a difficult task it does not mean, on the one hand, that it is a task which should be ignored or, on the other hand, that the statement is incorrect. It is very difficult to explain to people that the standard of living which they enjoyed right through the sixties and in particular in the seventies — being, as it was, artificially high — has contributed in no small way to the excessive burden of taxation which this and previous Governments have now found necessary to impose on the people. Similarly, the extent to which we fail to control our public finances represents the legacy which we are passing on to the next generation of taxpayers. The extent to which we overspend represents the amount of equitable distribution of the nation's resources which we are not passing on to the next generation. That is not a very popular or easy message to put across to people, but it is one in which I firmly believe.
However, even within the context of that difficult message, there are a large number of individual measures capable of identification, which were proposed or referred to in the Minister's budget statement. I propose to refer at some short length to a number of these proposals. In the welter of criticism of the increases in taxation — a criticism to which everybody instinctively subscribed — very many positive aspects of this budget have been lost sight of. It is right and proper that Seanad Éireann should take this opportunity of expressing their viewpoints on these items.
I have identified nine such items in the budget to which I want to refer. There are many more, and in addition to the positive ones of course there are items within that budget that are painful to the community at large. I have identified nine positive items which show the commitment of the Government and should be welcomed by Seanad Éireann. Briefly, the list is: the manner in which social welfare recipients have been looked after in the budget; the proposal to introduce a family income supplement; the proposals for the taxation of the self-employed; the proposals for the changing of the system of farmer taxation; the measures proposed in respect of deposit interest; the measures proposed in respect of tax evasion and tax avoidance; the residential property tax as outlined in the budget speech; the advance corporation tax company taxation proposal; and the amelioration of VAT on certain kinds of imports.
These are areas of particular importance which can be put forward as positive steps along the road towards reforming the public finances and moving towards equity. That is not to say, of course, that any one of these individual items is not itself subject to internal criticism. But, in broad general terms, as one examines each of them one will find that there are very positive and worthwhile aspects to each of them.
I am conscious, in talking firstly about the social welfare changes, not to get into the detail of the Social Welfare Bill, which has not yet been presented to the House, but which I understand will be the subject of discussion in a short time. The budget speech itself refers to the broad policies on social welfare payments during the coming year. In general, the Minister showed a welcome awareness of the need to ensure that social welfare beneficiaries would receive a substantial increase. The 12 per cent proposed in respect of short-term benefits and ten per cent in respect of other benefits is a welcome re-commitment of this Government and the nation to the necessity of protecting those in receipt of social welfare benefits.
Under both the Coalition budget which was defeated and the subsequent Fianna Fáil budget, the proposal was to increase social welfare payments and a 25 per cent increase was implemented. This cumulative increase of 40 per cent over two years contrasts very vividly with what has happened in the United Kingdom. In the United Kingdom for the last four years there has been no real increase in social welfare payments. It could be argued in respect of their last budgetary statement presented on 15 March by the Chancellor of the Exchequer in the British House of Commons that they, in fact, effectively reduced social welfare benefits.
In our difficult financial situation that the Government can bring about this welcome improvement is something which should not pass unnoticed. We can have discussions at a later date about the nitty gritty of other changes made, but as regards the vast majority of social welfare recipients, as announced in the budget they will receive very welcome increases which, when taken with the increases of last year will show, in a time when real wages for the rest of the community are falling, a preservation of the purchasing power of those in receipt of social welfare benefits. It will also show a slight increase in their purchasing power, and that is to be welcomed.
Also foreshadowed in the speech of the Minister was the family income supplement. This is an aspect of the budget of which, because it was short in detail in the budget speech, the significance has not struck home to the general public as yet. The Minister set aside a sum of £5 million in respect of this supplement. He indicated that he envisaged that about 20,000 families could benefit. The legislation and the enabling measures to bring this into effect will mean that its implementation will be later in the year. If it was in respect of the last three months of the year the amount set aside by the Minister and the anticipated number of families to benefit would indicate a payment in the order of £800 per annum, or proportionately; if the £5 million was in respect of a time greater than three months, then the £800 a year could be proportionately reduced.
This supplement, being a first step towards the bringing together of our social welfare and income tax codes is most important. It is vital that our social concern should extend not only to those people who are unfortunately unable to work at this time due to illness or lack of availability of work, but to those who are involved in marginal occupations and who might find themselves almost as well off if they did not work at all. The advantage of the family income supplement is that these people, from my understanding of the Minister's speech, will be helped in this regard and that the lowly paid people who are working will and can expect to benefit in some way from it. That is a very positive start and one which has not received sufficient publicity.
The Minister has mentioned his determination to tackle the problem of the taxing of self-employed people. I am self-employed myself, so anything I say here would obviously have to be viewed in that light. There is a considerable value at the present time to the self-employed in the delay which they can bring about quite legitimately in the payment of their taxation. I am not speaking in terms of the use of appeal procedures or anything like that, but about the self-employed paying their taxes exactly when they are due, but not before.
The amount of time by which the self-employed can delay the payment of tax varies depending, if they are traders, on the time of year which they are using for the basis of assessment. For example, if the self-employed person is using income up to 6 April of any year, he can delay his payment for practically two years beyond the PAYE worker's payment. Take the worker who pays PAYE every week. He is, effectively, paying his taxes in the mid-point of that year. The self-employed person who has a tax year ending on 6 April, 1982, for example, does not pay tax in respect of that until two years later. Of course it is not true that everyone benefits to that extent. If, like myself, their tax year ends on 30 March, their benefit is limited to approximately one year later than the PAYE person.
The Minister should, as a first step, recognise the difference in approach or in length of time and should tackle the problem on the basis of bringing those people who are to a greater extent in arrears up to date. The value of this delay to the self-employed should not be underestimated, in respect of someone who is two years in arrears being probably equal to a reduction of 30 per cent in that person's taxation payment. That is the extent of the benefit which the self-employed are getting. The Minister has expressed his determination to tackle this problem and to introduce it with respect to the coming year. This is another positive step towards the elimination of inequity within the tax system.
There is the question of the extension of taxation to small farmers who are not at present liable for tax. The Minister has also dealt with that matter in his budget speech. It is never pleasant to tell people that they must come within the taxation net when they were not previously within it. In equity, some of those who are involved have not objected, because if they do not have a taxable income, like everyone else in that situation they will not pay tax. The establishment of the general principle is, as the Minister said in his speech, moving towards tax equity. In that regard, it should be welcomed. It is important that the system of returns for such people should be of the simplest kind possible. They should not have to make a return of the variety of the AG3 form which farmers now have to make. A form like that is very difficult and quite unnecessarily complicated for the type of people who are now coming in to the taxation net.
Another point worth considering is deposit interest. This is a difficult area because those who have abused the system — and I suppose most of the people who have abused the system have only slightly abused it — feel that for the sake of the small amount of money involved they should not be subject to a major investigation. The Minister is correct in reducing the amount from £70 to £50, in effect retrospectively. He has to establish a code or practice in respect of the implementation of this which will not leave minor offences open to very severe penalties. The important thing is to ensure that there is no flouting of the law in future and of course that people pay their legitimate arrears. It will be recognised that the law was indeed widely flouted in this area. It is equitable that the Minister should seek to ensure that that does not happen in the future.
The budget speech also referred to the possibility of including a new provision in the Finance Bill on the question of tax avoidance. Anything in the area of tax avoidance should be welcomed. The determination of the community to stamp out tax avoidance has been lacking, and the time to turn over a new leaf is now. There is a lot to be said for some period of grace, to enable people to confess their sins and come to a sensible resolution of problems that may have been accumulating over years past. The Minister is to be commended on his determination to ensure that those who evade tax do ultimately go to jail. That is the only reasonable and sensible way of resolutely tackling the problem of tax evasion.
There is an area of capital taxation which has been foreshadowed in the budget — that is the residential property tax. It is only right and proper that those in receipt of income in excess of £20,000 a year in occupation of a house valued in excess of £65,000 should make this modest contribution towards the services provided by the community at large. The linking together of the valuable house and the substantial income is sensible, and the Minister should be commended on that. It is a sensible approach towards taxation, and one which I am confident will yield substantial revenue. The most important thing in capital taxation is not only that it be fair and equitable, but that it should yield revenue. There is no point in having taxation schemes that are grand on paper but, in fact, do not yield revenue.
The other point which is fair from the point of view of the community at large is the question of advance corporation tax. It is right and proper that the Minister should tackle this point. The House may not have been aware that until the present time it has been possible to receive a tax credit or a refund from the Revenue Commissioners in respect of the payment of a dividend from a limited liability company which assumes that the company from whom you receive the dividend has paid tax. Very often, that company have paid no tax and even though the company paying the dividend would have paid no tax, you would be as entitled to your credit as if that company had paid tax. The proposals of the Minister are sensible. They will not penalise any company who are paying tax in the normal way. If there is a slight effect on companies that are paying a reduced rate of tax it would have a slight effect on their shareholders. By and large, it is a good principle that you should not be entitled to get a tax credit or a tax refund in respect of tax that was never paid in the first place. The Minister's determination to introduce this new type of taxation is another example of the equity which exists in the budget but which has been overlooked because of the publicity which the more swingeing type of increases attract. These increases are equitable, is so far as we are accepting all responsibility and not passing the responsibility on to an even greater number of unemployed in years to come.
In addition, there is one other matter that I would like to refer to, and that is the very welcome change which the Minister proposes to VAT on imports. That very foolish change was brought about in 1982 as a result of an election promise. It had disastrous consequences for a large number of manufacturing industries, as well as having beneficial consequences in respect of some other spheres of activities. In respect of manufacuring industries, it has had disastrous consequences on their cash flow. The Minister's proposal to allow firms who export 75 per cent or more of their production to be excused from the full rigours of this rule is very welcome. I would commend the Minister for the courage which he has shown. This will cost the Exchequer £12.3 million in 1983. A subsequent provision of a similar amount of money and the rolling back of a greater amount of this ill-advised tax would have a beneficial effect on other sections of our economy, particularly on manufacturing industries which are not exporting 75 per cent of their production. I would recommend that the Minister would pay some consideration to that.
There are a number of things which I would have liked to have seen in the Bill, as having an even greater contribution towards equity. The special exemption for artists makes absolutely no sense in the present day and age. The people who benefit are those who do not need the exemption, while the artists who do not have an income get absolutely no benefit from the exemption. A new and more imaginative scheme using the same amount of money differently would be much more beneficial as regards our patronage of the arts.
Generally, with those few examples of the general thrust of the budget the changes that have been set in progress in the budget will lead to a greater degree of equity in the question of taxation and social justice generally. I commend this motion to the House.