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Seanad Éireann debate -
Wednesday, 14 May 1986

Vol. 112 No. 10

Finance Bill, 1986 (Certified Money Bill): Second Stage.

Question proposed: "That the Bill be now read a Second Time."

The Finance Bill has received considerable attention. It is a long and quite complex Bill and it introduces a number of major changes in the tax system. In addition to the budget changes, it contains a number of additional measures which are intended to encourage business activity and employment and to promote greater employee interest in share ownership. There are special provisions to encourage risk investment in industry, in line with the policies outlined in the Government's White Paper on Industrial Policy.

When introducing this Bill in Dáil Éireann, I made a number of references to general taxation policy and I would like to repeat on this occasion the general approach underlying the Government's policies. We gave a commitment at the outset to tax reform in our Programme for Government. By tax reform we had principally in mind a more equitable distribution of the tax burden, reductions in the overall level of taxation as far as budget constraints would allow, and an improved system of collection.

There was, and there remains, a widespread perception that our taxation levels are too high. I share this viewpoint but, I have to recognise that, while we continue to have a high expenditure profile, tax levels will continue to be high. Also, it is not true to claim, as some have, that we have the highest taxes in Europe. While exact comparisons are difficult to make, it is clear that some European countries have more severe tax regimes believe it or not. Most of them, however, have a wider tax base so that, on the surface, the tax burden is not always perceived to be as high as it is here. A choice has to be made and the degree to which taxation can be reduced is a function of our willingness to control expenditure.

In recent weeks there has been a number of pronouncements on new taxation policies. I welcome new ideas and I agree entirely that there is room for improvement and I would like to see more dialogue about taxation policies. It is interesting to note that there are widely diverging views about the general direction we should take. It concerns me, however, that in some instances new taxation policies are being advocated without any serious attempt to quantify costs and benefits. There are vague indications given that somehow the revenue lost in consequence of tax reductions will be recovered through improved economic performance, so that there will be no effect on the overall budget arithmetic. No effort has been made to acknowledge the link between tax reductions and expenditure cuts. Frankly this line of approach is dishonest and it is unfair to the general mass of taxpayers who will have to foot the bill in the longer term. Let us have some dialogue about taxation policy by all means but we must debate in an honest fashion and cost our proposals in every case.

I am concerned that self-financing tax cuts — that probably should be in inverted commas — may be put forward as the quick and painless solution to our difficulties. This is a dangerous folly. At best the scope for self-financing tax cuts is entirely marginal. We have already demonstrated this. The best illustration of this unfortunately is in the area of petrol consumption. There has been substantial fall in petrol prices in the past year as a result of the fall in oil prices. If self-financing tax cuts were to work one would expect to have seen a very big increase in petrol consumption, yet in the first three months of this year petrol consumption, notwithstanding its being at a lower price, is down on what it was in the first three months of 1985. If the notion of self-financing tax cuts were true, it would have risen but it has not. That indicates that while some tax cuts may pay for themselves in the very long term the long term is very long. As John Wayne said: "In the long run we are all dead".

To suggest that tax reductions can be made on a wide scale without loss of revenue and a consequent impact on the budget is irresponsible. If we offer the harrassed taxpayer the prospect of tax reductions, we have an obligation to him to say how those reductions will be financed and how they will relate to expenditure plans. I hope that future debate on taxation policy will be conducted on that basis.

After a long period of recession, there is a welcome economic upturn. Falling energy prices, lower interest rates and lower inflation have generated a new optimism and this will be reflected in higher investment, new job opportunities and a general improvement in business confidence. We are fortunate in that we are well equipped competitively to take full advantage of this upturn. We can look forward to higher living standards this year. Inflation is currently at its lowest point since the late sixties and it should fall to about 2 per cent in the second half of the year. Overall, the outlook is most encouraging and the Government will take maximum advantage of opportunities to increase growth and employment. In this regard the unemployment figures for April were also very encouraging. The unemployment figures fell again in April for the third month in succession. The fall of 4,900 was the largest reduction in unemployment to take place in any April, as against the month of March in any year since 1971. The situation by comparison with April of the previous year represented the best performance since May 1980 — again virtually the best performance in this decade.

A large part of the improvement was due to the great success of the PRSI exemption scheme. There were 2,800 people taken on under this scheme by private employers. I am delighted with the success of the scheme and, on becoming Minister for Finance, I made a special effort to promote it during the month of March leading up to the deadline on 5 April. I believe that these trends will now make it possible for there to be a further downward reduction in the projection for unemployment in the year as a whole. Already this projection has been significantly reduced from what was expected earlier in the year.

I must, however, also sound a note of caution. We have had statements recently from the Opposition benches, not in this House but in the Dáil, which imply that somehow the general economic upswing will pass us by, if we do not go for growth on an unprecedented scale, whatever that means. Whatever it is, it is a dangerous philosophy. It exaggerates the scope for Government-induced expansion. More significantly, it implies that we should put aside our concern about the state of the public finances and spend without worrying about the financial consequences. This approach is discredited. It has caused enormous problems for us previously and it would be foolhardy to go down this road again. The economic upswing will not pass us by. It has not passed us by.

In every month for the last nine months retail sales in shops are up on what they were in the same month the previous year. This is the longest sustained period of recovery in retail sales in this country in this decade. That clearly indicates that people have more money in their pockets and what is more they are spending it. That is also before the full effect of the oil price reduction will be felt, before the full effect of the fall in inflation will be felt and before the increase in income, as a result of the recent wage round, will be felt and before the reductions in income tax in the budget will be felt.

For the last nine months we have been on a path of increased consumer spending and that is going to increase still further. It would be a dangerous mistake for us to think that we need to spend ourselves out of the boom and to make the same mistake that was made in 1977, when we tried to spend ourselves out of a recovery into a depression by spending more, and by trying to prime the pump when it is already gushing water at a very rapid rate. The present recovery, to a good degree, is due to the fall in oil prices. That fall came quite rapidly recently. There was, in inflation-adjusted terms, a fall over quite a considerable period up to that, when you took account of the fact that oil prices were static when others were going up.

While this involved a transfer of resources to the developed industrialised world from the oil-producing countries, it can be reversed. Remember 1973 and 1979. This can go in reverse. We should not ourselves get into a situation where there is no leeway because we spent all our money when things were going well, where there is no cushion available to us if things start to go badly as they could if this process were to be reversed. If OPEC for example, were to extend its membership and be able to control the market again by bringing in countries like Norway, Britain and Mexico that have hitherto been out of OPEC, we could quite suddenly find ourselves in an extremely exposed position where we would need our borrowing capacity and where we would need reserves to get ourselves out of the difficulties that would then ensue. We need to manage our country prudently and not to assume, as Governments have mistakenly done, that whatever is happening at present will go on happening forever and there is no need to provide for the future. Just as the depression we suffered in the past was inevitably not going to go on forever, the recovery, as a result of oil price falls, will not necessarily go on forever either. We need to prudently manage our finances so that we are in a position to counteract bad times and to enjoy good times, rather than be in a position where, essentially, we have no freedom of manoeuvre because we spend it when we did not need to.

If we allow our public finances to fall into disarray, if we let the borrowing requirement rise again, then we will ultimately lose the benefits to be gained from the improving situation. We have a policy of phasing down the budget deficit gradually. Last year the outturn was 8.2 per cent of GNP and this year we have a target of 7.4 per cent. Likewise the Exchequer borrowing requirement is projected to fall from 12.9 per cent in 1985 to 11.8 per cent. The latest returns show that we are on target for 1986. It is essential that this policy of phasing down our dependance on borrowing be continued. It does not inhibit our capacity to benefit from the improving international outlook. On the contrary, it is for the good of the economy that we follow such a course.

The present Bill has some very significant contributions to make towards the objective of increasing growth and employment. There are three aspects of this legislation, in particular, which I would like to highlight — (i) the reductions in personal taxation, as announced in the budget and (ii) the incentives for productive investment and the extension of tax concessions to encourage greater employee participation. The reduction in personal taxation will lead to greater disposable income with a consequent improvement in living standards. The tax reductions are relatively modest but what is most important is that we have now turned the corner and real incomes are on an upward trend. The tax improvements are costing £120 million this year and £200 million in a full year and they go far beyond the commitments given in the national plan.

It is essential for our economic growth that we generate higher investment by Irish people in Irish business. We have been too conservative in this respect. We need business growth to generate more employment and more prosperity. In particular, we need investment in manufacturing and related activities. These are areas of relatively high risk and it is proper that we should provide incentives for those prepared to take this risk. We also need to encourage more employee participation. Where possible, employees should have a share in the ownership of the firm in which they work. This gives them a new perspective, and where they stand to benefit, a stronger interest in generating profits. We must get away from the traditional mould where employers and employees stood apart. We should look to developments in other countries where considerable progress has been made on employee participation and try to emulate the advantages that have resulted from this. I am making a strong appeal to interested groups to consider the merits of financial involvement by employees and to avail of the new incentives offered in this Bill and those already incorporated in earlier legislation.

I will now deal with the individual sections of the Bill and I will focus attention on the more significant items. As the Bill is long and much of the text is of a technical nature, it would be impractical to speak on all sections.

The early sections give effect to the income tax changes announced in the budget. These provide for the increases in the exemption limits, the new rate bands and the changes in personal reliefs. These changes taken in conjunction with the abolition of the 1 per cent income levy will mean a substantial improvement in take-home pay for practically all workers. For example, a single PAYE taxpayer on £12,000 will have a reduction of £320 in tax, while a married couple with two children on £16,000 will be £332 better off as a result of the tax changes and the new child benefit. These are the most significant improvements in income tax for several years and they will give a boost to living standards.

In recognition of the special circumstances of elderly people the age allowance has been doubled from £100 to £200 and the age exemption limits have been increased by 5 per cent. The abolition of the 1 per cent income levy and the reduction of the top income tax rate to 58 per cent will, together, have a significant positive effect on key employees with highly marketable skills who might otherwise feel that there is little incentive for them to earn additional income. Their income tax on each additional pound earned is being reduced from 61 pence to 58 pence.

The Bill contains a number of new significant incentives to encourage business. Sections 9 and 10 provide for significant changes in relation to stock options. The current tax treatment of stock options is based on the date on which an option is first exercisable. This may act as a disincentive for some companies to make use of stock option schemes to buy shares at below the market price and it leads to uncertainty about ultimate tax liability in this and other cases. Provision is being made so that, in future, in the case of stock options issued below the market price, a charge to income tax will arise at the date the option is actually exercised and capital gains tax will be payable on the difference between the market price at the date of acquisition of the shares, irrespective of the price paid for them, and the proceeds received on sale of the shares.

The provisions in relation to approved share option schemes, however, go much further than this. Where options are issued at the market price, there will be no charge to income tax. The gain on the ultimate disposal of shares will be treated as a chargeable gain for capital gains tax. In the case of options in manufacturing companies which are liable to the 10 per cent rate of tax, export sales relief and Shannon companies, the period of ownership for calculation of the capital gains tax rate will be reckoned by reference to the date on which the options are granted.

In support of my belief that increased share ownership can only help to improve the general industrial climate of the country and increase the productivity of workers, I am in section 11 reducing the qualifying period for full tax relief from seven years to five for shares issued under approved profit sharing schemes. There is also in section 12 an entirely new tax incentive to encourage employees to purchase shares. This is intended to promote wider employee participation. I urge firms to study the new incentives and to consider what they can do to further employee participation. This, I believe, is a key to improved industrial relations and to closer links between management and the workforce.

Given the success of the business expansion scheme, which in its first full year of operation caused some £5 million to be invested in qualifying companies, I have extended the scheme to 1991. In 1985, some 570 investors have qualified for tax relief under the scheme. The attractiveness of the scheme has been further enhanced with the recent launching by the Stock Exchange of the smaller companies market. This market will provide an additional exit mechanism for investors in the shares of qualifying companies.

Section 14 of the Bill provides for a scheme of relief from full rates of income tax on dividends paid out of the income of companies qualifying for the 10 per cent rate of corporation tax, in other words manufacturing companies. The aim is to improve substantially the after-tax return to Irish shareholders in such manufacturing companies so as to provide an enhanced incentive to encourage increased equity investment from Irish sources in Irish firms. The mechanism by which relief will be given under the new scheme is to exclude from the charge to income tax an amount equal to 50 per cent of all dividends received by individual taxpayers. The balance of a taxpayer's dividend income will then be liable to income tax at his marginal rate after deduction of the full tax credit. It follows that the effective rate of income tax on the distributed profits of companies qualifying for the 10 per cent rate of corporation profits tax will be 23.74 per cent. Compared with a rate of 58 per cent tax on wages this shows that investing in industry is very good value under this Bill. The total tax take on such profits, inclusive of corporation tax in the hands of the company and income tax in the hands of shareholders, will fall from 60 per cent to 32.55 per cent under the scheme.

Relief will, however, be subject to a limitation in the form of a ceiling on the amount of dividend income which may be excluded from the charge to income tax in any year. The ceiling for each taxpayer will be set at £7,000 per annum. Given average rates of return on investment in Irish industry today, the level of relief available under the new scheme will be sufficient to enable an individual to invest a sum of almost £300,000 and still obtain the full benefit of relief. It is, therefore, extremely generous by any standards. By providing a facility to receive investment income of an amount up to £7,000 per annum completely free of income tax, the new relief will represent an incentive to encourage Irish investment in qualifying companies which is unequalled in the member states of the EC and may be without parallel anywhere in the world.

I will just explain why that is being done. We have relied, as a country, to too great an extent on foreign investment to make our manufacturing base grow. Irish money has tended to be tied up in relatively passive forms of investment and in relatively risk free forms of investment including Government gilts.

In the Finance Bill we want to achieve a major shift in the way people use their savings, to put them instead into productive investment in the manufacturing sector which includes, of course, the food sector. This is the way self-generating growth can be established, using Irish money to grow more jobs in Ireland.

We must realise that we cannot rely in the future on American or Japanese investors to solve our unemployment problems. We have also got to realise that we have a limited amount of money in the country, either in private or in public hands, and that we have got to use it to the best possible effect. The purpose of this tax incentive is to shift money out of the safe havens and the relatively unproductive uses into the most productive use of all which is in the manufacturing sector of the economy.

The intention as I said is to promote investment in manufacturing and certain other activities by permitting the benefits of the 10 per cent rate of corporation tax to flow through to the shareholders in qualifying companies. If the section should be exploited as a mechanism for rewarding executives in such companies by issuing tax-relieved dividends to them in substitution for normal forms of remuneration which would attract full rates of income tax, this will be regarded as an abuse of the relief. I wish to give fair warning now that, in the event of instances of such abuse being brought to my attention by the Revenue Commissioners, I shall not hesitate to take action against it by legislation which will have retrospective effect. The acid test in determining the occurrence of abuse will be whether all dividends paid are realistically related to genuine investments.

Section 15 provides for the continuation for a further year of the existing stock relief arrangements for farmers. Section 16 provides for a credit for farm tax paid against the income tax liability relating to farming profits.

In chapter III there is a new mechanism designed to encourage taxpayers to invest in research and development projects, where the risk is high, but where the rewards may be equally high when they materialise. The level of research and development in this country is disappointingly low by international standards and we must do something about this. Expenditure in 1984 on industrial research and development in Ireland accounted for 0.4 per cent of GDP as compared to 1.2 per cent average for the OECD. The scheme for relief for investment in research and development may appear detailed and lengthy as it is set out in the Bill. The need for complex legislation arises in order to prevent the provisions of the scheme being abused and serving solely as a means of avoiding tax rather than facilitating the objectives of the scheme. Such detailed legislation will also assist genuine prospective investors by removing any uncertainty as to the scope or application of the relief.

Under the scheme, qualifying investors may get tax relief on up to £25,000 a year invested in a research and development company. The investment may be short to medium term and it is unlikely that many long term investment projects will be involved.

Qualifying research and development is defined in terms broadly similar to those used in the Industrial Development Act, 1969. Because of the varied nature of the projects which it is desired to promote, it is not possible to provide a more detailed definition of "qualifying research and development" without running the risk of excluding some worthwhile product. There is a requirment that the benefits of any such project must accrue substantially to this country. In order to encourage involvement by outside investors, the ceiling on investment by the sponsoring company, which must be a manufacturing company incorporated in this country was originally limited to 20 per cent. On further consideration and, in the light of the commitment and risk borne by sponsoring companies I have agreed to allow them to have a greater involvement in the research and development company and I have accordingly raised the 20 per cent to 49 per cent. This incentive will supplement the existing provisions of the business expansion scheme which may be used for raising capital for research and development in the case of a manufacturing company.

It has been argued that the present rates of capital gains tax are a disincentive to investment. This Finance Bill will go a considerable way towards ensuring that this is not the case. In addition to the planned reduction in the 40 per cent rate of capital gains tax announced in the budget, the Bill also provides for a new lower rate of 30 per cent which will apply to assets held for six years or more and also to gains made on disposal of shares on small companies which are incorporated and are resident here. This incentive is directed in particular towards the smaller companies market which is in its infancy. It is important that this market should succeed and open up new sources of capital to companies which could not at present qualify for quotation on the Stock Exchange. With this in mind, the Bill provides that, for a period of three years, gains realised on trading in shares in certain companies will be subject to the 30 per cent rate. This, I hope, will provide an impetus to the new market and will help to ensure its success.

The incentives for industry in this Bill should give a major impetus to investment in an already very favourable investment climate. There is no reason why industry should not be able to utilise this climate to create new jobs on a significant scale.

Chapter IV of the Bill gives effect to the deposit interest retention tax scheme. The retention tax, as announced in the budget, has received a mixed reaction. The financial institutions generally have welcomed it as a major step forward in harmonising the tax treatment of invested funds. There has been criticism of the tax because of its impact on certain individuals and institutions. The order which has now been brought to the tax treatment of deposit interest is overdue and, together with the uniform reporting arrangements, it will create an environment for fairer competition among the financial institutions. For a long time some of these institutions have been asking for standard tax arrangements to apply across the board and this is now happening.

I should like to take this opportunity to clarify some aspects of the tax which appear to have been causing confusion. First, the tax is deductible from deposit interest paid or credited after 5 April 1986: it is not a tax on the capital sum invested. Secondly, the tax does not represent double taxation since the interest earned by a capital sum is regarded as a new source of income and has always been liable to income tax in the hands of taxpayers. Finally, there have been allegations that taxpayers will have to pay double tax on deposit interest for 1986-87. This is not true. As a transitional measure, the previous-year basis for taxing deposit interest is being suspended for relevant deposit accounts on 5 April 1986, and the 1985-86 liability for deposit interst will be switched to an actual basis. That is, 1985-86 liability will be based on interest paid or credited in 1985-86 only.

The imposition of the tax itself will not materially alter the tax position of the bulk of depositors who are liable to income tax: the measure is a more effective tax collection system for that liability. The tax as originally announced was to apply to the deposit interest of all resident depositors. In granting concessions to charitable bodies, incapacitated persons and individuals aged 65 and over, I feel that the best possible balance has been reached in minimising the extent of genuine hardship while at the same time maximising the yield from the tax. It should not be forgotten that the tax will also apply to deposit interest paid in respect of moneys earned in the black economy. In response to criticism concerning the potential delay in making repayments of tax, I have requested the Revenue Commissioners to ensure that the repayments procedure is operated as speedily and efficiently as possible.

A tax of this nature will ease considerably the administrative difficulties involved in collecting tax on deposit interest. No doubt there will be continuing demands from other bodies and groups of taxpayers to have exemptions similar to those granted to charities and older and incapacitated persons. I must emphasise that, since exemptions are costly to administer, increase the complexity of the tax code and reduce the tax yield, there can be no question of any further concessions being granted.

When the Bill was published, I said that the Government had decided to exempt the over 65s and incapacitated persons as these are the categories most likely to be solely dependent on interest for income, because of inability to engage in other income-earning activities. Obviously, there will be a small number of individuals outside these categories who may be able to make a similar case. Wherever the line is drawn, however, there is the risk of genuine cases on the wrong side of it. Refunds for all non-liable persons cannot be considered, however, because this would be far too costly.

Chapter V gives effect to the tax incentives which have been announced by the Taoiseach and the Minister for the Environment to promote development and reconstruction in certain designated inner city areas in Dublin, Cork, Limerick, Waterford and Galway. The precise areas in which the incentives will apply are defined in the Fourth Schedule to the Bill. This chapter complements the Urban Renewal Bill, 1986, which provides for the establishment of a new statutory authority to promote and control development of the Custom House docks site in Dublin and for schemes of rates remission in relation to development on that site and in the other designated areas.

For many years, inner city areas of the major urban centres in Ireland have been decaying and large areas have become derelict. For decades, there has been a significant tendency for new development to locate in suburban areas and in outer-urban areas which are perceived by the property market to be more favourable. There has been a consequent increase in the extent of physical decay, unemployment, crime, vandalism and the dispersal of established communities in the inner city areas. Inner-city decay also poses a continuing and increasing threat to the architectural character of urban areas. Although public sector housing of a high standard is being provided in inner-city areas, efforts to encourage private development have had little or no success. Activity by the private sector has, in general, been painfully slow in securing the redevelopment of inner-city areas.

The Finance Bill, in conjunction with the Urban Renewal Bill, 1986, represents a major effort by the Government to stimulate activity to redress this situation and I am hopeful that the private sector will now respond to the needs of the areas in question in a positive way. A further objective of the incentives is employment creation. I am pleased to report to the House that the anticipated activity in the designated areas, along with the activity generated by the home improvement grants and the general pickup in housing demand, have an employment potential of more than 3,000 jobs per year.

Section 46 contains the promised legislation to counter abuse of limited partnership arrangements for tax avoidance purposes. The legislation has retrospective effect from 22 May 1985, the date when my predecessor announced in this House the Government's intention to introduce such legislation. The abuse in question arose from the fact that, in a limited partnership arrangement, the limited partners have had the right to set off losses and capital allowances arising out of the partnership trade against other income without restriction. Limited partners could thus circumvent their tax liabilities by manipulating in a contrived way a partnership arrangement so as to create highly inflated tax losses. Their investment in the partnership need only have been nominal, but limited partners were in a position as a result of that investment to obtain a guaranteed return in the form of a reduction in their tax liability which could be, and most often was, a multiple of the investment.

A number of instances of such blatant abuse indicated that there was a significant loss in tax revenue occurring as a consequence of limited partnership arrangements. In these circumstances, the Government have had no alternative but to move against the abuse in the interests of tax equity. In commending this section of the Bill to the House, I wish to put formally on record my intention to extend the scope of the proposed measure with retrospective effect to all general partnerships if these are used for the purpose of continuing the abuse which heretofore has been confined to limited partnership arrangements.

Section 48 provides for the application of a surcharge on ultimate tax liability where certain income returns are not received by an inspector of taxes within a specified period. This change was announced by the Taoiseach in this House last October as part of a tax reform package. The charge will be 10 per cent of tax ultimately payable. This measure is aimed at improving compliance by self-employed and corporate taxpayers in submitting income returns at an early date.

The ceiling on the restriction on capital allowances for business cars (and the pro rata restriction on the running expenses of such cars) is being increased from £3,500 to £4,000. This is a modest increase which, of course, does not take account of the increase in the general level of car prices since the introduction of the £3,500 restriction in 1976. This is the first time that anything has been done to increase this limit since 1976 and it is not bad in that context. There is no doubt that a lot of distribution companies have been very badly hit by this restriction. It has been a common cause for complaint as Senators will agree from meeting their constituents and I feel that we are on the right path by doing something about it at this stage, however modest. However, the cost to the Exchequer in raising the restriction to a level consistent with present prices since 1976 for appropriate cars would be quite prohibitive and it is out of the question at this time. It would also be inequitable since it is clear that many of those who have business cars enjoy a considerable advantage over other taxpayers who must meet all their motoring expenses out of after-tax income. This is due to the fact that the private benefit derived from a business car is subject to less income tax than monetary income. In these circumstances, it would not be fair to ask these other taxpayers and, indeed, taxpayers who cannot afford to run a car at all — to bear the cost of a substantial increase in the restriction.

For the future, I am prepared to consider raising the restriction beyond its present, revised level on the basis that the cost of doing so is matched in large part by an appropriate increase in the benefit-in-kind charges which apply in respect of the private use of business cars and by taxation of business mileage payments.

Section 56 empowers the Minister for Finance to withdraw certificates entitling a company to claim relief or exemption from corporation tax in respect of certain trading operations within Shannon Airport where the Minister is of the opinion that a company is engaged in activities which amount to an abuse of the certificate, for example, tax avoidance activities.

The tax benefits which are available for companies at Shannon and for their shareholders are conferred by means of certificates granted at the discretion of the Minister for Finance where he is satisfied that a project to which the tax benefits are being extended will contribute to the use and development of the airport. The relevant legislative provisions provide for the withdrawal of the certificates in question only if the companies in receipt of them cease trading or fail to meet any conditions which are specified in the certificates. These conditions have invariably been of a very general nature.

In the past year, my Department have become aware of at least one company established in Shannon which have abused their favoured tax status to facilitate several instances of large-scale tax avoidance. While the company in question was persuaded to desist from this objectionable activity, it became clear in the course of dealing with this matter that a Minister for Finance when faced with such activity by a Shannon company, has insufficient powers to take in the last resort the only action which would be effective against a recalcitrant company, that is, to withdraw their certificate. This is a serious anomaly, which could compromise the good standing of Shannon as a development centre. It is with a view to correcting the position that this section has been included in the Finance Bill. So as not to alarm the many responsible companies in Shannon, who might otherwise feel that their tax status is in jeopardy, the section provides for withdrawal of a certificate only in the event of a company refusing to desist from activities which they have been informed by the Minister for Finance are not acceptable.

I come now to indirect taxation. Part II of the Bill which deals with Customs and Excise mainly confirms the changes already announced in the budget. In this regard the duty on tubes and tyres will be abolished from 1 September 1986; the duty on spare parts will be reduced from 10 per cent to 5 per cent on that date and abolished from 1 January 1987.

Section 71 amends the betting duty legislation to strengthen the Revenue Commissioners' hands in dealing with evasion of duty in non-registered premises. The law is being strengthened also to provide more effective measures for the Revenue Commissioners in the control of red diesel oil. Section 77 provides for the new rates of road tax on private motor cars announced in the budget, with effect from 1 March 1986.

Part III of the Bill gives effect to the VAT changes announced in the budget. These comprise the increase in the standard rate to 25 per cent; the rate reduction to 10 per cent for many services currently liable at the 25 standard rate; and a measure to exempt the services supplied by dental technicians.

In addition, some further measures are included. These deal with the taxation of services received from abroad that can currently avoid tax, the use for VAT record-keeping purposes of data stored in electronic form, and the withholding of VAT repayments in certain cases involving associate companies and the application of the zero-rate to supplies of goods between VAT-registered traders in a free-port. The existing 10 per cent rating of newspapers is being extended to benefit certain fortnightly newspapers.

I confidently expect the substantial VAT reductions which come into effect on 1 July next to have positive and lasting economic benefits. The initial response of the tourist industry to the proposed VAT reduction on meals has been very encouraging and I am sure they will capitalise on the concession to achieve maximum impact. Taken in conjunction with the tax decreases for repair and maintenance services, body care services, cinema admissions and certain entertainment these changes represent proof of our determination to encourage employment and to fight back against those operating in the black economy. I look forward to consumers benefiting through lower prices.

This is a very deliberate policy on the part of the Government to reduce the levels of VAT on employment intensive service activities. We had already reduced the level of VAT on hotel accommodation. We have now reduced it on meals. We have reduced it on the services I mentioned, cinema admissions, hairdressing and all those services that are provided and which are extremely employment intensive. It is very important that these services be provided by legitimate traders operating in the white economy rather than in the black.

The very high levels of VAT that previously applied to these services when provided by legitimate traders represented something of an encouragement to people to go into the black economy at least, either whole time or part time. By reducing the VAT rates in this way to the reasonable level of 10 per cent we are both encouraging employment in services that are labour intensive and we are encouraging people to stay in the white economy. This strategy, which has been pursued consistently over a number of budgets, should be recognised as such: as a strategy to depress the black economy and encourage maximum employment in the white economy. It is beneficial generally to the development of our country and will ensure that the current recovery in the economy is trapped in Ireland by people using Irish services rather than using it on foreign holidays and exporting our money which we have gained with such difficulty.

Section 93 imposes a once-off stamp duty at a rate of 9 per cent on the investment income and the profits on the realisation of investments of life assurance companies. The life assurance companies have enjoyed extremely favourably taxation arrangements and this special duty is intended to recoup to the Exchequer some of the tax revenue foregone under these arrangements. A further reason for this new charge is that there would be an unfair competitive advantage for life assurance investment if the tax regime applicable to it remained unchanged at a time when a retention tax is being imposed on deposit interest.

Since a special tax imposition may sometimes present particular difficulties for the sector affected, it has been decided to reduce the impact of the charge, as originally announced in the budget, in a number of respects. The rate of duty is being reduced from 15 per cent to 9 per cent, industrial branch business and business relating to credit unions are being exempted in addition to pension and foreign branch business, and the final 10 per cent of the duty will not fall to be paid until mid-1987.

As already mentioned, this charge will not apply for future years. Instead, changes in the corporation tax rules applicable to life assurance companies are incorporated in this Bill. These will provide no additional tax yield of consequence in the short term but they hold out the prospect of a reasonable yield in the longer term. Up to now the tax contribution from the life assurance industry has been disappointingly small and a higher contribution will be expected for the future.

Section 101 provides for the continuation of the stamp duty exemption for transfers of agricultural land to young trained farmers. I am conscious of the fact that this scheme has, in the past four years, facilitated the transfer of land to young farmers but I am also conscious of the fact that its indefinite extension would remove the urgency for an early transfer of land and so would defeat the object of the scheme. Accordingly, the Bill provides that the scheme will expire at the end of September next year and that, for the final 12 months of its operation, the age limit will be reduced from 35 to 30 years and the qualifying ACOT courses will be extended from 100 hours to 150 hours. This will give an added urgency to the need for an early transfer of land and will also encourage more in-depth agricultural training, both of which should lead to an improvement in agricultural productivity.

The Bill gives effect to the decision announced in the budget to impose a 1 per cent annual charge on those discretionary trusts which were made subject to the 3 per cent once-off charge introduced in the 1984 Finance Act. The charge is directed at those trusts which are set up essentially to avoid or delay indefinitely the payment of capital acquisitions tax. As such it will not apply where the disponer is still alive and any one of the principal beneficiaries is under 25 years of age. I do not feel that a charge of 1 per cent is in any sense excessive or that it is a threat to the viability of any ongoing business concern. If, over a period of time, a return of greater than 1 per cent per annum cannot be secured from the assets in a trust economic pressures should force an adjustment. The effect of the tax might even be to speed up this adjustment.

Section 115 of the Bill provides that the holder of a fixed charge on the book debts of a company may be liable for the tax arrears of the company in certain circumstances. A recent Supreme Court decision — the Keenan case — which confirmed the validity of a fixed charge held on the book debts of a company has had the effect of seriously undermining the position of the Revenue and other preferential creditors in a liquidation situation. The purpose of this provision is to deter the creation of fixed charges on book debts. The fixed charge holder's liability is confined to arrears of PAYE and VAT and the provision only encompasses charges taken out after enactment of the legislation. Failure to act on this matter would leave approximately £10 million of tax revenue per annum at major risk.

This Bill is quite complex and it would not be feasible to explain all the details in an opening address. I have touched briefly on the more significant items and, in the course of the debate, particularly on the Committee Stage, there will be opportunities to go into more detail. I commend the Bill to the House.

There are a number of items which I think are very important in this Bill. First there is a major incentive to profit sharing and worker shareholding in industry. Secondly, there is a major incentive to research and development being undertaken by Irish industry. Our big failure has been that we have not done enough research on new products. Old products will not do five years from now. Thirdly, there is a major incentive to people to put their money into manufacturing and the food processing industry creating wealth rather than putting it elsewhere. Fourthly, there are major tax incentives to urban renewal in our major cities. Fifthly, there is a further incentive to encourage farmers to transfer land to younger farmers to increase productivity. These are probably the most important highlights of the Bill which I would like to bring to the attention of the Seanad. I hope that the Bill will be strongly supported by the speakers in the debate.

Senator Ryan should be given the alternative of deferring his commencement until after lunch. It is purely a matter for him but there are only minutes before the time we had agreed for adjournment.

I will start to ensure that I retain my place. I would like to welcome the Minister. He has been here before and, being a young man, it is quite likely he will be here again. In approaching this Bill we should remember certain basic facts about our economy and try to get the financial position into perspective. We have to start by realising — it is not necessary for me to point it out as everyone in the country is conscious of it — that we are at present a very highly taxed people, higher than most other countries in the world. The position would simply not be tolerable were it not for the assumption at least that it cannot last forever. Most people carry on under very severe taxation on the assumption that it will improve, that there is light at the end of the tunnel. I hope that is true but sometimes I wonder if it is.

There are certain historical and demographical factors underlying the position we find ourselves in. These accentuate our basic problem but they are not by any means the only reasons why we find ourselves in difficulties. We must realise that there is little real wealth in this country, in the sense that most European countries have it. We did not have colonies in the past through which most countries accumulated a great deal of wealth. In fact, we were in a sense a colony and any money of that kind was going out of the country rather then coming in. We did not have the benefit of the industrial revolution because we were not allowed to have it. These are two areas in which the kind of wealth which exists in other European countries does not exist here.

The second fact I would like to mention is the very high dependency rate. We have a very high dependency rate in the sense of the number of people who actually work as compared with the number of people depending on them because there are some large families and these depend on the wage earner more so than other European countries. This dependency rate has been exacerbated by unemployment. The end result is that we have a very narrow tax base.

The third matter I would like to mention is the ratio of employees as compared with self-employed. I am not sure of the present figure. A few years ago the figure was something of the order of only 25 per cent for employees as compared with the self-employed. In the UK something like 75 per cent were employees as compared with the self-employed. This means that it is more difficult to collect tax. It lends itself to a black economy. Certainly a black economy exists. This restricts the tax base and means for those who can be caught in the net the taxes are higher. This is a kind of cause and effect. As people find that taxes are higher and higher, they do everything in their power to get outside the net to enter the balck economy. These are three factors which contribute to the present situation, which to a considerable extent have been caused by ourselves. The effect of high taxes on the economy is very serious. It means the incentive for employees to work is undermined. For the entrepreneur it means that profits as opposed to risks and frustrations of starting a business or even continuing a business are marginal indeed. Many people, when asked if they would start a new business say "you would want to have a hole in your head to do so at present". Luckily there are people who go into business and stay in business.

High taxes have a serious effect on exports. It is very difficult to be competitive in these circumstances. In spite of these great difficulties our exports record is very good. I hope it will continue to surmount the difficulties which exist because of high taxes.

Agriculture is seriously handicapped because rising inputs are going ahead of prices which are falling behind. The tourist industry is also undermined by high prices and taxation. Apart from the difficulties imposed in regard to tourists from the United States, our high prices are given as reasons why people are reluctant to come here.

Over and above all these sectors of the community for the man in the street it all adds up to a dramatic effect on the quality of life. When I say quality of life I am not talking of luxuries. I am talking about basic things, food, drink, household goods and so on. The cost of living here is much higher than in many other countries. A motor car is now a luxury because almost half the price of a motor car is made up of various forms of taxation.

The Minister immediately after lunch will be engaged in another place but hopes to return to us when the business there is disposed of.

Sitting suspended at 1 p.m. and resumed at 2 p.m.

I was dealing with the effect of the very high taxes we are experiencing at present. We should look at why these taxes are levied, what they are spent on and whether there is a necessity for all the taxes that are levied. They way taxes are spent can be divided into four different areas. There are the essential and justifiable services, social welfare, health, education and basic administration. Nobody doubts that taxes have to be provided for these services and it is proper that that should be done.

The second category is the services which come under the heading of essential services but are really unnecessary, wasteful or irrelevant. We are inclined to think that because something is spent under the Votes for Social Welfare, Health or Education that it must be necessary and that it cannot be objected to. In all of these areas there is unnecessary and wasteful spending and some of the things done under these headings are irrelevant and unnecessary.

There is the other category where the service provided is no longer necessary, if it was ever necessary. There are bodies and areas of expenditure which go on and on because nobody has had the initiative to abolish them. These have to be looked at very carefully. The fourth area is servicing the national debt.

I have no criticism in regard to the first category — social welfare, health, education and so on. These services must be maintained. As regards the second, every possible effort must be made to eliminate areas which are not really necessary. Every way of approaching this must be availed of, including the fact that salaries in some of these areas simply cannot continue to escalate.

Regarding the third category, I mentioned bodies or services which are continued out of habit. There is a custom in one of the states of the United States that each of these bodies have to justify their existence annually. They have to appear before a committee of the legislature and make a case as to why they should continue in existence. It may be that at one time they were fulfilling some useful function but because of a change in events they were not necessary any longer and should be abolished. This is a kind of approach which could be introduced into this country. Every body of a marginal nature should be examined and should have to show why it is necessary to carry on. We would probably find a few mortalities if this approach was introduced.

The fourth category I mentioned was the national debt. It is one of the major problems we have and one of the major reasons why we have such high taxation. The servicing of the national debt now absorbs more than one-third of our taxes. It is an appalling burden but one which we have little option but to face up to, to face up to what has happened in the past but by no means to accept that we are going to allow it to get any higher in the future. In the present Finance Bill debt servicing amounts to almost 29 per cent of current budget expenditure. The current budget deficit is almost 16 per cent of budget expenditure. If we had not accumulated the huge debt which we have at present we would have no deficit in the present budget and we would be able to cut taxes by approximately £1 billion per year. That helps to put into perspective the kind of mess we are in because of the huge debt we have accumulated over the years.

It is not much use crying over spilt milk or dwelling at any great length on the reasons for our present position but we should look briefly at how the debt arose and who was responsible. Strange as it may now appear, borrowing to pay current expenditure did not exist up to 1972. That is a mere 14 years ago. In the 1972 budget, during the time of a Fianna Fáil Government, £5 million was borrowed for current expenditure. It was a very small amount and it was done for the first time in 1972. It was the Coalition Government of 1973-77 who really introduced borrowing for current expenditure as a regular feature of fiscal policy. It was done during these years regularly and with ever-increasing figures and this set the country on the slippery slope the effects of which we are complaining of at present. For current expenditure, the Coalition borrowed £10 million in 1973, £92 million in 1974, £259 million in 1975, £201 million in 1976 and £201 million in 1977. That was the period when borrowing for current expenditure was introduced as normal fiscal policy.

The effect of all this borrowing was that the national debt which was £1.42 billion when Fianna Fáil went out in 1972 had become £4.2 billion at the end of the Coalition period in 1977. The national debt had trebled during those four years and had increased in figures by approximately £3 billion. Between 1977 and 1981, during a Fianna Fáil period of office, the national debt went up to almost £10 billion, an increase of £6 billion. Then, there were two short periods of office in 1981-82, Fianna Fáil followed by the Coalition, during which time it would be impossible to allocate responsibility because they were such short periods. During the period of the present Government the national debt has gone up by over £9 billion. What is much worse is that the foreign debt is now considerably in excess of £8 billion. Foreign debt is a much more serious matter from the point of view of balance of payments and so on than borrowing domestically. It is now over £8 billion. If you look at it in perspective, in 1973 when Fianna Fáil went out the foreign borrowing was £126 million as compared with well over £8 billion at present. To look at the position in perspective, to look at how the national debt increased during the period since 1973, it increased by £6 billion under Fianna Fáil Governments and by £12 billion under Coalition Governments. The responsibility of Coalition Governments is twice as much as that of Fianna Fáil Governments.

This Government have increased the national debt in the last four years by £9 billion and they are the people who used lecture us about fiscal rectitude but they say very little about it now, which is understandable in the light of the figures I have just given. The tragedy is that for the £9 billion borrowed by the present Government since 1973 they have little or nothing to show for it. Unemployment has gone up from 12 per cent to approximately 17 per cent. There is no improvement in the economy. Almost nobody is even as well off as he was in 1973 in spite of the tremendous borrowing that has taken place during that time.

The Minister for Finance in his budget presentation went to great pains to show that the financial situation was being brought under control. He said that Exchequer borrowing requirements were being reduced from 12.9 per cent of GNP to 11.8 per cent, that public sector borrowing requirements were reduced from 15¾ per cent of GNP to 14¼ per cent and the current budget deficit from 8.2 per cent to 7.4 per cent. All of this is very welcome but it tends to disguise the fact that borrowing for current expenditure is still going on at a very high rate. The total Exchequer borrowing for 1986 for current expenditure is £2 billion. The £9 billion that I have mentioned is up by another £2 billion. The Government may say it is improving in one way but it is still going on at a very high rate. The Government said that they hoped by cutting expenditure to deal with this problem. They have not succeeded in bringing expenditure under control.

Expenditure continues at a very high rate. Increases in salaries continue at a very high rate. The Government at the beginning of their term of office talked about a wage freeze but the wage freeze has gradually melted and wages and salaries are going up, expenditure is going up. Total Exchequer borrowing for 1986 is £2 billion to add to the appalling burden that has already been laid on the neck of the taxpayer. The fact is we are going deeper and deeper into the financial swamp. One could not overestimate the extent to which this is happening. The Government assures us that we are travelling at an increasingly decreasing pace. It is like one of those exciting wild west movies. Will our runaway stage coach be brought to a halt before reaching a part of the swamp in which it will sink without trace? It will certainly be a close thing, it certainly will be a cliffhanger.

Anybody looking at the position at present would have very considerable doubt as to whether we can recover from the financial situation in which we find ourselves. What is certain about the position is that there are no easy options. There is no facile way of restoring the State finances to a healthy condition. It can only be done by cutting State expenditure to the minimum without abandoning the services which are genuinely essential and, having done that, making sure that we do not get into the same position again. It would be out of the question to increase taxes any more. The Government have undertaken not to do so but then the Government have undertaken not to do a number of things which they have ended up by doing during the past few years.

We must accept that if any improvements in finances is to be achieved, if any recovery from our position is to achieved, there can be little real decrease in taxes during the next two to three years. After that, if what has to be done is done, then it may be possible to move from our unenviable position as one of the highest taxed people, in the world. It is a bleak outlook and no easier to bear because we brought it on ourselves. We brought it on ourselves by living beyond our means, by providing ourselves with goods and services worth far more than we had earned as a nation. The only good thing is that perhaps we have learned a lesson. If we have not learned a lesson then there is little hope for us and even less hope for our children.

To be a little more cheerful about the situation there are a number of features in the Bill which I welcome. I welcome the increases in social welfare which will at least offset the effect of inflation. I welcome the decrease in VAT on food which will certainly be of benefit to the tourist industry and help to offset some of the serious problems it has at present and it will also be of benefit to the man in the street if the decrease is passed on. The reduction on duty on motor vehicles, spare parts and tyres is welcome and also the incentive for investment in research and development. I think this is a particularly good initiative. It is something which can be of considerable benefit. The reduction in tax on dividends for manufacturing firms will also be of benefit.

There are features in the Finance Bill which can be welcomed. The present Minister has shown some understanding of the problems of taxpayers, an understanding which his predecessor did not appear to have, nor some of the mandarins in the Department of Finance. I think he knows that there is a real world out there, a tough world where thousands of people are trying to make a living in commerce, in industry and agriculture, facing the vicissitudes of commercial life, the fierce competition at home and abroad, the frustrations of red tape, the delays of officialdom and the slings and arrows of outrageous fortune. They do not expect much from a Minister for Finance but would like to think that he was at least doing the best he could for them rather than thinking up the worst he could. After all, without them there would be no taxes and very little for the Minister or the Department to do.

I would like to welcome the opportunity which has been too long delayed for this House to discuss the Finance Bill, 1986, and in doing so to touch upon the financial proposals made and discussed and passed by the other House on the budget. It does not fall to this House to consider the details of the budget and the expenditure of the State except in so far as it requires the enactment of legislation such as this legislation which is before us. As other speakers, including the Minister, have recognised the discussion on Second Stage of the Finance Bill must of necessity range a little bit broader than the provisions of the Bill. The provisions of the Bill are a response rather than a policy. They are a response to the needs created by the demands for goods and services in the State, and the necessity for taxation must always be seen in the context of meeting a corresponding need or perceived need for the provision of services within the community.

I would like to refer to the continuing problem of the current budget deficit. In doing so I recognise the points made by the Minister with regard to the reduction in the deficit as a percentage of GNP. That is true and represents some progress but the progress is very modest. While this Government have been quite successful and considerably more successful than their predecessors of all parties since the 1970s in reversing the trend, they have not gone far enough at all in coming to terms with the problems of the permanent expenditure implications of the kind of policies which were pursued with such apparent abandon during the 1970s and well into the 1980s.

The reduction of the current budget deficit from 8.2 per cent to 7.4 per cent represents a very modest achievement. I feel it is only right that we should put on record that the reduction in the budget deficit can only be achieved by either an increase in taxation or a reduction in public expenditure. The Minister demonstrated very forcibly this morning that the opportunities for what has been loosely termed self-financing subsidies or self-financing tax cuts are very limited and therefore we are forced back to the inevitable conclusion that we must either increase taxation or reduce expenditure.

I share the Minister's philosophy that this country is already overtaxed. I also accept the rationale of what he says: that we are not as heavily taxed as other countries. However, the way our tax is structured means that the taxes bear very heavily on those who are at work and bears very heavily on the income of those who are earning.

An examination of the amount of taxation in a country must take into the account the stage of economic development of a country. Bearing in mind the stage of economic development which this country is at we are the highest taxed country in Europe. Other countries have a higher percentage of their gross national product raised by way of taxation but they are at a different stage of economic development than ourselves and in addition to that, and probably more importantly, it is raised in a different way. Greater use is made of expenditure taxation revenue, collecting methods which are based on VAT and similar type schemes. Less use is made in their tax code of exceptions and exemptions so, as a result of this different tax discipline, it is not necessary to apply rates of taxation of over 60 per cent at very modest levels of income. I think this Government and any other Government which might in time replace them will be failing in their duty unless they put as a very high priority the reduction of the marginal rates of tax on those who are at work. That has a very high priority indeed. I will refer to that later.

The historical exposition of the problem as outlined by Senator Eoin Ryan is indeed accurate, but of course, he over-simplifies the importance of those early years and certainly under-emphasises the very real change that took place in the nature of our deficit spending, in the nature of our expenditure and our deficits during the period of the Fianna Fáil administration from 1977-81. If you go back to the original £5 million which he said was the amount of the current budget deficit planned for in the year 1972 and indeed the £10 million in 1973 — both of which figures I have not checked myself but I accept their accuracy — that was done in a way in which there was some expectation that in the normal growth of the economy that current budget deficit would be wiped out.

The current budget deficits in 1974-77 which escalated quite substantially were only a reflection of what was happening in the whole of the western world in response to the first oil crisis. It was a completely proper use of deficit funding for the Government of the day to try to keep the economy moving by that deficit policy. It should be recognised, and I have no doubt it has been recognised by Senator Eoin Ryan, that in the latter end of that period of time the conclusion had been come to by the Government that that period of budget deficits should come to an end, should be phased out. The reduction between 1975 and 1977 shows that the Government of that day had the political will to bring about that change in direction, with the coming to an end of the first period of economic shock for the western world as a result of the first oil crisis.

A much more serious problem arose during 1977 to 1981. That was because the nature of the increase deficits during that period of time was such that they created a permanent expectation of deficit spending for the future and built into the system the automatic continuation of deficits. That is where the problem arose between 1977 and 1981. Whole areas of revenue-raising were abolished. Rates were abolished; road tax was abolished and above all the public service employee pay bill was expanded dramatically.

All of these actions together meant that automatic deficits were being planned by the Government of that time, not only in respect of its own period of office, but they were being planned and were inevitable in respect of future periods of office. What Senator Eoin Ryan had to say with regard to the freedom and flexibility which would have been available if we did not have to repay the money which we borrowed during that period is very instructive. It proves that this Government are providing enough money through taxation to meet their current budget deficit. What it cannot do and must borrow money at ever-increasing rates for is to provide for the problem which was created by the initiation of policies during that period of time, which led inevitably to increasing current budget deficits.

To abolish something like rates and to replace it with nothing is not only to create a problem in respect of that year, but is to create a problem in respect of that year for which borrowing will be necessary and the following year a problem in respect of that year itself plus the funding of the money borrowed in the previous year. A geometric problem is created by the abolition of revenue-raising possibilities and no funding by any alternative means.

That having been said it is great fun to be blaming Fianna Fáil for those things and only right and proper that they should be blamed because it would appear that they are hell-bent on trying to produce for the next election a policy document which will be a repeat of their 1977 manifesto. It is only right and proper that the people should be warned not to be fooled a second or a third time in respect of this kind of nonsense. The present responsibility rests with this Government and there are a few things which this Government have done for which they should be taken to task. In doing so, I do so as an individual Senator rather than speaking on behalf of my party.

That is not unusual nowadays.

It is not unusual for me, these days or any other days.

Not only that, I think Senator Smith would recognise that within his own party, within his own constituency the same problem arises. I would not refer to that because it would be a party political comment.

I am willing to have an update on matters in my own constituency.

I suppose you will win the next time. It is one-all and you will go ahead two-one the next time. The level of public sector pay settlements, not only in respect of this year and the coming year, but in respect of a number of years past, is daft. This applies more in respect of the present settlement than in respect of any other settlement. It was fairly daft all along. It is very hard to explain that to people when you have high levels of inflation, but, to have proposals for a basic 7 per cent increase over a period of time when the level of inflation will not reach 7 per cent, what in effect you are saying is that we are going to transfer resources from the private sector of the economy to the public sector of the economy and that that is the policy which should be pursued for the well-being of the country.

To me in the present economic climate and with the kind of budget deficit which we have and the levels of taxation we have, that is a daft policy. I would be enthralled if there was any political party in this country, whether it was my own political party or any other political party, who would tackle this problem and who would face it. It is quite obvious that the two parties in Government, while they are conscious of the problem, are unwilling to grasp that nettle. It is obvious that Fianna Fáil have no intention of grasping the nettle, as during the course of the recent teachers' dispute, they said they would pay whatever was necessary to get them back to work. That kind of policy is even more than daft. I doubt the political capacity or indeed the determination of the PDs to grasp this nettle as I think that their performances on local authorities throughout the country, which many Members of this House will be aware of, is that they have backed down from tackling the problems created by the proposed abolition of the various service charges. I am not passing comment one way or the other on the merits or demerits of service charges. They were unwilling to make public expenditure cuts to match the policy implications or inevitable implications of the revenue-raising cuts which they were proposing to make. So I doubt their sincerity or their political capacity to act in that area.

Secondly, I am glad that the Minister of State at the Department of the Public Service is present to hear me saying this. Again, it is a personal view. The continued existence of the public service arbitrator is causing a considerable problem for this Government. It caused problems for the last Government and it will cause problems for the next Government. Irrespective of the original intention of the scheme, it is being used for the purpose of establishing a leap frogging mechanism whereby in addition to the increases negotiated by way of a general pay round, additional special increases are being awarded on the spurious argument that in some way people in the public service are falling behind those in the private sector.

The Government should seriously consider asking the public service arbitrator to look at some grades in the public sector and compare them with what has happened in the private sector in the past few years. If this was done, inevitably the conclusion would be reached that these people are being overpaid and special pay decreases would be the order of the day rather than special pay increases. As a country, we are are not tackling the problem. If Fianna Fáil did it, they would have my full support. I know in my heart and soul they will not do it. This is the problem we are faced with. We are devoting an ever-increasing percentage of our gross national product to the public sector control and we are not getting increased service for it. The result is that we are getting more civil servants providing the same service.

There has been a cut of 3,000 in the past four years.

A cut of 3,000 in the number of civil servants and a dramatic increase in what they are being paid. The reductions which we are talking about in the numbers of civil servants, even if they went on for another 15 years, would still not bring us back to the 1977 level. I am not viewing this proposal on one year as compared with the previous year. It is being viewed over a long period of time: there are increases.

The Minister knows that there is resistance at every Department level to any reduction in the numbers employed. Is there any Department that ever went to the Department of the Public Service and said that they could reduce the number of people employed, for example, even by one?

I noticed that Mr. David Stockman, the recently resigned Budget Director in the United States, said such a proposal for a reduction in expenditure never came to him from any Department in the US. I suspect that precisely the same applies in Ireland. We may ask the question: where are we going?

I am not just talking about this Government, but politicians will have to get their act together and recognise that if we want to reduce personal taxation which is the objective we share, while at the same time wanting to preserve the proper level of public service, it must be done by a sensible re-organisation of our resources. It must be done by people who put forward a policy of a reduction in personal taxation taking the consequences of the inevitable reductions in levels of public expenditure which must take place.

The Minister in his speech, I am glad to say, committed himself to a policy of reduced taxation. I will quote briefly as follows:

There was and there remains a widespread perception that our taxation levels are too high. I share this viewpoint but I have to recognise that while we continue to have higher expenditure profiles, tax levels will continue to be high.

I have been seeking to get successive Ministers for Finance — and I hope to ask this Minister the same question during Committee Stage of this Bill — to say what level of personal taxation they think is appropriate? I am not suggesting that they should automatically introduce it or that it is possible to do so, but where are we going or what are their policies?

With the present level of personal taxation over 60 per cent — taking levies into account, it is effectively over 60 per cent in marginal terms — it is reasonable to ask the Minister what is his objective. I know that I would be working towards a top rate, inclusive of all levies, of not more than 50 per cent. I do not think anybody should pay more than 50 per cent of their marginal income in taxation. This is a reasonable objective and allows much flexibility to the Government with regard to the raising of taxation. We should be aiming for a standard rate of 30 per cent in the present climate. This is a reasonable objective also.

I should like to refer briefly to a number of the provisions of the Finance Bill in detail and give the Minister some indication of the amendments I will be moving at Committee Stage. We might even create a record during the course of this debate on the Finance Bill and get a recommendation accepted — I would not be too hopeful on that count.

The business expansion scheme which the Minister refers to is indeed quite successful. He has indicated that he now proposes to extend the scheme up to 1991. That is a worthwhile proposal. I contributed in a small way to an investment under the business expansion scheme recently which had the effect of saving from going out of business a very important, if small, Cork industry. I think that the provisions which the Minister has made for favourable pre-taxation treatment has already quite a beneficial effect on employment in the manufacturing industry. I welcome the Minister's continued commitment to its future.

I have no great time indeed for the motor lobby in this House, generally speaking, — I do not mean the people involved — and their method of approaching the problem. It would be churlish of us not to accept as unrealistic the limit of £3,500 which is the ceiling applied under the corporation tax code in respect of motor cars used for business purposes. I say this, not only because the cost of a car is considerably in excess of £3,500 but because the provision has been extended over the years to include, not only the £3,500 in so far as that is the notional cost of the car, but also to mean that the proportion by which the cost of the car exceeds £3,500 establishes a ratio. That ratio of expenditure incurred in the running of the car is disallowed for tax purposes. That makes no sense at all. I have no great time for the Minister's argument that in some way a further improvement from the new level of £4,000 which he proposes should be in some way linked to changes in the benefit-in-kind provision.

Part of the problem with regard to the £3,500 limit relates to expenses incurred properly in the running of business motor vehicles. It relates in no way to the personal benefit which is available and is availed of by the actual person driving the car when he uses it at night or at weekends. Under this provision, I have seen many examples — I am a director of one such company — where the company made a loss in the year in the ordinary trading terms but because of the application of this rule and because of disallowing expenditure in respect of company cars, they ended up paying corporation tax for that year. This not sensible. While I recognise that it is expensive to eliminate it, there are certain things which the Minister can do to ameliorate those problems. I will be asking him to look more closely at that and to examine his conscience with regard to the justice of that case.

Section 48 of the Bill — and it is difficult to have the sections right as the Bill was passed by the other House only last evening and the numbers were changed — deals with what I can only call the most extraordinary piece of anti-avoidance legislation that I have ever come across. It proposes that in certain circumstances — and they are not exceptional circumstances — a surcharge of 10 per cent would be made on a taxpayer who was late with his returns. That appears to me to be a most extraordinary provision. I think the Minister would be well advised to have a look at it. While I have no objection to people being forced to make their returns and make them properly, to propose that as a penalty a person should pay a surcharge of an extra 10 per cent because they are a day late with their return is in my opinion an extraordinary provision. In those circumstances, section 48 must be looked at.

Section 42, taking them in no particular order, deals with the allowances which are available in respect of reconstruction of certain commercial premises. Basically what is happening is that designated areas are being established and these areas are in major cities. There is a kind of super-designated area being created in the Dublin Customs dock area. Within that area it appears that certain tax reliefs will be available in respect of developments which are of a mixed kind, partly commercial and partly residential. It would appear that in respect of the other qualifying areas that provision will not be available and that the allowance will only be available where the total building or structure is commercial. That would have the effect that if, for example, one was doing a development in one of these areas which had a shop on the ground floor and offices on the first, second and third floors and residential accommodation on the top floor — which very often is a planning requirement particularly in the Dublin area — one would lose his allowances. That appears to me to be quite restrictive against the policy which the Minister is pursuing by other allowances elsewhere of encouraging people to build residences in or near centre city areas. I think section 42 therefore has to be looked at and I am sure we will get an opportunity of examining that during the course of its passage through the House.

There are a number of other matters I would like to refer the Minister to. I may have spoken about one of them in this House before. This Finance Bill and every other Finance Bill superimposes on top of the existing core of legislation new and additional provisions and fits them into the overall structure. Very often it does so by amending the Income Tax Act, 1967; sometimes by amending the Corporation Tax Act, 1976 and doing other various things and in addition to that there is a bit left over every year which really does not fit into any section and which is part of the income tax code in its own right. Part of that procedure which is dealt with in this Bill relates to the question of appeal. The Minister should be given fair warning of what I will be proposing in that regard. The whole thrust of this Finance Bill and indeed of other Finance Acts to which I have contributed during my short period of time in the Oireachtas has been to tighten up very much on the possibilities for avoidance and evasion of tax. I think that is only right and proper.

Considerable additional powers had to be given to the Revenue Commissioners to enable that to happen. What we have not looked at as closely is the way in which these existing powers are being used by the Revenue Commissioners. I will give one example. Where somebody is dissatisfied with his assessment — assessments are referred to in this Bill — he can appeal to the appeal commissioners and if he is dissatisfied with the determination of the appeal commissioners he can appeal to the Circuit Court. On the appeal to the appeal commissioner there is no mechanism by which the taxpayer can have that case heard in a reasonable period. It is totally within the control of the Revenue authorities to decide when that appeal will be heard. Sometimes that is not very serious. It is annoying and it is delay and is administratively inconvenient for the taxpayer but a very serious problem can arise at the next stage where a determination which is sometimes unfavourable to the taxpayer is made by the appeal commissioner.

At that stage the tax becomes due. When that tax becomes due, the taxpayer has to pay the tax or else be at risk with regard to interest. He is under an obligation to pay tax and he can appeal the case to the Circuit Court. At that stage the Revenue commissioners are under no obligation to list the case before the Circuit Court in any specified period. They can delay five months, six months or six years. They can literally delay it for years and make use of the person's money in the meantime. They can delay it so as to try to bring about a situation where they test the point which is being disputed by the taxpayer in a case and is a forum in which they feel more comfortable. That has very grave implications. I will be moving a series of amendments which will have the effect of ensuring that where there is an undue delay the appeal commissioners themselves on the one hand, in their case, and the Circuit Court on the other in its case, would have the right to intervene and to insist that after a reasonable length of time had elapsed the matter would be heard. I will be proposing amendments along these lines.

In section 116 of the new, up-to-date Bill as passed by the other House it is proposed to change the Income Tax Act, 1967 and in particular section 161 thereof. That section imposes certain obligations on inspectors of taxes and makes them liable for dismissal and for fines if they fail to do certain things. What it is proposed to do in effect is to remove that threat. Section 116 deals with the question of the appointment of inspectors of taxes about which I will speak also. In section 161 of the Income Tax Act, 1967 the Minister was given the responsibility for the appointment of all inspectors of taxes. It is proposed to transfer that to the Revenue Commissioners and I have certain things to say on that which I am sure the Minister will consider at that time.

There is another section, which I cannot find at the moment but I am sure the Minister will be aware of it, in which it is proposed to restate certain obligations which the inspectors of taxes have in connection with the duty to properly assess and properly determine taxation. Under the main Act in such circumstances the inspector of taxes who negligently or fraudulently does that job — certainly who fraudulently does it — is liable to a fine and liable to dismissal. For some unexplained reason, it is proposed to remove the possibility of dismissal for a person who deliberately changes or undercharges taxation on a taxpayer. This is quite a serious change in the law which is not being properly highlighted in the memorandum we have before us.

Another matter to which I would like to refer and to which the Minister will no doubt address himself on Committee Stage is the reduction in the rate of interest which is payable on refunds of tax. There was a long discussion of this in the Dáil and I do not think it is necessary for us to go into it at this stage. It is an area where undoubtedly the Minister will be questioned in this House. I feel that he should be forewarned as to our intentions in that regard.

In general, while it would appear that the Finance Bill, as proposed to us this year, does not contain as many fundamental changes as were proposed in the past, there are individual changes which will require careful consideration on Committee Stage in this House. I should say that there is also a problem with regard to the definition of premises dealing with the changes in the bookmaking regulations included in this Bill.

To return to the general point that while the Minister's decision to reduce the levels of personal taxation in line with the proposals set out by the Government since it came to office are welcome, it would be foolish of us not to recognise that in sticking so closely to those proposals the Government have been unable for one reason or another — I think it is really a failure of will on the part of the community and a failure of will on the part of the Government — to stick to the targets which have been set by them for the control of public expenditure.

This applies particularly in the area of public sector pay. If the Minister is to succeed in further reducing the level of personal taxation down towards the thresholds of 50 per cent and 30 per cent to which I earlier referred, that can only be achieved if the Minister is willing to take his courage in his hands — and the Government as a unit is willing to take their courage in their hands — and challenge the conspiracy of high public sector pay which is confronting us as such a serious threat to our financial stability as a nation.

I have confidence that this Minister — no more than the last one — and the Government share the objectives which I have laid out as being desirable. I am a little concerned whether they have the capacity to persuade their colleagues in Cabinet, their political parties and the Opposition — because that is a very important portion of it — that the national solvency demands that this problem would be tackled in the only realistic way, which is to reduce public expenditure so as to achieve the objective of reduced taxation levels to which we all aspire.

I welcome the changes that the Minister for Finance has brought and also Senator O'Leary's comments about grasping the nettle and about the county councils, which I am not particularly familiar with — I am only familiar with my own. He labels the Progressive Democrats in the same way as he does Fianna Fáil. This would, I presume, be a compliment for us by acknowledging that we are in existence and we probably will be a force in the future. It is good to be recognised as such by Senator O'Leary. To return to the Finance Bill he places three items in the correct order of equitable distribution of the tax burden, reduction in the overall level of taxation as far as constraints will allow and the improvement in the system of collection. He is logically correct. He specifies it as it is. There remains, as the Minister said, the situation that our taxes are too high. He accepts that and the country accepts it. Indeed, the PAYE worker would accept that his taxes are too high while he feels other people get away with not paying tax. The Minister says the way to decrease the national debt is to decrease your expenditure and, therefore, you have a better system of controlling your expenditure and that will reduce your borrowing and, therefore, give you more flexibility in the taxation system.

I welcome the Minister's statement about new ideas which he will accept and work on. I believe the Minister has always been approachable and very taken with new ideas, so that I would say that as far as finance legislation is concerned the Minister would accept any ideas we would have provided they are reasonable.

When you talk about new and improved economic performance Fianna Fáil brought in a situation in 1977 where there were no rates, no motor tax. When they went to the budget to find out the difference, they put it down to buoyancy, which means, in effect, that you add two and two and you want to get five, so you put in one as buoyancy. The Minister believes that it should be properly costed and properly looked at, that there is scope for self-financing cuts. If that were the case, then all over Europe we would have self-financing cuts and everybody would be doing it.

I remember going around during the 1977 election campaign and people who were members of my former party said that they could not vote for us because they could not afford to vote for us. That in itself is a condemnation of the policies by which that party have operated ever since. The idea of giving money away and buying votes should be a thing of the past. It should be realistic and you should not offer olive branches to people if you cannot afford to do it.

The Minister declared the recession to be over. I would disagree with that. If you were to look at the business community, particularly small businesses, you would find that many of them are crippled and only for the relaxation of the Revenue Commissioners which, in effect, is due to inefficiency in most cases many of these companies would be out of business.

He talked about falling energy prices. Many small horticultural companies should be affected by the reduction in the energy prices. They should get a better benefit from the fact that we have lower energy prices. I believe that all along the pipeline area where we have natural gas we have great scope for massive horticultural development. I believe the gas should be given at an economic rate to these places. I have one in mind and that is the growing of mushrooms and tomatoes, etc. These areas are high labour outfits and they would greatly benefit by a reduction in energy costs.

I agree with the Minister and congratulate him on the position he has taken on PRSI. It is a very good step to exempt companies from the PRSI payments if they take on extra workers. This had the effect of taking 2,800 people off the unemployment register. I would ask the Minister to review that and see if he could exempt them further for a two or three year period.

The Minister has stated that tax reductions are relatively modest. I agree with this. The proposals put forward would not encourage much happiness in the PAYE area. The amount of money the PAYE workers are getting back, £320 for somebody with an income of £12,000, would, in effect, be eaten away by the high cost of living.

I welcome the tax benefit for investment in industry. The amount of investment income, up to £7,000 per annum, is very encouraging. I read the Minister's statements when he was Minister for Industry. His thinking along the line of savings to be put to productive purposes has been a very good one. It came across in his belief that if you put your savings into manufacturing, they will produce jobs. There is so much competition for money for unproductive purposes that I agree with the Minister that we should try to interest people in, for instance, taking shares in the companies they work for.

I worked for Irish Ropes. Many workers took shares in that company. This gave them an interest in the company, in the profits, in the workforce and in production. On a Monday morning the workers would ask me what profit was made the previous week. The workers felt part of the company. If we could get more employee participation in companies there would be a better flow of ideas. If management were not looking after the company, it would come to light because the workforce are part of it.

Where the employee and the employer are apart, there is no way to go ahead. The idea of profits must be that they come back to companies. The realisation must be that if one takes a risk one should be paid for that risk. The Minister is taking a very positive look at this. His approach is a very definite one. He talked about smaller companies and the incentives for them in terms of capital and capital gains tax. This is a very good suggestion. The Minister has always been for small companies. He has recognised, in effect, that this country was built on small companies and that if you can improve the climate within small companies, the overall employment will fall into place.

Many small companies have, as he rightly indicated, very good ideas and are very good on production but their financial situations are very bad. They must go to the banks for finance. The Minister recognises that if a company go, not only to their employees but outside to the public, then you can get a very good small company base. If there is somebody with finance and somebody else with ideas on production and they are brought together, there could be a good and effective structure.

Chapter 6 of the Bill deals with the DIRT tax. I accept that the Minister made a genuine attempt to relieve hardship cases in this area. It is a genuine effort to relieve the societies, the old people and such genuine hardship cases. But he has not gone far enough. He should have allowed that for tax purposes. If he believes that this was a way to crack the black economy, it will not. What happens in the case of a husband with small children who saved for educational purposes, when the tax free allowance would not come near the income and where there is genuine hardship? He should allow that for tax purposes. Also, where one can give the name of an aunt in England and say that he is resident with her, he would be allowed to claim in that situation. This should be discouraged. The black economy must be tackled in order to get a fairer taxation system.

Section 6 (5) deals with the inner city. There is one area and I am sure Senator O'Leary knows about it. The Watercourse Industrial Estate in Cork is in the inner city renewal programme. I understand that there are 17 acres of this development which, in effect, gives employment. There are 40 companies there employing in excess of 500 people. They are seeking that that would be included in the urban renewal area, that the Minister would include this. Much money is going to be spent on this. They reckon that if they were to have this area included they would be able to increase that employment significantly and invest a massive amount of money in order to get it functional. I would ask the Minister to include this area. I will give him the information I have.

When he talks about the inner city and the places in which he has reduced the tax on high employment, one very high employment area is the whole construction industry. I would ask the Minister to have a look at that situation where the building industry was granted a VAT rate of 5 per cent and it was put up to 10 per cent. I feel that should be reduced significantly because there is massive unemployment in that area.

I agree with the Minister that the home improvement grants area is one for the small builder to get involved in. It has brought back a lot of small builders who were nearly at the wall as far as their continuation of business was concerned. That has done an enormous amount of good. I would ask the Minister again to have a look at the building construction industry.

He talks about the penalties, in effect, for non-compliance with the return of one's income tax forms. There are at the moment two positions. First, if you are caught driving while you are drunk there is a mandatory fine. One cannot drive for the next 12 months or one could be imprisoned. Second, if one does not return one's P35 at the end of the year and one is brought to court, there is a mandatory fine of £500. We are getting to the stage whereby eventually, step by step it has to be done. These things cannot be done overnight. People normally send in their returns on time and become like the PAYE worker. There have been many reasons why this has not been done and one of the main reasons is the inadequacy in the staffing in the taxation office and the taxation collection departments. If a member of the public was to go in and have a look at the situation there where one has one inspector dealing with about 300 companies, people who are not qualified dealing with the Collector General's money coming in, one would just see that the whole situation is in disarray. It is an area which should be looked at effectively and efficiently bringing in a team of consultants to examine the whole structure of the income tax department. The system of self-assessment is probably a good one. At the moment it is nearly self-assessment because in a number of cases the Revenue Commissioners do not examine the returns. They just gloss over them and send the return out and one in every 20 is examined. People should be urged to send in their income tax returns quicker.

I do accept the situation about the company car where the allowance has been from £3,500 to £4,000. That was back in 1976. The inflation rate since then would put that up £11,000 or £12,000 or even in excess of that. The Minister has accepted that the anomaly is there but he should investigate it further and increase it — by not only £500 — but by the rate of inflation since 1976. We have companies who have many cars and who give much employment and in order for them to benefit from it, it would have to be at today's rates and not at 1976 rates. The overall thrust of this is good.

He encourages — as his style is to encourage — a new look at our taxation system. The Minister has come a long way since his early days. He has learned a lot. There is a long way to go as far as the whole taxation system is concerned. There is a lot of reform and equity to be achieved, for which people are crying out. There are many things the Minister can do and there are many areas he can look at. There is much more information vailble to him now, for example, from the VHI, the Co-ops to tax inspectors dealing with self-employed. There is much more information available from the Government because they pay out so much money to the self-employed and the information is actually there.

In regard to subcontractors certificates, for example, I believe their use should be extended to doctors and dentists, and accountants dealing with the Government and if their affairs are not in order they should be paid less their tax. Subcontractors must be made to realise that their affairs have to be in order. Most subcontractors will look for their certificate because their certificate allows them work. If they have not got their certificate, they cannot work. This system has worked efficiently and effectively for subcontractors. I believe it should be extended right across the board.

We should look at the situation of the consultants and the Revenue Commissioners and we should bring in consultants to examine the whole question of revenue collection and the identification of accounts. I agree with the idea of the new sheriffs and their powers but also there should be local collection units and there should be more inspectors going out and being involved with the community so that they can see what it is all about. Most revenue inspectors have never seen the companies they deal with. If you take the IDA, for example, each IDA official would know more about the company than possibly the managing director of it. Very seldom would one get a revenue inspector to come and have a look at the company that it is dealing with or a look at the individual. The only time he sees them is when they come to him. Usually when they go to him, if they have any sense at all they will be very badly dressed and go by bus. They will actually see the situation of the person they are dealing with in their homes. I have never yet heard of anybody getting a phone call from the Revenue Commissioners about the back VAT and the back PAYE.

If you look at any liquidation, the amount of money that is due to the Revenue Commissioners is staggering and it is staggering because, first of all, the banks are in collaboration with the individual because if the cheque is made out to the Revenue Commissioners and the account is overdrawn, the first payment is to the Revenue Commissioners once the wages are paid, which I would agree with. I would agree that they should be more aware in the PAYE department and the income tax department that this money is actually due and there are massive amounts of money to be got.

It leads to a false sense of security for the company. I know many companies who have not paid their VAT and PAYE for such a long time. They never got any reminder. They get the green letter first, then the red letter and then they get a notice from the sheriff and then the sheriff gets fed up calling and that is the end of the matter for two or three years until they come around again. There is an area that should be looked at, possibly the Revenue Commissioners sitting down with accountants, asking them their opinions and how they should do their job. I believe there are many ideas there which the inspectors could work on.

I believe we should eliminate the social welfare fraud and the black economy. One way of doing that is through more inspectors and through discussion with inspectors. To inform the employees again about the state of the company is very important because most company employees are not aware of what is happening in the company until it goes into liquidation and then they find that their PAYE and VAT has not been paid up. Recently, we brought in a law whereby they would be cleared but still there is a long way before they get their rewards. Another area which should be looked at, is that of expense creditors. They should be outlined on the balance sheet. I agree with the disclosure of accounts, that the amount of VAT and PAYE due should be itemised on the balance sheet, how long it is due and the amount of pension money paid up. There is much to be achieved before justice is seen to be done to the PAYE worker and to the self-employed so that there is not this huge gap between the self-employed and the PAYE worker with the PAYE worker feeling that the self-employed are getting away with murder. I believe the Minister once said he referred to the amounts outstanding from self-employed persons. At that time I had a number of self-employed accounts to do. In three different cases, three different individuals were assessed, one for £25,000, another for £65,000 and another for £30,000. The three of them had gone out of business and were on welfare at the time. According to the income tax people they owed that amount of money, which was absolutely crazy.

There should be more realism in the structures. They should be more in touch with the individuals and should respond quickly and effectively to requests. The problem is that they do not respond. If you send a letter you will probably not get a reply for about three or four weeks. It is sent in deliberately at that time because one knows that the emphasis is then with the tax inspector and that he cannot get near the file for at least four weeks after that. He will send out a letter and then another is sent back. That has been going on for so long now that it is becoming ridiculous. There should be a more sensible approach. The employment of good civil servants in that area will improve the system and will improve also the tax collection and show that equity is being done so that PAYE workers will get a fair return for the amount of tax they pay.

The number of points I want to make are very short and, I hope, to the point. I am not a financer or an economist and, therefore, I am not going to spread out the small number of views I have but they are views about which I feel strongly.

One is about the small businesses of Ireland which together with the small and medium sized farmers, have carried this country, for very many years. During recent years unfortunately small businesses have come under pressure, particularly from the State. It is unfortunate that these small businesses have become glorified bookkeepers and glorified tax collectors for the State. People in business for a number of years are frightened out of their skins by having to keep various sets of books and having to make various returns rather than getting on with what they were trained to do — run their businesses. They just do not know where to turn. If one is lucky enough to make a profit then like everybody else he is highly taxed. Many of these small businesses such as small grocers and small publicans have been suffering for the past number of years, the former because of the supermarkets and for other reasons and the latter because of abuses of the licensing laws. Whatever may be the reasons for hounding these small businesses the number of people they employ is not matched pro rata by the larger shops or bar businesses. At the same time, these small businesses, and indeed also medium and large businesses, are being hounded by tax inspectors.

In my own case which I am not citing in any sense of bragging, but rather to point out what is happening, if the assessments made against me in two successive years were realistic I would not be sitting in this House or in any other House or working at all. In those two years I made nothing like the profits that were assessed against me. In fact in one of those years I made a loss. When I contacted the tax inspector she said she had raised what she had called a realistic assessment. When I asked how she could raise a realistic assessment that was so out of place she said she was allowed by law to raise an assessment which she deemed to be realistic. I would like to see the terms of the realistic assessment more clearly defined, not just to protect those people who are being unrealistically assessed but because hundreds and thousands of assessments raised against people are being used in the computation of the figure that is sometimes thrown out, of £600 million in unpaid taxes by the self-employed. That in turn gets the backs of the PAYE sector up and were it true there would be merit in the argument. What almost every businessman in the country knows is that it is not true. More realistic assessments must be brought in.

In saying that I am not trying to pretend that there are people making money and not declaring it. The country is absolutely full of that but it is not confined to the self-employed or the small business people. Almost everyone is on the make in some form or another. Recently the Minister offered amnesty from prosecution to persons who had made false declarations or who had not paid their proper share of income tax. I do not know how successful that amnesty has been. I suggest to the Minister, through the Minister of State, that the following be considered where there are large sums of money being debated. I am going to use as an example the taxman looking for £300,000 and the person involved offering £100,000. Where an amnesty from prosecution is being offered, let the taxman or woman — it would appear in my own area that the women are somewhat keener on these figures than the men — meet with the said person. This amnesty should be continued during all of the debate between them. Eventually the person and the taxman will agree on a figure of outstanding taxes due to the State. Once a figure is agreed on the person liable for tax can then disclose openly to the taxman any other moneys he or she has earned that have not to date been disclosed or that the tax man or woman has not to date suspected that he or she has got.

The socialists will say that I am encouraging letting the capitalist away with earning further money. I am not. What I am trying to do is this: if this money is "hot money", the taxman, in other words the State because it is for us the taxman is working, will never get his share of it unless it is allowed to be brought up. If it is brought up and declared — I refer to the case I cited of a man or woman having £500,000 of "hot money"— at that stage the taxman knows of its existence and, secondly, the person concerned can invest the money. This will result in employment and in his being able to come clean, perhaps for the first time in years and make a decent living and not have to be bowing his head to anybody. That money will be put back to work for our economy rather than working for somebody else's economy.

Not enough emphasis is placed on finances for services. For a number of years the emphasis has been on finances for manufacturing industry and grant aid is only available to manufacturing industry for export. I believe that services should be financed. I would advocate two things, one is that the financial institutions would make moneys available on longer terms because the five year term or the seven year term or the ten year term but particularly the five and seven year terms can be so crippling as to cause a firm to go out of business before it gets off the ground. I would also like to see the State getting involved in trying to control interest rates. The State should in some way guarantee rates at a medium level.

Interest rates are falling at present but not quickly enough for the Minister for the Environment and indeed for people in general with building societies being reluctant to move as quickly as they might. During the past few months some building societies have been very slow to disclose their own affairs even to their own members. Reading between the lines I felt that manufacturing directors lied to their own members. I am advocating that the State might get involved by setting up some sort of a scheme whereby moneys would become available for longer terms and at a fixed interest so that if interest rates moved higher over a short period the resultant payback would not increase and in turn when interest rates moved below that average the businessman would not get a lower rate, in other words that the body would recoup the investment made towards subsidising in the first instance.

The Minister referred to the notion of self-financing tax reductions. I believe that in setting up this body would be self-financing because the State would save money through the person paying a level rate of interest, but it would be dearer.

I should like to refer to small farmers who are caught in a trap and I would advocate that the Minister for Finance take them out of that trap. There are many small farmers in this trap in the west of Ireland. For every pound the small farmer who is on unemployment assistance earns it is reduced by that pound of unemployment assistance; for every £1,000 he earns he loses £20 a week; for every £2,000 he loses £40 a week. These people need help from the State. Do not let anybody say that I, Joachim Loughrey from Donegal, ever advocated removing aid from the small farmers along the west, because I do not. There is a total disincentive to that man or woman to produce anything. Some sort of subsidy other than unemployment assistance, should be brought in to help to remove from the small farmer the unemployment assistance tag. This would also help production in that the more he produced the more he would get.

I hope the Minister for Finance will take that consideration on board about the amnesty for hot money. There are hundreds of millions of pounds moving outside our economy simply because people are afraid to move it inside our economy. There is no doubt that taxation is too high. The person with a slight gambling instinct is afraid to make a bob because if he does the pound becomes 40 pence; he will lose 50 or 60 pence straight off. There must be some method devised because before we can lift those on the poverty line or among the poorer elements of our country to some acceptable level we will have to allow the richer to get even more rich. I have no doubt that unless we allow wealth to be created then we cannot distribute it; if the wealth is not created it will not be distributed. If wealth is being created by Irish businessmen outside Ireland then it will not be distributed inside Ireland. I would advocate to the Minister that he continue on the road he is on — that of reducing personal taxation and creating incentives, not only for productive investment but for all other types of investment as well. The extension of the tax concessions to encourage greater employee participation has merit. I do not believe it has been fully thought out. If somebody has built up a business with sweat and blood during a number of years I am not so sure that they should have to give it away subject to continuing in that business. I thank the Cathaoirleach for his consideration and I hope the Minister will take some of my ideas on board.

I regret that I have to begin on a slightly discordant note. With no disrespect to you, a Chathaoirligh, I feel that the procedures of this House are unfair in that Members can sit here waiting for their turn to speak and another Member who just immediately walks into the House can be called upon to speak.

I am not going to interrupt the Senator but that is quite correct. The group takes the turn. Numerous times it has been mentioned and I have suggested that it be discussed again at the Committee on Procedure and Privileges. There is no Standing Order governing it. It is a practice that has been handed down prior to my time. I entirely agree with the Senator. If a party is made up of 10 or 15 people and one individual comes in and gets a turn prior to them, that would not be my way of doing it. My thinking is in agreement with that of the Senator.

I have no wish to delay the House but I just want to put that on the record. Perhaps the Committee on Procedure and Privileges could have another look at it. The practice in this House has been that, since we do not have a budget presented here, Members take advantage of discussion on Second Stage of the Finance Bill to ramble a bit and cover matters that do not directly come within the ambit of the Finance Bill but at the same time have always been acceptable.

I wonder how relevant is a budget in Ireland in these times? One can recall in all Governments the fantastic media coverage, the hyped-up package and presentation and the way the expectations of the public are built up or, on occasions, played down prior to the introduction of a budget and finally it peters out almost always into an ineffectual instrument of economic policy. The reason I state that is that looking at the overall finances of the country and the amount of money which is expended or agreed to be expended prior to the introduction of the budget and looking again at the balance which falls directly within the control of the Minister for Finance of the day, you see that in percentage terms it is minute.

For instance, public service pay at approximately £2,600 million, servicing the national debt at £2,100 million, servicing our education, health and social welfare, combine to virtually reduce the Minister's discretion to a few hundred million pounds out of £8 billion to £9 billion. In that context — and here I agree with part of the contribution made by Senator O'Leary — we have to look very fundamentally at how we can order things as far as the management of the State finances are concerned.

We tend to get in the budget layer upon layer of new regulations, bureaucracy stitched in each year which conflicts from one year to another and it is not only ineffective but totally unintelligible to the man in the street. We will be told successively by the Minister that a scheme is being introduced to rid us of the black economy, to eradicate the abuses and avoidance of tax and to reduce the burden on the PAYE sector. Just how many times have we been told in this House and in the other House by Ministers that these three areas are comprehensively covered in this budget? Each passing year these efforts become more porous as far as tax avoidance is concerned. The black economy grows and a more disgruntled PAYE sector emerges, as the burden of taxation continues to grow, despite falling standards of living and falling numbers in employment.

The PAYE sector has paid in 1985 up to 85 per cent of total income tax paid to the Exchequer and this crippling burden which has sapped the creative energy of huge sections of our population is again set to rise by another 2 per cent this year. Income tax as a share of total tax collected continues to rise and is now heading to 40 per cent of total paid taxes. It is also estimated that there will be a 9.5 per cent increase in the tax yield from the PAYE sector in 1986.

When we consider that inflation is estimated to run at an average rate of about 4.5 per cent this year, the increasing rate of the tax rake-off will be double the inflation rate, or one of the highest in recent years. Since 1982 we have listened to a plethora of statements from the Taoiseach and his Ministers to the effect that this Government were improving the economic health of the country. Promises were made to reduce the level of taxation on the PAYE sector. Government borrowing would be brought under control. Public finances would be corrected.

In the course of his contribution Senator O'Leary was at pains to put the total blame for our present economic problems on the Fianna Fáil Government between 1977-81. Mistakes were made at that time, but at this stage I do feel that on all sides of the House there is little point in trying to score on the basis of mistakes that were made either in 1973, 1974, 1977 or 1981. What has happened during those years has now happened and for the young people that are growing up and the job opportunities that have to be provided, perhaps a more mature and less of the looking back attitude should be adopted, and all of us together try in what way we can mould public opinion to accept the kind of changes which will make it possible for the Minister for Finance to come into this House and have a little more room to operate and not have so much of the expenditure which lies within the ambit of his Department virtually determined long before he comes into the House.

In the promises that were made we were told that if the public accepted a variety of new taxes and very harsh measures and if this money was sucked into the Exchequer, all of our problems would be solved. The fact still remains that despite quite a variety of new tax measures and a reintroduction of ones which were previously abolished, the picture has not changed. You cannot pay your debts while you are sitting back. Whether you take a business, farm, or a country, you cannot repay what you owe as you continue to retreat. You can only pay as I understand it, when you are moving forward, because you have got to meet your day-to-day liabilities and on top of that you have got to meet crushing interest rates on repayments. That can only be dealt with, in my view, where the economy is helped to grow.

Let us look at the current account and the percentage they represent. I do not have the record here but I think it is something like 55 per cent on social welfare, 21 per cent on debt and about 9 per cent on the economic services. I know none of us can argue against the view that many services are essential and will always have to be provided for. What I am talking about is the balance between economic activity and the essential services. There is an imbalance, which all of us would accept has got to be changed.

Therefore, is the budget about what we spend or is it a creative instrument? I contend that, with the amount of money that is already predetermined, there is just not enough scope to deal with all the matters that are there. Servicing the debt now accounts for nearly one-third of Government revenue. This is an intolerable load. In this area, there is no point in going back to 1977-81. I am tired of listening to Ministers and Coalition speakers refer to that period. During the last general election on television and elsewhere Coalition candidates told us that the international bankers were out there at Dublin Airport ready to take Ireland Limited with them somewhere because of the financial situation and because of our borrowing which was at £12 billion. It will have doubled in four years. You can talk about percentage points. You can talk about point scoring, but those are the facts. If the international financiers were at Dublin Airport, they must be very close to me at the moment, although I cannot see them.

There has been considerable controversy with regard to the DIRT tax. I suppose it is ironic that it sounds rather badly as well. The question is just how can you order it in a way that it will not hurt sections of the community who should not be hurt. There is a certain amount of sense in trying to equalise the share of opportunity as far as competing for savings by the various institutions is concerned. Generally speaking, people will recognise that. It is not an instrument whereby it is possible to have fair play and equity. It is very like the land tax in that sense.

Last year we had a spate of attacks on old people. Many of us, in rural areas, were concerned that old people would be encouraged not to keep their savings at home but to invest them in banking and other institutions. In fairness to the Government, last year they responded and increased the savings relief for certain deposit interest accounts. In fact, relief on savings was doubled but in one swoop this year, not taking into account the value of what was done last year, those concessions are totally removed and a blunt instrument to deduct 35 per cent of all interest from people in that category together with others has been put in their place.

It is fine for the Exchequer to take in revenue from investments when people can afford it. I have been told by colleagues in the lending institutions that it is not unique for people to have four and five different accounts with different presentation of names and addresses. In those kind of situations, no one would legitimately argue against ensuring that people who were defrauding and avoiding their tax liability in that way paid the same as all other sectors. In order to deduct legitimate tax from people who either defraud or find some other way of hiding their resources. We attack in the same way old people who are not on a taxable income, who are shy about investing their savings and are, therefore prey to criminal activities tragically in our cities for a long time and now escalating in rural areas as well.

We also hit young couples. I would always encourage them to purchase their houses or buy sites as the case may be but never to attempt to enter into that until they have started to save, and not to think that one can afford to repay huge commitments overnight as a married person when one is not trained to the concept of saving. I am at a loss to know and I shall be endeavouring during the course of Committee Stage to discuss with the Minister some way of ensuring that these categories are facilitated. The same argument is made by the GAA. It could be made for all voluntary activities. At a time when there is so much unemployment and when it is so essential to provide the maximum kind of recreational facilities to use the energy of young people these organisations play a vital role in that regard. Some mechanism should be devised by which the moneys they gather voluntarily are not exposed to this tax.

Many so called socialists in this House would argue that the DIRT tax is an instrument to take funds from the financial institutions. Of course this is not so. It is just passed on to the consumer. This is clearly evidenced by the building societies who, despite lowering inflation and interest rates, have not passed on the advantage up to now to the borrowers. The Minister should use his good office to put on as much pressure as possible on the building societies to reduce, where possible, the mortgage rate on people who have provided themselves with houses.

Commercial banks continue to have one of the highest rates of interest in the history of the State. It is now running at nearly four times the inflation rate for some accounts. While the banks dillydally in passing on reduced interest rates to the public, more and more businesses get into financial difficulties. During the past three years approximately 2,000 businesses have been closed down or have been put into receivership or liquidation. I am not saying that interest rates were the cause of all of them closing down, but it was a contributor in making it very difficult in recessionary times for these companies to survive. It is crucial that banking institutions be pressured by the Government to reduce interest rates and to do that without clinging on to the last minute so that they can recoup some of the losses they incur in business and commercial life with the public generally.

I want to say a word in relation to the child benefit scheme which is being heralded as a fantastic measure in so far as families are concerned. Following the introduction of this scheme, the child allowance in the tax code has been removed. Childrens' allowances have also been abolished. We have seen a reduction in food subsidies. The base of the argument that I have been making since I began is that we have time and time again, not just in this instance, but year in and year out, played around with a small amount of money, the public believing that we were doing something for them but in the final analysis, as the year rolled on we discovered the position had not improved. So far as large families are concerned, it is very difficult for them to manage in these times. The Minister would have been wise to retain the £100 child allowance in the income tax code. I do not think it would have cost that much to retain that allowance. The overall benefit in that case would have been much greater.

During the course of his contribution, Senator O'Leary referred to the abolition of rates and the loss it was to the country not just in the year it was decided but as a continuing basis for income to the country and indeed to the local authorities. It would be fair to put on the record that there was no difference in 1977 between the Fianna Fáil manifesto in relation to rates and the Coalition's position. That is not justifying either. There was no distinction that I can recall in the final days of that campaign between the Coalition position and ours. There is little to be gained by saying that this or that caused this or that problem.

(Interruptions.)

I would go a fair distance with that but none of us are courageous enough to re-introduce it. In the area of revenue for local authorities, there certainly has to be some new thinking. For example, take our county roads system, I do not care whether it is a national charge or whether it is a local charge. I would say to any farmer or any person living on a bad country road, would you be prepared to give me funds through whatever source to try and maintain that country system as it disintegrates daily? The public at large and the people who use the county roads would argue that they are already paying too much. Leaving that aside, they would be prepared to help to finance the restoration and reinstatement of a network which was built up in difficult times and now is heading to disintegration. County engineers all over the country are telling county councillors that by the middle of the next decade many of the roads will be impassable. I do not think any of us want to see that happening. As far as I am concerned I would be glad to support any measures which would help the local authorities in the discharge of their function as far as the building up of our road network is concerned.

Reference has been made to the 16 per cent drop in the new house starts. Here again we should encourage new investment and private investment. The lending institutions stand condemned for the system of bridging finance provided for young couples who obtain local authority loans or building society loans. I know people who ran into difficulties in relation to transfers and delays with solicitors, delays in the Land Registry and found themselves with massive bills accruing even before they had begun to live in their houses. Banks should be pressurised to provide capital on a short term basis for housing in particular at reasonable rates and not at the astronomical rates charged at present.

All of the speakers have welcomed the new house improvement scheme. It is certainly very popular. There are one or two things I would like to mention to the Minister in that connection. One of them is in relation to the costings used by the Department inspectors in determining eligibility for this scheme. It seems that they are quite outdated. You have too many skilled workers who are unemployed and others who are in jobs who are in a position to do this work themselves. I know that the concept behind the scheme is to try to root out people who are engaging in the building business and in the black economy. It should be possible to leave it to the discretion of the inspectors in the Department of the Environment, perhaps even in conjunction with the local authorities, to allow for people who have the skills themselves and who can afford to do the work themselves but could never dream of bringing in a contractor because it would double the cost of the work. That is a reasonable assessment of the situation.

The whole purpose of the scheme is to provide employment for regular contractors who are out of work because of the downturn in the building market. If you start giving the same incentives to people to do their own work you would destroy that benefit and you would also throw it wide open to the black economy because people would say that they did it themselves when in fact they got some black economy contractor to do it. How would you prove who did it?

I recognise that difficulty and that is why I said "in conjunction with the local authorities".

Unless the local authorities stayed on the site every day they would not know who was doing it.

It is very difficult in a local authority area, at least as far as I am concerned, to have operations of that kind. It comes up under the planning section time and time again when people say they were only doing something very simple. Eventually an overseer saw what was happening. I mentioned it as one practical way of doing it. There may be some other way of doing it. I recognise that the concept is to try to get at people who are operating within the black economy but I still think that for people who have the capacity to do it themselves there seems to be something fundamentally wrong when they cannot do it themselves. If I can afford to improve my house and get in a contractor and meet all the legitimate legal demands of the Department of the Environment I can have this done. For a man living beside me who can do the work himself but cannot afford to get in a contractor the cost is doubled by forcing him to get a contractor. I am saying that it should be within the bounds of possibility to deal with that kind of situation.

Another area I want to refer to is the kind of sleeping pills some of the social employment schemes are as far as employment is concerned. We have had tremendous difficulty in Tipperary North Riding County Council in trying to get permission from the trade unions for some of the social employment schemes which were decided by the council. It seems to me that the only work that can be undertaken under some of those schemes is work you could not undertake in good times, work that will not interfere with permanent activity of the workers of the council, work which is not sought by the public and yet one has to find within that ambit and consideration schemes to meet the requirements of the Congress of Trade Unions. There are funds available and it might be much more worthwhile if these funds were provided for road upkeep and the essential services which the councils are providing but which are now deprived of funds.

I would like to welcome the income tax incentives which go to encourage people to invest share capital in industrial projects. This is quite a positive and helpful move and should start the process of tipping the scale as far as the tax regime is concerned in favour of new investment in industry and away from safe immobile havens. With one of the highest employment problems in Europe it is crucial that more private investment is directed into job promoting opportunities. For far too long research and development of new products and processes have been neglected. The amount of money provided by the State and private sources is dismally low compared to our European partners. I remember reading in a magazine some years ago that the Netherlands were spending about fourteen times the amount on research and development that was spent in this country in comparative terms. This would indicate the necessity to try to do something about this area. The scheme which has been introduced by the Minister is going in the right direction. I know that questions are being asked whether it is too restrictive or will many companies and individuals go for it. I still recognise in it a scheme which has potential and some of the restrictions perhaps can be removed, if not this year in the very near future.

What ones does the Senator have in mind?

We will be dealing with them in more detail on Committee Stage.

I have to confess frustration because accountants in particular are always talking about the restrictions and when you ask them what restrictions there are they are extremely short in explanation of what they are really talking about.

There is one limited to 20 per cent.

That has been raised to 40 per cent. I constantly hear accountants with this old song about the business being too restricted but they are extremely short on saying what exactly is wrong with the scheme when it comes to it. Maybe the Senator could ask whoever advised him to this effect to be more specific so that when we come to Committee Stage we can——

One of the problems which arises for the Seanad is the length of time that we have following the passage of the Bill through the Dáil and that we do not have the Dáil Report on the Committee Stage available to us yet.

That is the only change I made.

In the food area a number of worthwhile projects have been initiated but obviously a major revamping of agricultural policy. Farm co-op and processing policies will have to take place if cognisance is to be taken of the changing trends in the EC. Account must be taken of the needs of the consumer, the change in health trends together with innovation in marketing and continuity of supply. The Shannon Free Airport Development Company have established a centre in Limerick and there have sprung up in the past couple of years a number of small industrial projects. Hopefully this augurs well for the future.

I would like to welcome the Government's support for the provision of a regional technical college in Thurles and to press for the early sanction of the purchase of the site. Shannon Free Airport Development Company have agreed to establish an incubator unit on the college site which would facilitate research particularly in food but other processes and research would not be excluded. The development of this college will be a major commercial factor for Tipperary as a whole and we will be pressing the Minister for Education for early sanction for other developments.

The Minister has also reduced from seven years to five years the retention period for shares held under the employee profit sharing scheme. Most people welcome this change. The reduction in long term capital gains is also welcomed as is the new rate of 30 per cent for gains in respect of assets which have been held for six years. The Minister has reduced the insurance levy, which the budget proposed at 15 per cent, to 9 per cent and has also indicated that this will only operate for one year. There have been some complaints raised with regard to the level of the interest rate for payments of tax which are overdue. This is not similar to the rate of tax where refunds of tax are made to people where an error is made either by the taxpayer, his representatives or indeed the tax inspector. There should be no reason for this differential. Perhaps this is an area which the Minister could rectify also.

There are some positive aspects to this budget. Some effort has been made by the Minister to recognise the difficulties with regard to income tax and employment generating opportunities. Overall, it will not be the kind of steam engine which will help the country out of its present economic morass. I feel that much more fundamental appraisal of our total economic situation has to be done and the public will has to be moulded in a way which will make it possible for future Ministers for Finance to introduce budgets where the control that the Minister has over expenditure and over the totality of money available to him is far greater than is the position today.

I should like to congratulate and compliment the Minister for Finance for taking the measures in the budget of this year a stage further in the direction of giving, as I perceive it, greater stimulus and a greater boost to the economy and helping along the road to having our financial position improved. The Minister, no more than anybody else, would not suggest that a total solution is contained in the budget or indeed in the Finance Bill before us. Certainly it should be perceived as a very definite, positive step along the right road. I feel that we should salute the Minister for Finance for having taken that very definite initiative. It is the first time in recent years that there is a sign of an improvement in the economy. I am not standing here and suggesting remotely that all our economic ills are now in the process of being resolved. I would at the same time state that they are in the process of being dealt with and I am satisfied that the measures put forward will do a great deal along that direction.

There are, of course, external factors such as the steep fall in energy prices which are contributing quite substantially to matters being improved at present. Nevertheless we have internal matters, such as inflation levels, where we must acknowledge that a very definite improvement has been made by the present Government in the last three and a half years, where we have seen inflation coming from a level of 20 per cent to its present level of 3 per cent. I believe that, coupled with inflation, there is great urgency for a definite improvement in interest rates. I feel, with inflation rates being at a realistic level and with indicators suggesting they will be better before the end of this year, there is no logic at all for interest rates being at the extremely high levels they are at.

This applies to the agricultural scene, the whole industrial scene, the tourist area, and so on. I would say to the Minister: "you have done a fine job this far" but so far as interest is concerned, in whatever way a Minister for Finance can influence the situation there is an urgency to make sure that interest rates for various developments, be they industrial, commercial or agricultural, get a reasonable opportunity of getting money at a price they can handle. I believe there is much merit in serious consideration being given to Euro-currency moneys for agriculture, industry and developments generally. I appreciate very fully there are elements of risk with regard to exchange rates and so on but I would say that, having regard to the urgency of this finance for many types of development, that it is a risk that is worth taking particularly as we are now around the corner, where our recessionary situation is hopefully on the road towards improvement.

There is no doubt at present that people by and large see the economy being in a state of improvement and perceive the situation as one that is on the road to recovery. This in itself is very important because coupled with that kind of attitude we will have a great deal more definite confidence and there is nothing, as the old saying says, that succeeds like success. People when they believe genuinely that things are improving will contribute quite substantially towards greater improvement. There is an opportunity there now that should not be missed.

Energy costs and inflation are at acceptable levels. We must have money available at a price that can be managed. Managed is the word because up to now I do not think that people in business or farming were in a position to manage the level of repayments they had to make. This has been the straw that broke the camel's back, indeed more than a straw on many occasions. It has been the reason a lot of business, big or small, have found themselves in extreme difficulty.

There is at present a very strong indicator of an upturn in the world economy. This will directly affect the Irish economy. It is only appropriate that we have the Finance Bill package of tax incentives aimed at encouraging savers and investors to move their funds into productive investment. This is provided for and is welcome.

There is provision for rewarding persons for good management techniques and rewards for risk taking. Profit and wealth play a vital part in the recovery of the economy and play a vital part in the whole ability of the economy to provide the less privileged people with the necessary assistance. Things are changing but there was an attitude that profit and wealth were regarded as being undesirable. There is no way the economy can do the things it has to do without a certain number of people being encouraged, not just allowed, financially and otherwise, to create wealth, to make profits, to provide much needed employment and also to generate wealth in the whole economy which will enable the non-earning areas to do things that otherwise cannot be done. There are productive areas in the economy such as agriculture, the industrial sector and tourism. There are a whole host of areas which are not money earners. It is necessary for the State to ensure that law and order is maintained, to ensure that the needy are looked after, that the children of the nation are taught, that health is taken care of. These areas do not create money. For this reason it is essential that the areas which do create wealth are given the appropriate assistance.

The Minister has clearly entered into the area of profit sharing. It is important to give an opportunity for people working in a business to share in the profit. There are various profit sharing schemes in section 8 of the Bill which give further encouragement in line with provisions made in the 1982 and 1984 Finance Acts. These provisions are highly desirable. In 1982 there was a definite provision made in the Finance Act for employees to receive shares to the value of £1,000 tax free in any one year. In 1984 the value of shares which an employee could receive was increased to £5,000. In 1986 it was further improved. It is to be welcomed that persons working in a company are given a positive inducement to ensure that the company not alone survives but makes a profit. Profit sharing in Ireland is very new. At present there are fewer than 20 profit sharing businesses. This is something that is in the process of development and will progress. Various schemes are in the pipeline. It is early days to forecast where this will go but I am confident that progress will be made in the area of profit sharing.

Section 7 of the Bill contains a positive provision for rewarding persons who apply management techniques and expertise. This is to be welcomed.

In countries like Japan, the United States and other countries profit sharing companies are working quite effectively. There is no reason they cannot work here to the advantage of companies and of the economy.

The Minister and the Government are faced with the major challenge of endeavouring to recover a very sick economy.

Their best efforts are required to ensure that improvements are brought about. There is a consciousness among the Cabinet members of the serious job they have to do to tackle the problem of unemployment. There are measures in the Bill which will help enormously along this route.

Senators spoke earlier today about the two choices available to us. One was greater taxation and the other was curbing expenditure. It is obvious that taxation is at its limit. Nobody could suggest that direct taxation for PAYE workers and others should be increased. That leaves the options fairly narrow in the sense that one is talking about saving on expenditure. The other area from which finance could be usefully derived for productive purposes is that some foreign borrowing could be got on a very managed careful basis, knowing precisely where the money was to be invested. It would not be borrowed for anything except productive use.

Does that mean that it would remunerate the interest on the borrowing?

Yes. I would hope that any suggestions on my part about borrowing money would make a definite and positive return.

Sufficient to cover interest?

Yes. I share the concern of those who are concerned about interest levels. We are only sweeping the dirt under the carpet if we continue to borrow indiscriminately. I am confident we can borrow on a managed basis and make sure that each pound borrowed finds its way into the productive system directly. Any further borrowing for current expenditure must be avoided.

The point should be made emphatically that the Government are managing quite well with regard to existing deficits. The real problem is where there is an accumulation of deficits over a number of years. Who caused what is not very relevant at this point. Unfortunately, we have a serious build-up of deficits leading to an impossible situation vis-à-vis interest obligations on those large sums of money. The point is worthy of note that the Government are succeeding very well in coping with the day to day situation. Unfortunately, we have this massive build up and this is causing major and serious concern. We must be more imaginative in the area of new products. There is a great deal of potential for diversification into new products in the various spheres — industrial, agricultural and so on. We must make sure that we produce precisely what the market place wants. In other words, whether the consumer is in London, Bonn, Limerick, or Dublin we must ensure that that consumer gets exactly what he or she is looking for whether it is a food product or any other product.

This applies in particular in the agricultural sector where for a long time we have tended to produce very carelessly, without having an eye on the market place. I have stated in this House before and I do not think it can be over emphasised that we have to produce for the market requirement, not just to produce and then go out and try to sell that product. That applies not only in the agricultural and food sectors but in other sectors also. We tend to produce something and then engage ourselves in massive efforts at selling that product and, in many instances, without great success.

We are not paying sufficient attention to producing what is required. In other words, we do not have what I would see as sufficient research into what the market place is looking for. I know there has been a fair amount of improvement in these areas in recent times but, nevertheless, we have a long way to go. There are no easy options. As of now we have our financial position under control, but it is going to be a further hard slog on the part of the Government and also on the part of individuals within the State. There is no way that this Government or any Government can bring out economy back on the rails without a total awareness among all the people of the State and a level of co-operation from them.

Society appreciates that there is a major problem. Society is getting more and more responsible in this regard and is prepared to accept certain unpalatable decisions in the interest of solving problems for the future. It was remarked earlier that, whatever the situation is now, if we do not tackle it positively it will be untenable for our children and those who come after us. We have a moral responsibility as well as other responsibilities to make sure that does not happen. We have an obligation to keep this State in good condition for the future generations who will take over its operations.

Many areas are crying out for expenditure. For instance, roads were referred to by Senator Smith. If we were to bring our road network up to the present EC standards we would require something like £3,000 million to do so. We are now spending £140 million in that direction. That is the sort of leeway we have to make up if we are to do what needs to be done.

Private enterprise must be encouraged to the maximum. I am certain private enterprise has great possibilities for improvements in the economy. Private enterprise which embraces a great many of our small industrial projects can do wonders. We must make certain that we give every encouragement possible to persons who have the development of small enterprises as a priority. We must look upon Europe as one large market now open to us. It is a very large market. There is no reason why we should be trekking around the world with our wares while there is a very lucrative market right on our doorstep in the United Kingdom and the rest of Europe as part of the European Economic Community.

We tend to undersell ourselves in this regard. We underestimate our ability to produce for a sophisticated market. We have a very sophisticated market ready to take our products, but we tend to shy away from it and head for places like Tripoli and perhaps less dangerous places. We have taken the easy option and gone to places that up to now were more accessible than other places. We must bear in mind that if we enter into the scene of marketing in France, Germany, Holland, Denmark and so on we are into a very competitive area. We must make certain that we measure up. We must be in there with something those people require and will buy from us. That is extremely important. I have already expressed my views on increases in taxation and expenditure. I would like to think that most people share my views.

The development of our natural resources is something we have not really delved into to the degree that we ought to. We have not gone out there and developed our agriculture to its full capacity. We have not developed many of our industrial areas; nor have we developed our forestry area which has a vast potential. We have not developed our whole tourist potential, which is enormous. While we are limited in our natural resources we are endowed with a number of natural resources which, if properly developed, could do a great deal for us. I have already referred to unemployment, whether the figure is 200,000 or 250,000. I am not sure that anybody has the actual figure for unemployed persons. We may have a figure for those persons who draw social welfare or social assistance but that does not necessarily mean that those persons are unemployed. We have a great number of people who are fairly gainfully employed and yet they are drawing social welfare. Therefore, they appear on a register of unemployed persons. They are not, in the strict sense of the word, unemployed. There is at the same time a substantial number of persons who are genuinely unemployed and, in fact, the number is too great for anybody to feel complacent about it. We have had a fairly substantial increase in our population in recent years. We must take that into account when we talk about the level of unemployment.

On the unemployment side reference has been made to the black economy and so on. Estimates would suggest — they are not my estimates — that there could be as many as 100,000 persons drawing social welfare who are employed in some shape or form in the black economy. That is in the area of working persons. We have also a number of persons in the business sector who are benefitting from the black economy as well. We have unfortunately a situation there that is very hard to tackle and it is very hard for the Minister for Finance and his colleagues in the Cabinet to say precisely the level of unemployment we have to tackle because it is a moving target that moves pretty rapidly and that does not make it any more easy to solve. Various major changes are included here such as VAT on food. That is something that is to be lauded. It will do a lot of good for our tourist trade and I believe the Minister is to be complimented on his initiative in that direction.

Reference was made also to the question of the amnesty that is being allowed for moneys that have not been laundered through the ordinary process. I would suggest that a further look be taken at this particular area and that the amnesty should extend beyond the present measures proposed whereby somebody comes forward and pays the appropriate tax and is not penalised for not having paid it up to now. I would go further and have a certain carrot there for people to declare their position and in that way we would hopefully bring a lot of much needed money into the system. I appreciate that is a difficult area. Unless we offer a carrot as well as giving people a clearance for doing wrong in the past we will not bring a substantial amount of money into the system. It is very important that we get moneys into the system whether they are presently within the country, invested in various inappropriate ways or invested outside the country. I believe there is a lot of potential there.

The area of personal taxation is something that has been referred to. We all share the view that it has been exploited to its fullest.

It is no harm to acknowledge a few points that have been made by the Confederation of Irish Industry with regard to this 1986 Finance Bill. This is a CII newsletter, volume 44, No. 25, dated 29 April 1986. With regard to section 10 of the Finance Act it states:

The principle incorporated in the proposed tax treatment of certain dividends is welcomed. The provision means that the maximum amount of tax payable by a shareholder on dividends for manufacturing and other companies which carry a tax credit of 1/18th will effectively be 25% on the first IR£13,000 per annum of these dividends.

There is a problem, however, in respect of a 10% tax from a manufacturing company who incur a loss or who have capital allowances available and consequently do not have a net liability. In these circumstances, the manufacturing company cannot claim the 10% tax rate. It is also necessary to cover the position of a holding company which pays dividends to shareholders out of a primary fund consisting of dividends received from, e.g. the manufacturing subsidiary. It would seem unreasonable that a shareholder receiving certain dividends out of manufacturing profits should be denied the relief provided in this Section merely because of either of the factors referred to above.

The confederation go on to make certain proposals in this regard. The main point I want to make is that the Confederation of Irish Industry do, in fact, welcome that. Also with regard to sections 13 to 26 the Confederation of Irish Industry say:

The principle of attempting to generate investment in research and development is a very welcome one. There are, however, two main problems:

(a) The entire approach is too complex, and

(b) The restriction of a sponsoring company's stake to 20% will mean that very few companies, if any, will be interested in pursuing this mechanism.

With regard to section 53 the CII state: The reduction in the rate of capital gains tax for long term capital gains as indicated in the Budget is welcome, and also particularly welcome is the new rate of 30% for gains in respect of assets which have been retained for six years.

On section 104 they state:

The provisions relating to the use of electronic data processing are welcomed.

There is much other favourable mention not alone in the CII newsletter of that date but in many publications that have been issued. I believe the business sector in our economy has been extremely pleased with the budget and in particular with the Finance Bill which followed the budget. It is encouraging that those favourable comments have been put forward by these different bodies.

One could go on and on, but I do not intend to do so because there are other persons who are anxious to speak on this vital matter. One matter I inadvertently omitted is the DIRT tax. Reference was made to it earlier in the context that it might be the cause of persons keeping money at home now rather than putting it in the bank or the building society. I believe that is not so. There is, of course, tax paid at the bank and the building society on the same level. Frankly, I believe that the exemptions made by the Minister in the Finance Bill, 1986, take due account of hardship cases and indeed deserving causes and I believe that there is no reason for anybody to quibble with that tax. Finally, I want to say again that the Minister should be complimented on his foresight and vision in introducing a Finance Bill along these lines and topping it with the budget of 1986. It does to my mind, give a lot of hope and promise for the time to come.

I listened attentively to the Limerick Senator and I would agree with some of the sentiments he expressed in regard to this Finance Bill, especially in regard to the diversification that is producing a product that is marketable. First however, I would like to welcome the Minister here. He was appointed since the budget. I know that he was Minister for Finance previously. I do not know if he will be the "longest" Minister for Finance this time. He realises himself that he is on a tight rope and I suppose he hopes to survive.

He will be back.

I doubt it: That remains to be seen. It was the hope of everybody that this Finance Bill would have addressed itself to the question of reforming the taxation system; but, unfortunately, it dispels the hope for the future that it would put a halt to rising unemployment. That is not so. I can see nothing in this Bill to remedy these ills which are affecting our economy and our country.

This is a big Bill, and it is made up of restrictions and impositions; certain modifications are introduced, certain concessions made. They are tied up in so much red tape and so many constraints that the concessions are absolutely vitiated. It is a big Finance Bill of some 108 sections.

It is interesting to note that the only reference in the Minister's budget statement to agriculture, our greatest single industry, is a reference to farm tax. To refer to farm tax in the context of the present state of the agriculture industry is nothing short of an insult. All agricultural enterprises are losing money in terms of income, Being a farmer myself, I have always been interested in the development of agriculture, not only from the point of view of the farmers but because of its potential to generate economic activity nationally. If the agricultural industry is expanding it will reflect itself throughout the economy.

While on agriculture, I want to say a few words about young farmers and their exemption from tax. Over the past number of years there was exemption from tax for a young farmer who inherited a farm before reaching the age of 35 years provided he had completed at least a 100-hour agricultural course. In this Finance Bill this has been changed: the age has been reduced from 35 to 30 years and the number of hours to be completed by the young farmer has been increased from 100 to 150. This is terribly unfair, particularly since the subvention to ACOT has been reduced and there is no way for ACOT to provide additional hours for young farmers qualifying for this measure. He might have 20 hours, if the farmers will not avail of this service now as a result of this new ACOT Bill under which farmers will have to pay for that service. Everyone in this House recognises that the tax and duty exemption is a very advanced social measure which encouraged young people to acquire holdings and ensured that elderly people gave up their holdings and allowed younger people to take them over.

It is indeed very sad that the only reference to agriculture was farm taxation when it should be recognised that the farmers of Ireland never had it so hard as at present. Because of last year's bad harvest and the continuing bad spring, cattle are dying throughout the country, especially in my own County Limerick where there is worse land than the land in Senator Hourigan's area of east Limerick or where there is worse land than in County Meath, the Minister's county and smaller holdings.

There is bad land in Meath, too.

There is more of it, I am sure, in Limerick.

I do not expect any sympathy.

We must sympathise with the farmers who are suffering as a result of the bad harvest last year and the continuing bad spring. It is strange, but I believe that there is snow on the Galtee mountains even today. I heard one time that Old Moore, when he was advising his son before he died, told him to predict everything but not to predict snow in June. He could nearly predict it for this year.

Just for the record, I saw snow in June in County Meath.

To be serious, I know that there were schemes to alleviate hardships. The amount of money under the free voucher scheme to eliminate the hardship in this respect was very inadequate. Some farmers who applied for aid under that scheme did not receive any help. If the farm development services people decided that the applicant had 75 per cent of his feed requirement, the question of the quality of the feed this year was not taken into account in assessing these applications. Actually, I was told yesterday by the manager of a co-op that a woman who badly needed feed stated in her application the amount of feed she had but she did not state the quality and because she stated the quantity she was turned down for aid. Other people, when they were asked to say how many cattle they owned, were advised to put down the correct number because their last herd list would be on the computer and the officials would know anyway; they would not be able to get away with it. Strangely, people who did put down the wrong number and gave false information were never inspected and got the grants. This was a terrible anomaly and bad administration of this scheme. It was unfair.

That is feed vouchers?

I will ask the Department of Agriculture to investigate what the Senator said.

I did not qualify for the feed vouchers. I had quantity enough, whatever about the quality. I was told the people who did put down the correct information, although they deserved more of it than the people who gave incorrect information, failed to get it, whereas the people who gave the incorrect answers got it.

I would agree with Senator Kiely.

That is a serious matter. I will have that investigated.

Thank you; I am pleased with that. There was also dissatisfaction that it was only the difference between the intervention price and the actual price of a ton of barley that they got. It was valued at £20. That is what I was told. It was inadequate. I was inclined to blame the Government. I am delighted that the Minister for Finance is looking into the matter because of the number of cattle dying throughout the country and especially in the west of Ireland, including my own country.

Motorists are hard-hit by this Finance Bill, especially motorists by necessity. Not only have they to deal with the highest rate of purchase tax in Europe on a new car but they are now faced with an additional road tax and a further increase in the price of petrol, as announced in the budget. It is rather strange to hear the Minister express confidence in the beneficial effects of the decline in worldwide prices on our economy while at the same time he is fighting off these beneficial effects by the savage increases announced in the budget. A car is a necessity in this day and age. There had already been a drop in petrol sales in recent years. I deplore the increase in taxation because it is very expensive to keep a car on the road. The Government cannot justify the heavy taxation on petrol and so on. The reason for these taxes no longer exist.

The Government cannot also justify keeping a tax on ESB. It is an insult to domestic consumers to ask them to wait until next September for a reduction in ESB prices when they are paying every two months. When oil was on the up they had to pay the increase. All sorts of excuses were used to put up ESB bills; now that the cost have come down the Government are trying to tell domestic consumers to wait to get the benefit.

It is also an insult to the industrial, commercial and business people to say that they can only get a reduction of 4 per cent to 6 per cent. It is about time the Minister for Energy took the whole matter in hand with a view to a reduction in energy costs realising that we have to become competitive. The private sector and others who are trying to export goods need to be competitive in the market place. They are operating at a disadvantage in relation to inflation and, with all the taxation there is little they can do about competitiveness.

The Minister should have made more finance available for road repairs. The country roads are in a very bad condition, the worst in living memory. I make a special case for an increase in allocations for roads in rural areas. If this is not done soon there will be no roads at all. I was looking at the road development plan for the eighties, which includes my own constituency of Croom, County Limerick. There is a bottleneck situation in Croom. I noticed that in the projected scheme the Croom by-pass was to be done in the 1985-86 plan, but there is no progress in that respect. That is an area where there could be more employment given and perhaps ease the black economy. If we could get more people working on the construction of by-passes and roadways it would help employment. Employment is the greatest problem in Ireland and this Finance Bill has done nothing to tackle it by creating jobs.

In the past three years the number of unemployed has escalated from 170,000 in 1982 to the present level of 240,000 people, notwithstanding the fact that approximately 30,000 young, talented well-educated people have to emigrate each year. The Minister mentioned that the figures for unemployment in the past month were encouraging. Nevertheless, when one takes into account the number of enumerators employed in taking up the census, these figures might not be real. I read in my local paper that on the Maigue drainge scheme over 100 people are to be made redundant. I made reference to this on the Adjournment of the House recently and made a plea for some tributaries and extra channels to be included. Senator Hourigan also asked that the Maigue would be continued until the Mulcaire would be done. It is disappointing to find out that some of the channels that I was requesting to be included in this scheme have not been included and that there is not much hope of the Mulcaire being done. This is going to put more people on the live register. The Government forecast in Building on Reality that unemployment would be 226,500 at the end of the plan. When Building on Reality had been in existence only one month the employment figures were well off target by 13,000 and have continued to be very much off target. There is no plan for reducing unemployment. In recent years the number of unemployed has spiralled. Closures and impending closures continue unabated. The incentive to work has been diminshed to some extent by the impact of high taxation, direct and indirect.

I would like to refer to the 35 per cent deposit interest retention tax which was introduced in the budget which is included in this Finance Bill and which applies to all interest paid on deposits in banks and other financial institutions. This retention tax is commonly known throughout the country as the DIRT tax; it definitely has a dirty name. The Minister gave the impression that it was a tax on banks and financial institutions, but that is not the case; it is a direct tax at source on the general public all of whom have already paid tax on their investments. The Minister for Finance indicated that income tax reductions were needed immediately and that different measures like this new tax must be contemplated to achieve the overriding priority of reducing income tax. One cannot accept that income tax reductions can be achieved only through the imposition of a 35 per cent retention tax, especially where income is not liable for tax.

I cannot accept this imposition on the weaker section of the community, especially old age pensioners and widows. The Minister for Finance indicated he is increasing the exemption limits while at the same time imposing tax at source on the income of those exempt. Those under 65, whether widows, single or married, are totally dependent on interest from their deposits. Under the Minister's proposal tax is to be deducted at source from that income. Young people who do not have a taxable income will be subject to the same treatment. This tax offends against every principle of justice. The concession for people over 65 will allow them to claim a refund of tax deducted if they are not liable for income tax. Repayments will be made to them by the Revenue Commissioners on receipt of applications by the end of each year. Some old people are very slow to make applications and some of them might be so old that they would not bother; and, since processing of applications is a slow business, they may even have died before they get it. These people over 65 should not have to apply for a refund; it should not apply in the first instance. What is the position of the people who exist on the interest earned from investment? Will they have to wait months for a refund? Most old people have not the experience of completing tax forms and many of them are afraid to make a claim for the refund.

The new retention tax is a cause of serious concern to those in advanced years. It is also a cause of serious concern to charitable and voluntary organisations. I am a member of a voluntary organisation who are doing great work for the community. I refer to the GAA. They are campaigning to ensure that voluntary organisations such as this would be excluded from the deposit retention tax. The Gaelic Athletic Association are a national, cultural and community organisation. They are voluntary in nature and have no interest in profit for profit's sake, nor in the accumulation of financial wealth. The association's income from all levels is used to promote the national games of hurling, Gaelic football and handball and to develop club grounds and stadiums, social amenities for members and for the community in general; and to meet the normal costs of administration and staging of games. This income falls short of what is required. The GAA clubs provide playing pitches and dressing rooms and erect social centres with the money they receive through voluntary effort. At times they have to put this money on deposit and the interest from this helps them to continue their work.

The GAA take on the responsibility of creating an accident fund which is solely dependent on internal association funding and earning on deposit interest. As personal accident insurance will become prohibitive, this now is the association's sole means of giving reasonable cover for injuries to their many thousands of players. The association have been gravely concerned about the escalating demands being made on them by way of public liability. They are endeavouring to create a fund internally which will meet claims of up to £1 million. This fund will be provided by subscriptions from the already hard-pressed clubs and from the provincial and central councils; it will be widened so that the association will be in a position to maximise their fund if they are to meet their responsibilities. It was the association's intention to put this fund on deposit to earn money but this retention tax is a big blow to their plans.

The GAA are anxious to meet the Minister in this connection; I believe efforts were made today to do so. I see the Minister has gone. I hope he is meeting the GAA.

I should be grateful if the Minister of State whose brother is, I think, chairman of a divisional board in west Cork, could at this late stage, see to it that something is done if possible to eliminate this DIRT tax on voluntary organisations and the GAA.

The GAA are involved in vital work; they have their own insurance schemes for the protection of injured players; they have their own public liability to ensure that patrons generally would be covered. They are doing all this through their own resources. The deposit interest retention tax is an irritant and liability for the GAA in promoting games. I would be grateful if the Minister of State would convey to the Minister the concern of the many voluntary organisation in regard to the DIRT. These organisations are involved in providing amenities for our people, including games and especially now that there so many unemployed, this should be taken into consideration.

The Government are trying to "con" the people into believing that some wonderful benefits will accrue from the child benefit scheme. The people were told only half the story. This scheme will mean that for a person with three children, the increase of £36 per year in respect of each child will amount to £108. However, what the people have not been told is that if the income-earner of the family is paying tax at the rate of 35 per cent the child benefit scheme will mean an increase of £3 per year for a family of three children or £1 per child. In other words, the increase will amount to 2p per week per child. This is calculated on the basis of 35 multiplied by three and taking into account the abolition of the £100 child allowance in income tax. This is the level of increase being offered at a time when the prices of such items as milk, butter, bread, and electricity and telephone charges are rising.

The increases to social welfare recipients and to old-age pensioners were inadequate. I recently came across an anomaly where a small farmer was prepared to sign over his farm to his son if he thought he would qualify for the old age pension; his wife was earning, and on investigation, I was informed that the only deduction allowed from her earning was the PRSI; there is no allowance for PAYE or for travelling expenses if the spouse would qualify for a pension. This is something that should be looked into as it is unfair. This man if he knew he would qualify for the old age pension — it is doubtful because of the restriction on the deductions allowed — would willingly sign over his farm to a younger man.

Every year in the House I mentioned VAT on hurleys. I have already spoken on the serious effect the deposit interest retention tax will have on voluntary organisations, expecially the GAA, who have deposits on short term in the banks. VAT on hurleys is a penal imposition on the organisation responsible for promoting this national game. The GAA are doing great work in this respect and what would accrue to the Exchequer from VAT on hurleys would be very little, but it would be of immense benefit to the promotion of hurleys and hurling. Hurling is our national game; hurleys cost a lot and they are easily broken. I am not calling for the removal of VAT from footballs or any other articles involved in promoting GAA games but from hurleys. I am involved in a club and already this year they have spent £700 on hurleys. This gives an idea of what it costs to buy hurleys. Money has to be raised through raffles, church gate collections, tournaments and so on, for this purpose. This is something that the Government could afford to remove and thereby show some goodwill towards the GAA who are doing great work in promoting our national game. The GAA are an organisation who should be appreciated for all the work they have done down through the years.

Debate adjourned.
Sitting suspended at 5.30 p.m. and resumed at 6.30 p.m.
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