Recommendation No. 1 has been ruled out of order.
Finance Bill, 1992 [ Certified Money Bill ]: Committee Stage.
Sections 1 to 5, inclusive, agreed to.
SECTION 6.
Is that the recommendation in the names of Senator Upton and colleagues?
Acting Chairman
Yes.
Recommendation No. 1 not moved.
Section 6 agreed to.
Section 7 agreed to.
SECTION 8.
I move recommendation No. 2:
In page 22, between lines 23 and 24, to insert the following:
"(2) This section shall not apply to persons whose employment requires the fulltime use of a car supplied by their employers.".
I recognise that the Minister dealt with much of the contents of recommendation No. 2 in his reply on Second Stage, but he will be aware of the enormous disquiet among those who need to use their cars for full-time employment and, indeed, whose employment specifically requires the full-time use of a car supplied to them by their employers. I ask the Minister to accept this recommendation as it puts on the record specifically the assurances he gave verbally in his reply on Second Stage. It would remove the anxiety that is being caused by this section and the changes in the benefit-in-kind requirements generally. I await the Minister's response.
Senator Doyle's concern relates to high mileage drivers and how we would phase the tax for them. It will be on an increasing sliding scale of 5 per cent to 25 per cent over the next five year period. It is fair and also gives them an opportunity to adjust to the new position. I accept that high mileage drivers are unlikely to have the same benefit from the use of the car. They have pointed out to me that the last thing they want to do on a Friday night when they return from work is to use the car for personal purposes over the weekend.
Instead of the rate being 25 per cent from day one, it will be 5 per cent for the first year. This addresses the problem from the point of view of company representatives. We would like to make this provision tighter but we looked at definitions which the company representatives submitted — they had their own advisers — and at the end of the day they accepted that there was no system where we could ring-fence 3,800 drivers out of a total of 94,500 drivers. If we were to have any other definition, everyone would return forms saying that they too were high mileage drivers and claim that they were driving to the airport when they were driving home. This section addresses the company representatives and the high mileage drivers.
Would the Minister not agree that there are specific types of employment and job descriptions which would make it easy to distinguish people who use their car on a full-time basis for their employment — for example, sales representatives who are on the road from 9 a.m. to 5 p.m. from Monday to Friday on a constant basis and for whom the car is a tool of their trade? I am not talking about people who use the car for a minimal amount of time in relation to their job, but people for whom the car is almost the sole tool of their trade. It would be very easy to distinguish, by their job description, who these people are and I ask that they be exempt completely from this section rather than applying the sliding scale that the Minister has suggested.
I looked at the section and I want to bring it back to basics. I am thinking of individuals who have to drive 20 or 30 miles to their job every day. They must have a car to get to their place of employment but they get no perks, good, bad or indifferent, but yet they must use their cars every day, five days a week. They look at people who are using a car as a tool of their trade and say that up to now they have been doing particularly well. If we examine what the Minister is doing here, we are talking about any sales person who drives in excess of 15,000 miles a year. For a sales person, that is not a lot of mileage in a year; any politician knows we travel in excess of 30,000 miles a year. The cost of this measure to the individual this year is £2 per week, not a major imposition. In the circumstances and given the changes that the Minister has brought in, it is a fair and reasonable charge. I would not quibble with the changes that the Minister has brought in the terms of the benefits-in-kind.
Recommendation put and declared lost.
Section 8 agreed to.
Sections 9 to 11, inclusive, agreed to.
SECTION 12.
Question proposed: "That section 12 stand part of the Bill."
I object to the proposals in this section and ask the Minister to put on record how he can justify the changes.
This section terminates the concessionary tax treatment available in respect of share options granted under the approved share options scheme on or after 29 January last. The share options granted before the date are not affected by the section.
Share options are rights to acquire shares in a company and are often given to directors and favoured employees of a company as part of a remunerations package. Section 10 of the Second Schedule to the Finance Act, 1986 provided a concessionary tax regime for share options granted under approved share option schemes which provided broadly that a participant in an approved scheme would not suffer any income tax charge or any gain arising from the grant or exercise of a share option. Instead a capital gains charge arose on the total, that is, the difference between the indexed actual cost of acquiring the shares and the sale proceeds, if any, arising from the shares if and when they are sold. In the case of manufacturing companies in Shannon there was a significant concession in that the period of ownership of the shares which determines the rate of capital gains tax began at the date in which the option to buy the shares was granted and not on the date on which the option was exercised and the shares acquired as in the normal rule of determining the rate of capital gains tax.
The termination of the concessionary tax treatment for the approved share options scheme is in line with the commitment given in the review of the Programme for Government for a radical overhaul of the tax code involving a curtailment, on a phased basis of the range of exemptions, shelters and concessionary tax rates. The Senator will agree that the favourable treatment of share options under the approved share options scheme was generous. It was difficult to justify that to ordinary taxpayers who generally do not benefit from them in any way. The abolition of the concessionary tax treatment is in line with the recommendations of the Commission of Taxation. What will happen is that share options granted on or after 29 January, budget day, will be subject to the general tax treatment of options and the recipient will be charged income tax when the option is exercised. As I said, that is where shares are acquired under the option on the market value of the shares at the time they are acquired, less any acquisitions costs which includes the cost of the option. When the shares are eventually sold the capital gains tax will be charged on the difference, if any, between the indexed market value of the shares on the date of acquisition. For the information of the Senator, and the House, the figure for this year is estimated at £1.2 million for this year and at £1.4 million in the full year.
Question put and declared carried.
Sections 13 and 14 agreed to.
SECTION 15.
Question proposed: "That section 15 stand part of the Bill."
There was a good deal of public debate about this provision when the Bill was published. There is still some confusion and as the Bill is now going through the final stages in the Seanad this evening will the Minister deal with disability benefits and taxation?
The Minister would prefer if the Senator ignored this section.
The section is an enabling provision to cater for the announcement, as Senator Honan said, that certain short term social welfare benefits are to be brought in to charge to income tax. The benefits in question are disability benefit, occupational injuries benefit, unemployment benefit and pay-related benefit. When brought into charge to tax the benefits will be regarded as emoluments for the purpose of and taxed under the PAYE system. As I indicated in my Second Stage speech, there are oprational difficulties involved in taxing the benefits, for example, the potential interaction between employers, the Department of Social Welfare, the Revenue Commissioners and the large number of benefit claimants. These difficulties are at present being examined with a view to devising a system to keep the interaction to a minimum and so as to reduce the administrative burden on all concerned, including the benefit recipients. Until these difficulties are resolved, I am not in a position to announce a commencement date for taxation but the section provides power to bring in taxation by order on a phased basis if considered appropriate. A draft of any such order would have to be approved by Dáil Éireann before it can be made. I indicated this morning the lines on which the consideration is proceeding in my Department.
As regards the operation arrangements for implementing this taxation, discussions are ongoing with the Department of Social Welfare and the Revenue Commissioners. I am hopeful that a limited form of taxation of disability benefit for those in employment may be introduced later this year and while it is the Government's intention that taxation of unemployment benefit will begin in 1993, I would also like to emphasise to the Seanad that the taxation of these benefits is basically a matter of equity. There is no reason why the benefits, which are substitutions for taxable employment income, should not also be chargeable to tax. Non-taxation gives rise to anomalies in the tax treatment of different individuals with the same level of income and, by contrast, my intention is to try to ensure that, as far as is possible, income, however received, is regarded as income for tax purposes.
It has also been suggested on a number of occasions that non-taxability of the payments gives rise to absenteeism and is a disincentive to work. That is continually raised by the Federation of Irish Employers whenever they undertake any studies or whenever there is research done by academics on the question of absenteeism. This would not arise if the relevant social welfare benefits were taken into account for tax purposes which is what the section proposes.
We are all aware that what happened over a long number of years was that in the last number of weeks in a tax year, people on certain rates of pay with certain benefits under PRSI found that they would be in a better position if they were not working than if they were working. This provision will end that. I would emphasise that the extent — to which taxation will arise will essentially depend on the amount of other income the individual has in the tax year. It is not a question of a person paying tax on disability benefit. If no other income is involved, then they will not pay tax. That is the key point. There is no taxation on disability benefit in its own right. It is only when it is joined to some other income.
It is a fair system but the difficulty is to get the systems and the same computers to work together. They were formulated and developed in different times. As soon as that is sorted out I will be able to give the Oireachtas an idea of how this system can work.
Question put and agreed to.
Section 16 agreed to.
SECTION 17.
Acting Chairman
Recommendations Nos. 3 to 11 form a composite proposal and may be discussed together.
I move recommendation No. 3:
In page 27, line 10, to delete "£2,000" and substitute "£4,000".
I commend the Minister on the provisions in section 16 that we have just passed in relation to foreign adoptions, the capital gains tax Acts and the general tax Acts. It is a very positive step and is to be welcomed. Indeed, many to whom it will apply probably do not realise that this provision has been incorporated in the Bill and it deserves to be recognised.
Regarding section 17, and the list of recommendations, I will not pretend that I am overly optimistic that the Minister will take all of them on board. I await the Minister's explanation of what he is trying to achieve in this section.
Approved profit sharing schemes have, over the years, been a tremendous boon to enterprise and encouraged investment in industries. I fail to understand what the Minister is trying to achieve by reducing the ceiling. I ask him to delete the £2,000 ceiling. It was £5,000 and the Minister proposes to reduce it to £2,000. I would like him to substitute a ceiling of £4,000. Ideally, I would like him to leave the ceiling at £5,000; I would ask him to justify why the figure of £4,000 should not be substituted for £2,000?
I also ask the Minister to allow for a roll-over, in other words, if an individual did not make use of the full £2,000 he is allowed in relation to the profit-sharing scheme in any one year that he would, in the subsequent year or in any three years, be allowed the benefit of a £6,000 ceiling. The explanatory memorandum states that the section allows for shares in excess of a value of £2,000 to be appropriated to an individual in the years 1992-93 if in the year 1991-92 no shares, or shares to a value of less than £2,000, were appropriated to him. I presume where one reads "him" one could read "her" also. Could the Minister elaborate on what he means by this? He is allowing a roll-over from one year to another but could he build this in as part of the scheme where, if in any particular year, an individual was not in a position to avail of a profit-sharing scheme to the limit of £2,000 in the subsequent year he could have a maximum of £4,000 or in any three years, £6,000, or a similar type scheme that was not totally restricted on an annual basis?
People have good and bad years in business. Some years there may be a little surplus after the Revenue Commissioners have relieved us of at least 25 per cent if not 48 per cent of what we have earned. Having paid these taxes, if people have money left over in one year but not in the subsequent year, they should be allowed to roll-over their entitlements under this section and I ask the Minister to strongly consider this.
I understand that there was quite a lot of concern about the issue Senator Doyle mentioned. I thank the Minister for amending this section in the Dáil. The ceiling is now £2,000 but I notice that in the years following 1992-93 additional allocations will be available. Senator O'Keeffe made a number of recommendations to which the Minister listened and he amended this section. I do not have any trouble with it.
Why change it at all?
I thank Senator Honan for thanking me for changing the original decision. In the examination of the curtailment of reliefs and exemptions, and particularly on the profit-sharing share options and the purchase of shares in companies, the Government decided these were shelters that were distorting the system. They were all abolished. Following on that, a strong lobby across the board — the Federation of Irish Employers, the Construction Industry Federation, the Congress of Trade Unions and a number of other bodies, including the profit-sharing association who originally put this proposal to the Government and which was implemented by Deputy John Bruton — argued that for industrial relations reasons and in order to get additional productivity and activity in companies, it was a scheme worthy of some merit and they more or less accepted my arguments for the abolition of the other schemes; as the Commission on Taxation reported some years ago, some of these abolitions hurt some people but benefit the greater number of people.
On that basis I said I would take another look at the scheme. We spoke to a number of firms and received representations from many more. My officials met with several firms that used this scheme. On balance, the scheme was used mainly by multinationals and by companies for their more senior directors, but only a small number of companies used it for their ordinary employees. I was involved with the Basil Chubb committee who were working with the Federation of Irish Employers and the Congress of Trade Unions trying to implement some of these schemes in order to help worker participation in industry. It did not meet with great success and when we were trying to promote it we did not get much support from the trade unions. However, people said it was a scheme that should be continued.
We then looked at the use of the scheme by companies who appropriated shares to the value of £5,000. From the records of the Revenue Commissioners the profit-sharing association, it seemed that well in excess of 50 per cent of companies had been appropriating shares to the value of £1,000 a year. The profit-sharing association reckoned that — they did not have factual figures — over 90 per cent had been using it to a value of £1,400 to £1,500. At a meeting with the profit-sharing association it was suggested that rather than letting the scheme be used by people who were displaced from other share option schemes and the purchase of shares in companies, we should keep it in its present form, perhaps extend it to more companies and use the £2,000 limit which effectively brought in all the known companies that the profit-sharing association were aware of. Guinness were the exception because they felt they would be able to live with some cost to themselves and they agreed with the £2,000 ceiling.
In reply to Senator Doyle, the £2,000 limit keeps the principle of the scheme and keeps it for the great majority of people who would be using it. There is no disimprovement in the scheme for those who have been using it. If we were to change it to £5,000 it would not benefit those who were using it because none of them exceeded £2,000, but it would benefit those who were using other schemes, such as higher executives on.
Something that was highlighted by other companies is that before this scheme was introduced a number of companies gave Christmas bonuses. The Christmas bonus was a cost to the employer, but by giving it in shares it was a lesser cost. They were using this not as a new scheme, but as a substitute for the old bonus scheme. I am not arguing that but it is a point firms will use for their own purposes.
The £2,000 ceiling from 5 April last year was a once-off because I abolished this scheme on 29 January. Therefore, companies which had not paid out in the last six year were at a disadvantage. By bringing back the scheme I had broken the cycle. The ceiling is up to £2,000 every year, and you cannot withdraw your money or sell your shares at the market value for five years. It would have been unfair to somebody who was carefully building up their shares for five years. If a company want to give £2,000 in shares for the last tax year. I am allowing them to do so. One of the advantages of the proposal was that it generated debate. Up to then the vast majority of Irish workers knew nothing about it. Perhaps companies who did not avail of it before will do so now. If there is an argument to be made in the future that it is being used extensively, up to the limit of £2,000, some future Government may decide to extend it. We have reinstated the scheme at a rate which is well in advance of what was the case in the past. That is the reverse of what I said on budget day but it is based on the constructive arguments put forward by people from both sides of industry.
I ask the Minister to reconsider this provision. He has come along way down the road in reconsidering his views as of budget day on this issue. He intended abolishing the scheme but not he has decided to continue it with a limit of £2,000. I ask him to leave it at £4,000, if not the original £5,000. I still fail to understand the arguments for fiddling around with this scheme at all. Even the Minister's explanation argues my line on the issue in that 90 per cent of those using the scheme only use it to a ceiling of £1,400 or £1,500. Why fiddle with it? What difference will it make to the 10 per cent who may use it up to the £5,000 limit? On that basis, it does not need to be fiddled around with particularly since, on the Minister's admission, it has benefits. It increases productivity. It is an incentive for profitability in a company if the workers and middle management avail of this scheme at the end of a profitable year. It helps the whole concept of worker participation and industrial relations. Workers feel they are part of the company, that they own a stake in the company and that it is in their interest to ensure it runs smoothly and profitably and that productivity is maximised.
I cannot, with respect to the Minister and the Commission on Taxation, see any logic in fiddling around with the scheme that is there at the moment. After all, it only involves £5,000 a year at most in each case. Very few have used it up to that limit. Why trouble the 10 per cent of a very small overall number who might want the benefit of the £5,000? I am lost in regard to the Minister's argument. He can be convincing and very well advised on these issues but, on his own admission, since his all out stance against this scheme on budget day he has come down the road and recognises considerable merit in it. Given the unemployment figures, the need to increase the incentive to work generally and productivity in particular for the sake of the country and our GNP, why fiddle with a scheme that may be marginal in terms of its overall effect but is very important to those who use it? I urge the Minister to reconsider what he is proposing in this instance.
I will try again. The point I was trying to make was that by keeping the scheme at a limit of £2,000 it covers those who presently use it, with the exception of a handful. I have abolished the other share option schemes that were there for people who had a greater number of shares, up to 19,000 and over. If we leave a figure of £5,000 those people will all move to the extent of £5,000 and for every individual who does so we forego £2,480 in tax. That is the cost to the ordinary taxpayer.
The Minister would prefer they put it on special deposit accounts at no risk rather than invest in businesses that may be risky.
That is another argument.
It is relevant.
If they invest in savings bonds or saving certificates they help me with the national debt. I have no objection to that.
They are not helping job creation.
I am not too sure that people who are employed and looking for a way to save £2,500 in taxation are doing much for job creation.
This helps.
It helps to give an incentive to the ordinary worker and we are keeping it for that reason. But to follow the Senator's logic, 750,000 PAYE workers would move to this scheme to the extent of £5,000 which, would cost the Exchequer near enough to £2,400 so that we would forego a huge amount in revenue. I accept the argument that it is the only scheme for the small ordinary person. That is why I have maintained it. The Senator's argument would be right if no new person joined the scheme and nobody went over the £1,400 threshold. In that case there would be no cost to the State. We have reinstated the scheme and it can be monitored in the years ahead.
What about roll up over a number of years? Apart from the particular problem of this year and next year, would the Minister consider that?
It is not something I would change now just to see what would happen. If people were at the limit of £2,000, we would have to look to see if it should be extended. At £1,400 or £1,000 there is a cost foregone but some of these people would be on the standard rate and some would be at 48 per cent. Roughly it would be a little under £1,000 so it is reasonable enough. If it were there for everybody it would cause difficulty. We will see the effect of it in the future.
Recommendation put and declared lost.
Recommendations Nos. 4 to 11 not moved.
Section 17 agreed to.
Sections 18 to 26, inclusive, agreed to.
SECTION 27.
I move recommendation No. 12:
In page 41, subsection (1), line 35, after "apron", to insert "or airport hangar".
This section amends section 255 of the Income Tax Act 1967. My recommendation asks the Minister to include airport hangars as well as airport runways and — an airport apron. The amendment is self-explantory and I await the Minister's explanation as to why airport hangars could not have been considered in the original change, which I welcome.
I ask the Minister to seriously consider the points made in the recommendations that have been disallowed and to refer to them when replying. I am not sure if these would have been brought to his attention or if he knows what the disallowed recommendations were about as well as those that were in order. Technically, I understand why it was disallowed. It refers to subsection (2) of this section which, if the amendment was accepted, would read: "(2) subsection (1) shall have effect in relation to capital expenditure incurred on or after the 24th day of April 1991." I ask the Minister to give this serious consideration. I have a feeling that even if the Minister agreed with my argument, because of the role of the Seanad in regard to the Finance Bill, he could not accept my amendment. This is an issue he might seriously look at favourably particularly with an autumn Finance Bill promised.
Galway Aviation Limited have undertaken in the past 12 months a development from a green field site of a new airport in Inverin, County Galway. This is to service Aer Aran's Aran Islands service. While this is a local problem it is a very important one for the west. This initiative was taken by the company without the benefit of any grants, financial assistance or gurantees from any Government Department, Údarás na Gaeltachta or the EC. They did not get assistance from anybody. Despite the fact that this service is non-commercial, it is funded by those who have the best interests of the west at heart, people who are concerned about accessibility to the Aran Islands by the natives and tourists.
The company, spent £750,000 on this airport project of which £500,000 relates to the runways and aprons and was largely expended prior to 24 April 1992, the date referred to in section 27 (2).
The airport development was undertaken with the twin aims of providing for and improving the vital economic and social links between the Aran Islands and the mainland and attracting and providing a service for tourists. We cannot argue with those aims. The airport has been operating since 14 April this year and already the shorter flying time to the islands have been well received by the islanders and others availing of the service.
Galway Aviation Limited is the only developer of a new airport and, as far as can be ascertained, this is the only company that has incurred expenditure which might have qualified under the provision to extend industrial building allowances to airport runways and aprons. There is no other company, as far as can be ascertained, that might qualify for this extension of the definition in this section. It would seem unfortunate, and significantly unfair, that the company should now narrowly fail to qualify for the relief under the new provision.
Tax allowances for the development costs would obviously be of tremendous assistance in funding the very significant financing cost of the project. The logic of extending capital allowances to expenditure in runways and airport aprons applies equally to the expenditure on airport hangars. In fact, it may have been an oversight that airport hangars were not included. I ask the Minister, through my recommendation, to now extend the definition to include airport hangars.
In relation to this development in the west, the ceremonial turning of the first sod took place on 16 June 1991 but the development work actually commenced on 1 May 1991 so that any provision for capital allowance to apply from time prior to that date would enable the company to qualify for an allowance. That is why I would like the Minister to look at this section and if possible insert 1991 instead of 1992. That would enable a most important development that has not been grant-aided or subvented from any other source to become eligible.
This company has demonstrated an interest in the development of the west by a continuous commitment to the Aer Aran air service despite its inability to generate anything approaching a commercial return on the investment. I urge the Minister, given all our concerns for the west and the difficulties there, particularly in regard to transport and communication as we prepare for the Internal Market on 1 January next. We have heard much about cohesion and convergence in the Maastricht Treaty and I ask the Minister to backdate this provision by 12 months and include airport hangars as part of the general definition in the section.
I listened to the case put forward by Senators Doyle and Ó Foighil on this matter. Have I understood correctly that the developers in this case, the aviation company, are Irish people——
They are Irish people now living in the UK. It is a totally non-commercial company making nothing approaching a commercial return. It is a service they provide as expatriates for the Aran Islands. They have not received grant aid or assistance from anybody.
As the debate on this section will be circulated to the people concerned I might as well declare my interest in this, one of the people involved in this project is a personal friend of mine.
I avoided mentioning names but I compliment the individual as does the Minister.
I know the individual concerned. I was to open the airport but could not do so on the day in question as I was dealing with another matter in the House. As I said on the night of the launch in Galway in January it is a tremendous scheme. I know the profit margins——
There are not any.
I was not certain what scheme Senator Ó Foighil was talking about but when Senator Doyle referred to the date of the opening I knew.
Section 27 extends the meaning of industrial building or structure for tax purposes to include runways and airport aprons. This recommendation seeks a similar inclusion for airport hangars. The spelling of the word "hangars" on the official list of recommendations — in case my friend thinks I turned against him — will not fit in with the kind offer of the individual in supplying the airport.
Airport hangars in which a process akin to manufacturing has been carried on already qualifies as an industrial building for tax purposes. An example of this would be hangars used for the repair of aircraft. The rationale for the qualification of such hangars as industrial buildings is that they are broadly analogous to a factory. Airport hangars which are mainly used for storage purposes do not qualify as an industrial building.
Section 27 already provides a significant concession for the air transport industry in allowing runways and airport aprons to qualify as an industrial building or structure for tax purposes. If the concession were to be extended to airport hangars generally, it would undoutedly impose an additional cost on the Exchequer. Moreover, it would be hard to resist claims to have structures such as bus depots also treated as an industrial building or structure which would impose even more expense on the Exchequer.
I take the Senator's point that there may be only one individual in this category and up until recently nobody other than the State would have been involved in developing airports anywhere on the island. There is some concession in the present system. The difficulty would be to change the date. In tax law that is just not done. I would hate to argue the case but a person who undertakes such a development would have been aware of the regulations at the time and undertaken the development on that basis. I am aware that it was never expected to be a profit-making scheme. I know that the homeland of the individuals involved had more to do with it than profits. I am not going to argue with that.
If it is not viable there would be very little use for capital allowances being set off against income in the short term. I do not know about the possibility in the long term of making a substantial profit but time will tell. In the circumstances it would not be possible to go back a year in tax law.
Are we taking the two recommendations?
Recommendation No. 13 is out of order but the Minister is not precluded from saying he agrees with the spirit of the recommendation.
Senator Doyle is seeking retrospection for a tax relief. The Legislature does not seek to tax taxpayers retrospectively, and the converse is that tax reliefs only apply from a current date. That has always been the way. Inevitably there will always be cases where taxpayers find themselves on the wrong side of the commencement date for tax relief. It is unfortunate, but it is the nature of tax legislation. I have sympathy with the case not just because I know the individual but because it is a scheme of some merit.
I cannot accept the recommendation, because it would create a precedent that would inevitably lead to demands for similar favourable treatment from other taxpayers who might miss qualifying for tax relief by a few days or weeks.
I am disappointed with the Minister's response. There are two points I would like to make. I would have thought that given the vigorous support from this side of the House for these two recommendations, particularly the one that is in order and the point that is made in the other, it might have made it easier for the Minister to give on the issue. I understand the sensitivity of the situation given that the developer behind Galway Aviation Limited might be a friend of his. Surely we neutralise any potential political fingerpointing by having an all-party approach in this House in requesting the Minister to accept the two recommendations.
The Senator does, until she goes out the door.
The fact that he is a friend of mine does not necessarily mean his political allegiance is the same as mine.
If there is any sensitivity in that area, I will neutralise it immediately. The Minister has my full support for the case. I would like to see the Minister accept both recommendations.
I do not follow the logic of excluding airport hangars — however one might like to spell that word; it is a direct lift from the letter I received from the company concerned. Maybe the company secretary could take a look at the dictionary——
I am not disputing the Senator's spelling.
If airport aprons and runways come within the extended definition at this stage, surely there is no possibility of constructing any small rural airport without some type of hangar in which to house aircraft in adverse weather, for servicing, etc. It seems illogical to exclude airport hangars from the extended definition. I ask the Minister to look at that again. A rash of hangars will not be built throughout the country if the definition is extended to include hangars. How many airport hangars will be constructed if the Minister agrees to this? We are talking about the exception; there may be one or two cases.
I ask the Minister to reconsider the point I made about retrospection of the commencement date on the grounds that any expenditure incurred last year would be put against profits this year, particularly if it had not been completed. If there was a runover in terms of expenditure on the work being done, surely much of last year's work would be put into this year's calculations for tax liability? The Minister could allow one year only because of last year's expenditure being considered against this year's income, particularly when there was a runover, or he could make a recommendation because Senators cannot propose increases in expenditure. However, if the Minister took the sentiments in my recommendation on board and allowed expenses incurred last year to be incorporated in this year's balancing of the tax composition for the companies involved, we would get over it. If the Minister had the will, and without creating a precedent through retrospection, the one small unprofitable rural airport that might make good use of the provisions in this section need not be excluded. I urge the Minister to look at this again and at the two recommendations.
The atmosphere in the Seanad at this time of the evening is great. Nothing is closer to my heart than airports, runways, aprons and hangars. I have trouble in not supporting Senator Pól Ó Foighil because he is so supportive of us. It is lovely to have an east coast Senator with us; just talk to Cathal Mullan for us and we will be right.
Thankfully I am positioned equidistant between Shannon and Dublin airports.
I see hangars as industrial buildings that is what the Minister is saying to us — but the runways and aprons are different. Knowing the Minister separates his friendship from legislation, no matter what way he votes——
He has no vote; emigrants do not have a vote.
That is for another day. The section is all right, but I would like the Minister to comment on it.
I am glad of the all-party support and the people involved will be pleased to know there is such support in the Seanad for their project.
The Minister should visit us more often.
I would be accused of living here if I visit any more; I have been here every week for months. As regards the Senator's question on expenditure, it depends when it was actually incurred.
April 1992 is too short.
I do not know when it was incurred.
It is possibly ongoing.
I do not know what the position on that is, but it would depend when the expenditure was incurred. A runway is a runway and an apron is an apron, but a hangar is analogous to many other things.
It does not qualify under anything at present.
I accept that. You cannot have something analogous to an airport runway but you could to a hangar. A hangar could be used as a store, garage etc. I cannot see what we can do other than to put it on record that it is a good project.
The Minister could concede it.
Unfortunately on the tax retrospection dates, there is nothing I can do.
It is a good project.
Recommendation put and declared lost.
Recommendation No. 13 not moved.
Question put: "That section 27 stand part of the Bill."
The Committee divided: Tá, 23; Níl, 9.
Tá
- Bennett, Olga.
- Byrne, Hugh.
- Byrne, Sean.
- Conroy, Richard.
- Dardis, John.
- Farrell, Willie.
- Finneran, Michael.
- Fitzgerald, Tom.
- Foley, Denis.
- Haughey, Seán F.
- Honan, Tras.
- Hussey, Thomas.
- Keogh, Helen.
- Kiely, Dan.
- Kiely, Rory.
- McGowan, Paddy.
- Mullooly, Brian.
- O'Brien, Francis.
- Ó Cuív, Éamon.
- O'Donovan, Denis A.
- O'Keeffe, Batt.
- Ryan, Eoin David.
- Wright, G.V.
Níl
- Cosgrave, Liam.
- Doyle, Avril.
- Hourigan, Richard V.
- Howard, Michael.
- McDonald, Charlie.
- McMahon, Larry.
- Manning, Maurice.
- Naughten, Liam.
- Norris, David.
Tellers: Tá, Senators E. Ryan and Fitzgerald; Níl, Senators Cosgrave and McMahon.
Question declared carried.
SECTION 28.
Question proposed: "That section 28 stand part of the Bill."
If you want votes all night you should continue at that rate, a Chathaoirligh. We will vote against every section, if you like.
I did say, "Section 28", and then stopped for 15 seconds.
May I ask the Minister the reason for the different treatment for builders' subcontractors? I understand that they are levied at a different rate from other subcontractors in relation to the subcontractors certificate. Is that correct and, if so, why?
The difference is that on the C.2 certificates they are levied at 35 per cent. That arrangement was made some years ago when concern was expressed about some of the operations in the construction industry. The builders subcontractors are levied at 35 per cent.
Why should there be a difference?
The arrangement was brought in for the protection of the Revenue base, to make sure subcontractors could claim the levy back when they did their accounts. That arrangement was considered preferable to the 27 per cent levy.
I ask the Minister to reconsider this. It is no longer justified, given the importance of production of the tax clearance certificate, the C.2 certificate. Now that everybody is properly registered and accounted for in the system, they should not be singled out for the higher rate but should be levied at the lower rate along with all other subcontractors. I ask the Minister to consider revision. If the change cannot be made in this Bill, could it be introduced in the second Finance Bill, due in the autumn? There is no justification in continuing the system any longer, given the regularisation of the building trade and the importance of the C.2 certificate in trying to get work.
The scheme has existed for more than 20 years. It was introduced in the 1970 Finance Bill. As the Senator can see, this Bill extends the scheme to other sectors in the meat processing and wood processing industries. If we were to reconsider the scheme, it would be at some other time. The system has worked well and those in the industry are used to it. There is a necessity to extend it to some other areas. The measure was introduced in an effort to combat the avoidance and evasion that was occurring in some sectors. The House has been called on several times to do that. I am not sure that it would be advisable to remove it.
Question put and agreed to.
SECTION 29.
Question proposed: "That section 29 stand part of the Bill."
I do not want to let this section pass without making a comment. The Minister states that urban renewal of designated areas, which has been of extraordinary importance to the nation and to towns such as Ennis, Nenagh and Clonmel, closes a loophole. I accept the section absolutely but I warn that in closing loopholes we should guard against damaging people who may still get concessions under this section of the Finance Bill. That is just a warning, because all Members have witnessed urban renewal revitalise towns and be of enormous benefit to them. We have to make sure that the loopholes are closed at the appropriate point.
This issue arose in connection with the Temple Bar area in Dublin, but could have arisen anywhere. The loophole Senator Honan talks about is in existing legislation. It provides that a double rent deduction in respect of rent paid on an existing industrial building in a designated area will now be available, as was the original intention of the legislation, only when the capital expenditure is incurred on refurbishment of a building in the qualifying period for the urban renewal scheme. As the legislation stood, refurbishment would not have to be undertaken at all. I want to make that point absolutely clear.
The extensions to the urban renewal scheme run until the end of May 1993. The concept is to keep that work going, provided that a development has been commenced pior to the end of May 1993 applicants will have a year to complete the work. Effectively, the deadline for the completion of developments is now the end of May 1994, on the basis that the work on a development has been commenced substantially by the end of May 1993.
Question put and agreed to.
Sections 30 to 46, inclusive, agreed to.
SECTION 47.
Question proposed: "That section 47 stand part of the Bill."
The Minister addressed this section specifically in his Second Stage speech today. I welcome the changes contained in this section, which cater for the position of An Bord Bainne. The importance of An Bord Bainne is recognised. The board fly the flag for the Irish trade mark in many different agricultural commodities.
In speaking to this section and, to some extent, the next section, I ask the Minister to consider again the major difference between small developmental co-operatives and the larger, mega, plc-type co-operative structures. I should like the Minister to determine whether he could separate the two kinds of co-operatives in relation to his proposed termination of the tax relief accorded co-operatives generally.
I concede that the Minister has made concessions. Indeed, he has fairly — and, I presume, graciously — bowed to the request of his colleague and, I imagine, the Cabinet in relation to the treatment of An Bord Bainne and others by ensuring that the 10 per cent corporation tax rate will apply to sales of processed products purchased for members of An Bord Bainne, both co-operatives and non-co-operatives. The Minister conceded also that a co-operative that supplies milk to a processor engaged wholly or mainly in the manufacture of specified milk products would also be taxed at the 10 per cent rate. That aspect was a cause of major concern when the Minister made his announcement on budget day in relation to the imposition of a tax on co-operatives generally.
I ask the Minister to reconsider the provision of a two-tier tax system for co-operatives. Could he also give consideration to different treatment for the small development co-operatives — a tier of co-operatives that could effectively be considered secondary co-operatives at this stage, given the development and the progress that has been made by our better established and larger co-operatives? Many co-operatives are still extremely concerned by the provisions announced by the Minister in this area. Perhaps co-operatives could be exempted from the new tax proposals on the basis of turnover; for example, those with a turnover of less than £100,000 per annum might be exempt in terms of the new tax proposals. In that way the continued use and the establishment of new co-operatives in rural Ireland could be encouraged. I am a great supporter of the concept of the true co-operative system as envisaged by Horace Plunkett. Many co-operatives, because they have grown out of their origins, have gone on to become major players in the national and international marke-place but we still have many small, local co-operatives that need all the State support they can get. I ask the Minister to consider a ceiling on turnover — perhaps around the £100,000 mark — and exempt from the proposals contained in the Bill those co-operatives which are truly co-operative in their functioning and structure.
I recognise that the Minister has a major problem in trying to cater for all of the different sizes of co-operative structures. If the proposal made by Senator Doyle were accepted the Minister would then create a position of unfair competition. A family-owned hardware shop in rural Ireland, for example, would find that they were at a major disadvantage compared with a competitor who would be termed a co-operative. This is a very big issue and one that will have to be settled. At present we have co-operatives listed on the Stock Exchange and we also have small co-operative movements in rural areas. Co-operatives now sell everything from garden tools——
But they are being taxed on their trade, like other businesses. I am talking about the other manufacturing areas.
We shall hear Senator McGowan, please, without interruption.
Co-operatives now sell everything from garden tools to combine harvesters. Some of them have forgotten where they come from. It is mainly farmer co-operatives we are talking about here, and in the first instance these farmers had to subscribe pound by pound in order to form those co-operatives. The farmer, the initial subscriber, is now an insignificant element.
I should prefer the Minister to give consideration at a later date to the whole definition of a co-operative. There is much disquiet within the trade. Those who have to survive within it find themselves in very serious difficulties in that at present advantage is given to those organisations that term themselves co-operatives.
They have to comply with specific structures.
I come from rural Ireland and I believe that I am reasonably near the grass roots. I work with co-operative movements and I am a member of co-operative cattle marts. I buy from, subscribe to and work with co-operative organisations. It is my contention that on another day and in different legislation the Minister should examine the whole issue.
I believe that the Minister has done a reasonably good job in this legislation, that he has done as much as is possible. We should not create a two-tier system because two tiers might not be enough; perhaps even a six-tier system would not cater for all the different kinds of co-operatives. I hope that in the future close examination will be given to the definition of co-operatives in the market-place; whether they trade inside or outside this country and whether they are comprised of farmer participation or membership participation — the area is vast.
I have spoken on this issue today. If we were to provide for a 10 per cent rate of tax across the board there would certainly be EC implications. I realise that that is not what Senator Doyle is seeking. I may not have been Ireland's greatest expert on co-operatives six months ago——
But you are now?
I consider that I am better informed, anyway, with the help of Senator McGowan and approximately 160 other Members of the Oireachtas who are concerned about co-operatives all over the country.
Whatever about the rights and wrongs of the comments made by Senator McGowan, he is right when he talks about the diversification in the range and size of co-operatives. I shall not mention any names, because I feel that drawing attention to a half dozen huge co-operatives and the profits they make would distort the situation. There are many co-operative organisations ranging from middle ranking ones down to the smaller sized ones.
The point regarding equity has to be made. Whatever the structure of co-operatives, and I do not criticise their structure, that is not the point of this debate. From what I have heard from deputations on both sides, including the Irish Congress of Trade Unions, and the small business people on behalf of ordinary individuals who are selling precisely the same products and trying to run a business, they must pay 40 per cent while a co-operative pays zero. That was one of the reasons for the distortion.
Following discussions, tax on co-operatives was introduced at one stage, was taken out, was proposed at another time but did not go ahead. I was adamant that we had to deal with this and frame the legislation as best we could to take into account the real requirements. There were four or five of those. The Bord Bainne issue, which Senator Doyle referred to, was resolved. We implemented three or four rules to get it right. At the end of the day we have been extremely generous with the interpretation and I hope it works to the benefit of all the business expansion that has been mentioned to me during the discussions. I expect to see a considerable increase in employment in the immediate weeks ahead but we will have to wait and see if that happens.
The smaller co-operatives had a complaint about milk, where they collect milk which they do not process but refer on for processing to a large or another co-operative. It is very hard to distinguish what is the small, medium or large co-operative. To keep it simple, where a co-operative is involved in liquid milk, does not process it in any way but refers it on to another co-operative for processing, they remain at the 10 per cent rate. There are co-operatives that sell liquid milk straight to a plc or company in whatever form outside the co-operative movement; for example, co-operatives selling directly to Cadburys, Rowntree Mackintosh, Nestlé and other companies, they are at 10 per cent also. We phased the tax over three years for the remaining groups, which gives them a chance to operate. Many of these are fishery and other co-operatives who are earning very litle money but money is now being reinvested. Because of this tax position they are entitled to company expenses, capital allowances and so on which they did not utilise before. Presumably they will benefit from those; it is a matter of their accounting systems. There is no difficulty with that. However, for those co-operatives who have set up and who have had recorded accounting losses, this can be availed of in the years ahead.
I have made by far the most extensive changes in the area of co-operatives. I hope it works and that we have not created too many distortions for the ordinary business person. Such distortion of trade would be unfair competition for the small, family-owned companies that have been brought to our attention. Overall, the system is fairly good and I hope it will not be too open. We will have to wait and see how it operates.
I wish to extend my appreciation to ICOS who remained in contact throughout. If it were not for them I would not understand it all so well. They were based in Merrion Street for the past three or four months and they fought a good battle on behalf of the co-operatives. They had to adjust their case a little; they fought on behalf of Bord Bainne initially and then on behalf of the big co-operatives. I learned a lesson from this experience and that is if you give a little, more will be sought. I ended up giving at least half a dozen concessions to ICOS in order to resolve this. I learned as I went along. Senator Doyle asked why I waited for Report Stage to introduce the first amendment. In some instances that would probably be the answer and perhaps it would be a good practice for future Ministers for Finance to follow.
There is one group of co-operatives that may have already been dealt with — if so I apologise for my intrusion at this stage — namely, livestock marts.
They have not.
Livestock marts are not processing outfits and they are liable for 40 per cent tax. A livestock mart could have a very substantial turnover but yet have a very small margin of profit. We have quite a sizeable mart in Ennis, County Clare, with branches through the county and similarly in Wexford. They have been a matter of great concern for the Irish Co-Operative Society and I ask the Minister to address this matter, if he has not already done so.
This proves the point I made in my reply to Senator Doyle about the distinction that Senator McGowan mentioned between a big co-operative and a small co-operative. A very small co-operative or mart can have a high turnover with low profits. This is where the distinction lies between the big and the small co-operatives. In this case the profit margin is very small so, therefore, the tax is on the profits. Unlike the position in the marts, the capital allowances and the business expenses are matters that now come into play and because of the operation in the marts the tax yield cannot be high. Some of them have had no capital investment for a long time. In other words, they had losses. These are matters that can now be considered in their accounting procedures, so the tax yield will not be substantial.
Livestock marts at present are very expensive places for farmers to buy or sell cattle. They were expensive even before this new tax system came into existence. You are talking in terms of £5 or £6 per animal minimum to the seller and to the buyer, and higher depending on the price. While we say that the marts have a narrow margin and a small profit, they are a very costly place to do business. If the marts increase their prices too much, we will revert to the old system of selling outside the marts which is a highly organised system. The Minister should consider the marts as a special case. There is a vast turnover at marts, they are providing a great service to the Irish farmer and people in the cattle business generally, and they cannot be cast aside.
Is section 47 agreed?
I want to clarify a point raised by Senator McGowan; no one on either side is making a case for the regular trading in co-operatives to be treated differently from the other sections of retail such as hardware trading, tools and so on. I address my remarks strictly to the original concept of co-operatives, particularly the fishery and farming co-operatives, the small co-operatives, startup developmental co-operatives. I feel those who are in the manufacturing and processing area should get special treatment. With the depopulation of our rural areas and the distances from major marketplaces, with the difficulties for farmers in marketing their own produce, and the urgent need for value-added generally to be developed, particularly in the more remote areas along our seaboards and in depopulated villages, we must ensure that no tax regime, however benign the Minister might consider it, is put in place that will exacerbate the social and economic problems that exist in many parts of our country. That is my concern. If the Minister is not prepared to make any changes at this stage — and facing reality I believe he probably will not — will he promise a review of the operation of this section if it is seen to adversely affect those truly co-operative systems in the remote and disadvantaged areas I have just outlined? I would like to be assured that when it comes to amending legislation a review could take place without any major difficulty and that amendments would be fairly quickly put through if there was any risk to isolate communities. Many of these communities fear greater isolation given quota restrictions both under the fisheries policy and the common agricultural policy, and everything possible must be done to increase employment and value-added in agri and fishery products.
I support my colleague, Senator Hourigan's comments about livestock marts. With various Directives coming from the EC there will be a major overhaul in the livestock marts system. These marts replace the fairs of bygone years and they remain an intrinsic part of rural trading. I presume the Minister's proposals are based on equity, but if they are seen to adversely affect a system and a network that has served the rural community well, I urge him to confirm that these proposals can be reviewed immediately.
Naturally, if any of the proposals cause a major problem, they will be considered in the context of the budgetary circumstances at the time. We must be very careful in this regard in that the Senator's argument can be turned around the other way because — and this has been pointed out to me by several people in the most isolated parts of rural Ireland — the tax exemptions that are currently enjoyed by agricultural co-operatives in many cases cannot be justified on economic or competitive grounds; most of the larger co-operatives are operating as plc's, and many of the smaller ones have their own subsidiaries which trade and export on behalf of the parent co-operative. These co-operatives are clearly involved in commercial activities but continue to enjoy a substantial tax advantage over other commercial companies providing similar services in the sector. The point made this evening by many Senators, including Senator McGowan, was that there was a clear distortion of trade and unfair competition. We are not talking about marts in this case but about other businesses. I would say that in the Bord Bainne case we are in agreement. In the area of liquid milk, the co-operatives have an overwhelming percentage of the business, but for other co-operative activities additional commercial entities are in operation. On the basis of equity it is very simple — zero tax for the co-operative and 40 per cent for, say, a family owned company. Should we therefore put these small family companies that have been operating in rural Ireland for generations at a disadvantage, while co-operatives can link in to various structures and put them out of business? I am not suggesting that is what the Senator is saying but that could be the effect.
I believe the ICOS have been fair. We have considered milk production and have protected it by keeping the rate at 10 per cent. Whether the milk is going to a co-operative, a plc, to Bord Bainne or some other company, it is still 10 per cent. In the other cases it is phased; they may use their losses but I think it is a fair deal.
I accept Senator Hourigan's point, but ICOS have already launched their proposals on rationalising the marts, which are divided into 12 regions. We could probably debate all evening the reasons why it is costing £6 here and £6 there, but Agriculture is not my brief. However, the Senator indicated where the difficulties lie. There is an argument about efficiency and I believe ICOS are a very constructive organisation and are leading the campaign on this. It might be moving away from the traditional marts, but what we have done is fair, not implementing this immediately, not intervening except where there are competitive distortions, and catering for reinvestment and other business allowances and expenses, so I do not believe there will be any great difficulty.
Could I say that I am not unaware of the view of ICOS on the co-operative marts issue because I have close liaison with them. They are very concerned about the future viability of many of their members, be they big or small. Many of their members have expended a good deal of money in recent months. I am certain that the ICOS would be hoping for something significant by way of a change from the 40 per cent tax liability presently on marts. There are other non-processing co-operatives that are equally hard hit, but the most glaring examples are the livestock marts.
It would be very satisfactory if the Minister would give some assurance that the matter will be considered further or, as Senator Doyle has suggested, reviewed and monitored on an ongoing basis to see how the system is working, because I believe that livestock marts in particular, and other non-processing co-operatives also, will find it extremely difficult absorb a 40 per cent tax in the future.
Question put and agreed to.
Sections 48 to 51, inclusive, agreed to.
SECTION 52.
Question proposed: "That section 52 stand part of the Bill."
Section 52 makes a technical amendment to section 39 (a) of the Finance Act, 1980 — 12 years ago — which provides that certain certified trading operations carried on in Shannon Airport qualify for a 10 per cent rate of corporation tax. This section provides that, in addition to the existing circumstances in which certificates may be revoked by the Minister for Finance, the Minister may revoke a certificate where both he and the company to which it is issued are agreeable.
Would the Minister comment on this section? I have a horror of technical amendments in a Finance Act? You are referred back to subsection after subsection, but at the end of it you find they are subject to subsections (5) and (6) in which the Minister "may give a certificate certifying that such trading operations," and so on.
Could the Minister translate into the vernacular for most of the mere mortals in this Chamber the parliamentary gobbledegook contained in this section? The Explanatory Memorandum does not explain much when it comes to section 52. I defer to Senator Honan's greater knowledge on the comings and goings at Shannon Airport, but what exactly does the section mean when it says:
....The section provides that, in addition to the existing circumstances in which certificates may be revoked, the Minister for Finance may revoke a certificate where both he and the company to which it was issued are agreeable to its revocation....
In what circumstances might a company be agreeable to its revocation? It goes on to state "and replacement with another certificate", another certficate of what? What is the intention of another certificate?
While it is technical, it is quite simple.
Good.
If you have a certificate issued under the Act and the company want to change that certificate——
A certificate to do what?
I will come back to that. If a company, for any reason, want to change that certificate; rather than amending the certificate, the best way to do it is to revoke the original certificate and issue a new one.
The section makes a technical amendment to section 39 (a) of the Finance Act, 1980, which provides that certified trading operations carried on in Shannon Airport qualify for the 10 per cent rate of corporation tax. The trading operations which qualify for the 10 per cent rate of corporation tax must be specified in the certificate. The operations of the company are specified in the certificate. At present, the Minister for Finance is not empowered to revoke a certificate he has given to the company unless the company ceases to trade, has gone out of existence, has failed to comply with any conditions in the certificate, or that any activity of the company has had or may have an adverse effect on the use or development of the airport, or is otherwise inimical to the development of the airport.
If a company has a certificate which requires amendment for any of those reasons, as opposed to a certificate which is having something new added, it can be technically difficult to issue a supplementary certificate to the company. For example, occasions may arise where it is necessary to amend the range of qualifying activities specified in an existing certificate to cover activities which may not be simple or straightforward, or to amend or clarify conditions attached to a certificate. Where somebody wants to clarify why they were given certain conditions in the first place, their type of operation may have changed, or something has occurred in the airport and there is an argument that it is inimical to the future of the airport, it would be administratively more simple and legally more obscure to be able to revoke the certificate and replace it with a new one. Accordingly, section 52 provides that in addition to the existing circumstances in which certificates may be revoked, the Minister for Finanace may be empowered to revoke a certificate where both he and the company have no power to revoke it except that there is agreement between the Department and the company, it must be a two way process, to which the certificate was given or agreeable to its revocation and replacement with another certificate.
It is lovely when a Minister for Finance stands up and says: it is very simple. We all understand it. Perhaps I understand it a little better now; I want to thank the Minister for his explanation but I still cannot say I fully understand this section.
I will go through it again.
This is the Minister's knack of confusing us. Would the Minister be good enough to send his interpretation of the section, in our language, to the chief executive of SFADCo., or give it to me and I will bring it to him, because I am sure he does not understand it either.
May I ask the Minister what company he has in mind and what does he want them to agree to? In what circumstances would a company agree to the revocation of a 10 per cent corporation tax rate certificate?
There are constant changes going on.
Even without this legislation?
We are talking here about 10 per cent companies and why people have the 10 per cent certificate, and how they can operate a 10 per cent certificate. If they want to add an operation, update an operation, introduce new technology into an operation they want their certificate up-to-date. Rather than trying to change the existing certificate, they just revoke it. They want the new certificate to qualify for the 10 per cent tax. It is to the company's advantage to have the 10 per cent tax.
Has this been going on without legislation being regularised?
The Minister does not have to answer that.
No.
How could they have waited so long for this section?
These two eloquent ladies are going to keep the Minister here all night.
The Senators wanted to know, if the Department of Finance are issuing certificates, how can people change the certificates and what process would they use? It is far better to have this clear. None of the 10 per cent companies will have any difficulty understanding this because it is in their interests. If it was not, they might have difficulty.
Question put and agreed to.
Sections 53 to 56, inclusive, agreed to.
NEW SECTION.
I move recommendation No. 14:
In page 96, before section 57, to insert the following new section:
"57.—(1) In this section—
‘agency' means a charitable body providing development aid or emergency relief in developing countries and designated by the Minister for Foreign Affairs by order made under this section;
‘tax' means income tax or corporation tax, as the case may be.
(2) This section applies to a gift of money which, on or after the 6th day of April, 1990, is made to an agency and is not deductible in computing for the purposes of tax the profits or gains of a trade or profession or is not income to which the provisions of section 439 of the Income Tax Act, 1967, apply.
(3) The Revenue Commissioners may consult with an agency in relation to any question which may arise in connection with subsection (2).
(4) Where a person proves he has made a gift to which this section applies and claims relief from tax by reference thereto, the provisions of subsection (5) or, as the case may be, subsection (6) shall apply:
Provided that in determining the net amount of the gift for the purposes of those subsections, the amount or value of any consideration received by the said person as a result of making the gift, whether received directly or indirectly from an agency or any other person, shall be deducted from the amount of the gift.
(5) For the purposes of income tax for the year of assessment in which a person makes a gift to which this section applies, the net amount thereof shall, subject to subsection (6), be deducted from or set off against any income of the person chargeable to income tax for that year and tax shall, where necessary, be discharged or repaid accordingly; and the total income of the person or, where the person is a wife whose husband is assessed to income tax in accordance with the provisions of section 194 (inserted by the Finance Act, 1980) of the Income Tax Act, 1967, the total income of the husband shall be calculated accordingly:
Provided that relief under this Act shall not be given to a person for a year of assessment if the gift (or the aggregate of the net amounts of gifts) made by him in that year, being a gift or gifts, as the case may be, to which this section applies, does not exceed £100.
(6) Where a gift to which this section applies is made by a company—
(a) the net amount thereof shall, for the purposes of corporation tax, be deemed to be a loss incurred by the company in a separate trade in the accounting period of the company in which the gift is made, and
(b) the references in subsection (5) to a year of assessment shall be construed as references to an accounting period of the company.".
It fascinates me how this recommendation can be in order when an earlier recommendation of mine was not because they both seem to impose a charge on the Exchequer.
I urge the Minister to allow gifts of overseas development aid by individuals and the corporate sector to be eligible for tax relief at the relevant level. This does not require a lengthy explanation. Our television screens and radios carry stories daily of tragedies around the world, whether in Somalia, Yugoslavia or Central Africa. There are problems all over the world. Successive Governments have reneged on their responsibility in terms of official Government contributions to ODA.
As a country we have always been extremely generous both as individuals and on a corporate basis — the private sector generally — towards overseas development aid relief of one kind or another. It is time that non-Government organisations were recognised for the enormous work they do, and that individuals outside this House, outside the official sector, who contribute either on an individual or corporate basis, would be allowed claim tax relief on whatever gift they donate in this particular area. I urge the Minister, without going into a detailed explanation, because the case makes itself, to accept this recommendation.
I share the Senator's concerns about the plight of people in the Third World. This year £43 million has been allocated for official development assistance, representing 0.17 per cent of GNP. This amount includes grants for educational, agricultural and infrastructural projects on a bilateral basis, mostly in Africa, as well as contributions to multilateral agencies, such as the UN. It is true that this year's allocation is slightly lower than last year's. However, there were particular circumstances, mainly associated with the Gulf War, which boosted our ODA estimate last year. The 1992 provision will enable us to meet all the mandatory commitments for this year and also to maintain the value of our bilateral aid in real terms.
As the Senator is aware the Government's policy remains one of commitment to the maintenance of expansion of overseas development aid as soon as economic circumstances permit. However, the continuing budgetary and economic problems facing our own country makes it impossible for the Government at this stage to expand the aid programme to the UN target of 0.7 per cent of GNP. I would also remind Senator Doyle that the revised Programme for Government contains a commitment that the Government will undertake a planned programme of increases in Ireland's official development assistance so as to achieve a higher ODA-GNP contribution by the end of 1994. While our overseas aid contributions have been given in the form of financial assistance we should not forget the great unofficial contribution made by many Irish voluntary workers overseas as well as the voluntary contributions made by the Irish public. However, the Government have reached the limit of what we can afford as of now and to give tax concessions of the type suggested would represent a very real additional cost to the Exchequer which cannot be afforded at present.
I am very glad that Senator Doyle moved this recommendation.
On a point of order, given that this recommendation is in the names of Senators Upton, Costello, Harte and Ryan of the Labour Party — I want it noted that they are not present to move it. I want to ask you——
I think that remark is out of order and I demand that the Senator be asked to withdraw it.
——on a point of order.
It is not a point of order — it is a point of disorder.
I ask for a ruling from the Chair.
Senator Norris resume your seat, please.
Ask Senator O'Keeffe to resume his seat as well. He is not in order. As you know perfectly well, but of course he is Fianna Fáil.
Senator Norris, I ask you to withdraw that reference.
I withdraw it.
The people who have put down this recommendation are not present in the House.
My understanding was that Senator Doyle had permission from Senator Upton to move the recommendation.
Senator Doyle did not say so.
I do have permission and I did not need to mention it. Before Senator Upton withdrew I discussed with him the detail of his recommendation so that I understood exactly what he was trying to achieve and I agreed I would move the recommendation for him.
The point have not been clarified. As I understand it, it is not in order for one Member to move a recommendation in the name of another Member unless permission to do so is sought and the intention is made clear at the outset.
That is not true. It is in order to move something that is tabled in the name of another Member.
With permission as I understand it, a recommendation can be moved in the circumstances in question.
I recall moving an amendment in the name of a Fianna Fáil Senator in relation to a county councillor's representation on a certain body. I put the amendment to a vote, thereby forcing the person concerned to vote against his own amendment and I was not out of order on that occasion.
Senator Norris, please without interruption.
Ask Senator Finneran about that?
First, I would like to underline the withdrawal of my little remark that "of course he is Fianna Fáil". The remark was made in the heat of the moment and was not intended, on reflection, to cast any aspersions on the impartiality of the Chair. Consequently, I am more than happy to have withdrawn the remark. I am sorry that we were treated to this pettifogging dispute on a matter which is extremely serious and it was a point of disorder, not a point of order.
On the recommendation, please, Senator.
I am talking on the recommendation.
I must say I resent that because——
You resemble it rather than resent it.
On a point of order I looked for clarification. I got that clarification and I resumed my seat. I wish that other people in this House would act in the appropriate fashion but, unfortunately, experience has told us that this does not happen.
Thank you. Senator Norris, please, without interruption. We must continue with the important business of this Bill.
I will ignore the trail of red herrings left there, the coat trailing that was going on. I regret the Minister's response but I think it is very important that this recommendation was moved. I know that the Minister is a humane man but I am astonished by some of the comments he made in his reply, and I hope this information was prepared for him and did not originate in his own head. A figure of 0.1 per cent of GNP for ODA is not something we can congratulate ourselves on. The United Nation's target is 0.7 per cent of GNP. Our GNP was up to 2.3 or 2.6 per cent about four or five years ago and we are moving away from the United Nation's target. It astonishes me that the Minister can speak of proposed increases in GNP when our percentage is dwindling away all the time. I know this country is in a difficult economic position, that the Minister is doing everything possible to set this position straight and that he has the support and encouragement of all the Irish people across party boundaries, but I have to say it is never opportune to be poor in this country and that it is certainly never opportune to be poor in a global sense. We are either the 26th or 27th richest country in the world, yet we can only afford to contribute a continuing shrinking of the resources we devote the ODA.
The Minister also let slip the very telling phrase "we must not forget the voluntary contributions of the Irish people". The Department of Finance in which I have many friends and where I have found great assistance in my mathematical calculations about the tax position in the inner city, would not let you forget that point. Why would they? Government after Government have traded mercilessly on the generosity of the Irish people and every time the voluntary organisation — Live Aid, Gorta and so on — collect money, the calculation is made that we can afford to trim in this area. I think that is a great pity and I really do not think that the Minister's response is adequate.
May I say that although I agree with Senator Doyle, it was to a degree surprising that this recommendation survived because I would have anticipated it would have been ruled out of order technically on the basis that it involved a charge on the Exchequer. I have seen far more tendentious rulings in a matter like this where even a remote hypothetical charge was sufficient to cause the falling of such a recommendation but it does not represent a direct expenditure, it is merely a provision against tax and there is no real major loss to the Exchequer. There is, on the other hand, an encouragement to companies large and small, including multinationals, who like to have a good image and who may balance some of the repatriation of their profits — which is a thorny point — against some good image which they can buy in this country, whether there is a high public awareness of the need to support overseas development aid, by operating the tax breaks in order to support something which the Minister admitted is not being adequately supported by the Government despite the rhetoric he has engaged in. This is understandable because he is a politician and it is necessary for him to make the best case he can.
In conclusion, I would reiterate that the allocation of 0.17 per cent of GNP for ODA is a further shrinking from the 0.7 per cent which is still a tiny fraction. We are talking about tax exemption, not capital transfer from the Exchequer.
What Senators Doyle and Norris are seeking to achieve here is laudable given that the Government could afford to attain the targets they are setting themselves. It is quite easy for people in Opposition to make suggestions regarding the amount of money that can be set aside, but if we consider the figure involved here — £43 million — it is not an insignificant sum of money. While it is 0.17 per cent of GNP it is a significant figure, it represents the Government's commitment to overseas development and while the figure may be less than last year's it should be pointed out that in relation to the Gulf War last year there was an extra commitment by the Government to alleviate hardship.
In the circumstances, therefore, I understand the demands from the Opposition side, but I would ask them to consider the restrictions under which a Government must operate and to appreciate that £43 million is not an insignificant sum of money, particularly as a higher contribution would involve an extra burden on the taxpayer at a time when we are trying to reduce the existing burden.
I consider it grossly unfair of Senator O'Keeffe to make the case, we are making the point only because we are in Opposition. When we were in Government the contribution for overseas development aid increased and since we left office it has been decreasing.
I can give you the answer to that Senator.
You will have every opportunity of giving it if you want to. The figures are there to prove my point, that successive Ministers forgot about the voluntary contributions to the Third World, they seem to rely increasingly on these. When they are challenged with regard to the reduced Government contributions to the Third World, they seem to look towards the voluntary contributions, a figure that is basically unknown but one we are told is increasing. That is the wish of the Irish people and there is a message in that for the Government that they should increase their contribution. The Minister should cease referring to the voluntary contributions. People will stop giving voluntarily because these contributions give the Ministers an excuse to reduce the Government's contribution. I ask the Minister to seriously consider this matter.
We all know of the organisations that make voluntary contributions and the individuals who collect weekly on their behalf. They should be encouraged but their work should not be used as an excuse for the Government to reduce their contribution. This is not a levy on the taxpayer. We ask the Government to recognise that these contributions are being made and to allow tax exemption in such cases, in the same way as travel or clothing expenses are tax exempt for a firm. It is time that successive Ministers whom I have heard over the years referring to the voluntary contributions, stopped holding them up as if they were their contribution. It is having the reverse effect in that people are now beginning to take stock of the contributions they are making to voluntary organisations. I am sure many will consider reducing their contributions because of utterances from Ministers for Finance.
The Minister has been reminded that in official OECD ratings we are the 26th richest nation on the basis of income per capita. I know, and no one knows better than the Minister, the difficulties we have both socially and economically in this country. There is a very high rate of unemployment and major difficulties stem from that social problem and there are many other problems. Having said that, in section 56 the Minister is allowing the tax relief from corporation tax for donations made by companies to The Enterprise Trust Limited. Tax relief is being allowed for donations made by companies in our own country to help areas of unemployment. Yet, in countries that do not rate on any OECD list, where there is starvation and deprivation of all kinds in the Third World, the Minister is refusing to allow tax relief on corporate donations to these countries. There is no consistency in this treatment. The Minister allowed this and did not question the losses to the Exchequer in relation to section 56 on the tax relief to The Enterprise Trust Limited. I support the Minister on that, but I believe he should extend the generosity he showed to the difficulties in our country which is relatively affluent compared to the Third World, and extend to the Third World the same tax relief that is given to corporate bodies in respect of gifts.
Given our relative affluence and for all the problems we may have, they pale into insignificance compared to those of the Third World. Therefore, the Minister must accept the recommendation which extends the same treatment in respect of gifts to the Third World as section 56 extends to The Enterprise Trust Limited which helps the problem areas at home.
I am saddened by Senator Doyle's reference to the Minister's generosity. We were progressing well and suddenly the Minister is attacked, and that puts me on the defensive.
You are asking An Roinn Airgeadais to protect 11 of them.
The Senator has only come into the Chamber and I would like if he would leave.
When we talk about generosity and request the Minister to provide more funding for the Third World, it is the taxpayers who will pay. Everyone on this side of the House feels as strongly as Senator Doyle, but the bottom line is who will pay for this generosity? In the past Governments were over-generous and we are still paying for their mistakes. It is grand to be generous if you do not have to pay, but it is the taxpayers who will have to pay for this.
I will make a couple of comments on that remarkably ungenerous speech from Senator Honan. I know there is a degree of partisanship and that is inevitable, but this is a more serious problem and not one that should be treated on a strict party basis. The generosity of the Irish people is not confined to Independents, Fine Gael or Labour. The vast majority of the political electorate would have a degree of sympathy at least with Fianna Fáil, and they are the people who pay as well. There is a racial memory in this country of famine and the kind of arguments I have just been hearing, that we cannot afford it, and that generosity has led us into this state, are similar to what was said in the 1840s during the famine debate. When we say that £43 million is a wonderful amount of money, it makes me think about Queen Victoria and her alleged £5 for the Irish famine, in fact, it was £5,000, and £5,000 in 1846 was about the equivalent of £43 million today. We are giving this pittance and tossing it out as if it was generosity. It is not generosity. May I point out that we made a present of £161 million by way of the export credit guarantees to the beef deals of Saddam Hussein, against the advice of some Senators in this House.
That has nothing to do with this.
It has plenty to do with this; perhaps you cannot see the connection but it is there. We are also prepared to spend millions of pounds on tribunals and inquiries into every possible scandal until one might think that we should establish a Euro-scandal centre in Ireland as a development industry and have a Euro-scandal contest. That might make some money and we certainly are qualified to contribute in that way.
The contributions are voluntary. Who will pay for it? Senator Honan says that the taxpayers will pay for it. I am glad to say I am a taxpayer, probably everyone in this House is a taxpayer. I speak with some feeling on voluntary organisations because I have been involved with a considerable number and, like the majority of people I am prepared to put my effort, money and enthusiasm into these voluntary organisations. However, it would be appreciated if, in addition to that, the Government would not travel away from the internationally required target of 0.7 per cent. We were travelling towards that target. In the past we got to about 0.3 or 0.4 per cent of GNP and now the figure is reducing all the time and we are listening to paeons of praise for the generosity of the Irish Government. I do not believe this. This is a serious matter.
By taking a moral lead in issues like this, Ireland would establish a position of influence and importance for herself as a State with newly developing countries and because of our past we should have a special sensitivity. The Minister will know — I cannot recall the exact name — that there was an advisory council on development aid, and it cost about £75,000 per year. Its purpose was to advise with regard to the allocations and how this money could best be spent but it has been abolished to save a measly £75,000. This reminds me of the abolition of some other agencies in the domestic sphere. I cannot recall their names but there were some agencies of the State whose purpose was to advise citizens about their rights under the social welfare schemes and they were also abolished three or four years ago. I remember protesting about the matter. I thought it a particularly mean cut at the time because it was not the saving to the Exchequer that was directly involved but that people would be kept in ignorance of their entitlements. It is a perversion of language to suggest that these cutbacks coupled with the abolition of the Advisory Council on Development Aid, represent generosity. They do not. In view of our history, we should be especially sensitive to these people who are deprived.
We must consider where we are coming from. This is a Labour recommendation and the people concerned are not here. Those Senators were crying crocodile tears earlier tonight about the people that the Minister was homing in on, the tax dodgers, the people who were looking for the loopholes, the people, basically, who were evading tax.
The Senator is being ingenuous.
We are coming full circle. They are asked to provide more money.
Who was looking after the tax dodgers?
When we were trying to get that money, these were the very people——
Who was looking after the tax dodgers?
Senator O Keeffe, without interruption.
Lest the Senator impugn any of us on this side of the House, who were looking after the tax dodgers?
Restrain yourself Senator Doyle.
You interrupted on many occasions so do not try that line.
I am glad Senator Norris came to the House, he has added to extra dimension to it.
Senator O'Keeffe, do not encourage interruptions.
There is an irony here and we should realise it. I would love to be where Senator Norris is sitting on the Independent benches——
You are most welcome.
——with absolutely no responsibility, good bad or indifferent. That is not the way it works. For Senator Norris to say that we as a country have not been seen to play our part in the developing countries does not deserve comment because we have played a major part. I commend the voluntary organisations who have been most generous in providing Third World aid. That aid is subvented by the Government to the tune of £43 million, a significant amount given the country's economic difficulties. If things improve here, I am sure the Minister would be the first person to say we can afford more and therefore we should give more.
The Senator is talking as if things have improved. We have listened to nothing else but how things have improved, despite the unemployment figures.
The Minister without interruption.
The Senator cannot have it both ways.
The Minister is on his feet and wants to speak. In fairness you should accept that and have some manners.
I am listening.
I have listened to the discussion and I know Senators' views. I am not sure if the Committee Stage of the Finance Bill is the most appropriate debate for a discussion on development aid policy. I am not sure if corporation tax relief should be singled out as the best aid mechanism or if, within the budgetary figures we could go to a higher figure. I have stated the Government's intention in this area.
In the years 1987-90 there were decreases in Irish overseas development aid as all areas of Government activities were subject to cutbacks — and I am not denying that there were cutbacks. There were also cutbacks in many other important areas. The amounts provided were sufficient to maintain a basic framework of assistance and to meet our commitments. The Government remain committed to reaching the UN target of 0.7 per cent of GNP devoted to ODA and intend to move towards that target as economic and budgetary circumstances permit. In the review of the Programme for Government, the Government are committed to achieving a higher ODA-GNP contribution by the end of 1994. In addition to our allocation for ODA, the Government are providing financial assistance for Eastern Europe. This is part of Ireland's contribution to the European Fund through the European Bank of Reconstruction and Development, which will be about £1.4 million this year. Current events in Eastern and Central Europe highlight the importance of all European countries in providing aid. The figures are not as high as we would like; indeed, Senators on all sides of the House would like them to be higher.
I do not wish to argue the point regarding The Enterprise Trust Company, I have been trying for some years thorugh the Programme for Economic and Social Progress to make the partnership area work. In areas of high employment where there is social deprivation, and in some cases lawlessness, drug abuse and other social difficulties, we have set up the area based strategy companies with the help of voluntary organisations, the Federation of Irish Employers, the CII, the CIF, the ICOS, other bodies and business people who have voluntarily given their time to make these companies successful. The companies have now been established and there is a need to create employment and training opportunities in these areas. That seems to be the only way to raise money. It is very difficult to raise money for activities at home; it is easier to raise money to help people abroad. Some of the area based strategies do not get much media attention; they do not have internatinal film crews making programmes about them so they have to find other ways to attract attention. If every group sought relief from corporation tax to fund their cause, we would have no opportunity to help enterprise companies.
Senator Norris lives in the heart of the city and he will know the people I am talking about. There are areas in the city where there is no employment, very little assistance and they should be the priority for the tax relief areas. We must help raise money for these people, many of whom have never worked; they live in very small accommodation often without proper sanitation; they do not have adequate educational facilities and the business community do not have an interest in assisting them. While I have a great interest and commitment to the people in ODA, I also have a great interest and commitment to the people living on my doorstep. It is not a case of choosing one against the other. In this debate Senators appeared to be saying that if I support one I must also support the other; they are two different issues. The tax relief is for The Enterprise Trust Limited. The Government are committed to increasing ODA in the years ahead. As budgetary circumstances permit we will try to achieve the UN target and, hopefully, in better times we can go beyond that.
I raised the comparison of what this recommendation is trying to achieve and what section 56 is trying to achieve in relation to The Enterprise Trust Limited because I want to point up the comparison and the relevance of what we are talking about. Relative to the problems, the poverty, the famine, the unemployment and all the other issues in the Third World, our difficulties, bad as they are in terms of the European Community average, are insignificant. If the Minister can forego revenue to the Exchequer for corporate gifts to The Enterprise Trust Limited, surely he can extend that same logic and generosity to corporate gifts for Overseas Development Aid. That is all we are asking him to do. If he can justify foregoing Exchequer revenue for the former, he can for the latter. I urge the Minister to consider it and, perhaps, restrict it to gifts made between 1 April 1992 to 31 March 1994 to see how the scheme works. I cannot understand the Minister's closed mind in relation to this proposal because it makes a great deal of sense. I urge him to at least consider it, even as a short term measure, until March 1994, as in the case of the relief in relation to The Enterprise Trust Limited in section 56. Will the Minister give us a commitment that in the autumn Finance Bill he will incorporate the sentiments of this recommendation?
I do not know if section 56 will cost the Exchequer any money. I have long experience in this regard. I was involved in the negotiations on the Programme for Economic and Social Progress with the Congress of Trade Unions, the action groups for the unemployed, the Combat Poverty Agency and others. A conference some years ago in relation to the quays which was attended by Senator Brendan Ryan was, to the best of my recollection, addressed by Senator Norris. At that conference I was asked to introduce such a measure. At that time the Government did not do this, but, as Minister for Finance, I was able to introduce it. I do not know if it will cost the Exchequer anything. It is very difficult to obtain money for places such as South Hill, Seán MacDermott Street, west Tallaght or other disadvantaged communities, but this is an effort to get our companies involved. If it is opened up for one project the scheme will be ruined before it has started.
If we are going to argue about Overseas Development Aid let us do so and I will put the Government's position on the record. However, a comparison is being made; my comparison, in the short term, would be in regard to the tax base on the enterprise area because these are difficulties that are on the doorstep of Dáil Éireann. We have a 21 per cent unemployment level. More than 100,000 people are long term unemployed and approximately 5,000 people leave the education system every year. My commitment and effort as far as this tax relief is concerned is to see if we can work on the conscience and kindness of the corporate sector. It is another way of asking them for funds. The argument about Overseas Development Aid is a separate issue and if budgetary circumstances permit we will deal with it. It would break face with all of the bodies, groups and organisations who fought for this for so many years if I extended that scheme now.
I accept it has been a long and gruelling day and we all appreciate the fact that the Minister, and his advisers, spent a long time giving detailed replies to the matters raised. I have not been here all evening but I have been watching the proceedings on the monitor and I came in when something of particular interest to me arose.
I welcome the sentiment of what the Minister said because he appears to be moving towards a commitment to expand Overseas Development Aid although, as he said, this is not the proper context. It may not be, but he sees a context in which it is possible to make a legitimate demand on the Government. I will not press this too much. He also used phrases like "when budgetary constraints permit," but, in a way, they never really permit. It is a question of political decision and political will.
The Minister spoke with great sincerity and feeling about the problems of unemployment in the inner city and he knows them at least as well, and probably a great deal better than I, but living where I do I am aware that there are levels of unemployment in this city of 80 per cent. Of course, the Minister is perfectly right to give this situation urgent priority. It is, as he said on our doorstep. On the other hand, anybody who has a radio or television set will realise that the starvation and deprevation in the world — I am glad to see the Minister nodding, I would expect nothing less of him — are also on our doorstep. The Horn of Africa is closer to us now than the whole of Ireland was to Westminister during the famine.
I appreciate the fact that the House wishes to move on, but I want to make one point about some confusing remarks, made by Senator O'Keeffe on the subject of tax dodging. I was not here when the issue of tax dodging was being discussed in a favourable light.
We have moved on from that section. We are now on section 57.
I am aware of that but you will recall, a Chathaoirligh, that Senator O'Keeffe made lengthy references to it and I would like to place on the record in reply to that, that I would urge the Minister to introduce his crack down, not next year, but straight away. If it proved that substantial sums of money were generated from it, perhaps there could be some allocation, as conscience money, from that towards Overseas Development Aid. I accept the Minister's bona fide remarks in this regard and I would like to see them being acted on by the Government. I am glad he gave certain indications in the nuances of what he said which I hope I am not being over-optimistic in interpreting positively.
We are repeating the same points over and over again; the debate has to come to a conclusion soon.
Nobody wants to stay here any longer than is necessary, but I would make a last appeal to the Minister to make a commitment, as suggested by Senator Doyle, that this matter will be dealt with in a future Finance Bill. The Government find it extremely difficult to increase their allocation to ODA in this way, and the Minister could divert millions of pounds to the Third World. I do not think that is an over-statement. What he stated regarding the Enterprise Trust Limited is commendable; we agree with everything that is happening there and nobody wants to minimise the problems in that area. However, no matter what money goes into the company I doubt that it will save a life. It will bring more comfort to many people and that is commendable but if the Minister accepted this recommendation or made some provision for this aid in the near future, he could save lives. I know the Minister is a compassionate man, and he is known as being reasonable in negotiation and debate. Therefore, I ask him to give a commitment to make provision for such aid.
Recommendation put.
The Committee divided: Tá, 8; Níl, 19.
Tá
- Cosgrave, Liam.
- Doyle, Avril.
- Hourigan, Richard V.
- McDonald, Charlie.
- McMahon, Larry.
- Manning, Maurice.
- Naughten, Liam.
- Norris, David.
Níl
- Bennett, Olga.
- Byrne, Seán.
- Conroy, Richard.
- Dardis, John.
- Farrell, Willie.
- Finneran, Michael.
- Kiely, Rory.
- McGowan, Paddy.
- Mullooly, Brian.
- Fitzgerald, Tom.
- Foley, Denis.
- Honan, Tras.
- Hussey, Thomas.
- Keogh, Helen.
- Kiely, Dan.
- Ó Cuív, Éamon.
- O'Donovan, Denis A.
- Ryan, Eoin David.
- Wright, G.V.
Tellers: Tá, Senators Cosgrave and McMahon; Níl, Senators E. Ryan and Fitzgerald.
Recommendation declared lost.
SECTION 57.
Question proposed: "That section 57 stand part of the Bill."
Could I ask the Minister to put on the record of the House the continued justification for the exemption from corporation tax of certain net income. I accept this exemption was introduced in 1988 and it applies to income arising to the company from a contract for the supply of natural gas to Irish Fertiliser Industries Limited. Given this is a non-renewable, finite national resource can we justify, in the face of the Earth Summit in Rio de Janeiro, this inefficient use of such a valuable non-renewable fuel? On what basis can we continue this exemption? The Minister quoted from the Culliton report on other sections and I now offer him that report for my view on this.
In 1987, NET transferred their fertiliser manufacturing operations to Irish Fertiliser Industries Limited — IFI — a joint venture company of NET and the ICI of the UK. NET were left with a debt of approximately £167 million which is State guaranteed, and in order to help NET service the debt the Government, under section 39 of the Finance Bill, 1988, decided to grant NET a corporation tax exemption for five years on their trading profits from the business of selling gas purchased from Bord Gáis Éireann to IFI. The exemption is due to expire on 31 December of this year. NET have not been able to up to now to reduce their debt which is now in the region of £180 million, which is the statutory limit on their borrowings, and, unfortunately, there is little indication of improvement in the forseeable future. A liability to tax would result in funds used to pay the tax being diverted from paying the interest on the debt or reducing the debt. In those circumstances, the existing statutory State guaranteed limit would have to be increased and, more likely, given NET's precarious financial position, the Exchequer could be called up to assist NET directly.
To avoid such a situation, the corporation tax exemption to NET is being extended for a further seven years, until 31 December 1999. This date was selected as it is the expiry date of contracts governing the price of gas between BGE and NET and between NET and the IFI.
I am not satisfied. Basically, the Minister is telling us he and his Department do not want to pick up a tab of £167 million, therefore, the lesser of two evils is to continue the procedure he has outlined. I am not sure if we can, on a strictly environmental basis, justify this any longer. Given recent proposals to connect with the UK gas grid and from that to the European mainland gas grid, there is no reason to believe that in 1999, this relief will not be further extended if it protects the Government of the day from having to honour a guarantee they gave in relation to NET if they are unable to trade themselves into profitability. Can the Minister honestly say that the improvement in the trading profitability of NET, since this exemption was introduced in 1988, justifies it being continued at all or are we just postponing the evil day? Can we continue to abuse in this way a finite natural resource which could be used far more efficiently in many other ways? In my view this cannot be justified any longer and the Culliton report pointed this out, and various other sectors have done likewise.
There is a debt of £167 million which is State guaranteed and present NET contracts run up to the end of 1999, but long before that the Government will be able to review the position. The company are already in a precarious financial position.
From an EC perspective are we creating an uneven playing field and will this State subsidy be considered by our European competitors as fair competition in the fertiliser industry? How does it gel with free trade and fair competition?
It is not being challenged in any form and I do not think it can be.
Therefore, as long as it is not noticed we will continue.
I am not sure anyone will want to notice when they see the kind of money involved. It is a difficult operation and the measures mentioned will only reduce the debt slightly. The debt represents an extremely difficult position for the State.
We are postponing the evil day.
We will have to see what happens over time but at least there are contracts between both bodies, BGE and NET, and between NET and IFI and we will have to monitor this as time goes by. This is a satisfactory arrangement for now and has been for a number of years.
Question put and agreed to.
Sections 58 to 88, inclusive, agreed to.
I understand it was agreed on the Order of Business to go as far as section 88 and resume in the morning. Is that agreed? Agreed.
Progress reported; Committee to sit again.
When is it proposed to sit again?
It is proposed to sit at 10.30 a.m. tomorow.