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Seanad Éireann debate -
Thursday, 21 May 1992

Vol. 132 No. 13

Finance Bill, 1992 [Certified Money Bill]: Second Stage (Resumed).

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

Faoi alt 26 den Bhille, tá sé i gceist ag an Aire faoiseamh a thabhairt do dhream ar bith a bheadh ag plé le haerfort a thógáil, go mbeadh deiseanna ann chuige sin ó thaobh chaiteachas caipitil agus cánach de. Tá comhlacht beag ann, Aer Árainn, a chuireann seirbhís ar fáil d'Oileáin Árainn thiar i gConamara agus, i mí Feabhra anuraidh thosaigh siad ar aerfort beag nua a thógáil. Tá fear thall ansin a chaith cuid mhaith airgid ar Aer Árainn le blianta beaga anuas. Éireannach on iarthar ab ea é agus is beag airgead a ghnóthaigh sé thar na blianta, rud a chruthaíonn na leabhair chuntais. Ní bhfuair sé aon fhaoiseamh faoi na Billí Airgeadais éagsúla a chuaigh tríd, ach lean sé leis an tseirbhís, atá thar a bheith riachtanach i saol mhuintir na n-oileán.

Cúpla bliain ó shin thosaigh cuid againn ag áiteamh air an aersheirbhís a fhorbairt agus aerstráice nua a thógáil i gConamara, agus dúradh leis go mbeadh sé in ann a chuid costas a roinnt trí fhreastal ar cheantar turasóireachta, agus, sa chaoi sin, go mbeadh brabach ann. Rinne sé amhlaidh ach gan oiread is pingin rua a fháil ó dhream ar bith, ó Roinn na Gaeltachta ná ó Údarás na Gaeltachta ná ón Roinn Airgeadais. Chaith sé £750,000 ar aerstráice beag agus anois cuirtear ar ár súile dúinn go mbeidh an tAire sásta, faoi alt 26 den Bhille, faoiseamh chaiteachas caipitil a thabhairt do dhuine ar bith a thógfaidh aerstráice nó aerfort amach anseo. An mbeidh aon fhaoiseamh le fáil ag an duine a thóg a t-aerfort seo anuraidh? An mbeidh an tAire sásta an cás seo a scrúdú agus an comhlacht beag seo a chur san áireamh maidir le caiteachas caipitil.

Tá go leor cainte ann faoi thosca a chruthú san iarthar chun obair a chur ar fáil, ach seo fear a rinne gníomh in ionad cainte agus a bhí sásta infheistíocht a dhéanamh i bhfiontar a raibh spéis aige ann. Tá súil agam, nuair a rachaidh an tAire i mbun leasuithe, go ndéanfaidh sé leasú ar alt 26 chun an cás áirithe seo a réiteach. D'fhéadfainn leanúint liom ag caint faoi chúrsaí airgeadais an iarthair agus an chaoi a bhfuil an Bille seo ag dul i gcion ar na daoine ansin ó thaobh fostaíochta agus an daonra de. Tá drochaoi ar iarthar na hÉireann agus tá daoine ann a deireann nach fiú infheistiú a dhéanamh ann mar go bhfuil an dé agus an chroí bainte as, beagnach.

Tá rudaí éagsúla sa Bhille seo, ar nós faoisimh i gcáin phearsanta agus i gcáin chorporáideach ach ní dhéanann an Bille aon ní ar son muintir an iarthair nach bhfuil acu ach na sléibhte, na haibhneacha agus an deis chun suí ar a dtóin. Fuair na daoine a d'fhan san iarthar buntáistí thar na daoine a d'imigh. In áit an Bhille Airgeadais seo a chur i gcomhthéacs Culliton nó i gcomhthéacs DKM ní mór é a chur i gcomhthéacs an iarthair. Ní fheicim leor dóchas ann do mhuintir an iarthair. Tá daoine aonaránacha ann a dhéanfaidh go maith as, ach má ghníomhaítear de réir moltaí Culliton ní bheidh monarcha fágtha san iarthar ach i gcorrbhaile mór ar nós Chaisleán an Bharraigh agus Gailleamh. Molann Culliton go ndúnfaí monarchana ar fud an iarthair agus rachaidh na moltaí sin os comhair an Rialtais. Tá tasc fórsa curtha ar bun chun na moltaí a chur i bhfeidhm, a fhágann go bhfuil sé fánach domsa a bheith ag labhairt thar ceann an iarthair.

I welcome the opportunity to speak on the Finance Bill. It marks a further stage in the Government's economic strategy of tax reform as set out in the Programme for Economic and Social Progress and in the Programme for Government and provides a statutory basis for the taxation measures introduced in the budget on 29 January. It is one of the biggest Finance Bills to come before us. The Minister on Second Stage outlined his proposal to introduce a second Finance Bill in the autumn as a result of the various decisions which will be made by Heads of Government and Ministers at future Heads of Government meetings.

It is essential to outline some of the grounds quoted by the Minister on which the current Finance Bill is based and to look at economic prospects for this year. We are informed that the international economic outlook for 1992 remains uncertain. We had been informed that last December the OECD and EC Commission forecast a slow and modest international recovery with growth picking up by 2 per cent or more from about 1 per cent last year. Developments so far this year in the major economies, the US, Germany, the UK, and Japan, suggest that international recovery may be somewhat slower and less than earlier indicated. It is now indicated that economic commentators in December were a little off the mark and too ambitious in their forecast. Little information is to hand on how the economy is performing this year but there are indications that performance is on target.

Exports turned in another strong performance in January, and the same applied to industrial output. The seasonally adjusted trade success was one of the best on record. Consumer spending and building investment indicators for the recent few months show excellent signs of improvements. We have been asked not to become complacent about inflation which rose to 3.7 per cent in the year to February last. However, it is still one of the lowest levels in the EC.

Tax returns and employment levy receipts for the first quarter of 1992 point to employment holding up reasonably well. PAYE receipts for the first quarter were almost 10 per cent ahead of the first quarter of 1991. Training and employment levy receipts up to early April were over 10 per cent ahead of the same period last year. Both figures suggest that the continuing rise in employment reflects a growing labour force rather than falling numbers of unemployed.

I am pleased that the Minister for Finance decided to reconsider his budget proposals for the licensed trade and that the suggestion that the liquor licence would be charged on the basis of ratable valuation has been modified. The Minister is now making provision for a turnover base system. This is welcome to all concerned. Strong representations were made to the Minister on this issue, in particular from Kerry and he accepted that his original proposal was unreasonable. I am personally pleased that holders of liquor licences will be treated on a reasonable basis having regard to the conditions for the various types of licences involved. Section 135 of the Bill deals with this matter in an extensive form. No doubt this section will be welcomed by the trade.

The budget also allows for a 4 per cent increase in all social welfare payments. A special increase to £53 for all short term recipients, including disability benefit, unemployment benefit, short term unemployment assistance and carer's allowance, constitutes an increase of 6 per cent. Unemployment imposes strain on families, especially on those with young school going children and it is pleasing to know that the back-to-school clothing and footwear allowance has been increased by £10 per child bringing the full payment to £50 for each child attending second level school and £35 for each child attending primary school.

An adoptive benefit scheme has been introduced for women in employment. Further improvement has been made in the family income supplement scheme to help those at work on low pay from which it is predicted, 7,200 families and 29,000 children will benefit. There is also the introduction on a phased basis commencing this year of measures to give effect to an EC Court of Justice ruling on equal treatment which would be readily acknowledged to have been around for quite a while. The Department have established a special group to devote attention to the matter this year.

It is further proposed that the age for the pre-retirement allowance be reduced from 58 to 55 with a special increase in the adult dependant allowance payable with the old age non-contributory pension. There is also the extension of the free travel companion pass to certain pensioners and the extension of the over-80 allowance to invalidity pensioners with effect from April, giving them an extra £4.20 per week.

As a result of a recent change in social welfare legislation pensioners over 66 years of age will have the option of moving into accommodation more suited to their needs with the security of knowing that they will retain their pensions. Many elderly people live in houses that are no longer suited to their needs and which in many cases they are no longer in a position to look after. Up to now these people had a serious problem. If they were to sell their home they would be means tested and might as a result lose all or part of their pensions. For this reason many elderly people retained their homes or even transferred and eventually in many cases finished up in homes for the elderly. These changes in the social welfare legislation are much appreciated by our senior citizens.

Referring to social welfare I wish to seek clarification under a number of headings which are being drawn to my attention. The first is the effects on payments and entitlements under the social welfare code.

The social welfare system is designed to ensure against the contingencies of sickness, unemployment, maternity, old age and motherhood. The principle of the PRSI system also encourages the notion of solidarity between those who are in a position to pay and those who are not. It provides insurance against sickness and unemployment.

The Social Welfare Bill which is complementary to the budget seems to be interfering with this insurance provision and some elements of these changes could become to the subject of a judicial review. On Second Stage the Minister pointed out that he is not attempting to dismantle the PRSI system but rather to remove the concept of automatic entitlement. Why not automatic entitlement? A weekly premium has been paid to ensure entitlement. The main area where the system is being interfered with is in pay-related benefit. The maximum benefit is being cut from £17.40 per week to £17 per week. The pay-related element is no longer paid in respect of week on, week off work and is no longer to be paid with disability benefit.

Part-time workers will only be eligible for unemployment benefit at a level related to the employment lost. Those under 55 who are made redundant and receive severence in excess of a fixed level will lose unemployment benefit for nine weeks because redundancy payment is seen as compensation. Any earning from days in part-time employment will be treated as means on a pound-for-pound basis for assessing unemployment assistance for the remaining days. This is seen as a disincentive for the unemployed to actually seek work.

If a sick person in receipt of full unemployment assistance of £55 is fortunate enough to find two days work at £20 per day, deduction of PRSI at 5.5 per cent which is the lower rate brings the net payment to £37.80. Because of pound-for-pound means testing the person would only receive £15 unemployment assistance added to the £37.80 wages making a total of £52.80, showing a net loss of £2.20 after working for two days. This will have two major effects: one is a disincentive to seek employment and the other is an increase in the black economy. The disqualification period has been extended from six to nine weeks. I fail to understand why a person is guilty until proven innocent for social welfare purposes.

Thirteen of the 39 contributions needed for disability benefit must be paid rather than credited. It will no longer be possible to qualify solely on the basis of credited contributions. If an employed person goes on disability benefit for 40 weeks, returns to work and is unfortunate enough to become ill again in the following year she/he will find that because credits are no longer a basis for qualifying they cannot draw disability benefit for the second period of sickness. Occupational injury benefit is a scheme where the employer and employees pay contributions to cover the cost of an accident at work. Under this Bill occupational injury benefit is being reduced by £12 per week to £53.

To qualify for dental and optical benefit people are required to have 13 paid contributions in the year. Does this mean that a person on disability or unemployment benefit cannot qualify for dental benefit? The same rules have been introduced for the maternity allowance scheme which have been amalgamated so that a women who is unemployed, who takes up a full-time job, who becomes pregnant, will not then be able to avail of the maternity allowance scheme or maternity leave.

I welcome the reduction of VAT on technical assistance service and farm relief schemes to 12.5 per cent. The farm relief scheme provides essential services especially for those working alone or for those who are out of work through sickness, injury or for some social reason. Under the scheme employment is also created for many young farmers who do not now have full-time work on the farm and for young people who would be otherwise unemployed. These people have received good training and the scheme is effective.

I also welcome the Minister's decision not to tax the artificial insemination service. This full-time important service is aimed at improving the national herd and the quality of our stock which is essential at a time of tight pocket margins for many producers.

Much discussion has taken place with regard to co-operatives having been brought into the tax net. Small co-ops should be exempt; large plcs and those making substantial profits should not. Small co-ops throughout the country provide a good service and any profit they make is channelled back to improve the service for the farmer. As a result of the introduction of the Leader programme those co-ops will play a major role in ensuring that the programme is a major success.

The Minister made special reference to the excessive burden which our national debt imposes on our finances. Almost one-quarter of total tax revenue is spent on servicing our national debt. This has obvious implications for spending and it imposes certain limits on what the Government can do in terms of reflating the economy. In terms of public expenditure with particular reference to expenditure on health, social welfare and education, almost one-tenth of GNP or one-quarter of the total tax revenue must be allocated on an annual basis to meet debt services and costs. We cannot lose sight of this. The Minister has stated he is committed to maintaining financial and economic discipline. Any sign of slippage or any indication that we are going back to the old system will affect the economy. The Minister is going to follow through on budget discipline to attain the welcome targets he set for borrowing, public expenditure and taxation.

The Minister also indicated areas in which the Government are moving to combat unemployment. The first is by simplifying the taxation system and reducing tax rates. Most groups who have carried out surveys and analysis of our economic performance to date have drawn attention to the taxation system as a serious factor and a major disincentive to the creation of employment. The National Economic and Social Council, the Commission on Taxation and the Culliton report have made similar points and recommendations on taxation. The Minister has followed through on a number of those recommendations in this Bill and he has gone further than most Finance Bills in trying to implement certain proposals put forward by the Commission on Taxation and other bodies. It is hoped that by streamlining the taxation system and reducing tax rates we will give a greater incentive to the private sector to create more worthwhile employment.

I welcome sections 12, 13 and 14 of the Bill. Section 12 abolishes the concessionary tax treatment of share options granted under approved share opions schemes. These schemes introduced in 1986 meant that the recipient of share options were liable only to capital gains tax, a charge which arose only in the eventual sale of the shares.

Section 13 confirms the budget day measure regarding tax relief on dividends. Section 14 deals with the income tax relief available on interest on loans to acquire shares in a quoted company. This section eliminates the relief in respect of such loans applied on or after budget day. He also referred this morning to farm taxation. In order to avoid a clawback of stock relief, farmers are allowed a two year period to rebuild herds which have been depopulated due to disease eradication measures. Section 20 extends this provision by a further year.

It has also been indicated that the urban designated areas scheme has not taken off as originally intended. In Tralee we were very pleased to have an area designated which has helped us to secure a new conference centre and has helped to attract many worthwhile conferences to Tralee over the past few years, thus creating much needed employment. I hope to see this development extended over the coming years to areas like Listowel, Ballylongford and Castleisland and also to the seaside resorts of Ballybunion and Ballyheigue to encourage development. I appeal to the Minister to consider the extension of this worthwhile scheme to the areas I have mentioned. Developments should not be prevented because of a deadline at the end of 1994. The Minister should be flexible in that regard.

The Finance Bill is courageous. It contains many proposals in relation to the development of Europe. We must be seen to bring the benefits of European Union to all parts of Ireland, European Union is fundamental to our future progress. We need to invest more in the development of tourism and to offer attractive incentives for private investment in tourism.

Sitting suspended at 1.35 p.m. and resumed at 2.30 p.m.

When Deputy Séamus Brennan was Minister for Tourism, Transport and Communications he launched the tourism task force consisting of representatives of banks, hotels, accommodation providers, unions and marketing sectors to examine the potential of the tourism industry. I understand that, following discussions, proposals will be put forward on this issue. I hope a tourism plan will be devised for the country with special recognition for areas with potential for tourism development and job creation. I hope that special recognition will also be given to areas not interested in tourism at present but which have potential. I have no doubt that the present Minister, Deputy Geoghegan-Quinn, will follow on these lines.

The Minister, in his speech, made special mention of corporation tax. I welcome section 23 of the Bill. It ring-fences the losses arising from limited paratnerships to the trade of the partnership. A similar restriction is being introduced under section 25 for the capital allowances on holiday cottages. These capital allowances were being increasingly used as a tax shelter, which was in some respects better than the relief for rental residential accommodation in that the investor could put the construction costs of the cottage against all his income, not just his rental income. At the end of the ten year qualifying period, the investor would own a holiday home in respect of which the Exchequer would have contributed a large part of the cost. The Minister has, in response to many representations, introduced amendments to these sections. I congratulate him on that.

I would also like to refer to the question of incentives which the Minister spoke about this morning and, in particular, the Government assistance to the Cork-Swansea Ferries. With the aid of a Government grant, Swansea-Cork Ferries operated a service from May to September 1990 and carried a total of 88,000 passengers and 23,700 cars. A grant of £500,000 and a loan of £500,000 were made available by the Minister for Tourism and Transport to the company. The loan was repaid in full in December 1990 and the comany recorded a profit, before tax, of £310,000 for the year. The company chartered the Celtic Pride from the Polish Baltic Shipping Company to provide the service for 1991, with renewable options.

The season was extended to eight months from March to October and a total of 125,000 passengers and 33,000 cars were carried for the season. No grant was made available for 1991, but a loan of £500,000 was renewed. The loan was once again paid in full by the comany and pre-tax profits of £952,100 were returned for that year. The chartering costs of the ship and the full costs are paid in US dollars. The dollars were bought early in the year on foot of guarantees from three Irish shareholders by way of forward contract.

Here I must give credit to the local authorities, because it was due to the input of Kerry County Council, Cork County Council and Cork Corporation that this was possible, with the aid of substantial funding from the Government. It also created worthwhile employment. This year it is hoped to improve on last year's figures. I have no doubt that the ferry has been a major boost to tourism in the Kerry-Cork area. A target of 130,000 passengers and 34,000 cars has been set for the current year.

As a result of Maastricht we will be able to get additional assistance from the EC to promote tourism, agri-tourism and so on. It will be to our advantage to ensure that we are part of a greater European Union.

I welcome the setting up of the jobs forum. Only good can come of it. I am disappointed that the Fine Gael Party decided not to take part in the forum as they were the party who originally called for it. I would hope to see them take part in the employment committees.

I congratulate the Minister for putting such excellent and far reaching legislation before the House. I wish him well.

I would like to share my time with my colleague Senator Costello.

Is that agreed? Agreed.

I welcome the Minister to the House and compliment him on the attention and respect he shows this House during debates on financial matters. He sat through the debate on the Appropriation Bill here before Christmas; he has been here in the House all morning and I am very pleased to see him here again this afternoon. I thank him for the attention and respect he shows this House. I greatly appreciate it.

The Bill before us today is one of the most complex Finance Bills ever to be placed before the Oireachtas. It is an enormously long and detailed Bill and it is difficult to expect any of us to be able to fully comprehend all the details of what is involved. One of the reasons the Bill is so long and as complex is that it contains many of the measures required to make adjustments necessitated by our expected entry into the European Union, and the challenges which economic and monetary union will present to us. These challenges are enormous and unavoidable. Joining the European Monetary Union will result in considerable constraints on our ability to manage our own affairs. It might be good for us to be members of the European Monetary Union, but it may not be a pleasant experience, particularly in the short term.

We are debating this Finance Bill in the context of an unemployment level in excess of 280,000. If we are to believe predictions and work out the implications of the Minister's budget proposals, we are heading rapidly for unemployment levels in excess of 300,000. That presents an enormous challenge which I am not sure we are geared up to face. What is happening should be seen in the context of what is likely to develop here between now and the year 2000. I understand that approximately 22,000 people are scheduled to enter the jobs market each year between now and the year 2000. That figure has to be seen in the context of our best ever efforts at job creation, 17,000 jobs were created in our best year. Even if we equal that maximum level of achievement, we will still see increasing levels of unemployment. The outlook is very disturbing and grim. We can expect to see unemployment increase unless an unprecedented and enormous effort is made at job creation. We need to considerably exceed our best efforts and it is very difficult to see how that can be done.

The alternative is that a resumption of emigration. That is not a very appealing prospect. Admittedly that would reduce unemployment but I would not want to see it happen that way. However, if the number of people emigrating does not increase again, unemployment levels will continue to increase. I wonder if many people understand the full dimension of the challenge we are facing.

The Culliton report spelled out these challenges in grim terms. Any of the economists who deal with the area of economics has little hesitation in spelling out the dimensions of the challenge which the average person does not understand or appreciate in the context of our past achievements. I will not join those who come up with instant solutions. That is unrealistic and serves no purpose. It is very important that there should be wider understanding of the dimensions of the problem in the hope that we will begin to work towards solutions. Solutions are possible. Everybody should understand what the options are. The employment committee, of which I am honoured to be a member, should at least spell out the options, to the public. If we make sacrifices than we can expect certain things to follow but as things stand, many people think we can have it every way. Unfortunately we cannot.

The Minister referred to the fact that there was no shortage of expert reports on income tax, there are enough to fill a small library. One could spend the rest of one's life reading such reports but it would not do much good. Most of these reports seem to say that there is a great need to broaden the tax base. Everybody agrees with that, including myself, but the difficulties arise when you get down to the specifics of broadening the tax base because some people will be paying more tax. As soon as that is mentioned those people will begin to react in a very negative manner and will resist this move very strongly.

In relation to taxation generally, there is a need to shift tax in such a way that people will be encouraged to take more risks than has been the case in the past. In the past most investors understandably went for the safe option. They put their money into property, and investments guaranteed to produce a reliable income. That element must to some degree, remain. The balance should be shifted to make it more attractive for people to take risks when they invest. In the area of investment and tax, over the years a tax advisory industry has grown where many people seem to make large amounts of money simply by advising people how to invest to reduce their tax liability. I wonder if that type of industry serves any real need. It might be desirable to alter things so that the need for such services could be reduced and the time, energy and capacity of the people engaged in such services might be directed elsewhere, for example, to improve our economic performance and job creation record.

The Minister referred to the levels of taxation which he was imposing on co-operatives. I accept that there is a need for co-operatives to be treated in the same way as other forms of industry. However, we have to see co-operatives in the light of their history and the social purpose for which they were established. Many co-operatives have simply turned into private limited companies, but I would have preferred the Minister to have phased in the measure so that the burden of taxation which he has imposed on them could have been reduced. Could the Minister not encourage co-operatives through the taxation system, to investigate more in product research, product development and in areas which would create more jobs? The point made by Senator Foley in relation to small co-operatives is a very important one. I hope the Minister would have another look at that. A number of small co-operatives are struggling to get by and they should be encouraged to get something going. They should be given financial encouragement if it is feasible.

Much attention has been focused on the taxation levels paid by those on the higher tax rates. The Progressive Democrats like talking about this. They seem to believe that if the higher rate of taxation were lowered, some form of magical job creation energy would enter the economy and hundreds of thousands of jobs would be created in a very short time. I do not subscribe to that view. The United Kingdom experience in the days of Mrs. Thatcher clearly indicated that that would not happen, even if we moved in that direction. That is not necessarily a desirable way forward and I do not believe it would generate the type of response they seem to believe it would.

I would like to draw the Minister's attention to a specific area of which I have a certain amount of knowledge, the possible development of science parks around areas of expertise, mainly the universities, the regional technical colleages and so on. I would like to hear the Minister's response to the suggestion that some extra encouragement should be given to the development of those parks. A great deal of knowledge is available in the colleges and yet very little formal or structured effort is made to exploit that knowledge. There are considerable options, they are referred to in the Culliton report and the idea has considerable potential. There must be opportunities in relation to Trinity College and University College Dublin, where I work when I am not here. There are also opportunities in the various other areas where we have third level colleges. That potential has not been exploited.

There seems to be antagonism to any idea that we should expand the public sector. If the jobs problem is to be tackled in a meaningful manner, we must have some expansion in that sector. I am not suggesting that we should just dump money into the public sector and hope for the best. That is not a wise course of action, but there is potential for further expansion and for further investment in public companies such as Bord Na Móna. As they have considerable capacity at present, they would seem to be in a position to develop in a manner that many of the smaller companies are not geared to doing.

Senator O'Keeffe in his speech referred to the perks which some of the owners of big cars have had available to them over the years. To a large extent, I would agree with his line of thought, but perhaps the Minister has been too hard on people who are supplied with company cars, in particular those who are engaged as company representatives. For these people a car is absolutely essential. I suspect, to some extent, the antagonism to the car comes from the Civil Service. Some people in the Civil Service have a thing about cars. They seem very anxious to hinder the usage of cars, and are anxious to ensure control of the tax allowances which might be available to people with cars. I am not in favour of people who have very large cars being given very generous allowances, but I am concerned for people in very ordinary jobs, who badly need a car to enable them to do their work. Many of them travel in very modest family cars.

Anomalies still exist in the legislation in relation to the taxation of separated people, specifically those who are now involved in new relationships. There is a great need to reorganise the law in this regard. The problem is considerably wider than the scope of the Finance Bill. There seem to be considerable anomalies in relation to inheritance and so on. People form new relationships which in many cases amount to second marriages and if they die enormous tax penalties arise from the distribution of their money.

The Finance Bill contains very sweeping, additional powers for the Revenue Commissioners, which are a matter of considerable concern to many business people, particularly to small, very ordinary business people who are worried as to how those powers will be exercised. I accept the need for those powers. I am prepared to go along with them, but I want to sound a note of concern about them. I am most concerned that these powers should only be used by the Revenue Commissioners as a matter of last resort. They should not be heavy-handed in the operation of those powers.

If I heard the Minister correctly, he mentioned that the Revenue Commissioners were taking courses on how to engage themselves with the public and so on. That is very desirable. The language used by the Revenue Commissioners is excessively oppressive and abrupt, which is unnecessary for the most part. For those people who are prepared to pay their tax such terminology is quite unnecessary. The Revenue Commissioners approach to them should be more polite. They should have a more highly developed, public relations oriented manner.

The other side of the coin is that those people who are firmly committed to not paying their tax, are all too well aware of the type of language the Revenue Commissioners use and they take no notice of it. They have a whole array of tax consultants, advisers and a battery of lawyers to protect themselves from the Revenue Commissioners. For that reason, I do not think such heavy language really serves any useful purpose. It annoys, disturbs, and upsets people who are going to pay their taxes anyway and people who are opposed to the idea of paying tax will not be frightened.

There are considerable new changes in the Finance Bill in relation to the licensed trade. On the night of the budget I met a publican who seemed to be very aware of the provisions in the Finance Bill. I was very impressed at the capacity of the Minister to get through to a busy owner of an important public house. It was very impressive. He was fully aware of all aspects of the budget and the man in question has not fully settled down since. He still remains very disturbed. He has had a number of conversations with me and with many of his other customers.

I welcome the changes introduced by the Minister. They are more appropriate and more just than what was introduced initially using valuation as a basis. There are many anomalies in the law in relation to valuation and in the extent to which the process is up to date. On the matter of publicans and public houses, perhaps there is a case at this stage for liberalisation of the licensing laws. There is a strong case to be made for liberalisation of the law which would allow some of the licences which are now held in rural areas to be transferred to the urban areas.

I conclude by referring to the remarks which were made this morning by my colleague, An Seanadóir Pól Ó Foighil, who spoke for some time. All he seemed to be saying was Ochón, Ochón agus Ochón, arís agus arís in relation to the west. What good does such a speech do? Where does it get us? I know there are problems in the west, but we must begin to think in terms of reaching some solutions. I do not think any useful purpose is served by statements such as "Níl aon dóchas ann". That is the politics of "táimid cráite, táimid briste". I do not see where that gets us, and I certainly do not see where it gets the people in the west who are in difficult circumstances.

Finally, for better or for worse, and in spite of all the difficulties which Senator Pól Ó Foighil spoke about in terms of the neglect of the west and so on — I do not dispute that there are considerable levels of neglect in some cases — the bottom line remains that the people of the west, continue to support Fianna Fáil in proportions considerably in excess of the national average. If this country is to face up to the existing problems and if we are to try to find solutions to our enormous unemployment difficulties, I see no purpose in continuing to ochón, ochón. That will get us nowhere. We have to start thinking in terms of solutions and we owe it to the thousands of people on the dole queues to put our heads together to try to solve this problem. Many people have serious reservations about the employment committee, and I certainly am not naive about it. However, it is a start, an effort on the part of the Government and I hope the people who have reservations about it will do better than continue to moan and groan without putting forward alternative solutions. That attitude will never get us out of the mire. It is time we began to look forward and to grasp any opportunities to help resolve our problems.

I propose to share my time with Senator Farrell.

Acting Chairman

Is that agreed? Agreed.

There could hardly have been a less desirable Finance Bill for any new Finance Minister than that which is before this House today. Much of the target of the Bill could be, and no doubt has and will be, argued over for a long time to come by experts, each in their own specialist fields.

Our job here is not just to look at any one aspect in isolation and see how it may affect us or those we individually represent. We must concern ourselves in down to earth pragmatic terms with the overall effect — the cross-over effect of one area of taxation or tax relief on another, which is contained within the Finance Bill and which is, or might be, contained in existing or future legislation.

The temptation to take a softly, softly approach to financial legislation is great, to introduce some reliefs and restrictions and see how they run or are digested. Such an approach would lead to more uncertainties than the financial markets could ever dream up on their own, and one has to accept that the financial world is more than prone to severe cases of the jitters, albeit among the most dreaded diseases in financial circles.

We have the 1992 marathon Finance Bill designed to take into account the various changes which are necessary as a result of EC developments, in particular the abolition of all exchange controls from 1 January 1992. This brings me to my first point which I would ask the Minister to consider again, either now or in the near future. The shape and effect of the welcome adjustments to deposit interest retention tax — DIRT as it is known — are too severely limited to have any meaningful effect on either depositors or revenue receipts. With a ceiling set at £50,000 for special deposits, at a reduced tax rate, the whole scheme seems set, for the most part, to be applicable only to small personal savers. There can be no question that such encouragement to personal savings is to be applauded and, indeed, the general high level of savings to which we aspire in Ireland will no doubt see us move quickly out of the short lived depressed state of our economy.

However, we should realise that many of those who might benefit from the special deposit arrangements — particularly at the lower end of the scale — will either be unaware of the scheme, unlikely to be made aware of it and not sufficiently sophisticated in matters of finance and taxation to benefit or to be affected by it; they will simply leave their savings where they are. Those who could and would benefit by the special deposit scheme are unlikley to be attracted by it simply because the ceiling at £50,000 is too low by at the very least half.

The real money — the big six figure deposits — will go overseas as they have in the past. Even if the new regulations designed, or should I say, written, for the reporting of individuals overseas deposits plans are taken into account, the overall effect will only be to add to the grand list of unenforceable regulations. There is every reason to look at a much higher ceiling which can bring about a twofold beneficial increase on cash deposits held in this country.

We can simply make it not worth the risk of moving large deposits to offshore tax havens or overseas to more favourable tax climates and we can encourage the repatriation of funds which are currently overseas. The Central Bank, no doubt, have fairly accurate but undisclosed estimates of the many millions of pounds this represents and how much of this is made up of deposits of up to £100,000.

Ten per cent of any sizeable part of this money would make even the most cynical taxman smile. Of course, it is not as simple as that. Keeping large deposits at home is one thing, getting the accumulated deposits which nestle overseas back home from sunnier tax free areas is another. Yet, we would like to have it back where it belongs. In many cases those who have such holdings overseas would also like to have it here, but only if they were not about to find their funds locked in.

As the proposed regulations stand, a resident repatriating or, simply bringing in, quite legitimately, accumulated funds from overseas would neither be in a position to invest these funds in Ireland nor, if he or she so wished, to move them overseas again without being caught up in complex taxation regulations. It is a no win situation without some form of immunity, some simple tax amnesty to put all special deposits on an even footing.

Tax amnesties are not popular on the face of it as they give preferential treatment to those experts in tax avoidance and those guilty of tax evasion. However, there is often a fine and controversial line between avoidance and evasion. The practical view we have to accept is that we can all benefit by attracting the funds, which we do not have access to now, back into the system by declaring a simple tax amnesty. In line with the proposed strengthening of the Revenue Commissioners' powers to seek out evasion, such an amnesty would be a suitable and practical arrangement at this time.

The second and equally serious point I would ask the Minister to consider again is the removal of tax concessions on loans to finance the purchase of shares in publicly quoted companies. Clearly, the intention is not to discourage private investment in industry. Our industries, if they are to develop and expand as we would wish, as wealth and employment generators, must be assured of maximum support from investors. Investors must be encouraged to realise funds for investment against existing assets not held in readily available funds for the purpose of investment. Of course it is a risk for the investor but, in the spirit of enterprise which we so desperately need in Ireland, risk is a necessary ingredient; enterprise needs funding.

Too many of our entrepreneurs go overseas to develop their talent. Without some encouragement to work at home this trend will continue and with the removal of investment incentives and the introduction of a single 40 per cent capital gains tax, together with a reduced tax free allowance, we may well be looking at an acceleration in the movement of wealth from our shores.

The cross-over effect of the adjustment to DIRT and the removal of investment tax relief together with the capital gains adjustments, add up to a vicious circle where the saver could benefit greatly if only there were opportunities created by now departed investors or investors turned savers for him to have the necessary funds to benefit from saving.

The Minister has already shown his willingness to look again at some of the proposals contained in the Finance Bill, as indeed have the Government made clear their anxiety to maximise the opportunity for free and open debate on the Finance Bill. The Minister has given indications of a phase two Finance Bill. We can, perhaps at either Stage, see a more equitable balance between tax revenue benefit and business incentive brought about with a minimum of damaging delay.

Mr. Farrell

I welcome the Minister to the House and thank Senator Bennett for allowing me to share her time. There are a number of points I wish to raise in relation to tax on amusement and gaming machines. This section is primarily concerned with the implementation and collection of the new tax of £100 on amusement machines.

With the advent of new technology there is now a very fine line between what constitutes an amusement machine and what constitutes a gaming machine. In this regard there is now in operation in Dublin and other areas, a considerable number of what is known in the trade as credit poker machines. As far as I can ascertain, these machines were manufactured and introduced to Irish arcades in many areas as a response by the trade to the local authorities rescinding of Part III of the 1956 Gaming and Lotteries Act. The Minister will be familiar with this because I understand it was he who proposed the relevant motion in Dublin Corporation in 1985. He did so with the stated intention of urging the then Government to proceed with the early introduction of legislation updating the 1956 Act. That was seven years ago and since then there has been no move by any Government to update that Act. I mention this by way of a background illustration because the 1956 Act is still the relevant Act. It does not define an amusement machine and neither does the current Finance Bill.

The definition of a gaming machine has been the subject of many court proceedings in recent years. The definition of the categories of machines is central to any meaningful and efficient administration of a system of taxation and more especially when a new system of taxation is being introduced, as is the case under this Bill.

This brings me to my main concern, into what category does the Minister propose to place credit poker machines for the purpose of taxation under this Bill? He has two main options. First, he can define them as amusement machines and in this category they would attract a tax of £100 per annum. I do not see how the Minister can proceed on this basis because, as he may be aware, a Dublin District Court recently convicted a Dublin operator of credit poker machines of illegal gaming, yet the same court decided these credit poker machines were gaming machines in accordance with the definition of the 1956 Act.

I am aware this decision is under appeal to the High Court and that, in the circumstances, the District Court decision can be regarded as merely provisional. Nevertheless, the successful prosecution of this case by the garda, the support of the State's legal advisers and the decision of the district justice must prevent the Minister for Finance from now defining credit poker machines as amusement machines. Furthermore, if the Minister did so it would be disastrous for the Irish amusement trade and would lead to an undesirable proliferation of these machines all over the country. I am advised on good authority that such a development would be strongly opposed by all responsible persons in the trade. Therefore, I strongly urge the Minister to ensure this does not happen.

I now come to the second option. The Minister can define credit poker machines as gaming machines. This is what these machines really are. This course may pose problems for the Minister and I realise the question of definitions and other related matters in relation to gaming machines is more properly the function of his colleague, the Minister for Justice. If this is the case, I suggest that he urgently consults the Minister for Justice on the matter.

There is a further option open to the Minister on this issue, namely, to ban credit poker machines entirely and many responsible people in the trade have expressed their wish in this regard to me. However the amusement trade exists and gives a substantial amount of employment. Therefore, it should continue in a controlled and well regulated environment, but to achieve this end many issues must be considered.

I suggest, therefore, that the Minister consults with his colleague, the Minister for Justice, as to how these problems can best be resolved. He may consider the time is ripe to set up a committee mechanism, with some limited representation from outside the public service, to advise him as to the best way forward. I believe this course would be most essential.

I would like to pay tribute to the Minister and congratulate him on the establishment of the jobs forum because that is an important development at present. However, I would ask him to amend the regulation whereby a person must have been on the live register for a year before being assisted in setting up a business. I have always mentioned that I would never draw the dole and I never did, but my first job was as a temporary postman and I lost it because I was not on the live register; because I was not on the dole I could not hold a job of temporary postman. The same applies today. I have seen many firms close down and some of the people in those organisations who wanted to revamp them or, alternatively, set up smaller units on their own, were precluded from doing so because they would not get assistance unless the people involved were on the live register for at least six months. This is regrettable because within that six months the trade goes elsewhere and the business is dead. The Minister should reconsider this matter and take into account all unemployed people, regardless of whether they are on the live register because for many it is anathema to draw dole and will not do so or be part of that system. They may be living a poor miserable life but they put their principle and pride first. Those people cannot be assisted in starting up a business because they are not on the dole. If a firm closes and some members of the firm wish to start an alternative business in order to salvage some of the custom, they should not be denied an opportunity to do so. I would welcome a move in that direction.

I propose to divide my time with Senator Hourigan if that is agreeable.

Acting Chairman

Is that agreed? Agreed.

As an added measure of generosity, in view of the fact that Fianna Fáil did not take up their full time we might be allocated a few minutes extra. I will leave that to the discretion of the Chair and my good friends on the other side.

If the Senators share their time, the time allocated should be that for one speaker.

I could respond to Senator Lanigan but I expected a more generous response.

If you want to talk, do so.

I will not waste my few minutes with fruitless banter.

The Senator has wasted three minutes already.

Recently, the Minister has been criticised by the media for making certain changes to the Finance Bill following mature consideration of representations made to him, but I do not share that criticism. In fact, in the few changes of which I am aware, I believe it was a mark of courage on the part of the Minister to realise that, perhaps, there are better ways of achieving certain objectives. I welcome one change and I do not mind paying a compliment to the Minister in this regard. As I was nominated to the House by the licensed trade, I appreciate the fact that the Minister recognised there was a better way of dealing with the increased charges relating to the renewal of publicans licences.

The proposals in the budget caused serious concern in the licensed trade and representations were made to the Minister in this regard. However, certain changes can still be made and one is in relation to the proposed table of tiers in the Finance Bill. The Minister should include an additional tier in the bracket between £300,000 and £500,000 turnover. I ask the Minister to make that change.

Many people regard the licensed trade as a source of finance. That is a serious misconception. The people who hold this viewpoint judge the trade by the top 5 per cent. I would like to put on the record a synopsis of an investigation carried out by a reputable firm of accountants and management consultants, Stokes, Kennedy and Crowley. They made a number of points as a result of a full investigation into the viability of the licensed trade throughout Ireland. They stated:

When wages are charged to the accounts for the publican and/or his family, 43 per cent of Vintners would show a loss in 1989 and 25 per cent would break even.

When wages are charged to the accounts, Vintners with a turnover of less than £195,000 display consistent losses.

There is a significant and increasing reliance on food sales to maintain overall Vintner profitability.

Over the period 1986-89, drink turnover decreased in real terms by 2 per cent while overall costs increased by 6.3 per cent.

Average trading hours have increased from 82 hours in 1985 to 88 hours in 1989.

From 1982 to 1989, Vintner turnover declined steadily in real terms by 14.7 per cent while individual personal consumption on goods and services has increased by 14 per cent.

Drink volume and value declined by 30 per cent and 12 per cent respectively over the period 1979-89.

The volume of business in rural areas has declined steadily. Demographic trends underline the need to rationalise the over-supply of rural pubs.

Those are important points to bear in mind when judging the licensed trade.

Will the Minister explain why the same scale of licensing renewals is not being applied to registered clubs given that they enjoy many distinct advantages over pubs? Registered clubs are in direct competition with pubs, they do the same business, but clubs benefit from grants and other financial assistance not available to pubs. Clubs trade long after the legal closing time and many are not registered for VAT and other taxes. If the Minister is seeking equality in the licensed trade, I suggest he consider applying equal costs to registered clubs.

In regard to the requirement that all clearance tax certificates must be produced by September next for the purpose of renewing a licence, I would remind the Minister that there are only a few months left and many publicans may not be able to meet the deadline. What is the position with regard to what are known as inpocket licences? Will such licences be renewed for those who have retired and are no longer in the trade but who renew their licences each year because it appreciates in value? The Minister should consider a lead-in period of one or two years in regard to the production of tax clearance certificates.

In regard to the additional powers given to the Revenue Commissioners, I want to refer to Revenue audits, the failure of certain Revenue inspectors to observe the Charter of Rights and a recent document issued by the Revenue Commissioners. I accept the Minister's point in relation to tax evasion, business scandals and so on and I have no serious objection to the Minister providing Revenue with additional powers. However, if these powers are being provided, the Minister should insert a clause as a safeguard against abuse of this power or victimisation of compliant taxpayers. I would like to see-safeguards in place which give a statutory base and a force of law to the Charter of Rights. I invite the Minister to confirm that is his intention and if it will be of assistance, I propose to put down a recommendation to that effect.

Revenue audits have been in practice for two years and the pattern that is emerging in the treatment of the small family owned business has give rise to disturbing results. Surveys of small family businesses carried out by trade organisations reveal a consistent pattern of behaviour by some Revenue auditors, which falls into two brackets. If the business is large enough to employ a professional accountant and transactions are computerised, Revenue auditors are seen to behave in a professional manner. Investigations and inquiries are being conducted by professional people and few complaints come from people at the level of business. However, there are a large number of complaints from smaller business people who cannot afford the services of a full-time qualified accountant, whose transactions are not computerised, where members of the family are doing the books on a part-time basis and where the maintenance of records and documents may not be as efficient as they might be, particularly if they are going back over a period of years. Surveys carried out by trade organisations in relations to Revenue audits of small business people have shown a disturbing attitude by some Revenue staff. The Charter of Rights is being ignored and the presumption of honesty, which is the first requirement of the Charter of Rights, is being replaced by a presumption of dishonesty.

The Charter of Rights was published by the Revenue Commissioners a few years ago and they emphasised its purpose. The charter stated that the "objective of the Revenue Commissioners is to collect taxes, duties and other charges placed under our care and management in an efficient way and at the least possible cost to the public. This objective is to be achieved in a manner which fosters the highest degree of public confidence in our integrity, efficiency and fairness and encourages voluntary compliance with our Revenue law and deters evasion and avoidance."

The first item in the Charter of Rights states that there must be courtesy and consideration on the part of Revenue staff. The presumption of honesty is that a person has dealt with tax affairs honestly unless there is reason to believe to the contrary, and subject to the Revenue Commissioners' responsibility to ensure compliance with the law. In relation to information, it says that every reasonable effort will be made to give access to full, accurate and timely information about Revenue law and entitlements and obligations under it. Revenue Commissioners staff are entitled to expect to get the full facts and co-operation.

There is more than that in the charter. In view of the additional powers being given to the Revenue Commissioners, there is a growing belief — which is one I share — that there is a need to include safeguards to protect the honest, hardworking compliant taxpayer. The first step the Minister should take is to ensure that these safeguards are put in place and to give this charter the force of law. I invite him to do this, as part of this Bill.

The Revenue Commissioners have admitted that many of their auditors are trained in interrogation techniques. These techniques can be used with devastating effect on vulnerable, honest, hardworking business people. Surveys have shown that after a friendly first meeting the attitude of the inspector changes. Accusations of dishonesty and concealment of income begin to flow. If requests for supporting documentation going back over a number of years cannot be complied with, the family and business in question are advised that they are in conflict with the law, that they may face subsantial fines and imprisonment, that their only hope is to admit false accounting and deliberate concealment of income and to seek a settlement with the Revenue Commissioners. Major assessments are carried out when accounts are set aside and substantial settlement figures are imposed.

I have no sympathy whatsoever with tax dodgers but I believe that if evasion can be established with sufficient proof, then those responsible should be brought to court and face the full rigours of the law, rather than having a situation develop — as unfortunately these surveys would appear to indicate — where honest, hardworking people, who, because their knowledge of keeping accounts to the standard required is probably insufficient, are harassed and intimidated into making settlements which, perhaps, are not due. What the Minister is then receiving is extortion money. Perhaps that is emotive and strong language but I intend to quote some examples of what has happened to business families as a result of their experience of business audits which justifies the terminology I am using.

Reports of small family business people who have had Revenue audits show that the objective of setting aside accounts and finding the means as quickly as possible to do it because an objective at an early stage. It continues until that result is achieved. The vast majority of family business people are honest and proud people who regard their own integrity and standing in the community as being of great importance. Many of them are stretched to make ends meet in a difficult economic climate. Pressures on small businesses are many and growing. Unfortunately, they are vulnerable and easy prey for the interrogation techniques that are definitely required to break the hardened and professional operator and tax cheat. Appalling and disturbing consequences for some families are emerging from this exercise. It is no pleasure for me to give some examples to the House.

The first example has a certain element of lightness about it. It concerns a publican to whom I was speaking quite recently. Fortunately for this man, he had served as an officer in the United States Marines in Vietnam. Part of his training concentrated on preparing him to deal with interrogation by the Vietcong, should he be taken prisoner. He told me after his Revenue audit that were it not for that training he would clearly have been broken. I believe what he told me. I will give a few other examples.

A couple I know bought a pub a few years ago. The wife kept the books. They worked hard to have this business succeed. A Revenue audit took place. The interrogation techniques that I referred to were used. The husband and wife were interviewed in separate rooms with similar list of questions. They were then brought together and challenged about any inconsistencies in their replies. This went on for a number of days. The wife felt responsible because she kept the books. She had a nervous breakdown followed by a miscarriage, and is now under continuous medical care. Their business failed and it is now sold. The achievement by the Revenue Commissioner officials in that case is a broken family and a broken business. The tragedy, of course, is that at the end of the day no irregularities were proved or found. These cases are on record and will be presented to the Minister very shortly.

The second case to which I refer concerns another family business. A young family were left fatherless in the most tragic circumstances because of the pressures created by a Revenue audit. Again, no irregularities were discovered at the end of the day. I am personally aware of a girl in her late twenties whose father is now in a wheelchair as a result of a stroke he got two years ago. She took over the running of the business with her mother. Two members of the family are employed in the business, and there are three part-time employees. She was due for a Revenue audit a few weeks ago. The night before the audit her mother took seriously ill and at 10 o'clock on the following morning the mother was in an operating theatre in the local general hospital. The girl waited for the Revenue inspector to call. She explained her dilemma and asked him to put back the audit for a week. He agreed, but then inquired as to whether her mother was in a public or private ward. The techniques was already being applied. I have spoken to that girl since. She had heard of the experience of Revenue audits. She has worked hard to keep the family business together. She is in no position to go through with this exercise and I am satisfied that when she fails to produce the first linking document she will collapse and beg for a settlement.

When the techniques required to break hardened tax thieves are relentlessly used on vulnerable people, further tragedies will inevitably affect more families. It is essential that, where necessary ordinary decent, honest people are protected from the tactics I have referred to. The Charter of Rights is now necessary. We have a duty as legislators to protect the rights of the ordinary law-abiding citizens against abuse or ill-treatment by any arm of the State. We do that effectively where, for example, oppression or alleged oppression by the Garda is concerned. A few days ago a judge released a murder suspect because, he claimed, there has been oppressive questioning.

The matter you referred to is sub judice and should not be referred to.

We have often discussed here, after the event and after we should have done our duty, the presence of a heavy gang in the Garda and in the police force in Britain. That gave us the Nicky Kelly episode. It gave us the Birmingham Six. It gave us the Judith Ward case. As legislators, we stand condemned for our failure to nip in the bud the activities of the so-called heavy gang. We failed to do so. We had the knowledge but, unfortunately, we also had the cowardice. What I am saying quite bluntly is that if the nucleus of another heavy gang is emerging within the ranks of another arm of the State and applying the same techniques and the same pressures that broke the likes of Nicky Kelly, then we have a legal duty to act in order to ensure that such tactics will never again be used by an arm of the State against any of our people.

If the Revenue needs extra powers, then I am in favour of giving them. If they need extra powers to break the professional tax cheats and those who avoid their responsibilities to the State, I am in favour of giving these powers. In my own experience of dealing with the Revenue in relation to VAT audits I could not complain in relation to the treatment I received or with the approach of the people concerned who were dealing with me but, unfortunately, the pattern emerging from the surveys I have referred to clearly indicate there is a growth of unacceptable practices against genuine honest traders and business people. Therefore I propose that the Charter of Rights be given legal effect in the Finance Bill. There are people in the Revenue Commissioners who would welcome its inclusion. Their own words in preparing and producing it indicated they wanted to be perceived as dealing honestly and fairly with the public. They wanted respect for their institution and I want to see that also. I do not want to be misunderstood as advocating that whatever powers are genuinely required should not be provided. I am in favour of that, but I believe it is necessary to include the safeguards to protect the people I am talking about and who have been vulnerable in the circumstances I have outlined.

The complaints I have referred to are widespread and well documented. It is time to face up to this. It is probably not a very popular thing to do, but nonetheless I believe I have an obligation to do so.

I will conclude by reverting to what I referred at the beginning of my contribution. The Minister left us for a short time but I am sure he has been given a note of certain matters I raised. I did, of course, compliment him.

I was on the phone, and I was watching on the monitor. I thank the Senator for his nice remarks.

There were a couple of queries I addressed. In case there might be any misunderstanding in the course of their transmission, I would like to repeat them. I referred to my belief that the same licensing regime and costs should apply to registered clubs as apply to pubs. I made the point that clubs are in direct competition with pubs. They enjoy certain advantages which pubs do not in so far as they receive grants and other financial services. I also made the point that clubs rather than pubs trade long after the legal closing time for pubs. Many are not registered for VAT and for other taxes. If we are to have a level playing pitch and equality for everybody, let us all operate on the same level.

I also mentioned the requirement for a tax clearance certificate and I referred to the fact that many rural pubs would be below the VAT threshold. Therefore, in the few months between now and September, they may have difficulty in getting the tax clearance certificate due to the fact that they are below the VAT threshold. I also want to know what is the position in regard to what are known as the inpocket licences. This refers to people who no longer trade and who have retired. They renew their licence each year because a licence has an asset value. They are not trading so they are not going to have a tax clearance certificate. Are such licences, therefore, non-renewable? Are they going to lapse?

I spent a long time on the matter of the Revenue audits and the need to balance these with giving effect in law to the Charter of Rights. I look forward to the Minister's response. Perhaps there are others who either share or disagree with my view. Surveys now being conducted will reveal a most disturbing trend and, as legislators, we should deal with this situation before it develops to the point many of us would regret. My concern is solely for the honest, hardworking small business person who has not the resources to employ a full-time accountant or to computerise his business. Such people seem to be getting a raw deal, from the evidence that is emerging from these surveys.

I was glad to have the opportunity to speak on this debate. I had other matters to raise in regard to employment opportunities, the withdrawal of certain encouragements which I believe a workforce should always receive if you are to get productivity and so on. However, I have not the time to deal with these matters.

The Minister has done an excellent job in the proposals which he has put before us in attempting to bring financial rectitude into the taxation system. I agree with every word said in terms of the increased powers of the Revenue Commissioners. Basically, what has happened over the past number of years is that the powers of the Oireachtas have been taken away and have been given de facto to the Revenue Commissioners. In each Finance Bill in the past 20 years, the Revenue Commissioners have been given increased powers which cannot be given back to the Oireachtas. Members of the Oireachtas can get up here and rail against various elements of the Finance Bill, but when the Bill is passed the Revenue Commissioners get increased powers each time. In this Bill again, the Revenue Commissioners are given powers which supersede the powers of the Oireachtas. This annoys me considerably.

The Revenue Commissioners have powers with are over and above the powers of the Minister for Finance. That should not be the case. They should be a secondary element in developing a collection system of taxation. When the Government make a decision, they should have control over the decisions made. They should not give over the control to the Revenue Commissioners. By giving over control to the commissioners, the matter goes into the courts and the Oireachtas becomes totally irrelevant as far as revenue collection is concerned.

I have been in business since 1957 and, thankfully, I have been able to stay in business since then. There are very few people in my line of business who have successfully stayed there. Revenue factors have been most significant in the elimination of businesses in this country.

Mention was made by other Senators about the problems associated with the collection of revenue from publicans. There are major problems in that area. It has to be said that the Revenue Commissioners do not employ the same business methods as those employed by any other employer in Ireland, or even worldwide. The Government, unfortunately, have allowed the Revenue Commissioners to employ what they call Revenue sheriffs, a small group who are in the multi-millionaire class. I have not seen a Revenue check on any sheriff in any county. These people are solicitors who generally employ retired gardaí to harass traders not alone for taxes that have not been paid but for the interest on late payment that might have been due and, in many cases, for collection fees. There are heavy gangs going around the country. They are in Ennis, Kilkenny and in other places.

These ex-gardaí enter premises. They came into my premises for £27, a collection fee. When the three lads came in, the girl in my office started crying because she did not know what was happening. They had been in the supermarket next door but the owner was not there. They went into a restaurant at lunchtime and the owner told them to take a stool. He was busy. They were not in collecting taxes. They were collecting the fees that were due to the sheriff.

The Revenue Commissioners should have the same collection policy as any other business. The policy should be that when one owes money one pays it. I suggest that instead of having selected Revenue sheriffs in selected counties, who are making millions of pounds out of the system, there should be a Revenue collection system in each town. The person in charge should deal with the collection of taxes just as any businessman deals with the collection of taxes. The Revenue officer could, at the end of the month tell the businessman he owes so much and it must be paid. If I am owed money I try to collect it. Why should the taxman not collect his own money? If that were done tax sheriffs in Carlow, Waterford, Dundalk and Dublin would not have multi-million pounds deposit accounts. They do not send the money to the revenue until the total tax bill is paid. They are milking the system.

I do not mind anybody coming into my business to check whether I owe tax. My books show exactly what I owe but some people have been unduly harassed by people who have no connection with the tax system. They are employed by tax sheriffs. I would like audits on the tax sheriffs and those who work for them. There is a major problem there.

I am not suggesting that people can evade paying taxes which are due but the same method of collection should be used in all cases. I have seen businesses fail because of non-compliance with tax payments. That is fair enough, but business people should not be put to the pin of their collars by tax collectors employed by the Government who do not know what business is about in the first place.

Benefit-in-kind and taxation are thorny subjects. I suggest that the policy of the Government and of the Revenue Commissioners in terms of benefit-in-kind should be addressed. There is not a single member of the Revenue Commissioners who has a car does not charge for that car if he travels on Revenue Commission business. He gets paid 73p for every mile he drives. Why should the same concession not be given to a commercial traveller who is travelling on business? If benefit-in-kind is charged against a commercial traveller, such benefit-in-kind should be charged against every civil servant who claims 73p a mile for the use of his own car. He does not pay benefit-in-kind because he buys his own car and charges mileage against the Revenue Commissioners.

I could reverse the situation and suggest that everybody who is in business should buy his own car and charge the Revenue Commissioners a stated mileage allowance against his tax, which is the proper way to deal with it. I have heard civil servants in the Minister's Department ask why should these people be allowed a car allowance when they can get on the DART from Dún Laoghaire into Dublin. If you are in Mullinahone there is no DART to Kilkenny or Clonmel. I am suggesting that instead of charging benefit-in-kind there should be the same allowance for a businessman travelling as for the civil servants. They have allowed themselves — and continue to allow themselves — payment for travelling. Let us be straight about it. The civil servants who allow themselves 73p or 74p a mile are the very people who are creating the Finance Bill stipulations over the years.

There is a very dangerous situation in section 239 of the Bill which will have to be addressed. Under section 239 where an inspector of taxes is not satisfied with the return of income submitted, the inspector may serve notice on the person concerned that a statement of assets is required by way of check on the accuracy of the return. That would mean that if I bought a bullock for a £100 today, and the market value of that bullock was £1,000 the Revenue sheriff will assess me on a statement of assets rather than a statement of income. That is the most dangerous section I have ever read. It means that any Revenue person can come into any person's home and get an auditor, an accountant, or somebody involved in business, to assess the assets in the house and then make a judgment about taxing the assets rather than a return of income. That is horrendous.

Who is going to decide the value of an asset? This means that every auctioneer and valuer in the country will have a field day because they may be called in to assess my assets, and the Revenue Commissioners will give their figure. That is horrendous in its implication. I would like the Minister to address himself to that. I can see the reason for a return of income — I presume this is what you earn in a year. It does not relate to the asset value of what is in your business or your home. This is very different from anything that has been included prior to this in any Finance Bill.

None of us could condone the unlawful use of the taxation system but I have to agree with Senator Howard that once a small business gets into the tax system they are harassed and hounded. We had earlier this year a statement from the tax authorities that 90 per cent of the tax which could not be collected was due to the fact that the people had either left the State or they could not be contacted. This gave the impression that as a small businessman I am paying extra taxes because people have come into the country and have left it without paying their taxes. Their tax is written off. If I have a tax charged against me it continues on and on.

The Minister has a job to do. I would like to ask him whether he would consider giving a tax amnesty to young people going in to the taxation system for the first time. Instead of charging as happens at present, the top rate of tax why not give them a total tax amnesty for the first two to three years they start working. As young people, the likelihood would be that they would spend everything they get. Their take-home pay would be doubled because they would not have to pay tax. They would be paying tax in the VAT section; they would be paying tax because the things they would buy, generally speaking, would be taxed very high. If they did not spend the money they would be able to hold it and they would probably put it into a bank or post office. The post office happens to be the best investment anyone can have in Ireland and the return in free of tax under DIRT. After five years you double your income so maybe these people might put their investments into a DIRT tax-free investment.

People on the live register have the advantage of free phone, free fuel, free shoes and other concessions. If somebody comes off the live register they should get a tax advantage for the few months after they go back into the workforce. They should see that when they go back into the workforce there is an actual benefit in working. After a while they could be eased back into the tax network. One of the major problems we have in Ireland is that many businesses cannot pay the rates that are needed to keep people above the level they can get on social welfare. It is not the actual amount of money but the subsidiary benefits that are important. I suggest to the Government that if they want to increase the number of people working those coming off the live register should not be deprived of certain benefits on coming back into the workforce.

The Government's overall strategy has been excellent but, as a businessman, there is no way I can continue to employ people when I have to pay the taxation involved in employing them and the tax in continuing to employ them. We do not take on apprentices any more because that is no longer viable. There are literally no apprentices in the motor trade or in the building trade. If the economy took off in the morning there would not be enough technically qualified people to take up the jobs that might become available and we would have to bring back people from abroad which is a positive thing.

There has to be some incentive to small businesses to increase the number of people they employ. There has been some aid to people taking on extra employees over the past 12 months but anybody who has been in business for a long time knows these short term measures do not create jobs. The FÁS courses have to produce long term jobs but they are not producing them at present. The Minister must look at FÁS and say to them: "You have 20,000 people on X number of courses. Where are the jobs coming from?" Are these courses an extension of education or an extension of unemployment benefit?

I would like to get a response to the suggestion of a tax-free PAYE base for people going into the workforce. I would like a response to the suggestion that such people should not be in the situation that they would get more money and benefits on the live register than they would receive at work. I say again specifically that anyone who is employed as a commercial traveller should receive the same terms of taxation in regard to their cars as civil servants receive.

I welcome the Minister whom I am very glad to see in this sensitive and important Department and I congratulate him on his previous career when he was a very fine Minister for Labour. I have some matters to raise to which I hope the Minister will be able to give some consideration and then I will engage in a little generalised comment which I hope will not be too waffling. I will keep it to a minimum because I am not an expert on the economy. Very often economic matters are dealt with in a jargon that is impenetrable to the ordinary person and that includes me in this instance. I do not presume to travel into areas where I have no competence whatsoever although I have a very good instinct and I explored this before on a Finance Bill with two of the Minister's predecessors. When Mr. McSharry was Minister for Finance there was a question of giving some tax incentives for the redevelopment of our heritage in the inner city and Mr. McSharry very courteously allowed me to meet officials of the Department of Finance and they wiped the floor with me. They proved I was wrong but I knew I was right. I said: "They have proved I am wrong but I still know I am right. Can I go and bring back some official assistance?". I brought in the distinguished economist, Paul Tansey. He worked on a paper with me, I presented it and ultimately Deputy Reynolds, now Taoiseach, introduced some of the suggestions I made. This was to do with giving some degree of tax break, in very limited circumstances, to people in the inner city who restore houses of architectural, cultural or scientific merit within a rather wide framework. We managed to demonstrate that the existing tax provisions vitiated the situation because of the cubic space requirements for getting grants, they actually required the destruction of one of the most significant features of 18th century houses, and that is the wonderful proportions, the wonderful shapes. So, in order to get a grant one had to produce rooms of a certain size, and these were rather small and pokey, and destroyed the Georgian impact.

We managed to get some incentives. There was tax relief granted. The conditions were that they had to be listed buildings of architectural merit, they had to be within the designated areas and so on. I would like the Minister to inquire about the take up of that scheme. My information is that at most two, and probably only one person has managed to benefit from this scheme. Could there be a review of this scheme? It is very narrow indeed. It only hits places like Mountjoy Square, North Great Georges Street and Henrietta Street. There are fewer than 300 or 400 houses involved, and it is very important that this ever diminishing stock of our heritage should be encouraged by taxation measures where possible. Since I raised this last year on the Finance Bill, a number of people — one of them well known to the Minister — contacted me with an intention of buying a house in this area with his wife but when their accountant examined the tax provisions they found them so unsuitable that, instead, they went to Temple Bar and bought there.

I would like an opportunity to have a discussion with the Minister's officials to explore the possibility of increasing this tax provision, although I believe that tax incentives alone are not sufficient. One really needs a direct grant, a direct cash allocation to people who take up the challenge of restoring these houses. There is an economic benefit to the State in terms of culture and tourism, there is no doubt about that. That is an argument I will be happy to make to the officials.

I regret not being here for the Temple Bar Bill; I was lecturing abroad when this Bill went through. It is a matter in which I take a considerable interest because I took a lease on a building there in 1978, the Hirschfeld Centre, the Gay Community Centre, which was subsequently burned down. It had a considerable impact on limiting the spread of the AIDS infection in the city. The Minister knows the cost of maintaining somebody with AIDS — £25,000 a year. If you prevent two people from getting AIDS there is a saving to the State of £50,000. We did get an allocation of £50,000, a theoretic one from Dublin Corporation but that was junked.

I was interested to see an increase in the allocation to voluntary organisations. It is a pity the group that started and spearheaded the very important revitalisation of the Temple Bar area have received no assistance whatever, in fact have been impeded in their work by their honour and integrity, because I made sure that a proper limited company was established in order to do this important work, and then made sure we paid all our taxes, all our PRSI, all our VAT, the whole works. We paid something like £135,000 in tax over the years. None of us took any money from it and then I found — and the Minister will be aware of this problem — that not only was I working for nothing, not only had I invested my own funds, not only were we denied any form of State assistance but I was actually penalised for not making a profit. I thought that was rather odd. We got this demand from revenue saying we were being surcharged for non-distribution of profit. I asked an accountant about it. He explained that family firms sometimes put back profit into the business which increases the value of the asset, and this is non-taxable. I understand that but particularly with organisations constructed in the way this group is and, which has done such valuable work, there should be some degree of flexibility, particularly when we appear to be completely excluded from any form of grant.

However, that is my own little hobby horse and I will hop off it and get on to another one, and this is one where the Minister could be of assistance to me. I raised this issue briefly on the Appropriation Bill. I was contacted by an academic colleague who pointed out an anomaly in the tax legislation. I have not put it down as a recommendation because we could recommend until we are blue in the face, but if the Minister thought it worthwhile he might examine this and introduce an amendment himself. This deals with the double taxation agreements between this country and the United States of America, Australia and other countries which were entered into so that we could have the advantage of the academic wisdom and teaching skills of university personnel from the United States, Australia and so on. This double taxation agreement came into existence as a gesture of goodwill by the Government towards universities and in order to foster this kind of intellectual exchange.

However, because changes in the tax code, and particularly in terms of PRSI, have superseded the agreement — there have been subsequent developments in terms of PRSI — the effect has actually been negated. The agreements were made in the days before pay related social insurance reductions applied to this class of people. Consequently the exemption that was entered into by the Government on foot of the double taxation agreement did not include any reference to PRSI. I believe this was an oversight and the Minister might be able to introduce some slight change in order to rectify the situation because, as a result of this oversight, a visiting professor receives a salary without deduction of tax but is obliged to pay, himself or herself, 7.5 per cent of the salary as PRSI and the host university has to pay 12.5 per cent as the employer's responsibility. There you have a tax yield to the State of 20 per cent where the Government's clear intention was not to reap any tax benefit from the existence of this exchange programme.

I will move on to some general observations. The first one may strike the House and you, a Cathaoirligh, as a little unusual. I would like to applaud the work of the Roman Catholic clergy. They are often excoriated for talking too much about sex — in my opinion they do and they do not really talk very much sense about it either — but they talk a great deal of sense about poverty and they often complain that they are not given credit for their excellent contributions, their well researched documents and their wise statements on the nature of poverty. I would like this afternoon to give them credit for a real concern in this area which is not often highlighted. I have received from the Conference of Major Religious Superiors a copy of their response to the 1992 budget called "A Question of Choices".

Acting Chairman

We are discussing the Finance Bill not the budget.

To me they are much of a muchness because the Finance Bill implements the budget proposals. Is that correct?

Acting Chairman

The Senator must confine his remarks to the provisions in the Finance Bill.

I am confining myself but this is a reaction to the budget which the Finance Bill implements. I want to talk about the specific intention behind the Finance Bill. I am sure you will call me back to order when I get outside it. I think I am entitled at this stage to lay down general parameters.

The problem with both the budget and the Finance Bill is that as they are examined by, among others, the Conference of Major Religious Superiors, they do not sufficiently recognise or attempt to tackle and counter the growing divisions in Irish society between the poor on the one hand and the stronger on the other because there are choices involved; choices between the rights of the poor and the underprivileged on the one hand and the rights of people like ourselves who already have a sufficient income.

In the Finance Bill, certain choices are clearly articulated. It is decided that certain groups will be favoured, encouraged and fostered and others will not be so favoured, encouraged and fostered. I would like to quote, if I may, since you are requiring me to be technical and point out the kind of worry I have. I realise the very difficult problems the Minister has in attempting to balance the books and to deal with the various deficits that exist. If you look back over the period which has led to this Finance Bill you will see what kind of choices are being made. For example, there is the decline in social expenditure as a percentage of gross national product. If you look, for example, from 1986 until 1992, which is a comparatively short period of time, there has been a consistent decline in expenditure on social welfare although the number of unemployed people has risen by 13.4 per cent.

I will put on the record of the House rather interesting statistics — in 1986 expenditure on all social services as a percentage of GNP was 29.2 per cent; expenditure on social welfare as a percentage of GNP was 14.9 per cent, the total number of people unemployed was 250,200 and tax as a percentage of gross national product was 36.9 per cent. In 1992 the estimated expenditure on all social services as a percentage of gross national product was 26.9 per cent. In other words, it had gone down by over 2 per cent in this year. Expenditure on social welfare had gone down from 14.9 per cent to 13.8 per cent although the total number of unemployed people was estimated at 283,800. In other words, the provisions of the Finance Bill appear not to take into account sufficiently the increasing number of people who are unemployed in terms of the distribution or the redistribution of wealth to the most disadvantaged sections of the community.

I am aware that the Conference of Major Religious Superiors made certain recommendations and some of them may perhaps have been met but there are others that have not and perhaps the Minister might look again at them. They have, for example, welcomed the increased allocation to the Combat Poverty Agency, the community development programme for voluntary organisations. Although they welcome this, one of the ironic aspects, and the Minister must appreciate fully the irony, having increased the allocation to groups such as the Combat Poverty Agency, the magazine Poverty Today leads off in April 1992 with an editorial which contains this paragraph which I would like to put on the record. I am not inciting the Minister to shut down the Combat Poverty Agency but this is what they say:

It can scarcely be a coincidence that Ireland has, by EC standards, both exceptionally high levels of unemployment and an unusual degree of inequality in the distribution of income, wealth, educational opportunities and access to key services such as health, legal, arts and recreational services. In addition to being a major factor in widespread poverty, the debilitating effect on this very unequal society is to undermine personal development and initiative and to limit social mobility. In these circumstances implementing the commitments in Programme for Economic and Social Progress to radical structural reform, greater social rights and increasing social equity take on a special urgency and should be given a high priority in any programme to address unemployment and build long term economic growth.

It seems to me that in a paragraph like that is contained a criticism of Government strategy because they have not significantly addressed the inequalities or used the Finance Bill to articulate policies that would significantly redistribute wealth to the least advantaged section of society.

On a point of order, what is the Senator quoting from?

Acting Chairman

Senator Norris gave the source.

I am quoting from Poverty Today which I am sure you also have received. Previously I was quoting from the Conference of Lay and Religious Superiors.

We know who wrote that one.

Do you really? Perhaps you could inform me subsequently. Whoever they were they did a very good job in my opinion although they were in certain instances critical. I am not going into length on this because I am not an expert and the Minister has access to all these documents. They seem to me to make an argument with regard to matters that could perhaps be addressed in a future Finance Bill, if not in this one, for example, as child poverty and poverty traps. They made the point that 40 per cent of children live in households with incomes below what is required to maintain minimally adequate standards of living, that this should be a concern in financial terms and that an independent inquiry report which was prepared by the Combat Poverty Agency and published recently outlined the implications for Government policy and what could be done about it. They made it clear, for example, that a positive budgetary response to child poverty would be to raise child benefits substantially and then subject them to income tax. That sounds a strange argument to come from people on this side of the social equation which would be rather left-wing but I believe that argument is sustainable. If you raise the amount sufficiently and then subject it to income tax then you manage to cut out elements of the poverty trap. This would mean the child benefit cost could be raised by substantial amounts; let the Minister consider the political benefits of giving an increase of 40 per cent in child benefit and then subjecting it to tax. For an annual cost of £20 million child benefit could be raised by 50 per cent and most people would not suffer in terms of coming in a serious way into the income tax net; in fact, most people would gain.

There are a number of major suggestions here which the Minister could very usefully take on board and some on unemployment. "Dole" is a horrible word. It suggests doling things out to people. Nobody likes to have things doled out.

What is the origin of the word?

From the smile on your face Senator, I imagine you know; I do not.

The connotation is reasonable. There is nothing wrong with it.

It has rather unpleasant connotations because it suggests passivity and Victorian gratitude on the part of the recipient. Is it not possible where people have skills which could be applied for the benefit of the community, to offer them the opportunity of some slightly increased dole if they can be employed on public work schemes of some kind. I would like the Minister to look into the possibility of this kind of approach to the unemployment situation. It is very demeaning for people to be unemployed, particularly if they have skills, trades or professions.

With regard to poverty traps, the Minister knows better than I that what can happen is the gross income increases and then you get into a higher level of tax and your actual take-home pay either remains static or is reduced. I have spoken on this before in the House with some considerable feeling as this actually occurred to me in Trinity. On one occasion when I received an increase in my salary nothing happened in my wage cheque and I was rather surprised. I thought there was a mistake. I wrote to them and said there must be some mistake because I got an increase but my salary cheque remained the same. They said that because I have entered a higher tax net my income should have diminished by a small amount of about 35 shillings because what I received in fact was a negative increment. I wrote back and said I am glad to say I know nothing whatever about either mathematics or accounting but there is no such animal as a negative increment. What you are talking about is an excrement and I do not want it, you can have it back. That was just my little linguistic joke.

I am glad that mortgage interest relief was not touched; it would have been a mistake to interfere with it. I am also glad that, at least for some time, some of the inner city reliefs survived. The Minister will be aware that in North Great George's Street for example, after a lot of hesitation the provisions of the various budgetary reliefs as articulated in various Finance Bills have at last incited a builder to commence work, very hesitantly, and the entire scheme was sold out in the first day. Anything that can contribute to a reflation of the building industry is good for the economy.

I view with some angst the reduction of the threshold for residential property tax from £96,000 to £90,000 and the reduction of the income threshold from £28,500 to £27,500, and my reason for doing so is personal. I live in a house which some people would be foolish to value at perhaps, around that amount; and my income, because I teach in Trinity and I am lucky enough to share these august halls with the Minister, the Cathaoirleach and my fellow Senators, would be over that amount. I wonder if this is justified in all cases. Again, I would like to make a special argument, and I am returning to some of the material I addressed at the beginning when I was talking about tax provisions for the inner city. I suppose it is unrealistic to suggest that the Department of Finance should look at the possibility of exempting what could be described as heritage houses completely from the residential property tax. It seems absurd that you get people like myself coming into a derelict area of the north inner city, spending enormous amounts of money refurbishing the house, with no direct cash grants, with an unworkable system of tax incentives, which only one person so far has taken up, and then almost like the 19th century when Charles Gavan Duffy and James Fintan Lawlor were working for the three Fs — fair rent, fixity of tenure — what was the other one?

Thank you very much, Minister, for reminding me. I had forgotten one leg of that triad. I think one of the things they were very much against was rack-renting, because they objected when the Irish people had improved themselves, for every improvement they made by the sweat of their brow and their toil, they were hit with an additional tax. In terms of heritage houses that is exactly what happens. You move into what is effectively a slum, you sweat and labour and spend your own already heavily taxed money, and then find there is a gentrification process going on, and by your own efforts you place your house in the tax net. This means you are penalised rather than rewarded for improving not only your own accommodation but also the cultural heritage of the country. I appeal to the Minister to think about that, as I have already appealed to him to consider increasing the tax provisions for these houses and the possibility of introducing direct cash grants for this kind of work.

I congratulate the Minister on this Bill. He performed a difficult task. He is probably very frustrated as he sits here and listens to many of the good ideas which Senators from all sides put forward about what they would or would not like to see done. The Minister represents an extremely poor constituency. The north inner city is a place where everyone would like to see investment, with improved housing and improved living standards for everybody. I intend to ask the Minister to look at one or two things which may cost some money but which I believe in the long term will be of benefit.

I agree with Senator Norris. I believe the Government should look at further tax breaks for anybody refurbishing an old Georgian house or a house of architectural merit. In the long term it is of great historical and archaeological benefit and has a tourism spinoff. It makes people aware of their heritage and attracts people back to living in the inner cities. Inner city revitalisation is very important and the more people we can get to refurbish these houses and to attract people to live in the inner city, the greater the long term benefit will be for Dublin and other cities.

I would like to talk about the patent section of the Bill. The Government have put great efforts into developing the science and technology industry. Irish scientists are not by any stretch of the imagination very well paid. The slim prospect that they might invent something where they would get a tax free benefit on the patent is a small incentive to Irish scientists. Not many of them get it, and for those who do, it is not a lot of money. This change in the Finance Bill is taxing very few people. I wonder what is the income from this tax; I cannot imagine it would be a lot. Patents are the intellectual property of scientists. It is difficult for anybody to get a patent because very often scientists come up with great ideas but they are not commercially viable. To get a good idea, to be able to patent it and then make it commercially viable, is extremely rare.

In Ireland we produced very few patents, but we are trying hard to increase the level of commercially relevant innovations. I believe this section may do the opposite. I would like the Minister to look at this over the next 12 months, and maybe change it next year. I cannot imagine the Exchequer are getting a lot of money from these people. I would ask the Minister to have a look at that again and to change it in order to encourage Irish scientists to develop ideas with the potential of creating a considerable number of jobs in Ireland.

We have a very good science and technology base. The former Taoiseach, Deputy Haughey, when he became Taoisearch in 1987 put science and technology on a new footing and it has developed since then. Perhaps unkown to the Minister, this change is going to have a negative effect on work well done. A considerable number of people are putting a lot of work into it and I would ask the Minister to look at this over the last 12 months.

At the outset I would like to compliment and pay tribute to the Minister for Finance for his interest in the Seanad. I also welcome the Minister of State, Deputy O'Rourke, to the Seanad this afternoon.

Regrettably, the Finance Bill repeats and enforces the major errors which were made in the budget of 1992. The Bill fails completely to address the enormous problems facing the country, in particular the very serious cancer of unemployment. It also fails to take advantage of the opportunities of a new Europe on whose edge the country is now poised. In fact, I believe this Finance Bill could be described as anti-work and anti-enterprise. I do not make those remarks lightly. Inherent in the Bill is that sort of message. It discourages risk taking and rewards fence sitting and playing it safe. This is a retrograde step.

It marks the first increase in the Exchequer borrowing requirement since 1986 and moves fiscal policy further from the medium term target of a balanced budget by 1993 and the long term target of reducing the national debt to 60 per cent of GNP by 1997. It is a product, unfortunately, of some conflict between our two partners in Government, the Fianna Fáil Party and the Progressive Democrats. The message one gets is that there is a certain amount of conflict emerging which is apparent throughout the Bill.

Never before has this country needed greater vision and greater imagination in the application of fiscal policy to solve the country's problems. It is regrettable that never before has there been such clear failure in this regard. Of all the missed monetary opportunities in recent years, this must be considered the greatest one.

One of the most interesting aspects of the Finance Bill is the disparity and contradiction between the contents of the Bill and the rhetoric with which the Bill and the budget has been presented to the people. Neither the budget nor the Finance Bill does what those persons advocating them claim. The facts belie the words and one needs an insight into the conflict between the Government partners, at Cabinet level in particular, to understand how this has arisen. The Programme for Government negotiated between the major partner in Government, Fianna Fáil, and the junior partner, the Progressive Democrats, gave a solemn commitment to reduce the marginal rate of tax to 25 per cent and 44 per cent, respectively. This was to be done in a revenue neutral manner. Whatever was given in the swings would be taken back on the roundabouts.

The document was quite precise in indentifying the particular Peter who was to be robbed to pay Paul. Tax breaks, tax avoidance schemes and tax reliefs were to be abolished to fund the reduction in income tax according to the agreed programme. Government spokesmen said that almost unlimited funds were available for PAYE income tax reductions if reliefs and breaks were abolished. One Deputy from the Government parties claimed amounts up to £1.5 billion being available and the Government spin doctors placed juicy items in the media suggesting that the Revenue Commissioners and the Department of Finance were amazed at the possible yield. There was a euphoria projected, promoted and put before the people as to what could be done. Yet on budget day, when the Minister for Finance announced the reductions in the top rate of tax to 48 per cent and the standard rate to 27 per cent — a welcome move — at a cost of £168 million, he found only £37 million from the abolition of tax reliefs, breaks and tax avoidance measures, and £17 million of this came from changes in taxation on company cars. So, effectively, with the exclusion of company cars, there is only £20 million involved. Clearly, the only reliefs whose abolition would provide the Government with large sums of money were interest relief and VHI relief. There appeared to be a greater conflict between the Government partners again in this area. Frankly, it was evident that while a certain section of the Government wished to have the VHI reliefs and mortgage reliefs abolished, the other partner did not do so, and that argument won in the end.

There is a great deal of confusion when ideology on the one hand gets confused with expediency of a political nature on the other, leading to a certain amount of debris through the Finance Bill, which is a very important document. The political fallout from this situation is very serious. A large number of tax rates have been abolished for a small yield. The reasoning of certain people is that all tax breaks are wrong and should be abolished. I do not agree with this. The use of tax reliefs and tax breaks to encourage certain desirable kinds of social and economic behaviour is a feature of the tax code of every developed country, and to adopt a purist approach which claims that all breaks are wrong as an instrument of social and economic policy is ridiculous. This feature of ridiculousness is demonstrated time and time again throughout the Bill, and there are measures to prove that. There is little encouragement to advocate investment, enterprise, job creation or risk taking. Those sheltered in employment are rewarded through some of the measures taken. There will be an adverse effect on enterprise; in fact, it will cost jobs rather than create them.

I said earlier that if we omit the company cars dimension from this famous £37 million, we have only £20 million accruing from tax breaks. Since the Government failed to find the yield to fund their tax cuts in the way they said they would, they had to look elsewhere for revenue. They got it from two places — they increased borrowing and raised VAT. Both these measures run counter to our commitments to our EC partners and are totally inconsistent with the obligations which the Government are undertaking under the Maastricht Treaty. It is not generally realised that as a result of the Taoiseach's last budget and Minister Ahern's first budget the real Exchequer borrowing requirements have been doubled, and at a time when the Government are committed to a balanced budget in 1993 and are urging the electorate to undertake the far more onerous task of reducing the debt as a percentage of gross national product to 60 per cent by 1997.

One could go on and on and cite examples of the type I have referred to, but frankly the main thrust of this Finance Bill is one of great disappointment. We do not see much hope in it for jobs. Enterprise development is sadly lacking in the Bill. For instance, with regard to enterprise, the changes in VAT will cost jobs. The changes in the co-operative taxation will cost jobs.

On this point, may I elaborate slightly? Many of our co-operative societies will have a liability of 40 per cent tax; those are the non-producing co-operative societies such as livestock marts. I suggest that 40 per cent is not a very reasonable or equitable figure. Many of our co-operatives, big and small, depending on their type of operation, will find it extremely difficult to survive in the times ahead. The changes in tax on company cars to which I have already referred will also cost jobs. The changes in capital gains tax will cost jobs.

I would like to refer to an amendment put down in the other House by Deputy Foxe of Roscommon requesting the abolition of capital acquisitions tax. Deputy Foxe failed to get the amendment clarified. I support the view expressed in that amendment, the total and complete abolition of capital acquisitions or capital gains tax. I can justify my view by saying that at present the rates are such that many properties either have to be sold or the people have to borrow heavily on them when they pass them on to their successors. I appreciate that there are certain concessions available for inter-family arrangements where a father passes a property on to his son or his daughter, but these are exceptional.

There are many other examples I could talk about. It is imperative that the Government would realise that we need to have a very determined and close look at what is happening at present. For example, we have introduced a VAT arrangement which has six different rates: zero, 2.7 per cent, 10 per cent, 12.5 per cent, 16 per cent and 21 per cent. This could not in any way be regarded as progress towards harmonisation or simplification of the code. We appreciate downwards adjustments in the VAT area, but, frankly, presenting us with six different VAT rates is a bit too much.

Taxpayers who do not avail of the new deposit accounts will pay only 27 per cent on their unearned income from other accounts, but if they are part of the 40 per cent of taxpayers, they will be paying at the higher rate of 48 per cent. This is a disincentive to people rather than an encouragement to them to take risks and make money. It is important that we as a nation followed the example of other countries, such as the USA, and considered that there was nothing wrong with wealth or profit provided that it was made within the parameters of propriety, corrections and so on. There is a similar discouragement to small investors in the equity market, as the balance of advantage has swung in favour of the deposit accounts and against investment in equities.

There is not one single job creation measure in the Bill. I repeat that fact because I believe it is so important. It is difficult to conceive how indeed 15 intelligent people sat around the Cabinet table and saw his kind of document and gave it their approval.

I would ask the Minister to answer one simple question. Is there such a close connection between the marginal rate of tax and job creation? If there is, why is it over the last few years, when the standard rate of income tax has been reduced from 35 per cent to 27 per cent and the high rate has been reduced to 48 per cent, that this has been accompanied by the highest level of unemployment since the foundation of the State in 1922? I ask the Minister to respond to that question and to respond to the question on capital acquisitions tax to which I referred earlier.

I also would like somebody to explain how a further reduction in the marginal rate of tax to 25 per cent and 44 per cent is going to provide the magic trigger for job creation when larger adjustments up to now have had no effect whatsoever. Is it not time that there was a clear understanding about our present tax policy which, I respectfully submit, is not workable and not capable of giving effect to the dramatic economic changes that some people propose it can do? I know there is divided opinion on this matter, but I suggest that it is a very major issue in this Finance Bill and something that has to be addressed.

When the Finance Bill was published the Minister's PR people projected him in the resolute cloak because he insisted in the Finance Bill on implementing some of his budgetary proposals. The message was that the Minister would not change. Perhaps it was a list more personal than that. I would suggest that what was wrong with the budget in January was wrong in the Finance Bill in April and should have been changed. This is a weakness that has been allowed to go by. There was merit in the case put forward by commercial travellers, publicans, members of co-operative societies, small investors and farmers and the Minister should have listened to them.

I will deal with a few of the specifics in the Finance Bill. It is not the rate at which people pay income tax which is the key issue but the total amount paid. Taxpayers are dragged into the tax net at a low level of income, and at a moderate level are dragged into the higher band. It should be remembered that almost 40 per cent of all taxpayers pay tax at the higher rate. Single people on £60 per week fall into the tax net. It is logical that there should be a lower tax rate as an introductory rate and it would be feasible to introduce a rate of perhaps 15 per cent on the first £1,000 of taxable income for married persons. A clear commitment should be given to widen the tranche of income to which the lower introductory rate of tax would apply. It also makes good sense for the Minister to widen the standard rate band so that 80 per cent of taxpayers would pay tax at no more than the standard rate of tax by the year 1994-95.

With regard to the abolition of income tax relief on insurance policies, this would make endowment mortgages more costly and there would need to be a commitment from the Minister for Finance to maintain mortgage interest relief and VHI tax relief. On the question of the premia for life assurance it was a retrograde step to remove the tax relief there; it discourages important investment beneficial to our economy.

The decision by the Minister for Finance to introduce on Report Stage in the other House an amendment to the Finance Bill to apply the 40 per cent rate of corportion tax to advertising profits is appalling. The media are extremely important and the Minister made no provision for that in his budget or in the Finance Bill. It is appalling also that a major change in newspaper taxation is being introduced in an underhanded fashion. This new provision will have a serious effect on the newspaper industry and put additional pressure on its ability to carry out a fundamental democratic role in society.

Other provisions in the tax code which are being firmed up in this Finance Bill will make it difficult if not impossible for companies to offset losses made in the manufacturing part of the company against gains in the advertising area. Consequently newspapers which make an overall loss will quite likely have to pay tax on profits from advertising.

This Finance Bill is without imagination or vision and gives scant regard to putting our economy back into shape. Fortunately, an air of buoyancy is developing in the world economy and I hope it will come our direction soon. We must put our house in order to avail of that buoyancy when it comes. I am not sure that this Finance Bill equips our economy to avail of that buoyancy which will come I hope sooner rather than later. The measures introduced in the budget and in the Finance Bill will do little to attract foreign investment which is vital to the advancement of our economy and to the survival of our nation.

Every Irish person is concerned about the serious crisis in our economy at present, and I include the Government and Government parties in that. They are aware of the seriousness of the economic situation. I would like the Government to address our economic problems. The Government cannot solve our unemployment problems or our taxation problems but they could play a greater role in alleviating present difficulties. I am aware that most decisions which affect our economy are taken now in Brussels and we must exert more influence over what is decided in Brussels.

There are three sectors in our economy — agriculture, tourism and industry — which are the earners of money for State services. At the moment agriculture is underdeveloped and we must ensure through the Common Agricultural Policy and GATT, that it does not lose out. We must promote our tourist industry and develop certain industries more vigorously so that we will have more money for our starved Department of Health, for education, for law and order enforcement and for all other vital services that cannot generate or create revenue. It is incumbent upon the Government to take on board certain policies that will develop to the fullest these various sectors so that our economy can succeed.

I want to revert again to the question of inheritance tax and capital acquisitions tax which is a more serious problem than is appreciated by the Minister and by the Government. Many people do not have a direct relationship with the person to whom they transfer their farm or business. Small allowances only are allowed in those cases of inter-family transfers. The allowances that apply in industry and in agriculture are more generous; the allowance in agriculture is substantial whether the transfer is from parent to child or from spouse to spouse. Numerous properties throughout the country are transferred in circumstances other than a direct relationship. These transfers, together with direct family transfers, must be looked at with a view to abolishing the capital acquisitions tax or inheritence tax.

The amendment which Deputy Foxe of Roscommon put down in the other House and which was not dealt with there has my support. I hope that the Minister will give it and the other points I raised here his fullest consideration.

I welcome the Minister to the House and commend him for staying through so much of the debate. I welcome this Finance Bill in which the Minister shows the same practical, effective approach he brought to the Department of Labour. In the Department of Labour he was made familiar with the serious problem of unemployment. The present Government have already made enormous strides in financial matters over the past four or five years. We have transformed our financial situation from one in which we were close to being a case for the World Bank to one of growth. It was a pretty close thing. Present unemployment levels might have been worse under former policies with little hope of improvement. Now we have tackled the financial problems successfully. This afternoon one of the major banks dropped its interest rates overall by something like .5 per cent. There has been tremendous progress in that direction and also with regard to employment.

The number of permanent jobs in industry has increased considerably over the past 40 years. Last year was one of the few years in the history of the State since records have been kept in which we had nil emigration, the traditional way of dealing with unemployment where sons and daughters went to the States, to Britain and elsewhere to seek jobs. To deal with unemployment on a lasting basis and not over a year, 18 months or two years in a way which will provide long term unemployment, we must establish profitable, successful, competitive industry in the widest sense of the words. The Minister has gone a very long way towards clarifying the tax situation.

Tax breaks provide a certain temporary advantage but it is a transient one. In industry or business one needs to know what the rules are, to have what is sometimes known as transparency in the tax system together with clarification and, equality because then can one make serious investment on a long term basis. That is the only way to achieve worthwhile, lasting employment. We would all like lower taxes on capital gains, and lower corporation tax.

If we want to develop industry here two requirements are essential and one of these is capital. We can talk about plans, hopes and intentions but if capital is not available then industry and business will not develop. The European Community brings freedom of movement of capital throughout the European Community, comprising 300 million people. People will decide where to place their capital on the basis of where it is going to be profitably employed. The second requirement is for a proper physical infrastructure of roads, ports and facilities which make it practicable for an industry to set up here in the knowledge that it can compete.

The previous Minister for Education was rightly praised for her contribution to education during her period in that Department. Education is essential for development and should be more of an applied nature. To compete as an attractive location for investment with consequent growth in worthwhile employment, we need people capable of competing and of taking up the available jobs. We have a very good education system which continues to improve year by year. May the days be gone when young Irish girls and boys of 14 to 16 years with a primary certificate went to London or New York seeking the lowest paid jobs available. Those boys and girls often proved, in the most difficult circumstances that they were intelligent and able. They deserved a better education. Although things have improved greatly here only about 60 per cent of our young people between 16 and 19 years are in third level education. In that respect we lag far behind the Dutch and the Germans; 90 per cent in the same age group in those countries are in third level education and if we had the same percentage in third level education we would remove at least 50,000 from our unemployment register and do so with cost saving. That proposal should be examined.

The third essential for development is initiative. Let us have more Irish initiative. We have erred over the past few years in over dependence on foreigners investing in peripheral industry here while headquarters and key management structures remained abroad. Research and development departments were not established here and once the tax advantage period elapsed these industries tended to pull out. Despite that, over 1,000 foreign firms have set up here over the past few years. That is not a bad record but we need to encourage more indigenous initiative.

Many Irish people with ideas and initiative succeeded under adverse conditions in the United States, Australia, Britain and elsewhere. It is tremendous that people with initiative now stay in this country. We need to ensure that they are given the opportunity and encouragement to develop industries here.

That is a matter of which the Minister is well aware. The 1,000 plus major industires if located in small communities can impose considerable disadvantages on the community if the plant closes. These industries should be located in larger urban centres. They will not locate here other than on a temporary tax advantage basis unless there is associated small industry. The vast majority of successful industries in Hong Kong, Taiwan, West Germany, North America, the United Kingdom, France and the Netherlands are small. If an industrialist wants to develop a large plant in aerospace or whatever one of the essentials is to make sure there is a cluster of smaller companies of related subsidiary industries which will provide a base on which the larger industry can prosper. Without such development we will continue to enjoy merely a temporary advantage from major industry.

The Minister is well aware of the importance of fiscal incentives and some of the major European countries, despite all their advantages, offer better fiscal incentives than we do. Fiscal incentives are only a temporary measure but we need to ensure that we do not have fiscal disadvantages. This Finance Bill moves towards laying down the necessary ground rules which, based on the tremendous progress that has been made, will enable us to develop worthwhile, well paid, interesting competitive employment. In years to come, instead of being one of the disadvantaged areas of Europe looking for Cohesion Funds we could become one of the more prosperous areas. We have already shown our competitiveness in many ways. We have a young active population and enjoy many opportunities and advantages which other countries do not.

I welcome the Minister's tax provisions in relation to exploration, production and development and particularly in relation to abandonment in offshore exploration. We made a series of grave taxation mistakes in our exploration industries in the seventies. One could draw a graph to show the close relationship between money spent in this country on exploration and the tax system on one hand and the number of actual discoveries on the other. In the case of a very disadvantageous tax system it does not matter what physical resources exist — people will not spend their money. On the other hand, if one does not make discoveries people will not spend money either. It is a vicious circle. Let us not forget in relation to oil exploration that it costs approximately $5 million to sink a well in the Celtic Sea. If a discovery is not made, that $5 million is written off. If one invests $5 million in almost any other business one may lose most of it but some remnant will remain; put down a dry hole somewhere and one may lose everything.

However, $5 million in the Celtic Sea is peanuts compared to the situation in the Atlantic Ocean or the Porcupine Bank. There, costs of drilling if one is lucky are about $20 million. Why should any group spend those sums of money unless, first, there is a reasonable likelihood that they will find something to make the risk of spending such enormous sums worthwhile and, second, they will not be taxed so heavily that the discovery becomes uneconomic and not worthwhile. In the seventies we made the appalling mistake of bringing in tax systems which brought the exploration industry here almost to a halt. It was disappointing from the point of view of discoveries but what finally finished it off was that companies were spending huge sums of money and yet the tax system was such that even a very large discovery was unlikely to be economic. It will take a long time to recover from that.

The Minister has now taken sensible steps to repair the damage which, I hope, will encourage exploration around our coasts again. Much time has been lost and much leeway remains to be made up. Many other countries around the globe are looking for exploration dollars as well. Nobody is going to come to us unless there is something worth finding and unless it will be financially attractive to risk money looking for it.

I commend the Minister in relation to abandonment tax. One of the dreadful features of the oil industry, particularly to offshore oil industry and it applied to other aspects of natural resources industry also, was that when an oil field or mine came to an end it was left in poor condition, environmentally. Those living in the area had to suffer the consequences and often the seas were polluted afterwards.

It is extremely expensive to allow for abandonment costs for offshore oil rigs. We must insist on companies having full abandonment policies in force so that at the end of the period when they have made a discovery, put it into production and provided revenue to the State the drilling hole can be carefully shut down and appropriate abandonment procedures brought into play.

I commend the Finance Bill. It is yet another step towards progress.

I welcome the Minister to the House but I cannot say I commend him on a totally acceptable Bill. However, I commend him on certain developments there.

The Minister in his speech said that the statutory basis for taxation is laid in the Finance Bill, that measures are taken there to prepare for European monetary union and that he is indicating further steps in the Government strategy of tax reform in the context of the Programme for Economic and Social Progress.

In the first part of his speech he dealt with the state of the public finance which forms part of the introduction to the Finance Bill and to the budgetary policies being pursued. The figures quoted by the Minister in relation to our economic progress and development over the past number of years are impressive. He told us that gross domestic product expanded by about 2 per cent last year and in view of the difficult international conditions this was a very creditable performance. He said our growth rate was twice that of the world economy, all the more impressive due to a decline of 2½ per cent in the growth rate of the United Kingdom. We were in the first ratio. Merchandise export growth was strong in the face of international trading conditions. Export of goods and services increased by about 5.75 per cent, helping to boost the balance of payments surplus to about 5 per cent of gross national produce. There was a rise in manufacturing output of more than 3 per cent, and strong growth in the chemical industry. Inflation at 3.2 per cent was well below the EC average. That is an indication of a very strong economy. In fact, our economy has been growing at an average of 4 per cent to 5 per cent over the past five years and our inflation has been kept very low. Wage increases, as the Minister knows as he negotiated the Programme for National Recovery, have been kept very low also amounting to 2.5 per cent each year from 1987 and 4 per cent, 3 per cent and 3.75 per cent under the Programme for Economic and Social Progress. Indeed, the Minister, reduced those figures further when he indicated before Christmas that the country could not afford to pay the increases. Of course it can afford them. The Minister should have left the Programme for Economic and Social Progress as it had been negotiated 17 months ago.

The figures are disturbing and everything the Minister said is true, but the problem is that none of the strong economic indicators have transformed into job creation. That is the critical disappointment of our economic progress under the Government and their predecessor. Since 1987 we have had an enormous upturn in the economy in terms of our international competitiveness, the quantity of exports and the very substantial surplus of trading we have had in recent years. From that point of view, I am extremely disappointed that the Minister did not introduce in the budget interventionist policies to provide incentives towards jobs creation. That is my gravest concern about this Bill.

Having read it thoroughly I can find very little of significance or substance in it indicating a policy of job creation, or showing that the Minister introduced a pro-active budget that will transfer the benefit of our economic progress into benefit for our people.

The only judgment one can make on economic progress must be based on whether it benefited all the people of the country. Some anomalies have been eliminated which is very welcome, but this is more tinkering with the system, moving a tax exemption here or closing a loophole there. It amounts to moving money around and it does not address the underlying problems.

In the introduction to the Programme for Economic and Social Progress, the previous Taoiseach, Deputy Haughey, stated in January 1991 that the programme was a strategy to accelerate economic and social progress in the nineties. The strategy was simple. It was to maintain a low inflation economy, with a stable exchange rate which could compete internationally and give us the higher standards of living and improved social services to which we aspired.

The Minister was central to negotiating that programme which indicated a certain basic approach towards job creation: if we have low inflation and a stable exchange rate, we can compete internationally. We have done all that. We have been doing it since 1987. We have been able to compete internationally but not to deal with our unemployment problem. In other words, we created the right climate in the Programme for National Recovery and in the Programme for Economic and Social Progress. What we are doing here is creating the right climate once again and then leaving it to the private sector to create jobs. There is tremendous dependance in this Bill on the ability of the private sector to create jobs. The Minister, in his speech, said that for last year as a whole in manufacturing industry employment rose by 1,500. Average employment in banking, insurance and building societies was up by 1,000 in the first nine months of the year, yet unemployment was up by 29,000. The Minister's figure of 254,000 is wrong in relation to the present position.

In fact, it is in excess of 280,000. The Minister, in December last when presenting his Estimate said that by 1992 the unemployment figure would be 275,000. We hit that figure one week after the budget was presented at the end of January. In the beginning of February the figure was about 277,000.

That was an average; an average rate is not a figure.

We will have to wait until the end of the year to determine that.

I agree. The average rate is not the figure.

Unfortunately, the last figures we got, which brought us up to 281,000 plus, indicated that there was a very strong underlying rising trend in the unemployment figures, so I cannot agree with the Minister's sentiments in his speech, namely, that the economic trends are encouraging. They are certainly not encouraging at present. One could argue that they may improve but that is mere speculation. Economic trends remain good but unemployment trends do not.

I would like to refer also to the fact that there has been no mention in the debate so far about the transfer of funds from the EC. We have received approximately £1 billion each year since 1987. Last year we received in excess of £2 billion. There has been an enormous transfer of EC funds to us which is a tremendous boost to the economy. I would have liked to hear the remarks of the Minister's officials, on the effect that has on economic development, in relation to unemployment and development and how the funds can be used for job creation and for the benefit of the people.

My concern about the lack of improvement in job creation has to be underlined by the very large number of work days lost in the first three months of this year through disputes. We have lost 50,000 work days compared to 10,000 in the same period last year. We know that last year this Minister was Minister for Labour and, perhaps, if he were still Minister for Labour some of those industrial disputes might not have taken place. That is no reflection on the present Minister for Labour. Nevertheless we now have a rising trend, where industrial strife is becoming the norm rather than the exception. That is hitting at the heart of the Programme for Economic and Social Progress and at the heart of the philosophy of bringing about consensus, negotiation and round table talks to resolve problems rather than a heavy-handed macho management approach. We must not go down that road.

There is an underlying trend of rising unemployment but there is also an underlying trend of rising industrial strife. Such a combination is lethal. I could name the various firms that have gone to the wall, the companies which shed jobs — United Meat Packers, on which we had a long and difficult discussion in his House and the other House; Apple Computers, Cork; Dublin Cargo Handlers has gone into liquidation with the likely shedding of 220 jobs. It is unacceptable that a company can so easily go to the courts nowadays, to secure liquidation. During the bank strike, workers were suspended. This was a new development indicating a heavy handed approach to industial relations which we have not encountered in the recent past.

The present postal strike is the worst example of industrial relations this year. Workers have been suspended even though they are available for work; workers who are working are not being paid; casual staff are being brought in and, most terrible of all, while a ballot was taking place on a deal for proposed changes the unilateral decision of An Post management was pushed through. We can do without that type of industrial relations. I would bring to the attention of the Minister the need to try to soften that approach. I ask him to put it to management, particularly those so-called trouble-shooters in the semi-State sector, that macho management is not the way forward in industial relations. Perhaps the Minister could bring that to the attention of the Minister for Tourism, Transport and Communications and the Minister for Labour.

The Minister, no doubt, knows the two disputes I referred to: Dublin Cargo Handlers and the Sheriff Street Sorting Office, where the present dispute is centered. A great deal of employment will be lost there and the north inner city is already blighted when it comes to jobs. We can ill afford to lose further jobs through bad industrial relations.

Any budgetary projections depend on our ability to produce, manufacture and provide services. There is a ripple effect; if we do not have good postal services commercial and enterprise activities suffer. There is also a threat to Iarnród Éireann. If the Sheriff Street Sorting Office disappears and packages and letters are carried to centres throughout the country by road, obviously Iarnród Éireann will suffer and vulnerable lines, such as the Sligo line, will lose out. If the mail train is taken off its daily route, and the double trip to Galway and Cork, obviously that will have an adverse effect both on employment and the whole rail system.

We have moved a long way from the principles enunciated in the Programme for Economic and Social Progress and unless we return to negotiation, industrial strife will take over and the employers and the trade union movement, in particular, will find it very difficult to come into partnership with the Government. It must be remembered that budgetary projections are based on a good, stable working partnership.

I would now like to refer to the jobs forum. I compliment the Government not so much on taking the initiative but on listening to the calls from the Organisation for the Unemployed and the Irish Congress of Trade Unions. However, I am not happy with the constitution of the jobs forum. I believe it should be much broader. I am very concerned that it could become another Oireachtas committee that would end up as a talking shop. Because of its constitution and procedures, members may not be able to address the real business for which the forum was set up — job creation.

I urge the Minister to consider setting up local jobs forums on a regional basis. This would complement the national jobs forum and ensure that all those concerned with job creation — the unemployed, the trade union movement, residents' associations, tenants' association, job creating agencies, and training agencies — could meet at the local level and pool information. They could then channel ideas to the national forum and, at the same time, receive some degree of funding for serveys that might be required from the national forum. They could also focus on job potential in the local areas. Such an initiative, in the context of job creation, could get down to the grass roots and make some substantial proposals.

The Finance Bill and the budgetary provisions that underlie it will not make any substantial change to the welfare of the majority, it is merely tinkering with the system. Very few people at the bottom of the scale, especially those on social welfare would say they were better off, on social welfare, although those at the top of the scale will probably be relatively happy with it.

In relation to income tax, this Government are very much Progressive Democrat driven. It is a desirable objective that tax be pitched at as low a level as possible, but it must be done on an equitable basis. It is not acceptable that the greatest reductions should be in the higher rates. This year there has been a reduction from 52 per cent to 48 per cent on the top rate — 4 per cent — whereas on the standard rate, the reduction is from 29 per cent to 27 per cent — 2 per cent. Obviously, if one were trying to bridge the gap between those on lower wages and those on higher wages, the reduction, proportionately, should be greater in relation to the standard rate of tax rather than the top rate. Over the last five years, there has been an 8 per cent reduction on the standard rate and a 10 per cent reduction in the top rate. Once again, the trend has been disproportionately in favour of those on higher salaries. These tax reductions benefited those in the top bracket proportionately more than those in the lower brackets. The Minister should redress that trend. We should not be tied to the policy enunciated by the Progressive Democrats of reducing the tax rate to 25 per cent. It is more beneficial to the taxpayer to broaden the bands at the lower level and to increase the exemptions to reduce the top level.

The Minister missed that opportunity and he should give it priority in the next budget. The tax bands should be sufficiently wide so that anybody on the lower rate would reach a high level of salary before reaching the top rate and the top rate, for top earners, should remain at the present level. I am disappointed the Minister took the option he did this year and I hope he will redress the balance in the coming year.

In relation to broadening the tax base, I listened recently to the previous Minister for Eeducation, Deputy Davern, talking about a tax amnesty. You do not broaden the tax base with a tax amnesty. He was putting forward the idea that there were many Irish citizens who had wealth deposited abroad and who were anxious to bring it back to the country for some productive purpose. He apparently knew of about £3 billion waiting to come in, which would not come in because people were not prepared to pay tax on it but if they got a tax amnesty they would willingly bring it in. How did that money get out of the country in the first place and why is its return now sought?

In this context, one could ask what is happening to the £2.165 billion export over import surplus. We do not know whether that money has come back into the country or whether it has been deposited abroad. What accountability is there on earnings made abroad? Is there any way of tracing them to see what type of account they go into and whether they come back to this country? What measures can be taken to ensure that they are repatriated for the benefit of this country? That seems to be the real deficit in relation to job creation.

It has been said that we will not get any significant increase in job creation until our gross national product increases by at least 3 per cent. We would get a very marginal increase at this point. The reason it is so low is that the economic wealth we are creating from our profit margins is not coming back into this country for productive purposes. We are creating the wealth but it is leaving the country and is not used for the benefit of the people. I would like the Minister to examine the surplus value of our exports and see how we can best channel it for the benefit of our country.

I welcome section 4 relating to the abolition of income tax relief on life insurance. That is long overdue. I also welcome section 8 in relation to the benefit-in-kind. This was often used in an enlarged and exaggerated fashion. A company car was given as a way of getting round paying higher salaries. It gave the maximum tax relief without appearing to do so. A revision of these procedures is welcome but the Minister is still far too harsh in relation to commercial travellers and company representatives, for whom it is not really a benefit-in-kind, it is the tool of their trade. I would prefer that to be entirely exempt rather than have a phasing out process take place over a period of five years.

Section 15 cannot be welcome because it refers to the taxing of disability benefit, occupational injuries benefit, unemployment benefit and pay-related benefit. That is postponed until 1993, so presumably the intention is to introduce it at a later stage, perhaps after an election. The principle of taxing benefits that have been taxed already, when a person has paid PRSI seems very strange and I do not agree with it. If somebody is unemployed or becomes disabled, they suffer sufficient trauma in their lives without having it added to by finding that the meagre returns they will get from the social welfare system will be further reduced by having them taxed. This is as a very unsatisfactory development and the Minister should look at it again.

In relation to section 17, the Minister's original decision to eliminate any profitsharing relief and reduce what was originally a £5,000 maximum to nil was undesirable. At least I am glad he has listened to some advice and is now restoring it, at least to £2,000. This is an undesirable provision in the Bill, because the practice led to an element of job creation, certainly job maintenance. It was a good incentive to employees to have an interest in their companies, to get involved in share option schemes where they would benefit from the profits made by the company. Such schemes would improve industrial relations, motivation and output. Companies should be encouraged to introduce such schemes and the Minister should not have reduced the relief substantially, as he has done.

I have considerable reservations about the provisions in section 22 in relation to the DIRT tax. The Minister is proposing to reduce the tax take from 27 per cent to 10 per cent. This will now encourage people to invest their money in savings rather than in some more productive forms of investment. Money which is available for productive proposes will go in the wrong direction rather than towards job creation.

Regarding the urban renewal designated area scheme, I am glad to see an extension of this scheme. I do not see why there is a difference of one year between all other areas and the Customs House Docks area although I welcome the extension for that area. Other areas, particularly in the north inner city could be reconsidered. Here, incentives need to be provided for the entire area rather than selected areas, and over an extended period. I would like the Minister to look again at that provision.

I welcome the enterprise trust, where companies are encouraged by tax relief to make corporate donations towards job creation. That is just one good section. Overall, the budget is not a job creation budget. I would have liked to see the Minister introduce provisions which he himself would like to have, whereby incentives could be given for job creation rather than simply trying to create the right climate and expecting the private sector to do the rest.

I dtosach baire, ba mhaith liom fáilte a chur roimh an Aire go dtí an Teach.

There are many things one could say about the Finance Bill, which would take about a month to read from cover to cover. It contains many provisions, but I will make some general remarks.

It is regrettable that we discuss the Social Welfare and the Finance Bill separately because on the day of the budget they go hand-in-hand, and they tend to impinge on each other. In my work I deal with people who are on the margins of the tax system and, in one way or another, involved with social welfare, therefore, I will address my remarks to that group of people on low incomes. Since more and more people now have to make tax returns it is important that the tax system be as simple as possible. Particularly for the low paid sector. Those people have no experience of dealing with bureaucracy and most of them find the plethora of rules and regulations totally bewildering. Tax forms require all sorts of questions to be answered and most people with whom I deal do not understand the reasoning behind the questions.

There are too many little side issues in the system. For example, the average small farmer in receipt of a social welfare pension must answer a whole range of questions. If they are on social welfare they are asked if they are in receipt of a taxable pension. Unemployment assistance and disabled person's maintenance allowance may not be taxable as the tax position varies greatly between one type of social welfare payment and another. They are also asked if they have a medical card, if so, they do not pay the health levies. If one's income is over £2,500 one pays RSI, but if it is under £2,500 one does not pay RSI. However, there is another complication, you do not pay PRSI if you are on unemployment assistance. It might be said that I am straying into the social welfare area and far be it from me to stray from the discussion on this Bill, but I am talking about filling in a tax form.

In returns to the tax office those questions are raised on the tax form which must be returned to the tax office. Therefore, the complication that faces ordinary individuals is staggering, particularly for people on the marginal rates of tax. There is the additional complication of dealing with exemptions, etc. My understanding of the exemption system is that if one is repaying a loan, etc. one can add that to the exemption. One then has to explain about the marginal rate of tax paid when it is over the exemption level. Therefore, the entire tax system needs to be simplified, rationalised and co-ordinated with the social welfare system.

When speaking on The Social Welfare Bill I referred to the problem in the social welfare-cum-tax system of the limits for family income supplement being in excess of the exemption limits for tax which means that people pay tax and get family income supplement in the same week. I pointed out at the time that if you give such a person a rise in their income, they end up with less take-home pay when the family income supplement is adjusted.

This Government have made rapid strides in rationalisting the tax system and increasing the exemption limits, but I would like to see a major increase in exemption limits and a marginal rate for those just above the exemption limits that would gradually bring them into line with the ordinary taxpayer, using the ordinary system. In that way a good deal of unnecessary bureaucracy would be removed from the system. I also believe that the health and unemployment levies should be brought into the main system and, therefore, somebody who would be exempt from tax would automatically not have to pay the 2.25 per cent. This amount of money is generally very small for people on low incomes and merely means another bundle of letters from the collector general and so on.

Furthermore, I suggested here previously in regard to dealing with the system on a day-to-day basis, that, with computerisation, when the yearly tax form is being sent out to people it should be possible to give details of the loans they have already declared — relief on life insurance policies does not exist any more — and not to seek information already given. Similarly if an employer's number does not charge from year to year it should not be necessary to insert it on the tax form each year because people do not always have that information to hand when filling in their tax forms. That can be a daunting experience for somebody who is not familiar with filling in a tax form or who does not keep photocopies of the previous year's return.

Another point I would like to address briefly is the need to examine the whole tax structure and its imbalance on the regions. One of the greatest ways our tax system causes regional imbalance, is the amount of tax we take in regard to transport, whether tax on diesel, petrol or on vehicles. This causes more regional disparity, particularly in peripheral regions, than many other tax policies. The regional nature of taxation, its effect on different regions as well as its effect on socio-economic groups within regions has to be taken into account in any total review of the tax system.

Overall, I welcome the reduction in the tax rates. It will be a major incentive to people. I have always believed the trading-off of some of the lesser allowances in return for generally higher exemption limits and reduced tax rates was beneficial. Some of those allowances and benefits are dear to the hearts of business people but I would shed no tears if they were gone and although I use the BES scheme to collect money for local enterprises I would include it.

On the personal level, the aged relative's allowance, which is £100 a year, means that the maximum relief you can get is 48 per cent but it would be better to incorporate that into the tax relief system and take out all this form filling and complications which cause a great deal of misunderstanding in the system.

I listened to the debate in the Dáil and to some of the debate in the Seanad and was surprised in regard to the resistance that has suddenly sprung up on certain sides to anti-avoidance and the new methods of ensuring that people who are avoiding and evading tax will be brought to book. I thought it was agreed generally a year ago that we would have to grasp the nettle in this regard and that the people who do this in a professional way will use every means in their power to avoid or to evade paying tax. I have no doubt there are enough checks and balances in this democracy to ensure that any powers given reasonably by this Legislature will not be abused by going after people who are not trying to defraud the State. However, it is important that the loopholes are closed and, having done that, that the method of collecting would be enforced with the full rigours of the law.

In view of the fact that borders will be dismantled in 1992 mechanisms should be put in place similar to those which the Customs people already have which would ensure that taxes would be collected and that avoidance would not become the name of the game. In that context, changes in the regulations as they apply to publicans are welcome. Publicans who pay their taxes are not competing on equal terms with those who are not.

I welcome the fact that publicans will have to produce a tax clearance certificate before their licence is renewed. That is a reasonable request and it is something all of us in receipt of State grants have to do. Those who wanted to play fair found that compliance with the system was not so onerous and it ensured viability because it meant that those who were not operating fairly did not get an unfair advantage. I compliment the Minister on the changes he has made in the regulations regarding the licence; the new proposals are fair. There is a favourable reaction in rural areas to the Bill as it affects the licensed trade. It is considered an equitable way of collecting the licence fee.

The co-operatives are not overjoyed about coming into the corporation tax system, but I appreciate that the Minister has made major changes and given reliefs in certain areas. For example, milk producers will now be in the 10 per cent bracket and co-operatives may bring forward historical losses no matter when they were incurred. While the co-operatives may not recognise that as being fair I would have no objection to paying corporation tax if, in return, payroll taxes were reduced because one only pays corporation tax if one makes a profit while one pays payroll tax whether one makes a profit or not. I have always favoured a shift to corporation profits taxes.

There is a need to consider the structures of co-operatives, the creation for taxation purposes of something akin to what exists for charitable organisations in the companies sphere, where co-operatives acting as community bodies would have preferential status as opposed to seven or eight people coming together to form a co-operative for purely personal gain. Within that structure there should be some thought put into new methods of making it attractive for communities to put money into community enterprises.

Because of time constraints, I will be unable to expand on this matter today, but it should be given serious consideration for the future. Most rural communities have hidden cash reserves — which could be better utilised by introducing attractive schemes to ensure that people invest in their own area. I hope we can discuss this matter in more detail at a future date because if money is released into local economies I believe it would be a most effective way of tackling unemployment at local level.

I commend the Bill and look forward to Committee Stage.

I welcome the opportunity to contribute to the debate on the Finance Bill, particularly as this House does not get an opportunity at the post-budget stage to discuss matters in depth as we do on the Appropriation Bill. Some provisions in the Bill are addenda to the budget and others are of a technical nature. Some items need to be considered in isolation before we deal with the overall strategy of the Bill. In particular, we must consider how the Finance Bill will improve people's lives and alleviate some of our problems. It is regrettable that a Bill of 268 pages, 254 sections, which was passed by the other House yesterday is presented here today and we have to adhere to certain time limits.

I will raise several points which the Minister may be able to deal with in his Second Stage reply or on Committee Stage. The Finance Bill could be described as the final quarter of the January budget. What is the Minister's view of the implications of harmonisation of the VAT rates? I believe further progress should have been made in reducing the 21 per cent rate which is a crippling burden on business. Those who can reclaim VAT do not find it such a burden, but for an individual who gets a bill for £500 with £105 added for VAT, his total bill comes to £605.

I am concerned about the provision in the Bill that gives the Revenue Commissioners powers which, if abused, would have a drastic effect on companies and, possibly, individuals. The Minister has been quoted as saying that some of those proposals have been introduced as a result of the various financial scandals which have dogged this country for the past year or so. I would remind the Minister that some of those scandals were in the public sector — although I am not saying there are not a few hidden skeletons in the private sector also — but having regard to the events of the past year or so some of the Minister's colleagues should endeavour to get their own houses in order. I do not believe the provisions relating to some of the Revenue techniques will necessarily have the desired result.

One matter I would like the Minister to address relates to section 250 which states:

The Provisional Collection of Taxes Act, 1927, is hereby amended by the substitution for section 4A (inserted by the Appropriation Act, 1991) of the following section:

"4A. Where Dáil Éireann, having passed a resolution under this Act, has been dissolved on the date the resolution was so passed or within four months of that date, then the period of dissolution shall be disregarded for the purposes of calculating any period to which paragraph (a) or (d) of section 4 of this Act relates.".

After so many years and so many Finance Bills why has this matter suddenly come to light now? Does it concern a further Finance Bill — budget later in the year which the Minister may, or may not, present to this House and to the other House? Has it anything to do with a restriction being put on the Taoiseach in relation to the possible calling of a snap election?

It appears from the Bill that those prepared to take risks with their money are to be hounded by the Revenue Commissioners while others will be encouraged to stow money away, albeit legitimately, and not to take any risk. Apart from keeping bank or building society employees and others in employment there will be no incentive for any individual to put money back into ventures in the hope of creating badly needed jobs.

Our unemployment level is steadily heading towards a figure which I suppose will be a further noose around the neck of some of the 1977 brigade, not to mention some of the 1992 brigade. One wonders if we are only months or perhaps weeks away from an unemployment figure of 300,000 people. The Minister is already on record as saying we are facing that reality. Some of the actions he is taking in this Finance Bill will hasten that reality and push more people on to the dole queues. This Bill will certainly not help to create jobs.

That is not true.

I am surprised at the Leader of the House disagreeing with me. With your assistance, a Leas-Chathaoirligh, I hope to be able to continue without interruption.

Certain measures in the Finance Bill are welcome. Obviously, any reduction in the overall burden of personal taxation — a direction in which we are moving, even if at a snail's pace towards reducing the marginal and higher rates — is welcome so that people will not have to pay more than half their earnings in tax but we must do more in that regard.

There are a few other queries I would like to put to the Minister. First, in relation to the £3 million VHI levy, will that burden be passed on to the people who are already paying exorbitant premiums? Will it be a once-off payment or will people have to pay further levies which will be returned to them in yearly or monthly payments, but which will appear as another unlisted tax kindly sent by the Minister for Finance.

Another matter which must be considered is the question of how the motorist is being treated and in particular, the treatment of benefit-in-kind. I know the Minister said this will be done on a phased basis but I am sure he is aware that for many people a car is essential in enabling them to travel to work and so on. I will not go into the whole question of how unfairly motorists are treated in regard to tax etc. but I would remind the Minister of the 1977 "freebie" in regard to motor tax which, I am sure, assisted him in getting his Dáil seat, although I doubt if he got as many votes then as he is getting now. As I said, cars are an expensive item to run and it is time the Minister gave the motorist a break as he has done in the past for his colleagues and friends who frequent the odd house for sustenance.

I ask the Minister to reply to some of the points I raised and also those raised by our spokesperson and by some of my other colleagues. As a priority, we must consider whether this year's budget and the Finance Bill will set loose the Revenue Commissioners to hound individuals, small risk-takers and businessmen. I look forward to discussing some further matters on Committee Stage.

I want to thank all the Senators who contributed to this debate and to respond as best I can in the time available. Some of the detailed questions posed can be dealt with at greater length on Committee Stage.

I am glad to have the opportunity to respond to Senators' remarks about the general thrust of income tax policy.

Briefly, as I said in my opening remarks this morning, the thrust of this policy has been to extend the tax base, reduce tax rates and extend the standard band, and provide targeted help for the lower paid by means of the exemption limits and child additions. Persistently following this policy in recent years has produced a tax system which would have been virtually unimaginable in 1987, with much better provision for the low-paid, especially those with families, much lower tax rates and a much wider standard band. This year's budget represented a substantial step forward in this process, and has provided us with a simpler, fairer and less onerous tax system.

Senator Doyle and others spoke about a simpler and fairer system and I totally agree with that and I hope we will have an opportunity of dealing with it later. At last we have an income tax system with tax rates of 27 and 48 per cent, a manufacturing tax of 10 per cent, corporation tax of 40 per cent, capital gains tax of 40 per cent and the wear and tear allowances on the straight line system. This is a far simpler and a more satisfactory tax system, and as I said in the other House, it is the persistence in doing the same thing over a number of years that makes for a simpler and fairer system. I will not go into the arguments about how simple and how fair we can make it, but I agree with the concept that we must work to that end in so far as is possible.

These general improvements have been accompanied by base-broadening measures which are designed to further the Government's general policy that, as far as possible, income, however received, should be subject to taxation. Of course, they also release funds to help ensure that the rates of tax to which income is subject are brought as low as possible, consistent with equity and the need to generate revenue to meet expenditure. I know that the loss or phasing out of these reliefs may have had an impact on different groups but this has to be seen in the context of the improvements in the mainstream income tax code introduced not just this year but over the past number of years. I would also like to make the point that it was always inherent in the strategy of widening the tax base and reducing tax rates that there would be trade-offs between on the one hand, improvements in the mainstream income tax regime and, on the other hand, curtailment of reliefs which benefit limited groups or sectors.

An Leas-Chathaoirleach

I am sorry to interrupt the Minister but the Order of the House this morning was that we would adjourn at 6.30 p.m. Perhaps now the Leader of the House may want to alter the Order.

It was agreed by the House that we would allow the Minister to reply to the Second Stage debate and that instead of adjourning from 6.30 p.m. to 7.30 p.m. we would allow the Minister to conclude and then adjourn.

An Leas-Chathaoirleach

Is that agreed? Agreed.

This was common ground among the proponents of tax reform and was explicitly stated by the Commission on Taxation. The Commission said in its first report: "tax reform is a collection of measures, each of which affects some individuals adversely and others favourably. Those who will not benefit are those who are over favourably treated under the existing system". That has been the concept of all of our reports on taxation. That is now what is happening. As I said several times during recent months in debates on these issues, it is fairer to take away reliefs available in some cases, to a few hundred, in others to a few individuals and in other cases to a few thousand, and to spread those benefits over the 750,000 taxpayers who pay PAYE in particular.

Of course I recognise that more remains to be done in the income tax area and I would emphasise to the House that the Government's firm intention is to continue our endeavours to lower tax rates and increase the basic personal allowances and, I emphasise, widening the standard band. Tax reform must, of course, as the Review of the Programme for Government makes clear, be conducted within the overriding parameters of sound budgetary policy.

Some Senators were of the view that the Bill will do little to increase employment and that some aspects of it, notably the proposed DIRT provisions, are damaging to enterprise. Other Senators made the opposite point on DIRT and asked why DIRT was only available to £50,000 because all of the money would go out of the country if it was confined. They have answered each other and so there is no great need for me to go into it.

The fact is that people involved in major capital investment or major productive investment will not be curtailed one way or the other. The reality is that we have about £3,500 million reserves in the State and it is well known — as I said in my speech this morning — that the banking groups were getting ready — at least they hinted — to advise people on how to move their money. That would have immediately lead to increased interest rates and would have gone in all the wrong directions. As Senator Conroy informed the House, since we started this debate thankfully one of our banks has reduced its interest rates and that is what I hope to see the other banks doing. The last thing we want is our reserves to leave the country. That would automatically push up interest rates which would stop investment, stop productive action within the economy and increase unemployment even further. I will not go into that in great detail again other than to say to Senators who were not here this morning that if they read the arguments I made about the employment aspects they will see what is happening. The employment figures are holding quite well here thanks to the public and private sectors. Non-agricultural employment is not disimproving. The difficulties are because of the global recession. In some countries at least, like the United States and Canada, the recession seems to be coming to a halt or is reversing very dramatically. We will have to wait to see what happens in the United Kingdom. It is too early yet. The ability of our labour force to move to some of these economies is not there at present, not that we want to see them go but that is a reality. Our labour market is growing more quickly than we would, even in good times, be able to cope with. I recognise that we have to do more and I am not arguing against that. I am on public record many times expressing my views on what can be done.

Let me outline the connection between tax reform and the creation of jobs. It is accepted that the increasing burden of income tax on wages had an impact on wage movements for much of the eighties with adverse consequences for this country's international competitiveness and probably for employment. Developments since 1987 have operated in the opposite direction. The Government are pursuing a policy of widening the tax base and using the proceeds of this base-broadening to reduce tax rates and to increase the width of the standard tax band. The effect of this policy is to reduce the income tax bills faced by taxpayers. Under the provisions of this Bill, for instance, about 750,000 taxpayers will face lower tax bills this year than they would have otherwise. In fact, as a result of the mainstream tax improvements, an employee getting the basic Programme for Economic and Social Progress pay increase this year will actually see his or her take-home pay increase by a bigger percentage.

What we are aiming at in the income tax area is structural change that will make the system overall more conducive to employment creation. The likely impact will necessarily be gradual, as the effect of lower income tax bills continues to exert an influence on both wage demands and on the tax wedge. Reducing the burden of income tax helps to reduce the cost of labour and this will increase the demand for labour above what it would otherwise be. I could go on at length about budgetary matters and the incentives for employers. They are not in the Finance Bill; they are funded between the Exchequer and the European Social Fund and Senators are aware of that.

Turning then to the new DIRT provisions in the Bill, I cannot pretend that the proposals are desirable from a purely tax viewpoint. I have heard the complaints of those commentators who have criticised the special savings accounts for rewarding unduly those who are risk averse. I do not think that an income tax rate of 10 per cent on savings, when other income is liable to tax at higher rates, is something we would willingly choose. But the special savings accounts are the lesser of two evils. With the coming of the Single Market, Irish savers will be free to open accounts outside the jurisdiction where no withholding taxes on interest income will apply, and no tax might ever be paid in practice. The Government could not ignore the risks inherent in this situation for the stability of our monetary system and for the future of interest rates. While I can understand the viewpoint of those who have criticised the special savings accounts, I have heard no alternative proposals which would deal with the threat posed by the coming of the Single Market.

It has been suggested in another context that the special savings accounts are intended to be a mechanism through which money which was exported illegally may be facilitated to return. I would be surprised if the accounts were to have this effect. While financial institutions offering these accounts will not have to make returns to Revenue of interest paid on the accounts each year, it will still be open to Revenue to inquire from taxpayers about the source of money if, for instance, during the course of an audit they should become aware that a taxpayer holds such an account. That is the answer to the question raised by Senator Doyle. These accounts do not provide any guarantee of immunity from Revenue scrutiny about the source of the money in such an account. In these circumstances, it would be surprising if these accounts were to receive significant amounts of funds formerly held illegally abroad.

Senator Upton referred to the changes I have made to the budget proposals in relation to benefit-in-kind on company cars. I want to emphasise that what is being taxed is the availability for private use of a car provided by an employer. There is no question of the business use of the car being taxed. Other Senators made that point, including some of my colleagues. I am surprised that, four months after the proposals were announced people still do not understand it. There is no tax on the employment use or the work use of the car. It is agreed that the value of an employer giving a car to an employee for their work use and their personal use is 40 per cent. That has been worked out in many surveys. The private use of the car has nothing to do with the use of the car for business purposes.

It is difficult to distinguish.

An Leas-Chathaoirleach

The Minister without interruption, please.

I could go into it in great detail but that is it basically. There is no question of it being on the business use. The old rates were too low compared with the cost of private motoring. Tapering relief started too early, it started at a level of 10,000 business miles a year which works out at an average of about 40 miles a day. There is no way anyone can argue that 40 miles a day is high business mileage. Under the old system such a relief could wipe out the complete BIK charge. This was unrealistic because there is always some benefit in having a company car for private use in the evenings or at weekends.

I have had a number of meetings with a number of groups representing commercial travellers and company representatives and my officials met others. I proposed to the Government that they agree that certain changes should be made which would reduce the impact of the BIK increases particularly on employees such as company representatives and commercial travellers who have very high business mileage.

I would like to stress again that the BIK charge only arises where the company car is available for private use. The benefit-in-kind charge does not apply where the employee arranges with his employer that he will not have use of the car other than for business purposes. In that regard I tried to assist the representatives and they told me that the figure they came up with is about 3,800 but the international survey in The Financial Times a few months ago showed that we were at the top of the OECD list as far as business cars in the State was concerned, at 94,500 cars. Senators can see very clearly if remuneration is going to be based on people getting cars it is totally unreasonable on people who are paying standard tax and higher tax. It makes an absolute nonsense of the system. I have moved in some way to try to help those on high mileage, who would be company representatives by and large. There are difficulties with that system also but at least we have tried to deal with the point.

Various Senators, including Senators Doyle and Upton, have made the point that taxation should not apply to the smaller co-ops and that the exemption, which has existed up until 1 April should be continued in their case. From a tax policy point of view it would, however, be invidious to discriminate on the basis of size and such an approach would not be acceptable. There are already several measures in the Bill which address the changeover from exempt to taxable status for the co-ops and I want to thank Senators for acknowledging that. These are of particular relevance to the smaller co-ops who are not involved in manufacturing and whose activities will, therefore, be taxable at the standard rate of 40 per cent. In section 48 a phasing arrangement is provided in which co-op profits will retain a two-thirds exemption from 1992 and a one-third exemption from 1993. Only those profits arising from 1994 onward will be fully taxable.

As an additional measure, net losses which a co-op may have incurred while the exemption was in place may be used as a set-off against taxable income from 1 April 1992. Senator Ó Cuív picked up that point but it is a substantial one particularly for the small co-ops. ICOS, who have been a very diligent and hardworking group in the interests of their members, have made the point to me that this would be beneficial. I want to put on the record of the House and for the information of Senators that it is there and there is no time limit on that. They can go back into the distant past. The overall effect of these provisions will be to greatly ease the transition from exempt to fully taxable status. I want to emphasise that I included these provisions after taking into consideration the representations from ICOS and from other individual co-ops, both large and small.

Senators will appreciate that the fundamental thrust of tax policy is to abolish shelters and reliefs in order to fund reductions in income tax. I want to thank Senators for their support in that policy. The co-ops tax exemption was a quite exceptional concession and its retention would have been inequitable. As with all economic entities the co-ops should be taxed. In cases where they are not making profits, taxation will not be a factor and where only small profits are being made, any tax charge will not be of significance.

Senator Doyle said that the Finance Bill does not truly reflect a tax reform programme. Needless to say I disagree with that. The changes in capital gains tax represent a radical reform of the capital gains tax code. The tiered rate system, where the rate of tax depended on the length of time the asset was owned, has been abolished and replaced by a single tax rate of 40 per cent. A single rate was recommended by the Commission on Taxation a long time ago but I thought it was advisable to move to that. It will do away with the need for schemes such as those involving the use of loan notes which were developed to avoid the top rate of tax. The annual gains exemption was also reduced. This exemption encouraged the frequent turnover of investment and, therefore, encouraged short term rather than long term investments. The new exemption is sufficient to keep those with small gains out of the tax net, while ensuring that the tax avoidance potential of the provision is greatly diminished. Again, I take Senator Ó Cuív's point; this removes a lot of paperwork from that area.

In addition to these changes, the capital gains tax code is streamlined by the closing of three tax avoidance loopholes. Senator Ó Cuív spoke at some length about that. The first involves the abuse of the relief available to a trader putting assets of a business into a company. This provision is designed to facilitate the incorporation of sole traders. By confining the relief to those transferring assets for bona fide commercial reasons, the abuse of this relief will be stopped without affecting the genuine trader.

The other two abuses of the capital gains tax code involve options. Section 62 will prevent the misuse of section 9 of the Capital Gains Tax Act, 1975, which was designed primarily for gifts. This section is being used in an unintended way in order to reduce or eliminate capital gains tax on the disposal of certain shares. Section 63 closes off a scheme which was designed to use options in the sale of shares in a private company worth £2.5 million in order to avoid capital gains tax on the sale. Section 63 also changes the treatment of quoted options to ensure that there is no tax barrier to the development of a quoted options market in Ireland.

Senator Doyle asked about the staffing of the head office which will oversee this new tax. I want to thank her for her supportive comments about the decisions on that. At the time of publication of the Finance Bill I indicated that there will be a decentralised head office, with staffing of over 30 officers, to oversee the administration of the new vehicle registration tax. This office is to be based initially in Rosslare pending the building of new decentralised Government offices in Wexford. As regards absorbing surplus Customs officers I can say that there will be sufficient new posts in Rosslare initially and later in Wexford to do so.

Senator Howard asked why the new arrangements for taxing pub licences do not apply to clubs. While the turnover basis for changing excise duty on certain liquor licences does not apply to pubs, I would point out to the Senator that the duty on annual club certificates is increased to £400, from £100, in the Bill. I am sure the Senator will agree that the duty charged on pubs and hotels in the lower turnover brackets is favourable by comparison.

The Senator who was thankful to me for my remarks about the pubs and the changes in the pubs unashamedly hung his colours to the mast in regard to those for whom he was lobbying. Sometimes it is difficult to know who Deputies and Senators are lobbying for but not in this case. The city vintners said to me that two-thirds of the pubs would be paying the £200 rate and they would all go bankrupt if it was any more than £200. I am sure it will be said that clubs will almost go out of existence if you follow the logic; I say that in jest because I believe neither argument. We will see how it works for a while and then perhaps return to what is a more realistic assessment. I thank Senators who were grateful for the changes but I want to say very clearly that these changes are on ice as far as I am concerned. It is based on good faith that we can make the system work.

As I said on Committee and Second Stage I spent a lot of time talking to the vintners' lobby and I decided to make these concessions to give them an opportunity to come into line. I know that end of the profession fairly well and I have listened very carefully to what many members of the profession have told me about the rates. The profit used to be about 34 per cent but is now in excess of 40 per cent in most cases. I find it rather hard to believe that a £200 licence will have any great effect but we will continue to monitor it carefully.

In reply to Senator Howard, in my city there are the same number of licences as there were in 1908 and there are now 600,000 more people in the city.

But think of the price of drink.

I would also have to remind Senator Doyle and Senator Howard and any other people who are close to the pub lobby that in the past five or six years while the excise on drink has not increased, that percentage has been taken by way of profits and the mark-up along with the percentage for pay rates under the Programme for National Recovery and the Programme for Economic and Social Progress. I will not trouble the House to go into what that means to profit margins but we have to take these issues into account when we are looking at the issue. Senator Howard will probably forgive Revenue then for being careful about what happens in these areas. It is all about equity and fairness but we have given a short break on these matters so we can see what the position is but they will remain under review so far as I am concerned.

Senator Doyle referred to the multiplicity of VAT rates currently in our system saying this did not fit in with the EC proposals for a dual VAT structure. I would like to point out that this original commission proposal has been overtaken by events and that last June, the ECOFIN adopted a much more flexible structure which enables member states to adopt a range of rates depending on budgetary and other considerations. The original proposals were that each member state would have two VAT rates, one standard rate of between 14 and 20 per cent and a reduced rate of between 4 and 9 per cent. The new proposals, as amended by the Council of Ministers, provide that member states will have one standard rate which will be 15 per cent or greater. In addition the option is available and I stress that this is an option, to have one or two reduced rates, which must be 5 per cent or greater. In addition there are transitional arrangements which will allow Ireland to keep our zero rate for the time being as well as our special low livestock rate. This arrangement could, therefore, result in a single rate, a two rate or a multi-rate system depending on the policy of individual member states. The VAT rate changes adopted in the last three budgets are prefectly consistent with this proposal.

With regard to possible replacement measures to make good the revenue loss arising from the abolition of VAT at the point of entry, I am not yet in a position to give precise information on these because analysis of various alternatives is still under way in my Department. I can assure Senator Doyle that as soon as this exercise is completed we will make public the result because I know it is important for the various sectors to make the arrangements.

I thank the Senators who gave a general welcome to the provisions in relation to Revenue powers. A number of Senators referred to the need for restraint by Revenue in using the new powers. I want to make it clear that the Board of the Revenue Commissioners are fully conscious of this aspect and had assured me before they got these powers, that the officers concerned would receive appropriate training and guidance in the use of the new powers. I would again emphasise, as I did in my opening speech, that the compliant taxpayer has no grounds for concern. What I want and what the general public want is that Revenue should use the powers available to them to ensure that those who fail to pay taxes properly due can be detected and successfully prosecuted and that avoidance practice can be addressed promptly.

I will just say to Senator Howard and to the other Senators — the same as I have said in relation to pubs and other matters — that if I find these powers are not being used in the spirit in which I understand them, I will change them also. I will just rescind them. As Senator Doyle, Senator Batt O'Keeffe and other Senators said this morning, it is an area where we have to tread with caution. I was rather surprised that the only people who are totally against the powers are the Labour Party. They seem to be out of line with the Irish Congress of Trade Unions. There must have been some falling out. Congress have argued strongly for these powers. In fact last Sunday when a Sunday paper got a headline wrong even though the substantive argument in the article was right, the first people to condemn me out of court was the Irish Congress of Trade Unions, Consequently, I was rather taken aback to be castigated by the Labour Party today for trying to ensure that defaulters and others who do not pay their taxes should get away scot free. I assure the House that the powers will be used cautiously. There was another issue which Senator Costello raised on which there was a difference with Senator Upton. Maybe it is merely a point of difference within the Labour Party.

I take Senator Costello's point on clarification and I have given an assurance to both the Taxation Institute and to the chartered accountants and the other accountants body that rather than having argument or confusion about any of the new sections a statement of practice will be drafted in consultation with the professionals. In this way data that is required will be set out for business people so that they are not gathering and collecting information that no one will ever use. This statement of practice will be worked out by the respective presidents of the relevant institutes and Revenue immediately on the passage of this Bill. I am glad to see that the professional interests have welcomed that.

It is strange that in political life the atmosphere can change dramatically within a relatively short time in regard to the same subject. I am sure that if I was in this House at the start of the session last October, and dealing with the subject under discussion, everyone would have said: "What we need are increased Revenue powers. Look at what has been happening right through September and October. This cannot go on. The whole system is failling apart. The country's credibility is down the tubes". Six months later everyone stands up and says: "What are we doing? We are hammering people. This is awful abuse. It is right-wing fascism". However, after 15 years in the Dáil, such contradictions go in one ear and out the other. I have given a commitment to ensure that these new powers, under the Chairman of the Revenue Commissioners, will be properly used and monitored. If the powers are too strong, they will be rescinded, if they are too weak they will be strengthened. I want to thank particularly Senator Doyle for a very balanced understanding of what I am doing on this particular issue.

Senator Batt O'Keeffe and Senator Doyle put forward some good proposals. Senator Doyle asked me to look into the matter of the district service companies. I will do that. She mentioned Brendan Logue of the IDA. A Mr. McGoldrick, who was an unemployed man from Sligo, brought forward proposals to me in that regard also. I have promised both of them that I will examine the proposals. I give that assurance to the Senator, to, and I will pass the proposals to the Department of Social Welfare also asking them for a detailed and critical assessment. I see merit in them if they can be operated. They are not unlike the small co-operative areas where people are working for themselves. Any initiative that is in that area deserves a full examination and assessment and I am undertaking to do so.

I thank the Senators for their time and their patience during what I think has been a good debate. I assure Senators that we have taken note of the various other points raised and will follow them up. Where I think it is necessary to do so, I will send an individual letter to the Senator involved.

Question put.
The Seanad divided: Tá, 25; Níl, 12.

  • Bennett, Olga.
  • Bohan, Eddie.
  • Byrne, Hugh.
  • Byrne, Sean.
  • Conroy, Richard.
  • Dardis, John.
  • Farrell, Willie.
  • Finneran, Michael.
  • Fitzgerald, Tom.
  • Foley, Denis.
  • Honan, Tras.
  • Hussey, Thomas.
  • Keogh, Helen.
  • Kiely, Dan.
  • Kiely, Rory.
  • Lanigan, Michael.
  • McGowan, Paddy.
  • McKenna, Tony.
  • Mullooly, Brian.
  • O'Brien, Francis.
  • Ó Cuív, Éamon.
  • O'Donovan, Denis A.
  • O'Keeffe, Batt.
  • Ryan, Eoin David.
  • Wright, G.V.

Níl

  • Cosgrave, Liam.
  • Costello, Joe.
  • Doyle, Avril.
  • Hourigan, Richard V.
  • Howard, Michael.
  • McDonald, Charlie.
  • McMahon, Larry.
  • Manning, Maurice.
  • Naughten, Liam.
  • O'Reilly, Joe.
  • Ross, Shane P.N.
  • Upton, Pat.
Tellers: Tá, Senators E. Ryan and Fitzgerald; Níl, Senators Cosgrave and O'Reilly.
Question declared carried.

When is it proposed to take Committee Stage?

At 8 p.m. tonight.

Sitting suspended at 7.10 p.m. and resumed at 8 p.m.
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