Finance Bill, 1995 [Certified Money Bill] : Second Stage.

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

I am glad of the opportunity to put this substantial Bill before the Seanad. It contains many important measures and reliefs affecting the tax system. I propose to outline the main features of the Bill for the benefit of the House and I hope we can have a productive examination of the measures it contains.

The Bill will confirm the important new income tax and corporation tax reliefs announced in the budget; extend various capital gains tax and capital acquisitions tax reliefs to assist business; introduce a series of widely welcomed reliefs to assist those in rented accommodation, to provide tax relief on local authority service charges, to encourage donations to Third World Charities and to afford the opportunity for our cultural institutions to build up the national collection of heritage items; and provide additional powers to the Revenue Commissioner to counter tax evasion and, in the light of a recent court ruling, to secure the position of the Revenue Commissioners in the application of its traditional powers in the excise area. The Bill also applies particular requirements on tax advisers and auditors in relation to the reporting of tax evasion. This provision honours the commitment made by the Oireachtas to implement the recommendations of the beef tribunal report.

The Bill refocuses and confirms certain anti-evasion measures, such as the VAT monthly control statement and tax clearance rules, while at the same time easing the penalties for late filing under self-assessment; brings in a significant range of reliefs in the business sphere to promote enterprise and the renewal and upgrading of particular urban areas and tourist resorts; gives effect to a new relief to stimulate R & D expenditure which should be increasingly a key element in the strategy to upgrade and enhance the quality of jobs being created here; removes certain competitive distortions in the application of VAT to certain sporting facilities and implements a new EU regime for VAT on secondhand goods.

In the Bill, the Government is taking major steps to reduce the tax burden on employment, low incomes and the cost of employing labour. In this context, I am seeking to widen the tax base, to confine reliefs to the standard rate and to lessen the burden on business in general. I am sure the House will support these aims and give the Bill a speedy passage.

Turning to particular sections of the Bill, sections 1 to 4 provide for the major improvements in income tax announced in the budget. These cover increases in the personal allowances, the widening of the standard rate bands and the adjustment of the existing PRSI allowance and a new PRSI allowance of £50 per week introduced in the budget. The improvement in personal allowances, together with the significant widening of the standard band, mean that the thresholds for the higher tax rate in the case of most employees will be increased from £22,186 to £23,740 per annum for a married couple, and from £11,636 to £12,340 for single persons.

Section 5 provides, further to the budget announcement, for the introduction of a tax allowance for all tenants in private rented accommodation effective from 6 April 1995. This new relief is essentially a broadening of the relief currently available to the over-55s in such accommodation — the main differences are that the new relief will be at the 27 per cent rate and the annual allowances will be £500 for a single person, £750 for a widowed person and £1,000 for a married couple. The over-55s will continue to enjoy their existing level of entitlements, that is, relief at their marginal rate of tax allowances of up to £1,000 for single persons, £1,500 for widowed persons and £2,000 for married persons. While the relief for the over-55s operates on a previous calendar year basis, the Bill provides that this new relief, and the over-55s relief, will, from the 1995-96 tax year, operate on a current tax year basis.

Section 6 provides tax relief for tuition fees paid to private colleges in respect of approved courses. The Minister for Education will approve the colleges, courses and the level of fees eligible for tax relief. Only full time undergraduate courses of at least two years duration will be eligible for approval. The tax relief will be available for fees paid from the academic year 1996-97 and will be at the standard rate of tax.

In the budget, I announced a tax allowance in respect of local authority service charges which are paid in full and on time. The allowance will be given at the standard rate of tax up to a maximum of £150. Section 7 provides for this allowance and extends it to certain payments in respect of privately operated refuse collections, at a flat rate of £50 per annum, and to payments for domestic water supplies by members of approved group water schemes. To deal with a situation where a son or daughter might pay the charges on behalf of their parents, I extended the relief to charges paid by another person living in the same house.

Section 8 relates to tax relief for donations to designated Irish Third World charities. These charities will qualify for tax relief in respect of certain donations by individuals in the range £200 to £750. This will be topped up by the Revenue Commissioners remitting to the charity the tax associated with the contributions at the standard rate. Thus, a donation of £750 will be worth an extra £277 to the charity concerned. The figure of £750 represents the maximum qualifying contributions that an individual can make to all designated charities in a year. Relief will also be available where the qualifying contribution is made by instalments.

I know that Senators have received representations from the Irish Red Cross Society to the effect that it will be unable to benefit from section 8 because the society is active throughout Ireland as well as abroad. I should point out that, under section 13 of the Bill, the Red Cross as a human rights body will benefit from the continued availability of tax relief on income covenanted to the society by donors. This relief is more generous in a number of ways than the relief under section 8.

First, the tax relief is available in respect of all contributions, subject only to a limit on the donation of 5 per cent of the donor's income which in many cases would exceed the £750 limit under section 8. Second, the relief is given at the donor's marginal rate and both the recipient and the donor, if he or she is a higher rate taxpayer, can benefit from the relief. The covenant must, however, be payable for three years or longer, but this is a feature of other types of covenant relief, e.g., covenants for research purposes which has not prevented research bodies from successfully making use of the relief.

Sections 12 and 13 provide for changes in the tax treatment of covenants made by individuals. These changes are being made both as part of the overall changes in the financing of third level education and in order to reduce an area of tax expenditure which has been growing significantly over the last few years. This year's changes are as follows. First, tax relief is abolished on covenants in favour of minor children, except in the case of a covenant in favour of an Incapacitated minor child who is not the child of the covenantor. Second, tax relief on all covenants made by individuals, other than those in favour of the incapacitated, will be subject to an overall limit of 5 per cent of the covenantor's income.

From 6 April 1995 tax relief will no longer be available generally for covenants made by individuals. Tax relief will, however, continue to be available in the following four cases. First, tax relief will continue to be available, on an unrestricted basis, to covenants in favour of incapacitated adults and those in favour of incapacitated children, provided that the covenantor is not the child's parent. The other three categories of covenants will be allowed tax relief subject to an overall limit of 5 per cent of the covenantor's income. These are covenants in favour of those aged 65 or over, covenants for the purposes of research or the teaching of the natural sciences and covenants to certain bodies established for the promotion of human rights.

In order to deal with a limited number of hardship cases affecting certain cohabiting couples in long standing relationships who are bringing up children, I have included a provision to allow the Revenue Commissioners to continue covenant tax relief in such cases for three years subject to certain conditions. I am sure Senators will welcome this new feature.

Section 17 gives effect to a series of changes in the seed capital scheme, most of which were announced in the budget. These measures will make the scheme more effective as an incentive to new business start-ups by increasing the amount of tax relief available, removing a number of restrictions on the operation of the relief and allowing greater flexibility in how the scheme is applied.

The section also extends the qualifying activities for the purposes of both the BES and the seed capital scheme to commercial research and development activities and the cultivation of horticultural produce in greenhouses. There has been a significant increase in interest in this scheme in the past few months and the changes in the Bill will encourage other new entrepreneurs to look to the scheme for assistance.

Section 20 amends the public access requirements set out in section 19 of the Finance Act, 1982, which provides for relief from income or corporation tax, as appropriate, for owners of approved buildings of significant scientific, historic, architectural or aesthetic interest in regard to certain expenditure.

Buildings approved by the Commissioners of Public Works will now be able to qualify either by being open to the public on a bed and breakfast basis for at least six months of the year, of which four months must be in the period 1 May to 30 September, or by complying with the existing public access requirements, which require them to be open to the general public for 60 days, of which at least 40 must be in the period 1 May to 30 September.

Section 21 provides for the continuation of stock relief for farmers at 25 per cent for a further two years to 5 April 1997. The section also provides for stock relief at a rate of 100 per cent for four years for certain young trained farmers who first qualify for grant aid under the scheme of installation aid for young farmers in 1993-94 or later, or who first become chargeable to income tax in respect of profits or gains from farming for the year 1993-94 or any subsequent year of assessment up to 1997-98, and who were under 35 at the start of that year and meet specific training requirements.

Section 22 provides for a special relief for farmers in respect of profits arising where cattle herds are disposed of because of statutory disease eradication measures. This relief allows deferral of the profits for tax purposes over two years and the application of 100 per cent stock relief to the profits so deferred. The special treatment is available in the case of total herd disposals arising under disease eradication schemes, except in the case of a brucellosis disposal where it will be available for partial disposals subject to certain conditions.

Section 29 provides for the introduction of a significant new scheme aimed at attracting to Ireland certain major multinational corporations. Where the qualifying conditions are met, such companies will be exempt from Irish tax on the profits of their foreign branches. Entitlement to the relief will be dealt with by certification by the Minister for Finance in consultation with the Minister for Enterprise and Employment.

Sections 19, 30, 31 and 66 provide for certain changes to the self-assessment system in recognition of the improvement in voluntary compliance. The changes in the Bill follow a recent review of the system involving the tax administration liaison committee and include a reduction in surcharges and penalties for late filing of returns, the non-application of surcharges to businesses in their first year, the introduction of a direct debit facility for the payment of preliminary tax and the removal of a number of anomalies in the operation of the self-assessment system.

The Bill contains a number of measures dealing with the urban renewal scheme which, as Senators will know, is aimed at revitalising certain urban areas and assisting employment in the construction industry. Section 32 provides for a two year extension up to 24 January 1999 to the deadlines for the urban renewal tax incentives for the Custom House Docks area. Section 34 extends by two years to 5 April 1998 the period for the availability of the tax incentives in the Temple Bar area.

Section 35 provides for a scheme of tax reliefs for six enterprise areas located in Dublin, Cork and Galway. Capital allowances are available for the construction or refurbishment of premises used for certified projects carrying on manufacturing or the provision of internationally traded services. Double rent allowances for qualifying traders will be available for ten years as will rates relief. The capital allowances will apply in respect of either industrial or commercial buildings, including offices.

In addition section 35 provides for offices to be allowed as qualifying buildings for the purposes of the 1994 urban renewal scheme in the designated areas outside the five county boroughs of Dublin, Cork, Limerick, Galway and Waterford. This measure is retrospective to 1 August 1994 when the new scheme came into being.

A further incentive is provided in the section for the construction or refurbishment of certain multi-storey car parks where the local authority certifies the car park has been developed in accordance with criteria laid down by the Minister for the Environment and the Minister for Finance. The reliefs, which will be available from 1 July 1995 to 30 June 1998, consist of capital allowance of 50 per cent which may be taken in full in the first year by owner-occupiers; and in the case of lessors, may be taken at a rate of 25 per cent in the first year with annual allowance of 2 per cent per annum thereafter up to the balance of the 50 per cent. Double rent allowance will also be available to lessees in respect of rent paid on qualifying car parks.

Finally, sections 32, 34 and 35 increase from 90 to 125 square meters the maximum permissible floor size for newly built apartments in the various urban renewal areas. This is to encourage the provision of larger family oriented accommodation in these areas.

Section 43 provides for a corporation tax exemption in respect of employment grants paid by the industrial development agencies to medium and large industrial undertakings. A similar exemption already exists for employment grants to small and service businesses. The concession will increase the real value of the grant in the hands of recipient companies and thus provide an additional incentive for employment in such enterprises.

Section 44 provides for an exemption from corporation tax and capital gains tax for the Irish Horseracing Authority and its subsidiaries, Irish Thoroughbred Marketing Limited and Tote Ireland Limited from their inauguration dates of 1 December 1994. In line with precedent these bodies will not be exempt from retention tax on deposit interest.

Section 45 and the Second Schedule provide that following the reduction in the standard rate of corporation tax from 40 per cent to 38 per cent from 1 April last, the associated tax credits applicable to distributions to shareholders will be reduced by a corresponding amount in respect of distributions made on or after 6 April 1995. The reduction in the standard rate of corporation tax provided for in section 54 should be viewed as a first step on the road to securing a rate comparable with our overseas competitors. To that end the aim will be to reduce the standard rate further in future years, as resources permit.

I turn now to the pilot renewal scheme for seaside resorts. Chapter III of Part I of the Bill provides for a new scheme of tax reliefs from 1 July aimed at renewing and updating the tourist amenities and facilities in certain coastal resorts, namely Achill, Arklow, Ballybunion, Bettystown/Laytown/Mosney, Bundoran, Clogherhead, Clonakilty, Courtown, Enniscrone, Kilkee, Lahinch, Salthill, Tramore, Westport and Youghal. The precise qualifying areas are described in the Third Schedule.

Sections 47 and 48 provide for accelerated capital allowances in respect of capital expenditure incurred on the construction or refurbishment of hotels, holiday camps, holiday cottages and other tourist accommodation registered or approved by Bord Fáilte. The accelerated capital allowances will also be available in respect of capital expenditure incurred on the construction or refurbishment of types of non-accommodation tourist facilities as set out in a list to be published by the Minister for Tourism and Trade with the consent of the Minister for Finance.

Section 49 provides for a double rent allowance as a deduction in computing trading income of the lessor for the first ten years rent paid under a qualifying lease on a qualifying tourist business premises in a resort area.

Sections 50, 51 and 52 provide for reliefs for 100 per cent of expenditure incurred on the construction, conversion and refurbishment of certain rented residential accommodation. Under these reliefs the qualifying expenditure can be offset against all the rental income of the claimant in computing liability to tax but will be available where the accommodation is available primarily for letting to tourists.

Sections 56 and 142 deal with the bank levy. Section 142 provides for the phasing out of the bank levy from £36 million in 1994 to £24 million in 1995 to £12 million in 1996 and to nil in 1997. There is no net cost to the Exchequer since the levy is already fully offset against the banks' corporation tax liability. There would, however, be a cash flow loss in the current year due to the later payment date for corporation tax. To overcome this the banks have agreed to a compensatory cash flow arrangement whereby in 1995 they will make an earlier payment of corporation tax of £12 million in order to cover the £12 million reduction in the levy. Thus the Exchequer will not be at a loss. This compensatory cash flow arrangement will be continued in subsequent years.

Section 58 requires certain Irish registered companies which are not resident in the State for tax purposes to supply certain particulars to the Revenue Commissioners on their activities, including the identity of the individuals who control them and the country in which they are controlled. The provisions do not apply to companies actually trading in the State as these are subject to other information requirements. The measure is aimed at certain non-resident companies using Irish registered status to conduct undesirable activities abroad which have the potential to bring bona fide Irish companies into disrepute.

Section 59 gives a new relief for incremental expenditure on research and development incurred by a manufacturing company not in receipt of research and development grant aid over a three year period. For every year in that period such companies will be entitled to a quadruple deduction for tax purposes for additional expenditure on research and development in that year of between £25,000 and £175,000. These limits apply on a group basis in the case of a group of companies. Where a company obtains relief under this section it will not be entitled to raise BES funds in the three year period of the relief.

The International Financial Services Centre has been a great success. To facilitate the development of treasury activities in the IFSC and the Shannon zone, section 62 provides that, subject to certain restrictions, corporation tax on foreign interest receipts may be grouped together in determining the double taxation relief to be given for foreign withholding tax on intra-group interest receipts. Section 65 removes restrictions on the 10 per cent corporation tax treatment of dealings in commodity futures and commodity options on the Dublin Exchange Facility where dealing in futures and options is the principal trading activity of the company.

To facilitate the development of the collective funds sector in the IFSC section 38 will allow tax transparency where all the unit holders in a collective fund are themselves collective investors. Also in the collective funds sector, section 37 removes, in specific circumstances only, the advance corporation tax liability of certain investment companies. The IFSC companies will also benefit from other provisions in the Bill which are of a more general application.

Sections 68 and 69 provide for the taxation of investment returns under foreign reinsurance contracts taken out by Irish based life assurance companies. The provision is necessary because of a recent change in UK tax legislation which would have allowed life assurance companies established here to reinsure investment policies with UK reinsurers without paying either UK or Irish tax.

Sections 71 and 72 provide significant improvements in the retirement relief for the disposal of business assets by entrepreneurs aged over-55.

Section 74 provides for significant changes in the rollover relief for equity investment, the aim of which is to make the relief available to a wider range of entrepreneurs. Also, by virtue of section 73, rollover relief is being extended to the disposals of development land used for trading purposes where the business has to relocate for environmental reasons.

Senators may recall that a 27 per cent rate of capital gains tax was introduced in last year's Finance Act for disposals of ordinary shares in trading companies held by individuals for at least five years. Section 75 extends the 27 per cent rate on a once-off basis to persons who are currently unable to qualify because their business was subject to a restructuring or take-over and their shares were exchanged for non-qualifying shares or securities prior to the introduction of the reduced rate. Only disposals in the current tax year will be able to avail of this facility.

I will now deal with excise duties. Sections 77 to 84 provide for the extension of tobacco stamps to non-cigarette products such as roll-your-own tobacco. Tax stamps are due to come into effect on packet cigarettes this autumn and on roll-your-own tobacco next year.

In the area of excise duty compliance and enforcement, the Bill includes provisions to update and clarify Revenue powers to stop, search, detain and seize goods liable for forfeiture under excise law. The powers in sections 85 to 96 are largely a restoration of the search and seizure powers together with the reenactment of provisions in the Finance Act, 1992, and related basic excise management provisions from earlier statutes as well as a right to appeal against the seizure and forfeiture of goods. The need for this restatement of powers arises from a High Court decision last year.

The Bill provides for a vehicle registration tax relief scheme which I announced in the budget. Schemes of this type have been successful in other years. Tax relief of £1,000 will be granted by way of repayment where a car at least ten years old is scrapped and the owner purchases a new car. This approach ensures that the concession will accrue fully to the qualifying new car purchaser.

The Bill also includes other proposed amendments to VRT law which increase the minimum amount of tax payable on category A vehicles, mainly cars, from £100 to £250 and which make technical changes in the way VRT is calculated when a vehicle is converted to a category subject to a higher rate of tax. The VRT provisions are contained in sections 97 and 98 of the Bill.

Sections 103 to 109 provide for an appeals system whereby persons dissatisfied with an appeals determination of the Revenue Commissioners in relation to excise duty, including VRT, can appeal to the independent appeals commissioners who already provide a similar procedure in relation to other taxes, such as income tax and VAT. This extension of the appeals mechanism is supplemented by provisions later in the Bill improving the operation of the appeals system generally.

I want to refer to the implementation of the EU Seventh VAT Directive. Sections 118 to 141 of the Bill relate to VAT and are predominantly concerned with the transposition into Irish VAT law of the EU Seventh VAT Directive. The directive contains new rules for the VAT treatment of sales of second hand moveable goods, works of art, collectors' items and antiques. The objective of the directive is to avoid double taxation of such goods. Under the new system — the margin scheme — the dealer has the option to charge VAT on his profit margin only rather than, as has applied up to now, on the full sale price of the goods which would include an element of trapped VAT. The Bill also establishes a special scheme for auctioneers, which is similar to the margin scheme, and provides for the retention, in a slightly modified form, of our existing VAT input credit arrangements for dealers in second hand motor vehicles.

Irish VAT law currently provides that, in addition to the VAT chargeable on the supply of goods being sold through hire purchase or on credit sale, VAT is also chargeable at 21 per cent on the interest portion of hire purchase and credit sales transactions. Sections 120, 125, 128 and 139 of the Bill provide for the exemption of these interest payments and will bring Irish law into line with EU VAT law, as recently clarified by the terms of a judgment by the European Court of Justice.

The Bill contains two initiatives in the area of sporting and health and fitness which have the purpose of ensuring equity and consistency of treatment in relation to VAT. These changes are covered by sections 124, 137, 139 and 140 of the Bill. In the case of the golfing facilities, it is proposed that, where a member owned club's turnover from non-members exceeds, or is likely to exceed, £20,000 per annum — the normal registration threshold for services — it will be liable to VAT at 12.5 per cent on that turnover, in other words, the turnover from green fees from non members. Such clubs will remain exempt with regard to turnover derived from normal membership fees and where turnover from non-members' fees does not exceed the £20,000 threshold.

The Bill also includes an enabling provision which will allow the Revenue Commissioners to determine, on a case by case basis, if the VAT exemption afforded to non-profit making bodies operating in the general area of sports and health and fitness should be withdrawn where the £20,000 turnover limit is exceeded. It is not intended to apply a heavy handed approach in this area. A determination made under these provisions may be appealed to the appeal commissioners.

The measures represent a considered effort to respond to the many representations received on behalf of the commercial sectors concerned and are designed to conform to existing EU requirements that VAT exemptions should not give rise to distortions of competition. They will all take effect from 1 January 1996.

The Bill provides in section 133 that, if requested to do so, any VAT registered traders operating cash rebates or other incentives not recorded in normal trade documentation will be required to notify the Revenue Commissioners of all such payments or benefits given in connection with supplies to other trades. This measure, which replaces the monthly control statement requirement, will be reinforced by the continued development of the Revenue Commissioners' existing sector by sector audit programme. Business interests in general will welcome these new arrangements.

A number of technical VAT measures are introduced aimed at the clarification of existing practice, ensuring better management of the present system and generally simplifying the tax environment for business. The Bill clarifies that, in the case of the supply of new houses, in line with long standing practice, VAT is chargeable on the full value of the transaction, including the site value. It also clarifies that, as a basic rule, the place of supply of services is the place where the supplier has established his business or where he has his fixed establishment. A facility is proposed to enable me, as Minister for Finance, by order, to increase the annual turnover threshold for eligibility to account for VAT on a cash receipts basis.

For traders on annual accounting, provision is made for the alignment of the annual return with the trader's own accounting period. In future, VAT refunds will be effected directly into a bank account nominated by the trader concerned, thereby making the whole system faster, more efficient and secure. The rate of VAT on greyhound feeding stuffs is being reduced from 21 per cent to 12.5 per cent in response to concerns about cross-Border competition with Northern Ireland where such products are zero rated. Finally, there is a provision for a right of appeal to the appeal commissioners with regard to VAT registration rulings made by the Revenue Commissioners.

Turning to stamp duties, the Bill contains a number of measures which will be of particular assistance to the business sector. Sections 143 and 144 give stamp duty relief for company restructuring. Section 146 exempts health insurance from the 2 per cent levy on non-life insurance premiums which would otherwise have applied to the VHI when it becomes an authorised non-life insurer. Section 150 provides a stamp duty exemption to facilitate stock borrowing by member firms on the Irish Stock Exchange to improve market liquidity.

Sections 151 to 155 contain new provisions with regard to the residential property tax. The Bill increases the thresholds for property value and income as announced in the budget. The new thresholds for 1995 are £94,000 for property and £29,500 per annum for income. The tax will be at a flat rate of 1.5 per cent.

The Bill contains a number of important measures which will help family businesses. With regard to capital acquisitions tax, section 161 provides for an increase in business relief to a flat rate of 50 per cent on all qualifying assets. Previously, only the first £250,000 per beneficiary qualified for 50 per cent relief, with 25 per cent relief on the balance. In addition, more favourable instalment payment terms are being introduced in section 164 for capital acquisitions tax. This will give business owners the option of discharging their liabilities over five years at a competitive interest rate of 9 per cent.

I turn now to heritage companies. A number of family owned companies holding heritage houses, gardens and other items of historic or aesthetic interest are currently unable to avail of the capital acquisitions tax relief for heritage property which does not extend to company shares. In order to assist the preservation of such properties for public viewing, section 166 provides for the granting of relief to shares in existing heritage companies to the extent that the underlying value of the shares is attributable to heritage property.

Sections 167 to 170 make a number of amendments to the legislative provisions dealing with the Irish residence of individuals for tax purposes. Section 167 provides that the exemption from liability to DIRT will now be based on the non-residence status instead of the non-ordinary residence status of the taxpayer. Section 168 makes a similar change in regard to the exclusion from the obligation on financial institutions to report details of deposit interest to Revenue.

Section 169 introduces an annual £3,000 threshold in regard to the Irish tax liability on the foreign investment income of an individual who leaves Ireland to work abroad for a number of years. At present, all the foreign investment income of such a person is liable to Irish tax for the first three years of his or her stay abroad. Section 170 deals with the tax relief for Irish individuals who go abroad to work on foreign assignments and removes the existing disallowance of the first 15 days spent abroad in computing the amount of relief.

I turn now to Revenue offences and related reporting requirements. Section 172 deals with the reporting of tax evasion by auditors and tax advisers. It arises from the recommendations of the beef tribunal which the Houses, including the Seanad, accepted last year.

The essential requirement of this section is that auditors and tax advisers generally, who become aware in the course of their normal work for the client of material tax evasion committed by the company, must report this to the company and request that the matter be rectified and that the company should report the offence to Revenue. If, at the end of six months, it is not established to the satisfaction of the auditor or adviser that the matter has been so rectified or reported, the auditor or adviser must cease to act as auditor, or cease to assist or advise the company in tax matters, for a period of either three years from the date of the report to the company or until the auditor or adviser is satisfied that the matter has been rectified, whichever is the earlier. However, there is an important proviso that nothing in this section will prevent a person assisting or advising a company in preparing for or conducting legal proceedings, either civil or criminal, which are extant or pending at the end of the six month period in question.

The new section confines the list of reportable offences to serious tax evasion and deletes a variety of offences in the Bill as originally published. It does not seek to define materiality. It will be a matter for the auditor or adviser in any particular case to assess what is material taking account of their own professional standards and of the requirements of the section. The requirements apply to accounting periods beginning after 30 June 1995.

In the case of auditors, and in line with the beef tribunal recommendation, the new section also provides that they must report their resignation to Revenue if they have resigned in accordance with the provisions of this Bill.

While the section in its previous incarnation as section 153 generated a good deal of public concern and controversy, the amended section retains the essential core of the beef tribunal recommendation and places a statutory duty on tax advisers generally to assist in countering tax evasion. I believe that this is a substantive and important change in how tax evasion is to be treated by professional advisers. The public debate which has focused on this issue has made it clear to all concerned that compliant taxpayers and the PAYE sector in general will not accept the shielding or assisting of serious tax evaders. I know the House will endorse that view.

Section 173 provides for improvements in the administration of the income tax appeals machinery to the benefit of the taxpayer. The changes enhance the role of the appeal commissioners in dealing with applications for appeal hearing and will add to the independent status of the commissioners. In addition, section 173 also amends section 429 of the Income Tax Act, 1967, to confirm the right of accountants and tax practitioners to represent clients at the rehearing of tax appeals before a Circuit Court judge.

The black economy monitoring group and ICTU have identified access by the Revenue Commissioners to information held by public authorities as a valuable tool in identifying the black economy and combating abuse. Accordingly, section 175 empowers the Revenue Commissioners, for the purposes of the assessment, charge, collection and recovery of tax, to obtain from a Minister of the Government details regarding payments made by the Minister to specified persons. For example, this would relate to details of payments made to landlords by a community welfare officer for rent supplement, which are currently denied to the tax authorities. It will give the relevant authorities the power to obtain such information.

On a separate but related issue, section 14 introduces an amendment to the Income Tax Act, 1967, to require a return to the Revenue Commissioners of payments to landlords in relation to rent or rent subsidy by public bodies, such as health boards.

Further to the announcement in the budget, section 176 provides for a scheme of tax relief on donations of items of national heritage. It provides that the annual aggregate value of all items to be accepted under the scheme by an expert selection committee for donation to one of the national cultural institutions or approved bodies will be £0.5 million. No individual item worth less than £75,000 will be eligible for acceptance under the scheme. The tax relief available to donors will apply to income tax, corporation tax, capital gains tax and gift and inheritance tax and will be available also in respect of arrears of such taxes.

Section 177 deals with tax clearance procedures which must be complied with prior to the award of certain public sector contracts. The section confirms the powers of the Revenue to examine if the tax affairs of the applicant for a tax clearance certificate are fully in order and up to date and extends this examination to certain connected persons or enterprises to ensure that the procedures are not circumvented.

I wish to draw the attention of the House to certain minor corrections which I seek to have made by the Clerk under the direction of the Cathaoirleach. First, a typographical error in the reference on page 202, line 10 to a Department of Finance circular, F49/24/84, which should be amended to F49/29/84. Second, a correction to a cross reference to section 86(4)(f) on page 132, line 35 was made by default and without authority. The formal agreement of the Cathaoirleach is sought to confirm this correction.

I mentioned a minor textual correction at the conclusion of the Committee Stage debate in the Dáil, but this was not noted in the Official Report and consequently was not made. The correction in lines 17 to 19 on page 182 of the Bill requires the words "there has been a breach of any condition specified in paragraph (b) or (c) of subsection (1)" to be moved down and out under (c) of that subsection. I hope the Seanad will indulge me and allow those corrections to be made to the inadvertent errors made on Committee Stage in the other House.

I appreciate the attention which Members have given to this extensive and at times technical exposition. I will be glad to go into further detail on Committee Stage, if required. I commend the Bill to the House.

An Leas-Chathaoirleach

Before I call Senator Roche, I wish to inform the House that, in accordance with Standing Order 100, I am directing the Clerk to make the three corrections to the text as outlined by the Minister.

I compliment the Minister on his endurance. The Finance Bill is a technical Bill of extraordinary length and we should examine the way in which it is drafted. From my time in the Department of Finance, I am aware that there is always a temptation to make the Finance Bill an omnibus Bill, or the attic into which everything is put. We need to look closely at the way in which the Finance Bill is handled in the future.

It is intended as the legislative expression of the public finance and economic policies initiated in the budget. It is the way in which legislative effect is given to the policies of Government in public finance and on all economic measures. The Bill is the legislative response to the major economic and financial questions of the State on the day. Members will recall a famous photograph in the Magill book of politics some years ago, which featured two bright-eyed young women holding up a placard. The inscription on the placard, which was probably one of the sharpest pieces of political commentary I have ever seen, stated: "If Fine Gael is the answer, it must be a very stupid question." I am not saying this is a stupid Finance Bill. However, it is a complex and voluminous Bill. If this is the answer to our economic and financial problems, then a deeply confused and ill focused question is being answered.

There are a number of technical problems with the Finance Bill but I do not wish to dwell on them. However, I wish to dwell on the overall strategy of the Bill and on what it says about present economic and financial policies. The major problem with the Finance Bill is that it is so ill focused. It is poorly focused because Government economic and public finance policy is poorly focused. The Bill is simply the mechanistic reflection of the way the Government is thinking about economic and finance policy.

This Government inherited a unique economic situation. When it came into office the budget was in balance. Indeed, there was a unique opportunity to rein in public finance and to go not just for a balanced budget but for a budget surplus. As a result of the public finances being handed over in such excellent order, it would have been possible to achieve two things in this Finance Bill. However, the Bill fails on both counts. First, we could have resolved finally the long-standing issues relating to Ireland's public finances. We could have endorsed financial discipline; we could have shown the world that we are serious about financial discipline. We failed to do this in virtually every line of the Bill and certainly in every Chapter. Second, we could have done something to produce the long awaited and long overdue tax equity for which we have all hungered for so many years. We could have produced radical and meaningful tax changes to achieve justice for PAYE taxpayers. Those changes were possible in this Finance Bill because of the excellent state of the economy of this nation when it was handed over by the outgoing Government. While there are tax changes in the Bill which must be accepted and welcomed, the combination of all the changes in the Bill could by no stretch of the imagination be regarded as farsighted, radical or comprehensive.

Instead of clearcut answers to the economic, financial and taxation questions of the day we have received a mishmash in this Finance Bill. It lacks focus, clarity and coherence because Government policy on the finances of this nation, so far as taxation and all economic issues are concerned, lacks focus, clarity and coherence. I am not saying the Bill is without merit. That would be disingenuous. The Minister has introduced real and welcome changes in the Bill. However, its shortcomings far outweigh its undoubted merits. In the years ahead this Bill will be seen as a milestone, marking yet another unique missed opportunity. I would classify this Bill as I would Finance Bills in the middle and late 1970s and 1980s — as a series of milestones marking missed opportunities.

The Senator would know all about the late 1970s.

I worked with different Ministers at that time.

Public spending is the prime example of this Bill's failure. At the risk of being tedious, it is worth reminding this House and the State of the nation's economic and financial well being when the Government took office. Last December, all the economic observers believed that the economy was in excellent shape and that the outlook was more optimistic than it had been for almost a generation. Fianna Fáil-led Administrations from 1987 had succeeded in eliminating current budget deficits for the first time in nearly 30 years. What do we have now? We are slipping back into current budget deficits. Nobody who cares about the finances of this nation could welcome that reversal. Government expenditure was down to about 40 per cent of GNP compared to 52 per cent in 1986. That was a real achievement; it was a painful achievement. However, we are slipping back in the opposite direction now and nobody can welcome that. Inflation was 2.4 per cent. There are inflationary elements in this budget and we do not know what their final ramifications will be.

Employment growth at the beginning of this year looked to be between 30,000 and 40,000. I hope those targets will be maintained, although I doubt it. Major improvements in our competitivenessvis-a-vis our trading partners had been achieved in the previous five years. While they have not been eroded yet there are elements in this Bill which could help to erode them. We were set on the path to achieve dynamic and balanced growth of about 6.75 per cent. There are elements in this Bill which could restrain that growth or cause inflation to create a level of growth that is false.

Massive infusions of Structural Funds were lined up to develop our infrastructure and human resources and to improve dramatically our transport facilities. This Government is using those advantages to political advantage although I do not necessarily blame it for that. Our exports at the beginning of this year were rising. Our debt/GDP ratio was falling rapidly — that is an important marker. However, the Finance Bill and the Government strategy which underpins it are moving away from that.

We had been given a clean bill of health by the Finance and Economic Ministers of the European Union. Ireland and Luxembourg were the only two nations that appeared ready to meet all the Maastricht criteria at the beginning of this year. The prospect of building on the peace dividend was available, not only in the tourism industry but across the entire economy. Finally, the lowest interest rates for decades were in place and ready to spur investment and job creation.

By any objective standards this Government received the nation's economics and finances in a remarkably healthy and robust state. This Finance Bill and the budgetary strategy which underlies it have not only reversed the trend but will be regarded in the years ahead as having done irreparable damage to a nation that was on the ladder to full economic recovery and health. The Government has adopted a relaxed attitude on the issue of constraining public expenditure. At the outset it set itself a relatively soft target for public expenditure. It was suggested that growth in expenditure would be over twice the projected growth level of inflation. That was not a hard target to meet. Less than halfway through this financial year the slide is visible and dangerous.

The underlying increase in Government expenditure for 1995, which we see arising from this Bill and the budget, will be about 11 per cent and it will possibly be even higher by year end. That is double the projected target this Government set itself five short months ago. That is an appalling slide. That is something for which we will all pay dear. It is equivalent to the slide that was started when deficit budgets were first introduced in this House and in the Dáil in 1973 and which continued through the 1970s. That is, to use the jaded phrase, the first step on a slippery slope.

The Minister has a responsibility to explain this dangerous, indeed, potentially disastrous trend to the House. While his exposition today was clear and comprehensive — as they always are on all matters — any explanation as to why the nation is again sliding into economic chaos was missing. Why are we sliding into deficit budgeting? Why are we sliding so dangerously into the policies of the past? Why are we beginning to ignore economic discipline? Why are we again spending money with the abandon of drunken sailors? This is a dangerous trend and we should recognise it as such. All of us in politics should have learned the lessons of the 1970s. We should remember thebon mots of the finance spokesperson of the first French Government after the Revolution and learn the lesson that what governments spend, governments must first take from the people. This Government is spending and piling up debts for future taxpayers.

We must be honest. High spending today means high taxes tomorrow. By abandoning its own modest spending targets, the Government is also abandoning any possibility of future tax equity. The Minister quite rightly said that there is a comprehensive range of tax changes in this Finance Bill. However, they are far from adequate and far from meeting all the nation's requirements. The Government policy, if that is what it is, can only be regarded as short term and short-sighted. When any Government goes on a spending spree, it must be financed. The Government can tax, print money or borrow. The first two options are out and we have fallen back on the latter. There has been an attempt to obfuscate this. Creative accountancy is more of a feature of this Finance Bill and the budget that preceded it than on any occasion I can recall.

I have worked on and off in the Department of Finance since the early 1970s. I would like to hear the Minister's explanation why the Government is forcing, for example, the Housing Finance Agency or the National Treasury Management Agency to borrow £140 million. We know the money will be filtered through the Department of Finance and will go ultimately to the Department of Social Welfare to meet equality payments. The Government has, of course, a legal responsibility to meet those payments but the reality is that we are meeting those payments, and indeed a series of other payments which have fallen on this Government's shoulders, by borrowing. In other words, we are not meeting the bills, we are simply passing them on to the taxpayers of tomorrow.

The fact that the payments should be made is not in question but the way the Government and the Minister are going about it is questionable. Aside from being a departure from the Government's own promise of transparency in all matters, the approach also requires more specific explanations than we have heard from a Minister in either House. Why do it this way? What will be the future effect on tax? What will be the future PAYE implications? Does the Minister accept that borrowing this money, no matter how creatively, will, in effect, mean that we are deferring the tax burdens to next year and the year after?

I would like to move from the Bill itself to briefly consider the philosophical approach adopted, not just in this Bill but in virtually all previous Bills. The Minister is no different from his predecessors. This Bill is one of the biggest we have ever seen in this State. It is an incomprehensible document because of its sheer size. I doubt if any Member of either House has studied it and all its ramifications in detail. That is not a fault of one side of the House or the other but a fault of the system. The reality is that Finance Bills have been treated by Governments over the last 20 years like an attic or miscellaneous basket into which everything which cannot be covered under some other heading is thrown.

There is a bewildering array of schemes in this Bill which would be more appropriately handled individually under different sectoral and functional headings. This Bill has become such a mishmash that it has no strategy, coherence or general philosophical centre. This is not just a problem with this Bill — I am not just being critical of this Minister — but with all Finance Bills. The sheer volume means that the Bill and the whole process have become incomprehensible and some change is needed. The Fianna Fáil spokesman in the other House made a plea for a more realistic and focused approach on budget day itself and I extend that plea to cover the Finance Bill. We need not just shorter and more clear cut budgets but shorter and more clear cut Finance Bills.

Ministers for Finance must avoid allowing the Department of Finance and other Departments to stuff the Finance Bill with a polyglot, diverse range of topics. The Finance Bill has been used for many years, as I said, as a miscellaneous basket into which one throws everything that has not been resolved in some other way. This takes from coherence and strategy and the Finance Bill becomes incapable of meaningful debate in either House. Although we can only recommend changes to the Finance Bill and make observations on it, one of the primary constitutional tasks of the other House is guardianship of the public purse. Given the sheer volume of the material thrown at the House in one indigestible mass, I believe it cannot fulfil its constitutional responsibilities.

I have already dealt with public expenditure and I want to touch briefly on the issue of taxation. In spite of all the changes made in taxation in recent years, Ireland remains an unacceptably high tax economy. High taxes, particularly high personal taxes, stultify, cripple and destroy initiative. All the political parties in this House and in the Dáil accept that this is the case. While there have been some welcome changes in the Bill, the reality remains that taxpayers, particularly PAYE taxpayers, are not feeling the benefits. The Government and the Minister had an opportunity on this occasion to effect dramatic, even radical changes in personal taxation. While they introduced some welcome changes in personal taxation — I do not want to understate what the Minister has tried to do — the figures for once were right for an overall and radical review. The second failure in the Finance Bill and the budget strategy is that we have tried to spread what we have over such a wide range of activities that we will achieve nothing in the end. It must be regretted by all that spending rather than tax equity is the priority on this occasion.

I want to move away from taxation and deal with a number of specific items. I was pleased that the Minister modified his original stance on covenants. The original proposals put before the Minister and put by the Minister before the other House were wrong. They cut deeply and the Minister was right to modify them. However, he needs to look further at some of the covenanting procedures. He mentioned that in certain cases there was an exclusion of covenants by parents. He talked about introducing welcome changes for people who are cohabiting. However, should he not look in the first instance at covenants for family members and, in particular, for parents? I could not quite understand the point the Minister was making and it requires further examination.

The controversial section 153 in the original Bill has been relaxed and the provisions in section 172 quite rightly recognise some of the changes proposed to the Minister. I am one of those who believes it is a matter for Government, and particularly Ministers for Finance to make decisions. Ministers for Finance have to resist the lobby. He obviously listens to the lobby but he resists it where necessary. I subscribe fully to the view that we need a radical change in our attitude to tax evasion. Tax evasion is robbing money from my pocket and from the pockets of people who are less capable of sustaining the theft than the rest of us in these Houses. However, I wonder at the original provisions in section 153 and the amended provisions in section 172. The Minister has met some of the objections but I still see problems with the section 172 provisions which need to be thought through. Even after listening to the Minister, who dealt comprehensively with the matter, I still feel that this issue should have been put back for a further year. I accept that the Minister had a responsibility to respond to the suggestions in the beef tribunal report and he has sought to do so here, although there are still problems in section 172.

I have taken a particular interest in the seaside resorts scheme which is both innovative and worthwhile. When the Minister's immediate predecessor first discussed such a scheme I felt that there were obvious places that should feature in it — Bray, Greystones and Arklow. There are glaring omissions in the scheme and I have already drawn attention to them by way of an Adjournment debate in the House.

In the case of County Wicklow, Arklow, Bray and Greystones were originally left out. The excuse given at the time was that since this was a pilot scheme it could not be given to more than seven or eight different resorts. The second argument was that it was confined to the west. The third argument was that Bray, Greystones and Arklow were not recognised by Bord Fáilte as traditional resorts. The fourth argument was that Bray had been given urban designation. All those arguments are as invalid now as the day they were first trotted out in this House. The scheme is clearly no longer just a pilot one; it applies to 17 different seaside resorts, but there is now positive discrimination against one or two remaining resorts.

Bray was the original traditional seaside resort and it is both unforgivable and short-sighted to exclude it. Greystones also has a claim, and both towns have major projects in the offing. The seafront in Bray could be subject to revolutionary change if this scheme was made available. It is extremely short-sighted to exclude both Bray and Greystones.

Members of the House will know that there is a project in the offing for Greystones to the tune of £40 million. It is a big investment which would be copper-fastened by this scheme.

It would be all right to have the DART to shift them in and out.

I was very grateful the Minister succumbed to 15 years of lobbying by me, and allowed me to take the first DART into Greystones yesterday. It shows that persistence pays. I am going to be persistent in this matter too. I believe in being tenacious and in delivering to my constituents even if it does take an awful lot of door battering over the years. The Senator is quite right.

The Government has extended the seaside resort scheme dramatically in response to local pressure. Arklow has been brought in; it should never have been left out. That was an appalling oversight which says a lot about the quality of representation in Dáil Éireann from Wicklow at present. Equally, Bray and Greystones should not have been left out. If the Minister is seriously interested in tourism development I would ask him, even at this late stage, to accept a recommendation from Seanad Éireann in the case of those two towns. We will also be putting forward recommendations for one or two other small changes in that area.

As regards the national charities, the Minister avoided the real issue. The Bill introduces tax relief for donations to third world charities, a worthwhile measure. When somebody chooses to allocate a proportion of their salary or income to a charity, tax relief should be given and the tax benefit should go to the charity. A similar scheme has been tried and tested in other countries and has been used creatively in the United States. I would remind the Minister and his officials, however, that charity begins at home. While I welcome the change that has been made in the Bill, I cannot understand why the Minister is obdurately refusing to recognise the valid case made by the national charities.

In his contribution the Minister referred to the Red Cross. He is right. There is a possibility of covenanting money to the Red Cross but the Minister knows, as we all do, that charities — whether it is the Red Cross, Daffodil Day, the Conquer Cancer Campaign, St. Vincent de Paul or the myriad of other charities that do so much work in this nation — receive the bulk of their money by way of relatively small contributions. The suggestion that charities should use covenanting as a device to get the clawback is avoiding the issue. The Minister should examine the case of the Red Cross which finds itself in a most invidious position because it operates both here and abroad and is unclear how it can deal with this.

I mention the Society of St. Vincent de Paul in particular because, from time to time, in the course of our constituency work, all of us must fall back on the charity of that society and the fine women and men who run it. Its positive impact could be very real but the negative impact will be incalculable if the Minister does not review his policy. This will not be a political climbdown but a politician recognising that the original advice was flawed. I will be recommending that the policy should be reviewed.

The Minister should also look at farmyard pollution schemes. A suggestion was made in the Lower House that some form of accelerated capital allowance should be introduced for these schemes. This suggestion was made when it became obvious that the scheme which the Government had hoped to launch this year would not be launched for whatever reason. Farmyard pollution schemes are important and do not, in the main, add to revenue earning capacity. They do, however, encourage farmers to make a positive contribution to the environment. I would regard such schemes as an investment by farmers in all our interests, so some form of accelerated capital allowance should be introduced, and I will be making such a recommendation.

Overall, the most disappointing aspect of today's debate is that it has not dealt with the issues I outlined at the outset. The Bill deals with a series of technical issues and has a major technical agenda but it does not address the big economic questions that require attention. It is evident that there is slippage, which is dangerous and is something for which we will all pay.

I welcome the Minister to the House. This year's budget brought good news to most people and the Bill before us gives legislative shape to it. The various changes in income tax rates and the exemptions for low paid workers are welcome and long overdue but much remains to be done in this area. The main thrust of the budget was to make it a little more logical, feasible and desirable for people to come off the dole, take up a job and keep it. If our economy is to move into top gear we must tilt the balance in favour of people who want to work. We must use imagination, flair and common sense to show that it pays to work. Policies should be geared towards getting people back to work and this should manifest itself in a two-pronged attack on unemployment.

There must also be something for employers and it should be attractive for them to employ people. The Minister's aim in both the budget and this Bill is to reward work, encourage enterprise, strengthen social solidarity and look after those in the social welfare sector. It is not easy to realise those aims but the Minister has gone a long way towards achieving them in this Bill.

This is the current Minister's first Finance Bill, and I congratulate him on some of the changes which are included. They are welcome and will prove in the long term that this Government — despite what Senator Roche said about the Bill lacking focus, clarity and direction — intends to create a climate of taxation which rewards work, promotes enterprise and creates social solidarity.

The decision to increase the income tax threshold, below which the lower rate of employers PRSI of 9 per cent applied, from £9,000 to £12,000 is welcome. It gives the employer some respite. The reduction in corporation tax from 40 per cent to 38 per cent will have some effect, particularly for larger companies. From the worker's point of view, particularly low paid workers, comparisons will always be made between what they earn and what they would receive on the dole. There is nothing more soul destroying for a person with a job and who wants to work to realise that at the end of the week he is worse off than he was when in receipt of unemployment assistance. Unfortunately thousands of unemployed people cannot get work. It is not a bed of roses to rear a family on our level of social welfare. Our priority must be to get as many as possible off the dole so there will be more money for fewer social welfare recipients.

The services industry will become the largest provider of jobs. Every effort should be made to help people come off the dole to employ themselves. This budget will only remove some obstacles. There should be greater flexibility and liaison between the Department of Social Welfare, unemployment exchanges, FÁS and other interested parties. I look forward to greater integration and streamlining in this regard, particularly when European Union funds are used to encourage initiative and enterprise.

The provision in section 10 for special measures aimed at improving the position of those most adversely affected by the taxation of short term social welfare benefits is welcome. However, many people are bitter and angry that disability and unemployment benefit is taxed. They see this as a tax on sickness. I welcome the fact that the first £10 of unemployment benefit will be exempt from tax from 6 April 1995. The tax on disability benefit is a bone of contention in families where there is illness. I understand it is important to streamline it, but it is difficult to explain to people who are ill that it is in the interest of all concerned that all income be assessed for income tax. This is one of the main problems of the system.

I compliment the Government and the Minister for Education, Deputy Breathnach, on the decision to abolish third level fees. It is a measure which has been widely welcomed by the public. Third level education is a right for young people and this is a signal that the State is interested in their educational welfare. The current system of administration of third level grants denies the children of many PAYE workers assistance towards maintenance costs and has caused hardship in a number of cases. Another important section covers tax relief on fees for third level private colleges. Population trends combined with more dominate job markets have brought about a large increase in the number of young people seeking places in third level institutions. A number of private colleges are now in operation and I welcome the provision to allow tax relief at the standard rate on tuition fees paid to approved colleges. I note the Minister for Education will approve the college course and the level of fees eligible for tax relief and that course will have to be full time undergraduate course of at least two years duration.

I welcome the provision in section 21 for the continuation of stock relief for farmers at 25 per cent for a further two years up to 1997. The decision to provide for stock relief at a rate of 100 per cent for four years for farmers who first became chargeable to income tax in respect of profits or gains from farming for the years 1993 to 1994 or, indeed, any subsequent year of assessment up to 1997 to 1998 is welcome. Many young farmers welcome this measure which sends a signal to them that we care about them and want to see them set up in business. Section 22 is welcome, but I hope those who have gone through the trauma of herd depopulation because of animal disease will not have impediments placed in their way.

I draw it to the Minister's attention that all educational facilities are not liable for rates with the exception of agricultural colleges. I ask the Minister to put in place a system whereby agricultural colleges will not be liable to pay rates. There are three agricultural colleges in Connacht — Mountbellew, a privately owned college, Athenry, a State owned college and Ballinafad, a privately owned college which has closed as a result of increased running costs. The Minister will be aware that there are enormous costs in running these facilities and they are necessary educational facilities for young farmers. Agricultural colleges provide great training for young farmers and graduates and the burden of rates should not be carried by those colleges, which should be treated in the same way as other educational facilities.

People who pay service charges are now entitled to an allowance at the standard rate of tax up to £150 for service charges paid in full and on time. There is no difference between this and the imaginative systems initiated by local authorities to get people to pay their service charges on time. It is important that people pay their services charges. While we would all prefer not to pay the them, successive Government have found that without them they have insufficient moneys to fund local services. It is incumbent on everybody to pay for services such as water and refuse collection unless they are waived. If those who fail to pay service charges are served with a court order, then so be it. I do not have a problem with that. Funding local services from central Government has failed to provide the extra money required to fund what we do locally.

The Minister should look at the clothing industry and at reducing the current VAT rate. There is great potential in this area. Successive Governments have not given the commitment or the investment to put this industry on a footing which would allow it to compete competitively with imports and on the European market. Our woollen and linen fabrics are the best in the world. We have world class ladies clothing designers like Paul Costelloe, Louise Kennedy and John Rocha to mention but a few. Members will be aware that John Rocha won the British Designer of the Year Award last year. There are also success stories in the mens clothing area, for example, Magees in County Donegal. Another great success in County Donegal is the Fruit of the Loom company.

This industry is important to the economy for a number of reasons. It is an industry which badly lacks finance, but which has the potential to challenge the vast amount of clothing imports to this country. It also has the potential to take on the rest of Europe and to help our exports and Exchequer returns. I ask the Minister for Finance to look very seriously at the challenges which face this industry, and the changes which he can make to improve the climate for the home market and to help them compete in the European market, which will have great benefits for this economy.

I also ask him to look seriously at the decline in rural population. Our cities and larger towns are growing faster and faster at the expense of rural areas, which is very regrettable. The recent review of the constituency boundaries brought home to us the serious decline in rural population. For the first time, two constituencies, Mayo West and Mayo East, have been amalgamated into the one constituency of County Mayo, with the loss of a public representative in Dáil Éireann. Mayo has lost a Dáil Deputy as a result of the decline in population. It behoves every one of us, especially the Minister for Finance and the Government, to put systems in place to reverse the decline which has taken place over the last few decades. The decision by the Government to appoint Deputy Carey as a Minister of State with responsibility for the west is very welcome.

I ask the Minister to examine giving County Mayo special status and significance in an effort to redress the decline there. Strategically, Mayo is at a disadvantage from an industrial point of view. It probably has the highest rate of emigration. It is an area where great strides could be made and the Minister for Finance could put in place a pilot project whereby emigrants could invest in County Mayo, with a view to redressing the decline. If emigrants were given special tax concessions, not alone in the areas designated under the urban renewal scheme and the recent tourism coastal towns scheme but throughout the county, it would result in considerable investment in the smaller towns and the rural areas. That would be very worthwhile and the Minister for Finance should take it on board as a pilot project.

The peace initiative will establish tourism as the major force for economic growth and the spin off will be worth huge sums of money to the Exchequer in the long term. Peace also provides increased opportunities for greater inward investment and cross-Border trade. We will also face greater competition from the Northern counties. It is vitally important that the appropriate infrastructure is put in place to ensure that we are able to compete with them on an even pitch.

The ending of violence has opened up new opportunities for tourism throughout the island. We have lived with the Northern troubles for so long that we underestimated the harmful effects they have had on the international perception of this island, either as a place to visit or in which to invest. I welcome the decision of the Government, through the Minister for Tourism and Transport, to market both sections of this island, North and South, as an all Ireland entity. This is a very welcome step and it should open up vast opportunities in the tourism industry.

Tourism is a key sector for creating employment and wealth. It must also be a ladder in rural development. Ireland is located just off the largest and wealthiest tourism market in the world; that is, Europe, which accounts for over one third of world tourism. Tourism also expands trade, food, drinks and services and helps agriculture and many other areas and enterprises. It is a vital prop for rural Ireland.

It is against this background that I welcome the significant initiative by the Minister for Tourism and Trade, in association with the Minister for Finance, in launching the pilot renewal scheme for traditional resorts. This will revitalise a number of traditional resort towns. I am delighted that Westport and Achill in County Mayo have been included. Mayo has great natural beauty and resources. It has nine blue flag beaches and the finest fishing lakes and rivers in Europe. Yet, from a tourism point of view we are lagging behind other parts of the country. I hope that the inclusion of those resorts will have a major effect on the promotion of tourism throughout County Mayo, and that the inclusion of the other resorts will have a major effect on the national promotion of tourism.

If these resorts are to increase their appeal to domestic and foreign tourists, it is essential that visitor accommodation and other tourist facilities are extensively improved to meet the demands of the modern holiday maker, and that new tourist facilities, appropriate to the character of the individual resort, are provided to attract the growing tourism trade.

This new scheme is very similar to the very successful urban renewal scheme which has been instrumental in promoting the renewal and revitalisation of cities and towns around the country, and encouraging development in areas where it would not otherwise have taken place. I hope that the business community will take up the challenge and that there will be significant investment in these areas.

The tourism industry stands to gain significantly from the general taxation provisions in this Bill and I welcome them. With the PRSI changes announced in the budget, the income tax reliefs set out will provide additional relief to those at work, especially the low paid. It is a highly labour intensive industry and the cost of employing extra staff is a major issue for many tourism employers. These changes will improve their situation significantly. The reduction in the standard rate of corporation tax from 40 per cent to 38 per cent represents a very welcome step on the road to securing a standard rate of corporation tax which is comparable with overseas competitors. I look forward to a bumper year for tourism in 1995.

I welcome many aspects of this Finance Bill which I intend to address in greater detail on Committee Stage. This Bill places a duty on auditors, and tax advisers generally, to report tax evasion. This provision honours the commitment made unanimously by the Oireachtas to implement the recommendations of the beef tribunal report. It should also facilitate the refocusing of certain anti-evasion measures, such as the VAT monthly control statement and the easing of penalties for late filing under self assessment. This Bill gives effect to the reduction of the tax burden on employment and low incomes and on the cost of employing labour.

Section 17 gives effect to a number of changes with regard to seed capital. These proposals, which will make the scheme more effective as an incentive to new business start-ups, will increase the level of investment which qualifies for relief from £75,000 to £125,000 by extending the look back period to five years; allowing two qualifying investments in the one company to be made over a three year period; will increase to £15,000 from £10,000 per annum the level of the maximum amount of non PAYE income which an individual may receive and permit greater time flexibility in taking up employment in the new company by allowing employment to commence up to six months after the end of the tax year in which the first investment is made.

I welcome the decision made in sections 32, 34 and 35 to increase from 90 to 125 square metres the maximum permissible floor size for newly built apartments in the various urban renewal areas. This will encourage the provision of large family orientated accommodation in these areas.

I also welcome section 43, which provides for a corporation tax exemption in respect of employment grants paid by the industrial development agencies to medium and large industrial undertakings. This concession will increase the real value of the grant in the hands of the recipient companies and thus provide an additional incentive to such enterprises.

I welcome sections 134 to 138 which contain provisions on residential property tax. The Bill increases the thresholds for property values and income as announced in the budget. The new thresholds are £94,000 for property and £29,500 for income. The tax will be at the flat rate of 1.5 per cent.

I wish to draw the Minister's attention to the seaside resort scheme. The Bill provides for a new scheme of tax reliefs aimed at promoting the renewal and improvement of certain resort areas. There are a number of potential developers interested in building holiday cottage developments. Apart from the refurbishment of existing hotels and guesthouses, the developers see this as one of the main opportunities for potential development in these areas. The intention of the relief is to grant accelerated allowances to certain buildings in the areas, including hotels, guesthouses and holiday cottages. These allowances enable an investor to obtain a tax write-off in respect of at least part of his investment against all income in the year of investment.

Unfortunately, various provisions were introduced in 1992 for very specific purposes which restrict the use of capital allowances for holiday cottages. Essentially, they restrict the use of the allowances so that they may only be offset against income from the holiday cottages, which traditionally is very low and would not represent a commercial return on the investment. Unfortunately, because of the way the legislation is worded, these restrictions now also apply to holiday cottages in resort areas. Accordingly, as a result of this anomaly, holiday cottages in these areas will receive less favourable tax treatment compared to hotels and guesthouses. Essentially, they will receive the same tax reliefs as holiday cottages located in any other part of the country, which defeats the objectives of the legislation. It has already been acknowledged that these areas need greater tax reliefs than those available in the rest of the country. Otherwise, it is unlikely that the proposed developments will go ahead in those areas. In such circumstances the benefit of the new scheme is likely to be very limited and developers are likely to go to more popular tourist resorts.

I ask the Minister to look at the issues to which I have referred — the removal of rates paid by agricultural colleges; special concessions for the clothing industry, the Minister might look at the VAT paid by it; special status for County Mayo with a view to setting up a pilot project to redress the county's declining rural population, which is to result in the area losing a Deputy; and capital write-off for holiday cottages in the light of the announcement of the Minister for Tourism and Trade in conjunction with the Minister for Finance that there can be no tax write-off because a clause in the 1992 Act prohibits capital write-off for holiday cottages in designated areas.

I welcome the Minister. He seems to be coming here often. He may have a grá for the days he spent here as a Member many years ago.

I welcome the opportunity to speak on this Bill. We have plenty of comments to make on it because it covers a wide range of areas. I am sorry it is necessary on this occasion to highlight again the definite connection between taxation and jobs. In his budget speech and again today the Minister referred to this connection. There is no mystery about it. It is all about competitiveness in the marketplace.

We are living in a market economy; there is a market economy not just here but in the rest of the world as well. The current level of our total wage costs, including income tax and social charges, seriously reduces the capacity of many Irish companies to sell in export markets and compete against foreign goods on the home market. The Minister is aware of this and has taken steps in the right direction. My purpose is to make sure I strengthen his resolve to continue in that direction and to pursue it more actively than has been done in the past. This lack of competitiveness translates directly into lost jobs. This Government and the State have recognised that the first priority is the creation of jobs. If there have been lost opportunities to create new jobs, we must see what we can do about it. Some steps have been taken but not enough.

The situation is worsevis-a-vis our nearest neighbour, Britain, our largest single customer and the largest source of our imports. We have to work with the reality that Britain has a policy of low taxation and a low level of social charges. There is not much we can do about this. It looks as though it will continue in the future because the British are determined that it will continue. Added to that, we have to work with the reality that sterling is a weak currency. This sharpens greatly the ability of British industry and firms to compete with ours. This is what I call a double whammy. We have higher taxes and an unfavourable exchange rate against sterling. This is gnawing away at our competitiveness and is undermining the future of many thousands of jobs and the potential of job creation in many areas on this island.

How long can we ignore these realities in our taxation and currency policies? I know that many of these factors are not completely in our own hands but we can do something if we are determined enough. The Minister has taken steps in the right direction and I am anxious to encourage him to continue in that direction in the future.

This problem will not go away; it probably will get worse. Unfortunately, I do not see enough signs in the Bill that the Government is aware of the gravity of the problem or that it is prepared to act on it in a strong or tough manner. It is going in the right direction but it needs to go further. To create the new jobs we need so badly and to hold on to the ones we have, we need policies which reflect competitive realities, not policies which try to buck them. I am not claiming there are quick and easy solutions but the longer we delay in facing up to these problems the more difficult they will be to solve because for many of those jobs it will be too late.

In going through this Bill, we must see if it will achieve the objective the Minister has set out to achieve. We are talking about a competitive world market-place. We are talking about finding a way in which we can compete. I had the experience some years ago, prior to the break up of the Soviet Union, of visiting what was then Leningrad. I drove down the main street with our guide, a lady called Ludmilla. She showed us a museum and an art gallery and said the street contained the best grocery store in Leningrad. I asked to stop; the guide asked us whether I wanted to see the art gallery or the museum but I said since we had seen others already I wanted to see the grocery store. She was proud of the store but the six of us on the tour were unimpressed.

I asked if there was a self-service in Leningrad; she said there was and that she would ask for permission to take us to one. We did visit a supermarket in a suburb the following day and it was disastrous. Through our guide, I asked the manager how many customers he had. He was able to answer me immediately; the first question a person in business should ask is how many customers one has, not how much money one takes in. The manager said he had 9,500 customers; I was impressed because the store looked to be the right size for that number. I then asked how he knew how many customers he had.

They were part of the plan; they had to shop there.

The manager said he knew because that was the number of people who lived in the town. I almost said that surely they did not all shop with him but I realised they did because they had no alternative. Someone in charge had decided what size store was needed for the town; a smaller town would have a smaller store, a bigger town would have a bigger store. That shop was bad because there was so little competition in the area. The suppliers did not deliver because there was no competition. If a farmer's tractor broke down, there were no firms competing to carry out the repairs, so the goods were not delivered.

The story reminds me how our market economy works — through competition. Some companies and economies go out of business because someone else has taken the business away from them. If we live with that reality, we must remember everyone is fighting for survival. The greater number of jobs will be created in those companies and organisations which are able to compete in the marketplace.

If one of our tasks is to compete in the marketplace and create jobs, we must remember jobs are less likely to be created in manufacturing than in other areas, such as services. I would have welcomed a step in that direction to encourage more taxation incentives in service industries than in manufacturing industry. The current system was put in place some years ago but there has been a change in attitude since. If job creation is our main objective our taxation policies should reflect that.

I have spoken here about the growth of small industries, especially in services. This Government has recognised successful job creation will not come from large organisations but from small and medium sized industries. However I fear that if we are not careful we will steer all our efforts towards small industries alone. The big danger is that we could send a message that if an industry does not remain small it will lose benefits. The Minister has recognised that we must support not just small firms but growing industries. I welcome that.

I also welcome the Minister's assurance that if we are to take steps in that direction we must identify where jobs will be created so that small industries can survive and, more importantly, grow. We should encourage them to do so and avoid measures which discourage businesses from expanding on the basis that they would lose benefits. The Minister has taken this into account but he has only taken the first steps. He must go much further in the future.

I fear our taxation policies are so intricate and difficult to understand that we only create jobs for those accountants who have become experts in the area. I am sure that is not the intention but companies would be better able to concentrate their energies and efforts into producing more competitive goods and services if they could spend less time finding their way around our taxation system.

I am concerned that the Government also spends its time this way, because it goes to great pains to ensure no one pays less tax than he should. A large amount of the Bill is designed to ensure this. If we had lower taxation — and we have taken the first steps towards that — we would not need such an involved taxation system nor would we need to take such measures to avoid evasion. I urge the Minister to simplify the tax system further, to reduce tax, to recognise jobs will be created in growing industries and are more likely to come from the services rather than manufacturing sector and to take the necessary steps in that direction.

It is interesting to look at successful economies. Two years ago I was in Singapore and saw a thriving, energetic, low taxation system. They put effort into everything they did, because of their pride. We are in danger of doing too much — we are trying to divide the cake more equally before making it as big as we can. The Minister must do both; he cannot simply do one or the other. If, in dividing the cake more equally, it becomes smaller — because there is a lack of incentive or encouragement for growth through our taxation policy, to create more successful enterprises and more jobs — then no one does as well as he or she would otherwise have done.

I support the Finance Bill because its thrust is in the right direction. The Minister has taken the first steps and I hope he continues so that we will not falter when it comes to creating more jobs.

I support the Finance Bill and I welcome the Minister to the Seanad. This is his first visit on a matter relating to the budget because this Bill puts the budget proposals into effect. Many years ago I heard people making demands at a local meeting. An established politician told them the Minister for Finance did not have manna from heaven in Dublin; he had to balance what he collected and what he paid out. That is the Minister's task but it is not easy because he has demands from one side and criticism from the other.

In his first budget, he saw fit to reward work. He viewed PRSI as a hindrance to work and its abolition from the first £50 earned is a great step forward. He also introduced changes in income tax which gave greater relief and left more people paying only 27 per cent tax. It would be great if, in a year or two, he could reduce the standard rate to 10 per cent and the marginal rate to 25 per cent but we must be realistic. If he does that other things will suffer.

In his budget speech the Minister also promoted enterprise. He has addressed employers' PRSI, corporation tax and other issues. They may only seem small measures but they are extremely important to the individuals who benefit. The Minister was also anxious to assist agriculture. The personal income tax allowances have been increased and the standard rate band has been raised considerably taking many people on low pay out of the tax net and taking many on medium pay out of the higher tax band.

The Minister has also brought forward measures for those renting accommodation. Rent can often be seen as a form of double taxation: a person may already have paid income tax and has also to pay rent. The rented accommodation allowances of £500 for a single person, £750 for a widowed person and £1,000 for married people are welcome. The concessions already in place for those over 55 years of age remain.

Much criticism has been levelled at local authority service charges. The Minister has taken the bull by the horns and given a tax allowance of £150 for service charges. The service charges were another form of double taxation and allowing standard rate relief remedies that. I welcome the provisions for urban areas and tourist resorts. I am glad the Minister chose Clonakilty, which is in my constituency, as one of the towns which may benefit from the special concessions.

With regard to the VRT on cars, I am glad an allowance of £1,000 is to be available to somebody selling a car ten or more years old. The VRT is quite high and can be a deterrent to people to buy new cars. However, the fact that our population is small may explain the higher taxation levels. I also welcome the tax relief to be given on certain donations to Irish Third World charities.

Many people were unaware of what covenants were about until the debate on free third level education. We all welcomed the introduction of free third level education as it gave concessions which were not available in the past. It also helped clarify the issue of covenants. Wealthy relatives could covenant large sums of money to assist people going to school or college who were often wealthy enough to pay for their education. People above the income levels to qualify for third level grants and who were not wealthy enough to covenant large sums of money, were caught in the middle. These people will benefit greatly from free third level education. I am glad to see that covenants have been covered in the Bill. The Minister mentioned that covenants will still be available for incapacitated minor children or people over 65 years of age.

For people starting up new businesses I am glad tax relief will be available for seed capital schemes and that an element of flexibility is involved. We have some fine heritage buildings around the country. Not far from where I live is Bantry House which will play a big part next year in the commemoration of the French invasion of 1796. Such houses will benefit from the relief from income or corporation tax provided for in the Bill. These houses are part of our heritage and are a tremendous tourist attraction and leave a lasting impression on those who visit them.

I welcome the continuation of the stock relief at 25 per cent for farmers and I particularly welcome the installation aid scheme for young farmers. Section 22 provides special relief for people whose herds of cattle have been hit by diseases, particularly brucellosis, and who have to dispose of livestock under the disease eradication measures. It is a shame that somebody who has built up a herd over a number of years and, because of misfortune, has this very valuable asset taken from them. I am glad these concessions will continue.

I do not come from an urban area and there are no large urban areas in my constituency but I am glad tax relief for enterprise areas has been given to Dublin, Cork and Galway. Small rural villages with perhaps only a pub, post office, primary school and church, are a tradition and unfortunately their numbers are declining. They were often the centre of rural activity. At present, as a result of rural depopulation, there are often derelict sites in villages which take from them. If local authorities were given funds to buy up these properties they might be converted into homes for elderly people.

In rural areas people often live alone, isolated in the countryside. Not only is loneliness a problem for them but there is the danger of their being attacked or robbed. If local authorities could get money to build or refurbish old or derelict properties in the villages it would help keep the villages vibrant.

I am glad the Minister is dealing with the problem facing people who availed of hire purchase and had to pay 21 per cent VAT on the interest on the hire purchase payment. People will be relieved to hear this because 21 per cent VAT is excessive. I am also glad corporation tax is reduced from 40 per cent to 38 per cent.

The Minister is introducing VAT relief on sporting and health and fitness facilities. I am not a good example of a fit or sporting person, but this measure may encourage people like me to lead a healthier life.

Perhaps that is asking a little too much of the taxation system.

We could still manage it.

I mean everyone, not only the Senator.

We are in an unhealthy business.

I welcome the pilot renewal scheme for seaside resorts. Many towns have been included, but I am interested in Clonakilty. This will have a tremendous effect on local businesses, particularly those involved in the tourist and building trades. Accelerated capital allowances for the construction or refurbishment of hotels, holiday camps, cottages and other tourist accommodation registered and approved by Bord Fáilte will give a great boost to the Clonakilty area, which already benefits from the model village, the bay and the facilities provided.

Section 171 deals with tax evasion. I worked for many years in the PAYE sector where people could not avoid paying tax. Everyone should pay their fair share of tax because this would make it easier for those already paying it and it would also stop the double standards which exist in this country. Tax advisers and auditors must now follow certain procedures when dealing with accounts. People on equivalent incomes should pay the same amount of tax. There should be few loopholes through which these people can escape. Tightening up the system will make it more fair, although it is not always easy to do so.

These provisions were included as a result of the recommendations of the beef tribunal and various demands from the trade unions and PAYE sector. Tax evasion must be frowned upon. Would we have needed the beef tribunal or tax amnesties if such measures had been introduced many years ago? Many unemployed people would be glad to carry out investigations if the Revenue Commissioners and tax inspectors do not have enough staff to do so. Everyone should pay their fair share so that the Minister might be able to reduce tax to 25 per cent.

I welcome the Minister to the House, which is a haven of calm and peace given the political turbulence in the other House. I am flattered that the Minister has devoted time to this debate when our powers and functions are limited by the Constitution. It is inevitable that this debate will not get to the root of all the issues which this or any Minister for Finance must deal with. For that reason, I will confine myself to broad principles, some of which are exemplified in this Finance Bill. The Minister will not have to overexercise his staff or the Revenue Commissioners as a result of any change I propose because we are constitutionally limited to recommendations.

It would be expecting too much to see a dramatic change at the third stage of the essential three stage approach to the management of the public finances. The first stage, control of Government expenditure, is more important than either of the other two. The second stage is merely adjustments to the budget and social welfare and the changes which the Minister proposes to introduce in the Finance Bill. The third stage, the Finance Bill, makes the statutory changes in relation to tax levels, allowances and adjustments.

I agree with Senator Quinn and others who said that the more transparent and simple the regulation and control of the finances are through all three stages, the better for national development and the generation of sustainable employment. That is why I must return to the criticism made, not only by me but by colleagues and other commentators, that in the first stage the Government has made it next to impossible to give the right signals to attract investment, which is normally one of the functions of the Finance Bill. This is a competitive environment where investment is mobile and billions of pounds are transferred at the touch of a switch. Trust funds and investment funds can be switched from one country and one side of the globe to another as a signal of the confidence of investment houses, pension houses, banks, etc., in the economy and how it is managed. No matter what adjustments one makes in the Finance Bill at this stage, they will not overcome the negative signal being given to the markets.

Initially the Government said there would be a 6 per cent increase in public expenditure. This statement is unjustifiable given that inflation is running at 3 per cent. Tough decisions are needed to adhere to less expenditure. I know a little about such decisions because I, as Minister for Finance, and the Government at that time failed to adhere to what we said we would do and that is one of my greatest regrets. I hope we have learned from the mistakes made in the early and mid-1980s. When the 6 per cent target is well breached and, as most commentators will say, we are looking at an underlying increase in public expenditure of 11 per cent, what signal will that give to those investors whom we are trying to attract by tax adjustments and allowances in the Finance Bill? I believe it gives the wrong signals. They would be much more impressed if they saw a clear, transparent, simple and deliberate approach to that first leg of the tripod — regulating and controlling Government expenditure.

In the fiscal and economic areas as distinct from the social areas the role of Government is, where possible, not to be involved where it does not need to be involved. Indeed, this even applies to some extent in the social area. If people can be encouraged to provide for themselves and their families — and there is some element for scope with regard to this in the taxation measures of the Bill — as distinct from relying on the State to dole money out to them, the Government would do a much better job. A good Government is a Government that withdraws where it does not need to be involved. However, already this year we are far over committed in terms of public expenditure. The consequence is that we have to raise the necessary taxes to keep the budget deficit in line with our commitments. If there was never a Maastricht Treaty we would still have these obligations to adhere to, but with the growth of public expenditure we are making it extremely difficult if not impossible for ourselves to adhere to essential fiscal parameters.

As a former Minister for Finance I plead guilty to what each successive Minister has or should plead guilty to. Matters have become ever more burdensome. The Bill contains 179 sections. In my experience — and I am here 30 years — the Dáil has never, even with shorter Finance Bills, debated anything like all of the provisions in any Finance Bill in a manner in which we as legislators could say that we are deciding that this is the kind of direction or control we want. We are not and cannot do so. With each succeeding adjustment, by way of allowance or whatever, the process has become so complicated that it is a minefield for those of us who cannot cope with it. However, it is a treasure trove for those who can advise others how to avoid the new constraints that may be introduced in each succeeding Finance Bill.

Every time the Revenue Commissioners, for whom I have a considerable degree of respect, introduce new constraints there are others, including the Institute of Chartered Accountants in Ireland, who will busy themselves, sometimes exclusively, finding the loopholes for adjustments and about which they may advise their clients. It is not a process about giving broad signals to the investment world as to the kind of country Ireland is for investment and opportunity with regard to resources and personnel, but rather it becomes a game played out every year. In a sense we are pawns in that game, especially in the Seanad. By this I do not mean to criticise the Minister; indeed, I believe he has express similar views. I appreciate that he has both the time and the leisure to be with us today.

The Minister wishes to see a consolidation of taxation legislation, and it is time this took place. If I will be remembered for anything as a Minister for Finance it was that I established the Commission on Taxation. Some people believe that the best thing that could be recorded of a Minister for Finance is that they did not remember one holding the office at all. Perhaps that is the best tribute that could be paid to me, except that I established the Commission on Taxation. Since that time we have only touched on here and there the implementation of the simple — simple in terms of transparency but not easy — provisions recommended by Miriam Hederman O'Brien and her excellent team.

The measure with regard to the PRSI allowances is an important measure as they are taxes and levies on employment and they should be treated in the same fashion as taxation. Unfortunately — and this is not a personal criticism of the Minister — the Bill creates more allowances and adjustments which will only add to the plethora of provisions and confusion that the Commission on Taxation, as long ago as 1980, decided should be simplified. If a Commission on Taxation were to be established today it would advise that the task had become much more complex than it was 15 years ago.

In his opening remarks the Minister advised that the Bill was confirming important income tax and corporation tax reliefs. Of course it is. One would expect to find tax reliefs in what would be viewed as a benign Finance Bill. The Minister also advised that the Bill extends capital gains tax and capital acquisitions tax reliefs to assist business. Senator Quinn is involved in enterprise. Our role as public men is to create the climate in which doers, goers and entrepreneurs such as Senator Quinn will be encouraged and enabled to do this. However, we do not achieve it by adding to the regulations and controls and then increasing the reliefs across a whole range of areas. The only growth industry following from that would be the tax advisory and consultancy business, and indeed it has become one of the great growth industries in recent times.

The Minister went on to advise that the Bill introduces a series of widely welcome reliefs to assist those in a range of areas. A number of reliefs announced in the Bill are positive and welcome. However, the overall signal from the Bill — as part of a tripod of public expenditure control, budget and Finance Bill — is the opposite. I am reluctant to make any statements which might affect confidence in Government or investment in this country. I only ask the Minister and his advisers to reflect themselves as to whether or not they are satisfied that the confidence is as buoyant now as when the Government took office. Are they satisfied that the general degree of control and discipline with regard to the Government's finances is such as to create the signal to those who would invest that this is the place where inflation rates will be reduced, restricted and controlled to the point that a return on investment will be guaranteed? People in business want certainty, but when there is uncertainty the basis of what one is trying to achieve is undermined.

We still have a huge burden of national debt, of the order of £30 billion. All of us made a contribution to that debt in our time, but at the same time all of could act on a consensus basis. It must be a priority, and the reduction of the debt will not be achieved by anything other than difficult decisions, which will result in people screaming protest. I am well aware that when tough decisions are taken in Government, criticism is made of cut backs and there is a demand for a provision of services. These cannot be provided if the Government wants to reduce the burden of debt, which in itself creates a voracious appetite for extra taxation. With a current budget deficit of £310 million, we are risking releasing the controls which have been belatedly put in place since 1987. If we release those controls again we are in very serious trouble.

With the present turbulence on the international currency markets, the reality is that in regard to this element of fiscal management no one will really look at the tax adjustments which are being introduced. Some consultants will tell people that they can get a certain return for a certain kind of investment in the service, the business or construction sectors, but by and large people are not looking for adjustments at the margins. They are looking for stability and security, which will not be immediately forthcoming as a consequence of this Finance Bill.

In regard to our broad priorities for socio-economic development, we are all concerned about the fact that there has been, as in many other countries, an almost magnetic pull to the cities. We are now trying to cope with the social and other consequences that follow from that. I agree with what Senator Calnan said about using tax breaks as an incentive for rural communities. The Minister should use rural development programmes of one form or another. Instead, we have done nothing.

This is not a matter of blame for this current Minister. We now have tax incentives right throughout our designated areas in urban renewal. They are all around the city. However, they create a distortion, even in the city. Those areas which are designated will be renewed and developed; those that are not will be left derelict and deprived. We see many examples of that. Should a tax system really be used in that discriminatory fashion? I am appreciative of the fact that my own home town, Nenagh, was designated, which I thought was very generous of the Minister. However, bigger towns in the constituency, such as Thurles, are not designated. The distortion and disparity created by these incentives give rise to a distortion in the economic and social development of our communities and give rise to the problem which Senator Calnan addressed. No one has suggested giving urban renewal designation to rural communities, whether it be Callan, Abbeyfeale or smaller parishes. Is it any wonder that we are watching these parishes being denuded?

Prominent businessmen have told me recently — it is not just a consequence of this Government's policies — that the costs of development in terms of management and overhead costs generally in a rural environment for a recreational programme, for example, such as a country club or golf club are perhaps three times as much in terms of management commitment as it is for an equivalent development in or around Dublin. Some of those who are involved in major developments have moved into the city now and they are investing and expanding. Ask them to do something similar within any region near the towns of rural Ireland and you will find that whatever their goodwill might be, the burdens for them are such as to ensure that they cannot afford to do so.

My general criticism of this Bill is the same as the criticism I have had of many others before it. There is no broad thrust or purpose in terms of necessary socio-economic development, in terms of necessary attraction of outside industry. Those are the main aims I would like to see furthered, as Senator Quinn has said, in this and other Bills.

There are two healthy signs in Irish life. In community and welfare activities, all kinds of bodies, such as the one that I am privileged to be nominated to, the Irish Wheelchair Association, are relieving the State, quite properly in most cases, of what would otherwise be a great burden. I yield to no one in my admiration for our voluntary workers overseas, but I cannot see the basis for discriminating against those who are making an equal commitment in areas of great need here at home. I ask the Minster, even though it is simply a request at this point, to find some way of ensuring that this contribution will not be minimised or reduced. He must have considered the implications of this decision.

Tourism is our lifeblood. We want to attract as many as possible to enjoy the facilities we have here. For that reason I cannot see why one should, in the interests of relieving the anomaly between certain commercial enterprises and ordinary members' golf club, propose a VAT on green fees in a country that is trying to attract people to us here. The amount of money involved must be minimal. I can only say that I agree with Deputy Deasy, who attacked it as soon as it came out. We want to encourage people to avail of our facilities, but there is VAT on green fees in Ireland.

Having said all of that, I have to say that the general direction of so many of the provisions the Minister makes by way of adjustments and allowances are consistent. He has an intolerable responsibility. However, I would say that, as he himself has said before he took on this job, and I am sure he is even more convinced of it now, the simpler and more transparent it can be at each stage, whether it is Government expenditure, the budget or the Finance Bill, the better it will be for all and, incidentally, the easier it will be for us to make an appropriate contribution to the financial management of the country.

I welcome the Minister for Finance to this House for this his first budget. The Minister has said that we are talking about a pro-enterprise and a pro-jobs economy and that the budget should take account of this, but I believe that this budget represents a missed opportunity. Apart from the Government's record in controlling public spending, the other financial policy that is of fundamental importance to the economy is tax reform and the Minister has failed to reform our taxation system in this budget.

This country badly needs radical tax reform, but this budget is a pale imitation of reform. There has been an increase of 6 per cent in the personal allowance this year; but after inflation this comes to approximately 3 per cent, which could not be seen as major tax reform. There have been apparent reliefs in the area of PRSI, but these have been substantially clawed back by the halving of the PRSI allowance. On top of this comes the crazy relief of the first £150 in respect of service charges to local authorities. This has come about because this Government has given in, I believe, to Democratic Left's crazy demand in regard to payments of service charges, which will now be largely uncollectable, by making local authorities go through the expensive process of going to court before they can recover relatively small amounts of money.

The Government has also hammered domestic charities. It was decided to confer special tax status on charities giving aid to overseas development. This will have the effect of diverting money away from domestic charities. If we take this together with the failure of the Government to allow private charities to compete with the National Lottery, domestic charities are being hammered by an uncaring and unthinking Government.

Covenants in this Bill are being drastically changed. This Bill spells disaster for many people who are making substantial payments to needy relatives and dependants. Under section 12, payments to minors who are not the children of the covenantor will no longer be allowed unless the minor is permanently incapacitated by reason of mental or physical illness. The 5 per cent limit on transfers under covenant will apply to all covenants in favour of individuals who are not permanently incapacitated. From April 1996, payments to elderly or impoverished relatives will also be subject to the 5 per cent limit.

These changes will spell disaster for many couples in this country who, because there is no divorce, cannot avail of the married persons allowances and who are heavily dependent on covenant arrangements. It is no great consolation to these people that arrangements made by them in order to survive in the context of a hard tax regime against single people are being sacrificed in order to pay the university fees of children of very well off people who can afford to pay these fees themselves.

The Bill complicates and consolidates the most anti-work, anti-enterprise tax system among OECD countries. It holds in place a tax regime which is causing daily damage to employment prospects and the potential for social justice in this country. If one takes a topical example, Packard Electric hands over 35 per cent of its gross payroll expenditure in tax and PRSI to the Government. However, if that company was located in Northern Ireland, there would be a significantly lower amount of deductions and it would show a profit on the same figures which apply in this country. This is one example of the anti-work and anti-enterprise tax regime which exists in this State.

Unless we are prepared to accept the fact that the current tax regime is incompatible with substantial growth in employment and the creation of an enterprise culture and unless we realise that what we are doing is not helping to solve this problem, the outlook for genuine tax reform while this Government holds office is bleak. We need a Government which is composed of parties that are committed to enterprise and pro-jobs tax reform. The Bill marks the abdication from the tax reform process of a group which is politically jaded. They are united more by the pursuit of office than economic progress and social justice, even though the Minister's party has always claimed to be interested in social justice. The tax system does more than anything else to hinder social justice in Ireland.

Despite appearances, we are not in great shape as an economy. The problems faced by it are being exaggerated by the policies of this Government and the Bill. The huge challenge posed by tax reform seems to have been ignored by this and the last Government. Changes have been made in the tax allowances and bands, but this will amount in gross terms to an improvement of 6 per cent. When one allows for inflation, the improvement in real terms is 3 per cent. The Minister said he hoped to introduce three budgets, but if this measure is included in each, there will a very small improvement in the value of tax allowances and bands by the time he leaves office.

All political parties in this country have identified the need for tax reform, but where does it feature in the Bill? In the Culliton report, the committee stated that there was no greater scope for improving employment prospects than the reform of the tax system. For example, following the passage of the Bill, a single worker, with take home earnings of £172 a week and a gross wage of £12,230, will have almost 57p of every extra £1 of overtime confiscated by the State in taxes and levies. For every extra £10 of gross pay, the employee receives only £4.30 into his or her hand and it costs the employer £11.22 to give the employee that extra £10.

If one compares the £4.30 gained by the employee to the £11.22 payroll cost to the employer, one finds a system in which it costs £26 to give a below average industrial wage worker an extra £10. However, that figure, although shocking, does not tell the whole story. Apart from the high rate of tax on marginal income, the State takes a huge slice of all earnings. A typical single worker has a personal allowance of £2,500, a PAYE allowance of £800 and a £140 PRSI allowance and pays 27 per cent tax on the first £8,900 of earnings and a 7.75 per cent PRSI rate. Gross earnings of £12,340 yields £956 in employee's PRSI, £2,403 in PAYE and £1,510 in employer's PRSI. For a take home weekly wage packet of £172, the State demands over £4,870 per annum, or 39 per cent of gross earnings.

This is the reality of modern Irish employment. Work is taxed as if it were a luxury. Effort is penalised and risk taking to provide employment is almost outlawed. The budget was not radical, and the public should realise that during its lifetime the Government is not prepared to deliver on tax reform. This issue will not be addressed as long as the parties which make up the current Government remain in office.

In the Bill we see a Government which does not merely understand, but also rejects advice on tax reform. This advice was given in the Culliton report and also by the Central Bank, the ESRI, the OECD and many other non-party political commentators. The challenge to the political establishment to radically reform its system of tax and work must be addressed. It will not go away and it will not be altered by the marginal changes of the type included in the Bill.

The challenge must be taken up if we are to address the huge employment problem in this country. If it is not taken up by this Government, the next Administration will be obliged to do so. Reform of our tax system and lowering marginal rates of tax is one way in which this country can transform itself into a genuinely enterprising economy. It matters that the lower rate of income tax is 27 per cent and that the higher rate is 48 per cent. People faced with a 48 per cent tax rate and a 5 per cent PRSI contribution take different decisions in relation to their marginal earnings, such as whether they save or invest money, are prepared to take risks, work overtime or bother to employ others.

We do not have a culture of understanding in this regard. We do not understand enterprise or risk taking and we do not admire it. We regard entrepreneurship and profits almost as dirty concepts, to which as a State we are not really committed. How can we fail to understand that unless we have entrepreneurs and people who are willing to take risks, and ensure that they are admired and rewarded for doing so, we will never put a stop to the huge burden of unemployment? The people who are currently unemployed are being told that we are not prepared to bring about changes which will help them to get a job.

Until we have a Minister who does not simply tolerate profit but welcomes it, and supports and admires those people who are willing to take risks and make profit, this culture will never change and we will never bring about a prosperous country. We will never bring about an economy which is enterprising and there will never be an end to the huge level of unemployment.

The process of tax reform was started in 1989 — at that time there were three rates of income tax: 35 per cent, 48 per cent and 58 per cent — and continued until 1992 by which time there were only two tax rates: 27 per cent and 48 per cent. This process must be put back on the rails. It was abandoned in the 1993 Budget when there was an increase in taxation with the infamous income levy.

My party has continuously said, and I say it again today, that we need a programme of tax reform which would over a number of years achieve the target of reducing the standard rate of income tax to 20 per cent and the top rate to 40 per cent and which would eliminate PRSI and transfer employer PRSI into a single digit payroll levy on all income rather than paying the current 12.2 per cent. We also must reduce corporation tax. There should be a special corporation tax credit for small developing companies. This could be achieved in the lifetime of a Government. It would involve substantial costs of approximately £1 billion. However, if a quarter or a fifth of that was made available in every budget over a period of years by widening the tax base or by controlling public spending it could be achieved and we would have a very different country.

I wish to return to the subject of covenants. This Bill makes fundamental changes in that area. We were led to believe that the Government would introduce some changes in covenants when it introduced free third level education. However, nobody believed that there would be widespread changes in all legislation dealing with covenants. We are using the excuse of free third level education to change that legislation fundamentally. Anomalies will arise, causing much hardship to many taxpayers, as a result of the proposed changes. This is neither fair nor equitable. It will impose burdens on hard-pressed taxpayers who are using covenants to provide for separated spouses or elderly parents.

With regard to special tax status for overseas charities, I fail to understand the changes the Minister has introduced. I cannot understand how a Labour Party Minister could discriminate against national charities. The Minister must know that the tax relief designated to Third World charities has caused grave concern to Irish charities. I am sure the Minister has been lobbied strongly, as we all have been, on this matter. This new relief creates inequality where none existed before. It could be seen to be telling the Irish people that Third World charities are more deserving of support than national charities. This Government and previous Governments have relied heavily on national charities to do much of the work the Government should do and for which it should pay. The Department of Social Welfare recognises the work of the Society of St. Vincent de Paul so highly that it transfers funding to that organisation annually. The Irish Cancer Society, through national Daffodil Day, funds hospice nurses throughout the country who provide services which the Department of Health does not and cannot afford to provide. Charities such as the Irish Society for the Prevention of Cruelty to Children or Barnardos provide valuable services in the area of child protection and childcare that the Government should provide and would have to provide if those charities did not exist.

I feel strongly about this issue. I cannot understand how the Minister was willing to make changes to section 153, which would be a more strongly held core value or principle in the Labour Party, but turns his back on national charities and is unwilling to make any changes in their favour. It is wrong to attempt through the tax regime to encourage people to transfer funds for specific charitable purposes when domestic charities are so deserving and are already badly affected by Governments' actions in recent years. The fact that the Government has failed to raise the amount of money that can be offered in prizes by national charities, which used to have a large lottery income, while the national lottery can offer prizes of £2 million or £3 million has had the effect of siphoning money away from these many good causes and into the national lottery. It is wrong to complicate the tax system further by discriminating against domestic charities and by creating a new band of favoured charities which excludes charities such as the Society of St. Vincent de Paul. What is wrong with the Society of St. Vincent de Paul?

The Minister has said it would be difficult not to open the floodgates. However, organisations such as Trócaire and the Society of St. Vincent de Paul should both be entitled to the same tax breaks under Irish law without doing huge damage to the Exchequer's expectations in a given year. The approach the Minister has made in this Bill creates a distortion against home based charities. The Irish people are generous in contributing charitable donations. However, they are being asked to discriminate between their local branch of the Society of St. Vincent de Paul and some equally deserving Third World organisation. At the minimum we should ensure that there is a level playing pitch for both home and Third World charities. We have tabled amendments regarding these issues and I hope that between now and tomorrow evening the Minister will reconsider this matter. All sides of the House feel strongly about it. I cannot understand how it can be a core principle for a Labour Party Minister for Finance to discriminate against national charities.

There is clear evidence that the real rate of growth in public spending in 1995 will be closer to 10 per cent than to 6 per cent. That is three or four times the inflation rate. There is no need for such an explosion in public spending. However, there is evidence of it everywhere. Government liabilities each year have resulted in a public spending growth rate of well above 6 per cent. A huge proportion of Government spending goes on public sector pay. I spoke earlier about the tax reforms that are necessary. The demands of the public sector for increases way above the rate of inflation are the result of the Government's huge tax take from every pound of earnings by their public sector employees.

If the social partners had agreed to concentrate on real take home pay instead of gross pay under a regime of high taxation we could have greatly curtailed public spending since 1987. However, that has not been done and there does not appear to be any plan to do so. This Government is allowing public spending to go totally out of control. It has made no effort in 1995 to control the growth in public expenditure. In those circumstances this Finance Bill, which is intended to fund growth in public spending, must be challenged and the tax system which underpins this huge growth in public spending must be reformed.

Ireland's economy is not in a healthy state. We say we are deeply concerned about unemployment but we are strangling employment at every opportunity. We talk about spending control but we do little about it. We talk about tax compliance but we enact a tax amnesty. We talk about 6 per cent limits on public spending growth but we allow it to grow by 10 per cent. On Committee Stage I will table recommendations to change some of the faults in this Finance Bill. It is not a great Bill in its present state.

I congratulate the Minister on his first budget. There were many good provisions in the budget and I compliment him on that. I always fail to see the logic of Opposition economics which seek reductions in public spending while at the same time calling for more money to be spent in different areas and for greater tax relief. As a student of economics, I always found that extremely hard to understand but I suppose it is just the way politics runs in a democracy.

Senator Honan made a great plea for tax reductions and incentives to create employment. As an individual who employs over 30 people, I know how difficult it is to create employment. Before this budget there was more tax on employing somebody than on a packet of cigarettes and that was while the Progressive Democrats and Fianna Fáil were in Government. I compliment the Minister on reducing employer's PRSI. It is a step in the right direction and will give employers a chance to consider taking on people. The most employers could do previously was try and keep overheads down. They did not want to employ people because it cost too much money. The Government has taken that into consideration and there is an incentive now. It is a start and it will be worthwhile. I hope the Government continues in this vein in the next two budgets it will introduce.

The 2 per cent reduction in corporation tax is welcome. It is a start but it should be reduced quite an amount more. I live in the Border area. Corporation tax on service industries in Northern Ireland is much lower and this leaves us at a disadvantage. The peace process presents us with a good opportunity to consider tax harmonisation in the Border regions which would also be beneficial for employment. There is huge potential for employment in service industries and tourism over the next number of years. I would be grateful if the Minister could look at the service area. The 10 per cent tax rate for manufacturing is important for exports but there is also potential for great growth and large employment in the service industry.

I welcome the inclusion of Enniscrone, County Sligo, which is in my constituency, in the pilot renewal scheme for seaside resorts. It will benefit greatly the areas in which it has been introduced. An urban renewal scheme for small towns and villages throughout the country would also have great potential in creating infrastructure and extra employment and should be seriously considered. I notice that section 32 provides for a two year extension, to 24 January, 1999, for the Custom House Docks area and section 34 provides for an extension in the Temple Bar area. The Minister has visited Sligo and is aware of the urban renewal scheme there. I would be grateful if both he and his colleague in the Department of the Environment would consider an extension for the urban renewal scheme in Sligo. It is almost complete and if the tax incentive was taken away, a vast part of an area which heretofore was not built up would be left incomplete. That would not be of benefit to either the Government or the local economy.

The Finance Bill is welcome. It is a start, but there is a long way to go. We still have difficulties with unemployment, but I am happy with the reduction in employer's PRSI. This Bill is the start of an exciting time with tax reductions throughout the next number of budgets. I look forward to the next budget this Government will introduce.

I am sorry the Minister is gone because I wanted to say something positive. I will say it in his absence.

I was part of the 1987 Government which is credited with starting to bring some sort of order to the finances. Under Ministers for Finance, Ray MacSharry, Deputy Albert Reynolds and Deputy Bertie Ahern, we had eight years which brought us to a stage where Deputy Ahern, the former Minister for Finance, was able to bring in the best accounts in 30 years. The onus is on the current Minister, Deputy Quinn, and the Government to ensure that the eight years of good work is not undone. There are many parts of the Finance Bill which I welcome, but there is great concern in the Central Bank and the market about increasing expenditure. The Minister and Government should ensure that the work to put the finances in order started in 1987, which has continued over the last eight years, will not go astray.

I welcome the Minister's acceptance on both Committee Stage and Report Stage of amendments relating to the horticultural industry. The Minister is aware of my own interest in that sector. The first letter I received from him after he took office was a positive reply to many representations I had made on behalf of the industry. It is a great credit to him that he has extended the business expansion and the seed capital schemes to an industry which is ready to advance. It is suggested that if these proposals are sold correctly, anything between 20 and 40 acres of new glass can be developed in the industry. It gives the industry a great opportunity to attack imports and mirror the mushroom sector. The tomato industry and nursery stock could not only look to local markets but could also be export oriented.

I ask the Minister to indicate in his reply when the details of the seed capital programme will be announced. I note in the explanatory memorandum that it is to be dealt with in conjunction with the Minister for Agriculture, Food and Forestry. It is important that information is available to the industry so it can maximise the benefit of the extension of these two excellent tax reliefs. The industry is ready. It has been competing aggressively with imports and prices have been good. The Minister's proposal is flexible. It applies not only to new glass but also to the reconstruction and development of existing glass, which is positive. I ask him to tell us when the seed capital programme will be implemented.

I also welcome the changes the Minister made in the small business sector. Senator Reynolds alluded to that in his contribution. It is an important sector which has been recognised by Governments in the past and certainly by this one. I welcome the fact that he has accepted many of the recommendations made by the small business task force. He has encouraged the commercial banks to finally recognise the problems facing the small business sector. The Bank of Ireland recently issued a very positive document detailing how they would deal with small business loans. The idea that one's personal property can be collateral is hopefully a thing of the past and I welcome that.

I understand the Government intends to bring forward the successful subsidised ICC loan scheme, which is also welcome. The fact that this was oversubscribed last year shows its success and the desire of people in business to take a chance when the price of money is right. I ask the Minister to continue to ensure that those in the commercial sector bring forward innovative schemes that will give those in small business every chance of development. The implementation of the task force's recommendations is welcome.

I have always supported the idea of extending the enterprise zone and although it is only a pilot scheme at the moment, I have no doubt that it will be successful. In areas where enterprise centres have been set up and where people got a chance at sheltered rents to develop their businesses, it has been hugely successful. I hope the Minister will further extend the scheme next year following its success in the six pilot areas.

It is an ideal opportunity for that scheme to be extended to the airport. Dublin must be one of the few cities in the world that does not have an enterprise zone around its airport. That idea is a winner because that area is ripe for development and the encouragement of enterprise.

The Culliton report brought forward this idea of a mix of private and State development and Dublin Airport, through its various agencies, is ideal for that. The Minister should include Dublin Airport and the surrounding areas in his proposals for the development of enterprise zones.

Huge changes are taking place in manufacturing and people who develop products no longer build major warehouses to store them. Instead, the product is taken directly to the export markets. That is why the current demand around Dublin Airport for developed industrial land is so great. The problem is that we have no developed or serviced land there, which is to the detriment of job creation.

When the statistics on pilot enterprise zone schemes become available next year, I hope the Minister will see the need to develop it further. I have already made such a proposal to the Minister. I understand that various agencies are actively looking at the possibility of ensuring that job opportunities, investment and manufacturing will take place around the airport.

Senator Reynolds mentioned the seaside resort scheme but, in relation to north Dublin, I cannot understand why the Minister did not accept the amendment to include Balbriggan in the scheme.

It is in the Senator's area.

It is no wonder he would appreciate it there.

Not alone should it have been included but an in depth proposal on urban renewal and designation will be coming to the Minister from the town commissioners, the chamber of commerce and Fingal Council. Since it is the one area that is ready, with the necessary infrastructure that has taken place around Balbriggan, that proposal should be put in place. I hope that will be seen in a positive light.

Tomorrow we will have a chance to make recommendations on section 8 which relates to national charities. Many speakers have mentioned that issue and my party will forcefully ask the Minster to review his position. I find it difficult to understand why he is still standing over the discrimination between national and overseas charities. When he hears the weight of the arguments from all parties I hope he will come back with an amendment on Report Stage or when he brings the Bill back to the Dáil.

We are well aware that, given a free vote, those on the Government side would support the our recommendations on the national charities, and we will have plenty of opportunities during tomorrow's debate to develop that argument. I have no doubt that the Opposition parties will be speaking with one voice and hopefully we can convince the Minister.

Property tax is very much a Dublin tax. Despite the amendments made to the property tax, the average increase in house values this year is around 15 per cent. Therefore, a house worth £95,000 last year will be worth £109,000 this year. With the new threshold of £94,000, a taxable allowance of 15.2 per cent and 1.5 per cent, someone who paid £109 last year will be paying £238 this year.

Last week, Ministers announced a review of local authority funding to the General Council of County Councils, although there is no chance of seeing it before the end of this Administration. As long as the property tax remains as it is, it will be an urban tax, and specifically a Dublin one. Some 70 per cent of those who paid it last year were Dublin based. That is wrong.

On a more positive note, I welcome the fact that the Minister has kept section 35, amended by section 36, in relation to film investments. Commentators worldwide have praised the excellent structures and financial incentives to attract investment to our film industry. This investment means jobs.

Concerns have been expressed recently by the Central Bank and many commentators about overspending. This is something that the Opposition will keep an eye on to ensure that the work achieved by successive Governments and Finance Ministers over the last eight years to bring the economy into line will not be lost by this Administration.

We started it.

I am sorry that the Minister himself is not here. However, we have a very adequate former Member of this House who has already indicated that she will be an efficient conduit of information to the Minister with regard to the points that are made. I do not intend to take up a broad sweep of taxation proposals because I am not an economist nor am I in a political party. So, I will simply pick specific targets from the Minister's speech, the budget and the Finance Bill.

In a way the preparation of budgets represents a kind of political balancing act. In the budget the Minister has, by and large, shown a capacity for this kind of high wire activity of which, no doubt, the late Jonathan Swift would have approved. As the Minister will recall, Swift suggested inGulliver's Travels that one of the qualifications for being a Cabinet Minister is to be able to perform callisthenics on a high wire. To an extent, it is possible to argue that the Minister has performed this feat with a certain amount of agility.

I want to put on the record my gratitude to the Minister for making special provision in the budget for a capital grant to the James Joyce Cultural Centre in North Great George's Street. I have just come from the Joyce Centre where we were recording messages to be transmitted throughout Australia on Bloomsday. This shows the considerable development of inter-relationships along the lines of cultural tourism. I could go on at some considerable length about the value of this money to us and the return we will unquestionably make through cultural tourism to the Exchequer but I will leave it and merely place on the record my gratitude.

I pass on to the question of charities and the inequity that is revealed in the budget as between national charities that operate internally and charities that operate principally abroad. I share the concerns of many people who have spoken on this matter. I note in the letter from the National Charities of Ireland that the spokesperson indicated that it lobbied aggressively but found its meeting with the Minister unsatisfactory and as a result it decided to communicate with him through the newspapers. I am not sure that when seeking money megaphone diplomacy is always and invariably the best method to do so but I believe it has a strong case because it is clear that a distortion may be created.

We were warned about this when the national lottery was set up because many of the pre-existing charities believed that a distortion would be created in the market for those seeking funds. This was discounted by the then Minister for Finance but it turned out to be the case. I urge the Minister to consider this situation actively, but it may not be possible for him to alter the situation. I understand why my colleague, Senator Wright, said the Opposition would vigorously pursue this line tomorrow, but I am not sure of the voting numbers. Although I have been aggressively, but civilly lobbied by these charities, I will not be here because I will be in Portugal at a conference about East Timor, something I take extremely seriously.

From the briefing material I received, the Minister's figure of £21 million as the cost to the Exchequer appears to be exaggerated because it is one produced by the Revenue Commissioners and represents the entire spread of organisations registered as charities and does not reflect the real situation in terms of those in receipt of such money. I urge the Minister to reconsider the situation. His approach in this Bill has at least had one good consequence, that is, the creation of the National Charities in Ireland where 75 or so charities have come together under an umbrella organisation to co-operate in seeking funds and changes to the Finance Bill, 1995. That is a welcome development.

In the event that the recommendations are not passed tomorrow and the Minister decides not to alter his approach in this Bill, I appeal to him, over the following 12 months, to ask his Department to monitor the implications of this section to see if there is a clear disadvantaging of domestic charities. If there is, I ask him to give an undertaking to look at the situation again and to rectify it.

I move from some degree of criticism to my former posture of gratitude. I notice that the Minister has included provision for tax relief on heritage buildings operating as bed and breakfasts. I lobbied for this and I have received information from Mr. John Coakley who is concerned in this area. He provided clear cogently argued material to the Minister as to why this was important, particularly for remote houses in family care which could not be opened to the public under the preexisting terms of this relief. I welcome the fact that the Minister has been able to introduce this form of tax relief.

There is a dwindling stock of heritage houses, in particular those which have that element which, to be crass about it, the Americans love so much, that is, an actual human family living in it and being seedy aristocrats or whatever so the Americans can press the flesh. I know it is amusing, but it is a harsh fact of snob tourism. I believe in encouraging any form of tourism, be it snob, intellectual or cultural tourism. I welcome the Minister's flexibility in introducing this measure.

I now turn to the question of urban renewal and enterprise areas. I welcome the extension by two years of the period for the availability for tax incentives in the Temple Bar area under section 34. I regard Temple Bar Properties as a mixed event. There is no doubt that it has shown initiative and has done good work in this area, but I am concerned that it is beginning to operate in the manner of commercial property developers in the capitalist market. This is a great pity and a big problem.

I have direct experience of that area when, as the late Myles na gCopaleen would have said, it was neither popular nor profitable nor was it a cultural area. I assure the House that it was not reminiscent of the Left Bank of Paris until we moved in. In 1978 I took a lease on 10 Fownes Street and we created a gay community centre, the Hirschfeld Centre, subsequently destroyed by fire eight years ago. We were one of the first groups in that area. Some 1,500 people came to our discotheque each weekend. We ran discotheques for green issues, for women's issues, for environmental issues and so on. It was precisely that source of energy released through the Hirschfeld Centre which had a discotheque, a restaurant, a library, a bookshop, a cinema, a theatre, a counselling service and so on which brought people in and made this area, this warren of narrow, down at heel streets, reminiscent of the Left Bank of Paris. I find it very surprising that there has been no support whatever for the work conducted in that centre despite the fact that we started the whole thing off.

I find it astonishing that a group like Temple Bar Properties which has been in the area for five years takes all the credit and ruthlessly extirpates from the record of history any of the activities in which we engaged. I wonder was it because we were related to the gay community. I very much regret it if that was the case. It was not only the gay community who were involved, I know of artists, small enterprises, organically grown from the ground up, who have been, and are being, squeezed out ruthlessly. This must stop and Temple Bar Properties should be put on notice that that is not what it is in business for.

May I explain to the House the mechanism by which this is done? If preexisting groups, which pre-date significantly the existence of Temple Bar Properties, are unluckily enough — I am glad to say the Hirschfeld Centre is not one because I own it through a company, freehold — to be approached by Temple Bar Properties which says it will renew their lease at something approaching their existing rent but only on condition that they carry out work to its specifications to upgrade the building, which of course may be necessary, and they are required to spend £0.25 million or £0.5 million which they do not have. Alternatively they are offered the building refurbished by Temple Bar Properties at what is seen as an economic rent, £40,000 or £50,000, which they cannot pay. In other words, they are caught in a pincer movement. There should be a degree of categorisation for groups, organisations and centres which are seen to have assisted in the development of that area and they should be not squeezed out. It is outrageous that they should be.

While I am on the subject of incentive areas and on so, concern has been expressed to me in this regard. An appeal was made to me from Edenderry, County Offaly, that some degree of designation should be possible for enterprise projects in secondary towns. It came from the Edenderry Business Park where a group of entrepreneurs are engaged in the purchase and the refurbishment of the Edenderry Shoe Company. I have no personal interest or shares in this company or relations in Edenderry. My roots, although in the bog, are in a neighbouring county, not in County Offaly. I was impressed by their arguments. They want to invest in new factory units in Edenderry, but they claim that Government policy at present is biased against the creation of factory units in secondary towns. They feel they are discouraged as against businessmen who invest in luxury flats or large businesses which develop for rent retail outlets.

For example, the 90 per cent tax relief on two refurbished apartments purchased at £100,000 gives a total tax relief of £43,200. Their second example is the construction of a commercial unit in a designated area at a cost of £100,000. They give the square footage, rateable valuations, inflation, rent and so on, and they work out that the benefits for a tenant — for example, one of the big chain stores — over a ten year period would be £176,080, in addition to which they would get £18,337 rates remission and £21,600 in tax relief for construction. Therefore, the benefit to these conglomerates would be £216,017. The reinvestment by local businessmen in the shoe factory, which would give employment, would qualify for exactly nil in terms of tax incentives. A secondary, disadvantaged town in an area of high employment should be given the maximum possible incentives through the budget. I ask the Minister to look at this to encourage employment in market towns throughout the country.

I note with interest in his speech that the Minister is dealing with the question of VAT on sporting, health and fitness facilities. I raised this item as a matter of urgency last year, or the year before, with the then Minister, Deputy Bertie Ahem. I did so because I am a member of a fitness and sports club, the Olympus Health and Leisure Club, in Capel Street, which came under severe pressure because of the competition from community groups and big companies with their own facilities which paid no VAT. Very often they had higher membership and attracted membership away from what were seen as commercial health clubs and gymnasia. I said at that stage that there would be a continuing series of collapses around Dublin of these gymnasia and health clubs, which has proved to be the case. The club which I attend is swamped at the moment, because under a bond it has had to take up the membership of a neighbouring club which has just collapsed. I am glad that there is some degree of movement on that in the Minister's speech.

The question of residential property tax is very close to my heart and may at some stage be close to my pocket. I do not care for it and I think that very few people do — perhaps, some people in the Department of Finance like it a great deal — and I do not think that it raises hugely significant amounts. I want to make a special case. Some years ago I managed to win an argument with Deputy Albert Reynolds, who very kindly introduced some suggestions of mine into the Finance Bill which covered some small degree of tax incentives for List 1 buildings within the designated areas. That is a very narrow band of houses, so the cost is very small. However, these provisions were hedged around with so many qualifications and difficulties that, as far as I know, not one single person has ever successfully taken them up.

We are in an unusual situation in the European context in that there are virtually no grants available. There is no encouragement for the people who do this work voluntarily, even though it is a stated objective of our community, both at national and local level — for example, through Dublin Corporation and Dublin City Council.

However, we are in a very difficult situation if in addition to receiving no grant aid and very little encouragement, we are actually penalised in situations where we take over an area with a clear, consistent coherent programme, as we did, for example, in North Great George's Street. I hope that that has been and will be a model for the redevelopment of other areas in Dublin and other cities. The net effect of that is to catapult people into a tax situation which is triggered by their own efforts to achieve the stated objectives of our community. That seems grossly unjust. I do not see why, having rescued a house from dereliction and oblivion — admittedly, they are bought cheaply in some instances — and having put effort, the sweat of their brow and a huge amount of capital into the redevelopment and refurbishment of a property, the net effect is to trigger penal taxes.

I appeal directly to the Minister to exempt List 1 buildings within the designated areas from the operations of the residential property tax. We tried the other way with tax incentives which simply do not work. The Minister should give us that concession, which is tiny in budgetary terms. We have done damn all else for our heritage within the city of Dublin through the budget and tax structures, with the exception of the money which the Minister kindly gave to the Joyce Cultural Centre but which does not benefit individual owners. If we want to renew the housing stock in the inner city, that is one way to do it and I urge it strongly.

I am glad that the Minister has found some way in section 172 of dealing with people who evade their taxes, which I have never found to be a very admirable quality. I had to laugh when I heard somebody saying that informing is not in the Irish character; I think that it is the most Irish characteristic possible. One has only to look through history to see that at any opportunity Irish people happily inform on each other. I do not think that there should be any conflict with the Irish ethos and it is something which I would very happily encourage.

I wish to put various documents on the record which I do not think I need to spell out in great detail, because I have no doubt that the Minister and his advisers have received them. Barnardo's costed the effect of the full implementation of the Child Care Act. We fought in this House to secure an amendment to the Child Care Bill on the issue of guardiansad litem. In the light of what is happening in the other House today and the continuing festering sore of child abuse in this country, we owe it to the people of Ireland to implement this Act in full as soon as possible and to present a terminal date for bringing this Act fully into law.

I also received excellent briefing material from the Combat Poverty Agency. It has placed a number of demands before the Minister which I do not need to reiterate. I also received material from the Irish Wheelchair Association, which is looking for multi-annual funding arrangements. This is important because if it is done on anad hoc basis, it is very difficult for it to provide a coherent programme. It is looking for VAT relief and support for its driving school. I will not do justice to the association in a rushed summary of its document, but I am aware that the Minister has received it and I hope that he will bear it in mind. The St. Vincent de Paul is one of the most estimable and greatly cherished organisations in our country and has done enormously valuable work, selflessly, over many years. It has also issued a document which makes special specific pleas to the Minister.

At the beginning of my contribution I said that it was a balancing act and the Minster has done a reasonably good job of callisthenics on the high wire. He cannot, of course, take into complete account all of the submissions which have been made. However, I hope that he will find it possible to review the situation as regards charities and to take some of the other specific points — which I hope I made with some small degree of clarity, although at considerable speed — into account when he comes to review the Finance Bill.

I do not wish to unduly delay the passage of the Bill at this stage but to deal with a few areas which need to be expanded upon. As this is my first opportunity to speak in front of the Minister of State, I wish her well in her appointment. I am aware that when she was a Minister of State with responsibility for the Office of Public Works, an office which I later held, she was held in very high esteem by the personnel who worked with her in the Department. Her initiative and the work she undertook there, including the establishment of the national park in Mullaghmore, are examples of her dedication and I am sure she will use her initiative and drive in this area to deal with matters which need to be tackled.

This Bill is a mixed bag. Some items in it are welcome and useful and will benefit the economy. However, in my view an opportunity has been missed in that there are no incentives which I can see which would give any real drive to enterprise, employment and economic prosperity. In this regard the Bill is disappointing. People with enterprise, particularly people in small enterprises who are critical not only of this Government but also of previous ones, would look to a Bill like this to create a framework whereby they would have increased incentive to work and create more employment and prosperity. Unfortunately, the Government does not seem to have availed of this opportunity. Perhaps it will see to this later.

Some provisions of the Bill create incentives. The section which provides relief for people and companies involved in research and development is very important. We recently had the opportunity in this House to discuss issues related to research and development. Any tax reliefs or incentives which can be provided would be useful and beneficial to people involved in this area. As the Minister of State is well aware, there are many highly skilled professional people in this area who are unemployed at present. Recently there were 70 or 80 applications for a highly specialised post in a research and development agency. There are many highly educated graduates available for work in this area, many of whom are forced to emigrate after their education to find employment in research and development abroad. Any relief in this area is welcome.

I also welcome the reliefs to encourage the collection of heritage items. The absence of a framework which would create an incentive to people in this area has been noted for some time and these reliefs are welcome. I commend the Minister for undertaking this.

I have no brief for people involved in tax evasion or fraud. Neither have I time for those engaged in fraud in relation to the expenditure of any Government Departments. If people read the reports of the Comptroller and Auditor General, they would see that on a yearly basis he draws attention to the huge volumes of money which are fraudulently collected, not least from the Department of Social Welfare. At one stage, in a comment on social welfare expenditure, he stated the best he could do was to keep the fraud to reasonably manageable proportions.

When the Minister was in Opposition he strongly suggested there were ways and means of providing the Department of and Minister for Finance with substantial amounts of revenue from people who are making fraudulent claims from, for example, the Department of Social Welfare. Any requirement to stop the evasion of taxation would be desirable.

Nevertheless, I do not believe it is wise to have tax advisers and auditors turned into revenue collectors or advisers to the Government. If the Minister feels a huge amount is being diverted through one means or another and is being fraudulently collected, there is an investigations branch in his Department which I believe should be strengthened substantially. Its record of achieving results is impressive, as is the record of the investigation staff in the Department of Social Welfare, who have done substantial work in trying to deal with fraud in that Department. Rather than having this requirement on tax advisers and auditors in relation to the reporting of evasion, he should greatly enhance the tax evasion investigation staff in his and other Departments so that they can clamp down effectively and fully, insofar as it is possible to do so, on people who have been evading tax or defrauding the State of much needed revenue. This revenue should then be used for incentives such as those provided for research and development and heritage items.

I welcome the section which provides for the designation of a number of areas to try to create a climate of development in resorts which are, by and large, run down and neglected. Seaside resorts in particular — I am sure the Minister is well aware of this — were traditionally the backbone of Irish tourism. With the change in the pattern of tourism over the last ten or 15 years, I have seen towns like Kilkee devastated. Hotel after hotel went into receivership and was closed down. Kilkee is one of the designated areas. I welcome this and commend the Minister for this. Only one hotel remains in that famous resort. Because resorts have not been able to cope with the pressure from international resorts and international tourism generally, they have not been able to compete and need special attention.

I welcome the decision to include Lahinch and Kilkee in the designated areas and I appeal to the Minister to look favourably at three other areas in Clare, which I suggest need to be considered for special relief. One area is Lisdoonvarna. The Minister will be aware that a former colleague of ours, Mr. Jim Whyte, through very hard work and investment in Lisdoonvarna, transformed it from a dying resort into a vibrant one, admittedly for a very short season. Through a huge investment plan and the acquisition and renovation of a number of hotels, he has revitalised Lisdoonvarna. He would certainly be to the forefront in a campaign of this nature to develop areas like Lisdoonvarna, where there has been a traditional resort built around its famous spa water.

Resorts have been in decline because of changes in the international trend of holidays. In the designation of Kilkee and Lahinch, certain problems will arise in adjoining towns, which are equally competing for business in a narrowing market. This market is getting smaller all the time, because these towns are not able to provide the large investment needed to bring in coaches and tourists in the numbers required to make these resorts viable.

I strongly suggest that if the Minister designated further towns adjacent to the ones he has already designated, this would also benefit the latter. Relief for Lisdoonvarna, which is north of Kilkee and Lahinch, and for Killaloe, which is adjacent to Limerick city but has equally been devastated due to decline, would be a real tonic for them at a time of great depression. Many of these resorts have also suffered from a higher level of local rates. The Minister will be aware that resorts, because of their nature, have been valued at a higher rate than otherwise would apply in the county. A residence or business in Kilkee would pay perhaps one and a half times or twice the level of rates paid by a similar residence or business in another town in Clare.

This rate burden has put many resort hotels out of business. Even when new companies tried to revitalise the hotels it was not possible, so they went into receivership again. Some hotels went into receivership up to four times in the space of five years. The Minister is aware of the problems of new investors who were unable to revive the businesses in a declining market. There was also ever increasing pressure on small resort areas from the international tourism market, which is luring holiday makers to foreign destinations and depriving resorts of their lifeblood.

I welcome the Minister's proposal in as far as it goes and I compliment him for introducing it. It was mentioned for a number of years, but has finally been implemented. I ask him to consider the adjoining towns I mentioned because they would fit into a pattern which would enhance the area.

There is a big gap in the Irish tourism market in maritime leisure amenity facilities. Anyone who travels abroad knows a central part of tourism business is maritime related — for instance, leisure boating, such as on the Shannon. We have only a small number of custom built marinas in Ireland. I strongly suggest to the Minister to consider special treatment for areas adjacent to those marinas, which in some cases are only ten acres.

Kilrush Creek marina is an excellent investment and development which has already attracted significant business in the quality market we should seek to attract. There is a gap in our market. We do not have the ability to enhance facilities for people who want to avail of our marine resources so we do not get the full benefit from these developments. The Minister should identify areas adjacent to the marinas at Kilrush Creek, Malahide and elsewhere which find it difficult to survive in a competitive market.

Most of the area of Kilrush Creek marina used to be an old rundown harbour. With the decline of the shipping business over the last 40 years, towns like Kilrush and Youghal, with which Senator Calnan is familiar, have revitalised their maritime industry. Other marinas have also been built on areas which used to be rundown piers, merchant quays and pauper quays. The areas are attractive in their own right. However, there is no one in Kilrush with sufficient finance to revitalise the old mill in the town and turn it into an attractive dockside leisure amenity. They need help.

When speaking to the Minister about this I know I am pushing an open door. We are not availing of this opening and we could substantially benefit from it, but we need to approach it in a systematic and planned way. We need a network of well organised marinas around our coastline with good facilities. These would greatly enhance our tourism business and attract that part of the market we are losing to areas such as the south of England.

I welcome some of the provisions of the Bill. I have a query, however, about the £1,000 tax relief to purchase a new car. I do not know anyone who has availed of this facility yet.

It will be available from 1 July.

I do not know how many people the Minister anticipates will take up the provision. I do not want to lose any of my friends, but I must voice the growing concern about the number of secondhand imported cars, especially those from the UK. I was in Kilkee some weeks ago and thought there were a lot of English visitors until I discovered that it was simply a large number of English registered cars which were now on the Irish market. I do not understand the economics, but one wonders what is happening when so many of these cars are here. Perhaps the Minister could explain.

I welcome the relief in section 22 for farmers with disease eradication problems. Everyone from a rural area knows a farmer whose livestock was wiped out because of disease problems. I do not understand why the relief only partly applies to those affected by brucellosis. Only a small amount is involved but huge sums of taxpayers money was spent eradicating the disease. Ireland is now a brucellosis free zone and we should keep it that way. Farmers affected by this disease should be entitled to the same support as those affected by TB.

The Finance Bill is a mixed bag. As time goes on the Minister will have an opportunity to consider introducing better incentives so we can have vibrant legislation which will revitalise our small industries and give business people the incentive to enter the market and expand their businesses. More will be required in the future, but I welcome most of the provisions of this Bill.

Like other Senators, I welcome the Minister. Some of the topics I wish to raise have been discussed already, but one which is of great concern to me and about which I wrote to the Minister is covenants for education. I understand why he has removed them since undergraduate third level fees have been abolished. However, this is not the only group of students which has to pay fees. He has wisely allowed tax relief for students going to private third level colleges, but postgraduate students have been seriously affected. Postgraduate studies are greatly to be encouraged. Many such students are working on basic and applied research, the fruits of which are not only of benefit to themselves from an academic point of view and for theircurriculum vitae but also raise the money earned by the university and benefit industries in Ireland.

There are few post-graduate grants in Ireland. A large number of post-graduate students who are doing master's degrees or doctoral degrees have to live on very small amounts of money. I applied to a British charity for money on someone's behalf and the charity asked if it was just to ask anybody to live and work on the amount I was seeking. One source of income for them was money they could have covenanted to them by a grandparent, for example. I am disappointed the Minister has done nothing for these people. Tax relief might be of use to them or money convenanted to them from people other than their parents.

I gather there was great abuse of the covenanting system. My husband and I must have been the only people in Ireland who did not know about it. I never realised how open to abuse it was and I understand why the Minister has changed it. I am glad he has allowed it to remain for incapacitated minor children and people over 65 years of age. However, post graduate students are being invidiously treated.

Part time and night students face a similar problem. Many of them are mature students, who are often the most diligent and whom we should encourage as much as possible. They have lost out both ways in that they cannot have covenants and cannot get tax relief. I would not think the sums of money involved can be that great in terms of the overall budget and it would not cost too much to extend the provisions to one or other group.

I was delighted to note how the Minister ingeniously solved the problem of friends of mine regarding tax relief for heritage properties operating as bed-and-breakfasts. The Minister will remember I wrote to him about friends of mine who had a house which was open to the public. Senator Norris described such people as the "decayed aristocracy", but as they are friends of mine I will not. The house is in a remote area on the border between County Wicklow and County Carlow and they could not get enough people to visit the house to cover the cost of security. Even the tax relief did not make it worthwhile, given what it cost to employ people to mind the house. The Minister's solution is excellent. I will give the Minister the address of the house and my friends will be delighted to see him. They are open for guests and have been receiving American visitors who like to stay in such houses and have dinner with the family. I compliment the Minister on this excellent provision.

I am glad relief is to be given to heritage companies. The general interest of all Irish people in their environment and their heritage has increased greatly over the last few years. The Minister has allowed for tax relief on items of national interest. I am also glad the relief is to be allowed against any sort of tax. The lower limit of eligibility is rather high at £75,000. I would prefer to see many items of national heritage in the form of paintings, furniture or ancient farm equipment, for example, staying in the State if at all possible. It would not be too difficult to reduce the limit to £50,000, which is still a large sum of money for one single item. Perhaps the Minister could see his way to doing that, if not this year, then next year.

The changes with regard to income tax have been run-of-the-mill. The sooner there is some integration of the tax and social welfare codes the better. The additional benefits some people will get on social welfare make it better for them to stay on social welfare rather than go to work. It is most unfortunate, not just for financial reasons but for psychological reasons also. I hope that will be advanced in the next budget.

I welcome the additional tax relief for research and development. This links to the point I made earlier about the post-graduate students. Research and development is vital for us, as nobody will give us their best ideas. In this field the more tax relief that can be given the better. We have extraordinarily good people working in research and development and I am glad the Minister singled it out. When the Digital plant was closed I asked the then Minister of State, Deputy O'Rourke, to try to keep the research and development part of the business here. People involved in such work can be quickly slotted into another industry, as happened in that case.

I do not know if it would cost as much as £21 million to extend the tax relief provisions to the domestic charities. They were affected by the lottery and they will be affected by these provisions. I have sympathy for them, but apparently the Minister feels he cannot do anything about it this year. I have great sympathy for the Irish Red Cross Society. I am a member of its overseas committee. During the recent debates on the Arterial Drainage Bill we constantly praised the Irish Red Cross Society for its work. The Department of Defence gives it a grant and I am aware money can be covenanted to it — a status afforded to only two other charities — as it is involved with UN based relief organisations. The Red Cross is the largest humanitarian organisation in the world and the Irish society was set up by an Act of the Oireachtas. It has been to the forefront of so many overseas relief efforts in which this country has been involved. I ask the Minister to extend the benefit to its overseas work.

The tax relief given to other charities working overseas is not as simple as it first appeared. The tax benefit can only be gained on sums between £200 and £750. One of the main problems of this provision is the psychological effect it will have. Charities will be able to campaign on the basis that they will be able to get the tax back at the standard rate, whereas unless one signs a covenant to the Irish Red Cross Society for at least three years it will not be able to get any tax back. As a result there will be a promotion of other Third World charities, and that is good in itself. The Irish Red Cross Society has always been able to claim there was always an organisation with which it could deal directly in countries abroad and any programmes or problems could be dealt with speedily. It will now be in a situation which will not be to its benefit.

Another organisation which approached me and with which I sympathise is the St. Vincent de Paul. I did not realise it sent money abroad. It is one of our most reputable charities and it is a pity to see them put in an invidious position.

The money the Irish Red Cross got for relief overseas was often spent sending volunteers abroad. They go for longer periods than people in other organisations; they rarely go for two or three months. Six months or a year is a short contract. They have been invaluable in building infrastructures in some of the countries they have visited. I do not need to tell the Minister that Irish volunteers are socially acceptable in many countries compared with people from other countries. If the Minister sees that the Irish Red Cross is in an invidious position, I hope he will take note of its problems over the next year. Otherwise, it would damage not only our situation but our ability to campaign for funds overseas. We are sending something more important than money; we are sending our best young people who work extraordinarily hard in important positions with Government agencies and the Irish Red Cross and who always have contacts.

Like Senator Norris, I did not know which day the Finance Bill was being discussed in the Seanad and we both agreed to go to a conference in Portugal on East Timor. Irish delegates are considered important because of the country we represent. We do not realise how useful and important it is to come from a small non-aligned country. Those attending the conference know that we cannot send troops there because our people are always sent on peacekeeping missions. I will not be here for votes on recommendations which Members have tabled. I hope the Minister seriously considers the situation as regards the Irish Red Cross.

We will fly Senator Henry out after the vote.

I thank Senators for their general support and welcome for many of the provisions in the Bill. During the introduction of the budget and this Bill I did not say I would be able to please everyone. Anyone who tries to go down part of the road with everyone travels nowhere. I will now address some of the criticisms, having accepted the compliments which are nice to hear.

Senator Quinn made a valid point — that while we have gone a step in the right direction we have not gone as far as he would like, and I share that view. The analysis of the burden of taxation on employment is a valid one, particularly as regards our nearest competitor, the United Kingdom. International comparisons which place us in a relatively favourable position with France, Germany or Italy are of little or no concern. The main threat of competition for the food production sector in this country, exporters and retailers, comes from a low tax, low wage economy, the United Kingdom, including Northern Ireland, and we must consider the consequences of that over time.

I hope we will be able to accelerate the type of changes I have made. I invite Senators on all sides of the House to assist me in meeting those changes by not introducing motions between now and the end of the year which look for increased public expenditure. That is the other side of the coin. I will test the validity of the Senators' commitments, particularly those of the Progressive Democrats, to reduce taxes on employment. I will take careful note of its provisions because, as a political party, it has been the most strident in this respect. I will match every demand for public expenditure which it puts on the Order Paper against its commitment to reduce taxes on employment. It talks about tax reduction but we must look at its consequences. The analysis is valid.

One can implement the reductions of and alterations to the taxation burden on employment in a number of different ways and we are attempting to fine tune that. Studies I have seen seem to suggest that vulnerability lies with labour-intensive, low wage types of employment. We should try to focus on the burden of taxation and the take home pay packet, as well as the cost of employing a person. We have tried to do this in the budget and the Finance Bill.

There is a range of reliefs in the Bill, many of which did not get sufficient attention during the course of the hysterical debate on section 153, which is now section 171 following the acceptance of amendments. The pro-business transfer from one generation to another was designed specifically to recognise that the vast majority of businesses in this country are started by people who want to carry on a family tradition. This is not just an Irish tradition. The vast wealth of the economic miracle which is Italy, for example, from Rome northwards, is structured on a family basis with extraordinary success. One could say the same for Catalonia and the Benelux countries. Hence the focus on that area. I invite those Senators who are not familiar with the provisions, which we designed with a view to assisting family businesses and related types of activities, to look at them and, more importantly, to test them in their constituencies to see if they work. No one in Upper Merrion Street, myself included, would suggest that we have a monopoly of wisdom in these matters.

I want to address the question of charities, particularly the Irish Red Cross because it was mentioned by a number of Senators on all sides of the House. If one looks at the Schedule to the Bill, one will find that the national charities, many of which have written to Senators, are related to health deficiency areas, in other words, activities for the physically or mentally handicapped, Alzheimer sufferers or those with specific disabilities. We could never have enough support for many of their activities but these charities complement and add to the existing health service provision. They are not on an empty pitch; they are adding to what is already there in either the social welfare budget or the health budget, both of which are over £2,000 million. In addition, they qualify for support from the national lottery, although it may not be as much as they would like.

Third World charities are on an empty pitch as the barren fields of Rwanda and Somalia demonstrate. There is no local social welfare or health system to which they can give their additional support. In addition, the national lottery is prohibited from giving support to Irish Third World organisations which undertake the type of work that has touched the hearts of people in Ireland and those acting as volunteers, who are building on the missionary tradition with which most of us are intimately familiar.

During the 150th anniversary of the Famine I wanted — this was a political decision for which I take total responsibility — to commemorate in a tangible way Irish citizens' desires to identify with and express solidarity for those working in the Third World to relieve famine. We have structured this in a way which does two things. It will not have a competitive advantage from the point of view of a domestic charity because a cheque for £200 will come from an individual donor and they will not get a tax rebate on it. In other words, if a donor gives £200 to the Alzheimer Society of Ireland or to Concern over 12 monthly instalments, for example, they will not get a tax rebate. There is no benefit for someone who looks at the two charities and says it will cost £200 to give the money to one of them, but it will only cost £170 to give it to the other. We are ensuring that if the payment is made to Concern, it will take the RSI number of all the donors, as will all the other registered and qualifying charities, and send it on a disc to the Revenue Commissioners who will feed it through their system. Every time they get a matching pair of numbers they will identify the sum in question and the State will then remit through the Revenue the additional sum of money to the recipient charity.

First, this makes the donation incentive and impulse even because there is no apparent shortage of benefit in considering it; and, second, it means that the money we give through the State on foot of the donations made to Third World charities will qualify for additional ODA assistance within the context of the OECD and the UN figure of 0.7 per cent of GNP, the target to which we are aspiring but from which we are hopelessly far off at present. On top of that again, it enables individual citizens to decide which charity in the Third World they would like assistance to be directed towards, and not a group of civil servants in Iveagh House who happen to dislike the personality of a director of one organisation, or who do not get on terribly well with the strident voice of somebody else in another organisation, or merely have, as we all have, arbitrary prejudices and dislikes between one group and another. We are providing consumer choice, if one can use that term in this context, to people to enable them indicate what kind of support they would like to give themselves and to have it complemented by the State.

We spent much time designing this to minimise some of the genuine fears expressed by some of the charities who do essential work, and I would not for one moment take away from any of the points made regarding the work undertaken by Barnardo's or any of the others that are listed — and I understand that there are over 100 listed in the combined group that has come together. In terms of what the donor will give, it is the same cheque either way. The State provides an additional amount, so there is incentive up front for somebody to give more and get back some kind of rebate.

The charities have expressed the view that this measure will seriously damage their revenue, activities and their ability to do what they are doing at home. Our evidence appears to suggest that this is not the case. Less than 10 per cent of their income derives from the category we have described — the £250 to £750 donation that is going to be put in place — so it remains to be seen whether their fears, which are genuine, will materialise. If they do, I will attempt to address them.

With regard to the Irish Red Cross Society, I appreciate and support the work of this organisation. Indeed, in recognition of the contribution of such bodies to international humanitarian relief, I have ensured that contributions to the Irish Red Cross Society and other similar bodies recognised by the UN will continue to benefit from tax relief on donations made by way of covenant. This covenant relief is in many ways far more generous than the kind of provisions we have made. The covenant must be made for a period of three years or more, but this requirement has not in the case of other covenant reliefs for scientific and medical research prevented successful marketing. Hopefully, the Senators will accept that this relief could be used productively by the Irish Red Cross Society, as we believe it has a mechanism that will enable it, if it wishes to structure an appeal that gets tax relief, to market it in a specific way.

No charity, whether it is Concern, the Irish Red Cross Society or Barnardo's, is going to benefit, from tax relief one way or the other from an impulse donation of £10 into a bucket or collection tray. While I understand the fears of the charity associations, they are overstated. However, if it turns out that I am wrong in this view there is a mechanism open to us with regard to altering the donations which might derive from the national lottery, or indeed, by considering the thresholds or the ceilings that the national lottery and the gaming and lottery legislation puts on prizes that can be allocated.

Turning to sections 153 and 171 — I use the original reference because it was the reference that generated so much angst and hysteria — there was a recommendation from the Beef Tribunal report that in the next Finance Bill auditors would be obliged to report wrong doing, not badly managed companies but wrongdoing, tax evasion. It is the only concrete, specific recommendation of the tribunal — perhaps in that context the most expensive consultancy report the State has ever commissioned — and it was accepted by all sides of the House in August 1994. My predecessor as Minister for Finance, Deputy Bertie Ahern, gave an undertaking that he would introduce it into the next Finance Bill. On foot of that there were consultations with the four accountancy associations which are active in the country. I was not involved at that stage, but officials dealing with the matter considered that a reasonable case was made by the associations to the effect that if this was to be made a reporting requirement for their members, auditors were not the only people to advise companies on taxation affairs and that in all equity it should apply to all people who provide taxation advice — solicitors and lawyers who are tax lawyers, tax advisers and accountants. The officials in my Department and my predecessor accepted this level playing pitch approach in principle.

Work commenced on the drafting of the section. It was not easy, as was self evident. We felt collectively — and I take full responsibility for this — that section 153, as drafted, was constitutionally sound with regard to not interfering with the right to legal advice between a citizen and a solicitor or lawyer. As it turned out, this was not the case. We are constitutionally obliged to take the advice of the Attorney General on this matter, irrespective of what other senior counsel may think; and one eminent senior counsel who is an elected Member from my constituency in the other House held the view that it was constitutional. On reflection, the Attorney General held that it was not constitutional. From that point onwards we had to deal with the question of the lawyers as solicitors.

There were other operational defects in the detail of it following which, when we heard the criticism from many sectors — we have been open to and listening to criticism in the course of the Bill — we removed the problem of defining materiality, because materiality is special and separate to each individual case, and the moment one puts a figure on materiality one defines a level below which tax evasion is acceptable. What might be material to one company making low profits with massive turnover would be far less material to another company making massive profits with a very low turnover. It is not possible, therefore, in crude legislative terms to fix a single figure and expect it to apply equally, with justice, to all cases.

Ultimately, what we did in section 171 was to take the ethics of the various institutions involved, ethics to which their members are obliged to subscribe in respect of how they deal with their clients, and we have transposed those into law. In summary, what will happen is that where tax advisers or auditors or legal advisers providing advice in the normal course of their work find out that a company is not just temporarily off side but has committed an offence that is material, they must in the first instance advise the company that in their view it is a material offence. They are then obliged to advise that it must be rectified with the Revenue Commissioners — it can be rectified over a period of time — and that the company has six months to indicate to the Revenue Commissioners that it intends to rectify it. At the end of the six months if it appears that the company has refused to contact the Revenue Commissioners in the first instance to inform them of what is not a mistake, but fraud, breaking of the law, then in the first instance all advisers must resign from the account and stay off it for a minimum period of three years or until such time as the fraud or offence has been rectified, whichever is the lesser. In addition, the auditors will have to inform the Revenue Commissioners that they are no longer the auditors for that company. This is not especially onerous for the auditors, because under the provisions of the Companies Act, 1990, they are obliged take exactly the same action with regard to the Company Registration Office when they resign as auditors from a company.

On balance, the thrust and the spirit of the Beef Tribunal recommendation is incorporated in law with a degree of flexibility that recognises the complexity that no one tax case is the same as the next, but that general principles should nevertheless apply. We will hopefully never again see, not the odd bit of fiddling that goes on and will probably always go on, but systematic scientifically accountancy designed fraud, applied with a degree of skill and commitment that was mind-boggling and offensive to all of the tax compliant businesses in this country and to those people who as PAYE workers have their tax deducted at source.

The seaside resorts related to a proposal which I am happy to acknowledge was developed by Deputy McCreevy when he was Minister for Tourism and Trade in recognition of a transformation that has taken place in the traditional pattern of Irish tourism. Domestic tourism — having seen the downpour for the last half an hour today, 30 May, Members can see why — which used to go to Kilkee, Tramore and all of the traditional places to many of which we as children went ourselves, could no longer compete in terms of sun, sand and sea with what was available on the Mediterranean coast.

The traditional resorts had declined over time and what was needed was an attempt to try and reinvent the product. I do not think the product will survive on the basis of simply going back to the past alone; it has to be harnessed to a different kind of tourism product that relates to the 1990s and into the next century. Therefore, additional facilities like golfing, horse-riding and other kinds of active, outdoor pursuits would complement good quality accommodation and the services that will come with that.

We do not know how well this scheme will work. There was an argument that it should be confined to a small number of locations on the basis that if there were too many, the effect would be diluted. That argument came from the designated towns system which was the grandparent of this proposal, but it was based on an analysis which said that if too much of an area within a town is designated the impact of the scheme within that town will be diluted. We are not doing that. We have provided, in effect, a traditional seaside resort in every maritime county and two in County Cork, one on either side. Of course, Cork has always regarded itself as being slightly different. Hopefully, it will have a positive effect and will generate the kind of activity that is required.

Other measures were referred to and I will not go into them in great detail. I acknowledge the points made by Senator Henry in regard to the heritage area, and I would like to compliment the officials in the Department of Finance who found ways of addressing the very concerns she expressed in a manner that did not result in the probable abuse of such a provision or in a way that would give scope to widen its application until it would simply be too costly and not produce the desired effect. The tensions in providing a tax relief do not relate to the bona fides of the particular measure but to how can it be designed in such a way that it is not reinterpreted legally and applied in areas where it was never intended to apply in the first instance.

This brings me to a much more difficult and complex piece of legislative design, that is, the whole question of covenants. Covenants go back to the 1920s. They are a very crude instrument. Most people did not realise they were available for children or young adults until the lowering of the age of majority from 21 to 18, so in many cases they did not apply to third level students until very recently. The amount of tax foregone on covenant relief from 1980 to 1982 was of the order of £2 million to £3 million. I am speaking now from memory, but the figures are on the record. It would have been £40 million this year had this full tax year gone through.

We have very poor statistics about who was deriving benefit from covenants. All of the evidence that was available, based on a very small sample survey, suggested that most of this relief was going for third level education for undergraduate students — hence the action that we took in relation to that — but there are some losers. Among the losers will be post-graduate students. If they are working or have any kind of income, they can get tax relief on their fees; but I say unashamedly that there will be some losers because it is not possible to introduce a change in a tax system that does not adversely effect some people.

With the Minister for Education, Deputy Bhreathnach, I am prepared to look at how we move from where we are now over the next couple of years. In response to the expression of very legitimate concerns about students who could not find a place because of the demographic bulge in our system and who now can find an undergraduate place in a private college, we have decided to give tax relief on fees for such colleges, provided they are approved by the Department of Education. Many of the colleges to which I make reference have that approval.

The financing system for third level education, including tax relief, is far from finalised or perfect. This is the first step. For as long as I have this responsibility, I am prepared to respond to any evidence, comments or experiences that Senators come across in as constructive and sympathetic a manner as possible. To demonstrate that this statement is not just political rhetoric, a case was brought to our attention in the course of the Committee Stage in the Lower House where cohabiting couples in a long standing relationship in middle and relatively low income situations, with perhaps children from that relationship, had structured their finances with the aid of covenants and would now find themselves devastated as a consequence of changes in the legislation. We have brought in a hardship clause in respect of that.

The law must be firm but also compassionate. Therefore, we will continue to examine this measure as time goes on, but any amendments cannot be retrospective. If there are mistakes in legisation, they will be corrected for the future. However, I am not giving a commitment to retrospective correction, rather I will look at how it might be done in the future.

I wish to refer briefly to the economics of this Bill, because Senator O'Kennedy made some comments about public expenditure, as did Senator Roche in my absence and Senator Honan in my presence. Figures have been bandied about. I want to address those comments.

Senator Daly asked how the £1,000 relief will function and what kind of effect it will have. I can get the figures for him, but from memory, of something like 220,000 vehicles in the country, over 50,000 are over ten years old. A European Union directive, to which Ireland will have to subscribe, will bring into effect compulsory motor vehicle testing in this country within a number of years. This in part is a measure to facilitate the removal of unsafe vehicles off our roads, hopefully with the consequential effect of improving safety and in some cases environmental pollution, because by definition cars of that age tend to have a poorer fuel consumption and a poorer fuel emission system than newer cars.

SIMI, whose proposal this is, have had detailed discussions and have worked out in detail with the Revenue Commissioners a system of administering this. The person who buys the car will get the cheque. In other words, the individual customer will get the rebate, not the dealer. It will not be buried in the price of the car so that the cost of a new car will go up by a certain amount. We were taking it in good faith from SIMI that it can do no harm and can possibly do a lot of good. It seems to us on the basis of the figures we have done that this is a win-win proposition. I do not come across many of those and I will be surprised if this one turns out to be a win-win situation, but we are prepared to test it for 18 months. If it works, we all win. However, if it does not work, it will not be renewed.

Figures in relation to the economy and increases in public expenditure were mentioned by Senator Honan and others. With regard to public spending, the Government remains firmly committed to the fiscal policy parameters set out in its policy programme,A Government of Renewal. These envisage strict adherence to Maastricht's fiscal convergence criteria, which are that the annual general Government deficit should be no more than 3 per cent of GDP and that the gross debt to GDP ratio continues to decline satisfactorily towards 60 per cent.

In that context, we undertook to maintain the exchequer borrowing requirement prudently below the 3 per cent of GNP and to restrict the growth of current supply spending to a maximum of 6 per cent in nominal terms in 1995 and to an average annual rate of 2 per cent in real terms over the following two years of the programme.

Many figures were bandied about regarding the actual amount as against the 6 per cent figure; for example, I heard for the first time this evening that it was as high as 11 per cent. I wish to put on record the figures over which I stand. The undertaking to keep our borrowing within the figure of 6 per cent in nominal terms in 1995 was fully accommodated in the budget which I introduced on 8 February last. The 1995 EBR is set at 2.4 per cent of GNP. The general Government aggregates are well within the Maastricht limits and the gross current supply service spending provision made in the 1995 budget represented an increase of 5.8 per cent over the 1994 outturn.

It is not possible at this early stage to make a firm judgment on the prospective outturn for 1995 or the fiscal outlook for 1996 and 1997. However, the budgetary indicators over the year to date are broadly supportive of the budget projections. At the end of month five, we are on line with our projections and at this point we have no reason to consider that we will be off line.

The additional allocation of £140 million for equal treatment, which derived from the decision of the court after the budget was announced, and some other minor expenditure changes have been reflected in the recently published Revised Estimates for the Public Service. The effect of these changes is that the increase in gross non-capital supply services expenditure in 1995 is now 6.9 per cent as against 5.8 per cent provided for in the budget. If the £140 million is excluded from the figures, the increase in gross current spending is 5.6 per cent, which is below the increase on budget day and well within the Government's 6 per cent limit this year.

I will not bore the House with detailed figures. If they are accurate, I do not mind people who talk down the economy and say that public expenditure is out of control, with a resultant loss in confidence in the economy — as Senator O'Kennedy suggested. It is fair criticism if such a position pertained, but in this instance it is inaccurate. We are a small open economy, attempting to attract investment to the country and all our fiscal indicators, by external measurement, are good. For example, since I became Minister for Finance, all the international credit rating agencies have improved the fiscal credit rating of this economy. If public expenditure was out of control, it would be reasonable to presume that the agencies would have maintained the level or reduced it.

There are many areas about which we could engage in tough political debate. However, we should not identify areas where none of us will win and the nation will lose. Nobody would aim to damage the credit rating of this country with false figures. If anybody wishes to challenge these figures, suggest they are falsely based or that there are assumptions contained in them which are not credible and which do not stand up, we can discuss and clarify the situation.

Senator O'Kennedy suggested we were adrift from the Maastricht criteria — I presume he was speaking on behalf of Fianna Fáil although he is not the party's spokesperson on Finance in the House — but Ireland and Luxembourg, by virtue of the Commission's evaluation, were the only two countries to reach the Commission's criteria. Senator O'Kennedy's point merely knocks us in a manner in which we do not need.

I thank Senators for their broad support for many of the Bill's provisions and I look forward to a productive Committee Stage debate.

Question put.
The Seanad divided: Tá, 26; Níl, 17.

  • Belton, Louis J.
  • Burke, Paddy.
  • Calnan, Michael.
  • Cashin, Bill.
  • Cosgrave, Liam.
  • Cotter, Bill.
  • Cregan, Denis (Dino).
  • D'Arcy, Michael.
  • Doyle, Joe.
  • Enright, Thomas W.
  • Farrell, Willie.
  • Gallagher, Ann.
  • Henry, Mary.
  • Kelly, Mary.
  • McDonagh, Jarlath.
  • Magner, Pat.
  • Maloney, Sean.
  • Manning, Maurice.
  • Neville, Daniel.
  • Norris, David.
  • Quinn, Feargal.
  • Reynolds, Gerry.
  • Ross, Shane P.N.
  • Sherlock, Joe.
  • Townsend, Jim.
  • Wall, Jack.

Níl

  • Bohan, Eddie.
  • Byrne, Seán.
  • Cassidy, Donie.
  • Daly, Brendan.
  • Finneran, Michael.
  • Fitzgerald, Tom.
  • Honan, Cathy.
  • Kelleher, Billy.
  • Kiely, Dan.
  • Kiely, Rory.
  • McGennis, Marian.
  • McGowan, Paddy.
  • Mullooly, Brian.
  • O'Brien, Francis.
  • O'Kennedy, Michael.
  • Ormonde, Ann.
  • Wright, G.V.
Tellers: Tá, Senators Cosgrave and Magner; Níl, Senators Mullooly and Fitzgerald.
Question declared carried.

An Leas-Chathaoirleach

When is it proposed to take Committee Stage?

Tomorrow at 10.30 a.m.

Committee Stage ordered for Wednesday, 31 May 1995.

An Leas-Chathaoirleach

When is it proposed to sit again?

Tomorrow at 10.30 a.m.