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Seanad Éireann debate -
Thursday, 26 Mar 1998

Vol. 154 No. 17

Finance Bill, 1998 [ Certified Money Bill ] : Committee and Remaining Stages.

Sections 1 and 2 agreed to.
NEW SECTION.

I move recommendation No. 1:

In page 12, before section 3, to insert the following new section:

"3.—Section 15(2) of the Principal Act is hereby amended by the insertion of the following:

‘or

(c) in a case where such individual is a widowed person who has not remarried before the commencement of the year and a qualifying child is resident with him or her for the whole or part of the year, at the rates specified in Part 2 of that Table. A qualifying child shall have the same definition as in section 462(1)(a).'.".

I move this recommendation to speak to the point which is in the amendment but also to allow me some latitude to discuss the point which would have been included in all the amendments tabled in the Lower House by my colleague, Deputy Noonan, and, indeed, on Report Stage by my late colleague, Hugh Coveney. There is an irony that the first amendment Hugh tabled on Report Stage of this Bill dealt with the treatment of widowed persons with children. I do not know what we read from that, but it certainly gave me goose bumps last night to find, when I checked over what Hugh had been saying in Dáil on Committee and Report Stages, that this particular amendment was his first amendment on Report Stage. I am obliged to emphasise strongly to the Minister how we feel in relation to this particular point.

I read what the Minister said in the Dáil in reply so he need not go over that again if he does not want to do so. He may even juggle the words around and make it look different. I know the Minister has a particular interest in matters relating to the tax treatment of widowed parents one way or another, and I appreciate that. I know he increased the special allowance from £1,500 to £5,000 and increased the tapering from three to five years. I appreciate what he has done so I do not need to be told that again because there are many recommendations to get through. Therefore, I ask him to stick to giving the real reasons for not conceding the point I am making in the recommendation, which proposes that the married double tax bands be applied to widows and widowers with dependent children.

There is logic in the Minister's concern that if what I am requesting is extended to widowed parents it would have to be extended to the various categories of lone parents, which would result in a much larger financial consideration. I concede that point. However, in the first years of sudden widowhood, widows or widowers incur virtually the same expenses as couples in rearing children and maintaining a household. I ask that the Minister give consideration to the amendment which encompasses the point made by Deputy Noonan and the late Deputy Coveney, namely, that my party would have preferred an increase in tax bands and allowances as a way of putting more money back into people's pockets. Widows, widowers and other categories of lone parents would obtain greater benefits as a result.

I have chosen to table this recommendation on its merits rather than tabling three or four to the same principle. If the Minister could have conceded the point in respect of widening the bands and increasing allowances, widows and widowers would retain more money in their pockets than they will from the 2 per cent reduction in the top and standard rates of tax. Over 40 per cent of widows and widowers pay tax at the top rate. As stated on Second Stage, the budget and the Finance Bill have increased the number of people paying tax at the top rate by 20,000. Many of the widows and widowers about whom I am concerned will be taxed at the top rate, albeit paying tax at a rate of 46 per cent instead of 48 per cent, which is a welcome development. While it is politically easier to sell a reduction in rate to members of the public, it is much harder to convince them through the media that they will have more money in their pockets as a result of the bands being extended and allowances increased.

In the future, perhaps, we will look to a marriage of reduction of nominal rates and extended bands and allowances to solve this problem. I hope the Minister will take that path during his period in office. We do not know how long he will remain in office because of the many variables involved in the political equation. However, in view of his favourable disposition in respect of the treatment of widows and widowers, particularly those with dependent children, I wish him well. I ask him to take the additional step proposed in the recommendation and extend the double tax band to widows and widowers, particularly those recently or suddenly widowed.

I support the recommendation and I understand the reasons for it. As a local and national representative, I have met widowed people who informed me about the hardships they experience, the trauma of widowhood, the sudden decrease in income in the early years of widowhood, their responsibility to their dependants, the burdens, financial and personal, they shoulder and the fact that they are suddenly placed in a single capacity and transferred to a single tax rate. It is appropriate that the double tax bands should be applied to widows and widowers, particularly those with dependent children and substantial financial responsibilities, for a lengthy period.

The Minister will state it is an anomaly that widowed people do not retain the entitlements they received under the tax code as part of a married couple and are effectively treated as single. However, that is not the situation because, as widows, they retain the responsibilities they had when married. Due to the trauma these people experience in their personal lives — their income decreases while financial burdens remain the same — we are not interfering with the type of social policy we want the Finance Bill to put in place. It must be remembered that the Finance Bill should be oriented towards customers, citizens and people. If people have a real grievance, it should not be beyond our ability to ameliorate it. That is what the recommendation seeks to achieve. I fully support it and I ask that the Minister reconsider his position.

As Senator Avril Doyle pointed out, I gave this matter considerable attention before the budget, particularly with regard to what action to take in respect of the tax treatment of widows. I considered a number of options in that regard. I must declare a personal interest in this matter because my late mother was widowed at a young age and she had to raise three boys of whom, at four and a half years old, I was the eldest. It has always been my intention that if I was ever in a position to do something substantial for widows I would so do. I stated that in the Dáil and on Committee Stage.

I gave considerable consideration to what I would do in respect of tax allowances for widows. I pondered the concession recommended by Senator Doyle. However, as she pointed out, and as I stated on Committee Stage, making that concession would inevitably lead to questions regarding what I intended to do about lone parents. Before the budget, I decided to increase the bereavement allowance from £1,500 to £5,000 and taper its payment. That was a substantial concession.

To double the tax bands, as proposed in the recommendation, would lead to a small cost in respect of widows. If it was solely applied to those with dependent children, the cost would be £2 million in 1998 and £3.3 million in a full year. However, pressure would be exerted to extend this to lone parents the cost of which would be £9.2 million. Inevitably, pressure would then be exerted to extend these people's entitlements to reliefs on mortgage interest, etc., which would result in considerable costs. I decided that, in order to avoid substantial costs, the best action to take was to increase the bereavement allowance.

I am willing to consider this matter before next year's budget. If I could be satisfied that I could ringfence an extension of the double tax band to widows, I would do so. However, I gave this matter great consideration because many options were put to me before the budget. In the end I decided to follow the route I had chosen for the reasons outlined. I am not in a position to accept the recommendation at present.

There is an inevitability about the way this debate is proceeding. Because of the poignancy of the situation, I will repeat what my colleague, the late Deputy Coveney, said on this point in response to the Minister on 10 March in the Dáil four days before he was suddenly and tragically killed. I quote:

The Minister has given eloquent testimony of where his heart lies and I appreciate that. There are similarities between widowed and lone parents but the amendment was to cater for widowed persons. There are additional traumatic effects of widowhood — having one's life dashed, sometimes suddenly, and the fact that the surviving spouse might not have been the main breadwinner — a scenario which does not apply to lone parents.

It is not only in cases of sudden death that a spouse, who is not the main breadwinner, is left to cater for dependent children or try to run a business of which they may have no knowledge. There is also the fact that married couples have often entered into financial commitments which would be met easily if the two of them were working or if the breadwinner was able to meet them in any event. However, if a person is widowed suddenly the breadwinner may be gone and financial commitments cannot be met. As the Minister will be aware, one cannot always immediately extract oneself from financial commitments.

There may be circumstances which apply to widowhood, especially sudden widowhood, which are distinct from those of lone parents. Lone parents will have a financial structure to meet their circumstances which will have evolved from the time of becoming a parent — either they will be earning and looking after themselves or the State will be taking care of them. A widow can suddenly find herself without any livelihood or means to support dependants or perhaps the means to keep a business going and to meet commitments entered into by her late spouse. Different circumstances apply.

I understand the Minister's point and I recognise what he has done. However, we do not feel it is enough for the circumstances of widowhood, particularly sudden widowhood. Although I cannot do so as eloquently as my late colleague Hugh Coveney, I urge the Minister to reconsider the considered points he made and which I support.

Recommendation, by leave, withdrawn.
SECTION 3.

Recommendations Nos. 2 and 3 are related and may be taken together. Is that agreed? Agreed.

I move recommendation No. 2:

In page 12, line 28, column (1), to delete "£10,000" and substitute "£10,400".

I propose that the increase in the exemption rate would be raised from £100 to £500 for a single taxpayer moving into the higher tax band. An increase of £100 is a miserly sum. The Minister's predecessor, Deputy Quinn, increased the allowance by £500. The Minister has reduced the tax rates by 2 per cent but he has allowed more taxpayers to move into the upper rate band and, as a result, with rising inflation, many less well off people will fare worse. It is a sleight of hand to reduce the top rate from 48 to 46 per cent and to increase the threshold at which a person reaches that band by a miserly £100. I suggest that it be increased by £500, the increase given by the Minister's predecessor last year. We should be widening the tax bands so that taxpayers move into them at a higher level.

The Minister should have done more than he has, particularly given his statements about doing a good deal for the taxpayers by reducing tax levels. There is little sense in reducing the percentage rate unless the bands are widened to remove people from the higher rate. That is the thrust of this recommendation and such an approach would be of great benefit to a large number of people on low pay.

I support Senator Costello. No one is opposed to the reduction of rates, but it is a matter of the priority we give to what would best suit an improvement in disposable income for the lower and middle income as distinct from the higher income earners. Fine Gael, while welcoming the reduction in rates, would give greater priority to widening the bands to keep more people out of the top rate for longer. If we widened bands and increased personal allowances and exemption limits more people would pay at the standard rate of 24 per cent for longer. The Minister has increased by up to 20,000 the numbers who will pay the top rate, albeit at 46 per cent.

It is much sexier to describe, politically, reductions from 48 to 46 per cent and from 26 to 24 per cent to the taxpayers. They think it will put more money in their pockets. However, it is time they woke up to the fact that widening bands and increasing exemption limits and personal allowances will mean more disposable income than a nominal reduction in rates. We welcome the reduction in rates but it will not put more money in the pockets of the middle and lower income earners and that must be our priority. That is why I support these recommendations and why we pursued similar recommendations in the Lower House.

The Minister waxed eloquently in his reply on Second Stage and the odd expletive he uttered was omitted from the record. The Editor of Debates does a great job polishing us up when we lose the run of ourselves. I welcomed the Minister's contribution and I did not disagree with the thrust of it. However, it is a matter of priority. If there is a limited amount of money to return to the taxpayers, what is the best way to do that so that they benefit most? I want to see the lower and middle income groups have more disposable income and fewer people paying tax at the top rate. I doubt that the Minister would disagree with that. However, he has ensured that 20,000 more people will pay tax at the top rate. If he had widened the band not only would fewer pay the top rate but those who pay it would have to have a higher income. I support Senator Costello's recommendations. My criticism centres on the prioritisation of how the money is spent.

Section 3 proposes to extend the standard rate band by £100 for single persons and £200 for married couples. Coupled with this is a two point reduction in both the standard rate of income tax from 26 to 24 per cent and the higher rate from 48 to 46 per cent.

This is the same as the Minister's reply to the Dáil.

These changes are part of an overall personal tax and employees' PRSI package which will cost over £516 million in a full year. The Senator's recommendations would increase the standard rate band by a further £400 for a single person and £800 for a married couple at an additional cost of £53 million in a full year. The cost of the personal tax changes already provided for in the Bill, which represents a significant first step in meeting the commitments set out in "An Action Programme for the Millennium", is the most the budgetary situation will allow for this year. In the circumstances, I am not in a position to accept the recommendations.

"An Action Plan for the Millennium" envisages, among other things, a reduction in tax rates. The standard rate will fall to 20 per cent and the higher rate to 42 per cent over five years. If circumstances permit, the top rate will drop further to 40 per cent. In addition, personal allowances will be increased and the standard rate band will be widened over the five year period of the programme to ensure that 80 per cent of taxpayers do not pay tax at the higher rate. The budget proposals contained in the Finance Bill are a significant first step in giving effect to that programme.

It has been said that this budget inappropriately focused on cutting rates rather than bands or allowances and ultimately favoured the rich. As I said in the Dáil, the 2 per cent cut in both the top and standard rates of tax cannot be characterised as a sop to the rich. Single people on £14,000 per annum are on the top rate and married couples earning £27,000 and over are also on the top rate. These people are not rich by any stretch of the imagination. There is a genuine wish on all sides to seek a greater equity in the tax system and a need to ensure all taxpayers pay a fair amount of tax based on their level of income.

Tax policy is a matter for political choice. The people ultimately decide through the ballot box how they will be taxed. The Government has a mandate for the tax proposals in the budget which it received from the electorate last June. I can hardly be faulted for implementing what was promised in the election and what the people voted for. I am glad Senator Avril Doyle does not seem to have been as infected by her spell in Government with the Labour Party and Democratic Left as some of her colleagues in the other House. I pointed out in the Dáil that I did not think my friend, the late Hugh Coveney, had been infected at all but others have been badly infected.

"Improved" is the word.

They are down there and I am here. What does that say?

On Committee Stage of the Finance Bill in the other House I produced a Fine Gael document which gave a commitment that the top rate of tax would go down to 41 or 42 per cent.

As part of a package, including the widening of bands and an increase in allowances. It is a question of priority and balance.

We also said the aim of the programme is to ensure——

I will quote what the Minister said about nursing homes shortly.

——that 80 per cent of taxpayers will pay tax at the standard rate. We discussed this matter on Second Stage and I waxed eloquently about this on Committee and Report Stages in the other House, so I do not propose to go over that ground again. One of the reasons more people pay the top rate is that there is greater growth in the economy and peoples' incomes are higher. As I pointed out on Second Stage, the average tax take from the average taxpayer has been reduced substantially as a result of what I have done in the budget.

Although Senator Doyle made a good speech in this regard, I suspect her heart is not as much in this matter as Deputy Noonan's. I pointed out on Committee Stage in the other House that Deputies from Limerick have a habit of changing their views over time. Deputy Noonan seems to have been so affected by his time in Government with Deputies Rabbitte, Quinn and Spring that he had taken this on board hook, line and sinker, but I have not. I believe Deputy Doyle, or the constituents she represents quite well, have not taken this on board.

I am no longer Deputy Doyle, which is probably as a result of my views.

I am sure that is only a temporary aberration on the part of the people of Wexford and will be reversed at the next opportunity. We discussed this matter before and since the budget, much time has been spent discussing tax rates versus bands and allowances. As I said on Second Stage, I do not have much objection to those who have argued for that for some time. However, I do not subscribe to that particular political philosophy.

I know the Minister will not concede on this issue so there is no point wasting our energy on the matter. He said this is the most the budget will allow this year and that he does not subscribe to the philosophy of doing this by widening the bands. I am not sure where he stands. Is he in favour of a package which will reduce the tax rate and widen the bands, or is he simply in favour of a simplistic approach of reducing the tax rate? It is a question of priority, as Senator Doyle said. Last year the budget allowed for £500, while this year it allows for £100 only. We must remember that last year there was not nearly as much money in the kitty. It is a question of how we spend that money. Our philosophy is to extend the allowances and widen the bands rather than a simplistic cut, which is very much Progressive Democrat rather than Fianna Fáil policy.

The Senator was not here for my concluding speech on Second Stage.

I listened to some of it.

He may have listened to it on the monitor and he probably heard me on Committee and Report Stages in the other House. I refer the Senator to the many speeches I made over the years in the House on taxation. He should be in no doubt as to where I stand on this issue. I believe in a combination of allowances, bands and tax rates. I am convinced that tying nominal rates into tax is a disincentive and have always been of that view. This should not be a surprise to anybody.

We put this clearly before the people in the Fianna Fáil manifesto. As I said on Second Stage, opinion polls conducted during the general election campaign showed that although there was a hostile reception to the Fianna Fáil tax proposals, the people were at all stages more in favour of the Fianna Fáil proposals than those of the other parties. The general election was held and I have implemented what the people decided. I have no problem debating this issue with Senator Costello, who comes from a somewhat different political philosophy than I. However, this was democratically decided by the people and I implemented that decision in the budget. During the period when Deputy Quinn was Minister for Finance he reduced tax rates by 1 per cent only despite the growth in the economy.

He widened the bands.

I stated clearly what my philosophy is in this regard. Some people have described me as ideological in my approach. I do not mind being tagged as ideological on this matter, but my views on taxation are as well known as my views on many other issues in Irish life. I do not subscribe to this political dogma which has got recent vintage, particularly over the past five years, that there is one way only to deal with taxation and that is allowances and bands. I stated clearly, and have done so in the past, it is a combination of the three things. I fundamentally believe that high nominal rates of taxation are bad for the economy.

I accept Senator Costello's party hankers for high rates of taxation. Before I became a Member and in the intervening three years between 1973 to 1977, the Labour-Fine Gael Coalition had a top rate of tax at 77 per cent. In the period 1982 to 1987, they had a top rate of 62 per cent for most of the time which was reduced to 58 per cent. I accept the Senator's party, whatever about Deputy Doyle's, likes high rates of taxation, but I do not.

Question, "That the figure proposed to be deleted stand", put and declared carried.
Recommendation declared lost.

I move recommendation No. 3:

In page 12, line 33, column (1), to delete "£20,000" and substitute "£20,800".

Question, "That the figure proposed to be deleted stand", put and declared carried.
Recommendation declared lost.
Section 3 agreed to.
NEW SECTION.

An Leas-Chathaoirleach

Recommendation No. 6 is related to recommendation No. 4 and both may be discussed together. Is that agreed? Agreed.

I move recommendation No. 4:

In page 12, before section 4, to insert the following new section:

4. —Section 467(1) of the Principal Act is hereby amended by the insertion after ‘spouse' in both places where it occurs of ‘or other relative prescribed in that behalf by regulations made by the Minister'."

This recommendation has been tabled because of a recommendation by the carer's association, by whom the Minister and every party will have been lobbied. It is a reasonable recommendation to extend the carer's allowance from the immediate spouse to other close relatives, and the arguments are persuasive. The Minister has already said he did not have any more money in the budget to extend bands and allowances. However, this is an area in which we could save money by extending the carer's allowance.

We have a huge ageing population and projections show that as we move into the next millennium the age profile will grow considerably and disproportionately in respect of the working population and pensioners, the non-working population. Private accommodation costs an enormous amount of money. There is continuous pressure on hospital accommodation and we all know of the waiting lists for public wards with which no Minister for Health has been able to cope adequately. There is a difference between home care and institutional care.

Every argument — the personal, the humane, the financial and the pragmatic — as well as all projections for the future, favour us doing something more substantial with the carer's allowance than is being done at present. I ask the Minister to accept the recommendation with a view to extending the remit of the carer's allowance to close relatives and others prescribed from time to time by the Minister, which is in line with the suggestion of the carers' association, so as to provide better care for the elderly and those who are disabled and unable to care for themselves.

I support the argument made by Senator Costello and I have tabled a recommendation similar to his. One of the greatest social issues facing this country is the care of incapacitated people, especially the elderly and those who are no longer physically and mentally able to care for themselves. My recommendation requests the Minister to extend the incapacitated persons' allowance to the parents, siblings or children of the incapacitated person involved or of the person's spouse.

The cost of State care, even for geriatrics which does not involve elaborate nursing care, is over £500 per week. This is just to care for an elderly, bedridden and possibly incontinent person. The best place for anyone to be cared for is in their own home by their close relatives. With a little help from a tax incentive, many more elderly people could be cared for in the home, as could many severely incapacitated young people. Brothers and sisters could be cared for. Where a couple had reared their children who had then left home and either spouse had a severely incapacitated and possibly elderly brother or sister, they could be cared for in the home at a fraction of the cost to the State if the Minister extended the allowance. Otherwise, there would be a great cost to the State and the taxpayer if that person were put into institutional care.

The logic in these recommendations is overwhelming, not to mention the real reason for going this road — that the right people to care for family members are their nearest and dearest where practicable. That could happen in many cases if a little help was given to the family doing the caring. The logic and social reasons behind both recommendations are incontrovertible. However, I am aware that the weight given to recommendations of this House on the Finance Bill are such that we are wasting our sweet breath on the desert air and possibly the Minister's time, as he has much on his plate. However, a serious point is being made in these recommendations. Would that the Minister could take them on board because I do not believe he disagrees with the principles behind what either I or Senator Costello have said. I urge the Minister to accept our recommendations.

I would not like Senator Doyle or anyone else to think I would not take account of what was said in this House. I have picked up on many suggestions made in the House when listening to the debate on Finance Bills and I have tried to implement those I believe are good. When I was in Opposition I gave commitments to certain areas, such as cross-Border workers and charities, which I honoured, so I keep my word. I will take on board any good ideas from Senator Doyle or others. I have a reputation to live up to in that regard; I take on board what people say.

These recommendations propose that the allowance granted to an incapacitated person or their spouse in respect of a person employed to take care of the incapacitated person be extended so as to be available to the incapacitated person's parents, siblings or children. I have a great deal of sympathy for the recommendations tabled by the Senators and there is a commitment in the Government's programme to provide tax relief for those caring for the elderly and incapacitated in the home. Arising from this commitment, I announced in the budget that I have set up an interdepartmental working group to examine for the next budget the question of tax reliefs for those caring for family members in the home. As part of its work, the group has arranged a meeting with the carers' association tomorrow afternoon.

I want to come up with a targeted relief at a reasonable cost which will complement health and social welfare policy measures in this area. It is clear an amount of groundwork must be done before it can be decided what form of tax allowance for carers is most appropriate. The tax system has a number of special personal income tax allowances related to the care of incapacitated or dependent individuals; the dependent relative allowance, medical expenses relief, covenant relief and a carers' allowance under section 467 referred to in the recommendations. These provisions are very varied and have been developed in an ad hoc way at various times to meet different needs. I want to fully examine these reliefs and their interaction and I hope to bring forward for the next budget fully considered proposals relating to care in the community. In the meantime, I cannot accept the recommendations tabled by the Senators.

I listened carefully to the Minister and I wish to elaborate on the principle behind the recommendations, to which there are two facets. One is to encourage families through the tax system to take care of their incapacitated relatives in their own home. The second point is tax relief in private nursing care, as distinct from letting the State carry the full burden of over £500 per week for the care of an incapacitated person.

On that latter point, it goes without saying that those who can afford to care for their own relatives should be financially encouraged to care for them in properly regulated private nursing care if they cannot care for them adequately in the home. Couples paying over £500 per week for proper private nursing care for their elderly mother or father in an advanced state of incapacitation should be recognised in the tax code. My recommendation made specific recommendations in that area and I urge the Minister to examine that aspect as well as recognising the need for extending the concept of a carer in the home.

Recommendation put and declared lost.
Sections 4 and 5 agreed to.
NEW SECTIONS.

An Leas-Chathaoirleach

There is a correction to recommendation No. 5. The single quotes and double quotes in this amendment should be interchanged.

I move recommendation No. 5:

In page 14, before section 6, to insert the following new section:

"6.—The Principal Act is hereby amended in Chapter 1 of Part 15 by the insertion of a new section 467A as follows:

‘467 A.—(1) In this section—

‘appropriate percentage in relation to a year of assessment' means a percentage equal to the standard rate of tax for that year;

‘qualifying expenses in relation to an individual' means the amount paid by the individual , or if the individual is a married person the individual's spouse, for the care in a private nursing home of the parents of the individual or the individual's spouse.

‘private nursing home' means any nursing home or other institution approved of for the purposes of this section by the Minister for Finance after consultation with the Minster for Health and Children.

(2) Where an individual for a year of assessment proves that in the year of assessment—

(a) the individual, or

(b) if the individual is a married person assessed to tax in accordance with section 1017 of the Taxes Consolidation Act, 1997, the individual's spouse has made a payment for a specified service, then, the income tax to be charged on the individual if the individual made the payment, or on the individual's spouse, if the individual's spouse made the payment, for the year of assessment, shall be reduced by an amount which is the lesser of—

(i) an amount equal to the appropriate percentage of the full amount of the payment, or

(ii) an amount not to exceed £2,880, and

(iii) the amount which reduces that income tax to nil.'.

This recommendation is related to families who are in a position where it is a struggle to pay for private nursing care for elderly relatives. I have extended the recommendation to include an amount not greater than £2,880 in the year of relief. That would cover between £10,000 and £12,000 worth of nursing care in a year. We need not be pedantic about figures, it is the principle which I want the Minister to accept.

The greatest social problem facing families who are financially independent is financing the care of their elderly family members. We should do everything possible in the tax code to encourage families to make private arrangements for nursing care of their elderly parents. The alternative for those who are struggling each week to find the money to keep an elderly parent in a nursing home is to revert back to the State to look after that parent at cost of £560 per week. To recognise in the tax code, through an allowance on the payment made, would be a cost effective way of ensuring that the limited number of State beds for geriatric care are not taken up by the elderly relatives of people who, with a little help, could have them looked after in private nursing care. The logic of this is incontrovertible.

Many families would like to have their elderly parents looked after in private nursing care and not to load their problem onto the State, but if financially they cannot, they have no option but to let the State take care of their elderly parents. If we could recognise what PAYE workers are doing, and the net cost to the family income after tax of paying for nursing home care with an allowance such as that suggested here, the returns to Exchequer would be tenfold.

Given the demographics of this country and the ageing population, we will not be able to keep apace with provision of State beds for geriatric care in the years to come. We show no inclination to put capital into beds for geriatric care at present.

There has been an explosion of nursing home construction. Couples who have worked hard all their lives and who are at the most expensive stage of rearing children, putting them through third level education, and who want to pay for private nursing care out of after-tax income for their elderly parents should be recognised through a dependant's allowance and income tax code.

Given the incontrovertible logic of this for the couples concerned and the Exchequer, because of the money it will save in the long term on capital for geriatric care, I ask the Minister to accede to the principle of the recommendation.

I support the recommendation. It is part of a package seeking to provide a better deal for those people who are incapacitated using the tax code to assist in that process. The Minister seems to be ruling out any extension of the existing provisions but it is important there is a wider system than leaving people to State care and institutions when the individual is unable to take care of himself and the family cannot either. There should be an attractive package allowing a relative, as well as a spouse, to receive a carer's allowance towards the cost of taking care of a close relative who is incapacitated in the home.

We should use the tax code to encourage assistance for home care and so that someone who is incapacitated is able to afford private nursing. We have an ageing population and many people are incapacitated. It presently costs a great deal for State care, care which is not necessarily the best, especially when the close relatives of such people are anxious to care for an ageing parent or close relative.

We should be facilitating these people. The Minister should have a plan in relation to the tax code in this area. He has plenty of plans for the business and industry area, but he is wanting in respect of the consumer of services. I ask the Minister again to take on board what we have to say in next year's budget, if he is in that position.

The comments made by both Senators relate as much to the previous recommendations as to this one. This recommendation is covered by the present tax Acts.

A general point was made regarding the problems which will arise in nursing care. I am on the record as recognising these facts and I am concerned about them. That is why I introduced, as a first step, a tax break for the construction or refurbishment of nursing homes, provided those nursing homes are approved under the relevant Act and approved by the relevant authorities. That was my contribution this year to addressing the long term problem.

I was asked in this House and in the Dáil where I got the idea to cut capital gains tax. Many people had lobbied me about that. I took umbrage at the suggestion that the Minister for Finance cannot come up with his own ideas. If anyone had looked at what I said about capital gains tax over many years they would not have been the least bit surprised that I reduced it. The idea I have in the Bill regarding tax breaks for the construction of nursing homes was my own idea.

As Senators Doyle and Costello mentioned, this is a problem which must be addressed. The Exchequer will not be in a position to address the demographic problem of an ageing population from its own resources. We are lucky that the problem here is not as bad as the rest of Europe but over time it will become similar.

It will become as bad.

It will. We should make provision for it now. If we did not have carers looking after people in their homes the State would not be able to provide the resources to make good the shortfall. The tax code should encourage people to look after others. There has been a total change in society over recent years. I grew up at a time when one member of the family took on the responsibility of looking after elderly parents. Usually it was a daughter.

Her sacrifice was never recognised by the State.

Society has changed, for understandable reasons. I recognise the financial burden on people. This is why I am disposed to looking at this matter in its entirety. I hope to be in a position to implement targeted and focused relief before next year's budget.

One can receive tax relief under the existing code for this type of expense. Section 469 of the Taxes Consolidation Act, 1997, provides tax relief for health expenses. The cost of maintenance in a nursing home approved by the Department of Health and Children is an allowable health expense for this purpose. It is possible under existing tax law for an individual to obtain tax relief in two ways in respect of his or her contribution to the maintenance of a parent or parent-in-law in an approved nursing home. First, the individual may seek to have a parent or parent-in-law accepted as a dependant relative for tax purposes. In that event the individual may claim tax relief on the cost incurred by him or her in maintaining the dependant relative in an approved nursing home.

Second, where an individual is unable to claim the dependant relative allowance in respect of a parent or parent-in-law — for example, where the income of the relative is too high — the individual may effect a covenant in favour of his or her parent or parent-in-law in an amount which would cover the cost of maintenance in a nursing home. The individual may obtain tax relief on the amount so covenanted.

As regards the parent or parent-in-law who receives the covenant, he or she may offset the cost of maintenance in an approved nursing home against his or her income, including income from the covenant. As existing law adequately covers the situation that Senator Doyle seeks to address, I am not prepared to accept the recommendation. However, her comments will be taken on board and I hope to be in position to make further changes in next year's Finance Act.

Recommendation put and declared lost.
Sections 6 to 14, inclusive, agreed to.
NEW SECTION

I move recommendation No. 6:

In page 14, before section 6, to insert the following new section:

"6.—Subsection (1)(a) of section 467 of the Principal Act is hereby amended—

(a) by the substitution in subparagraph (ii) of ‘or' for ‘and',

(b) by the insertion of the following after subparagraph (ii):

‘(iii) that one of the individual's parents, children or siblings or one of the parents, children or siblings of the individual's spouse was throughout that year totally incapacitated by physical or mental infirmity,', and

(c) by the substitution, in paragraph (b) of subsection (1), of ‘(being the individual, the individual's spouse or any of their parents, siblings or children)' for ‘(being the individual or the individual's spouse)'.".

An Leas-Chathaoirleach

This recommendation has already been discussed.

Recommendation put and declared lost.
SECTION 15.

I move recommendation No. 7:

In page 25, subsection (2), line 41, after "122A" to insert "of the Principal Act".

This is a drafting recommendation necessary to correct a drafting ambiguity. There is some confusion that section 122A of the Principal Act as inserted by the section shall apply.

Subsection (1) of section 15 inserts a new section 122A into the Taxes Consolidation Act — the Principal Act — to deal with notional loans arising under certain employee share incentive schemes. Subsection (2) of section 15, to which the recommendation relates, contains commencement provisions for the new section 122A. The Senator's concern appears to be to copperfasten that the section 122A referred to in that subsection is a new section 122A of the Principal Act. However, the full reference to section 122A in subsection (2) of section 15 is section 122A as inserted by this section — section 15. Section 122A inserted by section 15 is a new section 122A of the Principal Act. Therefore, there can be no doubt as to which section 122A is being referred to in subsection (2) of section 15. Accordingly, the recommendation is unnecessary and cannot be accepted.

Recommendation, by leave, withdrawn.
Section 15 agreed to.
NEW SECTION

I move recommendation No. 8:

In page 26, before section 16, but in Chapter 2, to insert the following new section:

"16. —Section 905(2)(b) of the Principal Act is hereby repealed.".

This recommendation has become more pertinent as a result of events in the banking system. It refers to the need for the Revenue Commissioners to have the power to require anyone with relevant information to supply them with that information. This is what is stated in section 905 of the Principal Act. However, section 905(2)(b) states that these powers do not apply in the case of banks. Instead, under sections 907 and 908, they allow limited bank inspections based on applications to the appeal commissioners and the High Court. This recommendation would make that section redundant and, if necessary, it should be repealed. I am proposing that the same powers be extended to the Revenue Commissioners concerning banks as already apply to other sectors.

This is pertinent because of the crisis in National Irish Bank in which we have the appalling vista of a bank defrauding its customers. These are not just allegations, evidence has been produced and the bank has admitted it. People in the National Irish Bank are petty larcenists. The Revenue Commissioners are part of the investigation. There are four bodies involved in this investigation; the National Australia Bank — the parent company; the Central Bank; the authorised officer established by the Minister under the 1989 legislation; and the Revenue Commissioners. We are seeking that the Revenue Commissioners have the authority to require and compel anyone with relevant information to supply them with that information. The onus should be on a bank which is aware of wrongdoing or matters of concern to the Revenue Commissioners to supply that information rather than on the Revenue Commissioners to go to the High Court to seek authorisation for limited investigations.

The events which are the subject of the current controversy in National Irish Bank took place a number of years ago. However, they were covered up and nothing was done. No attempt was made to redress the situation by calling in the Garda Síochána, as a fraud had taken place, calling in Revenue Commissioners or restoring the money to those who had been defrauded. I do not wish to speak only of National Irish Bank but the entire banking system is in crisis if these events can take place in a major national and international bank. The credibility of all banking institutions is at stake.

If the Minister felt that this type of amendment was not required when the Bill was passing through the Dáil, the new revelations should focus his mind. He should revisit the situation. Whatever arguments he had in the past for not giving these powers to the Revenue Commissioners should be reconsidered in the light of recent developments. The Minister should accept this recommendation and ensure that the provisions of section 905 of the Principal Act, which require people to forward relevant information to the Revenue Commissioners, should be extended to the banking sector.

Section 905 of the Taxes Consolidation Act, 1997, gives authorised officers of the Revenue Commissioners power to visit business premises for the purpose of conducting an audit or investigation. The power extends to examination of books and records of the business being carried on at the premises, the search for such books and records and their removal for further examination. The power does not extend to premises where a banking business is carried on. In relation to the audit of a professional person, there is a prohibition on access to client files. The prohibition and audit is outlined in section 905(2)(d), not section 905(2)(b) as is suggested in this recommendation.

These powers were first provided for in the Finance Act, 1976, by the then Minister for Finance, Mr. Richard Ryan, who advised the House that "the exclusion of banking business was done deliberately in order to remove any possibility of a suggestion being made that there was an invasion of the confidential relationship between banker and customer". Successive Governments have, in general, subscribed to this view. Nonetheless I acknowledge that, in light of recent events, a serious review of Revenue's powers in relation to banks is required. As I made clear on a number of occasions, I have asked the Revenue Commissioners and my Department to review the adequacy of Revenue's powers in general following the report of the McCracken tribunal. I do not rule out new provisions if they are shown to be necessary, for example, a requirement for financial institutions to report to Revenue where they become aware that financial products sold by them may facilitate tax evasion or where funds have been transferred in certain circumstances to or from particular offshore locations. There may also be new powers for Revenue to access bank accounts where there are reasonable grounds to believe that certain accounts are being or may be used in tax evasion. Under the current tax code, Revenue can apply to the High Court or the Appeal Commissioners for an order to access the bank account of a named individual.

Before putting forward proposals, it would be necessary to have all the relevant information from the series of inquires under way. The Moriarty tribunal is specifically charged with making recommendations in the area of banking supervision, the protection of State revenues and offshore accounts. Proposals put forward must be carefully considered to ensure they would be effective, could not be circumvented, would not needlessly disrupt the affairs of law abiding citizens and would be proportionate in their effect on the financial sector when measured against the problem to be tackled. A responsible Government would need as much information as possible by way of answer to these issues before acting. As part of that information gathering process, officials from my Department and the Revenue Commissioners are visiting the tax administrations of other European countries to establish best practice on the question of balance between bank secrecy and a tax authority's right of access to bank accounts.

To accept this recommendation at this stage would be premature and irresponsible and I have no intention of being either. Therefore, I cannot accept the recommendation.

I do not accept what the Minister has said. He is suggesting it would be intrusive to allow the Revenue Commissioners examine accounts or that it would interfere with the confidential relationship between the banking institution and the clientele. However, the point at issue is that the bank I mentioned breached that confidential relationship be defrauding clients of money. The bank, through its own secrecy and the confidential relationship which has existed, has been in a position to defraud clients because there was no outside body with powers of investigation. If there had been a power of compulsion or a general power whereby the bank was required to reveal all relevant information, the situation which has existed for the past number of years would not have occurred.

Most of the Minister's reply has been geared towards the question of tax evasion and offshore accounts, which have been the big issues up to now.

These are raised in the recommendation.

That is true, but the issue has extended to other dormant, current and deposit accounts abused by the banks. Therefore, the recommendation concerns not just offshore accounts or tax evasion but all bank accounts which are open to abuse. Accounts are now being abused through larceny by the bank without collusion with others or in terms of tax evasion. There is a great onus on the Minister and his response should address the new developments taking place. His failure to address this issue makes it hard to accept his response. The recommendation provides a real opportunity to do something about the situation here and now. The Minister said he will act if new provisions are deemed necessary.

I congratulate RTÉ on its fine investigative work carried out under duress and threats of legal action by the bank. The Minister has ample evidence that steps are necessary and there is no need to examine the issue further or to set up a committee or commission of investigation. He should extend the power which already exists in other areas of business to require people to make relevant information available to Revenue. The management of banks must carry the burden of responsibility as they have access to much confidential information. If they cannot be shown to be fair and honest users of that information and relationship, there must be an outside investigative body. The Revenue Commissioners constitute such a body in other fields and by a stroke of the pen we can ensure they constitute a mechanism whereby the abuses which are occurring, and have occurred in the past, can be dealt with. The Revenue Commissioners would not be disruptive or interfering but would ensure the protection of citizens' bank accounts.

This recommendation provides for a lifting of the ban — which does not apply to others — on Revenue entering a bank. I have given my reasons for not accepting the recommendation at this time. I also said I am considering all these matters, I am awaiting the report of the Moriarty tribunal and officials of Revenue and my Department are visiting other jurisdictions to see what is done elsewhere.

I have given long and detailed replies on Committee and Report Stages in the other House and in reply to questions regarding the matters I am considering. I pointed out the background to the section in the Finance Act, 1976, which limited the powers of Revenue in certain areas and prohibited it from entering banks to examine individual accounts. I accept that times have moved on and I outlined what I am prepared to consider and my current thinking on the matter. I am awaiting the reports to see what proposals we will bring forward.

The Senator has raised the recent revelations regarding National Irish Bank. The Revenue Commissioners have no power in the context of the allegations concerning that bank. Revenue is concerned with tax evasion while the current allegations concern a different matter. I understand a debate in taking place in the other House and I will be contributing to it.

The recommendation tabled by the Senator relates to the repeal of the original section of the Finance Act, 1976, and I am not in a position to accept it for the reasons outlined in my reply.

Recommendation put and declared lost.
SECTION 16.

I move recommendation No. 9:

In page 26, before 16, to insert the following:

"16.—(1) Section 787(8)(a) of the Principal Act is hereby amended by the deletion of ‘20 per cent.' and the substitution therefore of ‘25 per cent.'.

(2) Section 787(8)(b) of the Principal Act is hereby amended by the deletion of ‘15 per cent.' and the substitution therefore of ‘20 per cent.'.".

The purpose of this recommendation is to increase the allowable percentage of relevant earnings that can be invested in pension schemes and to ensure that individuals make adequate pension requirements for the future. Work patterns have changed considerably and dramatically in recent years. People no longer retire at 65 and expect to live for three or four more years. Very few nowadays go into a job in their early twenties and stay in it for 40 years, paying their pension contributions for all that time. Most people move quite freely and willingly from job to job. There is mobility in the labour market, particularly for middle income earners and the self-employed. This recommendation asks the Minister to ensure that people can adequately provide for their retirement.

The practice of funding for a maximum pension of two-thirds of one's final salary is no longer feasible. If people want to retire early they should be able to fund a pension of 100 per cent, or more, of their final salary. I have read what the Minister said on this matter in the Dáil and I feel I understand his thinking on these issues. I cannot understand why he would object to the prudent provision for retirement and for the longer length of time which people will be drawing pensions, because of early retirement and greater longevity.

I concur with my colleagues in the other House who said that it is not acceptable that a widow should only receive half of her late husband's pension. The earning spouse, who is usually the husband, should be allowed to provide for his widow at the full rate of pension. I do not understand the principle that a widow can exist on half the pension which the couple received before her husband's death. She faces the same expenses and expects the same quality of life. This recommendation is to promote personal funding of retirement pensions to meet the reality of their pensionable years which people face today.

Many difficulties are looming in relation to the ability of the State and individuals to fund pension requirements in the future. Because of this, no brake should be put on allowing individuals personally to fund their own requirements, thereby ensuring they will never become dependent on the State. I urge the Minister to accept the recommendation.

The Senator has read what I said in the Dáil and I come from the same starting position as she does. I have never understood the reason for these rules and I do not understand why one cannot provide for a pension of 100 per cent of one's final salary. I gave this matter considerable thought and decided to await the final report of the pensions body which will report to the Minister for Social, Community and Family Affairs very shortly. I will then have a complete picture. Senator Doyle will know my thinking on this matter from her reading of what I said in the Dáil and from my discourse with the late Deputy Coveney and Deputy Barrett. Many of the rules which apply in this area are quite ridiculous. They may have been introduced to suit insurance companies. The Senator can be assured that I will take action on this matter.

Recommendation, by leave, withdrawn.
Sections 16 to 25, inclusive, agreed to.
NEW SECTION.

I move recommendation No. 10:

In page 51, before section 26, to insert the following new section:

"26.—Section 286 of the Principal Act is hereby amended by the insertion of the following subsection after subsection (2):

‘(3) In respect of any bus used for the carriage of members of the public there shall be available free depreciation for the purposes of determining what capital allowances are available to a person for any chargeable period.'.".

The recommendation is to allow for free depreciation on buses and to encourage investors and financial institutions to take up the capital cost of providing buses and leasing them at more favourable rates to Dublin Bus, Bus Éireann and private bus operators. The quality of life in our capital city and elsewhere is adversely affected by the ever increasing and uneconomic use of the private car. The cost of gridlock in our cities in probably inestimable but those who have attempted to estimate it calculate the cost at £1 billion. If the Minister rejects this recommendation on the basis of cost to the Exchequer I would urge him to look at the fuller picture of the loss to the economy and the Exchequer of this gridlock. People will not be encouraged to leave their cars at home and use public transport unless its quality is acceptable to the modern commuter. The DART has been a great success. It is clean, efficient and available when people want it. It is used to almost maximum capacity at peak times. Dublin Bus is not used to the same extent because the traffic flow does not make this option as efficient as it might be, but more importantly because of the standard of the stock.

Generally, buses are still substandard. The quality of the environment for the passenger in the bus is not up to what the modern commuter expects. One need only look at what happened when modern rail stock was introduced — people used the railways. Once the service is efficient and the surroundings are pleasant, people will use public transport. When one has cold, grotty and dirty stock that battles to keep to timetables because of traffic, people will not switch from cars to buses in sufficient numbers.

This is a horse and cart situation. We cannot prevent gridlock until we induce sufficient numbers of the public to use our public transport system, but they will not use that system if the stock is substandard. I urge the Minister to accept this recommendation, which seeks to reduce the cost to Dublin Bus and private bus operators of replacing, expanding and upgrading their fleets.

The school bus sector is another area that this provision would help significantly. This may not be relevant to Dublin, but some of the buses used to bring children to and from rural schools would not pass inspection for cattle transport. They are dirty, emit exhaust fumes and bellow out blue smoke. We have very stringent regulations regarding the transport of animals but we are not half as fussy about how children are transported. I have raised this strange anomaly both here and in the Dáil.

This incentive for both public and private sectors to replace bus fleets and, through favourable lease and tax arrangements, to lease buses would alleviate many existing problems. The Minister understands the principle behind this amendment, which would be supported by the Dublin Transportation Office and local authority members in Dublin. The commuting public would be delighted to use bus services in Dublin if there was an efficient, clean and modern stock in which to travel.

I support Senator Doyle's recommendation. This is an imaginative, proactive proposal which seems a win-win situation. During the Dublin North by-election, electors' top concerns were transport and traffic. The Minister will be aware of the huge increase in traffic. A sign of the booming economy has been the difficulties presented by increased car numbers, and we must encourage people to use public transport.

One way is to provide acceptable public transport, and this is a proactive way of encouraging that. I presume the Minister has done his sums on this proposal, but it seems an imaginative one that will help the environment and people's quality of life, as well as encouraging better use of the road system. I recommend that the Minister give this proposal serious consideration.

I support the recommendation, given that I have lived in Dublin all my life, have been on Dublin City Council for the past 20 years and am a bus user. There is a serious problem with traffic in Dublin. The Dublin Transport Initiative is addressing this in a fourfold way: the LUAS, the Liffey tunnel, traffic cells and, most important, quality bus corridors. When quality bus corridors are introduced, buses will have dedicated routes. If Dublin Bus can provide sufficient buses, the commuter will switch from the car to the bus. However, Dublin Bus will not have the rolling stock to meet the demand when those corridors are introduced and financial assistance must be provided to that body to meet that demand.

I support this recommendation. The purpose of the Finance Bill is to enhance and progress public policy, and environmental issues can be addressed by this measure. People's quality of life can also be improved. Tax relief on depreciation of value for mechanical vehicles intended for the carriage of large numbers of people would be very desirable. Individual carriage has led to gridlock and poor quality of life for many people, though the bicycle could be omitted from this assertion. This provision would encourage more public transport. The private sector could also get involved in ensuring greater use of buses and discouraging car owners from using their cars.

A similar amendment on Report Stage in the Dáil led to a very interesting debate on transportation in Dublin. I gave my views on this matter on that occasion. If I could be convinced that this proposal would do anything to alleviate the transport problem in Dublin I would accept it. However, this amendment would do zilch for the transport problem in Dublin and would be a considerable cost to the taxpayer.

The recommendation seeks to provide accelerated capital allowances up to 100 per cent in year one for capital expenditure incurred in the provision of buses. At present, capital expenditure on buses can be written off over five years at the rate of 20 per cent per annum. Taxis and cars for short term hire are entitled to a rate of 40 per cent. Since the early 1990s accelerated capital allowances have generally been phased out in a reform of the tax system with the objective of broadening the tax base. However, prior to these reforms, at no stage were buses entitled to accelerated capital allowances. To move in this direction would seem to be a retrograde step.

Accelerated capital allowances for buses would encourage financial institutions to become involved in leasing buses, which would be inevitable. Accelerated capital allowances could not be availed of by CIE or Dublin Bus because of lack of taxable capacity to absorb the allowances. Financial institutions could avail of the allowances and would benefit substantially. The consequence would be a reduced tax yield for financial institutions. The provision of extra bus capacity is an alternative to other forms of transport and should not be considered in isolation.

A broader view needs to be taken of the transportation area as a whole, bearing in mind the future requirements of the various competing elements of the system. There is no evidence that the lack of accelerated capital allowances is curtailing bus activity. I cannot accept the recommendation because, as I explained in the other House, I am not convinced that this amendment will achieve anything in the transportation area but rather will result in a considerable cost to the taxpayer by reducing the tax yield from financial institutions.

If one gives accelerated capital allowances for vehicles, the financial institution will become the owner of the vehicle and technically will lease it to the company at a lower rate because they will get a tax break. The leasing cost to the company receiving it will be somewhat lower and the tax rate goes to the lessor company. Dublin Bus or CIE do not have a taxable capacity and it makes no difference to them as they will not avail of the capital allowances. If they bought the buses directly they would, but that is no good to them because they do not have a taxable activity to set off their capital allowances.

They do not have sufficient new stock.

The benefit will accrue to the financial institutions who will buy the buses and lease them to Dublin Bus. Dublin Bus will have to pay leasing charges to the financial institutions, to whom the tax break will go. This amendment will do nothing in the transportation area. I accept some innovative thinking needs to be done. I commend Deputy Olivia Mitchell, who proposed this initiative, which shows she is thinking about the transportation problem in Dublin.

The only loser will be the Exchequer, because of reduced tax from the financial institutions. I commend Senators and Deputies for applying their minds to this problem. A range of measures needs to be introduced in this area and I will consider any tax incentives. However, this amendment will achieve nothing in isolation.

The Opposition has a duty to table amendments to try to resolve problems in society, even if they are not the solution. If Dublin Bus do not have the rolling stock for the 11 or 12 quality bus corridors to be introduced in the next year, the measure will fail and we will lose a wonderful opportunity to resolve the traffic problem in Dublin. Will the Minister increase the subvention to Dublin Bus to allow them purchase rolling stock to meet the demands of the quality bus corridors?

The relevance of this matter to the recommendation is somewhat tenuous.

That matter can be considered in the context of the Estimates. I hope Dublin Bus will make sufficient profits to fund these measures from their own resources.

Recommendation, by leave, withdrawn.
Sections 26 to 32, inclusive, agreed to.
NEW SECTION.

I move recommendation No. 11:

In page 60, before section 33, to insert the following new section:

"30.—Section 482 of the Principal Act is hereby amended—

(a) by the substitution of ‘£20,000' in the definition of ‘qualifying expenditure' for ‘£5,000', and

(b) by the substitution of ‘£20,000' in the definition of ‘relevant expenditure' for ‘£5,000'.".

This recommendation relates to section 482 of the Taxes Consolidation Act, 1997, which provides relief from tax in the respect of the cost of repair, maintenance or restoration of approved buildings and gardens which are of significant scientific, historical, architectural or aesthetic interest and to which reasonable access is afforded to the public. Additional relief was provided in last year's Finance Act for expenditure up to £5,000 per annum for (a) the repair, maintenance or restoration of the contents of an approved building or garden subject to certain conditions, (b) the installation, maintenance or replacement of a security alarm system or (c) public liability insurance for approved buildings or gardens.

The Senator proposes to increase this figure of £5,000 to £20,000. There is no necessity for this increase. The Senator will be aware there are budgetary constraints in a time of ever increasing demand for scarce resources. This relief does not merit an extension and I cannot accept the recommendation.

I do not intend to delay the House on the discussion of this amendment which differs in people's order of priorities. It is a tragedy we are losing many of our approved houses and gardens. Given the inordinate cost of preserving this important part of our heritage, we should look at the £5,000 figure again. I accept the Minister may not be able to increase it to £20,000 in one budget or Finance Bill. I ask him to at least double the figure to a more realistic £10,000.

The principle of this amendment and this aspect of our heritage concerns me. People do not wake up in the morning and think this is a major issue. However, once these houses and gardens are gone, the finger will be pointed at successive Governments for their neglect of our heritage. There must be realistic incentives to ensure these houses and gardens continue to be lived in and maintained because they are an intrinsic part of our heritage. I urge the Minister to look at this provision again.

As I said in the other House, there is a misconception about this matter. The problem Senator Doyle referred to was addressed as far back as the Finance Act, 1982, which provided that relief for expenditure on repair and maintenance of a building or garden is not subject to any limit. Taxpayers receive marginal relief which covers all such expenditure. The repair and maintenance is fully allowed against a person's tax, but it does not provide for items such as public liability insurance, the installation and maintenance of an alarm system, the contents or the garden, which are annual ongoing costs. Last year my predecessor, Deputy Quinn, introduced a £5,000 tax break for this kind of expenditure.

That is for general, not once-off maintenance.

The Senator's amendment proposes to increase that £5,000 limit to £20,000. I cannot accept the amendment, although I will look at it in the future. There seems to be a small uptake of the relief although we have no figures at present. I assure the Senator that maintenance and general repairs have been covered since 1982.

I accept the Minister's reply. However, £5,000 goes nowhere towards the installation of an alarm system.

I will consider that in next year's Bill.

There should be no obstacle to properly documented and genuine once-off expenses to ensure these houses and gardens survive for the future enjoyment of the public. Even in a one off context, £5,000 would barely scratch the surface of some of the jobs that need to be done.

Recommendation, by leave, withdrawn.
Sections 33 to 37, inclusive, agreed to.
NEW SECTION.

I move recommendation No. 12:

In page 73, before section 38, to insert the following new section:

"38.—Section 664 of the Principal Act is hereby amended in subsection (1)(a) by the deletion of subparagraph (i) in the definition of ‘qualifying lessee'.".

I will not dwell on this recommendation for too long because I think the point is self evident.

I am afraid that I cannot accept this recommendation.

Recommendation, by leave, withdrawn.
Section 38 agreed to.
NEW SECTION.

I move recommendation No. 13:

In page 73, before section 39, to insert the following new section:

"39.—Section 659 of the Principal Act is hereby amended:

(a) in paragraph (c) of subsection (1) by the insertion after ‘trade of farming' of ‘, or incurs capital expenditure necessitated to comply with the structural standards of dairying facilities required under Directive 92/46/EEC 1, as amended';

(b) by the substitution of the following subsection for subsection (3):

‘(3) The farming pollution capital allowances to be made in accordance with subsection (2) in respect of capital expenditure increased in a chargeable period may, where a person so elects, be any amount not exceeding 100 per cent of that expenditure or £30,000 whichever is the lesser, in respect of one or more years during a writing-down period of 7 years';

(c) by the insertion of a new subsection after subsection (3):

‘(3A) In respect of activities which are the subject of an integrated pollution control licence under the Environmental Protection Agency Act, 1992, as respects the first year of the writing-down period referred to in subsection (2) where the capital expenditure was incurred on or after the 6th day of April, 1998 an amount equal to 50 per cent of that expenditure or £100,000 whichever is the lesser.'.".

This recommendation relates to spending in the agriculture and food area and in particular to capital allowances in relation to investment under the dairy hygiene and farmyard pollution regulations, in addition to the matter of capital expenditure on pollution control. I am reiterating the point, made earlier by my colleagues, that this expenditure by farmers is not voluntary. They have to find this money regardless of profitability in the year in question. They do not even have the latitude to wait a few years until they can get the money together. They must find this money in large measure to comply with EU directives. It is in all our interests that farmers comply with these directives on health, hygiene and the environment. The Minister should be more generous about how he views capital allowances for investment in this area in order to reflect farmers' actual expenditure. We are not talking about farmers spending from annual profits — it is money they have to find, regardless of their income for the year in question.

I cannot accept this recommendation. In the negotiations on "Partnership 2000" the farming organisations put forward a proposal that this relief would operate up to £20,000. That was done by my predecessor, Deputy Quinn, and I met that commitment in "Partnership 2000". Out of the generosity of my heart in this year's budget I increased it to £30,000. Now, however, I am being asked by the Senator to increase the allowable qualifying expenditure to £100,000 and to reduce the writing-down period. I have gone as far as I possibly can, and no further.

Recommendation put and declared lost.
Sections 39 to 44, inclusive, agreed to.
SECTION 45.

I move recommendation No. 14:

In page 76, lines 25 to 33, to delete from and including "but as" in line 25, down to and including line 33.

This proposal is to oppose the changes in self-assessment deadlines that were requested by the Institute of Taxation. In one fell swoop the Minister was going to change the timescale for the deadlines for the self-employed. In his speech two days ago, the Minister went into some detail about having a change of heart on this matter, even though he will stick by the principle. He is probably right and will not be opposing it in the same fashion. Nevertheless, it is difficult for the Institute of Taxation to change deadlines without much prior notice being given. I am not sure if any consultation took place. The outburst from the institute, that it was simply impossible for these changes to occur within the deadlines set out by the Minister, seems to be quite genuine. I would like the Minister to clarify the present situation relating to deadlines.

My professional background is in this area so I know a fair bit about self-assessment, filing dates and the payment of preliminary tax. Both on Second Stage here and on Second, Committee and Report Stages in the Dáil, I put forward my views in this regard. It is my intention to make the tax year the same as the calendar year. That would be a sensible approach.

I have subjected this section to a commencement order so it will not take effect until 30 November 1999. The dates have been brought back by two months and the payment of preliminary tax has been pushed out, but it is subject to a commencement order and cannot come into effect until I sign it. In the meantime I will have discussions with the accountancy and taxation professions to assess what the full impact of these proposals will be. In the intervening period I hope to put some meat on the bones of my long held view that we should move the start of the tax year from 6 April to 1 January and put everything on a calendar year basis. It is one of the goals I set for myself before becoming Minister for Finance. There is plenty of time for all this to be worked out. I do not go along with what the Institute of Taxation said.

I have practised in this area for many years. I could not agree with one of the institute's press releases which said that this was the biggest controversy ever to hit the accountancy and tax professions. It certainly was not, and I speak from personal experience in that regard.

Acting Chairman

For the information of the House, in addition to Senators Costello, O'Meara and Gallagher, Senator Avril Doyle is also opposed to this section, although her name does not appear on the list.

I wondered what happened to my name. Thank you for that correction, not that it will make much difference.

I indicated my opposition to this section to allow us to ventilate our views on it. As I stated on Second Stage, with respect to those learned people, I found the Institute of Taxation's correspondence slightly over the top. Their hyperbole did not do justice to a reasonable case that could have been made in terms of concerns. Unlike the Minister, I do not come from an accounting background, but I think most people should be able to get their books in order in the seven months from April to November. The support of tax practitioners for the self-assessment system is important for the compliant running of the system. It is the single most important step we have taken in relation to our taxation system in recent years. The Minister's intention to bring the tax year back from April to January will negate the concern enunciated by the Institute of Taxation. May I take it that we are looking to an early change in the taxation year, perhaps by next year's budget?

We cannot expect it because if the Minister was going to move next year he would have to introduce it in next year's Finance Bill. Therefore, we are looking a couple of years down the road. Would it be reasonable to move the start of the tax year to 1 January and the change of the filing date for self-assessment in the one year so that the point the Institute of Taxation makes reasonably, certainly in terms of the first year's treatment, would be taken care of in one step? Now we may cause logistical problems for tax practitioners for a year or two but they should resolve themselves immediately once the Minister reverts to a 1 January or 4 January start to the tax year. Could we consider taking those two steps together and thereby negate the principle of the argument of the Institute of Taxation?

The Senator has put her finger on one of the main reasons I subjected this particular section to a commencement order. As regards my long-term view to come back to a calendar year, I moved on this in this year's Finance Bill because a good amount of notice needs to be given as to my intention.

There is a group comprising the Department of Finance and the Revenue Commissioners examining this particular problem because, as I pointed out on Second Stage, apart from the logistics for accountants and taxpayers there is a possible financial implication for the State also. Everybody's tax allowances would apply for the calendar year, that is, from 1 January not 6 April — I gave the historic background of 6 April. All that must be examined.

Since I have held these views for a long number of years when I became Minister for Finance I tried to put them into effect. In my discussions in the Department and with the Revenue Commissioners it was felt that, with the year 2000 problem with computers approaching and all that that entails, to announce at the same time a move to a calendar year basis in the year 1999-2000 might have been too much to take on. The whole machinery could collapse.

The problem with event horizons.

Exactly. All the problems would happen together. Therefore, what we are trying to do is examine all these matters and then make announcements.

If I am in a position to go to that particular base and have consultations with tax practitioners and others, I envisage that this particular section will never come into effect because it will obviate the particular problems. As I said on Second Stage, the new dates will be probably more acceptable for both filing dates and preliminary taxes.

This provision may be superfluous.

It may be superfluous but the purpose is to concentrate people's minds on where I intend to go on this matter because it has been around for some time. It is desperately complex and convoluted. Even tax practitioners get confused on the dates and must think about them. This is my long held view and it is another target I hope to achieve in my period as Minister for Finance.

Is the Minister saying there is no need for this section?

I am saying that there is a need for this section if we are not in a position to put into effect my intended provisions regarding the calendar year. Whenever we change to the calendar year we will have to announce it some considerable time in advance. If it was to be next year, it would be too late to announce it now. We would have had to announce our intention a good while ago. It will be announced in a Finance Bill.

Maybe in 2001, and the Minister expects to be still there to introduce it.

I intend to be here.

Acting Chairman

Could we bring structure to the debate?

We are getting to the interesting bit.

What the Minister is saying now is that this section is really a statement of intent. In that respect it is not needed. He has moved to a phased approach rather than attempting it in one fell swoop in terms of the deadlines and moving the start of the tax year from 6 April to 1 January. I will accept that as the Minister's expert approach to the matter.

To refer to a typographical error in that section, in line 28 the word "that" should read "than". Perhaps we will get an amendment out of the Minister before the day is out.

Acting Chairman

I thank the Senator for being so helpful.

Recommendation put and declared lost.
Section 45 agreed to.
Sections 46 to 54, inclusive, agreed to.
NEW SECTION.

I move recommendation No. 15:

In page 82, before section 55, to insert the following new section:

"55.—In determining whether a company is resident in the State for the purposes of the Principal Act, and without prejudice to any other enactment or rule of law whereby a company is deemed to be so resident, any company incorporated in the State pursuant to the Companies Acts, 1963 to 1990, shall be deemed to be so resident.".

This recommendation is intended to eliminate the scope for Irish registered non-resident companies to operate in the manner in which they seem to have been operating. There has been much concern expressed in recent weeks and months about the vexed issue of Irish registered non-resident companies, how they have operated in this jurisdiction and the controls in their regard. Indeed, the Minister is on record as saying that we simply do not know how many of them exist because there is no mechanism to register them; there is no mechanism for knowing what they do, from where they come and how they operate.

There was mention in the media of a figure of 40,000 Irish registered non-resident companies operating in some capacity, largely through the Irish Financial Services Centre. I am not sure whether that is the case, but the fact is these companies exist and they have used Ireland to avoid paying tax. Effectively, it would seem to be a tax scam where the tax is not paid in the home jurisdiction nor in this jurisdiction because each jurisdiction believes it is being paid in the other. This appears to be a foolproof way of evading tax.

This recommendation ensures that any company incorporated in the State pursuant to the Companies Acts, 1963 to 1990, shall be deemed to be so resident. This will eliminate the scope for Irish registered non-resident companies.

We had a substantial discussion on this amendment in the other House both on Committee and Report Stages. I made it clear then how I proposed to address the problem of Irish registered non-resident companies which are being used for illegitimate purposes.

It is an unfortunate fact that once promoters of undesirable companies gain a certificate of incorporation they can use the company for their intended purposes which can be damaging to Ireland's reputation. It is also a fact that companies can be incorporated here under company law without the necessity to disclose the identity of the real people behind the company.

This recommendation proposes that a company which is incorporated in the State will be resident here for tax purposes, irrespective of the location of its central management and/or control or, indeed, assets. The Senator should understand that many Irish incorporated companies which are not tax resident here are used for legitimate purposes. These company structures are favoured by certain foreign multinationals which have invested here and which make such a vital contribution to the success of the Irish economy. The Government is committed to finding the right solution to this problem but any solution would have to be one which does not adversely impact on Ireland's attractiveness for foreign direct investment.

On Committee and Report Stages in the other House Deputy McDowell, who on behalf of the Labour Party moved an amendment on the lines of the Senator's recommendation, acknowledged that the proposal may be too broad an approach. In addition, consideration would have to be given to the question of enforcement of any tax owed by the companies involved.

As I told the other House, it is my intention to address the issue in a measured and rational way. The Department of Enterprise, Trade and Employment and the Department of Finance will continue to work towards a practical solution from a company law and tax perspective. I propose to put forward this solution for comment by relevant parties before the Government takes a decision and that remains my position.

There was a long debate in the other House and I think it was quite useful. It is a pity it was not covered to a greater extent in the media. I put on the record how I thought the figure of 40,000 companies came about. Nobody has contradicted the assertions I made there so I must assume that the initial allegation — whether or not it is true — was made in an article in a British tax journal in 1995 which stated out of the blue that there could be 40,000 of these companies in Ireland. It was repeated in a recent article in The Irish Times but no indication was given regarding how the figure of 40,000 was arrived at.

In the absence of any contradiction, I am forced to conclude that the figure arose from comments made in an article which appeared in two British tax journals in 1995 and which was attributed to the same author. The article was originally published in one journal but its author must have received a higher fee from the second journal to have it reprinted. The individual in question is a very eminent person and he works for a company registered in the Isle of Man. In the articles to which I referred, he gave his views in respect of non-resident companies and the situation in the UK. I suspect the figure that appeared in the recent article in The Irish Times originated from that source.

As stated in the Lower House, I do not know if the figure of 40,000 is correct and I pointed out the downside of accepting the broad, sweeping approach suggested by Senator Costello. I understand what he is attempting to do but if we adopted his recommendation we would close down the legitimate activity of a number of multinational companies that use this protective technique. As the Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Harney, pointed out in the debate on this matter in the Lower House — which arose from background notes inadvertently supplied with the reply to a parliamentary question — this is a complex area. On a number of occasions I stated that we must move forward on three fronts: tax law, company law and, possibly, criminal law. That remains my position.

Recommendation put and declared lost.
Sections 55 to 64, inclusive, agreed to.
SECTION 65.

Acting Chairman

Recommendation No. 16 is out of order because it involves a charge on the Revenue.

Recommendation No. 16 not moved.
Question proposed: "That section 65 stand part of the Bill."

I wish to put a query to the Minister in respect of——

Acting Chairman

The Senator may only speak on the section.

May I do so now?

Acting Chairman

Yes, but the recommendation may not be moved.

Recommendations Nos. 16 and 22, which have been ruled out of order, benefit the people and do not place a potential charge on them. Are they being ruled out of order——

Acting Chairman

The Senator may not discuss the recommendation because it is out of order. He is only permitted to speak on the section.

I am not speaking on the recommendation. I merely wish to ask the Minister why it is out of order because it has the opposite intention——

Acting Chairman

It is not a question for the Minister to rule the recommendation out of order. The Chair has ruled it out of order. The Senator cannot address such questions to the Minister.

Will the Minister indicate whether the recommendation represents a charge on the people? I am not questioning the jurisdiction of the Chair in this matter, I am merely seeking an answer. I am sure the Chair will not provide such an answer because he baldly stated that the recommendation is out of order.

Acting Chairman

If the Senator wishes to pursue this matter, I am sure the Cathaoirleach will be glad to discuss it with him in his office. The ruling on the recommendation is a matter for the Chair, not the Minister. However, the Minister may wish to discuss the section.

This section relates to capital gains tax. There are certain areas where the 20 per cent rate the Minister intends to introduce will apply and where the 40 per cent rate will continue to apply. It is a matter of record that we have not been sympathetic to his attempts to reduce the capital gains rate from 40 per cent to 20 per cent. Where capital gains tax extends to a private residence, which is intended for investment or speculative purposes rather than residential purposes, we are seeking that a larger proportion should be subject to tax at the higher rate rather than the lower one. This section, where changes have been made to capital gains, is extremely important because of the ripple effect it will have on society, the disposal of property and the price of houses. It will turn housing construction into property investment and speculation. Will the Minister respond to our serious concerns in that regard?

With regard to the Senator's recommendation being ruled out of order because it represents a charge on the people, the Minister for Finance has no responsibility in that regard.

This section relates to capital gains tax. I have long held the view that the rate of capital gains tax was too high. This view is shared by many people concerned with the development of entrepreneurial activity in our country. To a large extent, capital gains tax is discretionary and it only arises when a person decides, for whatever reason, to dispose of a chargeable asset, whether a business, a shareholding or otherwise. Consciously or unconsciously, a 40 per cent capital gains tax rate was a significant ingredient in making the decision of whether to make a disposal. I am convinced that in many cases people decided not to make a disposal because they were not prepared to pay tax at that level. This high tax also resulted, for those who could afford them, in the proliferation of avoidance schemes which attempted to circumvent the imposition of the tax. In some instances individuals chose to emigrate and realise their capital gains abroad.

The 40 per cent rate interfered excessively with the organic development of our enterprise culture. In reducing the standard rate to 20 per cent, I wish to encourage the owners of existing indigenous businesses to grow to a size and scale necessary to compete successfully in the international marketplace. I wish to encourage those who have a business idea to "go for it", in the knowledge that the rewards of their success will not be unduly diluted by tax. I also wish to encourage our entrepreneurs to remain at home. Everyone, including the Exchequer, will benefit from this.

It should be recalled that when capital gains tax was first introduced in 1975 the rate was 26 per cent in contrast to the then highest rate of income tax of 77 per cent. With regard to the yield, while on a static basis the cost of this new rate to the Exchequer will be £40 million per year, the new lower rate will lead to considerably more disposals which will make up for the shortfall viewed from the static basis. In the budget I stated that the figure for net cost to the State will be £19 million, possibly from a static basis, which is calculated on the basis that there will be a growth cost of £40 million, a cost of at least £20 million because of increases in activity and there will be a saving of £1 million because of my intention to put in a de minimis exemption of £500. I have no doubt that the increased activity brought about by this change will lead to a substantial yield to the Exchequer in the future.

As I stated on Second Stage, if people were familiar with my past comments in respect of capital gains tax they would have been able to predict what I intended to do about it in the budget. It is obvious that people believe you often say one thing in Opposition and do another on coming to power. However, my party was often in Government when I made my remarks about capital gains tax. Therefore, people should not have been surprised that I reduced the rate of capital gains tax in the budget. I believe this will pay off because I am firmly of the view that it is better to encourage people to be adventurous in implementing their business ideas. They will not implement those ideas if they believe the State will claw back too much money through tax. That is an unfortunate fact which some people with a certain ideology do not want to recognise. I am not of that view.

The Minister believes in cost effective tax cuts.

I congratulate the Minister on this section because, as he stated, in the past we assumed that enterprise would come from outside the country. Indigenous industry does not have a great record of establishing enterprise. Capital gains tax was a definite disincentive for those considering establishing and developing businesses. I was particularly interested by the Minister's statement that the Revenue will benefit from this reduction in taxation. This is an imaginative effort on the Minister's part to encourage indigenous industry to create enterprise and I believe the Revenue will benefit.

I do not disagree greatly with what the Minister and Senator Quinn have said. However, there should be a more selective use of capital gains tax in terms of its application because it may fuel inflation, particularly in the property market. It will bring the investment and speculative sectors into the market fully and they will competing with each other to turn homes into property portfolios. Reducing capital gains tax will make it easier to buy and sell property. A selective reduction directed at enterprise and business expansion would be welcome. However, the reduction proposed could have been more selective. In the long run this will have a detrimental effect in a number of areas.

I do not accept the Senator's point. I have referred to this matter on many occasions and I do not accept that this measure will have the effects the Senator predicts. I gave my views as a former tax practitioner on those who think they might make a killing in this regard and the line that the Revenue Commissioners may take.

Question put and agreed to.
Sections 66 to 70, inclusive, agreed to.
SECTION 71.

I move recommendation No. 17:

In page 103, to delete lines 17 to 19 and substitute the following:

"71.—(1) Section 597 of the Principal Act is hereby amended—

(a) in subsection (2), by the substitution for paragraphs (f) and (g) of the following paragraphs:

‘(f) such of the activities of a body of persons established for the sole purpose of promoting athletic or amateur games or sports as are directed to that purpose,

(g) farming, and

(h) the letting of property where the individual or individuals are charged under section 75 of the Taxes Consolidation Act, 1997.'.".

This amendment seeks to extend roll-over relief to various sectors that do not currently enjoy it, in particular, those providing private rented accommodation. We do not have to restate the nature of the crisis for first time house buyers in urban areas, Dublin in particular, and the increased demand for private rented accommodation. The sectors named in the recommendation should be treated as other business entities are treated at present.

This provision is essential to ensure a sufficient supply of quality rented accommodation at affordable rents. If property owners trade up run down, poorly furnished accommodation for better accommodation and have to pay tax at each stage, rents will increase. I do not say the Exchequer should be denied the tax. The principle of roll-over relief is that the tax is deferred until the end of the chain, so to speak, and when the final property is sold and the owner is out of the property leasing business the tax accrues. The tax should be deferred until this final element in the chain to ensure that the improved accommodation which property owners can provide will be available at affordable rents rather than have tax paid at each point in the chain and the tax passed on by way of increased rents.

I can pre-empt the Minister's reply. I know he spoke to the Irish Property Owners Association and he was categoric in his view. The point is one of equity, particularly given that the Exchequer is not denied the tax. Its payment would merely be postponed until the final link in the chain of trading in properties.

The Senator seeks to grant roll-over relief on the disposal of rental property by an individual. This would mean that a landlord could sell a rental property and invest the proceeds in a new investment rental property without incurring capital gains tax liability at that time and that the capital gains tax liability would not arise until the new property was disposed of and the proceeds from that sale were not invested in a further property. The present roll-over relief provisions are targeted primarily at the replacement of trading assets.

A house is a trading asset for professional property owners.

I had representations from the Irish Property Owners Association on this matter. It has been seeking this provision for some time but I do not consider it is the way to proceed at this stage. I am not prepared to accept the recommendation.

Will the Minister consider the case for sporting facilities? I know he conceded the point in relation to racecourses and greyhound tracks — important for my area of the country — but can he not extend the concession for the sake of equity where it concerns the trading asset for other professionals? I am not talking about speculators who are getting into the market to hold a property for a while and then sell for a large profit. I am talking about genuine professional property owners who provide an important service in the form of reasonably affordable private rented accommodation for those who cannot afford their own homes. In this context, we are talking about a tradeable asset. The tax should be rolled-over until the owner breaks the chain, at which point the Exchequer gets its slice.

The purpose of the roll-over relief was to encourage employment creation not to create further assets. I cannot accept the recommendation.

Why is it available for agricultural land?

It is a tradeable asset but it should create employment.

Not any longer.

The Senator may be right. The reliefs that property owners have are generous and they are not a section of society which is hard done by. However, I cannot accept the recommendation.

I did not make the case that they are hard done by but I think their point is reasonable from an equity perspective.

Recommendation put and declared lost.
Section 71 agreed to.
Sections 72 to 76, inclusive, agreed to.
SECTION 77.

I move recommendation No. 18:

In page 141, line 27, after "Schedule 8A" to insert the following:

"or any other area which the Minister for Finance may, on the recommendation of the Minister for the Environment and Local Government (which recommendations shall take into consideration an economic plan for the area submitted by a local authority or a company established by a local authority and prepared by the local authority in co-operation with any other groups in the area which are funded by the Exchequer or the European Union and which are charged with promoting economic development in the area, to that Minister in respect of an area identified by it), by order direct that the area or areas described (being wholly located within the boundaries of the area to which the Economic Plan relates) in the order shall be a qualifying area for the purpose of one or more sections of this Chapter".

This recommendation seeks to extend the rural renewal reliefs and to condition them in terms of a strategic plan. The Minister should accept this recommendation. I have been concerned for some time about the number of self-help or bottom-up groups working in their own way with their own terms of reference, as it were, without a strategic focus. They have a great contribution to make above and beyond the sum of their individual contributions. I refer to the various Leader groups, area partnerships, vocational education committees and local authority development groups. There is a plethora of different groups in different areas working to individual agendas rather than to a strategic plan. The Minister should consider this proposal where, if an economic plan for an area was submitted through the local authority or by a company established by the local authority, the provisions he is making to encourage rural renewal would be thereby extended to them.

I am making a plea out of frustration to try to do something about the self-help organisations which have mushroomed in recent years to ensure we harness, for the benefit of local and rural communities, the best possible outcome from the endeavours, work and investment being made by the national and European Exchequers in this area.

I support Senator Avril Doyle in this regard. I spoke earlier in another context about a win win situation. If ever there was a win win situation, this is clearly one. The tax incentives and designations for urban areas have succeeded very well. There has been a real benefit from encouraging investment in urban renewal, whether we look at the International Financial Services or at towns in which there has been a successful experience of investment in urban renewal.

Senator Avril Doyle's recommendation is as effective in attempting to achieve and stimulate economic activity in rural areas. The objective behind it is to somehow or other stem the decline in the area of rural development. The population in rural areas is unlikely to increase in the future because it is unlikely that we will encourage enough development into these areas. Agriculture alone will no longer sustain economic development. Even if agriculture produces more, it will employ fewer people. Therefore, the objective of investment in rural areas and in rural development is something we should have high on our agenda. That objective has not been grasped, given the opportunities available to us. This recommendation allows us to follow through to rural areas what has been successfully achieved in urban renewal.

I refer to an example of four local development groups in the Limerick-Cork which have come together with the local authorities to combat rural decline probably what is the worst affected areas of Cork and Limerick. Those four groups have worked together with the local authority and formed an economic strategy committee and planning group and have developed an economic strategic plan. This type of activity needs to be encouraged and we must find a way to encourage others to support such a movement. Those in that area reckon that over £20 million has been invested in urban renewal by those resident in the area because of Government incentives for urban renewal.

The Minister must give attention to such development. We heard his response previously and he will say this is a pilot scheme, so let us see how it develops. He will probably say this may even establish a precedent on which he does not wish to follow through. This is an area in which we should encourage such development because it will answer all the questions asked and concerns raised previously about the difficulties of such encouragement.

I urge the Minister to give this recommendation serious consideration. It is a win win situation and this is an imaginative proposal. Urban renewal has succeeded and this recommendation provides us with the opportunity to enable rural development to succeed. As Deputy Avril Doyle said, it co-ordinates all the activities. If it allows do it yourself self-help groups established in an area to achieve this, then we should act. For that reason, this recommendation is worthy of consideration.

I support this worthy recommendation and also support the Government's initiative including this provision in the Finance Bill, 1998. Our problem is not so much with the principle of the proposal but with the manner in and procedure by which it is proposed to implement it. My only criticism of the recommendation tabled by Senator Avril Doyle is that qualified rural areas are defined after the drawing up and submission of an economic plan. I would extend that to include a social plan because we are talking about people and a wide range of issues, but I am sure that is probably included in the general context in which Senator Doyle proposes the recommendation.

The Minister must realise that while this is relatively new in relation to large areas of rural counties west of the Shannon, we have tax designation for seaside resorts and specified areas. The essence and success story of tax designation has been the urban areas. There is much, both good and bad, to be learned from that in that some of the development has been desirable, while some has not.

Because this was not as planned as it should have been, the Department of the Environment and Local Government now requires integrated area plans. For tax designation in the future, the local authority is obliged to provide an integrated area plan which covers not only a narrow designation in terms of tax relief, but also the broad repercussions and implications on other areas. Physical, property, educational, health and social climates are taken into account in the plan. That is the reason such a recommendation is so important.

A body of information should be put together locally which will inform the best use of tax measures and relief and, indeed, other reliefs and funding which might come from the EU or the Exchequer. We cannot allow such development to occur in a haphazard fashion and the next two recommendations suggest it is fairly haphazard in terms of location. There is much to be said for having a responsible group and, ideally, a statutory group like the local authority. However, other groups have developed and thrived with European and Exchequer money over the years and which have much to give also.

There will be much pressure to maintain the population along the western seaboard in the future. With European money drying up for the agricultural sector in future years, we will have to find new methods to at least maintain or increase existing populations. Already large areas have been denuded of their traditional population. There should be integrated area plans for the entire western seaboard, particularly in areas where problems have been identified and where there is a need for rural development. I commend this recommendation to the Minister.

I thank Senators for raising this issue. This is a pilot scheme and is confined to a specific area which was clearly identified as in serious need of some rejuvenation. This scheme needs EU approval which has not yet been granted. The purpose of the recommendation is to enlarge the definition of qualifying rural area for the purposes of reliefs being provided for in the new chapter 8 of Part 10 of the Taxes Consolidation Act, 1997, which is introduced by section 77 of the Finance Bill, 1998.

In addition to the areas listed in Schedule 8A, that is, all of Counties Leitrim and Longford as well as certain specified areas in Counties Cavan, Roscommon and Sligo, the recommendation envisages certain other areas which might be recommended to the Minister for Finance by the Minister for the Environment and Local Government. This recommendation in turn would have regard to an economic plan for the particular area submitted by a local authority or a company established by a local authority. It is proposed that the economic plan would be prepared by the local authority in co-operation with certain Exchequer or EU funded groups in the area charged with promoting economic development in the area.

The structure proposed in the recommendation for defining qualifying rural areas is akin to that to be used for identifying qualifying areas in the context of the new urban renewal scheme introduced by section 76. However, there is a crucial difference between the two schemes in that the urban renewal arrangements will apply, subject to conditions, to urban areas countrywide, whereas the rural renewal initiative is a pilot project focused on a limited and specifically defined part of the country — parts of the upper Shannon region. To follow the line proposed in the recommendation would result in rural areas in all parts of the country coming within the scope of the new initiative, and this would be incompatible with the proposals for rural renewal as envisaged when the Minister announced the scheme in last December's budget. At the time he stated clearly the area in which the new arrangements would apply — the upper Shannon — and he also pointed out that the introduction of such a scheme would need EU approval. Preliminary discussions in that regard with the Commission have taken place and the initial response has not been unfavourable. This was coloured in large measure by the fact that the project was limited in scope and aimed at a disadvantaged region of the country.

I do not doubt there are other areas which would benefit from this type of incentive package, but the Minister is not in a position to provide for an enlargement or a potential enlargement of the area already earmarked for the scheme. It goes without saying that, apart from EU considerations, the larger an area designated, the less impact the incentive has. Its effects become diluted by being spread too widely. This is a novel project and the Minister must be realistic in what he is attempting to achieve by it — the renewal and invigoration of parts of the upper Shannon region. Spreading the scheme over the potentially wide areas which could result from acceptance of the recommendation would not be in keeping with what he hopes the proposals will achieve and he therefore cannot accept the recommendation. It is important to emphasise that this is a pilot scheme and we will have to wait to see how it works. We still await EU approval for it.

On the point of EU approval, is there any indication as to how this proposal is likely to be viewed? Is there any reason to fear the case made by the Minister for this pilot scheme will not be accepted? Second, would the Minister not have achieved the same outcome if he had extended the pilot scheme to all parts of rural Ireland but for a limited period only? The Minister of State may say that there is a finite amount of investment which, if spread too thinly, would not achieve the same results.

The urban renewal scheme was confined to limited areas of one or two towns or cities at the start. That has been extended slowly but surely and it has been extremely effective. A different ethos lies behind the rural renewal scheme and it is a different type of investment we are attempting to attract. I support what the Minister is trying to achieve, but I am not convinced that restricting the scheme to a few parts of the northwest is making the best possible use of this limited scheme. If it is agreed to by the EU this time, it will not agree to it a second time when we seek an extension. That is why I would like us to have our foot in the door rather than just pushing it open. It would ensure the maximum return is achieved from the rural renewal principles upon which this section is based.

I support Senator Doyle. The question of EU approval is almost a fudge. The EU would certainly approve of this scheme because it does exactly what the Union wants done — co-ordinating self-help groups. One such group was in touch with me: the Ballyhoura development group in County Limerick. What it has put together is exactly the sort of initiative of which the European Union would approve and which it would encourage and hope to intensify. It is important the Minister recognises that the initiative he has taken needs to be widened. I recognise it is a pilot scheme but it could be more successful if it were widened using the recommendations made here.

I wish to add a few words as I raised this issue on Second Stage. The Minister stated that this scheme would be examined in future budgets. I accept it is a pilot scheme and I appreciate that County Leitrim was included in it, as it deserved to be. The NESC report covered all the western counties which, together with Border counties, ensured we had Objective One status until now, although they possibly fared the worst from it. Given the reduction in EU funds, I hope the scheme is a success and, if so, that it will be extended to western counties in future Finance Bills.

There have been informal discussions with the EU, as Senator Doyle is aware from her former ministerial post, and it views this scheme in a not unfavourable light. A formal presentation must be made and a great deal of work has been done to get to that stage.

I understand the points Senators make and would make many of them myself if I took the narrow focus of my own area. What is important is that this is a pilot scheme. Leitrim was accepted by all Senators and Deputies as a particularly serious case. It was also the case that the scheme would be viewed more favourably by the EU if it applied around the Border area because it is identified by it, as it is by us, as an area which needs rejuvenation.

It is wrong to suggest, as Senator Quinn does, that these schemes are a matter of course and that there is no doubt about their approval by the EU. That is not the case. What the Minister has done is correct. He has chosen a specific area to be targeted and for which one can argue the introduction of such a scheme as this. It has been clearly signalled and flagged as an innovative pilot scheme, so the EU will understand it in those terms.

If it is agreed and a certain level of investment takes place, we will observe the cause and effect of that. If it is shown to successful in the way the Minister and the Government wants, we will then be in a stronger position to request a widening of the scheme as Senators suggested. As things stand, we are proceeding on that basis but that is not to negate the honesty of the arguments made.

Recommendation put and declared lost.

There is a printing error in recommendation No. 19. It should appear in the name of Senator Connor and not Senator Avril Doyle.

Recommendations Nos. 19 and 20 are related and will be taken together by agreement.

I move recommendation No. 19:

In page 171, to delete lines 8 to 33 and substitute the following:

"The administrative county of Roscommon.".

I emphasise that Senator Connor specifically asked me to table this recommendation in his name. He cannot be present as he is at a funeral.

How were the counties of Cavan, Leitrim, Longford, Roscommon and Sligo selected? Only part of Counties Roscommon and Sligo were selected. How does the Minister justify leaving out the DEDs in the rest of Roscommon, Sligo and Cavan? Only by knowing that can we understand why other areas are not included. I am moving the recommendation that the administrative county of Roscommon be included. Is there a difference between the administrative county and the entire county? There can be differences in certain cases.

I cannot accept that this pilot scheme is not to be extended. I can think of parts of Mayo and Roscommon which I would have immediately assumed would be included. We can all pick areas. It is hard to understand why they are not all included. In the absence of a clear explanation of the selection procedure we must remain aggrieved.

I share Senator Doyle's views on this matter. I know the area concerned is the upper Shannon area geographically, but I do no think it can be limited to that as it cuts across many boundaries, administrative boundaries in particular.

This relates to the earlier discussion of which bodies are best able to deal with an integrated social and economic plan. The administrative body of the local authority is the ideal body in general because it has the engineers, architects and rural developers within its boundaries. Some will be included and some will be left out. All of Counties Longford and Leitrim are included but only parts of Counties Cavan, Roscommon and Sligo. The part of Sligo in which I was born is included in this area so I clearly come from a disadvantaged area.

The Senator was never disadvantaged in this House.

I am delighted to see it included but I could list many other district electoral divisions in the Sligo adjacent to this area which would deserve the designation for this rejuvenation scheme.

Because this is a rural development scheme it would be better to limit it to rural areas and that areas such as the county borough of Sligo be left out, but the county council area would be included for administrative purposes. A mistake has been made by simply looking at an area on the map. When that area cuts across county boundaries and jurisdictions it will be difficult to operate without setting up another administrative mechanism. We must recognise the strengths of local authority structures and give them the responsibility of dealing with it. That is what has happened in the local authority in Dublin, the integrated plans for rejuvenation and tax designation are all being drawn up by its officials. They have the responsibility for implementing it, they will seek the European funds to complement the funds from the Department of the Environment and Local Government.

I suggest that a fresh look be taken at the administrative side of the matter and at the counties area before this is implemented. I would like to see the scheme considerably extended in Sligo, where two thirds of the geographical land are left out.

I am pleased two thirds of County Roscommon were included. I understand the reasoning behind that as there was a census report showing a massive decrease in population in the section of the county which is included. The section of the county which is not included experienced a 14 per cent increase in population. It is important that all of County Longford has been included.

Perhaps some discussion should take place with officials of the council authorities. There can be problems in implementing this scheme where it would conflict with county development plans. There would be problems with planning applications similar to those in many rural areas. Some discussion is needed as all of the developments which take place under this proposal will need planning permission. Conflict has already arisen in discussions at local authority level. As a result we may not see the full advantage of the opportunities presented in this Bill.

The Government should give an indication to local authorities that it is policy that rural renewal means development, with planning applications being granted and developments allowed. The opportunity must not be lost due to restrictions implemented by planning officials at local authority level. This could be one of the major drawbacks to this scheme. The record will show that there are planning guidelines being implemented which are more suited to the United Kingdom rather than to a rural area with a declining population. While local authority members may make recommendations at planning level, and are responsible for the county development plans, the interpretation of those plans by officials could restrict what is being proposed. I ask the Government to indicate that it is its wish that development takes place, otherwise there may be a loss.

An Bord Pleanála will ultimately decide.

There were discussions with the local authorities, particularly with the three local authorities where the entire county was not included, and those discussions were concluded. It was not a random assault on the counties. All the local factors were taken in to account. If you look at the map you will see it is all one contiguous area. There is a methodology in the pilot area chosen. There are more than 150 divisions in the three counties included, 38 in west Cavan, 77 in Roscommon and 35 in south Sligo. By any standards that is a significant area.

Apart from being contiguous, what were the criteria which led to the selection of that region? Was it population, per capita income etc. ?

All of those.

What was the formula?

I do not have the specific formula. However, as a former Minister, the Senator will know that one would include demographics, economic needs, population, the shift in the area and the area needs. We are well used to using these criteria in proposals for EU schemes and deciding on our own funded schemes. There is a well thought out procedure in place which works well and this was the basis used.

It is a secret which the Minister is not sharing with us.

It is not a secret. I am telling the Senator of all the economic factors, demographic factors, population shift——

Why would certain DEDs be left out? Sligo is down at 35. Another 35 could be brought in, some of which may be equally disadvantaged.

I am not suggesting that one could make cases for other areas. No one factor would be used to decide. The decision is made on a combination of factors. These decisions can be subjective. However, the Government has taken an approach in Leitrim and the Border areas of getting a pilot scheme which can work, can generate the investment needed and could warrant EU approval. We have put the best possible scheme in place. It is a pilot scheme which the Government is hopeful will produce the desired results. If it does so, our hand will be strengthened to look at other areas.

Recommendation, by leave, withdrawn.
Recommendation No. 20 not moved.
Section 77 agreed to.
Sections 78 to 83, inclusive, agreed to.
SECTION 84.
Question proposed: "That section 84 stand part of the Bill."

My comments could equally apply to section 85. Like many others, I am becoming increasingly frustrated with our licensing laws and regulations on betting shop opening hours. It is time for the State to stop being nanny to its citizens. We should let our public houses, restaurants and betting shops open and close as they see fit. Competition, the time of the year, tourist demands, festivities etc. will dictate whether they open or close longer or shorter hours. Local requirements and current betting practice will dictate whether betting shops need to open on Sundays or open late, whether pubs shut on Sunday afternoons or mornings and so on. We should stop being nanny and let trade and competition dictate the service which betting shops and licensed vintners provide.

I support Senator Doyle's comments. When this matter is debated in the Dáil will be Minister give sympathetic consideration to Deputy Upton's Private Members' Bill?

In the first instance this is a matter for the Minister for Justice, Equality and Law Reform. All Senators and Deputies have come across this issue. There are competing forces as to why one does or does not have a flexibility built in. My personal view is that there are possibilities which should be explored. However, this section is allowing for that flexibility in these two circumstances. The Minister is not forcing anyone to open on the hours specified. They can open for the totality of what is allowed or less if they so wish. There is merit to the points made and I will raise the matter with the Minister for Justice, Equality and Law Reform. The time has come to look at this issue.

Question put and agreed to.
Sections 85 to 94, inclusive, agreed to.
SECTION 95.
Question proposed: "That section 95 stand part of the Bill."

What does section 95 mean? What can they do on the Aran Islands that we cannot do in the rest of the country? Is this a charter for poteen? This excludes the Aran Islands from the territorial application of EU excise law. Why the Aran Islands only? Why not other islands? Have the Blaskets been removed by a former Taoiseach without my noticing?

It is not the Aran islands, it is the Aland Islands in Finland. It relates to countries which have territories beyond their main territory.

What has this got to do with our Finance Bill?

We need to include it in our tax laws. I can get the specifics if the Senator so wishes.

It is an extraneous measure.

It needs to be there. These are areas for which member states have asked for special concessions. We did not ask for any such concessions. There will be many opportunities under EU Structural and Cohesion Funds which would be applicable to Ireland and not necessarily to other countries. I am fairly sure that we may benefit anyway in different ways and under different headings.

Question put and agreed to.
SECTION 96.
Question proposed: "That section 96 stand part of the Bill."

Has section 96 anything to do with duty free goods?

Can we get some information spelling out the items referred to and the exemptions or concessions given in relation to sections 95 and 96?

I will supply the Senator with that information.

Question put and agreed to.
Sections 97 to 101, inclusive, agreed to.
SECTION 102.
Question proposed: "That section 102 stand part of the Bill."

What does this section mean?

Samples of what? What purposes other than court proceedings could we be talking about?

It could be tobacco, red diesel or such items.

To be transmitted by such as couriers for analysis and this has not happened before?

It is tightening up the legislation.

There might have been a loophole.

Up to now officers brought the samples for analysis. This was an inefficient way of operating. This will give a framework or structure within which to operate.

Question put and agreed to.
Sections 103 to 117, inclusive, agreed to.
NEW SECTIONS

Recommendations Nos. 21 and 24 are related and may be discussed together by agreement.

I move recommendation No. 21:

In page 194, before section 118, to insert the following new section:

"118.—Any exemption from stamp duty on any instrument transferring by way of conveyance or lease an interest in a new dwelling-house or apartment shall apply to such an instrument relating to premises which were the subject of a previous conveyance or lease provided that the person acquiring the interest on the occasion in question is acquiring an interest in residential premises for the first time and is himself or herself taking up residence in the premises as his or her bona fide principal private residence, and the rates of stamp duty specified in the First Schedule to the Stamp Act, 1891, as amended by section 117 of and the Eighth Schedule to the Finance Act, 1997, shall not apply to the instrument.".

This recommendation proposes that first time buyers of secondhand property be entitled to the same stamp duty relief as first time buyers of new property. The principle in relation to stamp duty should extend to the buyer rather than the property. If the purchaser is a first time buyer and intends using the property as their private residence rather than for rental or other purposes, they should be entitled to relief from stamp duty whether the property is new or secondhand. This is a basic principle which has been enunciated on a number of occasions by Senators Joe and Avril Doyle and to which there is no aversion on this side of the House.

Stamp duty is an onerous burden for a new buyer, rising from 6 per cent to 9 per cent on houses costing between £60,000 to £150,000. Virtually every home falls into that bracket, be it new or secondhand. It is time to shift the advantage of tax incentives and exemptions more in favour of the consumer. To date the advantage of tax relief has been in terms of the property, whether industrial, commercial, rental or a portfolio which can be sold on, and the investor. The reduction in capital gains tax from 40 per cent to 20 per has meant that a portfolio can be sold much cheaper and more easily. This has fuelled house prices so that what should be considered homes are now becoming property. This is a major crisis which has ramifications for quality of life, apart altogether from the implications for inflation and the economic threat to social partnership. This issue has been raised by the social partners on a number of occasions.

The proposal in this recommendation is one small way in which a more level playing pitch can be achieved in relation to the purchase of homes. The issue concerns citizens purchasing homes for their own private use. They should be given an edge by not having to pay the very substantial stamp duty. The average price of a home in Dublin is £100,000, a figure which is rising rapidly on a weekly basis.

There is no reason for not extending stamp duty exemption to secondhand homes. It would level the playing pitch and would give some succour to couples and young families seeking to buy a house in a hostile market.

I support the comments of Senator Costello, which concur with Fine Gael policy on this issue. Stamp duty relief for first time buyers should be restricted to owner occupiers to avoid a situation where first time buyers could be purchasing property to set again. We are trying to help first time buyers in the city — generally young couples working for good wages well above the industrial average — who cannot afford to purchase even a modest family house. We want to give them some advantage.

The Government commissioned a study on this issue and we await its report, particularly on house prices in Dublin. The Minister is probably not in a position to accept one measure such as this as, ultimately, a package of measures may be necessary to deal with the problem.

There is a real problem when ideologues such as Senator Ross say that this is an area in which we should interfere in the free market. The situation must be very bad if Senator Ross and like minded persons agree that the Government should interfere with property prices through regulation or tax incentives.

He called for a capital gains tax rate of 80 per cent.

Senator Ross obviously has no property to sell.

I do not subscribe to that latter point, but Senator Ross's call underlines the degree of concern that even absolute marketers have over property prices in Dublin.

We would like stamp duty for first time buyers of secondhand houses to be reduced by £6,000, that is in line with the 6 per cent rate, for owner occupiers. It should be restricted to owner occupiers as otherwise a clever investor could rent accommodation at a reasonable cost ten miles from the city and set his or her own home for which they received the stamp duty incentive.

Recently I raised this issue during a Private Members' motion. At that time I pointed out that a three bedroomed local authority house close to where I live sold for £130,000. Now, three or four weeks later, there is another house for sale in the same estate and the asking price is £170,000. Prices are escalating on a daily basis. This is a serious problem for young people and I urge the Government to give whatever relief is possible to first time buyers of secondhand houses, particularly young couples.

I agree this is a complex issue and wish to emphasise the Government's concern about it. The Senators' recommendation is geared at making housing more affordable by granting stamp duty relief to first time buyers of new and secondhand houses. However, I do not believe that adopting this recommendation will achieve this. The rising house market is primarily attributable to the lack of supply of houses in the market and the Senators' proposals do not address this fundamental problem. The effect of these proposals would be to increase the price of houses still further as vendors will say purchasers have more money available to them. As someone who practised as an auctioneer for many years through the late 1970s and into the 1980s, a period which saw the last boom and subsequent decline, I very much concur with the view that a simple removal of stamp duty will not do anything for the purchaser: it will simply increase house prices, something experience teaches us.

Senator Doyle was correct when she said that a package of measures is required and that there is no one measure which will provide a solution. Even if this were not the case, prices would still rise due to market forces if the fundamental issue of supply is not addressed.

My colleague, the Minister for the Environment and Local Government, has commissioned a study on house price rises and the remit of the consultants is to examine all available information in relation to house price trends, the factors influencing house prices and the implications of changing house price levels. The Government will then use this information further to develop housing policy. I do not wish to pre-empt the outcome of this study.

Does the Minister know when the report is due?

I believe it is due within a few weeks. The Government recognises the serious concern regarding the rise in house prices. The measure proposed by Senator Doyle will not deal with the problem, and I speak both as a Minister and as a former auctioneer.

Recommendation put and declared lost.

Recommendation No. 22 is out of order.

Recommendation No. 22 not moved.
Sections 118 to 121, inclusive, agreed.
SECTION 122.

Recommendation No. 23 is out of order.

Recommendation No. 23 not moved.
Section 122 agreed to.
Sections 123 to 125, inclusive, agreed to.
NEW SECTION.

I move recommendation No. 24:

In page 197, before section 126, to insert the following new section:

"126.—(1) Subject to the provisions of subsection (2) of this section any instrument giving effect to the purchase of a dwelling-house or apartment where it is shown to the satisfaction of the Revenue Commissioners that:

(a) any person to whom this section applies has not previously been the owner of or entitled to any beneficial interest in any other dwelling-house or apartment, and

(b) any person to whom this section shall apply shall reside in the said dwelling-house or apartment as their sole or principal place of residence for a period of ten years, subject to the exemption of subsection (3) of this section, and

(c) any person who ordinarily resides in the said dwelling-house or apartment for more than 90 days in any tax year within a period of five years from the date of the instrument giving effect to the purchase shall be a person who shall have a joint beneficial interest in the dwelling-house or apartment with any other person or persons who ordinarily reside therein for more than 90 days in any tax year, except where that person is a minor child of any person ordinarily residing therein, an incapacitated person or a dependent relative within the meaning of section 466(2) of the Taxes Consolidation Act, 1997, and

(d) that any person ordinarily residing in the dwelling-house or apartment to which paragraph (c) applies is a person to whom this section would apply if that person was a party to the instrument giving effect to the purchase of the said dwelling-house or apartment,

then any stamp duty payable on any such instrument shall be reduced by a sum equal to the amount of the stamp duty payable thereon or £6,000 whichever is the lesser subject to the provisions of subsection (6) of this section.

(2) For the purpose of determining whether this section shall apply to any instrument, the Revenue Commissioners may require the delivery to them, in such form as they may specify, of a statement or statutory declaration by

(a) any person directly or indirectly concerned with any instrument giving effect to the purchase of the dwelling-house or apartment, and

(b) any solicitor acting on behalf of any person to whom paragraph (a) or subsection (l)(c) and/or (d) applies,

of any facts which the Revenue Commissioners consider relevant in the making of any such determination. The provisions of section 5 of the Stamp Act, 1891, shall apply except that the provisions of subsection (3)(i) thereof shall be construed as if the sum of ‘£1,000' was deleted and the words ‘a sum equal to the stamp duty payable on the instrument' was inserted therefore.

(3) The relief shall cease to be applicable to the instrument giving effect to the purchase of the dwelling-house or apartment if the said dwelling-house or apartment is sold or compulsorily acquired within a period of ten years after the date of the instrument giving effect to the purchase and is not replaced within a period of one year of the sale or compulsory acquisition by another property to which the provisions of subsection (1) would apply if the replacement property and the property sold or compulsorily acquired were deemed to be the same property.

(4) In the event of a dwelling-house or apartment or any replacement property ceasing to qualify at any time during the period of 10 years any person to whom subsection (2) shall apply shall notify the Revenue Commissioners by filing a return to the Revenue Commissioners in such form as they may from time to time prescribe within 30 days of such an event occurring. The date upon which the instrument shall be liable to tax shall be the date upon which the event occurs.

(5) For the purpose of this section a principal private residence shall be a dwelling-house or apartment to which the provisions of section 604 of the Taxes Consolidation Act, 1997 applies.

(6) The Minister for Finance may by regulations restrict the relief in this section to such dwelling-houses or apartments by reference to floor area, location or situation as may be prescribed from time to time.".

Recommendation put and declared lost.
Sections 126 to 130, inclusive, agreed to.
SECTION 131.

I move recommendation No. 25:

In page 200, subsection (1)(a), between lines 30 and 31, to insert the following:

"by the insertion of the following paragraph in the definition of ‘relevant deposit' after paragraph (h):

‘(i) in respect of which the person beneficially entitled to any interest has received any compensation payment—

(i) under the Hepatitis C Compensation Tribunal Act, 1997, or

(ii) following the institution by or on behalf of that person of a civil action for damages in respect of personal injury of the type referred to in the Hepatitis C Compensation Tribunal Act, 1997.'.".

I was very surprised to learn that awards to hepatitis C victims by the courts or the tribunal attracted DIRT. I understand that other compensatory type payments have been exempted from DIRT and my recommendation asks that money awarded to hepatitis C be likewise exempted from DIRT. I do not think we should add insult to injury and tax the income which accrue to awards when they are put on deposit.

I support this recommendation.

As conceived, and announced in the budget of 1986, DIRT was to be a retention rather than a withholding tax, that is, while the tax deducted could be set off against liability to tax there was to be no repayments, except to companies, and no exemptions, except in the case of certain inter-bank deposits and deposits in the name of non-residents. In the following Finance Bill this rigid stance was relaxed and charities were exempt from the tax and provision was made for repayment to individuals permanently incapacitated from maintaining themselves and the elderly who would not otherwise have been liable for tax on the basis of their total income including the interest from which DIRT was deducted. In announcing the relaxation the Minister indicated, on the Second Stage of the Finance Bill:

The tax, as originally announced was to apply to the deposit interest of all resident depositors. In granting exemptions to charitable bodies, incapacitated persons and individuals aged 65 and over I feel that the best possible balance has been reached in minimising the extent of genuine hardship while at the same time maximising the yield from the tax.

When the Bill was published the Minister said:

The Government have decided to exempt the over 65s and incapacitated persons as these are the categories most likely to be solely dependent on interest for income because of inability to engage in other income earning activities.

Obviously, there will be a small number of individuals outside these categories who may be able to make a similar case. Wherever the line is drawn, there is a risk of genuine cases being on the wrong side of it. Persons with Hepatitis C awards may currently claim repayment of DIRT under the existing provision which I have outlined. In addition, they are totally and permanently incapacitated from maintaining themselves and qualify for exemption in respect of their investment income from the award under section 5 of the Finance Act, 1990. The total DIRT deducted is refunded.

Consideration has been given on a number of occasions since 1986 to increasing the extent of the exemptions from DIRT or extending the categories of persons entitled to refund. However, it has not been possible to devise acceptable systems that would not be open to abuse and tax evasion without large scale costly policing. Any extension of exemptions and refunds would, of course, bite severely into the yield from DIRT, which in 1997 came to £150 million. It is for this reason that DIRT continues to be deductible from the savings accounts of children and an exemption at source was not granted to the incapacitated and the elderly. If Senator Doyle's recommendation was accepted it could not, in equity, be confined to persons with Hepatitis C awards but would have to be extended on a more general basis to other hardship cases. For these reasons Senator Doyle's recommendation is being opposed.

Recommendation put and declared lost.
Question proposed: "That section 131 stand part of the Bill."

Mr. V. Doyle

Section 131 provides for a budgetary measure increasing the rate of DIRT on special savings accounts from 15 per cent to 20 per cent. We have already dealt with the pension provisions in section 16 of the Bill. We accept that many people, particularly those with voluntary pension, will get a smaller pension than they expected. These people can only provide an income from the savings which they made throughout their working lives. These savings are often placed in special savings accounts. When these accounts were introduced the rate of DIRT was 10 per cent while interest rates were approximately 12 per cent. DIRT was later increased to 15 per cent and it is now proposed to raise it to 20 per cent. Meanwhile interest rates have fallen below 5 per cent and are expected to fall even further when we join EMU. Retired people who rely on income from special savings accounts to supplement their pensions now find that they are having to pay more tax on less revenue. I hope the Minister can consider giving some relief to people in this age group.

I know what the Senator is saying. An increase from 15 to 20 per cent in the rate of DIRT deductible paid on special savings account is provided for. Special savings accounts were introduced for individuals in 1993 following the abolition of exchange controls to counteract the threat of capital outflows while preserving DIRT revenues as far as possible. The interest on special savings accounts attracts a low rate of tax, which satisfies the investor's full tax liability in respect of the interest. Their introduction was dictated by the failure to reach agreement at EU level on common rules governing the taxation of internationally mobile deposits. The rate, which was originally set at 10 per cent, was increased in 1995 to 15 per cent. As the Minister indicated in his budget statement, the Government is aiming for a 20 per cent standard rate of income tax and it therefore makes sense to move the rate of DIRT on special savings accounts to this rate now. It also helps to correct the imbalance between the tax treatment of deposit interest and other income. The new rate still provides a competitive after tax return to Irish depositors on their investments.

Question put and agreed to.
Sections 132 to 138, inclusive, agreed to.
First to Seventh Schedule, inclusive, agreed to.
EIGHTH SCHEDULE.

Recommendations No. 26 to 44, inclusive, are related and are to be discussed together, by agreement.

I move recommendation No. 26:

In page 222, between lines 25 and 26, to insert the following:

“No. 7 of 1945.

Minerals Company Act, 1945.

Section 12.”.

I have sought to assist the Minister in correcting any omissions in the Eighth Schedule in relation to stamp duty enactments. The Minister of State will appreciate that I have had to trawl through the different enactments to ensure that there are no omissions in the Minister's list.

This list appears to be omitted and seems as extensive as the original list. The Minister should include these repealed stamp duty enactments.

The Senator's point is well made. This Schedule repeals a number of redundant stamp duty provisions, including section 12 of the Finance Bill, 1895. Section 12 imposes stamp duty charges on certain Acts of the Oireachtas. In practice, an Act of the Oireachtas which was liable to stamp duty under this section always contained an exemption from the charge. Many of those exemptions are being repealed in this Schedule. The Senator lists a number of exemptions from the charge imposed by section 12 which are not contained in the Schedule. The Minister is aware of the existence of all these exemptions, but due to time constraints it did not prove possible to reach agreement with the various Government Departments involved so that all redundant sections could be repealed in this year's Finance Bill. Those on which agreement was reached are listed in the Schedule. I assure the Senator that the others can be repealed in next year's Finance Bill. The Senator's point is well made and he is correct.

Recommendation, by leave, withdrawn.
Recommendations Nos. 27 to 44, inclusive, not moved.
Eighth Schedule agreed to.
Ninth Schedule agreed to.
Title agreed to.
Bill reported without recommendation and received for final consideration.
Question put: "That the Bill be returned to the Dáil."
The Seanad divided: Tá , 26; Níl, 13.

Tellers: Tá, Senators T. Fitzgerald and Keogh; Níl, Senators Burke and Ridge.

    Question declared carried.

    Bohan, Eddie.Bonner, Enda.Callanan, Peter.Chambers, Frank.Cox, Margaret.Dardis, John.Farrell, Willie.Finneran, Michael.Fitzgerald, Liam.Fitzgerald, Tom.Fitzpatrick, Dermot.Gibbons, Jim.Keogh, Helen.

    Kett, Tony.Kiely, Dan.Kiely, Rory.Lanigan, Mick.Leonard, Ann.McGowan, Patrick.Mooney, Paschal.Moylan, Pat.O'Brien, Francis.O'Donovan, Denis.Ó Murchú, Labhrás.Ormonde, Ann.Walsh, Jim.

    Níl

    Burke, Paddy.Caffrey, Ernie.Coghlan, Paul.Coogan, Fintan.Costello, Joe.Cregan, Denis (Dino).Doyle, Avril.

    Doyle, Joe.Gallagher, Pat.Manning, Maurice.O'Toole, Joe.Ridge, Thére se.Taylor-Quinn, Madeleine.

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