Finance Bill, 1999 [ Certified Money Bill ] : Second Stage.

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

I am glad to be able to introduce my third Finance Bill to the Seanad since taking office. The Bill as initiated was one of the largest Finance Bills ever published and it has increased in size by nearly 60 pages since then. The Bill contains a series of important initiatives which reform the tax system in favour of the lower paid, cut personal taxes for all taxpayers, introduce significant new tax reliefs, set a new agenda for tax relieved pension pro vision and strengthen considerably the powers of the Revenue to combat tax evasion.

Before I proceed I wish to express my regret that I will be unable to attend the debate this afternoon and tomorrow as I have to attend at the important meeting of the European Council. However, the Minister of State at the Department of Education and Science, Deputy O'Dea, will be standing in for me on this occasion.

I count myself fortunate to be the first Minister for Finance in over 50 years to bring in an overall budget surplus. However, the very mention of the phrase "budget surplus" brings with it the danger that the restraint which underpins the conditions that led to the budget surplus in the first place will dissolve under the pressure of raised expectations. Fairness demands that we use this opportunity to benefit those who have not done as well as most of us in recent years, particularly the old and the lower paid. However, in delivering fairness, we must not abandon prudence. Above all, there is the need to maintain social consensus – the co-operation between all sections of the community for the common good. What I have sought to accomplish in the budget and in this Finance Bill is both fair and prudent. The basic equity of the tax system has been improved; the use of the tax system to stimulate enterprise has been enhanced and tax administration is being modernised to deliver customer value.

As I have said before, I believe in making radical change when such change is desirable, not by short steps but by pushing out the frontier and challenging the accepted approach. I pursued this strategy in moving to tax credits – a move which was universally welcomed. I am also making major structural changes in the pension area which will be a challenge to the existing way of doing things and present new opportunities to providers of pension products. However, the changes are in the interest of those who count – the pensioner who has worked and saved to accumulate the pension fund.

In order to provide the fullest possible information on these pension changes and other elements of the Bill, I arranged for a detailed press release on publication of the Bill on 11 February. This document went into some depth in explaining the provisions of the Bill. It is important that the Houses and the public should be as well informed as possible on the development of taxation policy. To this end I have placed copies of the most recent set of taxation strategy group papers on the Department of Finance's website. A small amount of material has been held back either because it refers to tax avoidance schemes or relates to items still under decision by Government or subject to negotiation with other bodies. Nevertheless the voluminous material which has been made available will illuminate the policy making process in all areas of taxation. The papers set out the general principles underlying taxation strategy, describe the options that are discussed at official level and give a valuable insight into the dynamics of the formulation of policy.

There are 217 sections in the Bill, 21 of which have been added since publication. Much of the content of the Bill in volume terms is accounted for by a limited number of subjects – retirement benefits, the dividend withholding tax, profit-sharing schemes, stamp duty preconsolidation measures, rural renewal reliefs and Revenue powers, including measures in relation to offshore trusts on which I will concentrate. There are other provisions in the Bill which are also of significance and I will highlight these. I will also refer to the more important provisions added since publication.

The first part of the Bill deals with income tax, corporation tax and capital gains tax. The first six sections set out the basic elements of the personal tax package announced in the budget. This package of nearly £600 million in a full year will cut the tax bill of every taxpayer, particularly for the over 65s and those on lower pay. It removes 80,000 taxpayers from the tax net, 15,000 of whom are over 65.

It delivers on the promises made to reduce the tax burden and to improve the position of the less advantaged in the community. It does so by a radical equalising of the benefits of personal tax allowances by converting these into tax credits at the standard rate of income tax. I signalled in my first budget that such a move was on the cards but this prognosis seems to have gone unnoticed in the commentaries on my 1998 budget. I plan to deal with the programme for this move in my next budget.

Other income tax changes include an extension of the tax allowance for the employment of a carer to wider family members. Employment of a carer will now also extend to the hire of a carer through an agency.

Section 12 introduces a new tax relief in respect of funds raised by public subscription for persons who are totally and permanently incapacitated. This relief recognises both the needs of such persons and the desire of those who responded to the public appeal that the entire funds raised should be applied, without deduction of tax, for the relief of the distress of the person concerned. Generally, for the trust to be a qualifying trust, no individual may contribute more than 30 per cent of the total subscription raised. However, this initiative does not apply to trusts where the amount raised does not exceed £300,000. I know the House will welcome this initiative.

Other changes in this part include the removal of BIK on child care facilities and travel passes provided by employers on a free or subsidised basis and a reduction in the BIK charge on preferential loans. The Government is very conscious of the growing wish for a recognition of the child care needs in the tax system. I took the opportunity in the budget to outline a number of the important and complex issues that the question of a possible child care tax relief raises. The Government has already discussed this area in some detail and proposes to examine these matters further. In the interim, certain measures were announced in the budget to facilitate and encourage the supply of child care places. These measures are included in sections 34 and 49 and will apply to child care services which meet the required standards for such facilities as provided for in the Child Care Act, 1991, and regulations under that Act.

Section 34 provides that certain child care facilities made available by employers on a free or subsidised basis will no longer be subject to a charter tax in the hands of employees as a benefit-in-kind. Section 49 introduces capital allowances for expenditure on child care facilities.

Three major reports relevant to this area were published over the last 12 months and these are now being considered by the interdepartmental committee established by the Minister for Justice, Equality and Law Reform. This committee has been given six months to evaluate, prioritise and cost the recommendations on child care proposals outlined in the Government's An Action Programme for the Millennium. On receipt of the committee's report, the Government will consider what further steps to take in this complex area.

Sections 22 to 25, inclusive, make a number of changes to tax law to facilitate the introduction on a phased basis of new Revenue computer systems for dealing with taxpayers, to implement over time a consolidated tax billing procedure and to tailor the penalties for late filing of the end of year returns by employers, the P35, to the length of the delay in meeting the due date for receipt of return by the Revenue.

Section 209 provides the legislative framework for the electronic filing of tax returns. This will permit returns filed over the Internet to be treated in the same manner as paper returns. This innovation, which it is intended will be rolled out in 2000, will place Irish tax administration at the cutting edge of electronic administration. The Revenue collection agencies of many larger countries would be happy to be in a similar position with regard to the use of such technology.

Section 19 increases substantially the annual allowances that may be claimed as a deduction for the funding of retirement provision and also sets out the new pension arrangements which were announced on the publication of the Bill on 11 February, but which were provided for in amendments. The new limits range from 15 per cent of net relevant earnings to a maximum of 30 per cent, depending on the age of the contributor. The 30 per cent maximum also applies to persons in certain occupations and professions, irrespective of age, where there is a definitive and limited earning span. The Bill lists a number of such occupations relating to professional athletes in the main but allows for the list to be extended by regulations to other specific occupations. These limits will be subject to an earnings cap of £200,000 per annum.

These pension measures give effect to the principles set out in my Budget Statement as my guiding aims in reforming the rules in this area. These principles were that the individual will not be restricted to only one pension option on retirement; the individual will have the option of retaining ownership of the capital sum invested on retirement and the individual will have a greater role in the investment of accumulating funds during the contribution period.

The new rules seek to give greater choice in how persons plan to fund their retirement, greater flexibility in how they use their accumulated funds and a greater say in how their pension scheme is run. At the same time, prudent requirements have been put in place to preserve pension assets via the approved minimum retirement fund. I have also preserved the taxation principle whereby pension contributions and the investment fund, as it accumulates, are tax exempt while the draw-down or realisation of the fund is subject to tax.

I have taken account of particularly sensitive areas in this tax treatment, namely, the position of the surviving spouse and minor children. I have also removed the rule which forces pensioners who wish to access their lump sums to take out an annuity at the same time. They will now be able to choose between the annuity and the new pension option for which I am making provision.

These proposals are radical and sensible. They are definitely pro-consumer. I have had a considerable input in forming my views from Members of the Oireachtas, pension commentators, the pension industry, the experts in the Revenue Commissioners and the advisers in my own Department. In the final analysis these proposals have my stamp on them and the approval of the Government. I look forward to the views of Senators on these proposals and to a constructive examination of these on Committee Stage.

As Senators will be aware, recent Governments have been very active in assisting people to attend third level colleges. As part of this process the 1995 budget announced the introduction of free fees and tax relief was provided for full-time undergraduate students in private colleges. The following year tax relief was also made available for part-time undergraduate students in publicly funded and private colleges. This year I am introducing a new relief for the fees of undergraduate students studying a wide range of courses in publicly funded colleges in other EU countries. The relief is provided for in section 26.

Section 27 inserts a series of new sections into the Taxes Consolidation Act, 1997, to implement the budget day announcement of the new withholding tax at the standard rate of 24 per cent in respect of dividends paid and other profit distributions made from 6 April 1999 by companies resident in the State. The explanatory memorandum to the Bill sets out in detail how the new tax will operate. The obligation to withhold tax is placed on the company paying the dividend or on an authorised withholding agent acting for the company.

Certain exemptions are provided for in the case of dividends paid to Irish resident companies, charities, pension funds, certain persons resident in EU or tax treaty countries and to publicly quoted companies in such territories. Entitlement to these exemptions will have to be supported by particular documentary evidence from the recipients of the dividends.

The rules for the application of the tax are thorough and detailed. They have been drawn up in consultation with company registrars and intermediaries who will have to apply the tax. The rules seek to ensure that the relevant tax will be deducted and returned to Revenue while at the same time applying a system that takes account of the commercial realities and practical issues involved in the payment of dividends and distributions by or on behalf of companies in the State.

The Bill provides that, in the case of Irish resident shareholders, dividend withholding tax deducted in a year of assessment can be set against the shareholder's tax liability for that year – the shareholder will be taxed on the gross dividend at his or her marginal rate and will get a credit for the tax withheld. Where the tax withheld exceeds that liability, the excess can be repaid to the taxpayer. A person who is not liable to tax and who has been charged withholding tax will thus be entitled to a full refund of the tax withheld.

Sections 42 to 46 extend the termination dates for a number of tax relief schemes aimed at developing particular areas or locations in the State. These are the urban renewal scheme, the Temple Bar area scheme, multi-storey carparks, the seaside resorts scheme and islands reliefs. In particular, following agreement with the EU Commission, section 42 will extend capital allowances in the Customs House Docks area from the scheduled termination date of 24 January 1999 up to 31 December 1999 and in certain cases, where work on a project is well advanced at that latter date, the extension will run until 30 June 2000. This will allow the remaining development of the area and the 12 acre extension to the area to be completed.

There has been considerable reporting of our recent exchanges with the European Commission in the matter of State aids. While the Commission has opened a procedure under State aids rules to investigate the application of double rent relief and rates reliefs since 1993 in the area concerned, I believe we can defend this successfully and get a favourable outcome. These matters have to be negotiated in the same way as the approval for the extension of the capital allowances was secured.

My Department has been active in pursuing these issues as constructively as possible with the Commission. We have held detailed discussions with the interested developers here to keep them fully in the picture. We have in the last few weeks sent a very comprehensive response to the Commission regarding the applicability of the double rent and rates reliefs in the Custom House Docks area. We also sent a detailed response to the Commission in connection with commercial tax reliefs under the new urban and rural renewal schemes yet to be brought into force.

Approval for State aids must be sought and secured from the Commission under Article 92 of the Treaty. These rules apply in the same manner to all member states, and Ireland is not being singled out. As Senators will appreciate, the Commission has complete discretion in the grant or refusal of State aid approval. It is not a matter for the Council of Ministers.

The Commission has become increasingly vigilant and proactive where State aids take the form of tax relief. It produced new State aids guidelines in this regard which it published last November, setting out its approach to and policy in regard to special tax reliefs and reductions. It has indicated that it will be monitoring from a State aids point of view those tax relief measures notified by all the member states under the EU code of conduct on harmful tax competition. However, I should stress that our proposed single rate of corporation tax and the phasing out of our 10 per cent regime for manufacturing, the IFSC and Shannon have State aid clearance under the agreement between the Commission and the Irish Government last July.

The Commission has not regarded tax reliefs for residential development as requiring State aid approval and, accordingly, I brought in these reliefs for rented accommodation in the case of rural renewal last June, and the various residential reliefs in the case of the new urban renewal scheme will be commenced shortly by way of ministerial orders.

Section 44 provides for a further extension of the scheme for the granting of capital allowances for the construction of multi-storey car parks. It is being extended to 31 December 2000, where 15 per cent of the cost of the car park is incurred by 30 June 1999, except in the case of car parks within the Cork Corporation and Dublin Corporation jurisdictions. The deadline for entering into qualifying leases for double rent relief in respect of multi-storey car parks is also being extended from 31 July 1998 to end June 1999, where 15 per cent of the total cost of the project was incurred before 1 July 1998. The capital allowances for car parks where the double rent allowance is no longer available is increased from the current maximum of 50 per cent to 100 per cent with effect from 1 August 1998. Where the double rent allowance is available on foot of qualifying leases entered into after 31 July 1998, the maximum capital allowances remain at 50 per cent.

In relation to the pilot rural renewal scheme, I am proposing a number of changes in section 47 to enhance the residential tax reliefs in particular. The main changes involve the granting of a relief in respect of expenditure, incurred by an individual in the period 6 April 1999 to 31 December 2001 on the construction or refurbishment of owner-occupied residential accommodation in a qualifying rural area. The relief consists of an annual deduction from total income for tax purposes of an amount equal to 5 per cent in the case of construction expenditure and, in the case of refurbishment expenditure, 10 per cent of the expenditure incurred. The individual incurring the expenditure must be the first owner and occupier of the dwelling after the expenditure has been incurred. The relief available under the section may be claimed in each of the first ten years of the life of the dwelling following construction or refurbishment provided that the dwelling is the sole or main residence of the individual. To qualify, a building must have a minimum area of 38 square metres and a maximum of 210 square metres.

In addition, I propose changes in relation to the "section 23" relief for rented residential accommodation in the area. At present, in order to qualify for the "section 23" allowances available under the rural renewal scheme, the lease of the property in question must be for a minimum period of one year. This minimum period is now being reduced to three months. In order to qualify for those allowances, the premises were restricted to a maximum floor area of 125 square metres. This limit is now being increased to 140 square metres for newly constructed premises while, in the case of converted and refurbished property, the maximum rises to 150 square metres.

I see these extensions as a major fillip to the scheme and a clear incentive to investors to invest in the development of the areas in Leitrim, Longford, Cavan, Sligo and Roscommon covered by the scheme. I know that other areas wish to benefit from such schemes, but let us see how this focused pilot scheme works out first.

Sections 48, 49 and 50 provide for the new capital allowances for expenditure on private convalescent facilities and on employer based child care facilities and the granting of "section 23" relief for third level student accommodation. I accept that these new tax reliefs may run counter to the general policy aim of reducing the range of reliefs and widening the tax base. Nonetheless, if there are clear and desirable social objectives to be secured – as is the case in health, child care and housing – we should be prepared to use tax reliefs in a targeted and prudent manner to achieve these aims.

Section 51 is a similar type relief under section 843 of the Taxes Consolidation Act, 1997, to encourage private investment in the provision of third level buildings by providing capital allowances to investors who put up 50 per cent of the funds. This relief was introduced in 1997 and is a forerunner of a broader public private partnership approach to infrastructural development which I plan to develop on a broad front.

What is a third level building?

It could be a library or other facility in a third level institution. I propose two changes in this section. First, the termination date for the scheme of relief is being extended from 1 July 2000 to 31 December 2002. Second, the scheme will apply to projects funded by the research and development fund announced by the Minister for Education and Science last November and, to fit into the way the fund will operate, the section enables the Minister for Finance and the Minister for Education and Science to delegate the approval mechanism for such projects qualifying for section 843 relief to the Higher Education Authority.

Section 843 in a way foreshadows the public private partnership approach. The Government has endorsed a public private partnership or PPP model, on a pilot basis, for public capital projects in Ireland. The initial concentration will be on economic infrastructure projects. I have set up a special PPP unit in my Department and it is my intention to announce in the next few weeks a list of pilot projects on which I expect substantial progress to be made by the end of this year. My Department is discussing possible projects for inclusion in the list from the relevant line Departments. It would be inappropriate to specify today the candidates for inclusion in that list as consideration of their suitability is not yet complete and a decision has not yet been made on their inclusion. However, I can say the priority area for projects is roads.

In looking at the prospective pilot projects, the key considerations are long-term value for money and their priority at national level. However, their suitability for PPP and what we may learn from them for a wider application of PPP are also important. There is real scope to deepen and widen co-operation between the private and public sectors. I am confident that the pilot projects will prove a sound and sustainable base to extend the PPP process in the future into a range of areas where it can provide the optimum benefits for the national economy and the public purse.

Section 61 extends the tax relief on investment in films for a further year to 5 April 2000. As I made clear in the summary of Finance Bill measures published on 11 February, there are a number of reports on the operation of the film relief which are to be published shortly and which the Government wishes to consider more fully. One such major report, the Indecon report which was received in November, supports the continuation of the relief subject to a number of modifications to help better focus and target Exchequer resources in this area.

Chapter 5 of the Bill – sections 68 and 69 – makes provision for the introduction of a new savings related employee share option scheme and for changes to existing tax reliefs on employee share ownership trusts. In the Budget Statement I made it clear that there had been a number of calls for new profit sharing initiatives and that I was not opposed to reasonable proposals in this area.

My approach is based on a number of criteria. First, any profit sharing schemes should be open to all employees on similar terms. Second, they should provide an opportunity for employees to acquire an equity stake in their firm. Finally, there should be a medium to longer term aspect to profit sharing schemes in the form of the delivery of benefits in the future for efficiency improvements undertaken now.

Section 68 provides for a new save as you earn or SAYE scheme, which is modelled on a similar scheme in the UK. The SAYE scheme will provide for employees to save for a certain period to acquire shares in their employer company. The shares are acquired under options which may be granted by the employer at a discount to the market price at the start of the savings period. Any gain on such shares when the option is exercised will be free of income tax but will be subject to capital gains tax if the shares are sold. The scheme was cleared with IBEC and ICTU prior to its finalisation in the Bill.

Section 69 contains a number of amendments to the legislation in respect of employee share ownership trusts, or ESOTs, and approved profit sharing schemes. In particular, the Bill will allow those employees who leave a company in the first five years of the ESOT to benefit from the allocation of shares in the company to the trust for a period of up to 15 years after the ESOT is established. The normal benefit period for ex-employees in ESOTs and approved profit sharing schemes is 18 months after leaving. These and other changes in the Bill make the ESOT scheme attractive to employees. The return to the employer and the consumer is increased efficiency via new work practices, and to the taxpayer, as shareholder, via an increased share value.

Section 70 provides 100 per cent capital allowances for the establishment of park and ride facilities in larger urban areas to help alleviate traffic congestion. The principal change in this provision since it was proposed in the budget is the extension of the allowances to commercial and residential development associated with the park and ride facility, subject to the residential element of any project not exceeding 25 per cent of total allowable expenditure and the residential and commercial elements combined not exceeding 50 per cent of that expenditure. It has been put to me that the park and ride facility on its own would not be attractive to investors without this associated physical development. The park and ride scheme will last for three years.

Sections 71 to 74 give legislative effect to the reduction in the standard rate of corporation tax on trading income from 32 per cent in 1998 to 12.5 per cent in 2003 and to the provisions of the agreement reached between the Government and the European Commission last July on the phasing out of the 10 per cent rate of corporation tax for manufacturing and for certified activities in the IFSC and in the Shannon Airport zone. Section 73 identifies income to which a 25 per cent rate of corporation tax will apply from 1 January 2000. These legislative provisions will cop perfasten the future corporation tax regime in the State. This new regime conforms to EU state aid rules and the EU code of conduct on harmful tax competition.

Sections 82 and 83 deal with the problem of Irish registered non-resident companies. The use of such companies for questionable purposes by persons with no connection with the State was debated at great length and in some detail this time last year. The Government undertook to come up with a comprehensive package of company law and tax measures to get rid of the undesirable exploitation of such companies, while at the same time not ruling out the legitimate use of a non-resident structure for acceptable business purposes.

The measures in the Finance Bill will be complemented by action to be taken by the Minister of State responsible for science, technology and commerce under company law in the Companies (Amendment) (No. 2) Bill which was published yesterday. The measures in the Bill are an extensive, comprehensive and focused set of measures to deal with the malpractices in this area and to allow Revenue to identify and deal effectively with cases of abuse. It is a more complete solution than that attempted with limited success in the Finance Act, 1995.

Sections 88, 89, 90 and 92 introduce new provisions dealing with offshore trusts and companies. These provisions will tighten up the legislation in place since 1974 to ensure that gains made by such trusts and companies are effectively taxed in the hands of taxpayers who are domiciled and resident or ordinarily resident in the State. The law in this area is in need of some updating.

Irish tax law is similar to the corresponding UK legislation but has not kept up with the changes and adjustments that have been made in that jurisdiction. There is some evidence that the use of such trusts is growing as a means of avoiding Irish tax and the present deficiencies in the Irish legislation compared to the UK are being taken advantage of and advertised by tax advisers. The Bill tackles the main avoidance issue by imposing an exit charge under capital gains tax on trusts moving offshore; applying more stringent provisions for attributing gains to resident beneficiaries; limiting exemptions from tax for beneficiaries disposing of an interest in a trust; and requiring more information to be returned to Revenue in relation to offshore trusts. I am happy that these changes will close off a potential avenue for tax avoidance which would have become increasingly attractive as personal wealth in Ireland continues to grow given our rapid economic expansion in recent years.

As Members of this House know, the Government reacted immediately to the recommendations of the first Bacon report on housing. The measures introduced in the Finance (No. 2) Act, 1998, were part of the overall Government package aimed at addressing the supply and demand needs in the housing market. Since then, the Government commissioned a further study by Peter Bacon and Associates, economic consultants. This review, entitled The Housing Market – An Economic Review and Assessment, was published on 9 March 1999 and called for further measures to be taken by Government. While most of this report deals with non-tax issues, which the Minister for the Environment and Local Government and the Minister of State at the Department of the Environment and Local Government with responsibility for housing and

urban renewal are addressing, the consultants called for two further changes to the tax code. These are the withdrawal of the planning requirement before land owners can avail of the temporary reduction in capital gains tax and that the tax relief on private rented accommodation should be increased in line with the trend in rents.

According to the report's analysis, the planning permission requirement, contained in the Finance (No. 2) Act, 1998, was causing delays in the supply of land for housing. Consequently, I brought forward an amendment which extends the 20 per cent CGT rate to the disposal of land which is zoned residential under a county development plan. Thus, the planning requirement is no longer required. The provision is contained in section 91 of the Bill.

As regards the recommendation for an increase in the tax relief for tenants, this proposal warrants further consideration. Any increase in this relief would have a significant Exchequer cost. While I am not in a position at this stage to give a commitment on this issue, I will consider this recommendation for next year's budget. It is clear from the speed of the Government's response to the recommendations contained in both this report and the first Bacon report that it accords a high priority towards achieving a better balance between supply and demand in the housing sector.

Under the Customs and Excise provisions in Part 2 of the Bill, sections 94 to 109 consolidate and modernise the excise legislation relating to mineral oils – petrol, diesel and other heating and fuel oils. This oil legislation has been amended and supplemented on many occasions since the original 1930s legislation to the extent that it has become fragmented and difficult to follow. The various sections deal with the rates of excise, the charging of excise, reliefs and abatements, excise licensing requirements, control procedures, prosecutions and offences.

The excise duty and VRT changes announced in the budget are implemented in sections 110 to 117. As regards the VRT changes contained in section 105, it is interesting to note that despite the increase in rates on cars over 1400 ccs from 1 January, the level of new car registrations in January and February 1999 was substantially up on the same months in 1998. In relation to the cut in betting tax, section 117 provides that the new rate of 5 per cent will come into effect by order made by the Minister. This cut will take place from 1 July 1999 now that the new funding arrangements for the Irish Horseracing Authority and Bord na gCon have been put in place.

The VAT changes in this year's Bill are limited in extent and mainly technical in nature, apart from the increase in the farmers flat rate of VAT from 3.6 per cent to 4 per cent from 1 March 1999 and the associated similar increase in the VAT livestock rate announced in the budget. The VAT changes deal in the main with the removal of a double VAT charge on certain HP transactions and sales of second hand agricultural machinery, the tightening up of certain VAT charging and control provisions, the removal of a VAT charge in certain cases and the implementation of a recent EU directive on the VAT treatment of gold held for investment purposes.

A considerable part of this Bill, sections 140 to 197, deals with stamp duty changes. This is an area of taxation which normally attracts limited attention. The present stamp duty code goes back to 1891. Stamp duties were first introduced to the UK by William of Orange who brought the idea from Holland where they had proved to be an effective source of revenue. As I have remarked elsewhere, we owe a debt of gratitude to King Billy for this contribution to the Irish Exchequer.

The application of stamp duties in the 1891 Act was seen as a radical and progressive form of taxation requiring those who transferred property by deed to make a substantial contribution to the Exchequer. This was a particular source of irritation to the better off at that time. Stamp duties still contribute a significant amount of tax revenue to the Exchequer. The yield has risen by 90 per cent in the last three years from £286 million in 1995 to £541 million in 1998 which reflects economic growth and the increasing value of property. It is necessary, therefore, to ensure that stamp duty legislation, which was last consolidated in 1891, is kept up to date and that any potential loopholes are closed off.

As part of this process, it is proposed to publish a Bill later this year to consolidate all the stamp duty legislation since 1891. In advance of this, it is necessary to make a number of changes to stamp duty law in the Finance Bill. These measures, which are in the main technical, include repealing a number of redundant sections as well as standardising all references to fines and penalties so that there is a clear distinction between civil penalties and criminal offences.

As regards capital acquisitions tax, there have been many demands to reform the system to deal with the burden imposed on some residents of the family home by the recent surge in house prices which have outpaced the increase in CAT thresholds. There has also been a strong case to amend the CAT code to deal more equitably with modern family and interpersonal arrangements. I have sympathy for these points as I have a personal interest in some of these changes. I looked at these issues prior to the last budget but I decided not to act because I wanted to focus tax relief and reform on the lower paid. I will, however, look at the area of CAT in some detail for my next budget.

I now turn to the provisions governing Revenue powers which have been subject to much recent comment. Section 207 provides additional powers to Revenue to facilitate greater access to material held by or in financial institutions, including in certain cases in non-resident accounts, where this information is necessary to pursue tax liabilities. There are also provisions to enable Revenue to obtain a greater range of information from third parties in relation to persons with whom they have dealings and to require a taxpayer to provide fuller information to Revenue on their own tax affairs, including answering specific questions put by a tax inspector.

The Bill also augments the current provisions requiring a person to give a full statement of their financial affairs and of their assets and liabilities. These proposed new powers will add considerably to the statutory powers of the Revenue Commissioners in all tax areas. They are in response to recent tax disclosures and are based on actual experience of the gaps in powers which have been identified.

Section 211 of the Bill creates a new Revenue offence in respect of the concealment or destruction of books, records or other documents which are required to be produced under a notice served by an authorised Revenue officer or under an order of the High Court. The section also provides that a person convicted of a Revenue offence is now liable on conviction on indictment to a fine not exceeding £100,000. The upper limit had been £10,000. The section allows a court to order a person who has been convicted of certain Revenue offences to comply with certain provisions of the tax legislation, for example, the submission of a tax return.

I want to devote some time to the powers proposed in section 207 of the Bill. The powers contained in this section have been the cause of controversy over the last month. I indicated on previous occasions that the wisest course might be to await the findings of the Moriarty Tribunal. The tribunal was asked, among other things, to make recommendations in this area. Events have moved apace and the Government considered it necessary in the interest of reassuring the public to propose new powers at this time. It is the intention to set in train a further review of all relevant powers when the report and recommendations of that tribunal are available.

As regards access to persons' accounts in financial institutions, the Bill proposes to broaden existing powers of access to accounts of named individuals where Revenue has reasonable grounds to believe that there is particular information in the possession of the financial institution relating to the taxpayers' liability to tax.

The accounts referred to in the Bill include accounts in banks, building societies and other deposit-taking institutions such as credit unions. This wide range of deposit-taking institutions is already covered by the existing Revenue powers of access to individual accounts. These new powers of access will include resident and ordinarily resident individuals, companies, trusts and connected persons – not just individuals who are ordinarily resident in the State, extend to accounts held by unidentified persons or classes of persons – not just named individuals as at present, cover all tax heads and not just income tax and corporation tax as at present, allow access to non-resident accounts in cases where there is reason to believe that the true owner is resident, and extend the definition of "bankers' books" to include relevant supplementary information in a financial institution's possession, such as background documentation.

The Revenue Commissioners will also be able to examine the procedures and systems of financial institutions in relation to non-resident DIRT-free accounts and to examine a sample of non-resident accounts to ensure they are genuine. The Bill will also empower the Revenue in specific criminal investigations to gain access to accounts in the same manner as the Garda can in criminal investigations. The Bill will permit Revenue to conduct on-site audits of a bank's affairs, not just a PAYE or VAT audit as at present.

Under current law, the Revenue Commissioners must seek the approval of the High Court or the Appeal Commissioners for access to the account of a named individual who is ordinarily resident in the State. The Bill will allow for such access to be secured by an order issued by one of the three Revenue Commissioners. In the case of accounts held by unidentified persons or classes of persons and non-resident accounts, it will still be necessary to secure High Court or Appeal Commissioners approval. These arrangements are comparable to those found in many other countries. They bring us more into line with other countries rather than ahead of them as some commentators have suggested.

Fears have been expressed in certain quarters that this new provision will be misused and that the Revenue Commissioners will engage in trawling exercises of all and every account. This will not be the case. The powers will be used responsibly. The focus will be tax evasion. There will have to be prima facie information in the possession of Revenue of suspected evasion before the Revenue Commissioners would seek access.

The Bill provides that a taxpayer is informed when the relevant third party powers are being used to secure information, so that the taxpayer can use the normal legal process to object if there are valid grounds for doing so. The Bill also makes it clear that requests for information do not overrule normal client or professional confidentiality. This amendment covers legal privilege, but also covers the confidentiality that exists between any professional and his or her client. These amendments addressed concerns which I felt were legitimate.

The Revenue Commissioners have assured me that they will exercise these powers and grant orders only in those cases where it is necessary and where there are firm reasons to believe that there is material and particular information held in the deposit-taking bodies in question. The amendment which I introduced in the Dáil will ensure that a taxpayer will get notice when information is requested by Revenue in good time for the taxpayer to take court action for judicial review of the Revenue request.

The Revenue Commissioners have also assured me that there will be appropriate checks and balances to ensure that only properly authorised and trained Revenue personnel will have access to any new powers. The Chairman of the Revenue Commissioners has already indicated publicly that the proposed new powers would not be focused on smaller cases; he saw these powers as helping to restore public confidence in the tax collection system which has been dented severely by the revelations of the past two years.

The Institute of Taxation has called for the appointment of a special tax ombudsman to ensure that any new powers are not abused. First, there is no history in this country of the Revenue Commissioners abusing powers given to them by the Oireachtas. Second, the Ombudsman already has a remit in Revenue matters and dealt with 130 complaints on tax matters last year. The Ombudsman has also expressed doubts on the need for a special tax ombudsman. Third, there are existing procedures for a taxpayer to appeal to the appeal commissioners and to the courts. Fourth, Revenue have standing procedures for internal review by a senior officer unconnected with the case where a taxpayer is unhappy with the actions of a tax inspector.

I am anxious to preserve the balance between the legitimate expectation of taxpayers to go about their business without unwarranted intrusion and the need to empower Revenue to tackle the episodes of tax evasion which have caused such recent public concern and anxiety. This balance is a matter of political judgment. That is, in the final analysis, an assessment which can only be made by the Oireachtas and reflected in the legislation passed by Senators.

As I have said on a number of occasions, one cannot beat one's breast about tax evasion and cry horror at the same time when the powers to combat tax evasion are sought and given. This issue has arisen on each occasion when it is proposed that Revenue powers be widened significantly. The last such occasion was section 153 of the Finance Bill, 1995, in relation to the famous whistle blowers' charter requiring tax advisers of various sorts to report tax evasion by their clients to Revenue. I am sure we will have a thorough and frank debate in this House on the direction we wish to take in this area and I look forward to the constructive input of Senators on all sides.

There are many other important proposals in the Bill which I have not found time to mention in these opening remarks. All sections of the Bill can be gone into in detail on Committee Stage.

I would like to point out that a number of minor corrections to the Bill are required as follows: in page 36, line 48, to insert "the" before "value"; in page 46, line 9, to delete "in" and substitute "as"; in page 46, line 47, to delete "sections" and substitute "section"; in page 108, line 19, to delete "the"; in page 115, line 13, to delete "Section" and substitute "Sections"; in page 233, line 2, to delete "subsection" where it secondly occurs and substitute "section"; in section 209, pages 330 to 340, the references to sections 917A to 917K and associated cross references should read 917D to 917N, respectively, and the reference to section 197E(2) in page 336 should read 917H(2). I ask the Cathaoirleach to direct the Clerk of the Seanad to make the corrections under Standing Order 103.

I commend the Bill to the House.

I welcome the Minister to the House with this wide-ranging Bill. I regret the Minister will not be with us on Committee and Report Stages although I understand the reasons for his absence. As this Bill consists of over 217 sections and given the limited time available for Second Stage we cannot discuss it in great detail, particularly opposition spokespersons. Having a Minister of State present for Committee and Report Stages further underlines the rubber-stamp nature of our role as Senators when it comes to the Finance Bill. I have no difficulties with the list of technical amendments that the Minister has just outlined. I only wish that our amendments would be taken on board. We might have had some chance of being listened to by the Minister but, with respect to your Minister of State, I do not think he would have the authority to budge one whit or to give consideration to what we say. This exacerbates the nature of what we will do today and tomorrow as a rubber-stamping exercise. In terms of the use of Seanad time and resources it is very frustrating but I welcome the Minister and the broad thrust of most of what is in the Bill.

I agree with the Minister that financial legislation must be about fairness, prudence and getting the right balance. Without social consensus we will not have legislation that is broadly acceptable nor will we have the general support for the governance of the country and the Government of the day on which all democratic institutions are built. The Minister and the Government must get the balance right and try to ensure that as many people as possible enjoy the fruits of success, particularly the economic success of the past six or seven years. That is what any good Finance Bill has to be about.

I welcome the personal income tax reliefs and the general tax reliefs. The penal rate of personal taxation has been the main cause of tax evasion or legitimate avoidance and the saga of offshore accounts. A Sunday newspaper recently published a report on the number of high earners and successful business people in Ireland who have now chosen to live offshore, as it were, because of the penal rates of personal taxation. That picture has improved slowly over the years because we have other priorities in terms of the money that is being returned to the Exchequer and the budget surplus. There are priorities and, as the Minister said, we have to get the balance right between fairness, prudence and letting the individual taxpayers enjoy the fruits of their success. He has taken another 80,000 people out of the tax net in this budget. I welcome that.

I welcome the move towards tax credits. In the past few weeks we all received our new tax free allowance certificates but the move towards tax credits has resulted in very complicated TFA certificates which are no longer user friendly. Drawing on my experience of the SMI from my previous existence I can say that it is a retrograde step from a customer service point of view. I would like urgent attention given to this matter by the Minister and the extremely capable civil servants who are working on the SMI initiative in the Department of Finance.

The Revenue Commissioners have been to the fore with the SMI and customer service provisions in recent years and I compliment them on what they have done. One would need to have a doctorate in finance to be able to understand the new tax free allowance certificates. I am concerned about the message this sends out. I ask the Minister to address this problem urgently.

With regard to carers, I welcome the extension of the tax allowance for the employment of a carer. This is an extremely difficult area. The cost of care for the elderly, the ill and the incapacitated has become prohibitive for those who do not qualify for public health care. Some people would quibble with the standard of public health care for long-term patients, yet we want to encourage people to keep their incapacitated and elderly relatives at home and get the balance right between allowing tax reliefs and paying people a carer's allowance to look after them. I would favour tilting the balance further to ensure that more and more people are cared for in their family circle. This is the right approach for the person concerned, but it also the right approach from an Exchequer point of view because the cost of providing care as the proportion of elderly people in the population increases is a frightening prospect.

On child care, I ask the Minister to explain the delay on reporting on this issue. I know that various bodies are considering this matter and will be reporting back to the Government, but child care will be a major election issue.

That is three years away.

It is not that far away. As present Ministers come into the loop of the tribunals, it is only a matter of time before the tribunals could spring a general election. Whatever about the politics played out in this House, the child care issue transcends all the various groups of people. The working mother—

This is not one dimensional.

I accept it is not one-dimensional. There is a major child care issue for those who choose to stay at home to look after their children. I do not think any woman should be put at a disadvantage because she opts to stay at home and care for her children. Perhaps I am sufficiently old-fashioned to feel that where it can be managed financially this is the best option for caring for children under eight years old. Unfortunately, for many women it is no longer a matter of choice if they wish to keep a roof over their head. Such is the cost of housing and mortgage repayments that they must continue to work.

This is a major dilemma, particularly for young married couples who would love to start a family or to have one or two more children. However, when they consider the economics of the situation they may find they simply cannot afford to have one income and pay for child care at the same time. Therefore, they have no choice but to bring a second income into the household. Otherwise the State will be further burdened by increasing numbers on local authority housing lists. It is in the country's interest and in our children's interest, to get this right. I ask the Minister to give urgent attention to getting the balance right between those who choose to work, those who are forced to work because of economic circumstances and those who choose to stay at home. There are three categories of child carer to be considered. The Minister moved slightly in the budget in terms of capital allowances for child care and child care tax relief. However, this is a crisis, particularly in big towns and cities, which is putting huge pressure on marriages as a result of parents trying to cope with a full-time day job, returning home to look after small children and spending the entire week-end catching up on what they would have preferred in many cases to have done during the week. The burden is too great on young married couples trying to cope with these pressures. These couples must often choose what is not in the best interest of their child, otherwise they will not have a roof over their head. They are in a catch 22 situation.

The Minister mentioned three major reports in this area. I hope the reports will be published and that the Government will make a decision on the matter as soon as possible.

An element of the Finance Bill which has made most headlines are the pension provision changes. Perhaps at last we are getting away from the dreaded annuity scheme issue as the only choice available. We need greater choices and greater flexibility, but without risking security, particularly for pensioners who will not have assets as well as a pension to support them in their old age. I ask the Minister to consider this issue very carefully. Will the Minister tell us what the Pension's Board thinks of the recent changes, has he con sulted it and has he accepted its advice? There are those who believe that the changes effectively allow people to cash in their pensions.

There are conditions attached to this.

Yes, there are conditions but the Minister has introduced a provision whereby people can cash in their pensions. He talked about prudence in his contribution this morning. I worry about prudence, particularly for those who have nothing other than their pension scheme.

These changes are for self-employed people such as farmers and cattle dealers who have dealt with their own affairs for 40 years. These people are well used to managing their own affairs and there is no reason to suggest that when they reach 65 or 66 years they can no longer deal with their financial affairs.

I have no difficulty with the general thrust of the provision, but we have been making changes in the pensions area for the last ten years. Obviously, the Minister felt that the changes were not taking place quickly enough. He has now decided to put the pension changes into free-fall, so to speak, and make them immediate. I am concerned about the immediacy of this. The provisions in this area appear to be hurriedly and hastily drafted. I am not satisfied that time and thought has been given to providing what the Minister obviously felt was needed to speed up what we were heading towards anyway. I am concerned about the hasty drafting of some of the sections relating to the changes in pension provisions.

This area is a golden target for young brokers and accountants. We have already debated the problem of misselling financial products. There are those who believe that Margaret Thatcher's provisions for cashing in pensions ruined pension provision schemes in the UK. The concept of greater flexibility and allowing people to have greater freedom of choice is acceptable provided the mortality game, as it were, and the average annuity age of 82.5 years is understood by those cashing in their pensions. For every 100 pensioners who might consider doing this, 47 will actually live beyond 82 years of age. Effectively, many of these pensioners may have nothing left at that stage to look after them and their spouses. This is the reality if one understands the mortality game as the accountants and actuaries work out the figures. I am sure the Minister, as an accountant, understands this concept.

Accountants and the industry will like what the Minister is doing because it will free up large amounts of money to direct into tracker bonds and BES schemes. However, those who are concerned about pensioners, particularly the pensioners who will have nothing but their pension and will have no assets to back it up, are extremely worried about what the Minister is doing. Mr. McDowell's committee has yet to report. Regulation in this area is needed. However, even with regulation in the UK they managed to get it wrong and major hardship resulted. The Minister pre-empted the recommendations of the report of the national pensions policy initiative prepared by the Pensions Board and published last year. I am not sure what that says of his views of the NPPI report. Is the Minister giving the pensions board a thumbs up or has he decided to go it alone regardless of the changes it is proposing? In other words, has the Minister consulted them? Is what the Minister is doing prudent? Is the balance correct between security and flexibility?

There is a view that the proposed new regime, in attempting to maximise flexibility, will jeopardise the security of ordinary pensioners who have absolutely nothing else to fall back on. There are two main risks to long-term security under the new regime. First, at a very vulnerable time, many people will feel pressurised to cash in too large a proportion of their pension savings when they retire. With the high selling and misselling selling, that is quite a likely outcome. Second, the longer a person lives, the more likely it is that their retirement assets would be fully used up or dwindled to the point where they become completely inadequate. There are those who also feel that the Minister's proposals will be to convert pension savings from assets that people should be entitled to enjoy during their retirement into a family inheritance. This would pose an impossible dilemma for most ordinary people. Should they spend the hard won fruits of their labours or, having made sacrifices all their lives, should they try to survive on a lower income so that they can leave money to their families? There are many questions that have to be asked.

Most pensioners will need advice on the options open to them under the new regime. There are many examples both here and in the UK where the misselling of financial products has caused concern about the quality and independence of the advice which people will get in making decisions in a very complex area. Many observers in the UK believe that the flexible retirement scheme in operation there, which is a lot less liberal than the one the Minister proposed, is the next pensions' misselling scandal waiting to happen. Is that what we are looking at? Are the Minister's pension proposals the next charter for another misselling scandal down the road by the financial institutions?

Many new retired people will have access to a tax free lump sum and in many cases they may, at the expense of their own long term security, cash in more of their pension, for instance, to help a son or daughter with a house deposit or a business start up. However, easier access to those pension funds will put added pressure on many pensioners and, add to that the misselling of products that we have experienced this will be a charter to add another layer of misselling. There are concerns about the security of those pensioners who have no assets to back up their pensions policy at the moment.

I would appreciate a response to my comments relating to proprietary directors and pensions. It all ties into concerns about the legal interpretation of the concept of a proprietary director, a 20 per cent director as it were, which is outlined in pensions legislation which dates back to pre-1972. There are many proprietary directors of private firms who have less than 15 per cent of the shareholding of the company. Why should these people be excluded from the changes? These are people we can be sure will be able to pay for advice on how to spend their pension fund. Why must the proprietary director clause be kept to the 20 per cent plus directors – or is it 15 per cent? The concept is a legal definition dating back to 1972 – it means those who, together with family and close relatives, own or control more than 15 per cent of the voting shares in a company. Prior to 1974 such people were excluded from the occupation and pension schemes. I am advised that modern Revenue practice imposes special conditions on the participation of 20 per cent directors – those who own or control more than 20 per cent of a company's voting shares. We need to rationalise and sort out this whole area. Does it relate to a 15 per cent director or with a 20 per cent director? Why should it not be those genuine proprietary directors who own less than 15 per cent of a company but may indeed have a controlling interest? This is a problem that needs immediate attention and the definition of a "proprietary director" needs to be amended. A person could be a proprietary director with a 7 or 8 per cent shareholding. Indeed, a considerably wealthy proprietary director with huge assets behind them may only have a shareholding in the region of 5 or 10 per cent. Why are we stuck with slightly outdated legislation on the definition of a proprietary director. These are the people the Minister's legislation will comfortably suit. I will not be worrying about the security of these people if they live beyond 82.5 years of age if they or their spouse will go hungry. These are the people who can provide for themselves and need flexibility in access to their pension funds and in terms of spending that money; yet they are tied by legislation that is in urgent need of review.

Under the urban renewal scheme the Minister mentioned the Customs House Docks area, the Temple Bar area and other issues. Maybe we could have an update on the record as to whether he could be generous with his time limits and extend the date in terms of the Rosslare Harbour industrial zone to allow us deal with planning and other issues. In a remote rural area we need a greater carrot to get people down there as distinct from the Temple Bar or the Custom House Docks zone. I have a personal interest in ensuring that there is not a cut off time before we get the maximum return from the designation in Rosslare Harbour area.

As regards the State Aids Guidelines, if we are to believe the complaints from the Commission, we made a dog's dinner of this. At this stage I am not sure who to believe. Down the years Irish knuckles have been publicly rapped by Brussels for not having cleared with the bureaucrats there various proposed State aids. There has been some embarrassment about what might appear lax bureaucracy in this area – and I do not use the term "bureaucracy" in any derogative term. Apparently "i"s have not been dotted and "t"s crossed in this area.

Again the deadline on multi-storey car parks seems to be creeping up on us extremely quickly. Is there a case, particularly in rural areas where this is a very new concept, to extend the deadlines particularly when there is active interest in this area, where carparks applications are being processed, even if work might not have commenced or have reached the required stage.

I agree with the Minister on social tax reliefs. I know we are introducing a new area of tax reliefs which is against the thrust of what the Minister is being advised to do. I agree with the capital allowances for private convalescent homes. I welcome the reliefs for third level student accommodation and the changes in relation to child care facilities. I have already made my views very clear on that. This may only be a temporary measure until we sort out the problems around these issues. I had problems with the Minister's reference to third level buildings. I do not know whether it was a three storey building or an educational establishment, but I gather he was referring to an educational establishment.

We need to know what is intended in relation to public private partnerships soon rather than later. We need a proper debate on the proposals and not just a fait accompli in relation to that, particularly toll roads and other areas. The Minister has not gone far enough when it comes to the film industry. I welcome the save as you earn scheme and have no difficulty with the ESOTs. I also welcome the tax reliefs for the provision of park and ride facilities.

In relation to corporation tax, basically when this Government came into power, it recycled the work done by the previous Government. We had made the arrangements with the powers that be on a further 12.5 per cent but the Minister tried to unscramble it and represent it as his own. Nevertheless I welcome this; the Minister should thank us for doing the groundwork.

That is totally incorrect. As I pointed out in the other House, in May 1997 there was an announcement by the previous Government and absolutely nothing was given.

The Minister has accepted the first change in the tax codes that the Bacon report on housing proposed in relation to planning requirements and capital gains tax. The Minister should move urgently on providing tax relief for private rented accommodation, particularly in our major cities. This is one of the crisis areas. We have young, educated and qualified people to fill jobs, but even on a good starting salary they cannot get rental accommodation in Dublin. There is a critical need to examine this matter. I support fully the recommendation in this area which, with respect to the Minister, needs to be acted upon urgently.

I will deal with the issue of Customs and Excise on Committee Stage. There are great concerns about the powers of the Revenue. I welcome the amendments the Minister moved in the Dáil in this regard. He has to get the balance right because confidence in the Revenue Commissioners and the whole tax collection system has been dented severely by scandals in recent years. We should not move to a point, however, where the compliant taxpayer feels terrorised by a new regime. I broadly welcome what the Minister is doing but I want to be reassured that those who have nothing to fear will receive proper notice and that due process and natural justice will prevail. In small country towns in a small country like Ireland, everybody knows everyone else. There is a real concern, although it may be paranoia to do with the parish mentality within such a small population, that people will be picked on with no justification or prima facie evidence.

Can people request to see what prima facie evidence is available before the Revenue Commissioners proceed with the new powers the Minister is giving them? I would like to have reassurances on that point. That would further reassure people that natural justice will be seen to be done. I am only interested in the compliant taxpayer. The Minister has to sort out tax evaders who have caused such scandals and a lack of confidence in the system in recent times.

I will rest my case there. I thank the Acting Chairman for his patience. The Finance Bill is huge, with 217 sections. It is hard to do justice to any individual section in the time allotted, but I look forward to dealing with the specifics on Committee Stage.

I compliment the Minister on the excellent work he is doing in the Department of Finance. He is the first Minister for Finance in 50 years to have brought in a budget surplus. His own utterances over the years, including those from the back benches, have played a part in how we have handled our finances in the past ten or 12 years. I refer back to the 1987 period and we are now reaping the benefits of decisions taken at that time by the minority Government of the day. If we had not taken what some people considered to be rather drastic steps in cutting public expenditure, we would not now be availing of the advantages of what is generally termed the "Celtic tiger" economy.

Prudent handling of the public finances in the late 1980s, and proper control of expenditure under EU structural, cohesion and other funding, combined with our own national finances, con tributed to the situation we are in today. It must give some satisfaction to people who were in Government then – we have had different Governments, but the first stone was certainly cast in 1987 – to be able to look back on the work they carried out at that time, which has brought us to where we are now.

Ireland is in an unprecedented state of economic development. We are the envy of Europe and are talked about throughout the world. Our small open economy has progressed to the stage where we are now equal partners in a new single currency with our partners in Europe. It is a major achievement from the time in the mid-1980s when we were talking about the International Monetary Fund being called in because the creditors were at the nation's door. We were in trouble and the economy was going down the tubes, but the situation has been totally reversed.

The Finance Bill gives effect to the budget which was introduced in December. It is with some satisfaction that we can look at the provisions of the Finance Bill which, as passed by the Dáil, contains 385 pages and 217 sections. It is a major document covering every aspect of economic life. From the viewpoint of ordinary citizens the most important aspect is how it will affect their lives, either under the headings of tax relief, welfare or support for business.

There is broad agreement that the Finance Bill is most acceptable in terms of implementing all the provisions of the budget. There are radical changes proposed, in particular to the tax system. The Minister for Finance and the Government have provided £600 million in tax reliefs under the provisions of the Finance Bill. A further 80,000 people on low incomes have been removed from the tax net and will not pay tax at all. This is of vital importance. For many years economists and other experts have explained that because of the tax system it was not economical for people to go to work. This is an attempt to bridge that gap and help people to find greater benefit by seeking employment while not being penalised by a draconian tax system.

The new tax credit system is a radical change and while there was minor confusion regarding people's interpretation of it, I agree wholeheartedly with my colleague, Senator Avril Doyle – both of us are members of the Joint Oireachtas Committee dealing with the Strategic Management Initiative – that an explanation is needed concerning how tax credits will affect the individual. I hope such an explanation will be forthcoming and we will certainly follow it up at the SMI meetings. Those meetings have already complimented the Revenue Commissioners on the way they operate. We have recommended that some other Departments might look at the way they do their business.

A total of 80,000 people will be removed from the tax net under the provisions being introduced by the Minister for Finance. Of those, 15,000 will be people over the age of 65. It is important when we address matters of economic priority in a State with an annual growth rate of 7 per cent that we do not forget there is a large section of the community which needs support. Those people are not in a position to avail of the fruits of economic success. That places responsibility on Government to return to them part of that success. While that is not the business of the Minister for Finance, other than in relation to taxation, it is important that each Department addresses this. That is accepted to be the case. We must bring all sections of society along with us. We cannot forget those who are not in a position to be in productive employment at this time. The general consensus is that this matter is being dealt with by the Government.

Pensions are a source of great concern as people move into later life. People from the age of 50 focus on their pension. We live in an outdated but safe system of pension provision and an opportunity to modernise the system has been presented by the Government. All the protection necessary should be put in place. I do not want to see financial institutions selling products which will be investigated in ten years time and be found to have been sold inappropriately to the public. None of us wants to see a scandal materialise in the future. The protection which exists under all the legislation will ensure that is not the case.

We need to deal with child care. I appreciate the difficulties the Minister and the Government face in this area because different groups have different opinions about how this should be addressed. One group supports the view that facilities should be provided for the mother who goes out to work and she should be given tax relief. Then there is the mother who wants to stay at home to look after her young children. We must also consider the needs of minders. Each section has equal rights. In any new initiative in child care, the mother who decides to stay at home must receive equal protection and get the full benefit of any measures introduced in future budgets or in new legislation. We must consider all views. I am pleased that, in this budget, the Government did not rush into something which could discriminate against any section of the community.

Urban, rural and seaside renewal schemes have been of great benefit to towns and villages. Rural renewal schemes are in operation in many counties in the upper Shannon region – Leitrim, Longford, Sligo and parts of Roscommon – and they will have a great economic effect in those areas. At the moment that benefit is confined to residential properties only. While that has a positive effect, for towns and villages to develop, a commercial approach must be implemented. I have looked at urban renewal schemes in the past and the dual approach, residential and commercial, has been the key to success. I hope the Government will pursue the commercial side – tax designation – with the European Commission, particularly in regard to rural renewal.

I regret that I must condemn the expert committee on urban renewal. I do not know what criteria they used. This committee was established by the last Government. It got it wrong; it left Counties Leitrim and Roscommon out of the equation on this occasion. I am not sure on what grounds two such counties could be excluded. What expert committee, with the best interests of the State at heart, could leave out two counties which are struggling to better themselves in present economic circumstances?

People are investing in those counties but there are towns which need refurbishment, towns which had mass emigration in the past but are experiencing an increase in population today, and they need a boost. That boost was available under the urban renewal scheme. Under the 1993 scheme, Roscommon town qualified for urban renewal and the positive effects are there for all to see. How could an expert committee decide five years later that it did not qualify? Surely there is something wrong here. To whom are these people answerable? Will they come into this House and explain why, out of the 26 counties in the State, 24 can be included in urban renewal and two excluded? It is beyond belief that people who are termed "experts" could make such a decision. I am not satisfied with the committee's four line report which stated that it found no compelling reason. I find no compelling reason I should accept the decision and I do not accept it. I intend to pursue this matter further, on the floor of this House if necessary. The committee will be answerable itself or through a Minister.

Previous speakers mentioned the issue of third level fees and the budget addressed the issue of the fees of students studying in Europe. However, fees are not the greatest difficulty faced by parents as, by and large, they are free. The difficulty for students, particularly those studying in the UK, are the maintenance costs which are beyond the reach of parents. Thousands of Irish students are studying in the UK and it costs approximately £100 sterling per week in maintenance. This issue needs to be addressed. One way to do so is to increase the income limit under which people would qualify for third level maintenance grants. A partial maintenance grant would be of some value and the Minister of State should take note of this suggestion which might form the basis of a future Government decision. However, this is not solely a matter for the Department of Finance but also for the Minister for Education and Science and the Government. I have many dealings with people who have two or three children in third level education, some in the UK, for whom the cost of maintenance is becoming a major burden.

The recent decision to give Objective One status to the 13 counties of the Border, midlands and the west is the most positive decision taken by any Government for these areas. I warmly welcome this decision which presents enormous opportunities. However, it will take the resolve of local authorities, county managers, development agencies and all in public life to ensure that we maximise the benefits for these regions. Over the next six or seven years we will have a once-off opportunity to bridge the gap between the west and the east.

The opportunity for industry is our greatest plus as up to 40 per cent State aid can be given to start up industries in these regions. Members who represent constituencies in these areas know that the lack of manufacturing employment opportunities for young people is the main problem. There is a great onus on development agencies, local authorities and county managers to take advantage of this opportunity. The Department of Finance and the Government should issue thorough instructions to senior officers in local authorities and development agencies to be prepared for this opportunity and to ensure that adequate land is zoned and developed to facilitate industrial projects.

The Finance Bill includes a proposal to give extra powers to the Revenue Commissioners. In recent weeks many newspaper articles have argued that such powers should not be given. I have spoken many times in the House over the past year about financial scandals. The revelations in this area have been embarrassing. One financial institution ripped off its customers; there have been thousands of bogus accounts and all kinds of financial shenanigans. Genuine taxpayers feel ripped off because not everyone has been paying their fair share. Such taxpayers are not perturbed by these new powers as they have nothing to fear. However, they expect that everyone will pay their fair share from now on and that this will present a further opportunity for the Minister to lesson the burden on ordinary taxpayers.

I do not understand why those in exalted positions with proper contacts and resources to hire the best professionals should be in a position to evade paying taxes, while ordinary PAYE workers have their taxes deducted at source and pay the full amount demanded by the Revenue Commissioners. It is time that everyone was treated equally. If this means that the Revenue Commissioners need extra powers then they should be given those powers with the proper safeguards. The Minister outlined the safeguards involved and I am satisfied that the interests of ordinary taxpayers are protected and that the benefits of this provision will ensure that revenue due will be collected. The knock-on effect will be that we will all pay less tax.

The housing crisis is another problem faced by people, particularly young people. We have reached a stage at which the middle section of the market is disappearing. One is either at the top end of the scale and can afford to pay inflated house prices, or one joins a local authority housing list. This is a mistake. The housing sector has always included a large middle section. For many years this section expanded – it started with the Small Dwellings Acquisition Act administered by local authorities and was continued by financial institutions. This enabled people to buy or build their own homes. Such a prospect is now beyond the reach of many young couples. I welcome the initiatives in the second Bacon report but more needs to be done. The only way to maintain prices at their current levels – I do not believe they can be reduced – is by providing the opportunity for more houses to be built.

The planning laws are contributing to the present crisis. The system is cumbersome and this is exacerbated by the prevailing opinion that building should be limited to certain areas. County Roscommon had a population of 150,000 at the time of the famine and at that time there were no water, sewerage or other such facilities available. Today it has a population of 50,000 and practically every house in the county has a public water supply and every town and village a public sewerage system. Yet, it is difficult, and in some cases impossible, to acquire planning permission. When planning permission is granted to a farmer or landowner the remainder of his land is sterilised in effect by a section 38 agreement which means that no other houses can be built on that land, whether it be 50 or 100 acres.

What is it about planners that enables them, looking to the future, to decide that it is in the best interests of all that no houses should be built on these lands for the next five to ten years? They may only have graduated from a planning school, yet they profess to know all that is required to make a decision having regard to what is best for a village, town or rural area.

If we are to resolve the housing crisis we must look at the planning laws and give direction. If we are to develop rural areas, abide by the concept of regional development and adhere to the EU theory that the concentration on the centre, such as Dublin, is not in the best interests of a country, we need to send a message to county engineers, county mangers and planning officers that the policy of the Government is to redistribute the population. Those who decide on planning permissions should understand this. If this is not Government policy it should become so because it would ensure that we will not have the current concentration of population with consequent house price inflation.

I will address the many other aspects of the Bill on Committee Stage. I compliment the Minister and commend the Bill to the House.

I approve of the general thrust of what the Minister and the Government have been doing for the economy. While the Minister's first budget was better than his second, the thrust of financial policy, which I hope will continue for a few more years, is one for which some of us have yearned for many years. I hope it will not be squandered by a Government with a different philosophy.

It is easy for people to say that the Minister inherited an economy which was in such good shape that nothing could go wrong. I note Senator Costello is nodding in agreement. I disagree with him. If the Labour Party had been in office, it uniquely could have squandered this great inheritance and killed the Celtic tiger. I do not believe any other party could have done so, but the record of the Labour Party in office, and of its new friends, the former Democratic Left Party—

The party was also a friend of Fine Gael.

Fine Gael wrongly befriended Democratic Left. That was one of its problems. The Labour Party could have squandered this inheritance because when in office it was the high tax, high spend party whose attitude was to give everybody everything they wanted, especially those in the public sector. If the Labour Party was in office today we would not be doing many of the things the Minister and the Government have done. While I admire the party for the difference it would have made – it offers a choice – it would have been disastrous if it had been in office.

I strongly approve of the thrust of what the Minister is doing. I also approve thoroughly of the philosophy he espouses, which is to reduce income tax and capital gains tax. He is unashamedly prepared to take measures which initially do not seem popular and which have members of the Labour Party screaming. While it is not necessarily good for the economy if that party disapproves, it is time we did not listen to and automatically agree with, the general consensus in RTÉ, The Irish Times and among a few other do-gooders, to be initially popular, especially in the economic sphere. The Minister has refused to give in to those pressure groups which are popular with those parts of the media over which the Labour Party has such an influence.

That is an outrageous statement.

I applaud the Minister for what he has said and done. He inherited an economic boom, but it is fragile and he must be very careful in the way he treats it. One of the great mysteries of the boom is that nobody knows why it has happened. The previous Government derived some of its benefits. I have never come across an economist, politician or anybody who is credible in this sphere who has convincingly indicated the reasons for the boom.

The Labour Party.

Most of the reasons for the boom are external and no politician or Government can claim the credit for it. I suggest that the reasons are three or fourfold. The principal reason is probably completely external and has to do with the multinationals. The wealth generated in this country, including the employment boom, is being created by external sources. That may have much to do with IDA Ireland, including the great attractions we offer, our young population and the fact that the right decision was made in the 1960s and 1970s, probably for political reasons and by accident, to invest a huge a amount of money in education. As a result of that decision there has been a great coincidence of interests where a brilliant young educated population is matching the needs of multinationals. I do not believe that was foreseen. It was luck, but many of the great economic booms have been created by luck.

The fact that the boom is multinational-led means it is fragile. Multinationals can leave at dawn and on slippered feet, so to speak. The moment they can get cheaper labour, as we have seen in so many high profile cases, they will be off. They will make no apology and will pay whatever fines are necessary to the IDA and the State, as Fruit of the Loom in Donegal had to do. The moment we provide the exact conditions, or near to them, that they need, they come. They are staying now but they will not be here forever. Other countries will offer similar, more attractive conditions.

The EU may threaten, as Oskar Lafontaine did, the International Financial Services Centre. Our tax regime, which is magnificent for business and enterprise in many ways, may well be threatened by those in the EU, not just Oskar Lafontaine, who will look for tax harmonisation. We have an attractive commitment on tax reduction in terms of business and corporate tax which is attracting companies here. That is part of the economic boom but it is something which our EU neighbours look upon with envy and it may or may not last. It is very well for the Minister to say he has made a deal that it will be reduced to 12.5 per cent. However, if a future German or French Government does not like that, let him not tell me they will not be able to force us to change that, because they will. We will do it because they will put pressure on us in other areas, whether the Structural or Cohesion Funds, the Common Agricultural Policy or something else. We must treat the multinational basis of this economic boom with kid gloves and continue to encourage it. We are dependent on this external force, whether we like it or not.

Another reason for this boom, which is not as great as many people think, is the massive injection of EU funds. That, as everyone knows, is gradually coming to an end. Enlargement will happen in the first ten years of the next century. We will then become net contributors rather than net takers and we will be subsidising Poland, the Czech Republic and the other enlargement countries. In turn the great capital infrastructure in this country which is EU subsidised, will not only have to be paid for from taxes but will have to be replaced by Irish capital. All new capital constructions and infrastructure will have to paid for from Irish taxes and not from EU funding. It is coming to an end and I see very little sign of prep aration for that – I heard warnings given by the ESRI last week, but I see no signs of preparation. This second leg of the Celtic tiger is in danger.

The third reason is devaluation. It is generally recognised that the boom dates from about 1993. Devaluation took place in early 1993. It was a forced measure taken against the wishes of the Government at the time. All the forewarnings about how we would import inflation and how this was disastrous for the national debt were not borne out. Devaluation led to an export boom in this country, the like of which we had never seen before. We will never be able to devalue again. We will never be able to engineer a boom of that sort or to solve the currency problem by devaluing. We have given up that mechanism as a base or a weapon for economic boom. That was a once-off, and along with EU funding and multinationals, is one of the stilts upon which we are balancing so well. It will not be repeated.

I urge the Minister to look on this boom as an enormous coincidence of interests which he has been fortunate to inherit, but which he has so far dealt with extremely well and responsibly. We should recognise this, even though we may be opposed to many of his other political philosophies.

The other reason the Minister has given for the great success of this economy is internal – the other three were external – and is not one which I share although it is one about which my colleague Senator O'Toole will no doubt speak. It is the so-called social contract – the agreement between unions, the Labour Party, farmers and all the vested interests in this country which has kept wages down to such an extent that inflation has been kept down as a result and the whole economy has been kept under control.

Not vested interests.

As a result of this, what we have, unfortunately, is the Government paying back Senator O'Toole and his comrades—

His cronies.

—his cronies as Senator Costello said – he is one of them – by giving them more power.

Is this a speech or a polemic?

It is a political diatribe.

Senator Ross should not personalise the debate. He should stick to the subject matter of the Finance Bill.

Without interruption, a Chathaoirligh.

Senator Ross, without interruption.

The social contract is extremely relevant, especially given that my comrades are on either side of me. It has led to power moving quickly out of the hands of the Oireachtas and local government into the hands of trade unions, employers, farmers and other strong vested interests. Time and again, we listen to Ministers, the Taoiseach and other powerful people in this country saying that as long as we get the agreement of the social partners, we will do this. To hell with the social partners – I do not want them deciding policy for me or anyone else; I want the Oireachtas and the Cabinet to do it. I do not want Senator O'Toole telling me what my wages or conditions of employment should be; I want the Government to do that. I want my tax decided by the Government, the Dáil and the Seanad. I do not want the Taoiseach or anyone else to say that we must consult with Peter Cassells, John Dunne or anyone else. They should be allowed to lobby, but they have disproportionate power.

This is because there is an implicit threat of a strike every time wages may be contained. The result is that public service pay runs completely out of hand and the Government and Senator Costello roll over for an inflated public service pay deal which we cannot afford. This sets up expectations which cannot be kept after the economic boom is over. History will judge the economic responsibility of Ministers for Finance by whether they take on the public service or not. There has been no sign whatsoever of any Minister so far being happy to do that.

The reason for this is simple; these people control too many votes. Politicians are unwilling to take on teachers, gardaí, prison officers or any other group which controls enough votes to make a difference in various constituencies. The end result is that taxes get higher and ordinary taxpayers must pay the price; that is what I mean by the corporate state. We have a situation in this State where powerful people are not elected, and elected people are powerless. That is the result, and there are distinct signs of it in this budget.

Last year the Minister for Finance introduced direct tax concessions and reduced both rates of income tax, but he did not do that this year. This year it is quite obvious that, in order to try to achieve another agreement at the end of this year, he kow-towed to ICTU and the unions. Instead of giving the sort of tax cuts he promised, he gave greater personal allowances in order to placate the trade union movement, in the hope that he will get another agreement and industrial peace. That is the unwritten agenda behind this budget. It was agreed to by IBEC because that body is a toothless tool of certain vested interests which does not really represent enterprise in any sense of the word. The powerful groups are the semi-State and the banks, and the differences are becoming less and less noticeable, whereas small businesses are not represented properly. That is what is happening and the conspiracy between the trade unions and IBEC is apparent.

I am sorry the Government surrendered to that particular pressure, it will undoubtedly get an agreement after going through the motions before coming up with an agreement for which the only prerequisite is to be inflationary with public service pay. Once that agreement is reached, maybe the Minister will then revert to type and be able to reduce taxation again. That is my hope.

We should recognise that this is the first Minister who did not squander a budget surplus. He did the only responsible thing, although that was not politically popular.

What about the Taoiseach?

He decided to pay off some of the national debt. That is the logical and responsible thing to do. It means that taxes for future generations will be lower and the Minister is not setting an irresponsible standard of spending for future Governments. If he were to do the electorally popular thing and appoint extra teachers or spend more money on the public services, he would set a standard for future Governments to be equally irresponsible. He would also set a very high line to which it would be impossible to adhere without further borrowings in the times of difficulty that will undoubtedly come. That is why his decision was so sensible; if we spend now at a time of unprecedented boom, trouble will come in future when that will be almost impossible to replicate without returning to the situation of the 1980s when the IMF was at the door. The Minister has shown no signs of doing that and I welcome it.

I also welcome his attitude to capital gains tax. Some Members may remember the debate on last year's budget when the Minister was condemned by Opposition Members for reducing capital gains tax from 40 per cent to 20 per cent. It was a very bold tax, it was unexpected and it was one he had not signalled. It was expected that he might reduce the tax rate to the standard 26 per cent rate, but nobody expected him to go any further than that. It is symbolic of the Minister's nerve and his commitment to business, to enterprise and to a non-punitive tax system for those who are not well off, that he went ahead with the 20 per cent tax rate. Everybody knows the result; totally against the predictions of the begrudgers on the left, this has produced more revenue than ever. More money has come in as a result of reducing the tax. I do not have the figures, but I believe it is a great deal more – I think it is one and a half times more.

Because of the reduction in the tax rate, people have begun to move their capital around. Those with less than £10,000 in capital, investment and shares have decided that, instead of being paralysed with their stocks, as they have been for so long, they can now sell them. If they had sold those stocks before they would have had to pay 40 per cent of the profit to the Exchequer, but they now find they are paying what they regard as a reasonable amount to the Exchequer and they can move their money to more productive investments. There is a mobility of capital which is good for the market and the economy, and there is new capital going into investment, which had not happened before.

That arose out of one bold stroke by the Minister. On top of that, the astonishing fact is that the Exchequer got more money. That is the lesson: reducing tax brought in more money. Those who screamed from these benches last year – I remember Senator O'Toole distinctly – should realise there is nothing wrong, from the point of view of the Exchequer, with cutting taxes. It gives more mobility as well as more money to the Exchequer to spend on those who need it. I hope that this is a signal of the philosophy and measures to come in next year's budget, having got the gesture to the trade unions out of the way and the wretched social contract sewn up again.

I also welcome the Minister's move on pensions. It has taken a very long time for anyone in this country, let alone a Minister, to take on either the pensions or insurance lobbies and companies. This does not go far enough, but in principle it gives people a certain amount of control over their own money. It means we can manage our own pension funds if we like, and people are not treated like children. It does not play into the hands of the insurance companies, which are the next best thing to the banks. They are powerful, monopolistic, impersonal and charge far too much. The Minister is telling people to get on with it and to look after their own pensions; this is very reasonable.

The pensions industry needs to be looked at, and I hope this will be the forum for a very piercing examination of it. An extraordinary aspect of the pensions industry is that in the case of nearly all Irish pension funds a pensioner cannot find out where his or her money is. That it is unbelievable. I have been involved in this in another capacity, and it is not just true of semi-State bodies – I do not want to use this just to knock them – but it is true of private pension funds and public companies' pension funds also. If a person reads his pensions fund literature, having paid into the fund for 20 or 30 years, and wants to find out where his money is invested, he will not be told. Neither the managers nor the trustees will not tell because they are scared. The fact is that some pension funds are extremely badly managed, some are mismanaged and some are doing worse than that. A person may have been paying perhaps £50,000 to £70,000 over 20 or 30 years but when one wants to know where one's money is, they will not tell. They will say, for example, that 50 per cent is in equities, 25 per cent is in gilts and 25 per cent is in properties. The pension holder might ask: "Is it in Allied Irish Banks, Bank of Ireland, Cement Roadstone, Independent Newspapers or some other company? Where is it?" The reply is: "We will not tell you". They will not tell where the money is and they are not obliged to do so under the law.

Every year they send a little pamphlet which tells the person, globally, where their money is. There might be some in Asia, perhaps, or in the UK. They might also mention in what sectors the money is but they will not say exactly where. Why? It is because they have something to hide – mismanagement or underperformance or worse. It could be invested in areas of which they are not particularly proud or where there might be some incestuous relationships. It could be for reasons which they do not wish to be examined.

Armaments companies.

Correct. It might be invested in tobacco companies. However, they do not want the person to know where their money is. That is outrageous.

The Senator has two minutes left.

The Senator will not find out in two minutes.

I hope the parliamentary reporter can spell that grunt; it was eloquent.

I hope the Minister will revisit the pensions issue by requiring in law that all pension holders should know the location of their money and where it is invested. People will then be able to refer back to the trustees and say they are not happy that their money is in a certain place. It should be a democratic investment. If they do not like to have their money invested in tobacco companies, they should be entitled to instruct the manager not to invest there or in armaments companies or whatever. That facility does not exist at present. The person must hand over their money, it is put into something and that is the end of the story. That practice is outrageous and it should be stopped.

I wish to comment briefly on privatisations. This will be a thorny issue in years to come. It is also a topical matter with the imminent privatisation of Telecom Éireann.

There will be a debate on that issue on Thursday and Friday.

I do not wish to pre-empt that debate but something of relevance could be said to the Minister in the context of this Bill. I welcome the Government's programme of privatisation. I do not welcome the allocation of 14.99 per cent of shares to the people who work in this semi-State body. That has set a benchmark which must be followed by Aer Rianta and others.

However, I believe the Minister and Government will use the money in a responsible manner. This money is the State's or the taxpayers' capital and should be used for specific reasons. It should be used to pay off the national debt. It makes no sense to have a pile of cash on one hand and a pile of debt on the other. The money could also be used to substitute for the Structural Funds which we will no longer receive from the EU. On the whole, Ireland has used those funds well and could make equally good use of them in the future.

The moneys from privatisation should not, under any circumstances, be used for current spending and this Minister shows no sign of doing that. There is plenty of money in the kitty for current spending. It is no coincidence that at a time when money for current spending is coming out of our ears in terms of taxation revenue we also suddenly have this great opportunity for privatisation and bringing capital into the economy. When the Minister gets the proceeds of these privatisations, he should use them for capital purposes which are good in the long-term for the economy, not use them for current political popularity.

This Finance Bill gives effect to the second budget delivered by this Government. This debate gives the House a chance to reflect on what has been achieved through the two budgets and to examine the direction in which Irish tax and fiscal policies are heading. I thank Senator Ross for making a good speech on behalf of the Government.

The Progressive Democrats have always taken a keen interest in tax reform. I am pleased with the tremendous achievements which have been secured in this area over the past 20 months. The basic rate of income tax has been cut by 2 per cent. It was cut by just 1 per cent over the previous five budgets. The top rate of income tax has been cut by 2 per cent; it had remained unchanged over the previous five budgets. The most dramatic reform is the Government's move to a system of tax credits, an area in which no effort was made in the previous five budgets. I particularly welcome this development. Taxpayers on the lower rates of tax will derive the same benefits as people on the higher rates. Previously, people on the higher rates got the largest benefits from allowances against their tax liability.

The gains in take home pay for working people are significant. A single person on £10,000 per year is about £10 per week better off as a result of the budget changes, while a married couple on £20,000 per year with one earner and two children is approximately £20 per week better off. The incentive power of lower tax rates should always have been obvious but was not until recently.

For decades, Ireland maintained a low tax regime for the corporate sector. At first there was a zero rate of tax for exporting companies. This was followed by a 10 per cent rate for manufacturing industry. These special low rates were hugely successful and are the key reason Ireland has been so successful in attracting job creating foreign investment. Indeed, they are an object of envy on the part of many of our European partners.

We accept that industrialists can be incentivised by low tax rates; it is the cornerstone of industrial policy. In the 1998 budget, we also recognised that investors could be incentivised by low tax rates. The rate of capital gains tax was halved and, as a result, revenue boomed. Senator Ross ably pointed out the positive effect of that tax reduction. It generated a huge upsurge in economic activity and the Exchequer was £75 million better off.

It is now being recognised that ordinary working people might also be incentivised by low tax rates. It is no coincidence that the explosion in employment only happened after there had been a sharp reduction in personal tax rates in the early 1990s. Looking ahead, it is clear that tax rates must be reduced even further if the demands of the Irish labour market are to be met. After two reforming budgets, workers on middle and even modest incomes face an effective rate of tax on their marginal earnings of 52.5 per cent. This is punitive by any standard.

If the economic boom is to be sustained, the best and brightest of our young people must be kept in Ireland. We already have difficulty doing that. We will also have to entice back the people who emigrated in previous years, in addition to attracting skilled people from other countries to fill vital gaps in our industry and technology. An attractive personal tax rate is obviously a key component in achieving that policy. We will not achieve it with an effective tax rate in excess of 50 per cent. A lower rate will help to build the type of high skill, high wage economy to which we still aspire.

Two years ago, we achieved a remarkable cross-party consensus on cutting the standard rate of corporation tax to 12.5 per cent. The Progressive Democrats had no difficulty with that concept but I was somewhat surprised that this initiative was floated by a Government containing two left-wing parties. At the same time, those two parties were reluctant to reduce income tax rates; they were prepared to cut tax rates for Dunnes Stores but not for the staff working there.

There was an almost hysterical reaction to the cuts in income tax rates announced in this Government's first budget. It was portrayed as morally indefensible to cut the top rate of income tax, yet that change benefited almost half a million workers, the vast majority of whom were middle income earners. I am glad to see the position is changing. On the eve of the last budget, the Labour Party proposed that the top rate of income tax be cut by 4 per cent. There is a general recognition that we cannot cut tax rates for companies only, we must cut them for taxpayers also.

We used to be told that we could only cut taxes by cutting services. We were presented with a choice between reducing taxation and improving public services. We now know, because it has been conclusively proven, that this was a spurious choice. It was perfectly possible and desirable to cut taxes in the knowledge that this would increase revenue, take people off the dole, reduce Government spending and leave more money available for areas of deprivation where the money is needed. The Irish experience with income tax has shown that cutting tax rates brings in more revenue. The two rates of income tax were cut, in cumulative terms, by 23 points in the past ten years and the income tax yield doubled over that period.

I am confident that the Government can meet, over the next three budgets, the commitments on income tax in its programme. I am also confident this will not result in a fall-off in Government revenue, rather the opposite. Our problem over the next few years will be deciding on priorities for the application of the surplus funds. We will generate substantial surpluses on the current account and raise substantial revenues from privatisation. Like tax cuts, privatisation is another Progressive Democrat policy whose time has come and I agree with Senator Ross' proposition that moneys received from privatisation are best spent on capital outlays and should not go towards current expenditure.

In any event, a lot of money will be available and the question is what to do with it. One idea, to which Senator Ross alluded, is to use all or most of it to pay the national debt, but that would not be an imaginative approach to take in circumstances where the debt has been contained and is reducing. Our economy is booming now but will only continue to grow if we tackle our enormous infrastructural deficit. Our national road network is extremely poor by European standards and ill-suited to an exporting economy trying to compete in the international marketplace. This was brought home forcibly to me last weekend, when I was in Scotland for the rugby match – I will not mention the unfortunate result. The amount of infrastructural investment in Scotland in the past ten years was quite noticeable, not only on main roads but on those to the Western Isles. There was a great deal of construction activities on minor roads at the weekend; why are we not able to do such work at weekends, when it would cause far less disruption? It is notable that this takes place in a country where Sunday observance is highly regarded.

We need to invest in roads but we also need to increase the pace of such investment. Construction has started on the badly-needed Kildare by-pass, but it should have started in 1995. This will remove one major bottleneck on the main road from Dublin to Cork and Limerick, but completion of the by-pass will only shift the problem to Monasterevin, a few miles down the road, where long tailbacks are already a feature of life. On current plans – taking into account inquiries, designs, etc. – there is no prospect of by-passing the town until 2006. Development at that pace might have been acceptable at the dawn of the 20th century but not at the dawn of the 21st century. We need to inject a strong element of urgency in our national infrastructural development programme, otherwise we will not be able to keep up with the needs of a fast-growing economy.

The best way to inject urgency into the system is to give a much greater role to the private sector. The public private partnership concept, embodied in the Finance Bill, should be enthusiastically embraced and used to deliver large scale civil projects on time and within budget. The West Link bridge on the M50 is an example of how a major motorway project can be developed by the private sector, and it could be followed much more extensively.

Rail investment is also needed and I am glad the Government has recently approved a £500 million programme to renew the entire national rail network. However, before spending hundreds of millions of pounds, it would be useful if CIE could make maximum use of its existing infrastructure. To return to Monasterevin, in my constituency, it is less than 40 miles from Dublin and should be within easy commuting distance of the capital. Extensive building is already taking place there and more will come when the sewerage and water infrastructure can accommodate it. An excellent rail network, from Dublin to Cork, carries up to 40 trains a day through the town, but none of them stops there because the station was closed in 1976. How many of these mistakes have we made, closing vital pieces of infrastructure in the short-sighted belief that they would not be used? In France, even the canals are re-opening to accommodate the boom in tourist traffic, although several years ago it would have been regarded as prudent to allow them fall into disuse.

Monasterevin is not alone; many other towns are in a similar position. Their residents pay for the railway with taxes but derive no benefit from it. On the main railway lines, Kilmallock station, County Limerick, was closed in 1977, Dunleer station, County Louth, closed in 1984, and Newcastle station, County Wicklow, closed in 1964. A small investment would re-open those stations and several more like them, help to provide a proper commuter service to the capital city, relieve congestion on the roads and, probably, prevent our road system requiring even more investment.

The Government's tax strategy is clearly set out in An Action Programme for the Millennium. Over the next three budgets we can look forward to further reductions in rates of corporation tax and personal income tax; we need such policies for an enterprise economy and I am confident we will get them.

To turn to a couple of matters of detail, which we may also be able to discuss on Committee Stage, the Minister mentioned the need to look after the old and the lower paid. One such group deserves special mention. Where elderly siblings live together and one dies, the survivor may be liable for high levels of inheritance tax as a result of rising property prices. This does not apply to married couples because they have an exemption. Most elderly siblings living together are single people without direct lineal heirs. Where one of them dies and he or she owns the title to the house, it seems correct, prudent and charitable that it should be possible to pass that title to the surviving brother or sister without a huge exposure to capital taxation.

I could go through the rates in detail, but it would probably be more appropriate to do so on Committee Stage. It is wrong that people should be subjected to such trauma in addition to that caused by the death of their brother or sister. I appeal to the Government to look sympathetically at this issue as it would not cost a great deal.

Some people on modest incomes are living in properties with a substantial capital value because of their location in Dublin city or because they are good houses which would command a high price in the marketplace. It is only right that the exemption should pass to the surviving sibling because most of them will die without direct lineal heirs. As the money will eventually accrue to the State, it is only a question of deferring the tax rather than getting rid of it.

The LPG Association made a pre-budget submission to the Government of which I am sure the Minister for Finance is aware. While it welcomed the reduction of VAT inclusive on LPG by 1.8p per litre in the budget, it believes it is not enough. It suggests that an exemption to the increased VRT rates on larger vehicles should apply to cars which use clean fuels such as LPG. I ask the Minister to consider that proposal.

As regards rented camper vans, there is a different tax regime in Northern Ireland compared to the Republic where vehicles of less than three tonnes attract a rate of 13.7 per cent, while in the Republic the VRT rate is £40 for vehicles greater than three tonnes. This impacts directly on people who rent camper vans to tourists. They are operating on a less than equal footing with their Northern competitors. They are not suggesting that the vehicles should willy-nilly be subject to an exemption but that an allowance should be made for purpose built camper vans to allow them to compete. The Minister might examine this area.

I remember when I became involved in politics in 1989 the Cassandras of doom universally forecast that if tax rates were reduced there would be a catastrophe because revenue would fall, services would be reduced and people on the margins would suffer. However, when capital and personal income taxes were reduced, more money came into the Exchequer, revenue was buoyant, less money was required to support a reduced number of unemployed people and the economy benefited. We must ensure that inflation does not remove all those benefits which have been won over the past few years.

In the two budgets for which the Minister has been responsible he has ably demonstrated that it is possible to reduce taxes, increase spending to a modest level and ensure that inflation does not rise and that unemployment comes down. Any Government would wish to pursue these objectives which this Government is pursuing successfully. I look forward to the completion of that programme over the next three budgets for which the Minister will be responsible.

I was glad to note this morning that the Minister returned from Cheltenham with a shirt on his back. However, I was surprised he could not see more business and that he was flattered by a faded pearl.

Last year I suggested that the Minister review the entire regulations surrounding pensions and in particular the requirement of purchased annuity. I am glad he has taken my recommendations on board. He might, however, go the extra mile and extend the new regulations to all occupational pensions schemes. This area has remained undusted for approximately 20 years and a radical overhaul would be welcome.

Much has been said about the circumstances in which the Revenue Commissioners will utilise the substantial new powers conferred on them by the Finance Bill. However, I want to mention one worrying aspect. The Revenue Commissioners is a diffuse body with in excess of 7,000 people. I am not satisfied adequate control systems exist to ensure the proper policing of those new powers.

I am informed that in recent years it was routine for Revenue auditors to ask for individuals' private bank accounts, although they knew they were not entitled to such accounts. This was a clear abuse of power. It begs the question whether Revenue auditors can be trusted with their new powers when they have abused their power in the past. Will the Minister assure the House that a proper code of ethics will be published by the Revenue Commissioners in relation to routine Revenue audits and the utilisation of their new powers?

I recommend that the Minister take on board the recommendation of several bodies that an external ombudsman be appointed to act as a referee where taxpayers claim the Revenue Commissioners are abusing their powers. I acknowledge they must have adequate powers to deal with tax evasion. However, there is no evidence that the approach of the Revenue Commissioners to tax evasion in the past has been impaired by a lack of powers. Perhaps this is a red herring. We need a balanced approach and control mechanisms to ensure that Revenue officials exercise their powers only as necessary.

I wish to refer to a letter I received from the Institute of Taxation in Ireland. The members of the institute have voiced many concerns about the proposed new Revenue powers in this Bill. They have stated publicly that there is genuine disquiet among compliant taxpayers regarding certain aspects of these new powers. They believe the new powers give Revenue direct access to private bank accounts and records and the right to consult third parties about intimate details concerning taxpayers' transactions without their advance knowledge and that they contain no right of appeal by the taxpayer. It states:

We have received a detailed and compelling opinion from Senior Counsel regarding the constitutionality of the provisions proposed in the Bill. Senior Counsel has identified ten different areas where the proposed powers are probably unconstitutional.

In order to address the concerns of compliant taxpayers, we recommend that the Government amend the Finance Bill as follows:

Provide that taxpayers are informed in advance, in all cases where Revenue propose to obtain information from financial institutions or third parties

Provide that taxpayers have the right of appeal to the High Court against such requests by Revenue

Provide that requests for information from financial institutions and third parties by Revenue be subject to a High Court Order.

The Minister has indicated that Revenue will not use these powers without notice to the taxpayer and that the taxpayer will have the right of judicial review. However, so far it has not been confirmed publicly that the protection will be included in the legislation.

The Institute of Taxation condemns all forms of tax evasion and will continue to do so at every opportunity. However, it is also important to comment on any measures which we believe may be counterproductive to the objective of effectively tackling tax evasion, while at the same time protecting taxpayers rights. The Institute believes that the new powers contained in the Finance Bill 1999 must contain sufficient checks and balances to protect the compliant taxpayer and to preserve the integrity of our taxation system.

We also believe that the Government should take the following additional initiatives, which will improve the general public's confidence in our taxation system:

Appoint a dedicated Tax Ombudsman.

In the light of the extraordinary range of powers currently available to Revenue and the new powers being proposed, we believe that a dedicated Tax Ombudsman would be an important protection for compliant taxpayers.

High Court review of Revenue powers.

Once the Moriarty tribunal has issued its report regarding the utilisation of existing Revenue powers we recommend that a review group, chaired by a High Court Judge be established to review all Revenue powers and their appropriateness.

The Institute of Taxation is doing everything it can to ensure that there is an informed debate on the new Revenue powers and that the appropriate checks and balances are in place to ensure that the compliant taxpayers constitutional rights are protected.

I recommend that to the Minister and I look forward to hearing his views in response to this debate.

The proposed legislation limiting section 23 relief to owner occupiers only will not be as successful as the Minister intends. It will probably create the following problems. First, direct areas will not be developed. Second, there will be increased investment in UK and overseas property benefiting overseas economies instead of Ireland. Third, it will hurt the construction industry and will affect unemployment. The building industry is a substantial employer of previously long-term unemployed people. A substantial number are being retrained in the building industry and this is the quickest way of getting people off the live register. Fourth, there will be a loss of tax revenue in the form of VAT, PAYE, PRSI, income tax, stamp duty and corporation tax. The areas designated for investment in the new Finance Bill are few and far between.

There was a controversy about a change to the Finance Bill some years ago that benefited one man and allegations were made of the favourable tax treatment accorded to his residence as a result of a change in legislation. It is important that at the time the Minister for Finance publishes the Finance Bill he should also publish a list of groups and individuals that have made submissions to him on the legislation. A complex piece of legislation such as the Finance Bill contains many provisions drafted by tax experts and likely to be interpreted by tax experts. Many of the complex provisions of the Bill will be indecipherable to most Members of the Oireachtas and, accordingly, we might not fully appreciate the true import to any changes in the law. Therefore, it is important that the attention of legislators is drawn to specific provisions which have resulted from an individual or firm that lobbied the Minister, otherwise we may miss the significance of a change in the law.

An example may highlight the points I have made. Chapter 1 of Part II of the Bill codifies the mineral oil tax regime. The provision is complex and detailed and seems to clarify an already difficult and complex area of legislation. Section 90 contains the definition of mobile trains, off-road dumpers, mobile well drilling equipment and mobile concrete pumping equipment. The effect of that chapter on the Second Schedule to the Bill is to create a lower rate of duty for the fuel used by vehicles mentioned above. I may have misinterpreted the section but the Minister can confirm if I have done so. In any event we need to know if the provisions of Chapter 1 of Part II represents a change to the existing law in this area.

We also need to know when the measure was first enacted and whether it was based on representations from individuals and groupings. We also need to know on what basis was it decided that the owners and operators of mobile trains should pay a lower rate of duty on their fuel used in the vehicles and who advanced the case to the Minister.

With regard to this complex legislation, it would be useful if the Minister could appoint a designated official from his Department who would deal with specific technical queries from Members of the Oireachtas. This measure would assist us greatly in understanding the legislation and it would also ensure that we got answers to important points of detail in advance of debates.

With regard to child care relief, I note what the Minister has said. Tax relief on the cost of child care and capital allowance for the provision of child care reliefs needs to be increased greatly. The Minister does not go far enough in this regard.

I welcome the fact that the Bill reforms the tax system in favour of the lower paid and cuts personal taxes for all taxpayers. I also welcome the rural renewal scheme which is now operating in counties Leitrim, Longford, Cavan, Sligo and Roscommon. Unfortunately, County Kerry which is used to the hind tit, has been excluded as it has been Objective One status.

With regard to the provisions in the Bill concerning park and ride facilities, I welcome the 100 per cent capital allowances provision. However, the Minister stated in his speech that it will be confined to larger urban areas. This provision should cover all urban areas in this State because every provincial town suffers from traffic congestion. In recent years there has been a huge growth in the number of cars but the roads are inadequate. Every town suffers from a lack of centrally located off-street carparking and ring-roads. Therefore, we have to provide all necessary alleviating measures in favour of towns. If Members of both Houses are interested in protecting and enhancing the life and vibrancy of towns and villages and do not wish to see them suffer further then we must extend this provision to cover all the urban areas.

I agree with the measures outlined in sections 82 and 83 concerning the problem of Irish non-resident companies. I fully support – as I am sure we all do – the Minister's intention to root out all undesirable practices associated with them. I also eagerly await the proposed necessary changes to company law.

We are all very conscious of the price of houses and the inadequacy of housing stock. I agree with the measures taken by the Government arising from the Bacon reports. However, we must go much further because there is not sufficient serviced land zoned for housing in towns throughout the country. Perhaps the problem is that the land is not serviced, therefore, local authorities cannot zone it for housing.

There needs to be more funding for sewerage schemes in our villages. In pursuit of a policy against ribbon development, most councils have written into their development plan a provision which will allow their villages to grow. I subscribe to that ideal. However, in County Kerry the villages of Scartaglin, Currow, Farranfore, Barraduff, Kilgarvan, Milltown, Firies and Beaufort all need sewerage schemes if they are to advance. I utterly condemn ad hoc rezoning on the part of some councillors in some counties who are raiding their limited stock of residentially zoned land to allow for other pet projects which are invariably developer-led. The only people to gain from these projects are the developers who pocket the profits.

In this regard, I welcome the Minister for the Environment and Local Government, Deputy Dempsey's ministerial directive of 10 June 1998. However, this needs to be strengthened and a provision made whereby no local authority will be allowed to raid residentially zoned land, particularly when it is scarce, for purposes such as out-of-town shopping developments. I suggest that before any such change is contemplated it is properly informed by a land use and transport study. I recommend that such a course of action be mandatory on all local authorities.

I wish to refer to the disgraceful exclusion of two of the most peripheral counties on the western seaboard from Objective One status. I am gobsmacked. I listened to the Taoiseach speak about both counties being an integral part of Ireland's application. I challenge the Leader of the House to publish the exchange with EUROSTAT. The Taoiseach appeared to say they did not count, that this would be decided at a higher level and was the type of negotiation he enjoyed. Yet at a one hour meeting with the German Prime Minister, Mr. Schröder, the Taoiseach failed and Kerry and Clare were ditched. This has not been properly explained.

Most of the land in my constituency is classified as disadvantaged or severely handicapped. Despite what the Tánaiste said in Killarney yesterday that there would be no favourable treatment for anyone, the Government must make up the difference. County Kerry is badly off industrially – Transmould announced 50 job losses this morning and there has been nothing of substance regarding a replacement for Pretty Polly. County Kerry has been badly treated by the National Roads Authority in respect of its road network and access roads to the county.

I want to hear from the Government how the difference in funding will be achieved. Our smaller farmers who have suffered for so long cannot be expected to take the drop in income which will be forced on them by virtue of the recent CAP negotiations and the failure of the Taoiseach to secure Objective One status.

I welcome the Minister of State, Deputy Ó Cuív to the House. I hope this is a move in the right direction coming as he does from the influential Department of Arts, Heritage, Gaeltacht and the Islands. I thank him sincerely for the assistance he gave to my constituency and hope that if he moves to the Department of Finance there will be a lot more forthcoming in the future.

I congratulate the Minister, Deputy McCreevy, on a very extensive Finance Bill comprising of 217 sections. This is possibly one of the largest Finance Bills ever published and may be summarised into three areas. The first relates to the reform of the tax system. Despite the Minister mentioning this in his budget address last year, when he announced his intention to reform the system and move to a tax credit system, most commentators were caught unawares when he announced it this year. There has never been such unanimous support for the main thrust of a Finance Bill. There was silence by many because they did not fully understand the changes the Minister intended to introduce and the mechanism of the tax credit system itself. The Bill introduces a large number of initiatives and tax reliefs to assist individual taxpayers and to maximise the initiatives for people to work. It introduces measures to strengthen considerably the powers of the Revenue Commissioners to combat tax evasion, including measures in relation to offshore trusts.

I welcome most of what is in the Bill, including some of the additional powers to the Revenue. However, as a member of the Institute of Taxation and a practising accountant, I have grave concerns about some of the measures being introduced. The measures are far-reaching and cover many of the areas involved in the present controversies. They include the operation of the banking system and avoidance of taxation, whether income tax, corporation tax, value added tax or gift tax. The Institute of Taxation has genuine concerns about some of the new powers proposed in the Finance Bill. It believes there is genuine disquiet among compliant taxpayers regarding certain new powers. Following earlier consultation with the Minister and Department officials, two amendments have been made to the Bill in this area. The Minister has agreed to provide taxpayers with advance notice where the Revenue proposes to obtain information from financial institutions or other third parties, albeit the individual receives notice at the same time as the third party. He has also agreed that professional people shall not be required to disclose any information or professional advice of a confidential nature given to a client.

The Institute of Taxation condemns all forms of tax evasion. Any opposition they have to these powers is genuine. The institute will continue to condemn all tax evasion. However it can still see many areas in which the new powers are unconstitutional. The institute is still concerned that there is no independent review of what the Revenue can do. In its own words, there are not sufficient checks and balances to protect compliant taxpayers and preserve the integrity of the tax system. The Revenue Commissioners do not need to go to outside authorities to investigate any personal details of a small businessman. There is also no right of appeal by individual taxpayers against the use of the powers. There is genuine concern among compliant taxpayers, who have also paid their way, over the extraordinary powers now being given to the Revenue Commissioners. Some of the provisions are merely a reaction to the working of the tribunals and the subsequent public opinions that have prevailed. They may, in time, not be fully used as were some of the previous powers given to the Revenue Commissioners in earlier Finance Bills.

Section 908 enables an authorised officer to apply to a High Court judge to establish certain information in relation to a person or group of persons' tax liability especially in the area of claiming exemption in relation to DIRT while, at the same time, it only takes the authority of one Revenue Commissioner to trawl the bank records of individuals who may be compliant taxpayers but who are, unfortunately under suspicion.

I would also ask the Minister to consider confidentiality in relation to seeking information from third parties, such as suppliers. In my experience as an accountant in public practice dealing with Revenue audits, most taxpayers are prepared to make this information available from their own records, in other words, statements, invoices and back up statements from suppliers. It would be most embarrassing for small business people living in rural areas especially if third parties are made aware that the Revenue Commissioners are investigating their affairs. I can assure you that information like this being sought or being known to a third party allows a man's affairs to be the talk of the parish. At that stage confidentiality is gone, no matter how the Bill states the Revenue Commissioners intend to deal with this matter.

There are also fears among small business people that their powers will only apply to them. Speaking from experience I can assure the Minister they have been the soft touches in the Revenue audit system. In my experience over the past ten years, in many cases the real tax evaders have not been touched because the Revenue Commissioners did not have experienced staff to investigate their affairs properly or did not use fully the powers already available to them. Many pensioners have also great fears that the powers will be used to carry out witch hunts and investigations into means tested payments. Like individual Revenue employees there are many instances where social welfare officials have gone overboard in carrying out their duties. We are not opposed to the Revenue Commissioners or the Department of Social Welfare carrying out their duties, but we have a difficulty with how some people will impose the new regulations and take the regulations on board without having redress to an appeals system.

In my opinion the events that are unveiling daily in the Moriarty tribunal are consigned to history and we should not overreact. Since the introduction of self-assessment and the Revenue audit system, there has been a huge improvement in compliance and many of the mistakes and mat ters that were overlooked have since been corrected.

I am sorry for going on so much about this matter but, being involved in the operation of the system, I am fully aware of the effect an over-enthusiastic Revenue official can have on a small businessman and his immediate family. There have been instances where death has occurred. I welcome some of the powers being introduced, such as section 904 which gives powers to the Revenue officers to audit the DIRT returns of relevant deposit takers such as the banks, and the power to investigate more fully the authenticity of non-resident accounts. However, we should remember that previous legislation gives the Revenue authorities power to check the affidavits signed by non-residents. Unfortunately that power was not widely used and many of the difficulties that are reported today have occurred due to that.

All I am asking is that appropriate checks and balances are in place to ensure that compliant taxpayers' constitutional rights are protected and that small business people are not hounded out of business.

On a more positive aspect, the Finance Bill introduces a series of important initiatives to reform the tax system, especially in favour of those on low pay. As was seen in the national newspapers after the budget, it cuts the personal taxes for all taxpayers and introduces significant new tax reliefs. The Government's approach to tax policy is set out in An Action Programme for the Millennium which the Minister is introducing over a five year period. Last year we had substantial cuts in tax rates. This year the Minister has taken the first steps towards a tax credit system which, by its nature, gives more benefit to those on low pay. The Minister has also increased the standard bands mainly to compensate the higher rate payers in the initial move to a tax credit system. Many people understood that to be a huge increase in the tax free allowance.

The Bill also gives substantial increases in personal allowances with benefit to all taxpayers. Accordingly, the additional reliefs have been put into allowances rather than rates or rate bands on this occasion. Hopefully next year the Minister will return to cutting the tax rates so that, in the lifetime of the Government, we will reach a standard rate of 20 per cent and hopefully a higher rate of 40 per cent. This will make us comparable with our neighbours in Great Britain, especially those of us living in Border areas. It will leave us with the same tax deductions as our friends across the Border. This will allow freer movement of a legitimate employment force and allow employers in Border areas to compete, especially those on the southern side to compete with those on the northern side. It will also enable more people who work in Northern Ireland to live on this side of the Border without suffering penal taxation.

Last year the Minister introduced the tax relief for cross-Border workers, which mainly applies to those on PAYE. He did not address the situation of the self-employed. I can assure the House from dealing with a number of professionals who live and choose to live on the southern side of the Border, that the extra and additional taxation they have to pay, on top of what they have already paid the British Government, is penal. I cannot understand why they continue to live on the southern side of the Border.

There are £581 million in tax cuts in the present Finance Bill, 10 per cent more than was available last year, a year in which we already received a record amount of tax cuts. Many single people will not pay tax if they earn less than £100 per week. As a result of this, up to 80,000 will come out of the tax net altogether. This will obviously have to be reviewed further with the impending introduction of the minimum wage of £4.40 per hour.

I wish to compliment the Minister on the many new reliefs introduced in the Bill. Section 12 gives tax relief to funds and trusts set up for public subscription for the benefit of those left permanently and totally incapacitated from maintaining themselves. This leaves those people on a par with those who are the beneficiaries of personal accident insurance claims and there are restrictions on how the money can come into the fund.

Section 9 extends tax relief allowances for employment of carers to the wider family members. I would recommend the Minister have a closer look at this as well as the social welfare payments to carers and to the eligibility of those who qualify for the payments. There is no doubt that somebody who is ill and in need of care gets far better attention and is able to live a more normal life if they are cared for by their own family but there are restrictions in place which inhibit that from happening.

Section 14 increases the basic tax exemption for non-statutory redundancy payments. The basic amount of £6,000 has been increased to £8,000 and the annual amount for the number of years' service has gone up from £500 to £600. This should possibly be further extended in future because when people are made redundant they are at their most vulnerable. It is a difficult and soul destroying situation for them. People come into my office and ask me to calculate their tax affairs when they have been made redundant. They are people who have no hope of ever regaining employment. I welcome the extension of this measure and I hope it will be further extended in future.

Section 15 extends the annual £5,000 allowance for seafarers to crews of vessels servicing oil rigs who are non resident for over 169 days. I raised this matter last year in relation to the fishing industry and the crews of boats that operate off our coasts. Many of these boats are absent from the country for long periods. I have had great difficulty in dealing with existing legislation in trying to get the available tax relief for them. There seems to be total confusion in the Revenue Commissioners on this matter. It would be simple to extend that £5,000 allowance to these fishermen who work in severe hardship and are away from home for long periods.

Section 19, relating to amendments to the law on pensions, is the provision I most welcome. In particular, I welcome the increased contribution allowable for tax relief for people, depending on their age. When we are young and starting off our working lives, most of us do not make proper provision for a pension. It is only when one is reaching a pensionable age that one realises the extent of the underprovision involved. This is a fantastic method of allowing those who have not provided sufficiently for a pension fund in their early years to obtain full tax advantage for a higher contribution.

I also welcome the extension of this type of relief to those with a professional income, such as athletes who have a short earning span. Regardless of their age they will receive the maximum relief of 30 per cent of their assessable income with the restriction of a maximum amount of earnings.

The measures introduced in relation to the relaxation of benefit-in-kind for those who receive child care facilities from their employers are welcome, as are the capital allowances that have been introduced for those who provide such facilities. The Minister has a review group looking at this area. Like most people, I am not pushing for full tax relief because mothers and fathers who stay at home because they are unemployed should receive the benefit of any such changes.

I welcome the small change in the rural renewal scheme in relation to residential accommodation. However, as Senator Coghlan said, this should be extended to much of the area that will hopefully be included for Objective One status. While I would not necessarily consider County Kerry to be in such need as Senator Coghlan feels it is, there are parts of County Kerry and the west coast to which the rural renewal scheme should be extended.

The Minister has introduced the withholding tax credit for dividends and I am not totally opposed to that. I welcome the provision whereby those who are not liable to tax or who have a reduced tax liability can claim a refund. I hope the Minister will extend this scheme in future to the operation of DIRT tax, where those who have no tax liability, or a small one, should be entitled to reclaim tax paid.

There are many other areas in which new initiatives have been introduced. In particular, I welcome the Government's plan to reduce corporation tax from its 1998 level of 32 per cent to 12.5 per cent in 2000. The Minister announced this intention and I am glad to see that the European Commission has agreed to the plan. It will allow all companies to have the same benefit as has been available in the past for manufacturing companies and, prior to that, for companies benefiting from export sales relief. Many small businesses in the service, and other sectors that did not qualify for manufacturing tax relief, paid criminal levels of corporation tax and did not have the money to invest to enable them to create more employment. I welcome the once-off situation whereby small companies profit tax ceilings have been increased from £50,000 to £100,000. It is a once-off because from next year corporation tax will be at 24 per cent for all companies.

I notice in section 26 that tax relief will be allowed for school fees for undergraduates participating in courses in other EU countries. I am not sure that the introduction of the so-called free fees system was the answer. I would like to see some move back towards the deed of covenant system because many people who are marginally surviving cannot afford to send their children to third level education and cannot obtain State grants to do so.

I am not enamoured with the increase in VRT—

Hear, hear.

—especially as it may affect the Border areas. While the Minister will state that there has been an increase of 21 per cent in car sales in the month of January, I do not believe that was necessarily the case when one takes leased cars out of the figure. In a number of years this measure will have to go because, based on the Single European Act, cars should be the same price here as in any other European country. In the meantime, however, many dealers and other people in the Border areas will suffer from an influx of cheaper, unroadworthy cars from Northern Ireland.

I commend the Bill to the House, except for the couple of items I have referred to.

I am glad Senator Bonner referred to the question of vehicle registration tax because the Society of the Irish Motor Industry made a strong submission about it. In a very optimistic mood before the budget, it sent the submission to all of us. SIMI was actually looking for a decrease and maintained that it would create jobs, so it was astonishing that VRT was increased.

I welcome the Minister of State, Deputy Flood, to the House, but I ask that the two principal areas I am going to address will be brought directly to the attention of the Minister for Finance. The first matter I wish to raise involves serious aspects of human discrimination which would not be tolerated against any other section of society. It is an area about which the Minister himself has recently expressed some concern, at least in one approach to this which is the question of inheritance tax for persons who are not married but who are living together. This affects gay couples in particular. There was a case in the past couple of years where one of two men who had been living together for 30 years, died. They had contributed jointly to the rent for a cottage in south Dublin. When one partner died the other, although he had contributed towards the rent of this establishment, was not permitted to continue the tenancy. In fact, he was legally evicted. Imagine if that was a Roman Catholic in Northern Ireland, a Jew in Germany or a black person in the southern states of America? It is a vicious kind of discrimination and we must make people aware of it.

I remember clearly that some years ago – and I have referred to this before in the House – Tim Pat Coogan wrote an appreciation of Peader O'Donnell and said what a wonderful wit he had. Coogan wrote that on one occasion O'Donnell had told the story of "these two homosexuals living in County Roscommon, and when one of them died, didn't Seán Doherty get the other one the widow's pension". At first glance that is apparently quite funny but it is only funny if one does not regard gay people as human. Would Senators think it funny if one's partner died and even though one had contributed for 30 years, one was still regarded as being of such little significance in terms of human consequence that one was not entitled to a pension? If the boot was on the other foot, to mix a metaphor, it might wipe the smile off people's faces.

The Minister raised this matter himself in terms of heterosexual cohabiting couples and indicated that he had an interest in this matter because he was discriminated against. For that reason I presume that I am pushing an open door. I received many messages in the past three weeks by some coincidence, among them an e-mail from Cork which reads:

Dear Senator Norris,

I am writing to you concerning a desperate situation which is, as it happens, also a paradigm case for anyone concerned with gay rights. For a number of years I have been a close friend of a gay couple living in west Cork. They were an elderly couple in a relationship that went back nearly 50 years. Recently one of them, [A] died. He had been ill for some time. Unfortunately, his partner, [B] was (and is) also ill. Their common home was until recently in [B's] name – he was the one who paid for it. However, some time ago they moved and had their new home put into both their names. [B] insisted on this because he thought that he was going to die before [A] but, as fate would have it, [A] was the one who died. [This amounts to [B] having to pay inheritance on his own home.]

[A] did have some money which he left to [B]. This is in itself subject to punitive death duties. When we add into this the death duties on [B's] house, [B] inherits virtually nothing. The situation for [B] is rather desperate. He is ill with Parkinson's disease and, as a consequence, is at present in an old age home. He hopes to get out of it soon but I have my doubts that he will ever be well enough to take care of himself again. However, it is psychologically important for him to believe that he will and, consequently, that he has his own home to go back to. At present the old age home is costing three times what he earns so he needs his rightful inheritance to pay for it. Can anything be done? Does he have to pay inheritance tax on his own house?

The answer to that is yes, at the moment he does. It is an absolute scandal that this should be; it is a real violation of human rights. If we are serious about human rights, this is where the boot pinches.

I received a letter from Harold's Cross, Dublin 12. The Minister has a copy of this because copies were sent to him, the Taoiseach, the Tánaiste and Deputies John Bruton and Ruairí Quinn and myself. I will read it also so that it is on record:

I am particularly writing to ask you to remember all of the same sex couples that this anomaly has so cruelly affected over the years. I have been living with my partner for over 13 years and have contributed to my community both in terms of community work and in paying taxes all of my life. Nothing would give us greater pleasure than to be able to legally register our relationship or to marry if that was possible, however the state does not allow us to do so and probably will not do so in my lifetime.

This refusal to allow us to register our relationship puts same sex couples into a different category to heterosexual couples who do have that option, and is discriminatory. We are ordinary people with ordinary jobs. We do not have many savings and like most people our largest asset is our house, which unfortunately would have to be sold in order to meet the tax liability. In the event of my partner's death, with today's property market values I would be made homeless, as I could not afford another mortgage, particularly on my own. Unfortunately my situation is typical of all same sex couples, and usually it is when they are advanced in years and vulnerable that they find themselves in this situation. Is this any way for a democratic society to treat its citizens whom it purports to treasure equally and even goes so far as to state that it is illegal to discriminate against on the basis of their sexual orientation.

There is massive discrimination here. I will read a third letter, from Dalkey, to the House. I have had letters from Cork, Harold's Cross and Dalkey. Look at the amount of time these people have been together – 50 years, 13 years and this letter is from a couple who have been together for 26 years. There was a time when we were told gay people were not stable and could not sustain a relationship, that they were intrinsically volatile people? Here are people in the most adverse circumstances imaginable, immeasurably worse than any discrimination that has ever been practised against Catholics in the North of Ireland, who have sustained a dignified relationship, contributed to society and are penalised for doing it. It is time the Minister did something about this.

The letter states:

I am a gay man in a stable relationship. I have lived with my partner for the past 26 years. We have both been materially successful in life and have acquired a substantial amount of assets.

I have recently been taking advice with regard to life for my partner after I depart this life and am greatly disturbed in the knowledge that whichever of us dies first, the one remaining will be left with a substantial liability of death duty, not to mention inheritance tax.

It is grossly unfair for us, having lived as partners in life for this time, not to be recognised by the state in any legal way, other than as friends, for inheritance tax purposes.

It is a scandal. It is not, however, narrowly based. I have another letter from a single woman who is not gay. She wrote to me saying that she had become very aware of and concerned about the extraordinary anomalies and injustices in capital acquisitions tax which affect many ordinary citizens in Ireland, the unmarried in particular. One does not even have to be gay, one simply has to be unmarried.

If one is married and inherits from one's spouse, one pays no CAT whatsoever, no matter how great the inheritance. If, on the other hand, one is unmarried and inherits one must pay inheritance tax. For example, for a brother, sister or other close relative, the tax the bereaved would have to pay on an inheritance of £50,000 would be £6,284. On £100,000 it would be £24,712. For non-relatives inheriting, the tax to be paid on a house valued at £50,000 would be £10,142. On £100,000 it would be £29,856. That is almost £30,000 on a £100,000 house, even at a time when we read articles in the newspapers every weekend which say that it is impossible to get a starter home for £100,000.

The financial policy of the Government towards the unmarried and stable gay couples who have lived together and contributed positively to the community for 50, 26 or 13 years or however long is to make them homeless.

I demand that this matter be addressed. We hear people prating in this House – and I am glad of it – about human rights in Bosnia and East Timor. Let us have some respect for the dignity of life of people who live together and cherish each other for 50 years. These are terrible debts for ordinary, decent, unmarried people and extend beyond gay people.

People should be treated as individuals. It is wrong that one gets extra human rights simply because one goes through a form of marriage. That is unfair. I respect marriage and I am glad for my friends who are happily married – it is a wonderful thing. To have children who are the expression of the love of two people is beautiful and the State is right to protect that, but not to the disadvantage of other people. That is not how one should grant rights to a noble institution such as marriage.

Sections 189 and 190 give extra powers to the Revenue Commissioners. I welcome that. However, we need to be careful. I noticed the Minister of State, Deputy Cullen, when addressing the Institute of Taxation's annual dinner, said that it provokes hot debate when these matters are addressed. He said that we have been down this road before but in different circumstances. On each occasion there has been a general reluctance to expand the powers of the State in its dealings with taxpayers. As the Minister said in introducing the Bill, there has been an ambivalence here. The taxpayer is rightly concerned when cases of tax evasion come to notice but may shrink from giving new powers when these are suggested.

I remember the Minister saying that he was going to wait for the report of the Moriarty tribunal. However, apparently, he has decided to introduce this legislation in advance of it. The powers are substantial and many of us, in the light of the disclosures at the tribunal would welcome them, particularly that they augment the current provisions requiring a person to give a full statement of their financial affairs and that the new powers will require resident and ordinarily individuals, companies, trusts and connected persons to do so – not just individuals who are ordinarily resident in the State.

The powers will cover all tax – not just income tax and corporation tax, as at present. It will extend to accounts held by unidentified persons, or classes of persons, not just named individuals, like the celebrated numbered accounts of which we have heard so much at the tribunals. They will allow access to non-resident accounts in cases where there is reason to believe the true owner is a resident of this country and extend the definition of bankers' books to include relevant supplementary information in a financial institution's possession such as background documentation. I welcome that.

I have just come back from the United States, and when in Denver I met a successful Irishman who is running a large mortgage company. One of the cases he was dealing with involved a married woman who was applying for a mortgage and who supplied information about her credit rating. Her husband, who was divorcing her, applied to the mortgage agent for information about her financial status as he thought it might help him squeeze more money from her in the divorce settlement. I am glad that this decent Irishman refused to give that information. However, we need to be careful that we do not introduce measures which would be damaging and intrusive.

The Minister said that such fears are exaggerated and that the Revenue Commissioners have shown themselves, by and large, to be responsible. However, I will table an amendment to the effect that sections 189 and 190 shall cease to be in operation on and from the 30th day of April 2001, unless a resolution has been passed by each House of the Oireachtas resolving that those sections, or specified provisions therein should continue in operation.

Since the Finance Bill was published there has been considerable debate about the powers being given to the Revenue Commissioners in sections 189 and 190. The Minister and Minister of State have spoken about an historic reluctance to expand the powers of the State in its dealings with taxpayers. Traditionally we have been against Governments' attempts in this area. I was in college with a number of people who were delighted to evade certain income tax provisions and boasted about this during liquid lunches in the Stag's Head. These people are now in senior positions in which they rap the knuckles of people doing the same thing. I did not think such evasion was patriotic then and I do not think it is now. As the Minister said when introducing the Bill, there has been an ambivalence on this issue. The taxpayer is rightly concerned when cases of tax evasion come to notice but may shrink from giving new powers when they are suggested.

There is a balance to be struck between the legitimate expectation of taxpayers to go about their business without unwarranted intrusion and the need to empower the Revenue Commissioners to tackle the episodes of tax evasion which have caused such recent public concern and anxiety. Striking that balance is a matter of political judgment. The Revenue Commissioners should make suggestions on how we should proceed but it is for legislators to decide how that balance should be struck. In the final analysis that is an assessment which can only be made by the Houses of the Oireachtas.

One feature of the debate on these new powers has been the virtual silence of the Opposition in both Houses. The usual catch cry that the Opposition's job is to oppose has been conveniently silenced on this occasion, probably for the good political reason that Opposition parties do not want to be seen to be against the Revenue Commissioners' attempts to tackle tax evasion.

Thus the debate arises in this House, with no additional safeguards having been added to the Bill to meet the genuine concerns which have been expressed about these powers. I have spoken at a number of dinners for accountants, although I am almost totally innumerate, and these concerns have been expressed to me by people of the highest professional competence.

The purpose of my amendment is to insert a provision into the Bill which reflects the exceptional nature of the powers being granted to the Revenue Commissioners. In comments by the Minister and the Revenue Commissioners we have been given assurances that there will be appropriate checks and balances to ensure that only properly authorised and trained Revenue personnel will have access to any new powers. The Chairman of the Revenue Commissioners indicated on RTÉ radio that the proposed new powers would not be focused on smaller cases. People are worried that the big fish always get away with evasion but the poor granny in Limerick gets targeted by the Revenue Commissioners. The disproportion is incredible, particularly in recent cases where the wealthy have had their bills wiped out. Despite all these assurances, there is nothing in this Bill to underpin those comments – all we have are statements in the media.

My amendment will provide such an underpinning. It will ensure that these powers must be debated in the Oireachtas within two years, that is democracy in action, and that they will not become part of the day-to-day armoury of the Revenue Commissioners to be used against ordinary people. I would welcome these powers being used against the unpatriotic wealthy.

My amendment will also ensure that these powers will have to be regarded as exceptional, in the same way that the post-Omagh Offences Against the State (Amendment) Act was exceptional, and that these powers can be effectively reviewed following the Moriarty tribunal report, part of whose remit is to find out why the Revenue Commissioners did not use powers granted to them by the Oireachtas. I hope the Minister will agree to my amendment. It will not take away from the powers he wishes to give the Revenue Commissioners, but will subject them to parliamentary review.

I also wish to raise the issue of payments to families of disabled children living at home which only come into play when the child is two years of age. I know of families in which there are two or three disabled children. What are they to do for the first two years? This matter has not been addressed. It is a question of human rights. When families have to face a difficult situation they will usually love the child no matter how disabled it may be. However, why add to their burden by saying "live horse 'til you get grass"? That is not fair and these people should be assisted immediately. The Minister has received correspondence from the so-called Jack and Jill foundation and there has been some movement.

I also wish to raise the tax situation of micro breweries. Brewing beer on a micro scale is labour-intensive. A small number of companies are starting up in an industry in which there is a virtual monopoly. Exports by micro breweries are genuine exports. I do not wish to be antagonistic as some of the well-known brands have been generous in supporting causes in which I have been involved. However, when Guinness is sold in Irish pubs around the world we might get the illusion that we are making a profit. This is not the case as the beer is brewed locally, even in the most remote areas, and the profit stays in these areas.

Micro breweries are genuine exporters bringing revenue into the country. We need a staggered excise system, such as those operating in a number of countries including Germany where the excise rate drops to a percentage of the principal depending on the number of hectolitres brewed. The same situation operates in America and I am sure the Minister has the figures. There are a number of thriving micro breweries in Denver. The same industry is starting here and we should give these companies a little assistance.

We must also look at the situation of people with disabilities living alone. I would like to have had more time to deal with such issues. However, I wish to return to the two central issues on which I propose to table amendments. I have made a passionate plea for justice for elderly people living in a dignified relationship who are being put out of their homes at the end of their lives by a grossly unjust tax system which discriminates against citizens of this State. I have appealed to the Minister to do something about this immediately. I have also suggested that, in line with the real democratic feeling of this House, sections 189 and 190 be reviewed after two years. We will probably want to keep them but we should look at their operation to ensure that they are not damaging ordinary people.

I do not intend to repeat the comments of previous speakers. The debate has been long and the contributions have been worthwhile. I agree with a number of the points raised by Senator Norris. It is important that the Minister looks again at capital acquisitions tax, capital gains tax, probate tax and inheritance tax. The Minister is committed to doing so and I hope he will come back to the House before next year's Finance Bill with firm proposals on measures to eliminate any anomalies in the system. We need to examine and act upon those matters.

While I appreciate the concerns expressed by Senator Norris, the suggestion that it is Government policy to make gay people or old single people homeless is an over-reaction.

I accept the Minster's bona fides. However, while I am sure that is not the intention, it will be the effect.

Not so. The Government is committed to the dignity of life and of those living in that state.

I accept that.

A number of speakers referred to credit unions. It is important to recognise the important part they play in our communities. Small credit unions in rural towns and even in cities, such as Galway, are very important parts of our society. They are not all big concerns, nor do they all have huge assets. However, they all play an important role in society in terms of serving ordinary people and savers, who do not consider it a big deal to obtain loans from their credit unions to enable them buy a car, improve their homes, pay for a holiday or whatever. It is important that this issue be addressed and I implore the Minister to meet with the credit unions to try to find a way out of the current situation.

The powers to be given to the Revenue are necessary and worthwhile. However, it is important that they be reviewed within a two year period and the legislation should provide for this. Any legislation which proposes radical change, such as this, should be reviewed. I hope the Minister accepts this.

There are no substantive changes to VAT. At present a VAT rate of 21 per cent is charged on incontinence wear for adults whereas there is no VAT on children's nappies. It is important to consider removing VAT on such supplies. There is a big emphasis on carers and old people and the Government is very committed to them and to families looking after their relatives at home. We must make it easy for them to do so and by way of showing our commitment perhaps the Minister could consider this proposal for Committee Stage.

When there is a budget surplus it is easy to call for increased spending. It takes somebody with a hard neck to say that money will not be spent at will, that the Government will be prudent in ensuring that the economy can continue to grow and that all the money and effort made in recent years are not wasted. I applaud the prudent approach taken by the Minister and the way he has addressed the issues.

There is general agreement that the budget and this legislation will benefit the old and the lower paid. The Bill sets out to ensure that there is co-operation between all sections of the community for the common good. We need to look at those living in poverty and make a concerted effort as we enter the new millennium to do something to eradicate poverty traps and alleviate the begging on the streets and by traffic lights.

Once this Bill is passed I presume the Minister and his officials will be considering the next Finance Bill. That is where changes must be made and where we must take cognisance of the poor and those who are struggling daily, who do not have shoes or a roof over their head. I would like to see such idealism implemented in the next budget and Finance Bill.

There have been radical tax changes and the move to tax credits is welcome. However, speaking as an ordinary PAYE taxpayer, the changes are very difficult to understand. It is important, therefore, that the current good publicity campaign is continued and that all efforts are made to ensure that everybody understands how the new system will work, what it will mean on an individual basis and that people will be aware of all the credits and allowances they can utilise. In many instances people do not understand that they can claim certain medical expenses or that there is an extension of the carer's allowance. Perhaps the advertisement of changes to the tax system could be made easier. It could be done in the form of questions, for example, by asking if people are aware that they can claim certain amounts in respect of medical expenses or whatever. This would make it easy to understand and will help to ensure that people do not have to read large amounts of documentation, which tends to be complex and difficult.

The fact that the cost of gynaecological/ obstetrician services for a normal delivery, as opposed to medical emergencies, such as caesarean section, cannot be written off against tax discriminates against women. The cost of these services can amount to £600 to £800 and are not paid for by the VHI or by BUPA Ireland.

A number of Senators referred to child care. A recent debate in the House was poorly attended. It is regrettable that this issue was not more fully addressed in this legislation. If there was a genuine commitment by all involved, including the Government, Opposition parties, employers and child care workers, a solution could have been found and implemented.

I welcome the changes that have been introduced, including the removal of the benefit-in-kind from child care expenses, the capital allowances and the provision of child care by employers. However, many organisations are very small and are not in a position to provide crèche facilities either on-site or off-site. We must consider how employers can be facilitated, perhaps in association with other employers and agencies who want to become involved in providing adequate child care facilities. The lack of affordable and acceptable child care is having a growing impact on the availability of workers. It will cause problems for the future and must be addressed soon. I am aware the interdepartmental committee is to report within six months and I look forward to the ensuing debate.

The sections dealing with the electronic filing of tax returns are welcome. As a country we should be proud that, in moving towards the millennium, we are establishing structures that will utilise e-mail, the Internet and electronic commerce, which we hope to build up. If this was followed up by all Departments we would see a much greater use of the technology available, which would be to everyone's benefit.

I also welcome the extension of tax relief to publicly funded colleges in the EU. That is an important move and I compliment the Minister.

I welcome the decision to continue the very important initiative for the film industry. It is especially important to the west. I am aware that SIPTU has been discussing, and may even have reached a decision, on introducing a second post production zone based around Galway city or somewhere in the west. The continuation of this measure will help to attract film makers to Ireland and ensure the survival of the industry. While the Minister believes that the implementation of measures should not be for tax reasons only, we need these incentives to continue to bring people to our country to make films. This is vitally important.

I welcome section 70 which provides for 100 per cent capital allowances for the establishment of park and ride facilities in the larger urban areas. If we are to deal with transportation prob lems we need to put more money into public transport. Park and ride facilities were provided on a pilot basis in Dublin and Cork at Christmas, unfortunately not in Galway, but perhaps this will happen next year. I would like to see more done in that area. I welcome the Minister's important initiative.

As regards section 66, in the past corporation tax has been applied to the aggregate and concrete products industry. It appears that this industry will now be included in the 25 per cent corporation tax band. The concrete industry has provided a great deal of employment and is a very competitive business. Perhaps it was not the Minister's intention that the production of aggregate and concrete products would come under this section and be subject to 25 per cent corporation tax. Perhaps the Minister could clarify this; he might consider not making this change and including this important element of the industry in the 10 per cent tax band.

I have read the Dáil Official Report on the Finance Bill. It is fair to say that this has been a good Finance Bill. The Minister has introduced new measures and worked through some old ones. He has been courageous in his attempt to change the system. The Bill helps the lower paid and the elderly. I look forward to intended changes in child care. I hope firm proposals will be agreed and will be ready to be implemented in next December's budget. I look forward to the next two or three Finance Bills which will come before this House. I commend the Bill to the House.

I have enjoyed the debate so far and many valuable contributions have been made. I was impressed by Senator Norris's remarks on the capital acquisitions tax which the Minister should take on board; likewise the new pension arrangements about which there is great concern.

The Finance Bill gets longer every year and the Minister has added 60 pages since the Bill was published some months ago; it should be called the book of the year. Why do we need such an extensive tome – 72 sections in this Bill – every year? Perhaps we could manage with a more streamlined presentation which would focus on the key areas. It is certainly well padded out.

The Minister has presented a budget which is almost unique as we have not had a surplus in 50 years; he is in an envious position. The Finance Bill elaborates on the budget and makes statutory provision for its measures as well as adding some new ones. It also presents an economic framework for the management of the country in the next 12 months. I would like to see it go beyond that in terms of more long-term planning. This will be even more necessary because of the decrease in EU funding and the ESRI recommendations for a £50 million investment in the next seven years.

There are striking differences between this Bill and the budget presented by the Minister. The Minister previously presented a budgetary and economic strategy which was geared towards restricting Government expenditure. He claimed last year that he would restrict it to a limit of 4 per cent and that he would reduce the tax rate. The tax rate was reduced in line with Progressive Democrat policy. The restriction of Government expenditure to 4 per cent was a sleight of hand because, before he did that, he brought forward £5 million from the 1997 figures. This gave the impression that he was keeping more strictly within the limit he stated.

Last year's budget, with which I disagreed, gave a disproportionate benefit to the well off who benefited from tax reductions and the capital gains tax measures. This year the Minister thankfully made a U-turn. He forgot about tax reduction and began the process of tax reform through his espousal of tax credits, which we always recommended. He has begun the process and promised he will implement a tax credit system next year. I do not know what has happened to the impact of the Progressive Democrats on the Government; they are a long way away from the 20 per cent and 40 per cent tax rates they promised. Perhaps the Minister has asserted himself or the Progressive Democrats have gone soft. He may respond to that. However, this is a welcome new approach to tax reform.

There is a considerable amount of confusion as regards the Minister's short-term and long-term policies. For example, the health budget is one of the largest, and was allocated approximately £3 billion this year, reflecting a 11 per cent increase. However, despite that and last year's 10 per cent increase, the medical services are in a mess. There is a huge crisis in Tallaght Hospital and waiting lists have doubled in virtually all other major hospitals, certainly in the Mater, Beaumont and Cappagh Hospitals which I know best; Temple Street has been waiting for a new hospital for the past number of years and there is no sign there will be one at all. Waiting lists are growing while our per capita expenditure on health is still among the lowest in Europe. However, there has been a ten to 11 per cent increase in expenditure in the past two years, which is not within the 4 per cent limit; this is mismanagement. The Minister has now promised a reduction to 2.5 per cent in the next two years. If things are in a mess with at least a 10 per cent average increase, what will happen when the amount is reduced to 2.5 per cent in the next two years? Where is the multi-annual budget strategy also promised by the Minister, the sharp reduction from 10 per cent to a quarter of that? There is no indication how this will reflect on the existing inadequate services.

The Minister said on 14 March that £1 billion would be directed towards the reduction of the national debt. This has been dramatically reduced from 137 per cent of GDP 12 years ago to 54 per cent now. It is one of the lowest in the EU, and it seems strange that the Minister should find that the greater part of the Celtic tiger product – the budget surplus – should be used to reduce the national debt further. We have been reducing the national debt without paying anything off the principal by approximately 8 per cent per annum for the past five or six years. We are doing extremely well, and if we continue to do so we will be the best in Europe in a couple of years.

Apart from the short-term aspect of the Finance Bill's framework for 1999 and the management of the country's resources, there is also the question of a long-term framework to be addressed. The Minister will be in Brussels for the next two days, which is why he will not be here for the Committee Stage debate. It is unlikely that other Ministers will be able to accept recommendations tomorrow if the Minister for Finance is not here, which is unfortunate. However, the Minister's reason for being in Brussels is also important; he will be there for the negotiations on Ireland's share of European funding until 2006. It is high time the Minister reflected this in his Finance Bills and Budget Statements from now on. The Economic and Social Research Institute recently stated that what is required is a seven year plan to invest £50 billion in the interests of the country. The ESRI made that statement to coincide with the next tranche of funds, which is to last until 2006. The best figure we can expect is approximately £4 billion from Europe, which is about half what we got in the last tranche. That is a dramatic reduction but it is still £4 billion and if it is used properly, as much of the previous tranche was, it can be invested in infrastructure in a very productive fashion.

The £1 billion surplus should have been put alongside this £4 billion rather than going towards a reduction of the national debt. The Minister should also look at the privatisation policy of the Minister for Public Enterprise. If she proceeds with the sale of the various semi-States, as she has been saying, Telecom Éireann would realise in the region of £5 billion, which means it has doubled in value in recent years. There is a real question as to whether it should be sold at all, but I feel it should be used as collateral for borrowings that can be invested rather than this becoming a case of the family silver being sold off. We would have received £2.5 billion less if it had been sold two or three years ago. That is not the way to deal with some of our premier semi-State bodies, which have been extremely effective and which are very valuable. This will have to be included in the equation when we discuss infrastructural funding.

The Minister has referred to private and public partnership; that is a valuable initiative I am glad to see him use. That will also have to be included in the equation, and a figure will have to be put on the amount of funds realisable over the next seven years and which can be used for investment in infrastructural development. The Minister must address these issues, but he has not done so in this budget nor in the last one. The Minister refers to multi-annual budgeting but he has given no indication that he intends to do so in the short or long term.

The Minister should also address the housing crisis in both the long and short term. He decided to implement only one of the recommendations of the second Bacon report. He has not decided to implement the important recommendation of tax reliefs for tenants. He says he has made a major submission to Europe in relation to double rent relief and rates relief in the context of the urban renewal scheme, so there is no problem with his bending over backwards to use all his Department's resources to try to ensure that there are tax, rent or rate reliefs for the business and corporate sector. However, he cannot find a way to give any tax relief to tenants of landlords. Why can he not put people before property? Why can the State not put resources into providing relief for people rather than providing incentives for greater profits to be made and for every landlord to put a portfolio of property together, knowing they will get a wonderful return by way of tax incentives?

It is a scandal that the Minister rejected the Bacon report's second major recommendation, which is tax relief for tenants. The Labour Party introduced tax reliefs for tenants in 1995, and if still in Government it would have certainly extended those provisions very considerably. It would be one way of alleviating the financial suffering of families, given the enormous increases in rents. Members also know from their local authorities that families are being evicted because others can pay the higher rents the market determines. The Minister should have addressed this matter, but he has not.

There is also the matter of stamp duty for new home owners of second hand houses. Why should they have to pay stamp duty if they are new home owners? Again, the Minister is not putting people before property. He should be going out of his way to accommodate young people who want or have to buy a second hand house and who must pay stamp duty at an exorbitant rate. The Minister told us that that duty was introduced by King Billy of the Battle of the Boyne fame. The Minister called it a progressive tax initiative. It was introduced in England 200 years ago and in Ireland 100 years ago and is certainly not progressive the way it is being implemented. The Minister should have a fresh look at it.

The Minister must also target resources for education. Yesterday IBEC issued a statement saying that the shortage of skilled labour was causing a crisis for employment and requested more money and resources for education and training. Ireland is the lowest placed OECD country in terms of adult education provision. It is estimated that 25 per cent of our adult population between the ages of 21 and 65 years is functionally illiterate. That is a scandal for a country that prides itself on its young educated population. That percentage represents more than 600,000 adults who are in need of education and training. Was this statistic reflected in the Minister's speech? It was not.

Adult education and literacy schemes are operated on a shoestring, a few hours here and there. Training is carried out on a voluntary basis; most adult educators are volunteers. After a day's work in business or in the home, they are prepared to leave their homes again to teach in their community. Adult education is a scandal but the Minister did not have a word to say about it.

Child care and education is the other side of the coin. There is no pre-school system of education. Crèches are now so regulated that many of them go out of business due to the absence of support mechanisms. The Minister informed the House that he is deleting the benefit-in-kind to the employee from the employer in relation to child care facilities. That is unacceptable. He claims he is interested in resolving the child care issue but not yet, like St. Augustine. He assured us jocosely that the general election will not take place for another three years. It is time he addressed this issue and put the emphasis on people, the families, children, married women and parents who are losing out because of his attitude.

Ireland has had a booming economy for most of the 1990s. In the early 1990s, at the highest level of unemployment, the live register stood at 293,000. The figure has not dropped dramatically but gradually and sustainedly to its present level of approximately 206,000. That is a reduction of less than one-third and it was only in the past year that there was a significant reduction in long-term unemployment. The jobs being created have not gone to people who are regularly unemployed or who live in economic blackspots. Why did the Minister not consider extending designation status, which he has extended to rural areas and seaside resorts, to economic blackspots in the suburbs? Areas such as Tallaght, Clondalkin, Ballymun and Darndale in Dublin are replicated in Galway, Limerick, Cork and other cities. These are the areas which should be designated and to which business should be given incentives to relocate.

The inner city of Dublin is not in need of urban designation at present. It is booming. As a result, one cannot get builders, bricklayers or other skilled people. Look at the cranes throughout the city. It is unnecessary to continue the extremely generous tax incentives in the inner city. Their initial purpose was to attract developers to an area to which they would not have been attracted otherwise. Now developers are tripping over each other in the inner city. We should concentrate on areas which need the incentives. Designation should be extended to the suburbs to attract development and thus provide employment.

I agree with Senator Ross – it is about the only matter on which I agree with him – that the Celtic tiger has relied too much for its success on multinationals. Approximately 50 per cent of Ireland's gross national product comes from multinational production. That is a huge amount; it virtually puts us at the level of a banana republic. We have a narrow and low indigenous industrial base and there are no measures in this Bill to encourage the expansion of that base.

The Celtic tiger will always be vulnerable while so much of its manufacturing industry is dependent on companies which locate in Ireland to avail of its low tax rates. The current rate is 10 per cent but that will increase to 12.5 per cent if the European Union permits it. Ireland is extremely vulnerable in this regard and the Minister for Finance should have a plan in place to address it.

Ireland has no motorway linking its cities, not even the two major cities of Dublin and Belfast. The railway system is clapped out. Nearly every day the train journey to Tralee is completed by bus from Mallow because the rail link does not function. What is being done? A major investment programme is required. What about buses? There are two quality bus corridors in Dublin and nine more are planned but we do not have sufficient buses. How can a city have a public transport service if it does not have the required investment in rolling stock? The Minister must address this by drawing up a bold plan rather than simply paying £1 billion off the national debt.

What about water shortages when there is daily rainfall? We need more reservoirs. We do not have tertiary treatment for sewage. With regard to waste, it will soon no longer be possible to use landfills. What is being done about incineration, composting or recycling? There are no initiatives. None of these topics is mentioned in the Bill. Surely one could expect a reference to at least one of them.

Senator Norris spoke eloquently and at length about the capital acquisitions tax. It affects people who live together but who are not married. They might be a cohabiting couple, a gay couple or just brother and sister. They might also be divorced or separated people in another stable relationship but they are being penalised by capital acquisitions tax. The threshold on which one of these people will be taxed is £12,560. If the couple were married, there would be no tax requirement. The tax is imposed at an increasing rate of 20 per cent on the next £10,000, 30 per cent on the next £10,000 and the balance is liable to tax at 40 per cent. That applies to the home, life insurance and any other inheritance.

It is most unfair. What about an elderly couple of siblings? If the brother dies, the sister will be liable to pay a huge amount of tax. It also affects a separated person who is living in a stable relationship. The tax does not reflect the social and inter-personal developments that have taken place in this country in recent decades. Again, one can see the key theme or benchmark of this legislation. The Minister, as an accountant, is not concerned with people but with figures and property. This does not pass the test.

He is also on dangerous ground regarding pensions for the self-employed. He is trying to do the right thing by providing a more flexible system, allowing people to cash in their pensions and liquidate investments but, with the best will in the world, this will allow almost unfettered scope for abuse unless it is properly regulated. There are tens of thousands of small business people – farmers, shopkeepers, garage owners, etc. – but the legislation does not provide protection for spouses and minors. If a pension is liquidated, what guarantee is there that the spouse will be protected? The money may be spent with nothing left for the spouse of a self-employed person. The money could be dissipated quickly – for example, a sibling or child may want money to buy a house. We must ensure a pension continues to be what it is now, that it will provide a lifelong income and cannot be liquidated and dissipated. The Minister will have to introduce protections.

I agree with the Minister that, as well as providing a framework for economic, financial and tax matters for 12 months or more, the Finance Bill must also ensure confidence in the system, and I am glad he referred to the Moriarty tribunals. He acknowledged, although not to the extent I would have liked, that there were bogus non-resident accounts to avoid DIRT, off-shore accounts to avoid taxes, an estimated 25,000 Irish registered non-resident companies – many of which were bogus companies used for money laundering and which operated from the IFSC – payments to politicians and other abuses. Many professionals, such as doctors and lawyers, never provide a receipt and it should be a statutory obligation for professional self-employed people to do so. They should be properly supervised and regulated.

I am glad the Revenue will have greater powers, including greater access to records of financial institutions, building societies and credit unions, and that sanctions have been increased from £10,000 to £100,000, because it shows we are beginning to be serious. There must be precautions and caveats but it is good to see a Minister for Finance finally providing for this.

While I have been critical of what is missing, I am pleased with the movement towards tax reform and the Minister's emphasis on confidence in the system. I would like to see changes to the Bill and I hope the Minister considers our Committee Stage proposals.

I welcome the thrust of the Finance Bill. Its sheer size is evidence of the changes being made in various areas. As this is the year of the elderly it is right that pensions were addressed, and they will be further addressed when the Pensions Bill is introduced later this year. This is important at a time when people are living longer and the purchase of annuities when retirement schemes mature is becoming a greater problem. People whose pensions mature at 60 years of age and who invest a lump sum of a quarter of their pensions in an annuity have received a 6 per cent return at best; some fund managers were so bad that investors did not even receive a 4 per cent return. There are few good fund managers capable of providing a reasonable return for people in a position to invest lump sums from their pension. I am glad the amount which can be withdrawn will be increased so that there is flexibility in the tax system and these moneys can be invested at a more realistic level than has been possible heretofore. I am also glad there has been an increase in the threshold for contributions to pension funds on which tax relief can be obtained. The threshold increases according to the investor's age, to a maximum of 30 per cent.

Fewer than 50 per cent of Irish workers have pensions in addition to their social welfare benefits, which is low by world standards. Among the self-employed, the position is worse – perhaps fewer than 30 per cent of them pay into pension schemes. The changes to pensions are important and when the new Pensions Bill is enacted I hope we see how best to deal with this.

The widening of the income tax bands is a welcome development. The standard rate has been increased from £4,000 for single people and £8,000 for a married couple to £14,000 and £28,000, respectively, which will be extremely beneficial.

Other measures are also welcome, although they are small in terms of the overall economy. Section 12 provides for a new tax relief in respect of funds raised by the public for people who have been totally or permanently incapacitated, and will help many people who have suffered accidents in sport, on the road, in the home, etc. I support this because there have been problems in the past with paying tax on moneys raised for a fund to relieve the suffering of such people. The removal of BIK from child care facilities and from travel passes provided by employers is also welcome.

Speaking from a motor industry viewpoint, I do not agree with the VRT rate increases, which will neither reduce the number of bigger cars on the road nor help the environment. The Minister said there was an increase in the number of cars bought in January and February this year but that was to be expected regardless of this increase, because many of these cars are bought by fleet owners for the holiday season – orders would have been placed before Christmas and the cars bought in the New Year. There has been a big increase in the number of cars purchased for fleets, both for tourism and for large companies. A large number of two litre cars are bought in urban areas, such as Dublin, Cork and Limerick, which are practically gridlocked. While there has been an increase in the number of cars sold at the lower end of the market, the sale of big cars has dropped dramatically.

Senator Costello said that while there are two bus corridors in operation in Dublin and nine more being built, they are not of much use because there are not enough buses. Bus Átha Cliath has had a monopoly in public transport in Dublin for too long. There are a number of private operators, including a few in County Kilkenny, who would be capable of taking up any slack and would be prepared to buy as many buses as necessary to fill the bus corridors in Dublin.

One measure which might help to alleviate the gridlock in many towns and cities is the introduction of 100 per cent tax relief for anyone who provides a park and ride facility. Last Christmas Kilkenny Corporation carried out an experiment which cost a lot, but it did not work well because it was not publicised. Tax reliefs for the provision of park and ride facilities and for residential and commercial developments up to a limit of 25 per cent of the total cost at the park and ride facility will help people to become involved in something which might not otherwise be profitable.

We must look at different housing options. The cost of houses has increased substantially in recent years. This has been driven by the Celtic tiger and by the fact that county councils do not have funds to provide housing. This means people must move into rented accommodation which is subsidised. The more the health board subsidy, the higher the rents. This is not a successful way to provide houses for those who cannot provide for themselves.

We should not forget that charitable organisations, such as Respond, provide houses for people who cannot provide for themselves. The cost of building these houses is approximately 30 per cent less than in the commercial field. This suggests there is a 25 per cent profit margin on every house built by commercial developers. If this was removed we could build more houses. I am glad Respond has bought commercial land on which to build houses which people can then buy on a shared ownership basis. It is better to have a range of tax based housing schemes than relying on rented accommodation for those on lower incomes. We must deal with the housing crisis in a way different to that in the past.

Senator Costello said that nothing was being done for the surviving spouse and minor children in the tax treatment of pensions. However, that is dealt with in section 19. The Minister said that he has "taken account of particularly sensitive areas in this tax treatment, namely, the position of the surviving spouse and minor children".

The tax relief for fees of undergraduate students in the EU is necessary. In his speech the Minister stated:

. . . . . the 1995 budget announced the introduction of free fees and tax relief was provided for full-time undergraduate students in private colleges. The following year tax relief was also made available for part-time undergraduate students in publicly funded and private colleges. This year I am introducing a new relief for the fees of undergraduate students studying a wide range of courses in publicly funded colleges in other EU countries.

This is necessary because a number of courses not available in Ireland may be available in other EU countries. This is a step forward which will help people.

It was said that nothing was done about corporation tax. However, this Bill provides for a reduction in the standard rate of corporation tax, on a phased basis, from 32 per cent to 28 per cent to 24 per cent and so on. It is tied in with EU regulations but it gives businesses a better chance to have a reasonable return on their investments. While the Celtic tiger may be driven by information technology and multinational businesses, the smaller indigenous businesses must be able to retain a certain amount of profit or they will go out of business.

Last year concern was expressed about the reduction in the capital gains tax from 40 to 20 per cent. The sceptics have been proven wrong because it has increased the amount of money in circulation. Many people held on to investments because the capital gains tax was so high, but when it was reduced they divested themselves of property and reinvested in the economy. It goes to show that taking the bull by the horns in certain instances can give a very good return.

Sections of Irish society need a lot of help but their needs cannot be met in just one year. Like other Members, I would like to see more attention paid to the deprived in our society. Changes made to benefits in the Social Welfare Bill can take months to be implemented. Therefore, I would like any changes that are being made to come into effect immediately. Every year there is a necessity to look at the problems associated with various sections of society.

I welcome the introduction of a capital allowance for child care facilities because there are not enough such facilities. If bigger firms provided proper child care facilities then it would not be so difficult for women to return to work or for firms to get suitable workers in rural areas. Employers will receive a capital allowance for building child care facilities and this measure will help women who have children to return to work. In addition, they will not have to pay as much for child care and they will feel better having their children close by.

Many Members have referred to the increased powers of the Revenue Commissioners. Over the past number of years, particularly the past few months, it has been argued that their powers were not strong enough. Perhaps their powers were strong enough but there was not the political will to ensure that all legal avenues open to the Revenue Commissioners were availed of. We must have a system whereby the ordinary taxpayer is not targeted. As stated in the Bill, named individuals can be targeted under these new regulations only if there is a valid reason and if the Revenue Commissioners are satisfied that they should go to the financial institutions as part of an investigation.

The Bill provides for a change in the amount of tax professional athletes are liable. It is important that there is a provision for professional athletes to ensure that if they have a good year that they will not be taxed on the full amount at the highest rate. Athletes have a short professional career but if they have a good year 46 per cent of their earnings goes in tax. We should examine this situation with regard to all athletes. However, I would not include boxers in that category.

There are a number of areas that still need to be addressed by the Celtic tiger with the moneys generated by our economic success. The Bill indicates that we are moving forward and I expect that the public will receive increased returns next year as a result of increased taxation.

I welcome the Minister of State to the House. This is a very important debate. Senators have been examining the system and making proposals about how it ought to change while welcoming the positive changes in the Bill.

As Fine Gael spokesperson in the Seanad on public enterprise and transport, I would like to raise a few issues. First, I note in the Bill that park and ride facilities are to be encouraged in nominated counties and areas. County Louth should be included in that provision. Many people travel from counties other than the designated counties and towns to work in the main cities. Many more people would like to avail of park and ride facilities at their local stations and use the improved public transport facilities, particularly the improved rail links between County Louth and other counties and Dublin city, and proposed changes in the rail transport system. However, car parks in Dundalk and Drogheda are completely chock-a-block. Hundreds of people are travelling every day but there is no more room for cars. There are people ready, willing and able to do business with the local authority and Iarnród Éireann to provide park and ride facilities in Drogheda. I presume the same applies in many other areas in the country. This Bill should be amended in that respect. Senator Avril Doyle will table such an amendment tomorrow.

We must also examine the situation in other parts of the country. I listened to the recent radio debate about our railway system and heard that people commute daily from Portlaoise and Mullingar to Dublin. If we can encourage people to travel from those areas and encourage enterprising people to invest in park and ride facilities in areas outside our main cities it would have a very positive impact.

Any public representative or member of the public who commutes to Dublin by car has to deal with the problems of traffic, waiting in long queues and having to get up very early. It would normally take about an hour for a person to drive from Drogheda to Dublin but it can be as much as one and a half to two hours at peak times. The length of time it takes to drive to Dublin from other parts of the country is also increasing. Therefore, I welcome the Minister, Deputy O'Rourke's proposed upgrading of the railway system. However, I disagree with Iarnród Éireann having to bear the brunt of these proposals in that they must fund these improvements in rail safety and rail transport through increased borrowing. The Minister for Finance should examine this serious matter again. The railways need massive investment but it is unfair and inequitable that Iarnród Éireann should have to pay the whole price in terms of borrowing because there will be benefit to the wider community. There would be a knock-on effect because our road and transport systems would be improved and people would be able to get to work on time. The more people travel by rail the better and, therefore, the moneys the State allocates to Iarnród Éireann should be increased.

Recently, Deputy Yates suggested in the Dáil that the proceeds from the sale of Telecom Éireann should be used to fund improvements in our rail and transport system. That is a sensible suggestion and I urge the Minister to look at the need to have proper and radical investment in public enterprise and transport.

Our so-called tiger economy has benefited many people, but for a significant minority it has had no effect. Many people in the community need assistance and the Government should redirect its efforts in some of these areas. I refer in particular to people who are disadvantaged. I want to bring the matter of speech therapy to the attention of the Minister. In County Louth more than 100 children are waiting for speech therapy. These children are three years of age and cannot get a speech therapist to help them with serious and profound speech difficulties. If one lives in the community care area of County Louth and south Monaghan, one must wait for a minimum of 12 months if one has a serious speech impediment. In other words, if one cannot speak at all, there is no way one will get a speech therapist for at least 12 months, and if one has a very serious speech problem, one could wait for up to two years for a speech therapist.

It is totally unacceptable that very young people who cannot speak are being deprived of care because of lack of investment and lack of concern for them. The health boards do their best. Speech therapists train primarily in Trinity College Dublin, but at the moment the scheme can only take 27 graduates per annum. This is much fewer than the numbers required. Health boards offer these students scholarships, whereby if the students work for the health board they will pay their way through college and give them a contract for a period. However, pay levels in the public service for these important skills does not compete with pay in the private sector. Generally, qualified speech therapists go into private practice. I have discussed this with the Trinity College authorities who believe, as I do, that the Government must tackle this problem. More money must be invested in these courses and the Minister must ensure there is adequate remuneration for people working in the caring professions.

A medical card holder in Drogheda should be entitled to the same service as someone with a good job and a decent income who can pay for this service privately. Money ought to be provided to the health boards to contract out services to people in the private sector, in the absence of people working in the public service, sufficient to allow these young people to develop the ability to communicate with others.

Many other health service issues need to be addressed and I am angry that with the best will in the world there is very little we can do. This is something that needs initiative from the Government, and I urge that it is examined again.

Newspaper commentators can be cynical at times about public sector pay. People working in the public service, particularly in the caring professions such as teaching and nursing, are profoundly dedicated to the community. They do not rip off the system or fiddle their tax; they work for the good of the community and ought to be paid properly. I believe that professional carers in the health services and education are not paid adequately.

Many people are sickened by the revelations at the tribunals. The corruption exposed and the financial dealings of people who were trusted by the community, are totally contrary to what the public wants. A great disservice has been done to the State by people who claim to have served it well; in fact, they served themselves. In the process they have brought disrepute to people who work in the public service as politicians or administrators in local government, people who work day and night and who give their total commitment to their community.

The law must be changed because it is not acceptable that people can abuse the financial laws by being able to buy the best advice to get around the tax laws. There is great public demand for such changes. There has been criticism of the role of the Revenue Commissioners. I do not run a business so I cannot speak with the authority of people who may have a lifetime of experience in this area. However, I am pleased that the powers of the Revenue Commissioners have been strengthened, because they work on behalf of the electorate when they carry out their duties under the Finance Acts. I trust the Revenue Commissioners and believe they do a good job. Ordinary men and women want to see more of this, not less – they want to see an efficient system. They want those who have fiddled their taxes for years and who have dodged their responsibilities to be made face up to the wishes of the public. It has been said that the Revenue Commissioners will exceed their powers. In every walk of life there are those who will go beyond the limit, but the majority of people in the Revenue Commissioners are fine, committed and dedicated people and I support them in their work.

Another issue that concerns me is housing. It is fundamental for every family to have a roof over their heads. For thousands of people the inability to either purchase their own home or to get on a local authority housing list is an acute problem. Despite the best efforts of the Government – I accept they have sought expert opinion on this – not enough is being done to solve the housing crisis. Over a period of months I have been inundated with queries on housing from hundreds of people in Drogheda. Many of these people are young, unemployed and single parents. The system is not working for the benefit of these people.

I do not have a magic wand to solve the problem. However, I would like to highlight the work of the Respond co-operative housing group which is doing a wonderful job. They are based in Waterford and have operations in Drogheda and many other counties. I urge Ministers with responsibility in this area to encourage this group to do even more work. In County Louth the group is providing houses for people on the housing list with an income of less than £9,500 per annum. With the help of the local authority, they are building houses which will be purchased by people on the housing list. These houses will be sold at a fixed price and will be available to people who would not normally have the capacity to design and build their own home. The role of the voluntary housing groups is something we should try to expand, because they have a major role to play, particularly for the disadvantaged in society.

If one suffers from a disability and qualifies under the health board and local government assessment criteria one is entitled to two-thirds of the cost for home improvements up to a maximum of £12,000 to alleviate some of the problems posed by the disability. However, the problem is that the disabled person has to come up with one-third of the cost. The reality for many of the disabled people I meet is that because they are disabled they do not have that money. They cannot do the work that needs to be done without going into debt. Many disabled people are not able to come up with one third of the cost and it is putting a lot of pressure on them. I ask the Minister for Finance to look again at this provision and allow a 100 per cent grant up to £12,000 provided that it meets the criteria, which are strict. That would be a more equitable arrangement. For the disabled people who need money and cannot get it, this would be a sensible proposal.

I concur with Senator O'Dowd's last remarks. In most parishes there may be two or three disabled people. Where is the community or parish spirit? We have it in Westmeath – I am very proud of the community spirit there and the people who help out with the fundraising. A sum of £4,000 is not a great amount to raise for a small community or a parish. It could be raised in one night with no difficulty whatever. I must compliment the constituency colleague of Senator O'Dowd, the Minister for Social, Community and Family Affairs and congratulate him on increasing the death grant from £100 to £500 and spending an extra £1.7 million to back date it to the month of February. I am in full agreement with the Senator's sentiments in relation to the disabled.

The Minister for Finance has been in the fortunate position of having the first Budget surplus in 50 years. I respect the Minister very much. He has a background in the world of commerce through his accountancy practice. The Minister took the unpopular political decision of reducing the national debt with the budget surplus. Planning for the long term and the nation's children was the right thing to do. We can remember in 1987 when the IMF were at our door and when a former Minister for Finance talked about job sharing in the 1986 budget. We appreciate the position in which the present Minister for Finance finds himself and how much we have progressed over the last 12 years.

I would like to make a few points in relation to the budget without repeating the points made in the many contributions made. The urban renewal scheme has been an outstanding success throughout the country. I remember making a contribution in the House and saying that from the Aisling Hotel to O'Connell Street was the number one location for films about the pre-war era. That was about 12 years ago. Practically all those buildings have been rebuilt. This has happened as part of regenerating the economy and the construction industry. The incentives were given to people to invest their money in the areas that were most in need.

However, I am puzzled that only 24 countries were included in the new round of urban and rural renewal schemes that has been announced. I was flabbergasted that counties Leitrim and Roscommon were not included. Why were the two county towns of Carrick-on-Shannon and Boyle singled out? I travel all around the country on a monthly basis and the counties of Sligo, Leitrim, Roscommon, west Cavan, north Westmeath and Longford are urgently in need of investment. These areas were given an incentive under the upper Shannon region scheme in last year's budget. However, so far it has only been for residential purposes. I hope it will not be too long before commercial development will be included. The benefits of our tiger economy are barely evident in counties Roscommon, Sligo and Leitrim and something must be done. On the basis of the EU's 1994 regional agreement—

On a point of order, may I have a ruling on the position when there is no Minister present for the Finance Bill?

I am happy to contribute.

The Minister of State went out for a minute, he will be back shortly.

I have no difficulty continuing.

I feel we are not technically in order.

I cannot understand why counties Roscommon and Leitrim were singled out to be left out of the urban renewal scheme. This is an unfortunate event and I hope there will be an amendment by the Minister to include the two county towns. I know that the Cathaoirleach, Senator Mulooly, and Senator Finneran – and other Members of the Oireachtas – have been inundated with correspondence from those areas.

I welcome the progress which has been made on the Mullingar to Sligo rail line, particularly from Mullingar to Dublin. The dual line will be extended to Maynooth and trains from Mullingar to Maynooth and on to Dublin will be able to run every second hour. It is an enormous help to the people of the midlands. I would say that at least 2,000 people per day now travel from Mullingar and north Westmeath to Dublin to their place of employment. Dublin is coming closer all the time, as it were, and these areas need a better rail transport system. I am delighted that the Minister for Public Enterprise, Deputy O'Rourke, who represents County Westmeath so ably has been able to get the funding from Government to have this line improved.

I am disappointed with some of the measures in the budget. Irish entertainment artists are being discriminated against by our European colleagues. If Irish artists perform a concert in the UK they are charged 27 per cent retention tax plus VAT. If they go to Australia, Canada or America, they must pay ten per cent retention tax. If they go to another European country they are charged 15 per cent tax. All artists coming to Ireland from all over the world do not pay tax.

If an artist is performing in Dublin there could be 25 buses or two or three trains from towns around the country travelling to the venue, with tickets costing perhaps £30 plus £2.50 booking charge. This takes money from the younger generation's pockets which might otherwise be spent in their own area. The young people can go to one main event but where does their parents' hard earned cash go? It goes to the bank accounts of these major artists who come here but leave very little funding available for Irish artists. What is the Government doing for Irish artists? Absolutely nothing. It could charge 10 per cent retention tax, or whatever it decided upon, to be redistributed to create opportunities to promote Irish artists abroad.

Over the years there have been no better ambassadors for our country than Irish artists. I do not have to name them but the success of Riverdance and Lord of the Dance has done more for tourism than we could ever have planned for in a marketing campaign. Three Riverdance troupes are currently performing at various international venues; one is in Las Vegas for the entire year, another troupe is in Australia, and the performances are practically booked out for a year and a half and a third troupe is performing all over Europe.

I am proud that a boy and girl from my home village of Castlepollard have been part of the successful Riverdance team. They are out there selling the new, modern, young and well educated Ireland, but what has been done for them in this and previous budgets? All that has been done is to allow foreign artists to come in here and take £1 million or more out of the country. Before they leave Ireland, 95 per cent of the money will be in their banks in Nashville, Las Vegas, California, London or Berlin. Irish artists are being totally discriminated against.

If I could do so, I would move a recommendation to the Finance Bill because I feel so strongly for young Irish artists who are not able to represent themselves in the House. As a musician, I am pleased and honoured to make the case for them, both as a Senator and as Leader of the House. Senator Ó Murchú and Senator Mooney have been wholehearted in their support for Irish artists, but what are we doing in return? These young people would not even draw the dole on principle because they are totally committed to their art. Successful Irish artists have been the greatest ambassadors for this country. Our music and song is a much respected trade mark all over the world.

It was wonderful to see Paddy Maloney of the Chieftans appearing on CNN television for 20 minutes on 16 March. He told the CNN audience of 180 million how wonderful his success story was – having had his first number one record in 35 years. He has entertained with performances featuring Irish and Chinese music as well as music from other countries. I wish to make a case to the Minister of State, Deputy Fahey. In next year's budget we want the drain on money going out of the country stopped because it is affecting the livelihood of Irish musicians and other artists.

The museum business is a difficult one to run but it is a 363 days a year, family/visitor, all-weather business. Some museums are run by local authorities which are not obliged to pay VAT. In fact, they are subsidised by the State and do not charge an entrance fee to exhibitions. That costs the State an arm and a leg. Some museums have set themselves up as trusts because they will not have to pay VAT. Meanwhile, approximately 18 family run museums are struggling to survive. They must pay VAT and everything, but receive absolutely nothing by way of grant aid. State-sponsored bodies have a massive vested interest in coming up with ideas to justify £2 million or £3 million in grant aid from the State, yet some years later the businesses may fold up and disappear from our towns and cities. Why does the Government not step in to help those who have stayed in business for 15 or 20 years? It should grant aid them instead of those who have media reputations but very poor success rates in paying money back to the Exchequer which they received as grant allocations. These people are out in the marketplace using Government money to put family run firms out of business.

From personal experience, I can say that it is a massive minus to be a politician today when one seeks grant aid from Departments. I sincerely hope that will not be the case in future. I am proud to say that every Member of the Oireachtas is making a tax return. However, only 21 per cent of companies are making annual returns. Two weeks ago I heard a comment on a morning radio programme which went unchallenged. Someone said: "Don't put business people in the same category as politicians". However, since all the politicians are making returns I challenge where the man who made that comment stands regarding the 21 per cent rate of company returns compared to people in public life, 99 per cent of whom make honest returns. We are running our businesses honestly as well as making a contribution as politicians.

I wholeheartedly welcome the success of the capital gains tax in the past year. Last year I heard Opposition Senators commenting on this matter but the amount collected by way of capital gains tax has increased even though the rate was reduced from 40 per cent to 20 per cent. This has encouraged many people to invest capital which they had in shares and which had been lying dormant for a long time. It has given great incentive to people who wanted to sell a home. They have been able to distribute the profits to their children who, in turn, were able to put deposits on their own homes.

I very much welcome the broadening of the income tax bands. By 2002, at the end of the Government's full five year programme, we will have the low band rate at 20 per cent and the high band at 40 per cent. The Government is moving in the right direction and is giving people an incentive to work and to make their tax returns on time.

I also welcome the capital allowances for child care facilities. This is urgently needed. I know it is not the be all and end all, but the Minister and the Government are addressing the matter and this is a start. This was the most popular budget in my time as a Member of this House. The increase in VRT was the only minus reaction I received in representations from many organisations. Some people had views on the pensions provisions in the budget, but all fair minded people would say that a very good effort was made to address the problems that exist by encouraging people, including those working longer than normal hours, to invest their money. We must keep the existing incentives going.

In my speech on the budget last year, I said that Ireland was the envy of the English-speaking world given the success of our economy and we have, without doubt, enhanced that performance in the last 12 months. It is a wonderful time to be in public life as an elected representative. There is a lot of money in the Exchequer for local roads, for houses to be built and for extra lighting and footpaths. Such things may not seem too important but they are important in our local areas. An area in north Westmeath received £1,023,000 to spend on roads. All of this contributes to the community and environment in which we live.

The Minister is to be congratulated. Thanks to the economic success built since 1987, we will never have a devaluation again. Our finances have to be handled with the greatest of care and the national debt reduced because, in years to come, our children will benefit from the actions we take in the legislation before us now.

I welcome the Minister to the House and welcome much of this Bill. I will start, however, by plucking a great, fat crow. What on earth was the reason for raising the tax on a packet of cigarettes at all? Why bother raising it by 5p? I do not expect the Minister to consult with Mr. Gordon Brown but now there is a cross-Border difference on a packet of cigarettes of £1.37.

Smoking related diseases are a serious problem. We have very high incidences of lung cancer, arterial disease, heart disease, strokes and emphysema. There are problems with pregnant women smoking and the resultant effects on their babies and small children suffering the effects of passive smoking in the home. Price is the only thing which makes a difference to people smoking. Relatively the price of cigarettes in the State is falling. I cannot understand why the Minister bothered putting 5p onto the price.

How many admissions for chest diseases this winter were due to cigarette smoking? If the Minister wants to do something positive for the health services, why not put on a decent tax of at least 50p, if not £1, to make some impression on the dreadful increase in smoking? Since the Health Research Bureau was abolished there has been a constant upward trend in smoking, young women being one of the worst categories. Is there any explanation for this ridiculous increase? Why bother from an administrative point of view with an increase if it is only 5p? If the Minister wants to do something about cigarette smoking, he should put on a decent tax, especially when there is such a huge difference in price across the Border. We are encouraging people in Northern Ireland to smoke as well.

There are many small changes in the Bill which I welcome but which should have been done before. In section 5 additional personal allowances for widowed and single parents are allowed for children up to 18 years of age. In the past it was up to 16 years of age and I welcome this increase. It is an important measure because we repeatedly hear that education is the watchword for employment and we must do everything to facilitate children remaining in education for as long as possible. All the financial incentives for parents to keep them there are welcome.

I welcome the exemption from benefit in kind for child care under the section dealing with employers' services. With the increasing number of women in the workforce – although child care is not an issue just for women – we must do something about tax relief is this area. It may not do anything about poverty in low income families, but it will make a difference for those employing people full-time or paying for privately owned crèches. Publicly owned crèches should be more widely available so that there would be affordable day care for children in proximity to their homes. Few mothers want their children to become commuters. While I welcome what is being done, it is a very small step in this area, which, in the context of a well educated work force, must be provided for.

There is a major improvement for those who are providing for elderly, incapacitated parents. This sector has been neglected for too long. I have met many carers who left good jobs thinking they would be caring for a parent for six months or two years but found themselves still caring for that parent ten years later. It is not that they do not love the parent but their lives slip away – the possibility of promotion in their job goes, they lose pension rights and, worst of all, they become unemployable.

I welcome the tax relief for carers of infirm parents. It now stands at £8,500. If we can keep increasing it so much the better. We want to make jobs such as caring for the elderly or children worthwhile in themselves. I would like to see tax relief for those employing child minders at home because it would upgrade the job, bring them into the social insurance system and cut out a large section of the black economy, something which would benefit all concerned.

The provision for tax relief for buildings to be improved or erected for convalescent homes is welcome. This could be an important means of relieving the situation in hospitals where acute beds are held up because there is no step down care for many patients. Many patients cannot be discharged straight home, particularly elderly people who live on their own. To start such a system and link it with the hospitals could be very important and I was glad to see this provision.

Tax relief on child care facilities is important. It ties in with what I have said about providing child care facilities nearer the child's home. That has proved to be the most satisfactory arrangement in other jurisdictions.

It was imaginative to allow for relief for rented residential accommodation for third level students. The lack of availability of rented accommodation is a problem. The 30 per cent drop out rate after first year in Tallaght Regional Technical College was recently discussed. People were shocked at that rate but it is not an exceptional drop out rate. First year arts and science courses in many of our universities would have as high a drop out rate. Some say it is because there is insufficient space for people to go on to second year, which is disgraceful, but there is a large number of students who become lonely and dispirited when they cannot find suitable accommo dation. This is an imaginative effort on the Minister's part and I hope it will do some good.

I support Senator O'Dowd's call for change in the amount paid to people with disabilities to modify their homes. The ceiling is £12,000, which is a relatively small amount. It costs an enormous amount to install lavatory and bath facilities downstairs. People with multiple sclerosis may be anxious to keep themselves as mobile as possible and in employment. Senator Cassidy said that £4,000 is not much to raise, but it is a lot for many people. We should help people modify their homes so they can lead independent lives rather than having to enter State funded accommodation.

I welcome the exemption from income tax of investments of victims of Thalidomide. These funds were given in compensation because people were seriously disabled and it seems harsh that they paid income tax on those funds.

I support calls for changes in inheritance tax on the family home for family members, other than spouses, or for homosexual couples living together, as pointed out by Senator Norris. Unless they were very rich, I do not know how siblings living in Dublin could raise the money to pay the tax on a large majority of quite modest homes. One would have to have several children to avoid paying tax. This tax was not intended to create a situation in which the family home had to be sold. The increase in the price of houses in many metropolitan areas means that the tax is so high that one repeatedly hears of people being forced to sell the family home. We should address this situation immediately and introduce changes in next year's Finance Bill.

Most of the other matters I wished to raise have been covered. I was glad that the seafarers allowance was extended to those working on oil rigs. It seems extraordinary that this was not the case. There seems little difference between working on an oil rig in the North Sea for several months and being on a ship. I was also glad tax relief is being allowed on third level fees paid to publicly funded colleges in the EU.

I also welcome the decision that vehicles with only one stretcher can now be classified as ambulances. It was ridiculous that one had to have two stretchers. I welcome most of the measures in the Bill. However, we must get realistic about tobacco consumption. The best thing we can do is to make the cost of tobacco so high that it discourages people, particularly young people, from smoking. Senator Cassidy mentioned the cost young people incur when going to concerts, booking fees and so on. Young people have a limited amount to spend and they repeatedly state that the cost of smoking is the one factor which influences them. We have tried every other way so I hope the Minister will cheer me up next year by putting £1 on a packet of cigarettes and we will see if this helps tackle the problems of tobacco related diseases.

This is an important and interesting debate from which we can all learn. We live in times of economic buoyancy which our forefathers never dreamt possible. However, politicians have a responsibility to do the best they can to run the country and to plan and develop for the future. At budget time there are always demands from different sections of the community. One of the most repeated demands is for reductions in income tax. People have long stated that they are paying too much income tax. We are now paying less income tax but the speed of the reduction is not fast enough, particularly for lower paid workers who are paying too much tax. Governments should strive to reduce the rate of tax.

There was much excitement concerning changes in betting tax announced in the budget. I welcome those changes as I regularly attend race meetings. However, I was surprised to discover a hidden tax of £2,000 on each betting shop. I am seeking clarification on this measure as a small bookmaker told me that he would have to close as a result of this savage £2,000 levy. Was this tax agreed with the industry? Where did it come from? It is a severe blow to small, family run betting shops.

We are constantly addressing the need for improvements in infrastructure. The Bill should have addressed the infrastructural needs, particularly of smaller towns and villages. There is a particular need for more sewerage schemes in villages and towns. Villages such as Cappawhite, Annacarty and Rossmore in the South Tipperary County Council area have applications with the Department of the Environment and Local Government. I particularly wish to mention the Limerick Junction sewerage scheme. Deputations have been made to the Department concerning this issue as the lack of a proper scheme is causing problems for the racecourse and the future development of tourism in the region. We have to address these problems in smaller villages. There are huge demands for houses throughout the country and the rate of house building is increasing the need for adequate sewerage schemes.

Several speakers have raised the need to upgrade our roads, particularly national roads. We have spent a lot of money in this area over the past few years but we are not improving these roads fast enough. It is taking far too long to build many of the by-passes that are needed on the Dublin-Cork road, on which I regularly travel, especially in view of the volume of traffic. There must be a more rapid completion of the upgrading of this and other roads. For example, the road between Cashel and Tipperary is now a major road, yet only small amounts of money have been allocated by the Department each year to upgrade it. This is ineffective in view of the freight traffic using it to connect west Limerick with Wexford and Rosslare Harbour. This road needs improvement. There was a serious accident on it in the last few days.

I have spoken about the maintenance of the county roads at local authority level. Some of the smaller roads in rural areas are being neglected. Insufficient funding is being provided to their maintenance.

There is potential for huge development of the tourism industry in County Tipperary. Much of the tourism business in the past was connected with visitor sites at centres such as the Rock of Cashel or at the castle at Carrick-on-Suir. Big plans are in place to develop tourism over the coming years and there is great potential in terms of the marketing and development of my county. The roofing of the Rock of Cashel will have to be addressed. Some have said this is a silly project, but the site has huge potential. It is one of the finest monuments in Europe, yet it has been allowed fall into ruin. Part of it, the Vicar's Coral, was roofed some years ago. It is an outstanding example of the way in which Cormac's Chapel could be roofed.

We must also look at other similar projects. For example, there are no car parking facilities at Attassel Abbey, one of the oldest monasteries in the country, despite the fact that several submissions have been made to the county council and the Office of Public Works. Similarly, there are no parking facilities at Thomastown Castle and other places of interest. That is not good enough in this day and age. If we are serious about tourism we must provide parking and other essential facilities close to places of interest.

Some £500,000 has been spent on a heritage centre for the development of tourism in the Cashel region. It is now under threat of closure because there is no funding to pay for a manager to run it. A proper structure should be put in place to ensure the financial upkeep of centres like this, which are vital to the tourism infrastructure. If the tourism numbers meet expectations this heritage centre would be a profitable venture. It is bad planning and bad economics if such places are allowed to close or fall into a state of disrepair because of lack of funding. Something should be done about this.

Much has been said about the failure to include Counties Kerry and Clare in the proposed Objective One region. This matter was badly handled by the Government. Figures I obtained in the past few weeks indicate income distribution on a county basis for 1995-6. They show that the income levels in County Tipperary are considerably lower than in the counties for which the Government made a case for inclusion in the proposed Objective One region. The matter was mismanaged.

I join in congratulating the Government on the outcome of the negotiations on agriculture in Brussels. However, it is proposed that intervention beef should be priced at 55p per lb; at present the price is 75p per lb. Similarly, despite the fine contributions made on the opposite side of the House during the debate on the sheep industry, I am disappointed that nothing was decided at the negotiations.

Given these developments, what is the future for rural Ireland? How many will stay on the land? Young people will not stay. The numbers entering agricultural colleges are dropping. I visited one such college recently and was told that it had the lowest number of new entrants for many years. Given the changes in agriculture, we must concentrate more on retraining those living in rural areas. Their unwillingness to stay on the land is a matter of concern.

I welcome the provision of extra funding to the county enterprise boards. As a member of one such board I believe we should give greater encouragement to the boards and provide them with more funding. Despite the scepticism expressed at the time of their establishment, the boards are proving themselves to be good at job creation. In many instances people who started in small businesses have succeeded because of the funding and help they received from their board. We should encourage this.

We are too dependent on multinationals. More incentives and resources should be provided for county enterprise boards, in which there is huge interest. My county enterprise board ran competitions for secondary schools in the past few weeks, one of which I was glad to attend. The interest shown by young people is incredible. The pride they had in the projects they hope to develop was amazing. If we make more funding available to county enterprise boards, the younger generation will respond.

There was a great deal of lobbying on the urban renewal scheme and the difficulty in persuading Brussels to fund it. The towns which qualified were pleased but those which did not were dissatisfied. The residential aspect was welcomed. However, we need to press ahead with the business aspect which is crucial to the success of the scheme. It would be totally unfair to the towns which qualified in the past if towns now only qualify on a residential basis. I ask the Minister to do the best he can.

How can there be two speakers from the one party?

I regard all parties in the House as equal.

One group after another is the normal consensus. I am sure Senator Taylor-Quinn will agree.

Acting Chairman

I am sure the Senator will give way to the lady.

It does not suit me.

I have been sitting here since 4 o'clock.

Acting Chairman

I am an old fashioned type.

I will give way to the Senator. However, it is not normal practice for two Members of the same group to speak one after the other when a Member of another group is offering.

Acting Chairman

That is the first time it has been questioned.

This is the longest Bill which comes before the House each year and possibly the most important legislation as it affects every Department and everyone across the country. It puts in place the financial and taxation structure for the coming year. It allows many Departments to take a particular line of action, depending on the level of income, which will decide their expenditure.

Since this Bill was passed in the other House last week, a major decision was taken in Brussels on Objective One status, which is important to this country. Counties Clare and Kerry were not included. The Finance Bill has yet to be passed into law so the Minister will have an opportunity on Committee Stage to put in place a financial arrangement to compensate the counties not included in Objective One status. Senator Tom Hayes has already made a strong case for Tipperary, with which I agree. I also agree that figures for parts of Clare are comparable with affluent parts of the country. However, the periphery of County Clare – east, north and west Clare – are well below the lowest figures for the rest of this country. There is a moral obligation on the Minister, at a time of the booming Celtic tiger, to give financial assistance to these counties which were not included in the proposed Objective One region.

I ask the Minister and his officials to examine this matter between today and tomorrow to see if it is possible to include in the Finance Bill a provision for a parallel fund to compensate Counties Clare and Kerry so they will not be inhibited in the infrastructural work of their local authorities. Major schemes on the national primary route in Clare between Limerick and Galway need to be carried out, not to mention the other roadwork programmes around County Clare. We cannot afford to be given less funding than we received in recent years.

There are various tourism projects which are vital to the county. A county which had the transatlantic status of Shannon Airport removed from it four or five years ago does not need another blow from this Government which will further undermine its development. I appeal to the Minister to examine this matter urgently and include it in the Bill before its consideration is completed by this House.

The Bill includes some commendable provisions, on which I compliment the Minister, particularly as regards the social and carer's tax reliefs. These are welcome and long overdue. For too long these people were not given due recognition. I have heard the Acting Chairman speak on many occasions about carers and the need for recognition of the fine work they do. In many instances, this saves the Exchequer huge amounts of money.

Tax relief for nursing and convalescent homes is also welcome. We have a growing aging population and the entire social structure is changing. In many instances it is not possible to provide care at home for the elderly. It is important that people are encouraged to establish homes for the elderly. The tax relief provided for this in the Bill is welcome.

I also welcome the Minister's announcement of the extension of the closing date of the holiday resorts scheme to 31 December 1999. This is good for the 15 holiday resorts around the country which are taking part. In my constituency in Clare, a great deal of development work needs to be completed at Kilkee and Lahinch. The work will now continue to the end of December, which gives building contractors some relief and takes the pressure, under which they would have been if this extension was not given, off them. I welcome that.

However, I am concerned that the urban renewal scheme was decided in a haphazard fashion. Specific criteria were laid down for the application of this scheme. From what I have read, there was no uniform structure in the application of these criteria. I would like the Minister for the Environment and the Local Government to come to the House to give a detailed explanation of how there has been such a variation in the way the criteria were applied. If they had been applied uniformly, we would not have some of the erroneous situations which arise where one compares towns which were included with those which were not but should have been. For example, Kilrush fulfilled four of the five criteria for the scheme. However, it was excluded, even though it is an old market town which needed renewal. It qualified for all the criteria except that of population. We have not yet received a detailed explanation why it was not included. Shannon was included, which we welcomed. However, most of the section of Shannon town which is included is owned either by SFADCo or Sisk. The ordinary people of Shannon who deserve a break have not received any opportunities, which have been given to SFADCo and Sisk. This is not very community orientated. The Minister should review this matter with a view to extending his inclusion of the Shannon region beyond the current limit. These issues should and must be addressed in the Bill.

The credit union movement was disappointed that it did not get a fairer hearing and that the working group's recommendations were not taken into account in the Finance Bill. Will the Minister explain why the recommendations on corporation tax exemption were not included and why the 20 per cent DIRT on interest on credit union deposits does not apply? There is 20 per cent DIRT on the returns from all shares where a member's return is £750 or less, but in such cases the first £375 only should be exempt. Why was this not taken into consideration for the Bill? The credit union movement is a people's movement. It is for the smaller shareholder and those with small deposits. Consideration should have been given to the working group's recommendations. If that is not done, what is the point in setting up working groups and getting reports? It is a waste of money if these reports are left on the shelf and no action is taken. It seems a futile exercise.

I welcome the Minister's acceptance of a number of amendments relating to concerns expressed about the Revenue Commissioners' powers of access to individual and group accounts in banking institutions. I am delighted the Minister heeded some of the concerns expressed about confidentiality, privacy and other constitutional rights. The Minister made some statements that are by no means acceptable. He referred to

access to accounts of named individuals where Revenue has reasonable grounds to believe that there is particular information in the possession of the financial institution relating to the taxpayers' liability to tax.

The Minister is obliged to explain what reasonable grounds are. What I might consider reasonable grounds might be very different from what another person might consider reasonable. One is depending on the Revenue Commissioners, who will vary from time to time, and their reasoning and assessment of reasonable grounds could vary dramatically. Such a higgledy-piggledy approach is not acceptable in financial legislation.

The Minister also said: "The Bill will allow for such access to be secured by an order issued by one of the three Revenue Commissioners." Frankly, that is quite serious, given how personalities can vary. The three Revenue Commissioners are decent people, but membership will change over the years. The Minister has commitments from these Revenue Commissioners, but legislation remains on the Statute books even as individuals change. Future Revenue Commissioners may interpret and apply the law very differently. This is fraught with danger, and it is also irresponsible to allow just one of the Revenue Commissioners the sole right to make an order in such a matter.

The Minister said:

The focus will be tax evasion. There will have to be prima facie information in the possession of Revenue . . .

Will he elucidate what that prima facie information would be? I appreciate where the Minister is coming from and the level of fraud and corruption that has occurred. However, I would hate to think that ordinary, decent people would be subjected to intrusions from the Revenue because this legislation empowers them to do so and because they believe there is prima facie evidence to that effect. The Minister should give us an example of such prima facie evidence. It would be in the interests of the Minister, the Revenue and the taxpayers, as well as tax practitioners such as accountants and solicitors.

The Minister said:

The Revenue Commissioners have assured me that they will exercise these powers and grant orders only in those cases where it is necessary and where there are firm reasons to believe that there is material and particular information held in the deposit taking bodies in question.

I return to my original point – we are talking about individuals giving commitments to Ministers. When the three current Revenue Commissioners depart and their places are taken by others, the new Revenue Commissioners will not have given any assurances to any Minister and will be able to act as they deem fit and as they interpret the legislation. This is fraught with danger, and the Minister should clarify the matter for the public.

This legislation has some very welcome provisions. It is a huge Bill, but we do not have the time to go through it in fine detail now. There are some very welcome improvements and reliefs included in it, and the people paying the bulk of tax – the PAYE sector – deserve more breaks in the next budget. They have been heavily penalised for too many years, and only now is it becoming clear what has been going on in the taxation area. The PAYE sector has been paying to the last halfpenny, while others have had very privileged lifestyles at their expense. The more these people are sought out the better, but it is also very important that ordinary, decent people are not subjected to any harassment by the Revenue.

Public representatives meet self-employed people all the time who are starting off small businesses, and those are the people who are often being forcefully pursued by the tax inspectors. The medium and small businesses do not have a hope, but big businesses will get away with it, and the bigger the better. The more tax one owes the better one's opportunity of evading payment, while ordinary people are only backed against the wall. There is a need for justice, and the easy targets should not be picked on all the time. The cute ones who manoeuvre outside the country and who can employ outside taxation consultants should be pursued. They must be pursued forcefully and hard-working people in this country should be given an opportunity to develop and to create further employment.

I compliment Senator Ross on his outburst on the value of the direction the economy was taking and the concept of social partnership. Once again he has taken on the mantle of defender of the old oligarchy, the great advocate of the wealthy and the voice for the people who stopped progress here for many years. It is very important that we recognise what we have seen in Ireland in the last ten to 15 years. Senator Ross is right – there was a movement of power. There was a movement from that old oligarchy to representatives of the ordinary people. Large groups, be they farmers, the public sector or industrialists, now have a voice. It is a bit much, if not hysterical, to hear Senator Ross refer to groups such as farmers, trade unions, industrialists and others as vested interests. The people left out of those groups are the real vested interests in Irish society. They were the people who left us in a mess 20 years ago.

I support the Finance Bill. It represents important progress in areas of social partnership, social concern and taxation which is positive, radical and progressive. The debate about how we should spend our money, impose taxes and redistribute income, profits and wealth is rooted in the fact that Ireland is a country which can now afford such a debate. Contrast that with where we were in 1986 before the idea of social partnership and broad, comprehensive national agreements came into being, before we established a headline for western economies by giving a voice to stakeholders of all descriptions – making no distinctions – in the State.

These people ranged from voluntary groups and trade unionists to the captains of industry. All sat together with the Government of the day in an effort to find a way forward. That is the concept of social partnership which worries people such as Senator Ross who were used to having the wealthy, the landed and a small group of people in power make the decisions.

Before we became involved in the practice of social partnership, which is reflected so well in this Bill, the debt/GNP ratio of this country was between 130 per cent and 150 per cent. Talks had begun about the Maastricht requirements, one of which was that the debt/GNP ratio for aspiring countries should be no more than 60 per cent. The Minister of the day – who might well have been the current Taoiseach, although there were good Ministers on all sides – had to plead for a change in the requirement. The wording was changed to refer to economies with a debt/GNP ratio approaching 60 per cent. It was believed that Ireland would never achieve the target.

It is interesting to note that by the time the single currency commenced, Ireland had the lowest debt/GNP ratio while many of the countries which were below the target when it was first set are now above it. It is also important to note that interest rates have halved in that period and that the unemployment rate, which was then approximately 19 per cent, is now more than halved to between 7 per cent and 9 per cent. The number of people employed has doubled since the mid-1980s. These are hugely important achievements which must be acknowledged.

It is also important that the credit is shared by all groups. No single group can claim the credit. Governments were required to concede certain amounts to the stakeholders in the economy, employers had to examine where their profits originated and how much they could reasonably take, workers were required to decide how much of a salary claim they could justifiably make and ultimately settle for and voluntary bodies were to accept somewhat less than their aspirations in terms of Government support in grants. All participants pulled together for ten years. After that period the State found itself with a balance of payments surplus, an exports surplus and in the last two years, for the first time in recent history, a budget surplus.

We have moved from confrontation to co-operation and from an adversarial to a partnership process. None of these developments was easy, particularly for people who operated under the old ways where the bosses were on one side and the trade unions were on the other and never the twain should meet; the Government was on one side, the people were outside and the Government did not consult. Those days, thankfully, have gone.

I also wish to give the lie to the hypocritical onslaught from Senator Ross about the democratic process and his view that authority is being moved away from the Houses of the Oireachtas to outside bodies. Nothing could be further from the truth. For the past 12 years these national partnerships have been initiated, co-ordinated, guarded and directed by the Governments of the day. Democratically elected Governments went into consultations with the representatives of ordinary groups of people at different levels in society. Both came together to find a common agreement on which they moved forward. Effectively, we have moved the axis of power from the stockbrokers, bankers and gombeens to the representatives of the ordinary people. The phrase "ordinary people" does not simply refer to people who are poor or have nothing. They include—

Senator Quinn?

I have no problem with people who are wealthy. A society which cannot create wealth cannot redistribute it. There must be support for the creation of wealth as much as there must be pressure for the distribution of wealth. Eastern Europe proved that, if nothing else. A society which does not permit a certain element of the market to develop properly will not be able to create the wealth for division and eventually will crumple. I have no doubt about that.

In the national agreements, the Irish Business and Employers Confederation and the Irish Congress of Trade Unions were involved and they represented different ends of the spectrum. The value of the exercise, however, was that the Government of the day focused its energies on a target which was determined by that democratically elected Government. Part of that target involved the trade union movement learning the language of the marketplace, learning the importance of creating and supporting wealth creation techniques, supporting tax breaks for the development of the economy in various ways and ensuring that not all the tax breaks were directed at the workers.

We had to swallow changes in capital gains and corporation taxes which would not necessarily have been part of our brief. It is the nature of negotiation and bargaining that such a trade off must take place. Ultimately, however, the ten years have seen respect for the State's stakeholders, be they the industrialists, the workers or the people who are dependent on voluntary and community bodies. That cannot be a bad way to move forward.

The Department of Finance was a crucial part of that operation. I had the privilege of participating in a number of the negotiations. They involved long nights and hard days dealing with taxation possibilities, exploring other possibilities and trying to meet the needs of all sides. A new openness was created in that Department towards the social partners and towards the consensus approach. It was also obliged to concede some of its toughly guarded confidentiality on issues to do with taxation. It had to be more open.

I have mixed views on how the Minister dealt with the pensions issue. I do not agree with how he dealt with it but he was right to address it. For many years I have said that the system of pensions and annuities for the self-employed was the greatest rip-off ever perpetrated in this country. A person with £100,000 in a pension fund received a tax rebate of approximately 50 per cent – in other words, £50,000 was contributed by the pensioner and £50,000 was clawed back from taxes. Unfortunately, all the person can do with the fund is buy an annuity, which at current rates will probably only raise an income of 4 to 6 per cent, and when the person dies, the money is owned by the insurance company and does not go into his or her estate. This was nothing less than highway robbery and I am delighted the Minister has tackled it, although I do not think he has solved the problem.

If that person had decided not to take a pension with a tax break and invest his or her £50,000 in a bond, unit trust, Government bond or other safe investment, he or she would be certain of up to 8 per cent. Even building societies are currently offering between 4 and 4.25 per cent on money invested for one year. A return of 8 per cent on £50,000 would be the same as 4 per cent on £100,000 which a pensioner would receive through annuities, and he or she would also be able to leave the £50,000 to dependants or survivors. Under the current arrangement, the taxpayer has put £50,000 into the pension fund, which goes to the insurance company when the pensioner dies, along with the pensioner's contribution. This is a disgraceful rip-off and I congratulate the Minister for stopping it.

I do not agree with the Minister's measures, however. I have not put down any recommendations on the Finance Bill because I have taken the pragmatic line that they would not be accepted, but I make a strong case for taking a slightly different approach on pensions. People should not be able to reduce their lump sum to the level suggested in the Bill – it should not be possible to reduce it at all. The only requirement should be that it is put into an income-generating investment so that it continues to generate money.

I do not like the idea that people should have to work out their life expectancies and reduce their lump sums on that basis. There would be some sense in that if no one else was to get the benefit but it should be done in a simpler way. The money should be invested in a bond, investment, unit trust, or other income-generating instrument. This would require the financial services industry to generate a new type of investment, a hybrid of a bond and an ordinary investment, in which the capital would be guaranteed – there are plenty of such investments on the market. These would be issued by reputable, bonded companies and would provide a continuing income to the retiree.

I also support the evasion measures. This does not sit well with my views on personal rights, privacy and confidentiality, and I read the provisions quickly so they would not bother me too much, but when they are set against what we have heard from Dublin Castle in the last few months I can live with them. If we need to change the measures at some point we can do so. It shows a clear commitment from the Minister and the Government and that must be welcomed. The ICTU has pushed for movement in these directions. I received many letters from people who assumed I would oppose this provision but I told them I would not, even though I do not like it and do not know whether I would have had the guts to introduce it, if I were Minister. We need radical and strong measures at this time.

I agree that the Minister has not done enough for child care but, based on what he said on budget day rather than today, I assume he is looking to the future and that he will develop the system of tax credits and over the next few years implement more recommendations of the report on child care. That was the indication I received from him over a number of discussions on this issue and it is important that he state this at the end of Second Stage because many people are depending on him to take action. There is a case for allowing time for these measures to sink in. The tax credit concept is not fully understood and I ask the Department to use a budget to educate people about it because they do not know what it means or how it will work.

As the founder member of a credit union – Ms Nora Ahern, the founder of the credit union movement, was a member of my trade union and was a teacher in this area – I was happy the Department did not target credit unions in this legislation and that there was no row this year. I agree with Senator Taylor-Quinn that the Minister should take another step forward. Perhaps he felt they did not treat him well last year so he would not treat them well this year, but perhaps next year he could implement the report of the body which examined this area.

As a trade unionist working in the public service, I believe much work can be done in public private partnerships. The area is worth developing and I intend making a presentation to the relevant section of the Department. It would be possible to deal with many of the problems faced by schools, such as the caretaking and maintenance of buildings, through a public private partnership which would build and maintain a structure according to standards determined by the Government of the day. Many people I represent would be nervous about this, as would school boards of management, but it would free a lot of capital investment for the State, which would still have to pay a certain amount per year to run the school. This can be done through the public sector.

One would have to be wary about one aspect of this, however. If the private contribution goes towards the provision of the service the scheme will die on its feet, as it did in England, that is, if the private element provides the health service in a hospital or the education service in a school, it would meet huge resistance, but it would work if the private element provided capital investment for the building structure and maintenance. I will develop this idea further at another time.

In any of the public private partnerships I examined in detail in the UK the service was not provided any cheaper. It has not been done cheaper anywhere, even in Thatcherite Britain, and the Minister must state that clearly. People in the financial services area, who provide the money, will get their cut which will be more than the Department of Education and Science or the Department of Finance will get. It will free up capital investment.

I disagree with people, including the Minister, who say the extra money we are creating should be used to pay off the national debt. The ESRI, IBEC, ICTU and anyone who travels around Ireland knows that we need to spend money on our roads, tunnels, ports and airports so that when the downturn comes, the infrastructure will be in place.

It is always a joy to listen to Senator O'Toole. I am amazed he was able to finish as quickly as he did. I welcome the Bill which is complex and wide-ranging. I want to focus on the long-term strategy for corporation tax. Having listened to Senator O'Toole speak about Senator Ross, I must declare an interest. I run a company in the services sector, the sector which has created the net increase in jobs in the economy over the past 25 years, while being burdened with a penal rate of taxation compared to the manufacturing sector. All the tax and grant incentives have gone to the manufacturing sector, while the services sector has created all the jobs.

I welcome the strategy to put the services and manufacturing sectors on a par. I could hardly do otherwise since I have consistently complained about the discrimination the services sector has suffered over the past 25 years. The services sector has a tax rate which is a multiple of the tax rate of the manufacturing sector.

This strategy is not happening because of a belated recognition of the importance of services, rather it is an opportunistic development. The European Union has said we have a discriminatory tax regime because it does not apply to everyone. In order to protect the tax set-up for manufacturing, the Government has been forced to extend it to everyone. It is a great idea. The result is that from 2003 every corporate entity in Ireland will be taxed at the rate of 12.5 per cent. This is a quarter of the rate I have had to cope with for most of my business life and way below the lowest rate that exists elsewhere in the European Union.

Although I am reluctant to look a gift horse in the mouth, I must question whether the consequences of this strategy have been fully thought out. The idea smacks more of an election manifesto than of the real world. The fundamental idea is to protect the inward investment we have succeeded in attracting to Ireland in strategic high-technology industries, such as data processing, pharmaceuticals and chemicals, and in the internationally traded services area, such as software, telemarketing and financial services.

IDA Ireland's success in attracting such investment to Ireland is one of our great success stories of this century. If the Celtic tiger is a reality and not a myth, it is due almost entirely to that success. We are right, therefore, to seek to protect that investment and to create an environment in which it will continue into the future.

In the European Union context the tax incentives we have been offering these companies are blatantly discriminatory. It is not surprising, therefore, that we have been put under pressure to try to contain them. The wheeze we thought up to meet this challenge was to extend the low corporation tax to all Irish companies, not just those in manufacturing and internationally traded services. As a potential major beneficiary, I am the last person one would expect to blow the whistle on this strategy but I am doing so, however reluctantly, because it is not feasible in the long-term.

The strategy is based on the idea, which has been true for the past 40 years since Mr. Seán Lemass and Mr. Ken Whitaker launched the first programme for economic development, that we go out into the world marketplace and drag mobile investment into Ireland. Over the past 40 years we have been able to keep a tight control on inward investment because tax incentives were only part of the overall package we offered. To attract mobile investment, we also had to be in the grants business – grants were the icing on the taxation cake. Tax and grants were the dynamite that fuelled our boom and they gave birth to the Celtic tiger.

Due to the fact that both tax and grants were necessary, we were always in a position to control the inward investment we favoured. We used this power well for the most part. Sometimes we yielded to political imperatives and allowed investment we should not have because it was doomed in the long-term. The idea that Ireland could have a future producing T-shirts is laughable in the context of the situation in the Third World. For the most part, we focused on attracting companies which were strategically right for Ireland and we are now seeing the fruits of that investment. If anyone doubts the benefits of that strategic view, they should look closely at the history of inward investment over the past 20 years which has made us the envy of many countries.

The new strategy means giving up that control. While IDA Ireland will still be free to target the right companies, as it has done so well in the past, the universal 12.5 per cent tax rate means we will have a new factor. Up to now IDA Ireland had the power to keep investment out of Ireland. The tax regime was available to all who qualified but the grants were in the gift of IDA Ireland which was choosy about giving those grants. After 2003 it will be open to anyone doing business in the EU to relocate their business to Ireland and to benefit from the uniquely low corporate tax rate. It does not matter whether they are in manufacturing or services, they will have the right to relocate here and to benefit from a tax rate which will be half the rate obtaining in their own countries.

In this context, mobile investment will take on a new meaning. Mobile investment now means manufacturing industries in a few key sectors and internationally traded services. After 2003 we will, through this strategy, redefine the meaning of mobile investment because we will be making it possible for any company in whatever business to relocate their business to Ireland and direct their operations from here. They will benefit from a low corporate tax rate compared to anywhere else in the EU.

Tourism is a big growth industry throughout the world and the forecast is that it will be the single biggest industry in the next decade. Key players in tourism are tour operators. They operate on quite a wide geographic basis but they have to locate their headquarters somewhere. The headquarters are in one place and they have branches wherever their retail business is. So if a tour operator finds out – as I believe they will – that by relocating in Ireland they can halve or quarter their corporate tax, do you think they will be slow to do so? Of course not – and that is just one industry.

The truth is when our unthought out strategy will, when it is fully in place, lead to a stampede of companies wishing to relocate here. In contrast to what has been the case, the IDA will have no control over that influx. Companies will come here because it is their right as EU companies to do so, and because in taxation terms they are being made an offer they cannot refuse. Will there be great gains for Ireland? Yes. Will there be many jobs? Certainly. Will there be great demand for office space? Absolutely. Will there be a big increase in our GNP? Of course. Then why do we not welcome it? This is where I am concerned. Let us have a reality check. If that stampede takes place – and I can see no reason it should not – does anyone here believe our partners in the EU will tolerate it? Long before anyone in Dublin ever heard the name Oscar Lafontaine, the Germans were profoundly unhappy about what was going on in the Dublin International Financial Services Centre. Can you imagine their reaction when they see every tour operator, every supermarket company, etc. relocate to Ireland because we are offering a corporate tax rate at a level they have never experienced outside their wildest dreams?

I would like to believe that we are setting an example for the rest of Europe to reduce their tax rates to our 12.5 per cent. If I thought there was a possibility of that happening, then I would say forget what I have said and go along with it. I would dearly love to think this was a viable future. I have spent most of my business life struggling with a 50 per cent tax rate; I certainly will not refuse to cope with a tax rate that is a quarter of that but I simply do not believe it is sustainable in the long term. I do not think the EU will put up with it and I believe they will punish us for having tried to make it happen. We need to rethink this strategy at a higher level of tax, one that will be acceptable to our European partners. I say that reluctantly. If there was a possibility that the rest of Europe would follow our example and reduce their corporation tax to 12.5 per cent I would say forget everything I have said so far, but I cannot see that happen.

The price of what we are doing may be that we lose some of our existing inward investment but from the long-term perspective that may not be too serious. The sooner we get our economy on to a basis where it succeeds because of its fundamentals – not because of artificial incentives – the better we will be in equipping our economy to survive and to excel in the long term. These are strange words to come from someone in business. It may seem strange for me to issue a word of caution and ask people to stop and think things out particularly as I and many others have argued for a reduction in corporate tax rates.

I do not believe that our EU partners will tolerate a measure that installs a tax regime which would result in almost every company in Europe relocating here. The alternative is that they may all reduce their tax rates to 12.5 per cent. If the Minister really believes this will happen, then let us run with it and do so in a determined and enthusiastic manner, but, if not let us sit back and ask ourselves if we are doing the right thing. Are we taking steps that will result in our losing some control? Are we taking steps we will be unable to live with?

I wish the Minister well in this complex Bill. I also compliment him on the amount of thought that has gone into the vast majority of this Bill. Like Senator O'Toole, I am reluctant to make recommendations because I doubt they will be accepted. However, I would like the Minister to rethink his strategy on corporation tax now rather than take steps that we will be unable to live with in the future.

I would like to be associated with the other Senators in welcoming the Bill. There are many aspects of this Bill with which I agree. However, I want to highlight a number of issues with which I disagree.

The Minister said he is the first Minister in 50 years to have a surplus budget. There are a few areas that could have used that surplus – roads, railways, housing and small business. Most Members alluded to them earlier.

In the future this Government or the Government of the day will have no choice but to invest heavily in roads infrastructure. Four or five years ago the average number of cars per 100 people in Ireland was 27 while the EU average was 55. This nation is heading towards the EU average and that is putting great pressure on our roads. As everyone knows, our roads cannot cope with the current volume of traffic. The Minister has missed a golden opportunity to upgrade our national routes through the use of the surplus.

There are many counties who have miles of national secondary roads. The small sum of £18 million is provided for national secondary roads but that should have been increased significantly because these roads carry large volumes of traffic. There is now a major need for increased funding for this type of road throughout the country.

This year is the centenary of local authorities: the majority of councils held their first meeting in April 1899. To celebrate this fact extra funding should be given to local authorities. It would be very worthwhile if the Minister targeted our national secondary roads.

Railways have been spoken about on numerous occasions in this House in the recent past. I would like to draw attention to the railway line from Westport and Ballina via Athlone to Dublin. I am on record as saying this is the slowest railway line in the world. It takes longer to travel by rail from Westport to Dublin today than it did over 100 years ago. That is an indictment, not just of this Government but of several Governments down the years. When this train travels on bad stretches of track it reaches a speed of 25 miles per hour. I welcome the announcement made by the Minister for Public Enterprise, Deputy O'Rourke, that she was putting a package of almost £700 million together for our railways. However, the Minister for Finance should have seen to it that some Exchequer funding was used, particularly with the surplus this year.

Many Members spoke about the great need for housing and extra local authority housing throughout the country. The vast majority of local authorities have an increased number of people looking for housing; not just ordinary people in receipt of social welfare look for local authority housing but middle class people as well. Middle class people are unable to buy houses mainly because they cannot qualify for loans and the value of property has increased significantly over the last three or four years. The Minister should have looked at this issue more closely.

Small businesses throughout the country are increasing in number. In the past when we spoke of small businesses we were referring to shopkeepers, publicans and so on. Nowadays small business extends to contractors. The majority of larger businesses contract out various aspects of their business and as a result small business activity is on the increase. However, the new powers being given to the Revenue Commissioners are a direct attack on small business. In the long term, older small businesses such as rural shopkeepers and small rural publicans will be put out of business. I ask the Minister to explain in more detail to the House on Committee Stage the elements of the Finance Bill which give more powers to the Revenue Commissioners to examine bank accounts.

What percentage of large businesses, with more than 20 people employed, have been audited compared to small businesses? In my view the majority of audits carried out over the last number of years by the Revenue Commissioners have been carried out on small businesses because they do not have the resources to carry out audits on larger businesses, such as the banks and large manufacturers. Over the last 12 months we heard what has been happening in the banking sector throughout the country, and at no stage have I heard of an audit being carried out on any bank. Will the Minister indicate in his reply what percentage of small businesses are being audited compared to large businesses?

Given the additional powers being given to the Revenue Commissioners, I have no doubt this Bill is a direct attack on the small business sector. In his speech the Minister said that accounts referred to in the Bill include accounts in banks, building societies and other deposit-taking institutions such as credit unions. In my opinion very few large businesses lodge money in the credit union. The Minister is giving additional powers to the Revenue Commissioners to look into credit union accounts for businesses. This leads me to believe that the small business sector is being attacked directly.

I would like an answer to my questions from the Minister. I will go into more detail on Committee Stage. While I welcome some of the reforms introduced by the Minister in the previous budget and in this budget, much remains to be done and I look forward to hearing his views on the matter.

I am grateful for this opportunity to reply to the Second Stage of the Finance Bill, 1999. I know the Minister for Finance would wish to have been here to reply to the important contributions of Senators, but I am sure the House will join with me in wishing the Government team success in dealing with the important financial issues being settled at the European Council.

The Finance Bill is one of the most important events in the legislative calendar – one that affects the interests of many in our community and which sets out the Government's response to the various social, economic and development issues which we face. The core of the Bill is the implementation of the budget tax measures. The 1999 budget was well received by all commentators, both for its prudent approach to fiscal policy and its radical rewriting of the tax code to promote greater equity in the tax system and to promote and protect the interests of the lower paid. It also copperfastened the ongoing reductions in business and personal taxes which have been an important element in consolidating the basis of our rapid economic growth and in sharing out the fruits of this growth.

There are important issues still to be tackled in the social area, including that of housing. The Government has adopted a multi-pronged approach to addressing this current concern. However, it is important to note, as many recent commentators have made clear, that making real headway will take time. This must be based not on quick fix solutions, but on steady, concerted and well planned action on several fronts to overcome infrastructural constraints.

I would like to deal with a number of specific issues raised. Senator Avril Doyle welcomed the broad thrust of the income tax proposals in the Bill and underlined the need to keep our focus on the tax burden and on reducing it. We share common ground on that issue. The Senator also welcomed the move to tax credits, as did Senators Dardis and Costello. However, Senator Avril Doyle pointed out that it has made the tax free allowance certificate that much harder to comprehend. Even the major firms of accountants got it wrong in some of their tables published the day after the budget. I take Senator Avril Doyle's point and I will ask Revenue to consider what she has said. There will always be problems with such radical changes, but the completion of the move to a full tax credits system in the next year or so will make things easier to explain on tax free allowance certificates.

The Senator also made a number of interesting points on care for the elderly and on the benefits of focusing relief on assisting families to undertake this in the home situation. I agree, and that is what we are trying to do in the Bill.

Senator Avril Doyle raised the need for action on child care and that is a pressing issue. The Senator appreciates the many faceted aspects of this issue. Whatever changes are made need to be fair as between those who go out to work and those who remain at home to care for children. there are also equity issues between those in the tax net and those outside of it on low incomes who cannot gain from tax relief. There is also the need to expand the supply of child care places. All these factors must be weighed carefully. As Senator Finneran pointed out, we need to get the balance right so that Government action in this area produces a fair and effective outcome.

Several Senators raised the issue of the new powers being given to Revenue to combat tax evasion. I welcome Senator Avril Doyle's judgment that the overall balance is not unacceptable. I can appreciate that there are mixed views on this matter and that concerns have been expressed on the use of the powers. I would make the following points in reply. The new powers were sought by Revenue in response to recent tax disclosures and are based on actual experience of the gaps in powers which have been identified and which should be closed to help combat tax evasion. There will be checks and balances in the use of powers both internally in the case of Revenue who will update their statement of practice on Revenue powers and externally where, in the most sensitive circumstances, court or Appeal Commissioner's approval is required.

Incidentally, I take this opportunity to reject the suggestion by Senator Taylor-Quinn that when the present three Revenue Commissioners cease to be Revenue Commissioners, whoever replaces them will not be bound by the promises they have made that these powers will be exercised carefully. That is an infantile argument. These assurances have been given on behalf of the Revenue Commissioners as a whole. The Government will keep the operation of these powers under review – we have an opportunity to do this every year under the Finance Bill. Given the responsible record of the Revenue Commissioners and the fact that they have not misused their powers in the past, I am sure we will not need to take that action.

I can give a public assurance that the new powers will not be focused on smaller cases and will be used in a responsible manner and only after the appropriate approvals have been given within Revenue. The approval of one of the three Revenue Commissioners will be required to gain access to information in a financial institution. The new powers being sought are not out of line with those available to the revenue enforcement agencies in many other reputable jurisdictions. If anything, they are less extensive.

The Bill was amended on Report Stage in the other House to ensure that a taxpayer is informed when the relevant third party powers are being used to secure information, so that the taxpayer can use the normal legal process to object if there are valid grounds for doing so, and to clarify that requests for information do not overrule normal client-professional confidentiality. Senator Norris suggested that the need for those powers be automatically reviewed in a few years. The fact is that all such powers can be reviewed each year in the Finance Bill, if need be. I hope this reassures the House on those points.

Senator Avril Doyle also raised a number of questions on the pensions provisions in the Bill. She expressed concern that this would lead to misselling, place persons at risk of loss and set back the national pensions policy initiative. I think her fears are somewhat overstated. In fact, as Senator Ross pointed out, the need for change in this area was long overdue – change in the consumers interest which is not always the same as the interest of the pension provider.

The Minister took care to include a safety net in the scheme in the form of the approved minimum retirement fund. There are also powers provided to regulate the operation of these funds. The Minister listened to advice from many quarters, including the Pensions Board, those representing consumers and Members of these Houses. The form of the provision was decided on by the Minister in the light of this advice. I take the number of points made by Senator O'Toole and I will convey his views to the Minister.

Senator Doyle raised a specific point regarding the definition of proprietary directors for the purposes of the pension changes. We can go into this on Committee Stage but I can say that the Minister is prepared to look at this for next year's Bill. There are however, wider tax ramifications of amending the definition of proprietary directors which would have to be examined.

Senator Finneran raised a number of issues in relation to maintenance costs for students. I can appreciate the point he made but the tax reliefs introduced in the past few years relate only to fees. To extend this to maintenance costs could open up the relief quite considerably and add substantially to the cost.

Senator Ross called into question the role of social partnership and made clear his doubts about the benefits of this process. I could not agree with that. The benefits of social partnership are clear for all to see. The model we have pioneered is now quoted by other countries as worthy of emulation. I welcome his comments and those of Senator Dardis on the need to husband our resources even in times of plenty. We need to make space for the sort of investment we will need in the future to consolidate the basis for economic growth.

Several Senators referred to the role of EU in taxation issues. The EU dimension to tax matters is becoming more and more relevant. While there is only a limited amount of tax harmonisation at EU level and that relates to indirect taxation, there are state aid rules under the Treaty with which tax reliefs and regimes have to comply. These rules have always been there. They apply to all member states and not just Ireland. However, the Commission has begun to take a greater interest in the application of these rules to aid firms in the form of tax concessions. The application of state aid rules is not tax harmonisation by the back door. For example, our 12.5 per cent single rate of corporation tax is not a state aid since it will apply generally.

Some other member states have, of course, the view that the rates of corporation tax should be harmonised on an EU wide basis – that is a sep arate issue. The Government has made it clear that it does not see such harmonisation on the agenda, notwithstanding Senator Ross's fears on this matter. EU efforts have concentrated on the elimination of unfair tax competition and on the examination of tax reliefs and regimes to ensure that unacceptable reliefs and special regimes are reined in. Ireland has participated actively in the work of the relevant EU group conducting these examinations and we have no reason to fear concerted efforts in this area.

State aid rules mean that particular schemes such as urban renewal and rural renewal must be cleared by Brussels in respect of their commercial tax elements. The application of residential tax reliefs requires no such approval and we have pressed ahead on implementing those measures. Our success rate in securing EU approval has been very good and I am hopeful that this can continue. Approval does take time and the ground needs to be carefully prepared in advance of making the formal application.

Many specific points were raised by various Senators including Senators Dardis, Coghlan and Norris. One particular point raised related to the application of capital acquisitions tax and rising property prices. This is a sensitive area. People do not like paying tax on the family home, irrespective of the relationship involved. The Minister indicated in his opening remarks that he would be looking at the area of CAT for the next budget. I will ensure that the contributions in this House are brought to his attention.

Senator Coghlan raised the point about the application of excise duty to mobile cranes. I can respond to that in more detail on Committee Stage. Senator Coghlan asked for the publication of a list of people who have made submissions on tax matters prior to the Finance Bill. A request can be made under the Freedom of Information Act for such material covered by that Act.

Senator Cox raised the issue of child care and allowing tax relief where employers get together to provide child care places. This is in fact provided for in the Bill. The Senator also mentioned the need to continue film relief in the interests of developing the sector here. I take that point. The Bill extends the relief for one year to allow for a full review of the relief so that it can be targeted better for the future.

Senator Cox also raised the position of credit unions and the request that they made for tax relief. The position is as follows. The Minister set up a working group last year to examine the taxation of returns on credit union savings. This group, under the chairmanship of Mr. Terry Larkin, was comprised of members of the League of Credit Unions, the Registrar of Friendly Societies and senior officials from the Department of Enterprise, Trade and Employment, the Department of Finance and the Revenue Commissioners. The Minister received the report of the working group last October and published it recently.

It was not possible for members of the working group to reach a consensus and, in the absence of an agreed position, the chairman made a number of recommendations, namely that credit union surpluses should continue to be exempt from corporation tax; that 20 per cent DIRT should apply to interest on all credit union deposits; that 20 per cent DIRT should apply to all dividends from shares, except where the dividends in any year is £750 or less and in such cases only the first £375 would be exempt, and that there should be no reporting to Revenue of interest or dividends on credit union savings. The Revenue and Finance members of the group did not support the recommendations dealing with the effective tax exemption of credit union dividends.

There are a number of important issues which must be considered in this context. Issues such as tax equity and Exchequer cost, particularly if tax breaks given to credit union savers had to be extended to savers in other financial institutions. In addition, there is also an EU dimension which must be considered very carefully. The corporation tax exemption for credit unions which was renewed last year and which the Government fully supports has been questioned as a state aid in Brussels. I understand that one consideration influencing the Commission in taking a benign attitude to this exemption is that credit union members themselves are liable to income tax on the dividends paid out of it. However, this attitude might change if we were to exempt such dividends from income tax.

The different views expressed in the working group reflect the complexity of this issue and the need to examine carefully all the implications before coming forward with firm proposals. The Minister is considering this report but as of yet there are no proposals to amend the law in regard to the taxation of credit union savings.

Senator Costello mentioned tax reliefs for rent payments introduced in 1995 for those aged under 55 years and the need to increase this relief for all persons paying rent. The Government has undertaken to look at this in the context of the next budget which will be later this year. The cost of increasing the relief for both under 55s and over 55s – the latter relief has been in existence since 1982 – by £500 per annum is nearly £20 million. This is not an inconsiderable cost. The Government is taking firm action to tackle the housing problem which it inherited. As I said earlier, the problems here will take time to put right but a good start has been made.

Senator Burke raised the question of the auditing procedure for small businesses as opposed to large businesses. I do not have the percentage figure with me that he requested but I will certainly have it tomorrow. I suspect from my own experience in this area, which is not inconsiderable, that the Revenue Commissioners operate this on more or less a lottery system. If a higher percentage of small businesses have been audited than larger businesses, it is pure pot luck and I suspect the figures will probably show otherwise.

Senator Quinn raised the issue of corporation tax. It is not just a question of looking at the straight rate of corporation tax. Senator Quinn should be aware that one must look at the tax base. Some of our EU partners have exempted a certain percentage of income. I think one of them has gone as high as 80 per cent of the actual income of the company. If one applies a 50 per cent rate and exempts 80 per cent of the income from tax, obviously it will be a much smaller rate than Ireland's.

In the past, when we had a 10 per cent rate for manufacturing, we lost some companies to foreign competition, even with that low rate. There fore, it hardly seems logical that the way to reverse, change or improve that would be to increase the tax rate. It must also be remembered that there are factors other than the tax rate which attract mobile investment into Ireland.

I look forward to Committee Stage tomorrow, which I will be taking. I have not yet seen the list of recommendations, but I suspect many of them will be repeats of those already been discussed on Committee and Report Stages in the other House. We will go into the various technical issues in more detail tomorrow.

I commend the Bill to the House.

Question put.

Bohan, Eddie.Bonner, Enda.Callanan, Peter.Chambers, Frank.Cox, Margaret.Cregan, John.Dardis, John.Farrell, Willie.Finneran, Michael.Fitzgerald, Liam.

Gibbons, Jim.Glynn, Camillus.Keogh, Helen.Kett, Tony.Kiely, Rory.Lanigan, Mick.Leonard, Ann.Moylan, Pat.O'Donovan, Denis.Ormonde, Ann.


Burke, Paddy.Coghlan, Paul.Coogan, Fintan.Doyle, Avril.

Hayes, Tom.O'Dowd, Fergus.Ridge, Thérèse.Taylor-Quinn, Madeleine.

Tellers: Tá, Senators Farrell and Keogh; Níl, Senators Burke and Ridge.
Question declared carried.
Committee Stage ordered for Wednesday, 24 March 1999.

When is it proposed to sit again?

Tomorrow at 10.30 a.m.