I am very pleased to be here today to put the Finance Bill, 2000, before the Seanad. The Bill gives effect to a very wide range of tax changes that will benefit all taxpayers, reform the tax system, close significant tax loopholes, promote real tax equity and bring a better balance into the application of capital acquisitions tax.
I wish to record my appreciation of the informed and careful analysis which Senators give to the Finance Bill each year. This year's Bill contains a number of important changes in the area of CAT and pensions, which were the subject of particular comment by the House when the 1999 Finance Bill was being discussed. I will listen attentively to what Senators have to say over the next two days.
The last occasion on which I spoke to the House on tax issues was shortly after the budget, when the debate on the standard rate band proposals was in full swing. I outlined to Senators the full extent of the tax improvements which the budget contained. I will not, therefore, repeat the long list of tax changes which the House welcomed at that time. The debate has moved on and I will come to that in a moment.
When I announced the publication of the Bill on 10 February I summarised its main themes as follows: the implementation of budget measures, the introduction of new tax reliefs, the enactment of the Public Accounts Committee's DIRT recommendations, a streamlining of tax administration and the setting of the tax agenda for the new millennium. In addition, a number of important anti-avoidance provisions were included on Committee Stage in the Dáil. For the benefit of the House, I will give a brief outline of the principal provisions of the Bill in its entirety.
Sections 2 to 12 of the Bill give effect to the personal tax changes announced at budget time. The main provisions are the reduction in tax rates and the increase in the standard rate tax income band provided for in section 3, the increase in the main personal allowances set out in sections 4 and 5, the doubling and standard rating of various personal allowances in sections 6 to 11 and the introduction of the £3,000 home carer's tax allowance in section 12. The changes being made in these sections continue the major tax reform which the Government introduced last year, that is, the move to tax credits, and introduce a further major reform, namely, the move towards establishing a single standard rate band for each individual taxpayer.
Change and reform is not an easy process. This fact should not deter the Houses from doing what is needed. When I addressed the Seanad in December, I set out the cogent case for treating income earners as individuals under the tax code. The Government is convinced that the reform of the tax bands is the way we must proceed to meet the changing conditions in our society. We must recognise the new labour market situation and the fact that in many households both spouses are income earners. The social partners have recently endorsed this policy in the Programme for Prosperity and Fairness.
I have, it seems, opened up a broader debate on family issues, the role of earning and non-earning spouses and the view one has of equitable treatment of different household types. The position one takes on these issues is essentially a policy choice. In a democratic society, this involves an open and constructive debate and, ultimately, boils down to electoral choice.
The issue is open to debate but recent opinion polls indicate a far greater support for the proposed changes than one might have deduced from the positions adopted in the immediate post-budget period. Whatever one's position, no one will deny that budget 2000 was a turning point in the evolution of tax policy in this State.
Section 12 of the Bill relates to the £3,000 carer's allowance announced by the Government on 8 December for spouses caring for children, the incapacitated and the aged. The section indicates how this allowance will apply. To ensure the allowance works as smoothly as possible, it is proposed to allow for an income disregard where the caring spouse has a limited amount of income of their own, for example, through part-time work. It is also proposed that the allowance will be available where an aged or incapacitated relative resides in the caring spouse's home or is being cared for close by.
The allowance can also be retained for one year after the spouse returns to full-time employment. This, and the tapered withdrawal of the allowance when the spouse's income exceeds the income disregard, is designed to ensure the allowance is not suddenly lost when family circumstances change. A number of proposals have been made to extend this allowance to other caring situations and I have stated that I will look at these requests for next year's budget.
Sections 13 and 17 set out the changes to standard-rated mortgage interest relief and rent relief announced in the budget. Discussions have commenced between Revenue and the mortgage providers on the introduction of mortgage interest relief deducted at source from April 2001. Similar discussions are being held with the providers of medical insurance on the deduction of tax relief at source from insurance premia. I am hopeful of a satisfactory outcome to these discussions. There are benefits from deduction at source for taxpayers and the State which we must try to garner.
Section 15 reduces the reference rate of interest for calculating benefits in kind in respect of home loans. It leaves the reference rate unaltered in other cases. Section 16 continues the special exemption from taxation of the unemployment benefit paid to certain systematic short-time workers. This relief was first introduced in 1994. There are, surprisingly, still over 3,000 workers on short-time arrangements for whom the relief continues to be relevant.
Section 18 enhances the tax relief available for agreed pay restructuring, where a restructuring is necessary to safeguard the future of the firm. The relief, introduced in 1997, is being extended to 2003. Section 19 restores the application of the tax-relieved seed capital scheme to new traders on the financial futures exchange in the IFSC.
Section 21 extends tax relief at the standard rate for post-graduate fees under certain conditions. The relief can be claimed by the person concerned or by his or her parents, guardians or spouse where they pay the fees. This new relief, which will apply at the standard rate of tax, will be available to full-time and part-time post-graduate students and will include distance education courses offered by publicly funded colleges in other EU member states.
I am aware of requests to extend this relief to non-EU colleges and to broaden the terms on which tax relief can be claimed. While I can look at these for next year, I am happy that what I have provided in this section is a reasonable response to the demands that have been made for tax relief in this area. I hope the House will accept this view.
Section 23 relates to pensions tax relief and builds on the important changes which I introduced in this area with widespread support last year. This gave certain pensioners the option of investing in a continuing fund instead of being forced to convert to an annuity in all cases. This year, section 23 of the Bill, among other things, extends the new pension options to proprietary directors who control more than 5% of the shares in their company – the previous ownership requirement was 20% of share capital. It allows certain individuals whose pension date has passed but who have not yet invested in an annuity to use the new pension options instead. It extends the new arrangements to those using AVCs – additional voluntary contributions – to build up their pension rights and applies gross roll-up tax provisions to the approved retirement funds and approved minimum retirement funds, whereby tax is paid only on payments from the fund. These changes will be welcomed by the House as some of them respond to recommendations put forward in the House last year.
Sections 24, 25 and 26 make a number of limited changes to the legislation governing employee share ownership trusts. These amendments were requested following discussions with ICTU during the talks on the Programme for Prosperity and Fairness. Section 27 relates to share options and provides for a deferral of the income tax liability on the exercise of share options until the shares are disposed of, or for seven years, whichever first occurs. This relief is sensible and will do away with the situation where persons may have to sell the shares simply to pay the tax bill, which can be substantial.
I have particular views on share option schemes. I recognise their value in incentivising those in the more dynamic and expanding sectors, on which we will rely for growth. At the same time, there are issues of fair play for all employees generally who may wish to avail of tax relieved schemes. A special working group set up under the PPF, on which ICTU, IBEC, the Departments of the Taoiseach, Enterprise, Trade and Employment, the Revenue Commissioners and my Department are represented, is examining these issues for the next budget. It held its first discussion on 16 February last. I expect to put more extensive proposals on share options and other employee incentives through the House next year.
Under the income tax provisions section 29 ensures that where under joint assessment the non-assessed spouse is proceeded against for non-payment of tax in respect of their income, this power can be exercised at a delegated level within Revenue or by the Criminal Assets Bureau, where relevant. The term "non-assessable spouse" replaces the reference to wife that has been a feature of the provision since 1958.
Sections 30 to 33, which form Chapter 3 of Part I of the Bill, deal with changes to the system of dividend withholding tax which was introduced with effect from 6 April 1999. Last year's Finance Act applied the withholding tax at the standard rate of income tax on dividends paid by Irish companies to certain shareholders. There are detailed rules laid down in the legislation on how and when the tax can be deducted. There are also various exemptions provided for.
The Revenue Commissioners have examined how the dividend withholding tax has worked in its first year of operation. They have consulted market operators, Irish company registrars, stockbrokers and custodian banks, here and overseas. As a result, this year's Finance Bill will modify the system to reduce administrative costs, simplify certification procedures, remove unnecessary requirements and extend the range of exemptions from withholding tax to companies resident in tax treaty countries but which are not controlled by Irish residents. These changes will be welcomed by business.
The application of a withholding tax is an effective collection mechanism – the yield from dividend withholding tax in 1999-2000 is expected to be £50 million. My 1998 budget forecast was £15 million. From an international perspective, the application of a dividend withholding tax helps to reassure our international colleagues of the integrity of the Irish tax system and assists in defending our corporation tax regime.
Sections 37 to 40, inclusive, and 42 to 46, inclusive, deal with changes to the relief for urban renewal, rural renewal, the Custom House Docks area, multi-storey and other car parks, regional airports and certain offshore islands. The House will know that the EU Commission has decided to close the legal proceedings initiated by them in respect of the availability of the double rent and rates reliefs in the Custom House Docks area. This decision means that these two reliefs, which are available for a ten year period, will continue subject to an end date of 31 December 2008 where, either the construction of the building was completed before 1 April 1998, or the construction of the building commenced before 1 April 1998 and the tenant occupation of the completed building commenced before 9 February 1999. In other cases where certain contractual arrangements were in place by 2 December 1998 the two reliefs will continue up to 31 December 2003.
The Commission's decision in relation to double rent relief is given legal effect in section 39 of the Bill. Capital allowances for the buildings in the 27 acre and 12 acre sites in the area were approved by the Commission in January 1999. These allowances are unaffected by the Commission's decision on double rent and rates relief. While this matter was brought to a satisfactory conclusion, after a considerable amount of effort on our part, the proceedings themselves bear testimony to the close attention which the Com mission is paying under State aids rules to new and existing schemes of tax reliefs under Irish tax law. We now routinely notify all such new schemes to the Commission. I have made this point repeatedly on many occasions, in particular when answering questions on credit unions. The penny has not dropped fully in all quarters but we are being scrutinised closely on all tax changes by the Commission.
The Commission has set its face against double rent relief and rates relief which it regards as operating aids to business. The State aid rules do not affect tax relief in relation to residential schemes. However, we must continue to examine carefully whether all such reliefs are needed on a general basis at a time of an ongoing property boom.
Section 42 extends the capital allowance regime for regional airports to 31 December 2000 where 50% of the expenditure on the project had been incurred by the end of 1999. The section also extends capital allowances for multi-storey car parks outside of Dublin and Cork to the end of 2002 where 15% of the expenditure on the project is incurred by 30 September 2000.
Section 43 provides that a person can qualify for tax relief for construction, conversion and refurbishment of residential accommodation on certain designated islands up to 31 December 1999 where 15% of the total cost of the project was incurred by 30 June 1999, instead of 50% of the cost as currently required.
Sections 44 and 45 extend the qualifying periods for the urban and rural renewal schemes until 31 December 2002 and increase the capital allowances in respect of qualifying commercial buildings to 100%. The year one allowance of 50% will apply to both owner occupiers and lessors of qualifying industrial and commercial buildings with the remaining 50% written off at 4% per annum. The legislative provisions for the business tax incentives available under both schemes are being amended with effect from 1 July 1999 in order to comply with the EU Commission's approval of both schemes. Double rent and rates relief will not apply to such schemes as a result of the EU Commission ruling.
Sections 41 and 47 close off certain tax loopholes. Section 41 relates to capital allowances for computer software where an over liberal use of the tax regime was being taken by some firms in circumstances where a licence or right to use the software was granted. Section 47 restricts the relief available under the foreign earnings deduction scheme in order to combat the misuse of the scheme which successfully excluded substantial amounts of foreign earnings of certain Irish residents from tax. The scheme is now being refocussed on its original aims – to provide relief to businessmen and employees of companies required to spend significant periods of time abroad each year promoting, selling or marketing their businesses. An overall cap of £25,000 on the amount of income that can be deducted for any one year is being put in place. The scheme requires that the periods spent abroad must be of at least 14 days duration. That is now being reduced to 11 days. This will alleviate some hardship that the two weekends abroad requirement implicit in the 14 days rule may have entailed.
Section 48 continues tax relief for film investments for a further five years to 2005 and increases the proportion of the cost of producing a film that can be met from tax relieved investment. Section 49 requires that in order to qualify for tax relief on expenditure on significant buildings and gardens in the future, the property must be open to the public on at least ten weekend days out of the 40 opening days required during the high season. Section 146 later on makes a corresponding change in the rules for CAT relief on a stately house or garden.
Section 50 makes a number of changes in relation to relief for gifts to third level institutions. The current legislation allows tax relief at the marginal rate of income tax on donations of at least £1,000 made to certain third level educational institutions in respect of specific projects approved by the Minister for Education and Science in the areas of research, the acquisition of capital equipment, infrastructural development and the provision of facilities in certain areas of skills shortages.
Section 50 allows instead for each third level institution to set up an approved development fund to which the donations can be made in respect of the areas specified above, or other such areas as may be approved by the Minister for Education and Science and the Minister for Finance. The section also provides for a reduction in the minimum level of contribution from £1,000 to £250 per annum and for the carry forward of unused tax relief by donors in any one year for a period of three years in total.
This Government and its predecessor have been innovative in using the tax system to direct more private resources into education. Provided these reliefs are targeted properly, I see these innovations as good. We can expect to see private donations play a much greater role in the funding of education in the future and I was glad to be able to respond positively to the proposals put forward by the combined heads of the Irish universities which are reflected in this section.
Sections 53 to 59, inclusive, and sections 62, 72 and 80, give effect to the new arrangements announced in the budget in respect of the taxation of life assurance and collective investment funds. The purpose of this is to align the domestic market and IFSC tax treatment of these products and to enable the industry to retain its competitive advantage in the provision of such products within the EU. We are moving in the Bill from the traditional UK method of taxing these funds to the system prevalent in the other member states.
The changes, which have been discussed in detail with the industry, mean that the proceeds of these investment media will no longer be taxed on an annual basis but will be subject to an exit tax on encashment or maturity. The exit tax will be the standard rate of income tax plus 3%. This method of taxation is referred to as "gross roll-up" as the investment returns are allowed roll up gross each year and are taxed on withdrawal except in the case of non-residents. This is the tax regime which currently applies in the IFSC. The new gross roll-up arrangements will come into effect from 1 April 2000 for new domestic funds and from 1 January 2001 for new domestic life assurance business. The current arrangement of taxation of the fund on an annual basis will continue for existing business at the request of the industry. Existing business will eventually run off, leaving in time only the new system applying to life assurance and collective funds.
Section 60 of the Bill increases and restructures the tax relief on capital allowances for farm pollution control in line with the commitments given in the Programme for Prosperity and Fairness.
Section 61 introduces a new tax regime for the purchase of milk quotas to support the new quota scheme arrangements to be introduced by the Minister for Agriculture, Food and Rural Development.
Section 63 provides for accelerated capital allowances for expenditure on the construction, refurbishment or extension of child care premises that meet the required standards as set out in the Child Care Act. This accelerated allowance is available to both owners of the child care facilities and also to investors who wish to invest by way of leasing arrangements. The availability of these allowances is an attractive incentive and will assist in increasing the supply of child care places to help ease the current shortage.
Section 64 allows for certain rights to use telecom networks as capital assets for capital allowances purposes and for expenditure on the purchase of those rights to be written off over seven years, or over the life of the agreement to use these rights where this exceeds seven years. The provision of this relief is central to the continued development of the information technology and communications sector in the State.
Section 68 of the Bill implements a number of substantive changes to the DIRT audit regime. This provides for Revenue to be able to appoint, at their discretion, specially qualified persons to conduct or to assist with DIRT audits, to report to the Public Accounts Committee on the results of the DIRT "look-back" audit currently under way and to publish the results of this audit. The section also augments the powers of the Revenue to obtain information in the course of a DIRT audit and applies the audit powers to returns made by life assurers and collective funds under the new gross roll-up tax regime just described. The audit by Revenue of the DIRT position of the banks is ongoing and the completion of this audit is a matter for them alone. I understand, however, that their work is well advanced.
Section 70, which was inserted on Committee Stage in the Dáil, closes off a significant tax avoidance scheme availed of extensively by certain high income earners, through the use of partnership structures. Various efforts have been made since 1986 to combat the use of partnership structures to avoid income tax by contrived or artificial commercial arrangements. The tax loss to the Exchequer can be substantial and the implications for tax equity can be quite considerable. Put simply, certain very well off individuals can use these schemes to shelter very substantial amounts of income from the 44% income tax rate. As with all changes to tax law of this nature, transitional provisions have been provided for to take account of cases in the pipeline where a sudden change may affect commitments already entered into. Transitional provisions cannot last indefinitely, or for extended periods, but the provisions I have made in the Bill are reasonable – some would say generous. We can go into the details on Committee Stage.
Section 73, which was also inserted on Committee Stage in the Dáil, is an anti-avoidance provision to counter a situation where interest payments to financial institutions may be structured so as to provide a timing mismatch and maximise relief to the borrower at the current standard rate of corporation tax. At the same time, the lender is able to have the interest received taxed on an accruals basis over the period of the loan at the reducing standard rate of corporation tax. This facility will no longer be available. As the House will know, the current standard rate is 24%, reducing to 12½% in 2003.
Section 74 is a new provision relating to the taxation of the investment income of trade unions. Under current law, such income is exempt from tax where it is used to provide provident benefits to members of the union, for example, death grants, compensation for members' loss etc. The existing exemption is being extended to cases where the investment income is used to educate, train or retrain trade union members or their dependants. This is a constructive extension of tax relief to promote socially desirable objectives and was brought to my notice by SIPTU during the PPF discussions.
Sections 75 to 84 in Chapter 5 of Part I of the Bill cover other corporation tax changes. These largely deal with the application of the 12½% rate of tax to trading income which does not exceed £50,000 and technical changes to consortium loss relief and to IRNR provisions.
Section 82, together with section 34, is designed to facilitate the growth in securitisation of assets business both within the IFSC and in the Irish financial sector in general.
Section 83 makes a number of changes to the grant and revocation of taxation certificates to IFSC or Shannon companies and the repeal of provisions allowing the application of special tax rates to particular IFSC or Shannon trading operations.
Section 84 exempts the Commission for Electricity Regulation from corporation tax, as is the case with the profits of certain other regulatory bodies in the State.
Sections 85 to 88 deal with capital gains tax, enhancing certain aspects of CGT "retirement" relief for over 55s; providing for a more efficient and streamlined tax clearance procedure on sales of newly-constructed houses; and removing certain tax obstacles impacting on the disposition of property following a foreign divorce or legal separation which is recognised in the State.
Section 86 applies the 20% CGT rate to gains on the disposal of non-residential development land and section 52 earlier applies a 20% rate of tax to profits from dealing in such land. Both measures are designed to encourage an increase in the supply of land for development. Increased supply is the most effective price control mechanism in these cases, as the various Bacon reports attest.
Section 89 deals with the income and corporation tax reliefs for the renewal and improvement of certain towns throughout the State with a population between 500 and 6,000. The relevant selection process to designate these towns in each county is well advanced. This process involves county councils recommending areas where tax incentives ought to be applied to an expert advisory panel which in turn will make recommendations to the Minister for the Environment and Local Government. I will then designate those areas for tax relief which are recommended to me by the Minister for the Environment and Local Government. We borrowed this system from the previous Government and, as I said in the Dáil, it is a good model to copy.
This town renewal scheme involves a similar range of reliefs as in the case of the current urban renewal scheme. The scheme will operate from 1 April 2000 to 31 March 2003, subject to EU approval of the business elements of the reliefs. The residential reliefs will, however, apply from 1 April next. The scheme is intended to assist in restoring or improving the built fabric of Irish towns, to promote sensitive local development and to revitalise the centres of small towns. This relief will help redress the decline of some of our smaller towns in rural counties and attract investment from areas of the country that have a plentiful level of investment demand already.
Parts II and III of the Bill deal with indirect taxation. Sections 90 to 106 relate to excise duties and sections 107 to 124 to value added tax. The excise duty changes comprise a series of measures which:
1. confirm the budget day increase in tobacco excise duty; the reduction in excise duty on kerosene and the abolition of the travel tax on overseas travel by air or sea;
2. provide that the excise duty rebate for diesel fuel used in buses and trains will be confined to the use of low-sulphur diesel;
3. clarify the application of excise duty exemptions and reduced rates for fuel used in private flying, buses and off-road vehicles;
4. legislate for updated collection procedures in the case of certain court issued licences and apply excise duty and tax clearance requirements to liquor licences issued to the national cultural institutions;
5. provide for the delegation to authorised staff in Revenue of certain decisions in relation to the operation of vehicle registration tax and for the issue of a combined motor vehicle registration document, and
6. close a number of loopholes in relation to the use of mineral oils for automotive purposes.
The VAT changes are largely technical, apart from sections 111 and 113 which confirm the increase in the farmer's flat rate of VAT from 4% to 4.2%, as announced in the budget. A number of the other sections close off loopholes, for example, in the reclaiming of VAT on rented holiday accommodation, and restrict the scope for tax planning in claiming VAT input deductions in a number of areas.
While the VAT changes in this year's Bill are not extensive, this will not be the case in future years. The EU is actively considering changes to VAT law to modernise and simplify it. It is also seeking to ensure that changes in the business environment which we are seeing through e-commerce, and the increasing private provision of former public services, are adequately catered for in EU VAT law.
Part IV of the Bill sets out a number of stamp duty changes. These are mainly technical except for section 126, which continues the relief from stamp duty on transfers of assets to young trained farmers for a further three years. The relief, which up to now has been a two thirds abatement of the relevant duty, is now increased to a full relief arising from the commitment in the Programme for Prosperity and Fairness.
Part V of the Bill refers to residential property tax. While RPT was abolished from 5 April 1997, arrears of tax continue to be collected, some £1.5 million or more each year. Section 134 of the Bill provides for an increase in the market value exemption limit to £300,000 from £200,000 in respect of properties which must be tax cleared when they are sold if they exceed this limit. Section 135 absolves any property from tax clearance which the vendor purchased after 5 April 1996, the last valuation date on which RPT was payable. These changes will reduce the administrative burden of tax clearance without jeopardising the collection of arrears.
Sections 136 to 153 give effect to a number of major changes in the CAT code, as announced by me in the budget. In addition, there are some further changes which are being made to the operation of business and agricultural relief. The result of these changes overall will be to reduce the impact of CAT on family inheritances in particular, make business and agricultural relief more available and move the basis of gift and inheritance tax from domicile to residence, which is the more general basis of liability in the tax system both here and abroad. These are among the most radical and extensive changes to CAT since its introduction and many of these were signalled in the House last year by the Minister of State at the Department of Education and Science, Deputy O'Dea, on my behalf.
Sections 137, 138 and 139 propose to change the basis on which gift tax and inheritance tax is charged on assets situated outside the State from domicile to residence. Under existing tax rules a liability to gift or inheritance tax can arise where either the disponer is domiciled in the State or the property comprised in a gift or inheritance is situated in the State – regardless of the domicile or residence of the disponer. There is no change in this latter property rule. However, the Bill changes the general domicile rule to a residence basis so that a liability to gift or inheritance tax can arise on foreign property where either the disponer or beneficiary is resident or ordinarily resident in the State.
A person will not be treated as resident or ordinarily resident in the State for this purpose unless they have been resident in the State for five consecutive tax years. This five year period starts to run from 1 December 1999 and a foreign domiciled person in the State will not be affected by this change until end 2004. The changes apply to gifts or inheritances taken on or after 1 December 1999, except in the case of a gift or inheritance taken under a trust or settlement existing on that date where the present rules will continue to apply. Gifts or inheritances taken prior to 1 December 1999 are unaffected by these changes.
Section 140 closes off a loophole in the qualification rules for agricultural relief while section 148 allows a person to qualify for CAT business relief in respect of a farming business which does not qualify for agricultural relief in the case of inheritances taken on or after 10 February 2000 – the day the Bill was published. Section 145 provides for the increases in CAT thresholds in the budget and the introduction of the uniform 20% rate of tax for both gifts and inheritances. It also provides for the aggregation of prior gifts and inheritances only within classes of relationship instead of across classes as at the moment. The current complex aggregation rules can lead to unforeseen tax consequences depending on the sequence in which gifts or inheritances occur.
Section 147 increases the threshold for exemption from probate tax to £40,000 as announced in the budget. Sections 149 and 150 remove certain obstacles in the CAT and probate tax code to the recognition of foreign divorce orders. This mirrors the changes made in the Bill in respect of CGT and stamp duty in such cases. Section 151 provides for the new relief of CAT on the family home as promised in the budget. I know this relief will be supported by the House as it responds to a growing concern on the part of many home sharers about the tax consequences of the death of a partner or family member. I have received a large volume of representations on this issue in the last year alone, as have Senators.
The final part of the Bill contains a number of miscellaneous but nonetheless important tax measures. Sections 156 and 157 deal with the investment powers of the Post Office Savings Bank and the operation by the National Treasury Management Agency of certain deposit accounts for Exchequer moneys.
With regard to section 159, the House will know of the Government's decision last year to partially pre-fund social welfare and public service pension liabilities with annual provisions of 1% of GNP and an allocation from the Telecom Éireann sale proceeds. Interim legislation was passed before Christmas setting up a temporary holding fund for pension allocations and a sum of £3,015 million was paid into the fund before the year end. Section 159 of the Bill will enable me to make further payments of up to £1,850 million into the fund this year. This is slightly above the estimate included in the recent budget, due in part to higher than expected additional receipts from the Telecom Éireann sale. The payments into the temporary fund, which is being managed by the National Treasury Management Agency, are being made pending the introduction of an appropriate statutory framework for the financing, management and investment of State pension funds on a long-term basis.
Section 161 deals with donations of heritage items. This provision was introduced in 1995 and allows for the value of certain donations of heritage items to a national heritage institution to be written off against certain tax liabilities of the donor. Each donation must be worth at least £75,000 and be approved by a special selection committee. There is a limit since 1996 of £750,000 on the total amount of gifts which can be tax relieved each year in this way. In response to requests from the Minister for Arts, Heritage, Gaeltacht and the Islands, the Bill increases this limit to £3 million. This relief has been used quite actively since it was brought in and I expect to see its extended use in future years for the State to acquire heritage items for the public benefit.
Section 162 provides for certain changes to the legal requirements for the publication of certain details of tax defaulters. Since 1983, the Revenue Commissioners have been required to compile and publish a list of persons on whom either a fine or other penalty has been imposed by the courts or in whose case the Commissioners have accepted a settlement offer in lieu of initiating legal proceedings. Publication is prohibited in certain cases – where the settlement is the result of a voluntary disclosure, where the 1993 tax amnesty applies or where the settlement amount does not exceed £10,000. The list of names of tax defaulters is published on a quarterly basis. The list gives details of the name, address and occupation of the person concerned and the fine or penalty imposed by the courts or the amount of the tax settlement involved.
Section 162 contains a number of changes to tighten up these requirements to ensure that details of settlements are published by the Revenue Commissioners irrespective of whether a fine or penalty has been imposed by a court and irrespective of whether any such fine has already been published by the Revenue Commissioners. The current law has been interpreted as allowing publication of either the outcome of the court action or the settlement, but not both. Section 162 also ensures that in future settlements, details will be published even if the relevant tax penalties have been paid in full. In addition, and more importantly, the published list will now give a brief description of the circumstances relating to the default or evasion, for example whether a case may have arisen out of a specific inquiry or investigation. All these changes take effect for settlements agreed or court fines imposed after the passing of the Act.
Section 164 incorporates a number of provisions to facilitate the introduction of consolidated billing by the Revenue Commissioners – the issue of a statement showing a taxpayer's payment or repayment position across a number of tax heads. The section provides that claims for repayment can be set off against outstanding tax liabilities. The Revenue Commissioners are empowered to make regulations specifying the order or sequence in which repayments may be set against tax liabilities. A similar enabling provision will allow for appropriation of a tax payment in a particular order where no specific instructions have been given to the Revenue Commissioners.
I am as conscious as anyone else of the need to maintain confidence in the tax system. The measures I have included in this Bill will go a long way to achieve that goal, as well as taking one of the more effective anti-tax evasion measures – that is, to reduce the tax burden to sustainable proportions. Those income earners paying their tax, as good citizens ought, can take it from me that those evading tax will be pursued and that tax due to the State will be collected. I am sure the House will endorse this position.
I hope the House has benefited from the extensive outline I have given of the provisions in the Bill. It is substantial tax legislation and I look forward to hearing the views of Senators. I commend the Bill to the House.
I wish to point out that the following two minor corrections to the Bill are required. In page 183, line 38, to delete "906(1)" and substitute "906A(1)" and in page 296, line 11, to delete "subsection" and substitute "paragraph". I ask the Cathaoirleach to direct the Clerk of the Seanad to make the corrections under Standing Order 121.
