Seanad Éireann debate -
Thursday, 13 Mar 2008

Vol. 188 No. 24

Finance Bill 2008 (Certified Money Bill): Committee Stage.

NEW SECTIONS.

Senator Alan Kelly

I move recommendation No. 1:

In page 11, before section 1, to insert the following new section:

"PART 1

TAXPAYERS' ADVOCATE OFFICE

1.—The Ombudsman shall include in her annual report a special report on the overpayment of tax by PAYE taxpayers, and on the take up of credits by such taxpayers, and the branch of her office dedicated to ensuring that the take up of credits is readily available to all taxpayers, and refunds made as rapidly as possible where this arises, as well as ensuring the availability of a ready mechanism for informing taxpayers (particularly pensioners) who are entitled to a refund of DIRT tax, shall be known as the taxpayers' advocate office.".

This recommendation relates to a taxpayers' advocate office. We propose the establishment of a taxpayers' advocate who would be independent of the Revenue Commissioners and who would take cases independently on behalf of taxpayers and ensure these were dealt with in a fair and transparent manner.

The most effective way of obtaining tax refunds from the Revenue Commissioners in respect of many payments would be to introduce a method similar to that used with mortgage interest relief. In this regard, the way in which taxpayers get their money would be done centrally and would seem to work quite well after some initial teething problems. This would help to deal with a range of different refunds to which people are entitled, such as doctors' fees and bin charges. We are putting this proposal forward because it is a way of dealing with what is currently a cumbersome method by which taxpayers must apply to Revenue. A serious volume of money goes unclaimed.

We propose that such a process would be overseen by a taxpayers' advocate in such a way to help the Revenue Commissioners to overhaul the current cumbersome system. We hope the Minister would look favourably upon this and support the amendment.

Minister for Defence (Deputy Willie O’Dea)

The Senator's recommendation is one which was debated at some length in the other House. The Tánaiste and Minister for Finance is not convinced still of the merits of the case. The statutory remit of the Ombudsman already incorporates both of the roles proposed for a taxpayers' advocate, namely, acting for taxpayers and investigating actions which are contrary to fair or sound administration.

Since the inception of the Office of the Ombudsman, a significant number of tax queries have been submitted to it. The Ombudsman has carried out a number of special investigations on the office's initiative, such as an investigation into the repayment of tax to certain widows and the operation of schemes for disabled drivers. I must point out that when calls were previously made for the establishment of a taxpayers' advocate, the Ombudsman drew attention to the duplication of roles and responsibilities that such a development would have involved.

Apart from the statutory role and responsibilities of the Ombudsman, other avenues are also open to taxpayers to make their complaints or to seek satisfaction for perceived unfair treatment. They can lodge a customer service complaint about the standard of service received in their personal contact with the Revenue Commissioners. They can complain to a Revenue office by telephone, correspondence, fax and e-mail or in person. In addition, or as an alternative, they can request a review by Revenue of any aspect of the way in which their tax affairs have been handled. Such reviews are carried out by a senior official who was not involved in the original decision. Ultimately, taxpayers who are dissatisfied with their treatment by Revenue can make a statutory appeal to the Appeal Commissioners who, by law, are independent of the Revenue Commissioners.

In the Finance Act 2007, the Minister introduced new schemes to allow the operation of DIRT-exempt accounts, subject to two conditions. These were that the account holder must be 65 or over or permanently incapacitated and that their total income must not exceed their current exemption limit. In 2007, Revenue arranged for an information leaflet to be issued to social welfare customers in receipt of State and other pensions. Approximately 100,000 leaflets were issued in this way and Revenue will continue to publicise through appropriate channels the facility offered by the accounts.

The Revenue Commissioners are satisfied that their ongoing efforts to inform taxpayers of their entitlements are having the desired effect. This is demonstrated in the substantial increase in the number of PAYE taxpayers seeking reviews of their tax liability in the context of claiming additional tax credits and reliefs. The number of PAYE reviews processed in 2006 was 1.14 million, as opposed to 552,000 in 2005.

Revenue staff in front offices dealing with the public and those manning customer helplines are trained to give full assistance to all customers. The fact that few people are enthusiastic about paying taxes is all the more reason for effective channels of complaint and appeal by taxpayers against poor service or unfairness. However, given the comprehensive and accessible system already in place for complaints or appeals by any taxpayer who feels unfairly treated by the tax system, it is not obvious that there is a case for putting in place an additional layer of a tax advocate's office.

Recommendation, by leave, withdrawn.

Senator Alan Kelly

I move recommendation No. 2:

In page 11, before section 1, to insert the following new section:

"PART 1

CHARITY STATUS OF TIDY TOWNS GROUPS

1.—Any group which in the opinion of the Minister formed or designed towards participation in a tidy towns scheme shall be entitled to benefit from charitable status for the purposes of the Principal Act.".

This is something to which I drew the Minister's attention yesterday. There seems to be some confusion in respect of the charitable status of Tidy Towns groups and inconsistencies in the way in which it works. While I will not press this amendment, I ask that we look at this issue because these groups carry out a significant volume of work. Birdhill, which is a parish near me, has won the award for a number of years and the amount of work it does is phenomenal.

I know the Minister said yesterday that a number of Tidy Towns groups have charitable tax status going back 20 years but others do not appear to have this status. We need a consistent approach to the way Tidy Towns groups are treated so that they can benefit from the work they do.

Deputy Willie O’Dea

I understand where the Senator is coming from and I am aware of that apparent anomaly. It is a matter for the Revenue Commissioners to determine whether a body or organisation has been established for charitable purposes. I have been advised that the activities of Tidy Towns organisations, generally speaking, would be regarded as satisfying one of the categories of charitable purpose, which is that they are to be of benefit to the broader community. The other categories of charitable purpose are the advancement of religion, the relief of poverty and the advancement of education. Obviously, Tidy Towns groups do not have anything to do with these categories.

A number of Tidy Towns organisations enjoy charitable tax exempt status, the first of which was approved approximately 20 years ago. Two key requirements must be satisfied for a body to maintain charitable status under the Revenue rules. The first is that the body must be established solely for charitable purposes. That would normally be stated in the body's governing instrument. Second, and perhaps more importantly, the body must apply its funds solely for charitable purposes. This means that, on an ongoing basis, the body must conduct itself in accordance with its governing principles. Failure to do so will result in a removal of charitable tax exempt status.

If the Tánaiste and Minister for Finance simply designated all those bodies as charities for the purposes of the charitable donations scheme, as suggested by the amendment, the ongoing means of control would be absent. The bodies would retain charitable tax exempt status regardless of the function they ultimately carried out. There is a definition of what someone must do to qualify for charitable tax exempt status. Any organisation, such as a Tidy Towns organisation, can apply to the Revenue Commissioners to see if it comes within the rules. Sometimes, after looking at all the facts of the case, the Revenue Commissioners will say that it does, while in other cases it will say that it does not.

I assume that if one Tidy Towns group establishes a precedent of being designated as a charity under the legislation, there must be something materially different about what is being done by another Tidy Towns organisation such that it does not get that exemption. If we were automatically to designate all Tidy Towns groups as being tax exempt because they are charities, we would have the unusual situation where organisations which might be blatantly acting outside what the regulations provide in respect of charitable purposes would be exempt while others which are probably nearer the definition of charity would not.

The position at the moment is that a Tidy Towns organisation must apply for charitable tax exempt status and the Revenue Commissioners will decide case by case whether it is inside or outside the statutory definition.

Recommendation, by leave, withdrawn.

Senator Alan Kelly

I move recommendation No. 3:

In page 11, before section 1, to insert the following new section:

"PART 1

COMMISSION ON TAXATION

1.—The Minister shall in establishing the commission on taxation include in its terms of reference the following matters:

(a) to examine anomalies arising from the tax treatment of married persons where one spouse remains out of paid employment in order to attend to child care duties;

(b) to examine the treatment of unmarried persons living together including gay couples in long term relationships;

(c) to examine the operation and possible reform of stamp duty particularly the capacity of property developers to avoid stamp duty on certain transactions and the exclusion of certain financial transactions (e.g. contracts for difference) from the lower rate of stamp duty applied to financial transactions;

(d) to examine the need to ensure that carbon tax proposals have due regard to the ability of less well off individuals including pensioners to meet the cost arising from increased taxation on carbon based fuels such as coal and gas;

(e) to inquire into the fairness and equity of the overall tax system and to provide for the evaluation of tax breaks and other provisions permitting tax payers to mitigate their tax liabilities and the impact in particular of provisions for exemption from tax and residency rules and shall publish at regular intervals the outcome of their enquiries into the tax system.”.

This amendment has been somewhat pre-empted or overtaken by the decision by the Minister for Finance to set up a Commission on Taxation. While I will not press the amendment, I wish to make a few points. The terms of reference set out for the commission need to be widened. They should provide some methodology in respect of the examination of high net worth individuals and the level of tax they pay which, as my party has pointed out on a number of occasions, is not at the required rate. For various reasons they do not seem to be paying tax although they are investing in capital programmes, etc. However, some analysis is needed.

We believe the terms of reference of the commission need to be widened. If this is not being accounted for, the way it will work will not satisfy the requirements of what a commission should be doing. While it has terms of reference to deal with many issues, I would like to see it carrying out a serious review of the benefits of tax individualisation, because I and others across many parties are not convinced about its merits. While I will not press the recommendation, I wish to make those points.

Senator Dan Boyle

While I note the recommendation is not being pressed, I wish to outline some of my thoughts on the Commission on Taxation. It was included in the programme for Government at the suggestion of the Green Party and I am happy that the Tánaiste and Minister for Finance has established the body. The terms of reference are not about what the commission can or cannot do. The commission has a specific remit to examine the taxation system. The terms of reference cover particular areas the commission will examine and report on. When published in 2009 I expect the report to be very wide-ranging.

I was concerned that the Senator's recommendation proposed introducing certain things without taking others into account. I refer specifically to the carbon levy, which is one of the priorities for the commission. I find offensive the suggestion that such a levy would be introduced without due regard for the ability of people to pay and its social consequences. I have every certainty that what will be proposed by the commission and adopted by the Government will be appraised on those lines. The Labour Party needs to indicate whether it believes in environmental taxation and if so that it can only be introduced without socially negative consequences. Everyone involved in the political system should accept that, rather than trying to score cheap political points.

Deputy Willie O’Dea

As the Senators will be aware the Tánaiste and Minister for Finance announced the establishment of the Commission on Taxation on 14 February. The work of the commission will help establish the framework within which tax policy will be set for the next decade at least. It is important for the commission to take a strategic, considered and balanced perspective that recognises the evolving challenges we face on the tax front. Therefore the terms of reference of the commission that were also announced on the same day are deliberately broadly defined, far-reaching and allow for consideration of all aspects of the taxation system, as Senator Boyle has said. Introducing the type of very specific terms of reference proposed in the recommendation can only serve to restrict the work of the commission and introduce unnecessary constraints.

When setting up a commission to examine the taxation system generally, it does not make sense to have terms of reference relating to examining stamp duty on contracts for difference, which would be very restrictive. If we were to make the terms of reference so specific that it removes the discretion for the commission, why have a commission in the first place? As the Tánaiste indicated on the Committee and Report Stages in the other House, the members of the commission are drawn from the social partners, the accounting and tax advisory services that advise all businesses, big and small, accomplished people with environmental and economic expertise, and people with wide experience in central and local government. The wide range of skills and knowledge of the members of the commission will ensure we get a report that will help shape future policy in a positive manner. I have every confidence in the chairman, who is the former chairman of the Revenue Commissioners, Mr. Frank Daly. I am sure he is fully conversant with what the commission wants to do and he will ensure the commission is steered in the right direction.

Recommendation, by leave, withdrawn.

An Cathaoirleach

Recommendation No. 4 is out of order as it involves a potential charge on the people.

Senator Alan Kelly

I move recommendation No. 5:

In page 11, before section 1, to insert the following new section:

"PART 1

TAX RELIEF AT SOURCE

1.—Tax relief at source shall be available for environmental service charges.".

I hope this will be considered favourably. We believe the tax relief on environmental service charges, including bin charges etc. should be applied at source. There is considerable under-claiming of these reliefs, particularly in Dublin. Given the number of environmental service providers we have — I note the announcements of changes recently particularly in Dublin — and taking into account all the local authorities, most of which provide some of these services or award them in some cases to private contractors, it is difficult to fathom why we cannot have a central system for doing this. Households in most parts of the country are being billed. By doing this we would provide a process by which the householders would be able to get the benefit of the relief while importantly taking away the bureaucracy. As with the other recommendations on which I have spoken, it would help to reduce the number of residents who are not benefiting from the relief they should be getting and would eliminate the administrative burden.

Senator Liam Twomey

Yesterday I spoke about people installing geothermal or solar panels on their houses. Instead of needing to apply for a grant they should be able to get tax relief. When they apply for grant they need to submit the C2 number of the installing contractor. It would be less bureaucratic than giving a grant to people who want to make changes to their lifestyles and improve the environment. It would also be more tax efficient and economic to give the equivalent of the grant as a tax relief and should be considered. I understand the Government uses it to some degree to control the amount of money it will spend on these grants. However, it would work out being considerably more efficient in the long term if we set it up this way rather than the existing cumbersome grant applications process.

Deputy Willie O’Dea

The recommendation relates solely to tax relief for service charges. I understand what the Senators have said and their arguments for and against. I will communicate their comments to the Tánaiste. Relief for service charges is currently available in respect of charges paid by a householder in the previous year subject to a maximum claim of €400per annum. Where an individual makes a claim in any year, the level of relief claimed is automatically allowed for all future years. The Revenue Commissioners have gone that far in giving continuity. The Revenue Commissioners provide a number of simplified ways for individuals to make their claim for this relief by text or on-line, or by phoning or writing to their local tax office.

The recommendation proposes that tax relief at source should generally be applied to service charges paid by individuals. While the principle of relief at source is very effective in ensuring that all qualifying individuals benefit from the relief, I am advised it would involve a cost on the Exchequer from one point of view, namely that individuals who are exempt from tax and who would not be currently be availing of the relief would in effect be getting a direct subsidy from the Exchequer. In order for such a scheme to operate successfully it would be necessary for the ten local authorities and in excess of 400 private operators to all participate fully. It could not be envisaged that a dual system of granting relief would apply.

Service providers use a wide variety of methods to levy the service charges, including direct payments, bin tags and service charges. There are considerable variations in how the level of service charges is determined. It would require amendment to some or all of those systems before the introduction of any such scheme of direct relief at source. To ensure the tax relief is highlighted to as many eligible payments as possible the local authorities have agreed to assist Revenue in publicising the relief. The Tánaiste is favourably disposed to the general notion of giving as much tax relief at source to those matters as possible. The Senators can rest assured that the Revenue will continue working to find a way.

Recommendation, by leave, withdrawn.

Senator Alan Kelly

I move recommendation No. 6:

In page 11, before section 1, to insert the following new section:

"PART 1

RESTRICTION OF BENEFIT-IN-KIND

1.—Where an employer provides a childcare facility directly to an employee, or pays the childcare costs of an employee to a third party, the provision or payment shall not constitute a taxable benefit-in-kind.".

The ethos of this recommendation is a simple one. I will not use this opportunity to go into the child care debate but this measure would be worthwhile if it were studied properly and adopted. I hope the Minister will move on this matter soon. I understand one of the reasons this has not been changed and the Minister is not in favour of it is that there is some concern that people might deliberately use the measure as a way of avoiding tax. However, this should not negate the fact that a number of genuine employers provide such necessary facilities for employees owing to the unsocial nature of their jobs. This could also apply to a husband and wife who are employed in the same area. Such a strict, down-the-line approach by the Government is unhelpful. If the Minister were willing to re-examine this matter he would receive practical support. This fairly simple issue does not justify a strict and aggressive approach from the Minister. In this respect, we are not necessarily talking about people who are trying to avoid tax.

Deputy Willie O’Dea

This matter was debated at some length on Committee and Report Stages in the Dáil. As the Tánaiste and Minister for Finance indicated in those debates, the position is that existing law already provides an exemption for an employee benefit-in-kind charge where employers provide free or subsidised child care to their employees. However, the exemption applies only on certain conditions. I will not go through the conditions now but essentially, for the exemption to apply, the employer must be involved in the provision, management or funding of the facilities.

Concerns were previously expressed that the relief was not available to small and medium enterprises by virtue of their size. Where the individual SME might not be able to facilitate the provision of child care facilities on its own, the legislation allows the enterprise to join other small employers in providing co-located facilities, contributing proportionately to costs and jointly providing the child care service. In this way, SMEs can address collectively the differences of scale in the provision of facilities. Therefore the recommendation, in so far as it relates to direct provision of child care, is addressed in existing legislation.

In regard to the second proposal in the recommendation, namely, that employees be given a benefit-in-kind exemption where their employer purchases child care for them from third parties, a core requirement of the current exemption is that employers must be involved in the provision, management or funding of facilities. Apart from this, there are a number of difficulties, the first of which relates to cost. The second one is that allowing employers to buy child care for employees from third parties is unlikely to have any significant impact on the supply of additional child care places. Indeed, it could lead to some displacement with employers buying up most of the convenient child care places for their employees, and with those not getting such a benefit being forced out to less convenient child care facilities. Third, there could be a knock-on effect on the cost of child care as people being subsidised might be prepared to pay even more for the service. Certainly, those providing it probably would be inclined to charge even more. Fourth, it would not be a legitimate policy objective to provide tax relief for some taxpayers who have been lucky enough to be employed by an employer or group of employers that have sourced child care places from the existing complement. Such a policy would be of no benefit to those without taxable income, for example. Fifth, ultimately, such a provision, if introduced, very likely would lead to pressure for full tax relief for all those paying their own child care costs, with the associated costs being borne by the Exchequer. Current Government policy is designed to increase the supply of child care places through the creation of additional places, not to use the resources to grant tax relief for child care costs per se.

Over several years, the Government has sought to support parents with children. These support measures, introduced in tandem with significant increases in child benefit payment, include the early child care supplement scheme, the national child care investment programme, the supply of a further 50,000 child care places, the national child care training strategy which aims to produce 17,000 additional child care training places by 2010, increased maternity leave, and a tax exemption for those who mind children in their own homes.

Recommendation, by leave, withdrawn.

Senator Alan Kelly

I move recommendation No. 7:

In page 11, before section 1, to insert the following new section:

"PART 1

BENEFIT-IN-KIND — TRAINING

1.—Where an employer provides training to an employee, or pays the training costs of an employee to a third party, the provision or payment shall not constitute a taxable benefit-in-kind.".

This recommendation concerns benefit-in-kind training. I am raising the issue following increases in redundancies and consequent unemployment. As the Minister is aware, there have been a spate of closures throughout the country, unemployment is at its highest rate for eight years while redundancies levels are up substantially year on year. Some companies offer phased redundancy packages over a period in a humane manner but, unfortunately, that does not happen in all cases. Training programmes can be included in such packages, especially for middle-aged people who are concerned about not being re-employed. Many training packages are provided by State agencies such as FÁS and Fáilte Ireland. Companies can purchase training from such agencies or colleges. There is a wide range of training opportunities but where training is provided as part of a redundancy package, the employee is charged on a taxable benefit. Given the way the economy is changing and the increasing volume of people participating in lifelong learning, including additional training, does the Minister consider the tax code could be amended in this regard?

Deputy Willie O’Dea

The proposed recommendation seeks to ensure training costs paid by an employer will not result in a benefit-in-kind charge applying to the employee. I am informed by the Revenue Commissioners that in circumstances where an employer either refunds course or examination fees on behalf of an employee or pays them directly on behalf of the employee, and the course undertaken is relevant to the employer's business, then a taxable benefit would not arise. In addition, my colleague, the Tánaiste and Minister for Finance, Deputy Cowen, has introduced section 22 to provide a new exemption to deal with the cost of retraining provided by an employer as part of a redundancy package. There has been substantial debate about that in the other House and people have sought to have the provision amended. We will leave it as it is, however, and see how it works out.

Recommendation, by leave, withdrawn.

Senator Alan Kelly

I move recommendation No. 8:

In page 11, before section 1, to insert the following new section:

"PART 1

FAILURE BY EMPLOYER TO REIMBURSE TRAVEL COSTS

1.—Where an employee incurs travel costs in connection with his or her employment, which are not reimbursed by an employer, the employee may be afforded a relief on such travel costs against his or her liability to income tax in connection with the employment.".

This is a common sense recommendation but it probably needs to be redrafted. I will not press the recommendation. Travel costs are not tax deductible for a number of small businesses which do not derive any benefit from them. A recommendation such as this one, if redrafted, could encourage greater use of public transport rather than using cars for business purposes. If the Government were to adopt such a measure, I can understand why a certain cap or scale would have to be put in place, and such travel expenditure also would have to be receipted. Some small businesses cannot afford additional travel costs to which tax deductions apply. If the Government were to consider providing relief in this area, it would encourage the use of public transport.

Deputy Willie O’Dea

This issue has been around for some time. When studying at the Institute of Chartered Public Accountants in UCD I was taught that self-employed people may claim travel expenses incurred for the purposes of their businesses whereas employees may claim only for travel undertaken in the performance of their duties, a somewhat narrower hoop to get through.

The difficulty that arises in this regard is cost. We cannot provide a tax reduction in respect of travel expenses for every employee. A person's travel to work is not travel undertaken in the performance of his or her duties. An employee required to travel as part of his or her duties may claim tax relief on such expenses. To provide tax relief on travel expenses for every employee in the country — we now have 700,000 more people at work despite the redundancies referred to — would result in enormous cost to the Exchequer. It would also mean some of the tax reliefs given to the less well-off would have to be reversed or partially reversed.

Senator Kelly will be aware of the salary sacrifice scheme, whereby persons employed by a large concern agree to sacrifice part of their salaries in lieu of public transport expenses, the cost of which is not taxable. There are considerable tax savings to be made in this regard provided the people concerned use public transport. I understand some private operators now come within the remit of this scheme. As I understand it, the deal must be for 12 months and, a person who cannot afford to purchase an annual ticket and gives a commitment to purchase a ticket monthly is also covered by the scheme.

Recommendation, by leave, withdrawn.

Sections 1 and 2 agreed to.

SECTION 3.

Senator Liam Twomey

I move recommendation No. 9:

In page 13, line 22, column 3, to delete "€900" and substitute "€1,540".

The amendment seeks an increase in the home carer's tax credit. This issue was debated at length in the Lower House. It is Government policy to encourage both persons in a household into employment. Down through the years, tax reliefs have been altered to ensure households with double incomes are substantially better off than households with a single income. This gap has widened significantly in recent years and needs to be corrected. Often, the person who remains in the home chooses to do so in order to take care of children. These families are making significant sacrifices to rear their children and this should be taken into account.

It is Government policy to encourage people to work and to alter the tax reliefs accordingly. However, that gap has grown too wide. We should afford more status to children's rights than we do to encouraging people to return to work. We need to rebalance this system and acceptance of the recommendation would go part of the way in doing so.

Deputy Willie O’Dea

The effect of the recommendation would be to double the value of the 2007 home carer tax credit of €770. The cost of the measure, if implemented, would be approximately €54 million in a full year and €37 million in 2008. The financial resources available to the Tánaiste for the budget 2008 personal tax package including, PRSI and health levy changes, amounted to €582 million, not an inconsiderable amount at a time when economic growth has slowed considerably.

The aim of the income tax measures contained in the budget is to use tax credits and bands to ensure low income earners remain outside the standard tax band and average earners remain outside the higher rate band, as promised in the Government programme. The measures are also focused on assisting the elderly, lone parents, widowed persons and widowed parents, those with a disability and carers. More than 54% of the resources in the personal income tax package were devoted to assisting those categories and the low paid.

Senator Twomey will appreciate that the resources available to the Tánaiste in budget 2008 were more restricted than in previous years and choices had to be made in respect of their allocation. To provide for a doubling of the home tax carer credit as recommended would mean increases in other income tax credits or reliefs would have to be curtailed or not implemented. The Tánaiste stated in an earlier debate on this year's Finance Bill that he is satisfied that budget 2007 allocated the available resources in a fair and equitable manner. For this reason, I am unable to accept the recommendation.

The tax position of a married single income couple does not change unless their income exceeds €44,400. According to the statistics available, two out of three married taxpayers in the country do not reach that level of income and as such the discrimination of the difference applies only to one third of married one-income couples. The maximum differential between the married one income couple and the married double income couple is €5,500 and as such the discrimination only kicks in when the married double income couple's earnings reach upwards of €70,800. The gap is not as great as is being portrayed.

A number of the increases in allowances introduced in budgets 2007 and 2008 specifically benefit married one income earners as opposed to anybody else. It is not true to say that the sole motivation for individualisation was to force married women out to work. The previous tax system bore hard on the single income earner. As far as I can recall, ten years ago a single person entered the PAYE net at the equivalent of what is now €84 per week. That is extraordinary. We have continued the practice of giving double tax relief to married couples. We were required first to concentrate our necessary resources on married persons, be they two income or one income couples, and then to change the structure and bring more balance into the system. In an effort to further balance it, we introduced the home carer credit. I accept this is the first increase in this allowance since 2000 when it was first introduced. The Government is committed to doubling the home carer's credit during its time in office rather than in one go.

Senator Liam Twomey

As the Minister and I differ only in respect of the timeframe, I will withdraw the recommendation.

Recommendation, by leave, withdrawn.

Section 3 agreed to.

Sections 4 and 5 agreed to.

SECTION 6.

An Cathaoirleach

Recommendations Nos. 10 and 11 are related and will be taken together by agreement.

Senator Liam Twomey

I move recommendation No. 10:

In page 15, line 25, to delete "€2,000" and substitute "€3,000".

The issues dealt with in these amendments have been also discussed at length in the Lower House. As a result of some of the changes introduced at budget time, people who are renting are being disadvantaged when compared with first time buyers or those receiving mortgage relief. The amendment seeks to rebalance the situation to ensure those who cannot afford to buy even with improvements in mortgage interest relief receive a fair crack of the whip.

Deputy Willie O’Dea

Most of the recommendations and amendments put forward today and in the other House are, on the surface, quite acceptable. Were I on the other side of the House I, too, could make as good a case in respect of some of them. However, the Minister must strike a balance. Resources are not limitless.

Section 6 of the Finance Bill implements the budget announcements to improve the level of rent relief. The section amends section 473 of the 1997 Taxes Consolidation Act which grants reliefs to taxpayers for rent paid in respect of private rented accommodation which is their sole or main residence. The changes introduced by the Tánaiste will increase the amount of rent relief due to all categories of claimants. For single persons under the age of 55, the credit will be increased from €1,800 to €2,000. For single persons over the age of 55, the credit will be increased from €3,600 to €4,000. For married and widowed persons under the age of 55, the credit will be increased from €3,600 to €4,000 and for married and widowed persons over the age of 55, the credit will be increased from €7,200 to €8,000.

The recommendations proposed by the Senator would increase the amounts due for single persons only. The tax code generally ensures a married couple should get the same level of relief as two single persons and it is not proposed to depart from that principle on this occasion. The cost of the recommendation, if implemented as proposed, would be approximately €29 million in a full year. Over the past four budgets the Tánaiste increased rent relief by 57% in total and the cost of living increased by approximately 27% during that period. Therefore, the real value of rent relief increased by approximately 27% or 28%. This change proposed to section 6 would increase rent relief by 11%, which would be quite significant. The Tánaiste is satisfied that the increases in the relief provided for in the Bill will help to reduce the burden of rent for tenants in the private rented sector, particularly in light of reports showing recent increases in the supply of rental accommodation which should lead to reduced rent levels.

The changes in this Bill, in conjunction with other changes introduced by the Minister, Deputy Cowen, in the previous four Finance Bills are generous. Owing to the excess in supply of rental properties, there is a downward pressure on rents.

Recommendation, by leave, withdrawn.

Recommendation No. 11 not moved.

Section 6 agreed to.

Section 7 agreed to.

NEW SECTION.

Senator Liam Twomey

I move recommendation No. 12:

In page 15, before section 8, to insert the following new section:

8.—Part 30 of the Principal Act shall be amended by inserting a new section:

"785.—A person who reaches retirement under a Defined Contribution Pension scheme shall from 1st March 2008 not be required to purchase an Annuity unless they do not have an income equivalent to a Non-Contributory Pension prevailing at the time of retirement.".".

This issue was discussed on Second Stage yesterday and in the Lower House. This amendment relates to pensions. People with private pensions who are forced to buy annuities on retirement will be under significant pressure in the next few years owing to changes in the stock market. The changes that have occurred, especially in the past 12 months, and which potentially will occur in the next few years have eroded and will erode significantly the value of such pensions. Changes need to be made to protect the pension benefits of those employees who do not have the same benefits as public servants whose pensions are based on their incomes on the day they retire. Private pensions are based on the value of the investment in the fund and policyholders are forced to buy annuities on retirement which may not retain their value.

Deputy Willie O’Dea

In principle, there is much merit in the Senator's amendment. Many annuities have fallen in value or are not as valuable when they come to be paid as was originally anticipated. This is because the yield from Government bonds has dropped considerably and there has also been considerable turmoil in the international equity markets.

The other difficulty with annuities is that, generally speaking, the benefit dies with the annuitant. Some people live long lives and other not as long as anticipated and I suppose the numbers balance each other out. Self-employed persons, provided they can prove they have an income of €12,800, are entitled to convert their pension contributions into cash, but that option is not open to employees in the PAYE system. There seems to be an inherent unfairness in that regard.

However, I hasten to add that all the criticism of annuities is not correct. There are different types of annuities and people can make different arrangements by incurring extra costs or paying extra contributions. This issue is under discussion in the context of the debate on pensions. The Government's view is that to extend the same facilities to employees under the PAYE system as the self-employed enjoy, which on the surface might appear fair, would be to put the cart before the horse given that it has begun to examine the question of pensions, including private pensions. Any tax changes or amendments to the existing tax structure relating to pensions will fit in with the general scheme on pensions that will be decided on foot of the current deliberations. It is somewhat premature to make such a change now, but I take the Senator's point. I do not want to anticipate the outcome of how this will evolve.

I do not envisage that the current system, which provides that the self-employed have the choice of converting their contributions into cash but those in the PAYE system do not, will survive. However, it is somewhat premature to introduce such a change in this year's Finance Bill.

Senator Liam Twomey

The are three groups involved, namely, the self-employed who own their pension funds, those in the public service and Civil Service whose pensions are indexed to their final pay, and employees in the PAYE system who do not own their pensions funds and whose benefits are subject to the whims of what is happening on the stock market on the day they retire. Furthermore, the latter group cannot defer the date on which they take their pension benefit or continue to work for a longer period. This issue should be dealt with now because, as the Minister is aware, it could be two to five years before the recommendations from the discussions on pensions ongoing at Government level are implemented. Therefore, a significant number of people will be discriminated against in the meantime unless this issue is given greater priority. If it is not be dealt with this year, it certainly should be given priority in next year's Finance Bill.

Deputy Willie O’Dea

I will convey the Senator's view to the Tánaiste. People in the public sector, including ourselves, are fortunate in that we have a defined contribution scheme. The existing position covering many smaller contributors in the PAYE system, whom I suspect the Senator has in mind, could be described as paternalistic. The Government is of the view that if some employees are given the option of taking a lump sum on retirement rather than having the certainty of an annuity, which will give them a certain guaranteed stream of income over a period, they will be at the mercy of the uncertainties of the stock market and financial advisers. They would have to depend on their lump sum to supplement whatever provision they may have from the State in the form of a contributory old age pension or retirement pension. They might not necessarily get the best investment advice. The self-employed who provide their private pensions tend to have access to better advice and more high powered accountants. I agree with the Senator that the Government's view in terms of those employees is a little paternalistic. I will convey his views to the Tánaiste.

Recommendation, by leave, withdrawn.

Sections 8 to 15, inclusive, agreed to.

SECTION 16.

Question proposed: "That section 16 stand part of the Bill."

Senator Liam Twomey

I received interesting correspondence relating to this section concerning the way in which multinationals operate here. I do not know if the Minister also received such correspondence. It relates to the blocking of a loophole. The individual who raised this issue with me said that if a multinational were recruiting people from aboard, one of the best ways to secure those with the highest talents for the industries we want to have here, namely, the hi-tech industries, the fourth level of development, is to offer them stock options. That will effectively tie employees to a company and its success is as much in their interests as it is in the interests of other shareholders. This blocks to some degree the option in this regard. I am talking about high powered jobs in research and development and marketing. This individual said that such employees will stay in other jurisdictions where they can be given such stock options as part of their incomes.

The Taoiseach and Ministers who travel to the United States next week will undoubtedly seek an assurance from the United States Government that undocumented Irish living in that country will attain legal status. However, many such people who might be willing to return to Ireland, having gained valuable experience in the United States, may be discouraged from doing so because the stock options available to them in that jurisdiction are not available here. This represents a disadvantage in attracting a considerable pool of talent back to the State. Is the Minister aware of the problem with this section? I can provide him with the information if he has not already received it.

Deputy Willie O’Dea

I did not receive the specific letter to which Senator Twomey referred but I am aware of what is being said and who is saying it. I disagree with the Senator's argument. The current position is that where an employer gives an employee shares in the company, those shares are taxable at their current market value. What is happening in many cases is that companies are giving shares, securities or other types of financial interest in the company to employees at a certain market value, which is quite low, which these employees have an immediate right to transfer to a different type of security that is much higher in value. However, the tax applies only on the lower value. This represents straight tax avoidance. The shares might as well be given tax-free.

On the other hand, to encourage high-powered people in the software industry and so on to come to Ireland, there are various stock option schemes for which tax relief is available provided one receives the prior approval of the Revenue Commissioners. The Revenue will give that approval if certain conditions are met. The stock options schemes in place, although specific and requiring the prior approval of the Revenue Commissioners, are also generous and wide-ranging. There is no need to allow people concoct their own schemes which may represent nothing other than undiluted tax avoidance.

Senator Liam Twomey

Will the Minister to send me information on those schemes?

Deputy Willie O’Dea

I will.

Question put and agreed to.

Sections 17 to 23, inclusive, agreed to.

NEW SECTIONS.

Senator Alan Kelly

I move recommendation No. 13:

In page 30, before section 24, but in Chapter 3, to insert the following new section:

24.—Where a taxpayer claims relief based on the construction of any premises, he or she shall furnish to the Revenue Commissioners sufficient information to demonstrate that he or she or any relevant contractor is complying with any relevant requirement imposed by the Health and Safety Authority or by law in respect of the construction.".

The purpose of this simple recommendation is to ensure that persons claiming relief on the construction of any premises must prove their compliance with all requirements and by-laws in regard to health and safety standards before benefiting from the relief. Several cases with health and safety implications have recently been brought to the attention of this House. This relief was introduced for the benefit of these people and the work they are doing. However, it is puzzling that there is no requirement to demonstrate adherence to health and safety regulations and other by-laws.

Deputy Willie O’Dea

Getting the Revenue Commissioners involved in the area of health and safety is a step too far. There is a bewildering array of health and safety regulations and the Revenue has plenty to do. Moreover, it is not qualified to assess such issues because its expertise lies elsewhere.

Senator Alan Kelly

I refer to the documentation and so on.

Deputy Willie O’Dea

I appreciate that point but there are requirements in place regarding the fulfilment of health and safety regulations. In most cases to which this amendment would be applicable, there is already a requirement for a health and safety certificate. In addition, many claimants for tax relief will have purchased the property involved from the developer and will have no responsibility or control in regard to the construction itself. In other words, the property was built before the claimant acquired an interest in it. Therefore, there is not necessarily a direct link between claimants of tax relief and responsibility for the construction of the building which is the subject of that relief.

Recommendation, by leave, withdrawn.

Senator Alan Kelly

I move recommendation No. 14:

In page 30, before section 24, to insert the following new section:

24.—(1) Section 1041(1) of the Principal Act be amended by inserting the words "in respect of commercial property" in paragraph (a) after the words “Schedule D” and before the word “, or”

(2) Section 1041(1) of the Principal Act to be amended by inserting the words "in respect of commercial property" in paragraph (b) after the words “terms of the lease" and before the words “, but to a person other than the lessor.”.”.

This proposal is based on information and advice from Threshold. The effect of the recommendation would be to restrict the liability of tenants of commercial property to account for the tax due on rent paid to overseas landlords. Tenants should not have to account for the income tax owed on rent paid to overseas landlords. Tax on such income would be covered by section 1034 of the principal Act which provides for the liability of overseas residents for tax owed on income earned in the State.

We propose that the Revenue should adopt something similar to the non-residential landlord declaration operated by the Inland Revenue in the United Kingdom. This effectively places the bureaucratic burden of compliance not on the tenant but on the non-residential landlord, as it should be.

Deputy Willie O’Dea

I understand the thinking behind Senator Kelly's amendment. Where a tenant is paying rent to a foreign landlord, even if he or she is in receipt of rental allowance from the HSE, the law requires that the tenant must deduct tax at the standard rate from the rent paid against the liability the foreign landlord will ultimately have for tax. This imposes an onerous burden on tenants. I am not sure how many tenants are paying rent to absentee landlords but I suspect few of them are aware of this provision. Nevertheless, I am informed by the Revenue that a certain of money is incoming under this scheme, where tenants hang onto the portion of the rent and pay it over at the end of the year.

It is a difficult issue. The purpose of the provision is to protect the Exchequer. The information available to the Revenue Commissioners is that if this requirement is removed, any or all Irish landlords could set up offshore entities to rent out their properties and there would be no obligation on the tenant to disclose this situation or make returns to the Revenue Commissioners. This would facilitate the avoidance of tax on the part of landlords. Nevertheless, I accept it is not a satisfactory arrangement. The Minister is conscious of this and he and the Revenue Commissioners are working to see if a more acceptable system can be devised which still protects the Exchequer.

Senator Alan Kelly

I accept the Minister's points and I reiterate the need to review this anomaly. I acknowledge his point on the possibility of facilitating a tax loophole. However, the current arrangement is unfair and must be addressed. Now that there is an awareness of the implications, perhaps it will be addressed in the next budget.

Recommendation, by leave, withdrawn.

Sections 24 and 25 agreed to.

Progress reported; Committee to sit again.