Finance (No. 2) Bill 2013: Committee Stage

Sections 1 and 2 agreed to.
SECTION 3

Recommendation No. 1 in the name of Senator Sean D. Barrett has been ruled out of order as it involves a potential charge on the people.

Recommendation No. 1 not moved.
Question proposed: "That section 3 stand part of the Bill."

I welcome the Minister for Finance, Deputy Michael Noonan, on the start of a happy weekend for him as he escapes the clutches of the troika and company.

I was seeking to limit a fiscal privilege in the agriculture sector. As the explanatory memorandum states, the changes will not apply to a loan where a farming partnership is involved. Tax concessions in the agriculture sector manifest in higher land prices. My recommendation was ruled out because it would cost the Exchequer money. I reassure the Minister that I would never propose anything that would cost the Department of Finance money; I was actually trying to save money. The recommendation was ruled out of order on a ground I did not intend and I will certainly not be pushing it. There is a danger that we create tax breaks for special sectors - they are what are called fiscal privileges - and they result in higher land prices. As the Minister is preparing his medium-term strategy, the aim should be to have a low single across the board tax rate for corporates and people, if possible, with fewer deductions and allowances and fewer career options for tax lawyers and accountants. That should be a principle in the Department. Having more complications, providing exemptions for some, leads to the creation of a huge tax lawyer and tax accountant sector which does not produce anything we need. That is the problem with fiscal privileges. We are making recommendations and, as Senator Paul Coghlan has reminded us of the role of this House in financial matters, I will not push recommendation No. 1, but there is a danger when people receive such concessions, that the economy will be distorted. That is not the development we require. I make this point for consideration by the Minister and his officials in future budgets.

The Senator is seeking to abolish tax relief for loans to acquire an interest in a farming partnership. There are challenges in the farm structure in terms of age profile, farm size and skill set. Increasing the number of farmers working in partnership can help to overcome these challenges. The agrifood and fisheries sector is Ireland's largest indigenous industry which collectively employs more than 160,000 people. Bord Bia estimates that in 2011 the sector accounted for more than €9 billion in exports to over 160 export destinations. The stated Food Harvest 2020 goal is to increase this export value to €12 billion by 2020. Despite the size and importance of the sector, there is an information gap in relation to the amount of the tax relief being received by the sector versus the return in terms of taxes paid. The Department of Agriculture, Food and the Marine, Teagasc and the Revenue Commissioners all have large amounts of data relating to the industry, but it has proved difficult to match it all up in a way that enables informed policy evaluation and consideration of proposed measures.

In line with the Department of Finance's policy to review all tax expenditures on a regular basis, in conjunction with my colleague, the Minister for Agriculture, Food and the Marine, I announced in the Budget Statement that I would be commissioning a review of the tax reliefs available to the farming sector. The purpose of the review will be to assess the costs and benefits of various agriculture tax expenditures with a view to ensuring the maximum benefit to the sector and the wider economy is obtained. The overall objective is not to change the level of Exchequer support to the sector through the tax system but rather to maximise the benefit to the economy from the existing level of State support. Any recommendation will be considered in the context of budget 2015. There will be an opportunity for farmers and all those involved in the sector to give their views once the review process is launched in 2014. In the context of the overall review, the provision of this relief for farming partnerships will be examined. I would welcome a submission from the Senator on this matter or on any other tax expenditure applicable to the agrifood industry.

I thank the Minister.

Question put and agreed to.
Section 4 agreed to.
SECTION 5

I move recommendation No. 2:

In page 10, to delete lines 42 and 43, and in page 11, to delete lines 1 to 4 and substitute the following:

"(I) in the year in which the qualifying work was carried out by an amount which is the lesser of-

This recommendation concerns the home renovation incentive scheme which I welcomed on Second Stage. However, some improvements could be made to it. Our recommendation would allow the benefit of the tax credit to be gained in the year in which the work was carried out and not to be spread over the two subsequent years. Under the Minister's proposals, the credit will be obtained in the two years after the work is carried out, with the first relief payment in 2015. There would be a greater take up of the scheme if the Minister allowed the tax relief to be obtained in one year as opposed to being spread over two years and in the year or, at the very least, the year following the one in which the works are carried out.

I would like to hear the Minister's thoughts on that. I am just trying to be helpful in this regard. The scheme is good and we have welcomed it. I hope it will have the effect of reducing the amount of work being done in the black market in this area. There are registered contractors who are tax compliant competing against people who are doing work for cash. The Minister's proposals should assist in this regard because applicants have to use a tax-compliant and properly registered and qualified contractor. There is a double effect in that people will get tax relief for improving their houses and smaller contractors should be supported. However, the scheme could be improved somewhat by allowing the tax relief to be paid in the year in which the work is done, or, if it is late in the year, the subsequent year. That is our recommendation.

I welcome the Minister to the House. This idea is very good and it has been promoted by Fianna Fáil and many others in the House. Having read through pages 1 to 7, I believe there is more red tape associated with the relief than any other. God be with the days when there was a simplified form to apply for a relief of this nature.

There is an impression that there is a grant available. It is not a grant and it does not apply to those who are not in the tax net although their houses may need renovation by a C2 contractor. The relief is wrapped in red tape. Deputy Noonan, who has had experience at local level all his life in addition to experience as a Minister, should consider the implementation of the system and the presentation of the form. I have been speaking to many contractors who are anxious to get involved in the scheme. The scheme is good but, from having read the Bill, I believe a simplified form, approach and application process should be designed by the Minister and his officials.

I concur with my colleague Senator Darragh O'Brien that the relief should be made available in the year of the work or the subsequent year, not further down the line, in order to make it more attractive.

The idea is good and the scheme will be self-financing, as the Minister knows. Can the Minister envisage any way in which the scheme could be turned into a grant scheme for those who want work carried out but who are not in the tax system, or those earning an income below the specified level? Could he simplify the process to make the scheme more accessible to small contractors?

I am confident that contractors will be inundated with requests to have reconstruction work carried out on the primary residence. The scheme applies to the primary residence only but it is broad in the sense that it can apply to the garden, surrounding walls and front lawn, provided there is C2 certification. A number of different jobs could be done throughout the year and be packaged as part of one bundle, provided one does not exceed the threshold pertaining to the relief.

I spoke about this measure yesterday during the Second Stage debate. My comments are not just on the amendment under discussion but also on a number of others tabled related to provisions in this section. I agree with colleagues who have said the measure is very good and beneficial. I do not believe some of the comments to the effect that is has been put in place just to bring people out of the black economy. Many people want to work with a proper contractor so they will have a guarantee if there is a difficulty with the work. Therefore, the measure is very good and necessary. It will be of great support to the construction sector.

I have concerns, which I raised with the Minister of State, Deputy Brian Hayes, yesterday. I ask that the incentive be kept under review to ensure it achieves its objective, which is to improve the overall housing stock. This is necessary, particularly to achieve thermal efficiency and also to provide much-needed jobs within the construction sector. In this sector, a significant number of former employees are on the live register. We know from studies that they are not amenable, as a group, to retraining so as to enter the IT sector, for example. We are losing capacity in the construction sector at an unacceptable level for an economy of our size.

My concern is to ensure that the measure is efficient. The scheme needs to be reviewed after a period to ensure it achieves its objective. I ask the Minister to consider extending it, however. As currently drafted, it applies only to the main residence of the applicant. One in five families is living in private rented accommodation. The standard of much rental accommodation is far from desirable. The figures for 2011, the most recent year for which we have figures, show that one third of all properties inspected were found to fall below the minimum standards set down by law. I ask that the measure be extended to dwellings other than owner-occupied ones, including dwellings in the private rental sector.

The Society of St. Vincent de Paul has raised serious concerns, as has Threshold, particularly on fuel poverty. There are renovations in addition to those in question that can be written off against tax. However, this relief is different and would encourage certain individuals who cannot avail of other tax measures to renovate their dwellings. I ask the Minister to consider this.

I am thankful for the general welcome of the scheme in the House. The primary purpose of the scheme is to stimulate increased activity in the building and development sector and to boost employment. One consequence of the bad results over recent years is that the skills of approximately 80,000 people on the live register are primarily those required for the construction industry, including those of carpenters, electricians, plumbers, block layers and plasterers.

Irrespective of what labour activation measures are introduced, especially for those of middle age, I do not believe all workers will be turned into electronic engineers or become suited to working in Facebook, Google or whatever the new industries are. We are obliged, therefore, to ensure that jobs are made available for persons with the skills in question in a socially useful way.

The secondary purpose of the measure is to improve people's living standards so those who need extra space can provide it and obtain a tax credit for doing so. They can improve the family home, which has the social benefit of increasing living standards.

The relief costs money. I have often heard of self-financing tax breaks but I have yet to come across one.

The Minister may be pleasantly surprised by this one.

They are like black swans; they are very rare.

The Minister will be pleasantly surprised by this one. He should mark my words.

It will certainly cost money. Since there is a cost, we have confined the scheme to two years. It is not open-ended. One must impose a time limit on tax breaks designed to stimulate activity in a given sector. If there is no limit, the stimulation will not happen. There is the potential tax and we have decided to spread the cost over two years. It is for financial reasons that one cannot claim in the year in which the work is carried out. It is also for financial reasons that the tax relief is spread over the two subsequent years. This, of course, helps many low-paid taxpayers. The maximum tax credit is €4,050. Many primary earners would not have a tax liability amounting to that so, by making provision for a two-year period, there is an ease for the taxpayer. If somebody does not have a tax liability sufficient to allow him to claim the credits over the two years, the following year or fourth year may be taken into account. If it takes three or four years before one has a tax liability equal to the maximum relief of €4,050, the reclaims can be spread beyond the second year into the third or fourth year. There is not a big problem with that.

On the issue of extending it to the rental sector, buying houses or apartments for rent is a business. It is not the tenant who would normally upgrade rental accommodation because often he or she would not get the permission of the landlord to upgrade or build onto rental accommodation anyway.

Landlords are already eligible for relief on works carried out to their properties. Landlords can claim a deduction against rental income for repair and maintenance work carried out on their rental properties. That is works of a non-capital nature. Where a landlord who builds on another room, turns the garage into an additional bedroom or enhances the property, there is a relief where that would be written off against the landlord's capital gains tax liability. There is a different scheme in place already which benefits landlords.

As for those who do not pay tax, the scheme is designed for taxpayers. It is not designed for persons outside of the tax net. However, there are grants available which can be used by those who do not have a tax liability, particularly from the SEAI, for energy efficiency works. For those undertaking such work as insulating their walls, putting extra insulation in the attic or upgrading the central heating boiler, the Department of Communications, Energy and Natural Resources pays grants rather than allowing a tax credit. That brings in another tranche of persons who are outside the tax net. These grants and the scheme we are discussing can be combined so that a taxpayer can avail, not only of a grant, but a tax credit on a calculation for a residual part of the cost.

The other misunderstanding about it is that the work is confined to work which costs a maximum of €30,000 plus VAT. One can spend as much as one likes on upgrading one's home. It is the tax break that is limited. If one wants to spend €50,000 or €60,000, one should go ahead and do so, but one gets the tax credit only for expenditure up to €30,000 plus VAT.

On the lower end, to qualify the work must be €5,000, inclusive of VAT, which is approximately €4,600 plus VAT, but one can accumulate that over a number of jobs. If one paints the house in February and decides one needs to put in a new kitchen in September, one can combine a number of jobs. The Revenue has not made this complex; it has made it simple. Both the contractor who will be registered for tax and the householder would both register electronically. Because it is registered electronically, one can accumulate jobs with separate contractors and once it passes the value of €5,000 inclusive of VAT, then it qualifies for the tax break in the following year and in the year after. That is the full explanation of it.

There are many amendments that could be made to make this a better scheme. It is just that I cannot afford to do that. It is a cost-control question not to accept some amendments which logically would enhance the scheme further. This will cost a great deal because already there have been many inquiries. It is a scheme that will work.

They introduced a scheme such as this in Sweden in the mid-1990s. It was the first drive to get the economy back and stimulate the building sector. It worked well but it was extremely costly.

I thank the Minister for his response and for his useful explanation. I accept the Minister's answer on the spreading of the tax credit over a couple of years. It is sensible. I will not push that recommendation.

I have a further question for him on a matter not specific in the Bill. The local authorities operate disabled persons' grant schemes and accessibility schemes for upgrades to houses, in particular, for the elderly. In many of those grant schemes, an individual can get up to 80% in some instances or, depending on earnings, 70%. Is there anything that precludes them? For instance, if someone gets work done on his or her house for €10,000 and from the local authority, through the disabled persons' grant or the accessibility grant, gets half of it, perhaps the Minister would clarify whether the person would be able to get the tax credit on the other work done by way of a payment of €5,000 or would the person be precluded because he or she applied for one of those type of grants?

I thank the Minister for the good clarification on the position. In fact, I was going to make the point that if one carries out a certain amount of work, for instance, putting in a new floor and a wall built outside by separate contractors, and accumulates it, that is a good approach. There are 80,000 small contractors or small builders on the live register and they will avail of this scheme. If the Minister had confined it to a single contractor, that would not open the scheme up as it is.

The Minister mentioned the question of whether it will get a return. I am convinced it will and I will tell the Minister why. It will stimulate so much employment in the economy. One is bringing the unemployed into a job where they will be taxed. One is bringing a supply of materials which are mostly produced in Ireland - concrete blocks and timber. The Minister is creating stimulus. It is one of the best schemes I have seen for quite a while.

When the Bill is passed into law, I would ask the Minister to communicate, particularly with the TDs, Senators and councillors, the simplified form in which this will apply. There are contractors in contact with me wanting to advertise this scheme and when I read the Bill, all the detail seemed daunting to say the least. In his comments today, the Minister clarified it well. He provided a simplified version, making it really worthwhile to apply and get the work under way as quickly as possible. Then he has that deadline as well which, of course, stimulates a quick movement in this regard.

I commend the Minister on this scheme. His comments and clarifications show his experience as a public representative. He knows how the system works. He will be aware that those tradesmen are available to work and that if one is below the limit, by spreading the work throughout the year one may reach the maximum of the limit through a combination of works, for example, a roof, new windows and new doors. It is a tremendous scheme from that point of view. It is not a tight ship on which one would have to employ a main contractor and one job only. The scheme will work. Every one of us will get behind this scheme and push it in our localities because it will stimulate much employment.

The Minister put his finger on it when he stated that tenants are not in a position to make improvements to the properties in which they live. Unfortunately, 90% of landlords in this country own one or two properties. This is an ongoing issue. Perhaps the officials could clear this up between now and Report Stage. Unfortunately, most landlords who provide accommodation in this country might be in a position, for the sake of argument, to put in new windows in their own family home or put in insulation in their own attics, but do not take the same approach to their rented properties. My understanding of the tax code is that such persons are not categorised as a business. Unfortunately, somebody who farms part time can be categorised as being in the business of farming but somebody who provides accommodation part time is not categorised as being in the business of renting properties. My understanding of the tax code - I hope to be proven wrong on this - is that the kind of business costs that can be written off by persons who are categorised as being in business cannot be written off by landlords in the private rented sector. However, my concern is not for landlords. It is for the tenants who are living in these properties. There needs to be incentives for persons to provide better quality rented properties and the tax code should be examined to ensure that such is the case.

Senator Hayden is not quite correct. There is a tax relief for a landlord who applies under PAYE. I see no difficulty. The Minister can clarify the position. If a landlord spends €5,000 on his or her property, that is a cost against the rent. There is no doubt about that.

By the way, how can a tenant, who might live in the property for two months, three months or ten months more, spend €5,000 or €10,000.

I know many landlords who carry out the work and receive the tax relief. They have an incentive to upgrade their properties and provide better accommodation. While I do not know the precise numbers, it is a broad church and a relief is already available. It should not be extended, as to do so would result in the provision of a double relief. I do not see the point in a tenant carrying out renovation work when he or she may move out of the dwelling three months later. I ask the Minister to respond.

While the Minister may comment, he has already clarified the point.

To respond to the issue raised by Senator Aideen Hayden, we are all aware that there is some inferior rental accommodation which we would like to be upgraded. This provision is not geared to that objective but helping people who are unemployed and possess building skills to return to work. The second target of the measure is to improve homeowners' living accommodation by doing whatever work they believe is necessary. A tax relief is available for works carried out by landlords. If a schoolteacher, garda, nurse or factory worker has windows fitted in a second property that is rented, he or she can claim the cost against the income derived from the rental property. There is a business expense which is applicable to those whose tax is primarily paid under the PAYE system. If they fit windows in their home, however, they will not receive a tax break because they will be acting as a private citizen with his or her own accommodation.

On the issue of grants which was raised by Senator Darragh O'Brien, I propose to read the note provided on the matter. Any grant, compensation or insurance settlement will not affect eligibility for the scheme. If a claimant has received or will receive any grant, compensation or insurance settlement, the amount of any payment or payments which are taken into account for the purposes of calculating the relief shall be reduced. Depending on the nature of the receipt, the following reductions apply. In the case of amounts received from the State or any public body or local authority, the reduction will be three times the amount received or receivable. In the case of payments received under any contract of insurance or by way of compensation or otherwise, the reduction shall be the amount received or receivable. The point in principle is that if a person receives a grant from a State agency or local authority such as those to which the Senator referred to improve accommodation for the elderly, he or she will not be disqualified from benefiting from the scheme. However, a mathematical calculation will be made to ensure the person is not paid twice for the same work and does not receive a tax break on the grant element or a multiple thereof. That is a satisfactory position.

The previous question was on the effect on the retail sector. Since this measure was announced, it has been broadly welcomed by the construction sector and homeowners. If the inquiries the Department of Finance and the Revenue Commissioners have received are indicative of the position, we expect a significant take-up of the scheme which should provide a welcome boost for the construction sector. This additional activity will undoubtedly contribute positively to the broader economy, not least retailers and suppliers to the construction industry.

On the issue of communicating the scheme to homeowners, I am keeping the scheme as simple as possible. When all Stages pass the Seanad and the President signs the Finance Bill into law, Revenue and the Department of Finance will publish guidelines on the scheme which will be posted on their websites in the normal manner.

I have addressed all queries thus far. I again thank Senators for their strong support for the scheme.

May I have a copy of the Minister's note? I would like to get my head around the detail of the scheme. Is the figure three times the grant amount? If, as in the case to which I referred, someone had work done for €10,000 and received a €5,000 grant from the local authority, is it the case that he or she could not claim any sum under €15,000?

Yes, the position would vary from case to case. The details are included in the Bill.

I thank the Minister for the explanation.

During the boom times many developers purchased and built rental properties to which alterations such as painting and extensions may be required. Are they entitled to grant aid? Will the Minister confirm that owners of multiple rental units must be tax compliant and must have paid the household charge on all their properties before any application for grant aid will be considered? Must they produce evidence to that effect? Is that the current procedure?

I am sure the Minister will allay the fears of Senators from the Carlingford bloc.

I assure the Minister that I am not one of them.

The scheme will only apply to homeowners and the principal private residence of the homeowner. As such, it is available for work carried out on the principal private residence of a homeowner. If someone has rented accommodation, he or she qualifies for write-offs against the income from the rental accommodation. This comes under a different part of the tax code and is not being interfered with in any way by this provision.

If Senators are speaking to people who are out of work and have construction skills, they may wish to point out that, under another section of the Bill, people may return to business without incorporating. If, for example, a carpenter is on the dole, he or she can set up in business and be eligible as a contractor once he or she is tax compliant. The incentive being given is that for years one and two, he or she will receive tax relief against income tax on the first €40,000 of income in each year. As well as encouraging people to spend on the improvement works we have described, another section provides an incentive for unemployed persons to set up in business as self-employed business people without incorporation. The incentive is that they will receive relief up to €40,000 in the first and second years that they are carrying on the business. This measure would suit building workers who wish to establish a business and return to the construction sector as small contractors. People must be local property tax compliant, even though the NPPR attaches to the credit. The tax compliant clarification is provided.

For how long must a person who is not required to reincorporate claim welfare payments?

We announced on budget day that it would be 15 months, but the figure has been reduced to 12 months.

On a point of clarification, owing to the way in which the Constitution is framed, any inadvertent reference to amendments should be construed as references to recommendations. This is because the Seanad's wings were clipped in the 1937 Constitution and have not grown back since, despite the referendum. If I have used the word "amendment", I meant the word "recommendation".

Recommendation, by leave, withdrawn.

Recommendation No. 4 is an alternative to Recommendation No. 3. Recommendations Nos. 3 and 4 may be discussed together.

I move recommendation No. 3:

In page 11, line 30, to delete “€5,000” and substitute “€2,000”.

The purpose of the recommendation which is not 1 million miles from the recommendation in the name of Senator Kathryn Reilly is clear. The Fianna Fáil recommendation proposes to reduce the threshold to €2,000, whereas Sinn Féin's recommendation proposes to reduce it to €1,500. Such a reduction would allow smaller jobs to be undertaken and widen the attractiveness of the scheme. It would not cost a hill of beans either compared to the current proposal, while allowing smaller works to be undertaken.

That in itself would help to make the scheme more successful. The recommendation is very clear and does not require further elaboration.

I welcome the Minister and hope our debate on Committee and Remaining Stages will be productive. I think I made an impact on the Minister of State at the Department of Finance, Deputy Brian Hayes, yesterday and hope to continue that good work today.

The Senator was left in the trenches on her own.

The recommendation we have proposed is not 1 million miles away from Fianna Fáil's recommendation and is aimed at broadening the attractiveness of the scheme. The Minister indicated that one could combine a number of jobs with contractors, but what about those who can only do one job that might not reach the €5,000 threshold or cannot afford any further job for several years? They might, for example, have to repay a bank or credit union loan that they took out to cover the cost of the work.

The Minister has stated one of the reasons for the measure is to generate employment. In broadening the attraction of the scheme it is important that we also reduce the threshold because people who are under considerable financial pressure will question whether they can afford to pay for this work. The scheme could be a deciding factor in whether they commission the work. By reducing the threshold, we could increase demand and give contractors on the live register the opportunity to obtain work. All of us know young unemployed electricians, builders and plumbers who are unable to find work and if there was more confidence in terms of being able to claim this relief, they would have more opportunities to tender for smaller refurbishment projects.

The focus of this measure is on the sector rather than the individual. If somebody needs to paint his or her house and will do so anyway, there is no additionality. The reason we are not going for small, low cost jobs is many of them would not involve additional work that could be incentivised under the scheme. It would be work homeowners would carry out anyway and, as the focus is on the sector, we need to incentivise additional work by offering tax credits.

I listened to the arguments in the other House about the level at which the threshold should be set. I moved it down by changing the way VAT would apply. On budget day we were proposing a minimum threshold of €5,675, inclusive of VAT, but that has since been reduced to €5,000, inclusive of VAT. I listened to the arguments and made an adjustment to the threshold. I also clarified that jobs could be accumulated to reach the new threshold of €5,000. Taking everything into account, we have pitched it at the right level.

Question put: "That the figure proposed to be deleted stand."
The Committee divided: Tá, 26; Níl, 17.

  • Bacik, Ivana.
  • Brennan, Terry.
  • Burke, Colm.
  • Clune, Deirdre.
  • Coghlan, Eamonn.
  • Coghlan, Paul.
  • Comiskey, Michael.
  • Conway, Martin.
  • Cummins, Maurice.
  • D'Arcy, Jim.
  • D'Arcy, Michael.
  • Gilroy, John.
  • Hayden, Aideen.
  • Higgins, Lorraine.
  • Keane, Cáit.
  • Kelly, John.
  • Landy, Denis.
  • Moran, Mary.
  • Mulcahy, Tony.
  • Mullins, Michael.
  • Naughton, Hildegarde.
  • Noone, Catherine.
  • O'Keeffe, Susan.
  • O'Neill, Pat.
  • Sheahan, Tom.
  • van Turnhout, Jillian.

Níl

  • Barrett, Sean D.
  • Byrne, Thomas.
  • Cullinane, David.
  • Daly, Mark.
  • Leyden, Terry.
  • MacSharry, Marc.
  • Mooney, Paschal.
  • Ó Clochartaigh, Trevor.
  • Ó Domhnaill, Brian.
  • Ó Murchú, Labhrás.
  • O'Brien, Darragh.
  • O'Donovan, Denis.
  • Power, Averil.
  • Quinn, Feargal.
  • Reilly, Kathryn.
  • Wilson, Diarmuid.
  • Zappone, Katherine.
Tellers: Tá, Senators Paul Coghlan and Aideen Hayden; Níl, Senators Averil Power and Diarmuid Wilson.
Question declared carried.
Recommendation declared lost.

As Senator John Gilroy forgot to press his button, the vote result has been amended to include him. The result of the vote means that recommendation No. 4 cannot be moved.

Recommendation No. 4 not moved.
SECTION 5
Question proposed: "That section 5 stand part of the Bill."

I note what the Minister said in his earlier helpful replies. There is a cost and it could be substantial. He is taking steps to control costs.

The scheme will end in two years, which I welcome. It could be expensive and the problem with such tax expenditures is one does not know how much they will cost. If it was more explicit, we would know the cost in advance and could try to estimate its benefits. There is a problem with schemes such as this and stimuli in general because, as the Irish Fiscal Advisory Council, IFAC, pointed out, multiplier effects in the economy are almost zilch because it is so open and there is no way to commence such a scheme without reducing the multiplier effect dramatically because it will leak away in imports. People will buy cars to go to work in and buy holidays out of the proceeds and so forth.

There must be a caveat to such proposals. I am glad it will end. It could be expensive and the multiplier effects will be low. Such measures should not be included in the medium-term strategy the Minister will announce soon. They have lobby groups. When robbing Peter to pay Paul, one usually gets Paul's support and, therefore, I am not surprised at all at people supporting it but whether it is worthwhile from the point of view of society as a whole is a question for future deliberations when schemes such as this are proposed in the Department. In this case, the Government is returning to the construction sector, which, goodness knows, got us into enough trouble previously. The benefits will accrue to the householder by either reduced expenses or increased property values. If the money was put into a schools building programme, for instance, the assets would be available to wider society.

There are downsides to this scheme. I acknowledge it has been welcomed and I will not press this recommendation but short-term schemes such as this may not have the beneficial effects the beneficiaries usually claim. I hope this is temporary. Twenty or 30 years ago, the State provided grants to people to put in windows. These schemes seem to exist in departmental files and they keep returning. I hope this has a two-year life because it would be easy for us to overstate its benefits. If there is a black economy, let us tackle it directly rather than trying to induce people to enter the proper economy. I stress the IFAC advice that there is not much of a multiplier effect from these schemes because we long ago declared ourselves in favour of free trade and economic openness. Keynesianism was designed for a large closed economy.

I thank the Senator for his comments and I do not disagree with anything he said. One of the problems with the arguments in favour of demand side stimulus of the economy is the multiplier is probably less than one whereas all the Keynesian theories that seem to be imbued in the mentality of Irish people of a certain age are based on a strong multiplier effect but the economy is so open now that the multiplier effect is not achievable anymore.

As a general approach, we were in a frightful crisis after the catastrophe that occurred. Doing nothing is not an option for the Minister for Finance or the Government in these circumstances. I freely admit that if I try ten things and seven work, I am well ahead and I regard that as success. Not everything that we try works but that should not stop one from trying. Some of them have worked spectacularly, such as the reduction in the VAT rate for the hospitality industry from 13.5% to 9%. That has worked spectacularly as a job creator. We have also had an immediate return from abolishing the travel tax. In return for reducing the tax yield by approximately €36 million per year, many more tourists will visit the country next year. In so far as there is such a thing as a self-financing tax break, that would come close.

The calculation regarding the home renovation scheme is if the VAT rate of 13.5%, which generally applies to building products, is applied to the upper threshold of the scheme, €30,000, that would almost equate to the tax credit being provided to householder, which comes in at €4,500. This is, therefore, not a random set of figures. We think we will get quite a bit of the tax break back through the increased activity relating to materials and the VAT that will be paid. When people leave the live register, there will also be a significant saving in social welfare payments. Then if they come into the tax net, there will be additional USC and income tax payments. Over a period, if additional activity is generated, this will be successful and may not be that expensive. However, the volume of inquiries so far suggests more people may improve their homes and claim tax credits than we expected. We will see how it works out and we will monitor it. The scheme is limited to two years in accordance with the provisions of the legislation. If I or a subsequent Minister for Finance wants to extend the scheme, it will be necessary to return to both Houses to secure a mandate for that. It will not be automatically extended. I am prepared to such schemes to focus a sector for particular purposes but if they remain in place forever, they do not work. They must, therefore, be time limited. I am in favour of making sure this closes after two years.

The Senator is correct about the grants that were introduced in the 1980s to replace doors and windows during the aluminium revolution, which destroyed many a decent house. If one person got aluminium windows, the entire road had to get them. It got completely out of hand and it cost a fortune with limited benefits aesthetically, socially or economically.

Question put and agreed to.
Section 6 agreed to.
SECTION 7

Recommendation No. 5 is out of order, as it involves a potential charge on the people. Recommendation No. 6 is in the name of Senator O'Brien------

I would like to explain recommendation No. 5. The explanatory memorandum states: "To qualify for this credit, the relevant child must reside with the claimant for the whole or greater part of the year of assessment". One hundred days does not equate to the whole or greater part of the year of assessment. This is why I included 183 days in the recommendation. I do not know why that was omitted in the first place.

Recommendation No. 5 not moved.

I move recommendation No. 6:

In page 20, line 19, to delete "100 days" and substitute "75 days".

This was tabled in error. We oppose the 100-day rule. I will refer more broadly to the single parent tax credit when we discuss our later recommendations and why we feel it is unbelievably regressive and will have a huge impact on parents' ability to co-parent and to have as much contact with their children as possible, particularly where relationships break down or where parents are separated or divorced. The 100-day rule is unwarranted and unworkable, particularly in cases where a child is young, as Treoir has pointed out. The organisation argues that it is unreasonable and shocking to expect the mother of a young baby to share parenting of a newborn child for 100 days, which is at least two days every week, when for the first few months he or she needs to spend as much time as possible with his or her mother, especially if the mother is breast feeding. The provision does not make sense.

It will also be problematic when a child is ill and perhaps in hospital for a long period. He or she will be unable to stay with the "non-primary carer". I take issue with the emphasis put on this description because we are trying to move away from the old language used in family law which refers to primary carers and so on. It is contradictory in many ways that just as the Minister for Justice and Equality is about to introduce the family relationships and children Bill to reflect modern family and relationship breakdowns, changed guardianship arrangements and so on, a measure is being introduced in this legislation which is from the Dark Ages in terms of its impact on separated and divorced parents and their children.

The 100 days provision may also be unworkable where parents live a considerable distance from each other and one of the parents is unable to take the child or children every weekend.

As we proposed, we would prefer to see the tax credit applied to the family where there is a written parenting agreement for maintenance between parents. With most cases arising under the Bill, the fathers will be disproportionately affected by the changes in the tax credit. As I noted yesterday, Trinity College research indicates that even when courts grant equal access to both parents, in 97% of cases the mother is deemed to be the primary carer. There is no doubt that the changes discriminate against fathers in particular and will make it very difficult for them to have a positive and sustainable relationship with children. Where there is a proper written agreement in place, it should be respected. This would occur where a father, for example, provides maintenance for children and may be spending substantial time with them. The issue must be considered on a case-by-case basis, taking into account individual family circumstances, rather than just having a crude 100-day rule. For that reason, we oppose the measure.

I thank the Minister for introducing an amendment to the original budget proposal, which had a one-parent tax credit changed to a single person credit for the primary carer. The Minister has listened and proposed an amendment that a secondary claimant, in certain circumstances, can avail of this very important tax credit for separated people. How can it be proven that a secondary claimant has spent 100 days with the children? The Bill indicates that the claimant must prove this. I am reminded of what King Lear said to his daughters, Cordelia, Regan and Goneril, "Which of you shall we say doth love us most?" That question had tragic consequences for the children, father and the state. I do not see how to measure love or care with a blunt instrument like a number of days. Would a child say that his or her father or mother only spent 99 days with him or her this year and should not qualify for the credit? The measure should be reflected on again and dealt with through a less blunt assessment. I would like to see provision for the credit to be shared but that is another matter. I know the Minister has taken cognisance of what people have said on the matter. Will he reconsider the 100-day period, as it could even be seen as accusatory in tone? I would like to see something done about this.

I spoke on Second Stage to advise that I have great difficulty with section 7 and the principles underlying it. Considering the recommendation before us and speaking to the 100-day provision, it seems to be an arbitrary figure that is unworkable. To preface what I say, the majority of primary carers are mothers and all the organisations working with lone parents, including Treoir, Barnardos, One Family or OPEN, have argued that this will disproportionately have an impact on fathers. The measure is excessive, unnecessary and unworkable. The 100-day requirement will reinforce a negative stereotype about single fathers, implying that they must be cajoled into participating in a child's life in order to avail of a tax credit. We can imagine how that could play out. In the early days of breaking up or even later, this could be used destructively by either party; one may argue to children that the other party only wants to see them in order to get to the 100 days and be eligible for the tax credit.

Senator Power mentioned the issue of newly born babies who are breast-feeding and how the 100-day rule can be met in that regard. Even as children get to teenage years their attitudes can be quite fluid. At one point they want to be with one parent but they may want to go to another parent at other times. This happens in settled families and with separations. It is down to interests or where the children are in their life. This is an idea that the State must interfere in this way and stipulate that children must stay with a parent in order for a tax credit to be availed of. Children may be staying with a father not because he really wants to see them or be part of their life but because he must get the tax credit. The issue is boiled down to a tax credit.

I know the amendment has good intentions but there must be a better way to consider requirements. We know life can change and there may be court orders or custody arrangements with particular families. Is the State interfering and stipulating 100 days as a minimum? The life of families changes all the time, as one parent may get a job that involves long-distance travelling, so it may not be financially viable for a parent to have the children every weekend. Nevertheless, people may want to play a significant role in a child's life.

I would prefer if we did not have to proceed with the measure but I accept it is going ahead. There must be a much better way of doing it. It is inappropriate for the State to interfere in this way in a family's life. Although such action may be appropriate in speaking about child welfare and protection, how would we monitor or police an issue like this? What is the basis of proof? Does somebody have to disprove that a person spent 100 days with children or is the opposite true? What calculation will be accepted? Will the mother have to sign a form every time the father takes the children, as with a delivery note? How will the provision be monitored? This is sending a particular message and I do not see how this can be worked in a pragmatic fashion.

Will the Minister include a commencement order that would allow time to fully study the impact of the measure and redraft it if necessary? I have a difficulty with the idea, from a child's perspective, that access to either parent would be based on a taxation measure. We could consider a system where the primary carer could agree to share or pass over the credit. The 100-day requirement is unworkable but if we try to work it, I wonder how many administrative hours will be wasted in trying to police it, especially if one parent claims they have met the 100-day provision but the other argues that it has not been met. If there is proof for 90 days, is there a margin of error? I have a major difficulty in how we could achieve this but the biggest difficulty is that seen from a child's perspective of when he or she sees a parent. It can be played upon by either party.

Any of us with friends who have gone through a separation knows that it is not a logical stage in one's life. Going through a separation is not a time when one can sit down matter of factly and calmly discuss issues. Often children are used as pawns in these processes and we should do nothing that adds to that.

This issue was quite contentious on Second Stage. The overall change in the one-parent family tax credit is undesirable. This change follows a trend that has happened over the past number of years. For example, under the rent supplement scheme, it is now impossible for somebody who is not the primary carer to get appropriate accommodation that will allow visitation rights with his or her child. Day in and out I see cases of fathers - in 90% of cases it is fathers who are affected - who are living in one person accommodation who are not in a position to have their children spend time with them. This goes against the right of the child to have a relationship with both parents. It also goes against the child's right to a home.

Generally it is accepted that when people live separately, they incur greater costs than when living together. This is recognised in social protection legislation and in tax legislation and needs to be recognised in the context of the capacity of families to live together as families. I agree completely with all of those who have spoken about the 100-day rule. This is unenforceable. I am a solicitor by profession and have worked on cases of family breakdown. There is nothing more destructive in a family breakdown scenario than people arguing over their children. I see this measure as adding to that torture. I urge the Minister to give serious condition to this.

I am not an expert in regard to how this issue can be worked out and I accept the points made by the Minister in the Dáil and by the Minister of State, Deputy Brian Hayes, here regarding the necessity for this measure, but I would like to see it reversed at the first available opportunity as the country exits recession. However, I believe the 100-day rule is unenforceable. I am reminded of a prominent businessman who was at a board meeting and at ten minutes to midnight somebody knocked at the door and said: "I am afraid you have to leave now, Cinderella." Let us get real about what we are asking people to do. This is not appropriate.

I am completely opposed to the recommendation for the 100-day requirement. It is okay for Deputies and Senators to fob in for 120 days of the year to get our travel and accommodation allowances. Many of us will have received a letter congratulating us on our full attendance and telling us what days we have attended. However, this formula of 100 days is completely unworkable and should not even be on the table. The Minister has shown flexibility since the original announcement in the budget, but this amendment is unworkable. We suggested an amendment on this matter and Senator van Turnhout suggested a ministerial commencement matter should not be made until a report examining the effect of this measure is completed and laid before the Houses. This provision should not take effect until then.

I do not wish to repeat what other Senators have said. All of us have serious problems with this and I intend to oppose the section. Senator Power mentioned something that was raised at the constitutional convention earlier this year, namely the new and modern forms of family. This section is regressive and seems to be going backwards in this regard and for that reason I intend to oppose it. The issue of the 100 days is not like us fobbing in to record our attendance. It is not workable and needs to be re-examined.

Senators are correct in saying there are many different types of families now. The traditional family, which was practically the only model in the Ireland of 50 years ago, has been changed. We now have many types of families and should not be judgmental about these.

We are not being judgmental. This is purely about tax. The weakness in the case being made in the public debate is the assumption that there is tax credit for children in the tax code. There is no tax credit for children in the tax code. The children of cohabiting couples, partners living together or married couples living together do not get any tax credit and are not eligible for any. One of the exceptions to this relates to the children of separated couples. These children get a tax credit to acknowledge to fact that separated couples living apart can have additional expenses. This is the general background to this issue.

When the Commission on Taxation recommended in 2009 that we should change the situation, it pointed out there was no specific tax credit for children in the tax code. Whether married or cohabiting as a couple, these couples are unable to avail of any additional credit in respect of their children. This is the case despite the fact that some such couples also have to maintain two households due to the location of employment. For example, a father from Donegal may need to have a residence in Dublin if he is working in Dublin and lives there during the working week and his wife remains in Donegal with the children. There is no tax credit for the children in those circumstances. The distinction is not between couples living apart. Married couples frequently have to live apart because of economic or other circumstances. Therefore, there is a wider context to this debate.

In 2009, the taxation commission advocated this position should be changed and advised that one tax credit per family would be the way to go, because what was happening was there were two claimants in most cases for the care of the same child and in a number of cases there were three or more claimants. The Revenue decided and advised me that the credit should be confined to one credit paid to the principal carer and suggested that an indication of who that would be would be which parent was getting child benefit. However, that would not be the absolute proof. This is the background to the change.

In the course of the public debate and the debate in the other House, it was pointed out to me that if the principal carer who would be eligible for this child tax credit did not have a taxable income, no tax credit would be paid. Therefore, I agreed to amend the proposal so that in those circumstances the other parent could claim the tax credit. However, the overriding consideration is that there will be one child tax credit paid per child, not two or three.

In regard to qualifying for the credit, there is no problem if the principal carer has a taxable income and claims the credit. It is only where the principal carer yields up the credit to the other partner that the issues arise. Then it is a question of the Revenue Commissioners adjudicating on a claim. The 100 days is only relevant if the primary claimant with whom the child lives for most of the year relinquishes the credit. In regard to the 100 days, it is a self-assessment process. The individual makes a claim, and depending on the facts and circumstances, the Revenue Commissioners grant the credit or query the claim. The practice has not been for the Revenue Commissioners to chase after individuals in these circumstances. Its code of customer practice is operated on the basis of an acceptance of the honesty of the applicant and that is stated in the code. The Revenue does not treat people who make claims with suspicion. Its opening position is that a claim has been submitted and it accepts that taxpayers are honest people and will honour the claim, unless other evidence comes to them that the claim is fraudulent.

There have been a lot of fraudulent claims in the tax area and the Revenue has reviewed these matters on several occasions.

In the west Revenue undertook a review of the one-parent tax credit some years ago and collected €4 million on the basis of fraudulent claims. This is not as simple as it looks and the compromises we have made are reasonable.

In respect of a child of separated parents, one tax credit is payable. In the first instance, it is paid to the primary carer, but if the primary carer cannot avail of it through not having a taxable income, it may be relinquished and transferred to the other partner who must claim it from the Revenue Commissioners. The qualification period of 100 days was included because the legal position up to now was that if a child stayed with his or her grandmother for one night in the year, she could make a legitimate claim to Revenue for the full credit. While in practice that only happened infrequently, the legal position was that a person could qualify for the credit. There was the potential to abuse the system and that potential had to be removed.

It is not our business or that of the Revenue Commissioners to be judgmental about anybody or to interfere in family arrangements in any way. The position we have taken is reasonable in principle. Where there is no general tax credit for children in the tax code, it is reasonable to apply one tax credit to the child of a separated couple. That credit will, in the first instance, be payable to the primary carer and in the event that the primary carer is not in a position to avail of it, a mechanism will be provided in law whereby it can be transferred to another person, usually the other partner, who can then legitimately claim it. That is my position, but it is not as simple as it has been presented in public debate so far. There is no tax credit for the vast majority of children in the country.

While I welcome the Minister's explanation, the Commission on Taxation suggested previously that we tax or means-test child benefit. At the time I prepared a paper on behalf of the Children's Rights Alliance to show how unworkable that would be. It took the State four years to arrive at the same position. The Minister gave the example of a couple living in County Donegal, one of whom was working in Dublin, but what we are talking about is a situation where parents are trying to have a home in order that their children can come and visit. In the example the Minister gave the partner had moved away purely for work reasons and was not trying to create a home base. As Senator Hayden pointed out, there are costs involved in setting up a home for one's children to come and visit. I understand the Minister's position and appreciate the fact that there is a tax credit available for the child or children of a separated couple. The Minister said the Revenue Commissioners had a self-assessment process in place that worked on the basis of trust. If the primary carer agrees to sign over the credit to the secondary claimant - to use the terminology in the Bill - why can that not also be done on the basis of trust? Why does the Minister insist on including the 100 day rule? If he is trying to arrive at a situation where one person is claiming the credit for a child or children, why is the 100 day rule necessary? That sends a wrong message.

The Minister has made reference to principles on a number of occasions, but perhaps there are other principles we need to consider. The Minister is talking, in the main, about the tax code and that is his job as Minister for Finance. However, by including this provision in the Bill, he is creating a hierarchy in parenting. He is creating a so-called primary carer or primary parent, which implies the existence of a lesser parent. That is what is happening with this measure and that is how many people I have met view it. This is not just about a financial arrangement. There are certain principles that should underpin this measure. The first is the principle and practice of shared parenting as a feature of modern life. The second is the principle that the tax credit can be transferred to the non-principal carer and, if appropriate, crystallised through a shared parenting agreement. I am not saying this should be done on an ad hoc basis and agree that reform is needed in this area. However, what the Minister is doing is using a sledgehammer to crack a nut. He mentioned fraud. This provision was presented in the Budget statement as an anti-fraud measure and the Minister has repeated that assertion by referring to Revenue investigations in the west. I have no doubt that there was fraud because there is fraud in every area of the social welfare and taxation systems. However, just because there are people who will try to defraud the system does not mean that we should shut down the system.

The tax credit is awarded to reflect the additional costs involved in caring for a child or children in a shared parenting arrangement; therefore, the credit should follow the child or children. I am most uncomfortable with the provision and, in particular, the 100 day rule. I take the point the Minister made about the Revenue Commissioners and agree that they do an exceptional job. The honesty of the citizen in the self-assessment system is a given, but in an instance where Revenue decides to audit individuals or carry out an investigation, is it the case that parents will submit a calendar to prove when their child was with them? Will they be expected to have a record in the event that there is an audit?

During the debate on Second Stage yesterday I suggested we would see a raft of maintenance orders and agreements being renegotiated. Fathers who are paying maintenance will argue that they are no longer receiving the tax credit and cannot afford the agreed maintenance payments. Who will suffer at the end of the day? To use the Government's term, the primary parent who, in many instances, is the mother will suffer because she will end up receiving a lower maintenance payment. There are additional costs involved in separations, which was why the tax credit was introduced in the first place. I agree with Senator Jillian van Turnhout that the analogy of a person working in County Donegal and returning to Dublin at weekends is not relevant. Separated parents are trying to create two homes for their children. They are trying to create a home environment for their children and all responsible parents, married or separated, try to do this.

I was struck by what Senator Aideen Hayden said and know that many Government representatives are opposed to this measure. All the Seanad is trying to do in opposing the section is send a clear message on the issue. We are only making a recommendation because we cannot change a Finance Bill. We are recommending that the Government rethink this measure. I accept that the Minister relented somewhat by allowing the credit to be transferred between parents if one parent could not avail of it, but why not allow it to be shared? Why not operate on the basis of trust and the assumption that the citizen is honest? By all means, review cases, but this change to the tax code will result in many unintended consequences. The Minister has been very clear in his statement that this is a tax measure, but the social consequences of any new tax measure must be taken into account. It is not simply about balancing the books but also about the effect of a measure on those to whom it applies.

I ask the Minister, even at this very late stage, to examine the submissions he received from one-parent family groups and others, some of which have not received a response from the Department. We will trenchantly oppose this change and I ask those Senators opposite who are concerned to stand up on this issue. I urge them to make the recommendation that the change being proposed is not acceptable and must be reconsidered. Perhaps the Minister might meet us halfway and commit to not initiating the change until it has been fully reviewed and any possible alternative to it examined. I urge him not to make this change on 1 January when the Revenue Commissioners are probably going to write to all of those parents in receipt of child benefit, having taken this as proof that they are the primary parent.

In 99% of cases, it will be the mother. It does not recognise shared-parenting responsibilities, however. In many instances, unfortunately, separations are not amicable. Senator van Turnhout pointed out rightly that children can be used as pawns in separation cases. This is going to exacerbate the existing problems in this area. At this late stage, the Minister should hold off on making this change and consult further on it.

This is an issue that has caused concern. The 100-days requirement is an encroachment a little too far in my opinion. If the tax credit is ceded to the other partner, in all likelihood they will achieve residency of 100 days or more. Then, we will have Revenue checking how this is done. That is not prudent.

Is there a calculation of the cost to the Exchequer of the second and subsequent credits in question? Some choose to ignore the fact that tax credits or breaks are moneys foregone to the Exchequer. There are occasions when the actual cost of a tax credit is not sufficient in terms of its social cost.

I agree with the Minister on the point that non-separated families do not have any child tax credit. This credit has been established and some people have become accustomed to it, people who are using it to stay treading water. When people separate, financially they go into a different space. What is the cost of this tax credit? If it is not significant, maybe there are grounds to question the advancing of this measure. Will the Minister conduct a significant analysis of this measure over the next several months for next year’s finance Bill?

While I thank the Minister for his clarification that the person’s word on the 100-days residency requirement will be taken by the Revenue Commissioners, I still believe it should not be in the Bill. The Minister has explained the logic from the financial point of view. From a social point of view, it is an absolute disaster and a kick in the teeth for separated fathers. Let us call a spade a spade.

When I separated, that €1,650 single-person child carer credit kept food on the table for my children. Separated fathers cannot get social housing. I have met fathers whose children have had to smuggle them Christmas dinner from the family house as they sit in a cold flat at Christmas.

We discussed the role of women in politics and in the home one weekend recently at the Constitutional Convention. It is time for change but we must recalibrate the role of fathers in the family, particularly separated families. They are treated like dirt now. I accept the removal of this credit is a financial measure. Those officials working on the finances of the budget must not consider social issues as such. That does not mean they are callous but the measure is.

The Minister recognises there is a role for fathers, as he was amenable to an earlier amendment on this measure which went as far as he could go. Senator Darragh O’Brien is correct that this area is complex and, accordingly, needs to be considered more deeply from a societal point of view. Will the Minister consider, just as a concession, reducing the 100-days requirement? Will he look at it on Report Stage and see what can be done with it? I do not want conflict on this and I understand the Minister is trying to square a circle here.

This issue was raised by several Members on Second Stage. We all understand the valid policy reasons given for the change to this credit and I thank the Minister for clarifying the 100-days issues. Senator Jim D’Arcy first asked if this measure would be looked at again and I raised it with the Minister in October. We all welcome the amendment to allow the relinquishing of the credit by the primary carer in cases, which greatly improves the measure. However, as others have said, the 100-days requirement comes across as a clumsy compromise. I agree with Senator Jim D’Arcy that the underlying theme of this provision is based on an outdated model of parenting, that the primary carer and the breadwinner are still divided along gender lines, namely the former is a woman, the latter, a man. As the Constitutional Convention found in its debates on the provisions on women in the home in the Constitution, it is a flawed model when so many couples are share-parenting, even in separation and divorce, and that both partners often work outside the home.

Yesterday on the conclusion of Second Stage, the Minister of State, Deputy Brian Hayes, spoke about perhaps reviewing how this provision works. We may find it is hard to work it. The Minister’s earlier amendment will resolve matters for many separated couples, allowing them to work it out between themselves. There may still be some issues around the 100 days, however.

I have concerns about that, which are shared by others.

I thank the Senators for continuing with this debate and the very good points that have been made. Senator Michael D'Arcy would like to know the costs. The Revenue Commissioners estimate that in 2013 the one-parent family tax credit will cost approximately €127 million. The Revenue Commissioners also estimate that the yield from replacing the one-parent family tax credit with the single person child carer tax credit from 1 January 2014 will be €18 million in 2014 and €25 million in a full year. I am further advised by the Revenue Commissioners that the expected yield will be reduced to €16 million in 2014 and €22.5 million in a full year as a result of the amendment to this section which I brought forward to the committee.

One person's tax credit is another person's tax liability. There are no free tax credits. Do the Senators think it is fair that all those couples with children who get no tax credit should pay extra tax to give two tax credits to the children of the people in the circumstances we have been discussing or would they agree with the advice of the Commission on Taxation that one tax credit would be more appropriate than two? I am of the view that one tax credit is more appropriate than two, but Senator Jim D'Arcy in particular - but also the public debate - made a reasonable case that if the primary carer could not avail of the tax credit it should be transferable to the other parent by arrangement or by law so the principle of one tax credit in each case would be applicable and that no family would be completely deprived of the tax credit. Senator Jim D'Arcy privately made that point very strongly to me and he was right. It improved the situation very much.

The question of the 100 days is obviously providing a difficulty to some Senators. The primary carer has the first right to the tax credit and if he or she claims it there is no transfer. In circumstances where the primary carer is not claiming it, it is transferred. To be the primary carer that person would need to have care of the child for half the year, six months. The 100 days to be the other carer is approximately half of the other six months. The reason for it, as advised by the Revenue, is to prevent multiple claims because if one had a shorter period of time one could end up with two or three further claimants, depending on how one pitches it. The Revenue Commissioners will apply their customer code to this, as they do to everything else, and will presume the honesty of the applicant. If one applicant applies for this and no other credit is being paid in respect of that situation, he or she will receive it. If there is a second claimant, they will need some test of who should get the credit. If there is a second or third claimant, somebody will have to bring forward proof of the 100 days. It is a very exceptional circumstance and I would not see it arising except in very limited cases.

This does not apply just to fathers. Fathers or mothers are not mentioned in law. This could apply equally to a grandparent or a sister's or brother's family. As originally constructed, the test was caring for the child for at least one night of the year. This is why three tax credits were frequently awarded and more than that in exceptional circumstances. The Revenue has records of this. We are making a change that has consequences for people but now that we have amended it, it is a fair change. If the 100 days causes difficulty in practice I will go back to the Houses of the Oireachtas and change it because I have been impressed by the Senators' arguments.

I thank the Minister for listening and for his amendment. Could I clarify something? It is stated that somebody who relinquishes his or her claim to that credit can pass it on to the secondary claimant. Can a person who has a tax liability transfer the credit?

Originally it was said that the primary carer could transfer it if he or she had no tax liability. This is significant that the tax credit can be transferred even if the primary carer has a tax liability. Where by agreement that can happen-----

If one partner was at the higher marginal rate of tax the tax benefit might be worth more in one person's hands rather than the other.

That will cost the Revenue a few bob.

That is not the issue.

I am glad to hear that. It is significant. I thank the Minister.

The purpose of the credit when it was introduced was never to allay the expenses of having a second home but to allow a person caring for a child the possibility of returning to work. It was a job activation measure and it was principally to give the woman looking after the children the opportunity to get back to work. It was on that basis that the Commission on Taxation adjudicated and advised on it.

I welcome the fact that the Minister has listened and given this very small concession. This is not a political thing because it is too important. What happens in January? The Revenue and the Department of Finance will select the primary parent based on-----

That is not right.

I asked, but I probably was not clear-----

Self assessment.

So that will have to be returned to Revenue. Anybody who receives a payment-----

There is no question of the Revenue or the Department of Finance interfering in family arrangements. In normal circumstances it is self-evident who the primary carer is because that person looks after the child for more than half the year. If there is contention about this, the first marker the Revenue will use is who receives the child benefit because that marker will have been used previously by the Department of Social Protection in paying child benefit.

I thank the Minister for listening to the arguments and giving a commitment that if practical difficulties arise he will return to both Houses of the Oireachtas.

I thank the Minister for that very clear and full reply and for that commitment to examine how it operates in practice. That is very helpful to hear. I also thank him for setting out the practical detail of how the Revenue will operate this. That is also helpful.

Recommendation, by leave, withdrawn.

I move recommendation No. 7:

In page 20, between lines 29 and 30, to insert the following:

“(5) Where a primary carer has insufficient income to avail in full of the single person childcare credit the other parent may avail of the full or unused amount of the credit, on condition that the other parent has met any court ordered maintenance payments.”.

The Minister made an amendment in the Dáil and he has outlined that clearly here. We are only tabling these recommendations on the basis that it is a given that he is proceeding with these changes anyway.

The basis of the recommendation is to soften the blow somewhat and I want to be very clear that it does not in any way provide support for the change being made by the Minister. This is a backstop whereby changes are being made and we want to soften the blow. The recommendation states that where a primary carer has insufficient income to avail in full of the single person child carer credit the other parent may avail of the full or unused amount of the credit on condition the other parent has met any court order maintenance payments. The Minister has stated clearly with the change that if a person is working from home and cannot claim the tax credit it can be transferred in full. Will a balance transfer be allowed if it cannot be claimed in full? We are asking that if someone cannot claim the full credit the residual amount should go to the other parent.

Senators, including Senator O'Brien, propose that rather than requiring a person making a claim for the single person child carer credit as a secondary claimant to demonstrate he or she is involved in the actual care of the child, adhering to the terms of a court order maintenance agreement would be sufficient. The intent of the legislation is to provide a support for those single persons who have the additional responsibility of caring for a child while in employment. The credit is not granted simply on the basis a claimant is obliged to provide financial maintenance for a child but rather where the adult is involved in the care of the child.

Existing tax legislation does not provide tax relief for the element of a maintenance agreement on divorce or separation of parents which specifically refers to support for children. All parents have an equal responsibility to provide financial support for these children. Parents in families are not granted a tax credit where they must bear a similar cost. The Senators further propose partial relief should be possible in circumstances where the primary carer does not fully utilise the credit. There are clear administrative difficulties in circumstances where the credit being granted to one person is determined by reference to the tax situation of another independent person. To provide such a division of a credit would probably expose the Revenue to have to indicate in some fashion the confidential detail of another person's financial circumstances. I introduced an amendment on Committee Stage in the Dáil which provides for the circumstances whereby the secondary carer can claim the single person child carer credit and for this reason I must oppose the Senator's recommendation.

I thank the Minister for his response. This is a reasonable recommendation. I do not take the point about disclosure of private information. I intend to push the recommendation. In fairness, the Minister has gone some way to allowing the credit to be transferred should someone not be able to avail of it. We state there will be instances where the credit cannot be used in full and the recommendation asks for the residual amount to be transferred. The Minister is rejecting it so I will push it.

It would be possible for a separated couple to make a financial arrangement which would have the same effect. To enshrine it in law would impose very big data problems on the Revenue Commissioners. If a couple was not amicably separated to make provision in law that one person's tax circumstances should be revealed would create a big difficulty.

Recommendation put:
The Committee divided: Tá, 14; Níl, 26.

  • Barrett, Sean D.
  • Byrne, Thomas.
  • Cullinane, David.
  • Leyden, Terry.
  • MacSharry, Marc.
  • Mooney, Paschal.
  • Ó Clochartaigh, Trevor.
  • Ó Domhnaill, Brian.
  • O'Brien, Darragh.
  • O'Donovan, Denis.
  • Power, Averil.
  • Reilly, Kathryn.
  • van Turnhout, Jillian.
  • Wilson, Diarmuid.

Níl

  • Bacik, Ivana.
  • Brennan, Terry.
  • Burke, Colm.
  • Clune, Deirdre.
  • Coghlan, Eamonn.
  • Comiskey, Michael.
  • Conway, Martin.
  • Cummins, Maurice.
  • D'Arcy, Jim.
  • D'Arcy, Michael.
  • Gilroy, John.
  • Hayden, Aideen.
  • Higgins, Lorraine.
  • Keane, Cáit.
  • Kelly, John.
  • Landy, Denis.
  • Mac Conghail, Fiach.
  • Moran, Mary.
  • Mulcahy, Tony.
  • Mullins, Michael.
  • Naughton, Hildegarde.
  • Noone, Catherine.
  • O'Keeffe, Susan.
  • O'Neill, Pat.
  • Sheahan, Tom.
  • Zappone, Katherine.
Tellers: Tá, Senators Averil Power and Diarmuid Wilson; Níl, Senators Aideen Hayden and Michael Mullins.
Recommendation declared lost.

I move recommendation No. 8:

In page 20, between lines 29 and 30, to insert the following:

"(5) Where a primary claimant marries and is no longer a single carer, and where the secondary claimant continues to share the parenting of his or her child, that secondary claimant shall be entitled to the single person child carer credit in full.".

I am seeking in the recommendation that where a primary claimant marries and is no longer a single carer, and where the secondary claimant continues to share the parenting of his or her child, the secondary claimant shall be entitled to the single person child carer credit in full. Where there has been a separation and someone remarries, the other parent then becomes what the Minister terms the primary parent, but will get the child carer credit in full, as the other couple are now married.

There are such situations where people separate and enter a new partnership or marriage. This recommendation would allow the other parent to claim the single person child carer credit in full. All of the recommendations we have tabled to section 7 do not support in any way the changes the Minister is making; they are trying to improve a bad situation.

I understand the Senators propose that in circumstances where a primary claimant has no entitlement to the restructured tax credit because he or she has married or entered into a civil partnership or a cohabiting relationship, the secondary claimant would have full entitlement to the tax credit. It is intended that the restructured credit will be an activation measure and it is designed to be an in-work benefit to support single individuals who are the primary carers to take up or remain in employment. It will assist single parents or carers with the cost of child care.

Given the difficult fiscal environment, it is essential to review all tax reliefs, credits and incentives to ensure they are properly targeted and, if necessary, refocused to achieve the social economic objectives set for them. A system which allows multiple claims in respect of the same child is unsustainable and not in keeping with the original and current intention of the credit. For this reason, I have refocused the tax credit for the benefit of those single individuals who care for a qualifying child for the whole or a greater part of the year. However, where the child is part of the family unit and care is provided by two adults together, whether married, civil partners or cohabiting, clearly since the primary claimant will no longer satisfy the basic qualifying criterion of being a single person caring for a child, there is no entitlement to a tax credit. Therefore, the issue of granting the credit to a secondary claimant for whom the basic requirement is that a qualifying child reside with him or her for a minimum of 100 days in the year does not arise. The credit is only available to a secondary claimant by virtue of relinquishment by the primary claimant who has established his or her entitlement to the credit in the first instance. I must, therefore, reject the Senators' recommendation.

It is unfortunate because the situations I have outlined will happen. It will remove the father further in most instances. By way of example, if the mother remarries, enters a civil partnership or cohabits, the child will be seen as being cared for by two adults. The inference is that the father has nothing to do with the upbringing of the child. He is still separated and all of the matters we have brought to the attention of the Minister are still valid.

Does the Minister wish to comment?

I have nothing to add.

Recommendation put:
The Committee divided: Tá, 16; Níl, 26.

  • Barrett, Sean D.
  • Byrne, Thomas.
  • Cullinane, David.
  • Daly, Mark.
  • Leyden, Terry.
  • Mac Conghail, Fiach.
  • MacSharry, Marc.
  • Mooney, Paschal.
  • Mullen, Rónán.
  • Ó Clochartaigh, Trevor.
  • Ó Domhnaill, Brian.
  • O'Brien, Darragh.
  • Power, Averil.
  • Reilly, Kathryn.
  • van Turnhout, Jillian.
  • Wilson, Diarmuid.

Níl

  • Bacik, Ivana.
  • Brennan, Terry.
  • Burke, Colm.
  • Clune, Deirdre.
  • Coghlan, Eamonn.
  • Coghlan, Paul.
  • Comiskey, Michael.
  • Conway, Martin.
  • Cummins, Maurice.
  • D'Arcy, Jim.
  • D'Arcy, Michael.
  • Gilroy, John.
  • Hayden, Aideen.
  • Higgins, Lorraine.
  • Keane, Cáit.
  • Kelly, John.
  • Landy, Denis.
  • Moran, Mary.
  • Mulcahy, Tony.
  • Mullins, Michael.
  • Naughton, Hildegarde.
  • Noone, Catherine.
  • O'Keeffe, Susan.
  • O'Neill, Pat.
  • Sheahan, Tom.
  • Zappone, Katherine.
Tellers: Tá, Senators Averil Power and Diarmuid Wilson; Níl, Senators Paul Coghlan and Aideen Hayden.
Recommendation declared lost.

Recommendation No. 9 has been ruled out of order.

Recommendation No. 9 not moved.
Question proposed: "That section 7 stand part of the Bill."

Senator O'Brien mentioned earlier that many recommendations put forward today on the section would show that while we were in no way in agreement with the section, they attempted to make it better. Recommendations are not being accepted; recommendation No. 9 has been ruled out of order because it is apparently in conflict with the principle of the Bill but it would have put the provisions of the section subject to a ministerial commencement order. If accepted, the provisions of the section would not have come into effect until a report on the effect of the section was prepared and laid before the Oireachtas. Only a few minutes ago the Minister indicated that if there was any difficulty in the practical application of the tax credit he would change the process. Would it not be better to pre-empt any difficulties and include a commencement order? A report could be done on the effects. We fully agree with the Minister's statement that there were flaws in the tax credit system but making the changes in the section is akin to throwing out the baby with the bath water. That is why we will oppose the section.

I welcome the Minister's commitment to consider the impact of the 100-day requirement if there are negative consequences. I stand in support of Senator Reilly in opposing the section. She has made a very good case about having a commencement order in order to allow a report on the impact of the section to be prepared, and if that happened I would not necessarily oppose the section. Perhaps we could look to other countries and consider how they handle this type of issue.

I will speak very briefly to the Dutch system of benefits related to children. It has two payments, one of which is child benefit and one of which is kindgebonden, an extra benefit for low-income families. Their model involves co-parenting. As an aside, we should examine our use of language, as we speak of "primary" and "secondary" carers, which gives the impression of a hierarchy. The Dutch social insurance system, SVB, considers court rulings, parenting plans and written agreements between parents that states how child benefit is to be divided. If it is not clear where a child lives, the SVB divides the amount in half. The kindgebonden is referred to as a child budget, and it is similar to what we are considering now. The Dutch ask the parents to consider how they are dividing the sum involved, keeping in mind that the person with the lower income would usually get higher child benefit.

There are other models for us to consider. I understand what the Minister is trying to achieve and I take him at his word about the 100-day ruling. My difficulty is in how we could put a system in place with such a provision without consideration of the potential impact. Recommendation No. 9 has been ruled out of order but it sought a ministerial commencement order, and it would have been a compromise that I could support. That is why I stand in support of the Senator opposing the section.

We will also oppose the section. As I indicated at the outset, we consider this change to be incredibly regressive and we are very disappointed that none of the recommendations tabled by Members on different sides of the House has been accepted this afternoon. The Minister indicated at the start of his contribution that he accepts the principle that it is more expensive for people to maintain two separate homes when separated or divorced on the same income as they had when they maintained one home. Nevertheless, the Minister is pushing ahead with provisions that will make it next to impossible for some families to provide their children with proper quality of life. As my colleague, Senator O'Brien, mentioned earlier, people will have to go through unnecessary court cases to unpick maintenance agreements that were very carefully calculated in the first place. Families may have hoped to move on in making those provisions and looked to focus on doing what was right for their children but now they will end up back in court, with all the costs coming from that. Parents will be unnecessarily forced to take social welfare and overall family income will be pushed down. It is a completely misguided and unjust effort so we will be opposing the section.

My colleague, Senator Power, and I have tried to outline why we oppose the section. We have supported other sections of the Bill so it is not a case of our opposing this for the sake of it. I am disappointed that none of the recommendations, from all sides and parties, including the Independents, has been accepted. They were well thought out. I give a guarded welcome to the Minister's commitment that if there is a difficulty in this process, he will seek a review. Who will flag those difficulties? If the Bill is passed today, there will be no further change to the legislation. Once it is done, it will not be undone.

Senator van Turnhout mentioned the Dutch model for co-parenting in the Netherlands, and there is no reason that cannot be done here. In a response to a question earlier, the Minister indicated that he saw difficulties with the sharing of other people's financial and personal information. The process works very well in the Netherlands so I wonder if the Minister is using an excuse. He was clear in his contribution earlier that he sees this as a tax measure. The social impact of the measure he is introducing is something that the Government and Minister for Finance should consider.

The Minister directly asked Members earlier if they believed it fair that parents - be they married, co-habiting couples or those in civil partnerships - should pay extra tax to allow for this tax credit. I am married and I have a child and I would see it as fair to have to pay additional tax to support families that have broken up. There would be additional cost and we must ensure that children not being brought up in an ideal environment - the family environment where most of us hope to be brought up, whatever the construction of the family - do not find it more difficult. The onus is on me as a citizen and taxpayer in this respect, as the purpose of tax is to pay for services for others who need them. Those of us who can afford to pay for that should do so. To answer the Minister's question directly, it is fair for some to pay extra tax to allow for this credit.

The measures being brought through in section 7 are unfair and will have a social consequence. I was very struck by Senator Jim D'Arcy's contribution earlier on what many of us believe is the position of single fathers in particular in Irish society. There is no question that most single fathers in relationships that have broken up feel like a second class parent. I have friends who are separated and divorced but I also know this from representations I have received.

In what he is doing the Minister is copperfastening that parent as a second-class parent. He continues to emphasise the primary parent and the primary carer. He is creating a hierarchy of parents and parenting, whereby one parent is more important than the other. That is the implication of these changes. I am sure that is not what he wants to do and know it is not what my colleagues who will shortly vote on these changes want to do. I again put it to my colleagues on the Government side that this is an opportunity for the Seanad to make a recommendation. It would send a clear signal that it has listened.

Members will agree that Barnardos, Treoir and One Family are three agencies that are the experts in this area. All three are completely opposed to these changes. They, like me and my party, agree that changes and reform are required. However, is it a question of the Government being right and all the experts such as the agencies I mentioned being wrong and their concerns about the changes brought forward by the Minister being irrelevant? The Government is all-powerful and all-knowing; therefore, any independent advice and opinion given to it by the expert agencies is simply to be set aside and ignored.

We have had a good debate on this section and I thank the Minister for his open contribution to it and responding to the questions we have asked, but that does not get around the fundamental fact of what Members are doing in voting to support section 7. All of the negative impacts that others and I have mentioned will come to pass. Maintenance orders will be unpicked; maintenance agreements reached in the family courts will not be met and people who depend on this tax credit to look after their children and travel to see them will not be able to do so. It is an anti-family and certainly an anti-child measure. For that reason, it should be trenchantly opposed.

Progress reported; Committee to sit again.