Seanad Éireann debate -
Tuesday, 12 Dec 2017

Vol. 255 No. 1

Finance Bill 2017 [Certified Money Bill]: Report and Final Stages

Acting Chairman (Senator Gerry Horkan)

Before we commence, I remind Senators that a Senator may speak only once on Report Stage except for the proposer of a recommendation who may reply to the discussion on the recommendation. On Report Stage each recommendation must be seconded.

I welcome the Minister of State at the Department of Finance, Deputy D'Arcy, back to the House.

Recommendation No. 1 in the names of Senators Higgins and Nash has been ruled out of order because it does not arise from Committee proceedings and involves a potential charge on the Exchequer.

Recommendation No. 1 not moved.

Senator Colette Kelleher

I move recommendation No. 2:

In page 88, line 3, to delete “Dáil Éireann” and substitute “both Houses of the Oireachtas”.

Senator Lynn Ruane

I second the recommendation.

Senator Colette Kelleher

This recommendation is simple. It proposes that the promised report on a vacant and derelict property tax be laid before both Houses of the Oireachtas and not just Dáil Éireann. As a matter of good practice when reports like this are produced they should be presented to all Members of the Oireachtas.

Senators may remember that in February last I seconded the Derelict and Vacant Sites Bill as proposed by my Civil Engagement group and Green Party colleague, Senator Grace O'Sullivan. That Bill sought to bring forward such a measure. It is well recognised and well rehearsed that we are in the midst of a catastrophic housing crisis. Nationwide there are families living in bed and breakfast accommodation and in hubs, and young people sofa surfing. There are men and women who have spent all of their adult lives in homeless hostels or emergency shelters and these have become the only homes that such women and men know. At the end of October 2017, there were 8,374 men, women and children in emergency accommodation across the country. Rough sleeping in Cork increased ninefold in the four years from 2011 to 2015, from 38 to 345 people.

This extraordinary housing crisis requires an extraordinary response and it is good to see that we are getting a report on a tax on vacant property and I hope that such a measure is introduced. It is sensible policy interventions like this that will change how land owners view and treat vacant property. The 2016 census revealed that we have 198,358 vacant housing units, excluding holiday homes and derelict buildings. I live very close to the city centre in Cork and the only use of vacant and derelict sites that I see is of doorways where people bed down in desperation on wet and windy nights, such as those we have had in the past week. It is not good enough that we have homes, houses and offices empty when people are dying outside. Last Thursday a woman died at the back of a hotel in Cork city. She was 42 years old. I went to her funeral on Saturday. It was a tragic, pitiful and preventable affair. The Government needs to take this seriously, not just for Christmas or because we have people singing outside. That woman's aunt died on the streets a number of years ago and her cousin, whom I met and know, a woman who is the same age as my own daughter, is in a pitiful state.

We need to get every action we can possibly think of under way and the Vacant and Derelict Sites Bill, which we proposed in February, is a contribution to that. I would very much like to see the report on the effectiveness of the Government's tax proposal that is due to be laid before the Dáil being laid before Seanad Éireann too. The town I grew up in, Macroom in County Cork, has 210 vacant properties according to the 2016 census. That is a huge number of properties in such a small town. It would reinvigorate a small town like Macroom to have people living over the shops like I did when I was growing up. These 210 houses could be homes for people waiting on the social housing waiting list. Given the work and the concern in Seanad Éireann around this issue, it is important that this recommendation is passed and that the report on a tax on vacant residential property is debated in this House.

Senator Máire Devine

The Minister's report on a vacant home tax should be laid before both Houses of the Oireachtas and I do not see why it would not be. This morning, along with members of the Joint Committee on Children and Youth Affairs, I visited a recently established family hub in Crumlin.

I cannot help but wonder how many fewer hubs we would need if a vacant home tax was implemented? While the hubs are an improvement on bed and breakfast accommodation, they are not homes. It is bizarre that, having rejected an amendment tabled by Sinn Féin on Committee Stage in the Dáil, the Minister tabled a replica amendment on Report Stage. Presenting a report is to be welcomed.

A vacant home tax could be part of the solution, if implemented correctly. Deputy Eoin Ó Broin has produced a strategy which looks at this issue and makes many proposals. In summary, to maximise the return of vacant units, incentives are required by those who need assistance to return their properties to active use, as well as penalties for those who willfully leave properties empty. We should introduce a second home property tax exemption for owners who bring their homes back to active use. Local authorities should receive a new homes bonus equivalent to the annual second home property tax yield after the first two years, if houses are returned to active use. The funding could be added to local authorities's discretionary spend and it would cost the Exchequer an average of €6 million, making a total of €36 million during a seven year period. This cost could be offset against the current expenditure budget allocations to the Department of Housing, Planning and Local Government and thus be revenue neutral. One could introduce a vacant home tax which would be applicable to properties which have been vacant for more than six months, as determined by the local authorities based on the high level of vacancies and housing need in their areas. Obviously, there would be exemptions. The issue is why are we only looking at the presentation of a report instead of implementing a tax this year, as a year will be wasted. I hope next year we will see results, not reports.

Acting Chairman (Senator Gerry Horkan)

My understanding is the recommendation proposes to delete the words "Dail Éireann" and substitute "both Houses of the Oireachtas".

Minister of State at the Department of Finance (Deputy Michael D'Arcy)

Section 85 is intended to provide for a detailed exploration of the key issues in the implementation of a vacant property tax to be reported on within nine months of the passing of the Finance Bill. This period should allow sufficient time to collect and analyse the relevant information. Importantly, the report should be completed in time for consideration in advance of budget 2019. The aim of the section is to provide that a report on vacant home taxation will be published and publicly available within nine months of the enactment of the Finance Bill. Laying it before the Dáil will achieve that purpose. On that basis, I do not propose to support the recommendation. There is no intention on my part to be disrespectful to the Seanad. As I indicated, the objective of the text of the section is to provide for publication of the report within the nine months. Section 1 of the Finance Act 2010 provides a precedent in that regard, as it called on the Minister for Finance to lay before Dáil Éireann a report on tax expenditures. The objective of the report will be to report on the analysis made, but some have to understand that if the analysis states it is a good idea, we will be trying to influence people to make a vacant property available for either letting or sale. What a vacant home tax is not going to do is to put such a hideous price on it that people will be forced to do it because that would neither be reasonable nor fair. It would also not stand up to scrutiny.

Senator Kieran O'Donnell

On the section, it is important, when the report is presented to the Minister for Housing, Planning and Local Government who will forward it to the Minister for Finance, that it be complete. It is extremely important that there be some review of the resources available to the local authorities to combine vacant site lists.

It is not a straightforward procedure. Senator Kelleher referred to the census, which is a kind of marker document. We need to get down to detail. The ultimate objective here is to find a mechanism whereby we ensure sites can be identified and taken up for primary residential purposes. There is a view that some of the more appropriate sites have not been identified. Some sites are not suitable. It is important for us to be certain that the local authorities have the necessary resources and skill sets to be able to compile a register.

Senator Colette Kelleher

I am disappointed by the lack of urgency I am hearing from the Minister of State. At a time when people are perishing on the streets because they do not have access to houses, we are talking about a report on a tax, rather than something that will bring properties into use. I am disappointed that the Minister of State does not seem to consider it important to bring the report in question to the Seanad. We have an absolute knowledge of and interest in this issue. We have been a source of pressure and knowledge with respect to housing. I am asking the Minister of State, as a small gesture on his part, to recognise the work we do on this matter by agreeing to bring the report back to this House as well.

Senator Kieran O'Donnell

Surely the Seanad can debate the report when it is published.

Recommendation put and declared lost.

Senator Alice-Mary Higgins

I move recommendation No. 3:

In page 88, between lines 6 and 7, to insert the following:

"86. The Minister for Finance shall ensure that Budget 2019 is gender and equality proofed and accompanied by an Equality Statement.".

Senator Lynn Ruane

I second the recommendation.

Senator Alice-Mary Higgins

This recommendation relates to the potential for ensuring budget 2019 is gender-proofed, equality-proofed and accompanied by an equality statement. I recognise that progress has been made in this area. I am making this proposal again now because we did not have an opportunity to debate it fully on Committee Stage. I am disappointed that budget 2018 does not deliver on the Government's commitment, as set out in the programme for Government, to gender-proofing, equality-proofing and accompanying equality statements. I hope the Minister of State will assure me that we will have equality-proofing and gender-proofing of budget 2019.

I have read a document that was produced on 10 December last in Scotland. This intensive and detailed analysis makes the most of equality and human rights levers and looks at the draft budget for 2018-2019. On the same day that the budget is published there, an equality statement is produced that indicates how equality issues have been considered in the budgetary decisions on how the State's finances are to be directed and gathered in the year ahead.

I welcome the publication of the Minister's policy paper, Equality Budgeting: Proposed Next Steps in Ireland. It is a very constructive document. I acknowledge that officials in the Department of Public Expenditure and Reform have worked and are working on this area. I think the policy paper is positive. I hope the Minister of State will give us an indication of how he envisages that the policy paper and its recommendations will be put into practice over the year ahead as we consider and evaluate budget 2018 and prepare for budget 2019. I believe the potential exists for a focused approach to equality budgeting in the 2019 budgetary cycle.

A couple of issues were highlighted in the Department's own policy paper or staff working paper.

The first is the importance of having data disaggregated by gender available to Departments. I have asked the Minister to explain how he intends to ensure these data gaps are addressed. A second issue highlighted in the paper was the need for Departments to set specific and measurable objectives on how they can achieve equality in their respective areas and link this to the tracking of the budget and proposals for budget 2019.

I urge the Minister to ensure the gender and equality pilot programme is advanced across as many Departments as possible. I ask the Minister of State to indicate the number of Departments in which the pilot project will be advanced in the coming year. The Department of Public Expenditure and Reform must provide sufficient resources and capacity to Departments to drive forward the process of gender budgeting.

My final appeal relates to a highly constructive approach that does not yet feature in the staff working paper. In Scotland, the equality budget advisory group, or EBAG as it is known, is a key pillar in the budgetary process. It means that an advisory group with expert advisers, including representatives of women's organisations, equality bodies and key academics, works alongside the relevant committee and the Department and its officials. Is the Minister considering the introduction of a similar advisory group as part of the equality budgeting process?

Senator Máire Devine

I am disappointed that the recommendation on tax relief for trade union subscriptions has been ruled out of order. The ruling is unfortunate as trade unions are the only bodies which defend workers' rights across the globe.

I support the recommendation on gender and equality proofing and recognise that significant progress has been made on this front. I note the equality budgeting campaign has been wound up and is happy to hand over the reins of equality budgeting to the Irish Human Rights and Equality Commission, which is tasked in the programme for Government with implementing equality budgeting. Sinn Féin first placed this issue on the agenda in a Private Members' motion tabled in 2013 and unfortunately rejected at the time. I echo the call made by Senator Alice-Mary Higgins to replicate the Scottish model of good practice for equality budgeting. We could learn from some of the ideas and policies being pursued in Scotland. We cannot rest on our laurels. I support the recommendation.

Deputy Michael D'Arcy

A Programme for a Partnership Government contains a commitment to develop the process of budget and policy proofing as a means of advancing equality, reducing poverty and strengthening economic and social rights. It also includes a commitment to ensure the institutional arrangements are in place to support equality and gender proofing in key Departments and the independent fiscal and budget office. I am pleased to advise that several initiatives have been undertaken for this year's budget to progress this commitment, including a range of analysis that has been published as part of this year's budget documentation.

Annex A of the budget book presents information illustrating the effect of the budget measures on different examples of income earners and household types across a range of income levels. It also contains tables showing the development over time of the average effective tax rate for different household types across a range of incomes from a variety of sources.

Annex B of the budget book, Income Tax and Progressivity Issues, analyses the role the income tax system plays in the distribution of income, an important factor in assessing the fairness of budgetary policy.

As is customary following each budget, the Department of Employment Affairs and Social Protection will shortly publish a social impact assessment of the budget. This will use the SWITCH model to consider the impact of budget 2018 on households across the income distribution and present its overall distributional impact by income group and family type. It will also examine the impact of the budget on the "at risk of poverty" rate and work incentives. The social impact assessment is being completed in consultation with the Department in respect of the income tax elements of the budget.

The social impact assessment framework developed by the Department of Public Expenditure and Reform to facilitate a more comprehensive assessment of budgetary policies on household living standards is described in the paper, Equality Budgeting: Proposed Next Steps in Ireland, which is also published on the budget website. This framework will complement the established social impact assessment carried out by the Department of Employment Affairs and Social Protection.

The framework focuses on policy areas that cannot be incorporated easily into the existing SWITCH model, specifically the impacts of public expenditure on recipient households. It also outlines the pilot approach taken to gender budgeting adopted for this budgetary cycle. I acknowledge that budget and policy proofing is an important means of advocating for and advancing equality, reducing poverty and strengthening economic rights, but I am also cognisant of policies and strategies being developed across the Civil Service, which work informs the policy options advanced. I know, for example, that my Department is represented on the group which is considering the national strategy for women and girls for the period 2017 to 2020 which is underpinned by the societal values of equality, non-discrimination, inclusiveness, generosity, intersectionality, diversity and respect for human rights. I will ask officials in the Department how these issues might best be addressed in the context of next year’s budget. Therefore, I do not plan to accept the recommendation.

Acting Chairman (Senator Gerry Horkan)

Senator Colm Burke has indicated that he wishes to come in. I will then bring in Senator Alice-Mary Higgins to conclude.

Senator Colm Burke

On section 85, it is welcome that we are talking about having a report presented within nine months.

It is slightly off the issue, but I refer to the tax rebate that will be available to those who buy property for development. The rate of stamp duty is 6%, but they will be entitled to a refund, bringing the rate back down to 2%, if the property is developed within a specified period. Will this apply to individuals who buy a site to build a single dwelling house? Will they be entitled to a refund of stamp duty? I have raised the issue before, but I am still not clear on whether an individual who buys a site and obtains planning permission to build on it will be entitled to the refund of 4%. I would be grateful if the position could be clarified.

Acting Chairman (Senator Gerry Horkan)

I will allow the Minister of State to clarify the issue. I will then call Senator Alice-Mary Higgins.

Deputy Michael D'Arcy

Yes, it does. The rebate of 4% applies if the property lies within a curtilage of one acre.

Senator Alice-Mary Higgins

I welcome the recognition of the SWITCH model which has been used to date. While it captures the distributive effects, it misses many other social impacts, as we have been flagging. I know that it has been flagged by the community and voluntary pillar to a significant extent. We need to look beyond the distributive effects and consider the social impacts. In terms of their assessment, has consideration been given to the micro-simulation model? For example, it took a long time to have a micro-simulation carried out on austerity measures introduced in Ireland. We were of the view that certain issues were not being captured in social impact assessments or under the SWITCH model. The micro-simulation process revealed certain measures had a disproportionate impact on women. For example, women who were part of a couple suffered a loss of 14% in their income, as against a figure of 9% loss by men during the period of the austerity measures. The process also provided an opportunity to dive into some of the causes and consider how they might be addressed.

I am happy not to press the recommendation. However, I hope that, in addition to introducing the new social impact assessment, the Minister of State will be able to indicate whether his Department is open to Senators engaging on the form the social impact assessment will take as there are many options available in order to make sure it will produce the information and data we need. That is very important because there are gaps in the data. In the end, it will come down to each Department identifying and tackling equality issues. This process has been successful in Scotland and it is interesting that equality budgeting is now considered to be part of the preventative spending process there. It is used to identify how money can be spent better to prevent costs from arising in the future because equality budgeting leads to better outcomes for all in society and more effective use of resources. There is an understanding and an intention in that regard.

I have a minor technical question. How many Departments does the Minister of State expect to pilot this initiative heading into the next budgetary cycle?

Can the Minister of State confirm that his Department is open to engaging further with the social impact assessment proposals?

Acting Chairman (Senator Gerry Horkan)

Senator Higgins must conclude.

Senator Alice-Mary Higgins

I will not press the recommendation.

Acting Chairman (Senator Gerry Horkan)

Is the Senator withdrawing it?

Senator Alice-Mary Higgins

I will withdraw it, but I would like a response first.

Acting Chairman (Senator Gerry Horkan)

The Minister of State cannot respond. The Senator concludes. The Minister of State is not entitled to respond. That is the procedure on this Stage, so I cannot let him respond at this point. Unfortunately, I have to ask the Senator if she is withdrawing her recommendation.

Senator Alice-Mary Higgins

I will withdraw my recommendation for now, but I will continue to press the issue.

Acting Chairman (Senator Gerry Horkan)

The Senator is not allowed to speak. At this point in time, the proposing Senator concludes this particular recommendation. They are the rules, which I am only implementing. Is it agreed that it be withdrawn?

Senator Alice-Mary Higgins

Yes.

Recommendation, by leave, withdrawn.

Senator Kieran O'Donnell

Can I speak to the section?

Acting Chairman (Senator Gerry Horkan)

Not at this stage. I am moving on to the next recommendation, which is-----

Senator Kieran O'Donnell

There is something I might have-----

Acting Chairman (Senator Gerry Horkan)

I am sure the Senator would have, but the rules are the rules. Recommendation No. 4 is in the name of Senators Higgins and O'Sullivan. It arises out of committee proceedings.

Senator Kieran O'Donnell

On a point of order-----

Acting Chairman (Senator Gerry Horkan)

I have to allow the point of order before I can then say it is not a point of order.

Senator Kieran O'Donnell

Can I make a point of order?

Acting Chairman (Senator Gerry Horkan)

The Senator can make a point of order, but it probably is not a point of order.

Senator Alice-Mary Higgins

Have we skipped a recommendation?

Acting Chairman (Senator Gerry Horkan)

No.

Senator Alice-Mary Higgins

I would like to clarify whether recommendation No. 2 was taken.

Acting Chairman (Senator Gerry Horkan)

Yes. It was defeated.

Senator Alice-Mary Higgins

That is the recommendation on tax treaties. Was the recommendation taken?

Acting Chairman (Senator Gerry Horkan)

That is the one we are about to address.

Senator Alice-Mary Higgins

Sorry, I have the recommendations in the order they were submitted. I will be very brief.

(Interruptions).

Senator Alice-Mary Higgins

I move recommendation No. 4:

In page 88, between lines 6 and 7, to insert the following:

“86. The Minister for Finance shall, within twelve months of the passing of this Act, prepare and lay before both Houses of the Oireachtas a review of Ireland’s trade tax treaties including an assessment of the role tax treaties might play in relation to the global achievement of the Sustainable Development Goals and recommendations as to areas for potential reform.”.

Senator Lynn Ruane

I second the recommendation.

Senator Alice-Mary Higgins

I am asking that within a year of the passing of this Bill, the Minister would prepare and lay before the Houses of the Oireachtas a review of Ireland's trade and tax treaties. This refers to our bilateral tax treaties. I ask that this would include an assessment of the role the tax treaties might be playing with regard to the global achievement of the sustainable development goals, and recommendations as to areas of particular reform. The specific issue that I am touching on is one that we do not focus on much. I know there has been much focus on Apple tax and wider issues, but this concerns Ireland's bilateral tax treaties specifically. I am concerned that in some of the tax treaties which Ireland has with developing countries, there are very low levels of withholding tax. I am concerned about how that may be impacting on the capacity of those countries to achieve sustainable development goals within their own territories, and how we might be effectively contributing to the denial of revenue to those countries.

If this review is undertaken, I would hope to ensure that companies which are registered in Ireland are made tax resident in Ireland without exception. There is a concern around companies that are registered in Ireland, but are not Irish tax-resident. That is the other side of the tax treaties, which affects our capacity to generate revenue and ensure that we can fulfil our sustainable development goals. In a new global context in which we have made new global commitments, I am asking what the plan is for reviewing our bilateral tax treaties to ensure that there is policy coherence between them and our other stated international and national goals.

Senator Máire Devine

The 2015 spill-over analysis, looking at how our affairs affect the developing world, is out of date. A new and, frankly, an improved one is needed. The recent Christian Aid report on this issue was very alarming, and it should act as a wake-up call. This is yet another issue damaging our reputation, and yet again we have a Government in denial about it. If history is any judge, the Government will get around to supporting this report, but not for a few years yet. That head-in-the-sand attitude must change. More generally, I hope that the report might look at why we insist on using the OECD model for tax treaties, when the UN model is considered fairer for developing countries.

I hope the Minister can accept the need for this report, including that issue.

Deputy Michael D'Arcy

The sustainable development goals were adopted in 2015 by 193 UN members, including Ireland, and consist of 17 high-level goals and 196 targets. While not legally binding, both developed and developing countries are expected to take ownership and establish national frameworks for achieving the goals by 2030. A senior officials group led by the Department of Communications, Climate Action and Environment has been set up to oversee Ireland's implementation of the goals.

Double taxation agreements are widely regarded as critical pieces of fiscal infrastructure for developing substantial bilateral trading and investment opportunities by reducing tax impediments that might otherwise deter cross-border activity. In order to ensure that Irish business remains competitive and that Ireland remains an attractive destination for foreign direct investment, we have been expanding our double taxation agreement network. The agreement with Kazakhstan will bring to 73 the number of double taxation agreements that Ireland will have ratified once this Bill is enacted.

Double taxation agreements are bilateral in nature. No country is obliged or required to enter into such an agreement. They are agreements willingly entered into with a view to facilitating greater trade and investment between two countries by the elimination of double taxation on such cross-border trade and investment. The BEPS multilateral instrument will amend Ireland's tax treaties to add anti-avoidance clauses to ensure that treaties cannot be used for aggressive tax planning. This Bill begins the process of implementing this instrument and I hope to complete ratification during 2018. In negotiations for tax treaties with developing countries, Ireland use provisions from both the OECD and UN models. Negotiations for tax treaties are always held on an equal footing between both countries. A key objective during treaty negotiations is to end up with a treaty that both parties are satisfied with.

We are one of only two countries to commission an independent and comprehensive spillover analysis of the impacts of our tax system and tax treaties on developing countries. This report, published two years ago, shows that there is very little likelihood of spillovers from the Irish tax system negatively impacting developing countries. Where two treaties dating from the 1970s were found to be restrictive, these have been renegotiated and amended.

Taking these factors into account, and in view of the oversight role held by the Department of Communications, Climate Action and Environment in regard to the sustainable development goals, I cannot accept the Senator's recommendation.

Senator Alice-Mary Higgins

I am aware of the spillover analysis that was done. I welcome it and the renegotiation of the treaties.

I was trying to highlight that the context has since changed. Since that analysis two years ago, we have had both, as the Minister of State mentioned correctly, the Paris targets which have been set and also our commitments under the sustainable development goals. Would it not have been possible for those issues, those commitments and those global targets to have been considered at the time of the previous analysis? It may be that next year is not the time, but I believe that we will need to look to revise that analysis in the medium term. That is something I hope we can revisit.

I note what Senator Devine said. It is important to mention that the OECD BEPS standards are not necessarily the gold standard because the UN has put forward standards also. Many advocacy groups which have worked in this area, including Christian Aid, Trócaire and Oxfam, have highlighted that the UN standards are perhaps more rigorous in terms of ensuring fair deals for developing countries.

I will not press the recommendation at this point. I merely note that while that spillover analysis was a positive measure, the time may be approaching when it may need to be done again if we are to ensure that we protect our international reputation and hold ourselves to the highest standards. The question of what are the highest standards is something we must keep under review.

Recommendation, by leave, withdrawn.

Senator Alice-Mary Higgins

I move recommendation No. 5:

In page 88, between lines 6 and 7, to insert the following:

"86. The Minister for Finance shall, within six months of the passing of this Act, prepare and lay before both Houses of the Oireachtas a report with recommendations as to-

(a) how Part 30 of the Principal Act might be amended to allow for replacement of the current marginal rate tax relief in respect of private pensions with a standard rate tax relief, and

(b) how Part 30 of the Principal Act might be amended to allow for replacement of the current marginal rate tax relief in respect of private pensions with a single rate tax relief of 30 per cent.".

Senator Lynn Ruane

I second the recommendation.

Senator Alice-Mary Higgins

This is the most crucial recommendation and, therefore, I would appreciate it if the Minister of State could indicate how he intends to tackle this issue. There has been extensive media coverage of the deep structural inequities within our contributory pension system, which ensure that those who have taken time to care for someone or to contribute to society in different ways have been penalised through the averaging system. They are predominantly women. The pension gap is very large and it has increased from 35% to 37% in recent years. There are deep inequities in the way total contributions are calculated, which was acknowledged in the then Government's Green Paper on pensions almost a decade ago. These are only partially addressed by the home-maker's scheme because it only applies from 1994 onwards. The scheme does not extend back to 1973 when women were still being asked to leave the public service when they married. The marriage bar was removed that year but it should have been ensured that there were no disadvantageous measures in the pensions system. That should have been part of a response to Europe's ruling against the State.

That is an historical issue but there is also an issue going back to 2012. Extensive reports from Age Action Ireland and others have highlighted that, despite knowing that the method of calculating contributions to the pensions system is unfair, those on lower contributions were further penalised from 2012 onwards. Up to 40,000 people, predominantly women again, have been affected by this issue. The vast majority of those in receipt of the top rate of contributory pension are men, but while that rate remained the same, the lower and reduced rate of pension was cut substantially. When these issues were raised and as the figures were discussed in an effort to address the inequity, we were told the cost would be too high. Even though it is an acknowledged inequity, we were told the Government cannot afford to remedy it. The cost is estimated to be a paltry €70 million to address the 2012 inequity and €10 million every year thereafter but this is beyond our resources as a nation. However, the Minister for Employment Affairs and Social Protection informed the House last week that the cost to the Exchequer of private pension tax relief is €2.6 billion per year. Analysis shows that the measure disproportionately benefits the top 21% of taxpayer units, who are higher earners. The tax relief is inequitable because through the marginal rate relief we give more tax relief to those on higher incomes than to the vast majority of the population who are on lower incomes and receive standard rate tax relief or less than that.

Private pension tax relief was noted by the troika in its memorandum of understanding with the State as an issue. It is interesting that it is one of the few issues in the memorandum that was not acted on. The troika said the State should move to a standard rating tax relief system either by applying the standard rate of 20% to all private pensions or by introducing a new standard rate of 30%, which would benefit lower earners rather than giving an increased benefit to higher earners. A total of 43% of lower earners who pay the standard rate are only entitled to receive a marginal rate tax relief of 20% on a private pension and very few of them take it up.

The usage of the private pension tax relief scheme is predominantly by higher earners and a higher earner can have up to €40,000 a year as a write-off in terms of private pension tax relief. How can we justify not addressing this inequality in our tax relief for private pensions when we are being told we cannot afford to fix the inequalities in our contributory pension system? How can we spend €2.6 billion on private pension tax relief, unequally distributed, when we cannot find €70 million to fix the inequity and the insult experienced by women in Ireland represented by the 2012 changes?

Senator Kieran O'Donnell

I did not get a chance to speak on the recommendation in regard to gender that Senator Alice-Mary Higgins withdrew. It is something I have a personal interest in and I want to take up the theme. We spoke about women who left the workplace, many of whom are now coming to us. Typically, one must have 520 paid contributions at class A or S and have an average of ten payments. Many of those would have had seven or eight years out of the workplace and they cannot make the average.

Acting Chairman (Senator Gerry Horkan)

That is certainly an issue but it has nothing to do with the amendment. I acknowledge that Senator Higgins put the amendment in context by elaborating but this is about the standard rate versus the marginal rate.

Senator Kieran O'Donnell

These are issues that Senator Higgins raised in her contribution. I would not have brought them up if she had not raised them.

Acting Chairman (Senator Gerry Horkan)

All right. Go ahead.

Senator Kieran O'Donnell

The second issue I want to raise concerns a group in society I feel very strongly about, that is, lone parents, particularly lone-parent women. It is a group we need to look at and study in great depth to find ways of dealing with the inequalities, in particular in the context of getting them back into the workplace. We have all had people come to us. Senator Higgins spoke about social proofing and this is one area that, as a society, we need to get to grips with. A lot of work needs to be put into this area. Many lone parents come to me who are phenomenal mothers and who are trying to get on in life. We have to find a way to make the system more friendly in terms of getting them back into the workplace.

The theme I am talking about concerns women and the whole sphere of pensions and work. I have perhaps taken a bit of a liberty in how I have brought that into the discussion but I wanted to put it on the record.

Senator Máire Devine

Tax reliefs on pensions are quite controversial and, as Senator Higgins said, the IMF and the troika were always asking questions about them. On the one hand, they encourage the saving of a pension but, on the other, they can seem to subsidise those of us already lucky enough to be able to afford a pension. Certainly, when we consider that 80% of the relief goes to the top 20%, we would have to question the suitability and sustainability of the reliefs over the long run. Looking at Britain, it has moved to taper off all reliefs over a certain income, which is an angle worth exploring, and this is something we have slightly started to do with PRSI. Rather than a blunt standardisation, the combination of reducing the standard fund threshold and the earning limit that applies to the relief seems a cleverer and fairer way of tackling this issue. High earners should not be subsidised while the savings of other workers are not protected. I thank Senator Higgins for tabling this amendment.

Senator Gerry Horkan

At a time when we are asking people to get involved with pensions and when the front page of the Irish Independent is telling us that many people do not have pensions, we should not be putting up more barriers preventing people from doing so. There is merit in parts of the Senator's argument. We keep encouraging people to fend for themselves and to save where they can. However, the pension levy was the greatest smash and grab ever imposed on people who had put away their own money. People had been told by successive Governments to look after themselves and not be entirely reliant on the State pension. They did so but the State came along and said there was a pile of money that people had been saving for their futures out of earned income and that it was going to take a chunk of it, at 0.6% of the pot, for four years in a row. People were hit far more by that than they would have been by water charges or by property tax.

I accept it has stopped now but it should never be done again. It is exactly the same as the State going into someone's bank account, saying someone has money there and it wants a chunk of it. It was wrong. This measure could have unintended consequences of discouraging people from setting up private pensions for themselves. They will then be more reliant on the State and, ultimately, a greater cost to the State at a time when we will have changes in dependency ratios, etc. I will not be voting for this recommendation.

Senator Michael McDowell

I want to endorse what Senator Horkan said. We are not talking about the ultra rich when we are talking about people who are paying the marginal rate rather than the standard rate. I agree with Senator Devine that there should probably be minimum effective tax rates for everybody in this country. I would probably go further and say that there should be minimum effective tax rates for every citizen of Ireland who has assets in this country, no matter where he or she decides to live for the time being, subject to double taxation agreements. I do not believe it is a good idea to discourage the provision of pensions by people, many of whom are by no means considered wealthy, yet who are paying at the marginal rate rather than the standard rate. What is being proposed by Senator Higgins to achieve tax equity is too blunt an instrument. I am fully in favour of tax equity but I do not believe this is the right way to do it. I ask everybody to remember that those who are getting public sector pensions are in a very different and much more favourable position than many people in the private sector. Many self-employed people are not wealthy professionals but are people doing market gardening, electrical contracting, timber harvesting and things like that. They have to be looked after as well. I say that as somebody who has forgone a substantial ministerial and Dáil pension to be here. I know the value of that pension and that I could never have got that in the private sector no matter what I had done and no matter what I had contributed to whatever fund. I am not receiving it at the moment and make do on my other earnings. Although I am in that happy position, I know the value of a public sector pension compared with a private sector one. I ask people who level their weapons at private sector pensions not to extrapolate from the figures that the great majority of this relief goes to people on high earnings. Of course, it does because those people are paying a huge amount of tax and they are bound to ask professional advisers what to do to minimise their tax burden. However, there are very significant constraints on the amounts that one can put into pension funds. It is not as simple as it is made out. If one goes over that amount, one hits effective tax rates of 70% and 80%. This is not as easy as it is made out to be.

I agree with Senator Horkan and do not agree with this recommendation.

Deputy Michael D'Arcy

I will just make a few observations before reading the departmental note. The figure that the Senator put out of €70 million cannot be taken in isolation. The old age pension payment is the biggest payment in the State and amounts to €7 billion. It is €7 billion out of the €20 billion social protection pot. It is not just a question of putting €70 million in on top of that. The State pays €7 billion for old age pensions, something with which I fundamentally agree. The next biggest quantity of money is the public sector pension payment which is almost €4 billion. Therefore, the State is providing €11 billion in pension payments. The €4 billion fund for what some like to call "gold plated" pensions is not a pension fund as such. The money comes from current expenditure. There is no pot of money set aside by the State for the purpose of paying the pensions of our public and civil servants.

In terms of discussions on pensions, only 50% of people in the State have a private pension. The other 50% will rely solely on the old age pension. To consider doing anything that would negatively impact on the take up of pensions would be huge error. To put that into context, there is not a single pension pot in the country that has as much money as people put into it in the last 25 years. Senator Horkan spoke about the fact that the previous Government extracted 0.6% from the pension industry by way of a levy but that was extracted for a good reason. It enabled the Government to reduce VAT in the hospitality sector from 13.5% to 9%. The pension levy money, despite Department of Finance objections, was ring fenced to pay for that provision. Senators may remember that Fine Gael announced its intention to do that before the 2011 election and when it went into government, it did so.

A reduction in the marginal rate of tax relief on pension contributions would represent an effective pay cut for those PAYE employee members of occupational pension schemes across both the public and private sectors liable to the tax at the higher rate, including mainly middle income earners about whom Senator McDowell spoke. There would be an additional impact on public service employees’ pay if the tax relief on the pension-related deduction, PRD, was also reduced. This is due to the way in which such contributions and deductions are currently tax-relieved under the net pay system whereby pension contributions and the PRD for PAYE employees are deducted from gross pay before applying tax. A change to a lower rate of tax relief could therefore lead to claims for compensating pay increases for significant numbers of PAYE workers.

I can confirm the Government’s intention to publish and commence the implementation of a five-year pensions reform plan in the near future. The objective of reforms contained within the plan will be to establish a sound and fit for purpose pension system for the coming decades that will shape the retirement landscape benefitting our retirees for generations to come. In delivering on the reform plan, the Department of Employment Affairs and Social Protection will conduct a period of consultation with relevant stakeholders, including interest groups, representative bodies and the Oireachtas. The implementation of the five-year reform plan will involve an examination of the supplementary pension arrangements and in that light I do not intend to support this recommendation.

Senator Alice-Mary Higgins

I am aware of the intention to develop a new five-year pension reform plan, as flagged by the Minister of State's Cabinet colleague, the Minister for Employment Affairs and Social Protection, Deputy Regina Doherty. Her Department is considering an auto-enrolment pension system. That will be given due consideration in these Houses, particularly by the Oireachtas Joint Committee on Employment Affairs and Social Protection. My concern is, in the context of proposals to develop a new five-year pension reform plan and to consider an auto-enrolment system, that the long promised 2020 reform of the contributory pension system to ensure a total contributions approach which takes caring into consideration may not happen.

If we are considering one new pension system, I want to know the following. Will the long promised new pension system and reform in terms of total contributions take place? We have always been told it would address the anomalies experienced by women in terms of the inequities in how total contributions are calculated, the averaging system and some of the inequities generated by the 2012 changes. The Government has adopted the approach of we will wait and see but address it by 2020.

We are discussing the Finance Bill but there is a new supplementary pension system on the horizon. Will the State allocate resources to address the existing inequalities and inequities? The solution is not simply a matter of moving around the social protection budget. This is a concern for the State and, indeed, the Department of Public Expenditure and Reform as the Department responsible for equality and gender proofing the budgetary system and budgets. There is a cross-cutting equality and gender issue in respect of the State's contributory pension system and the inequality experienced predominantly by women in that system. The solution is not simply a matter for the Department of social protection. It is a matter for the Cabinet and specifically for the Minister for Public Expenditure and Reform as his Department takes a lead in equality and gender proofing.

I am aware of the long-term plans but I believe the current situation will damage the take up of the scheme. Senators have talked about public sentiment and public confidence in pensions, encouraging people to save for a pension and not wanting to discourage people from doing so. People are greatly discouraged when they see that the current injustice in the pension system is not considered important enough to be addressed. The Minister for Employment Affairs and Social Protection, Deputy Doherty, will be bringing proposals from 2012. I wish to simply point out that this is not a battle for her alone to face and that the financial resources required to address the anomalies may need to come from the Exchequer rather than the social protection budget.

In terms of the other issues that have been addressed, I agree that the blunt tool at play is the way tax relief for private pensions is calculated. As the Minister has outlined, it is a blunt tool in terms of how we calculate gross pay. I agree with her that it is a blunt tool. It also does not allow us to ensure we achieve our pension objectives.

To answer Senator McDowell, I encourage everybody to get a pension despite the very poor returns provided by pension companies. I believe that a standard rate of 30%, a figure that has been proposed for a long time, would encourage many people to get a pension who are currently only offered 20% tax relief. The difference between a 20% and 30% tax relief is enough to persuade people to commence a private pension. I believe it would be enough to encourage a people to divert some of their resources from their day-to-day finances to a pension that provides for their future. I suggest that we could examine the matter if we had this report. I believe there would be a greater uptake of private pensions if there was a 30% tax relief. I do not believe that many people will automatically decide to leave their private pension systems because their tax relief has been reduced from 40% down to 30%. I query the question of the rate acting as an incentive or a disincentive.

The Minister of State has made it clear that he cannot accept the recommendation. However, we need to shine a light on the pension issue. We need to ask whether the current measures serve the goals set out in the programme for Government, which we want to fulfil. The current tool is inappropriate, inequitable and needs to be examined. We have heard different proposals from across the House and I accept that the proposal that I put forward today may not be perfect. I ask that we shine a light on pensions and examine it more robustly.

Senator Kieran O'Donnell raised the issue of contributions and specifically referred to gaps in contributions where people have spent eight years, for example, out of the workforce. The Taoiseach was the Minister for Social Protection this time last year. He was kind enough to accept my proposal that would make it easier to make voluntary contributions and extended the period in which voluntary contributions could be made.

I may discuss the issue further with the Minister of State. This change was brought in by means of ministerial order in January of this year following the debates in the Seanad this time last year. I applaud and note the then Minister's decision to take on that issue and adjust our social welfare voluntary contribution policy as a result.

Recommendation put and declared lost.

Bill received for final consideration.

Question proposed: "That the Bill be returned to the Dáil."

Senator Gerry Horkan

Over the past week, I have spent a great deal of time in this Chamber during debates on proposed amendments to the Finance Bill 2017, primarily as Acting Chairman but also in my capacity as Fianna Fáil's spokesperson on finance in the Seanad. It is good that the measures in the Bill will go back to the Dáil and consideration of them will be concluded before Christmas.

A number of people have made representations to me about the changes to section 135 of the Taxes Consolidation Act 1997. It has been suggested that this section is mainly about aggressive tax planning and anti-avoidance measures. Some people, particularly practitioners acting on behalf of family businesses, are concerned that this legislation will result in family business succession being taxed at 52% rather than 33%, 10% or 0%. Obviously, we are not going to deal with this matter this afternoon. I am putting the Minister of State on notice that I would like the Department to ensure the Revenue guidance clarifies that these particular mechanisms are being set up specifically as anti-avoidance measures and should not affect people who are trying to transfer businesses from one generation to the next. It has been pointed out that while Revenue guidance can be important, it is not appealable in the same way that legislation is appealable. I would like to put the Minister of State on notice that the Department needs to ensure this is dealt with in the appropriate way. If that does not happen, we might have to raise this issue in the House again.

I thank all the Members and the absolute army of officials for their work on this legislation. When I went into the ante room last week, there were almost 40 people there. The thickness of the Bill is a reflection of its contents, as set out over a large number of sections. Before Senator Conway-Walsh starts trying to take offence, I should say that I am talking about the thickness of the Bill, as opposed to any of the Members of the House. No offence was intended on this occasion. I never mean to cause offence. A substantial degree of expertise is required to bring through a Bill with so many sections. I congratulate the Minister of State, who was a member of our committee this time last year, on being so well able to deal with the various issues that have arisen. I welcome the return of the Bill to the Dáil and I look forward to it being passed before the end of the week.

Senator Máire Devine

On a point of order, the Bill has not yet been passed.

An Leas-Chathaoirleach

It has not been passed.

Senator Máire Devine

I am a bit thick, so-----

An Leas-Chathaoirleach

You are not.

Senator Gerry Horkan

I never said that, but if the Senator wants to say it, that is her own business.

Senator Kieran O'Donnell

I remind Senator Horkan that just as one should never judge a book by its cover, one should never judge a Bill by its thickness. This has been a lengthy process. I compliment the Minister of State, Deputy D'Arcy, on his perseverance and patience. I also compliment the officials, who were here in great numbers, and those who contributed to the debate.

On Committee Stage I raised the issue of management buyouts, which has just been raised by Senator Horkan. I suspect that the Department and Revenue are seeking to close this anti-avoidance measure. It is extremely important for us to ensure we do not throw out the baby with the bath water.

Many practitioners are concerned that this measure may have unintended consequences in cases of management buyouts involving family owned businesses and, for example, long-term employees of the business seeking a management buyout to ensure the business and its staff are retained. The Minister gave a commitment on Committee Stage in the Dáil that a statement of practice would be produced. It is extremely important that proper due diligence is done on this issue, on which interaction will be needed with the Irish Tax Institute, Chartered Accountants Ireland, the Law Society of Ireland and others to ensure this measure does not interfere with bona fide management buyouts.

We need innovators and small businesses but we also need business longevity. Companies require new blood and management buyouts. I agree with Senator Horkan that advice may be needed on this measure. I ask the Minister to urge the Revenue Commissioners to produce a statement of practice quickly. I do not want to find in three or four months that a statement of practice is nowhere in sight.

Management buyouts take place all the time. Speaking to former colleagues in practice, many are nervous about proceeding with management buyouts. Business is about continuity, movement and change. I urge the Revenue Commissioners to produce a statement of practice quickly. Proper interaction must take place with the various representative bodies, including in business, the legal and accountancy professions and so forth, to ensure bona fide management buyouts are not impeded by this anti-avoidance measure. I wish the Minister of State a happy Christmas and new year.

Senator Rose Conway-Walsh

I thank the Minister of State for wading through the budget on our behalf. This is a missed opportunity. The budget fails to address the inequality and unfairness that prevails across the country, whether in housing, health or other services on which people depend. The absence of a single line addressed to those who have been affected by pyrite and whose houses are crumbling around them is also a missed opportunity. The Bill also fails because it enables the banks to avoid paying tax on vast profits for a further 20 years. The budget could have required them to pay tax and closed some of the tax loopholes that allow many multinational companies to get away with not paying tax. The budget could have addressed these matters and resulted in a more equal distribution of wealth. For this reason, Sinn Féin cannot support the Bill as it stands.

Senator Michael McDowell

It occurs to me that there is a very strong case to be made for examining the issue of minimum effective tax rates across the taxation system. I know small efforts were made to achieve this in the area of income tax in the past. It is wrong, however, that a person with a secretarial post pays a much greater proportion of her or his salary in tax than some of the wealthiest and most influential people in Ireland who have the greatest amount of business assets in Ireland and also claim to be Irish citizens.

It occurs to me that, in principle, we should examine the idea of every Irish citizen with an income above a certain threshold, perhaps €100,000 or €200,000, who has business assets in Ireland over a certain threshold being liable, regardless of where they live, to a minimum effective tax rate of, say, 20% or 25% on their worldwide income unless they can show that they paid that amount to another jurisdiction. The idea that there are people who are totally stateless flying around in the atmosphere or in space, earning huge sums of money and contributing nothing but deriving significant income from this State seems to me to be wrong. They can avoid capital gains tax and a whole load of things by simply moving out of the State.

If citizenship under Article 9 of the Constitution involves not merely loyalty to the State and fidelity to the nation, one would think that Irish citizens should be willing to pay a fraction of their income given that people on the lowest salaries in their businesses in Ireland are obliged to pay a contribution to the Exchequer to fund services. I believe the time has come to examine the possibility and to end what for many people is a big scandal. They see themselves as being heavily taxed on smallish income while those who can break through the sound barrier and the glass ceiling and get out of Ireland in terms of their geographical residence seem to be in a position of having to pay nothing by way of income tax. In a republic that wants to have a degree of solidarity and social cohesion, surely the time has come for us to examine the possibility of a minimum effective tax rate on all Irish citizens.

Senator Alice-Mary Higgins

I will be brief. I second Senator McDowell's comments on the effective tax rate and how it can be better. We can look to achieving this and, at this point of the year, we send an arrow towards next year's Finance Bill and the considerations involved in it. There is a question about the effective tax rate and how we can bring it forward but there is also a question about our tax reliefs. We need to have a more robust scrutiny of our tax relief measures. We should not simply say what are the benefits to a particular sector or business. Instead we should look at them with the same level of scrutiny we would give any other area of expenditure. As a whole, we might say that it is positive and there are benefits associated with it, but we should query how it compares to other areas of spending. When we discuss spending areas in this House, we are often told a particular area is a worthy one that could bring about positive benefits but that the Government is not sure we can afford it. In the area of tax reliefs, however, often there is not the same depth of scrutiny. This is not to be against tax reliefs but to ensure they are doing the work we need them to do. If we have an effective tax relief, that is one way to ensure it is not being exploited in an inappropriate way.

I have spoken in this House about the knowledge development box. There are questions about ensuring we are doing better at joining up the dots. The knowledge development box may have a positive benefit, but the problem with such a measure is that the tax relief is being made available and we are hoping there will be benefits but we are not tracking them. For example, in terms of the knowledge development box, I simply sought to establish if those who receive the benefit also work with, for example, Enterprise Ireland or IDA Ireland, to what extent they are large or small employers and where is the benefit so that we can track where we, as a State, deploy a tax relief. In the end, this is expenditure. It is money that could be in our Exchequer and routed towards another purpose. However, we have decided to forgo it because we believe there is a benefit to be had elsewhere. We should be more rigorous in our examination of those benefits. We would not forgo the money in any other area of our public expenditure in the same way and hope that a benefit would accrue.

In many of our tax reliefs, there is a very clear argument of why they matter. I worry that we do not necessarily carry that same robustness through in all areas and I agree that in effect the tax rate is one of the key ways we can ensure we do not create inadvertent consequences of our tax relief and rationalisation measures.

Minister of State at the Department of Finance (Deputy Michael D'Arcy)

I have been working on this since 12 October, and we are nearly there. The Minister, Deputy Donohoe and I spent 19.5 hours on this section on Report Stage in the Lower House.

This is the first balanced budget in a decade. That is quite an achievement considering the era we have come through, which has been difficult and pretty awful for many. People get going and kept working; they kept trading in the most difficult circumstances and I thank all of those people. We expect there will be more leeway in next year's budget and we may be able to do more. At its lowest point in 2011 or 2012, our income tax take was €11 billion. In budget 2018, the expectation is that we will bring in €21.5 billion. That is the major readjustment.

We do not apologise Senator Conway-Walsh for giving people on low or middle income a small amount of money back via USC and the widening of the tax bands. Some €400 millon was given back. We must now bring our tax rates, some of which were emergency rates, back into line with normal practice. Stamp duty is one of the rates we are increasing from the emergency period - what I describe as the war time period - from 2% back to 6%. People say it is a trebling of the rate and it is but 2% was not a normal rate. Stamp duty used to be 6% and had been as high as 9% or 11%. We also examined and considered changing other rates on this occasion but decided against it, such as the VAT rate at 9% potentially going back to 13.5%. The latter is the normal rate and we will return to it at some stage. That is a figure of €491 million tax foregone. We decided it was in the best interests of the State because we hear Senators talking about rural and regional Ireland. That is exactly why we decided to leave those rates as they were.

I want to be clear for Senator Higgins. Make no mistake, every measure involving tax foregone is analysed with deep scrutiny. Perhaps I took the Senator up incorrectly but I thought she was a little glib in that we were not really analysing this. Every last red cent is analysed in very deep detail from top to bottom to ensure we are getting the best potential value.

If someone chooses to leave the State and become tax resident elsewhere that is a matter for him or her. I want to place on the record that corporation tax will be close to €8 billion. It is our third highest tax head. We are very clearly collecting it all. I have made the point before in the House that people have quoted the Comptroller and Auditor General’s report of a few months ago about, I think, 11 companies which pay zero. That is the correct rate because we have tax arrangements with other jurisdictions and with companies which participate and pay the tax in their country. In the same way Irish companies pay the correct tax rate. They are trading in other jurisdictions and pay the tax rate here.

In those other countries that they are trading in the correct rate is zero but, because of our double taxation agreements where companies do not pay tax twice on the same activity, they pay the correct rate. Everybody wants to quote the Comptroller and Auditor General's report but they choose to ignore the next page which outlines those facts. One should not do that because it is misleading. It is a misrepresentation of companies which are paying the correct rates of tax in the countries where they choose to operate.

I thank all of the Senators. I thank the Members who participated in the Chair. I thank all of the officials in the Department of Finance. We have nearly finished in the Dáil. I believe there is a small period tomorrow night in which we will take the Bill. We finish here now.

I never question anybody's bona fides. We have disagreements but I appreciate and accept that everybody is acting in the best interests as he or she sees fit.

Question put and agreed to.