Select Committee on Finance and General Affairs debate -
Tuesday, 9 May 1995

SECTION 7.

Mr. Dempsey

I move amendment No. 9:

In page 21, subsection (5)(b), line 11, to delete "on time".

This is a matter which I raised on Second Stage in connection with the tax relief for service charge payments. The phrase "on time" is used in a number of different sections. I repeat that the use of this phrase will open up a can of worms that will keep the local authorities, the Revenue Commissioners and, possibly, every Deputy busy for months on end if it is left in the Bill. I ask the Minister to withdraw it.

By way of illustration of what I mean, there are various practices in local authorities for payment of charges. Most local authorities have service charges in place at present. Most go along with the system of having them paid in two moieties but the practice differs in each local authority. Some say that the first moiety is due on 1 January and the second on 1 June while others say that the first moiety is due for payment by 1 March and the second on 1 September. Other local authorities, although this practice is illegal in accordance with a decision of the courts, demand one payment at the beginning of the year. The difficulty arises when somebody pays their service charge at a certain time but the local authority may say, in accordance with their definition, that it has not been paid on time. A taxpayer may appeal to Ministers, the Revenue Commissioners and point out that he would be on time in 15 different local authorities if he had half of his service charges paid by 1 June. I am very much afraid that the inclusion of this phrase will turn the situation into a bureaucratic mess. This is a good idea that may encourage more people to pay their service charges reasonably on time, but it could be bogged down because of the different practices of local authorities and great confusion could arise from that.

I have a profound objection to giving my RSI number to anybody other than the Revenue Commissioners. I mentioned this on Second Stage and I am not sure if I can table an amendment to it on Report Stage. Various subsections in this section request the submission of my RSI number to the local authority and, worse still, to private contractors if I want to claim a repayment on my service charges. What is wrong — we have talked about it on the previous section as it related to college fees — with leaving the system as it is? If I pay my service charges, I will get a receipt and forward it with my tax claim at the end of the year. Why do I have my submit my RSI number to a private contractor or a local authority?

I ask the Minister to consider the use of the phrase "on time" but also to look at that aspect of this section.

Mr. McCreevy

When the Minister proposed in the budget to have a tax allowance for the payment of service charges to local authorities, he would have been inundated from representations from private contractors who would have contacted many Deputies. This serious anomaly arose a few days after the announcement. I know of at least 50 people in the same estate where I live, a local authority estate, who told a private contractor to take his wheel-bins back because they were going to get a tax allowance from Kildare County Council. Many private contractors were put under severe difficulties and were forced to make some of their employees redundant. The private contractors grouped together. Arising from that the Minister has decided in the Bill to give a £50 allowance for payment to private contractors. My amendment seeks to extend that amount to £150 — the same as for local authorities — on the basis that if it was a good idea to give it in the first place it is a good idea to make it equal for everybody. That is the purport of amendment No. 10.

Mr. M. Ahern

Will the Minister tell us the estimated net loss to local authorities due to the introduction of this allowance? There will be enforcement costs, the cost of receipt books, new stationery and phone calls. There will be a myriad of costs involved in this new relief. Has an estimate been made yet of what it is going to cost the local authorities and, consequently, where is the funding to the local authorities for bringing in this relief going to come from?

Mr. Quinn

I recall Deputy Dempsey's strong intervention on Second Stage in this matter. "On time" will be interpreted by the Revenue Commissioners as a bill for the year 1995 being receipted as having been paid in 1995. If somebody pays in 1995 a bill that falls due in 1995, then it would be deemed by the Revenue Commissioners to be paid on time. The phrase is taken from A Government of Renewal and was designed to ensure that people would not be claiming for arrears going back over many years. The Revenue Commissioners have indicated to us that they will be flexible in that regard. Payment on the 31 December 1995, will be deemed to be “paid on time”.

The second point that Deputy Dempsey raised was about the RSI number. The RSI number will not be given to a private contractor. It is being requested in some cases by the local authority. Section 5 (c) (i) states that:

Each local authority shall, within one calender month after the end of every financial year, provide the Revenue Commissioners with the return in such computerised format as the Revenue Commissioners may require for the purposes of giving effect to the relief provided for...

The intention there — Deputy Dempsey and others will be aware of this — is that with the increased computerisation of the Revenue Commissioners records, the local authority would simply supply the disk in electronic format, or physically hand it over to the Revenue Commissioners, containing the RSI numbers of those who have paid their service charges. That would automatically be merged with the processing of income tax allowances. It is in the interests of efficiency that that will be done.

I am not, and I suspect that neither is Deputy Ahern, a member of a local authority but I understand that the vast majority of local authorities are welcoming these provisions because they reckon that the rate of revenue to them will be in excess of what was otherwise the case. We have made — to address the point made by Deputy McCreevy — the distinction in favour of the local authorities of £150, as against £50, because of the assessment of charges and services offered by private contractors around the country. That is our best estimate at present. We estimated tag charges at being in or around £50. That is what was calculated on the information we were able to get. I have to tell the committee — maybe it is a reflection on our administrative system — that the Department of the Environment was unclear as to what the practice was in many counties. We simply did not know. That information was not centralised or shared. We are going to have to in this first year use this operation as a way of obtaining some information which would enable us to fine-tune the operation of the scheme in subsequent years.

Mr. Connor

I notice that group water schemes are one of the water suppliers that can qualify for the tax remission. However, in a recent court case in the west, where a group scheme organiser had attempted to collect water charges from certain clients, the judge adjudicated that they could not collect such charges because they had no legal authority to do so. He also stated that there was a great deal of precedent for his decision. In a constituency such as mine where 50 per cent of domestic water supplies are supplied by group water schemes, there is now a grave legal doubt in relation to the validity of a receipt if a householder was, if you like, foolish enough to pay a group water scheme charge since at least in the opinion of one judge and he quotes others, it is illegal for group water schemes to collect water charges in the first instance. Perhaps the Minister would comment on that.

Mr. M. McDowell

I am opposed to this whole idea; it is a waste of everybody's time. The amount of local authority time spent filling out these forms is incredible. Could the Minister say whether the effect of section 7 (2) is that the person who claims the allowance must be the person who is liable to pay the service charge? If there is a non tax-paying mother at home and the son pays the service charge for her, is he entitled to a tax allowance on this? It seems to me that he has to be liable to pay the charge in order to claim tax relief. Perhaps the Minister would consider changing that for Report Stage. If I live with my aged parent and she has no taxable income and I lay out the full amount, it seems that I cannot claim tax relief on it.

Mr. McCreevy

I do not accept the Minister's reasons for differentiating between the local authorities and the private contractor. I do not honestly think it will stand up because it is trying to create a distortion in the market-place; that is not a proper thing to do in the area of competition. Perhaps the Minister would consider bringing forward an amendment on Report Stage. I doubt whether the cost will be any greater; competition between local authorities and private contractors ensures that the customer gets good value for money. They are competing very heavily against one another, particularly in the urban areas such as Kildare.

If the Minister thinks about amendment No. 9, which proposes to delete the phrase "on time" he will agree to it because different arrangements for payment are made in different local authority areas. We have a very sophisticated system of weekly payment in County Kildare. Over a number of years Kildare County Council has set up facilities in various towns and villages in the county. People turn up on a Friday or Saturday and pay £2 or £2.50. This practice will be made more difficult if the phrase "on time" is left in the Finance Bill as it will be interpreted differently. I suggest that the purport of the section is not lessened by having it there.

Does section 7(5) (a) (i) to (iii) mean that the local authority is not going to issue a certificate unless the arrears are paid? Is it possible that a person could pay the charges due in the current year but, because he or she has not cleared his or her arrears, will lose his or her tax allowance because the local authority will not give him a certificate? Deputy Dempsey, who is much more familiar with local authorities than I, last week pointed out that his purpose was to put a stop to much of this red tape. He wants to avoid turning the local authority system into one involving many visits, representations and forms, which must be filled out. This is why I tabled the amendment to delete the phrase "on time".

We could avoid many of these difficulties in the future if we adopt this sensible approach. It has taken a long time for people in parts of my county to accept the principle. Unfortunately, when they have just reached the point of accepting it, some genius in the Government — irrespective of party — wants to change it. A decision made in another area recently was absolutely criminal. I ask the Minister to clarify these points.

Mr. M. Ahern

I note that section 7 (1) (b) states that references to an amount paid on time mean payment of that amount by such date or dates as a local authority shall decide. Does the Minister intend to introduce an amendment in that regard? The Minister stated that the Revenue Commissioners will accept anything paid within the calendar year as "on time". This seems at variance with section 7 (1) (b).

Mr. Cullen

On amendment No. 10, it is in a sense anti-competitive to place the bias as the Minister has placed it. As he is aware, the mix in local government was wrong over the past number of years. Everybody recognised the need to involve the private sector in taking some of the burden of the provision of all these services from local authorities.

Some local authorities, encouraged by the Department of the Environment, moved in this direction and some have been successful. However, when we reach the point where this mix starts to become acceptable and there is a growth in investment by some operators, some of which is quite substantial, the Minister proposes quite a substantial difference between the allowance available to local authorities and the allowance available to those dealing with private operators. Given what is involved, there should be an equal figure of £150.

I come from a constituency which includes Waterford city and which has been at the centre of this issue for many years. In that context, I wish to make a point regarding the overall figure of £150. Many of those who object most to service charges do not pay any charges, given the waiver scheme involved. They are not in the net due to the generosity of those who are willing to pay and also as a result of their income and social position. Another large section is on a generous part waiver scheme and if one puts those two blocks together, one practically removes from the net all those who object to paying service charges.

Those who will benefit from the £150 were paying the service charges anyway, while those who objected most were either not paying or only part paying them. As a result of the drafting of this section, one is not entitled to claim the £150 allowance unless one pays the full charge. If the Minister accepts my point — as I expect him to — is it not possible to have a scaled approach? Is it not possible to equate the figure with what is paid by the person?

It is interesting that the figure chosen by the Minister is the maximum amount allowed in my city. We established a ceiling of £150. In terms of trying to encourage those who object most to service charges to pay into the system and to remove some of the animosity involved, could the Minister allow the figure to equate to the local charge? Perhaps there could be a ceiling of £150.

I am concerned that those who object most to service charges are covered by part waivers. This does not mean a fig to them. If we are to have any chance of getting broadly based support for the payment of service charges, we should remove the animosity and aggression involved in the payment of these charges. Unfortunately, although the £150 is welcome and well meant, it is doing absolutely nothing for those who are the greatest objectors. If the £150 ceiling was scaled down to equate to the payment it would go a long way, I can assure you.

Chairman

I will have to cut Deputies short now.

Mr. Cullen

I might put that down on Report Stage if the Minister gives me some response to it.

Chairman

It is now 4 o'clock and under our agreed time schedule at this stage we should have dealt with sections 7, 8, 9 and 10. With the indulgence of the Committee we will take the last contribution from Deputy Dempsey and then put the question on this section. Section 8 is a matter of some interest, but I have to finish sections 8, 9 and 10 by 4.30 p.m.

Mr. Dempsey

I fully support what Deputies Ahern, McCreevy and Cullen have said. The Minister should take a good hard look at this again. I refer in particular to section 7 (5) (c) (1) where there is this beautiful system where each local authority will, within a calendar month at the end of every financial year, compile this list and send it off to the Revenue Commissioners. Did the Minister check to see how many local authorities are on computer and will be able to extract that information?

Mr. Quinn

All of them.

Mr. Dempsey

The Minister must be getting information that is a lot different from mine because I do not think they will be capable of doing that. You will be tying up local authority staff for some time who are trying to do it manually. The Minister should look at the section again and delete it as it stands. The section should just say that a person who has a receipt from a local authority for his charges can claim tax relief on it. Make it simple, do not complicate it.

Mr. Quinn

I will be as brief as I can. Deputy McDowell raised the question of entitlement to tax relief. I am informed that it is only applicable to the occupier and not necessarily to the son of the occupier who may volunteer to pay for it because the occupier may not have an income from which he could derive tax relief. In much the same way that people could assign their mortgage interest relief for taxation purposes, I have to say that if a person is paying the amount of money in real terms and there is no waiver coming into the household, then a person who has a taxable income against which the waiver could be set should be able to do it.

We will have to look at this. I understand that the Bill as written does not provide for that but I will take steps to see that it should be the case in that situation. Where the occupier is a widowed mother or pensioner and is not getting a waiver, the benefit should be there.

Mr. McCreevy

They might not be getting a waiver because of the value of the house.

Mr. Quinn

It depends. We are not going to get a double benefit and we are not going to penalise the other way. The principle is established; if she can assign it we will look at it. The point is well made and thank you for bringing it to our attention. As Deputies will readily appreciate, we are taking some of these things on the trot. We will reflect on it. An occupier in a house, or a person who is living with an occupier, should be able to qualify if they are making the payment.

In relation to the points made by Deputies McCreevy and Dempsey, irrespective of what the local authority does, there will be different practices which we are trying to align and bring into modern, efficient administrative systems. However, the Revenue Commissioners will be the final arbiters as to whether a person qualifies or not and, as I indicated, they will accept your receipt in the calendar year, notwithstanding anything else in this section. We can clarify this point later on if you like.

With regard to a portion of the arrears, a certain amount of local judgment will be exercised. I am advised that the Department of the Environment is preparing guidelines which will be issued to all local authorities, before the Finance Bill becomes law, to deal with the matter in question. It is understood that a person who is in arrears with service charges will, in general, be required to pay off those arrears over a five year period. Payments, therefore, of about a 20 per cent portion of the arrears together with a currency or service charge will entitle the person to relief under section 7.

Deputy McCreevy's other point was the difference between the £50 and the £150. These charges to which Deputy Cullen referred and, indeed, in parts of Kildare, not areas where the Deputy was a known agitator, but others were agitating on his behalf.

Mr. McCreevy

I always advocated paying the charges, even when in Opposition.

Mr. Quinn

One of the great arguments about this measure was that it was double taxation; the local authority was charging for a service and the State was charging tax also. It is to address that question that the difference is £150 as against £50.

I have dealt with Deputy Dempsey's question about paying on time. He may not have picked up the information I signalled to him across the room but there have been detailed consultations with local authorities about systems of communication with the Revenue Commissioners. By international standards Revenue has a sophisticated computer system, through which people can transfer information on line or in diskette form. The provision is designed to plug into the increasingly sophisticated Revenue system and therefore minimise the costs. If the Deputy has concerns about local authorities with which he is familiar perhaps he would discuss them with us.

Chairman

I am going to put the question.

Mr. M. Ahern

I was given no reply to my queries. Can we ignore the Finance——

Chairman

We will have to move on to deal with the other sections properly.

Mr. M. Ahern

The Minister did not answer my question.

Chairman

Can you clarify that matter, Minister?

Mr. Quinn

The local authorities will operate section 7 as it is. If there are any disputes or difficulties the exercise of final discretion ultimately lies with the Revenue Commissioners who will do as I indicated. The object of the exercise with any new system is to provide as much common sense and practicality as is feasible and reasonable. In relation to Deputy Cullen's point, the reason there is £50 for private contractors and £150 for State charges is to address the question of double taxation.

Amendment put and declared lost.

Mr. McCreevy

I move amendment No. 10:

In page 22, subsection (6) (a), line 15, to delete "£50" and substitute "£150".

Amendment put and declared lost.

Section 7 agreed to.