Select Committee on Finance and General Affairs debate -
Wednesday, 24 Apr 1996

SECTION 4.

Mr. McCreevy

I move amendment No. 8:

In page 13, subsection (2), line 47, after "employment" to insert "or in relation to disability benefit payable during the first four weeks of any claim therefor".

This is connected with the subsection of section 4 which relates to unemployment benefit and short time workers' relief. I propose that the first four weeks of disability benefit should qualify for this relief also. The problem of unemployment benefit for short time workers has caused much difficulty but it would be well for trade union members to remember that this proposal was agreed with the central review committee and came from the trade unions in the negotiations for the last wage agreement. It was felt that people getting similar amounts of income should have the same net take home pay. It was therefore necessary to get over the problem of those who were abusing the system, who seemed able to work from May to November but were then sick every year until the following May. Serious anomalies arose because people who went off sick got back the tax they paid, plus disability or unemployment benefit, but people who kept working were worse off.

The former Minister for Finance, Deputy Bertie Ahern, was asked by trade Unionists to bring in this change. When it came into effect there were certain anomalies and some alterations were made to get over them. My amendment is to get over a further anomaly. It is only fair to point out that the previous and the current Government were asked to do this by workers, although some comments from trade union leaders in the last year would lead one to believe that it was the Government of the day who thought up this idea.

Mr. Quinn

I understand the pressure behind this amendment but I must make a clear distinction between disability benefit and short term unemployment benefit — it does not apply to unemployment assistance. Anomalies have occurred in connection with short term working. Seasonal patterns of work in tourism and aspects of agri-business have reduced patterns of remuneration whereby the back to back arrangement of employment and short term unemployment benefit was grossed together to provide a working wage for the course of the year. We have introduced income disregards on taxation thresholds to accommodate and provide for that, because the extent of the practice was much wider than trade union leaders realised when they agreed to this as part of that process in the run up to what became known as the Programme for Competitiveness and Work. The legal provisions were enacted in the 1992 budget, if memory serves me correctly. New agreements over time will remove this distortion, whereby employers are using the social welfare system to top up wages. However, to extend this transitional principle to the disability benefit would be to return to a pattern I observed and which Deputy McDowell may recall, although it is not as frequent as it used to be. Healthy Ringsend dock workers became mysteriously sick after Christmas, were laid low for the winter months and bounced back to full health on 6 April, with extraordinary physical fitness.

Mr. McCreevy

Amazing. Was it Lourdes?

Mr. Quinn

It was a wonderful sight to behold and it was done without the aid of medicine, not even a cough drop. Deputy Noel Ahern worked in parts of Dublin port at that time and might have observed similar patterns of work behaviour. It was crazy that our tax system encouraged absenteeism. It still exists, but it has reduced considerably and I would have to oppose anything which might take us back down that road.

Mr. M. McDowell

In fairness, Deputy McCreevy is being his usual conciliatory self. Instead of a four month holiday after Christmas he is suggesting a one month holiday.

Mr. Quinn

Having given a Second Stage response, let me give a Committee Stage reply. Some 61.2 per cent of all claims are for four weeks or under, so the amendment would exempt the vast bulk of UB claims. The cost of the amendment is estimated at £11 million out of a total tax take in this area of £24.4 million. It would be a highly retrograde step. I know what we are doing is unpopular but it is necessary to be so because it was a bad practice which entered our system.

Mr. McCreevy

What happened to the statutory sick pay scheme proposed in the context of the Programme for Economic and Social Progress and also considered in Government circles? Its effect would be to make the employer responsible for the first few days of sick pay. I am aware of the figures from my time as Minister for Social Welfare — it is extraordinary to look at charts of when people were sick. It was proposed and agreed by the social partners that we would have a statutory sick pay scheme. I worked on it as Minister of Social Welfare but it started before my time. It would have a remarkable effect on claims for disability benefit in the downward cycle — the Minister is correct in what he said.

Mr. Quinn

I am informed, subject to confirmation, that preparatory work was done in the Department of Social Welfare but it was not progressed because they ran into operational difficulties. I can only imagine what they were as I do not know. It is not on the agenda at present and it is not on any list of legislative proposals with which I am familiar.

Mr. M. Ahern

Two of my constituents asked me about unemployment benefit. This concerns a cheese factory in my area——

Acting Chairman

Is this relevant, Deputy?

Mr. M. Ahern

It is because it relates to taxation of unemployment benefit. These people are normally laid off in January when no milk comes in and return in the middle of February.

Mr. Quinn

A number of special measures were introduced in 1995 to assist families: child dependant additions are payable with both UB and DB and were exempted from tax in April 1995; the first £10 of unemployment benefit is also exempted; and the special exemption from UB taxation for systematic short time workers was extended for a further year and broadened to all such workers.

Mr. McCreevy

The first £10 of unemployment benefit is exempted but what about CDAs?

Mr. Quinn

CDAs payable with both UB and DB were exempted from tax since April and there are transitional arrangements because of that.

Mr. M. Ahern

Would these people qualify as systematic short time workers?

Mr. Quinn

If the Deputy supplies the details I will give him a definitive reply.

Mr. M. McDowell

Will the Minister explain the logic of the one year extension? Will this be always there, like the PRSI allowance, or will it go?

Mr. Quinn

Who can answer that question?

Mr. M. McDowell

I was hoping the Minster would.

Mr. McCreevy

Will any of us be here?

Amendment, by leave, withdrawn.

Section 4 agreed to.

NEW SECTION.

Mr. M. McDowell

I move amendment No. 9:

In page 13, before section 5, to insert the following new section:

"5. — Where tax relief is afforded to a person resident in the State in respect of the cost of medical or dental treatment furnished to such persons outside the State under the provisions of section 12 of the Finance Act, 1967, the Revenue Commissioners shall furnish to the revenue authorities of the State in which the treatment was furnished particulars of the payments in respect of which the relief was claimed.".

This amendment relates to strong concerns of members of the dental profession, who feel at a disadvantage because people needing dental treatment can have it done north of the Border or in the UK and claim the cost against taxation under section 12 of the Finance Act, 1967. Dentists are of the view that they, who must pay full tax on their income, are at a considerable disadvantage compared with dentists in the UK who have cash paying customers coming from the Republic because they can charge far less.

When they first approached me — I assume they also approached the Minister — they wanted the work to be carried out in the State but I think that there are certain types of dental work which people may want done elsewhere. In any case, people are entitled to go where they like and under EU law it would be impossible to do something of that kind. However, dentists are compliant taxpayers whose activities are fully under the glare of the Revenue, whereas their competitors across the Border and in the UK are not under such scrutiny. In that position, at least some of their anxieties could be met by providing that the Revenue Commissioners should furnish to the revenue authorities of the State in which the treatment was provided particulars of the payments for which the relief was claimed. This will at least show dentists that they are not mugs to pay tax in Ireland while their customers go abroad to pay cash for the same treatment.

Mr. McCreevy

I support this amendment and my amendment No. 17 is to address this anomaly also. Because of the cost factor, people are driving north of the Border to avail of dental services outside the State. This is perfectly reasonable because of freedom of movement, etc. An individual is entitled to make his or her own pragmatic economic decisions, as I said under an earlier section. The effect of the present law is that an Irish taxpayer can claim for those dental expenses just as he or she can for services in the Republic. It has created difficulties for dentists practising as far south as Laois, Offaly and Kildare. At least six of my friends have gone across the Border for dental services and claimed it against their tax allowance, which is perfectly within the law.

My amendment would provide that the dental services had to be carried out within the State for tax purposes because the taxpayers who would fund the rebate would be from within the State. The Minister made an earlier point about no taxation without representation and this is an analogous issue, so mine is a reasonable amendment. There is unfair competition for dentists practising in the Republic. I have also been lobbied by the Irish Dental Association and individual dentists who want the loophole closed. They do not want people to be stopped from benefiting from the dental service in Northern Ireland but they want equality.

Mr. M. McDowell

No tooth extraction without tax extraction.

Mr. Quinn

I will desist from ideological observations about free movement, competition and the wonderful mechanism of price being used to get value for money, because they are self-evident.

The particular provision goes back to 1967 — pre membership of the EEC — and it was not designed to support the medical profession or the suppliers of medical services. It was a provision to reduce the cost of medical operations, including dental operations, for those who were paying for them. If they could get value for money anywhere, so much the better from the point of view of both the individual concerned and, by extension, the Revenue Commissioners.

Behind what is being sought now is the inference that medical practitioners north of the Border are not reporting their cash trade to the Revenue Commissioners, while medical practitioners south of the Border are reporting every penny of their cash trade. I will leave the dental and medical professions to decide where virtue falls in this regard. I am not a great advocate of the virtuous approach and any member of my party would want to have been very clear about that in recent months.

Mr. McCreevy

The Minister never was.

Mr. Quinn

I am told the amendment is unnecessary as the information is available. There are bilateral discussions and communication lines open to the Revenue Commissioners on both sides of the water and if the UK authorities wish to get this information it is available to them if they make those inquiries. We do not need a legal provision to make this possible because that provision is already there in effect.

Mr. M. McDowell

I am sure that is possible at the moment and that if the Revenue Commissioners are telephoned by their counterparts in England the information is available to them. However, how can they possibly know all of this unless it is brought to their attention?

I am sure the dentists and doctors are as compliant or non compliant as anybody else in our economy — I am not claiming they are saints. However, we are not just talking about people getting fillings but extensive bridge work and so on which can cost £5,000 or £7,000. No dentist in the Republic could possibly afford to pocket such amounts of money because they know the taxpayer will demand a receipt which they will send to the Revenue Commissioners. A Northern dentist, who is offered £3,000 or £4,000 by a patient for the same work, is confronted with the question of whether it is really a cash payment, or if it is claimed back against tax in the Republic will the Irish revenue authorities notify the UK authorities? There should be a mandatory reporting requirement because at least then the dentists in the Republic would not think they were fools for complying with the law.

Acting Chairman

In relation to dental treatment and tax claims, it appears that tax claims are allowed for some forms of dental treatment, such as root canal work and extensive bridging treatments, but not for fillings, extractions and so on. Does the Minister know the origins of that anomalous situation which has been brought to my attention?

Mr. Quinn

I do not. It is in both countries' interest to ensure we have tax compliant citizens and that opportunities to exploit Border divisions, which would reinforce non compliant behaviour, are not availed of in either direction. A certain degree of price pressure is not a bad thing. When my colleague, Deputy Howlin, was Minister for Health he was able to exercise quite a degree of pressure on consultants in the Cork area when hip replacements were being done in Northern Ireland. That was clearly a transparent operation. I do not believe such price pressure is a bad thing.

However, having said that, the concern expressed by the two Deputies is a valid one. I will not accept the amendment because I do not think it is necessary to put it into statute law. However, I will give a formal undertaking that we will communicate this during the next formal session of the negotiations under the bilateral tax treaties we have. I would add that it might be a useful piece of information for Deputies to convey at the Anglo-Irish Parliamentary tier. The British authorities have a major tax shortfall at the moment and I am sure they would be delighted to have additional tax or due tax being generated.

Mr. M. McDowell

In those circumstances, I will withdraw my amendment.

Amendment, by leave, withdrawn.

Mr. McCreevy

Would it be possible to take a break?

Acting Chairman

If members agree, yes.

Sitting suspended at 11.46 a.m. and resumed at 12 noon.