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SELECT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE debate -
Thursday, 8 Mar 2001

Vol. 4 No. 4

Finance Bill, 2001: Committee Stage (Resumed).

SECTION 69.
Question proposed: "That section 69 stand part of the Bill."

This section provides that the 12.5% corporation tax rate applies from 1 January 2001 to the profits of shipping trade within the 10% manufacturing rate up to 31 December 2000. In the absence of change, they would have been taxed at the general corporation tax rate from that date, that is, 20% this year, 16% next year and 12.5% from 1 January 2003. This amendment accelerates the introduction of the 12.5% rate for shipping companies to compensate for the loss of the 10% manufacturing rate.

The section also amends section 407 of the Taxes Consolidation Act, 1997, which prevents the set-off of losses or capital allowances arising out of a shipping trade against profits taxed at a higher rate. It also provides that, where a ship is leased for use in the shipping trade, the capital allowances in respect of that ship can be set against income arising under that lease, but not against other leasing income. Section 407 was due to expire on 31 December 2000 as the shipping regime ended on that date. However, as the 12.5% rate is being introduced for shipping from 1 January 2001, section 407 is extended for another two years after which the 12.5% rate will apply to all trading income and the question of the ringfence can be reviewed.

I gather this proposal addresses the maritime development advisory group's report. I was just reading the TSG paper, which relates to that and which also reflects some of the other provisions the Minister is introducing in this Bill. Will he give us an overview of what he envisages will happen to the report's recommendations?

The key taxation report combined in the IMDO report are as follows: the introduction of legislation to incorporate a tonnage tax regime in the Finance Act, 2001, which I have not done.

Has the Minister decided not to do so?

I have decided not to do so in this Bill because there are other, greater considerations. It is only fair to say there are two conflicting views from the commission, which is anxious that Europe becomes a centre for shipping activities. On the other hand, Deputy McDowell will know that I had very interesting negotiations since June 1997 in obtaining a 12.5% rate for Ireland. The records will show that not long before the election was called here, the Government of the day just announced a new 12.5% rate. That would have been very good if someone had bothered to go out and negotiate it in the EU.

A couple of weeks later the Minister announced a 10% rate.

No. Weeks before the Government announced the 12.5% rate, my colleague, the Minister, Deputy O'Rourke, announced the 10% rate. To be strictly correct I never announced 10% for Ireland - she did so some months before the Government announced the 12.5% rate. Be that as it may, the election was called around 15 May and the Government announced a week beforehand that Ireland would have a single low rate of 12.5%. The only difficulty was that nobody bothered telling the European Commission. I and my officials spent the greater part of my first year and a half out there negotiating through many difficulties.

A code of conduct group was set up as a result of the Luxembourg conclusions at ECOFIN on 1 November 1997. That group has been looking at all forms of potentially harmful tax competition. The report has not yet been adopted. The group is chaired by Ms Primaloro of the UK Treasury, who did a very good job in difficult circumstances. As it turns out, all the other countries had potentially harmful tax measures, running into double digits, whereas we had only five, two of which we are dealing with, the 10% rate, the Shannon rate and everything else, while we reached an agreement with Mr. Monti as to how we are to phase in the 12.5% rate. It took the Department an inordinate amount of time to negotiate that.

I decided in the overall interest not to proceed with the tonnage tax on this occasion. My concession is to go straight to the 12.5% rate for shipping business. There has been continued lobbying from the industry - from the IMDO and the Minister for the Marine and Natural Resources - and I have taken all that into account.

I sent the Minister for the Marine and Natural Resources a letter in January stating that, as he knew, the issue of the future fisheries regime for the shipping sector was considered during the recent budgetary process and that my Department, on receipt of the report from the Irish Maritime Development Office, prepared a discussion paper for consideration by the tax strategy group, and the views of the Minister for the Marine and Natural Resources were made known by his officials. With some exceptions the group expressed reservations about the taxation proposals outlined in the IMDO report. Following the report of the tax strategy group and taking into account all the arguments made both for and against the IMDO proposals, I decided it was not appropriate to pursue the specific incentive package for the shipping sector proposed by the IMDO. In coming to that conclusion developments at both EU and OECD level in relation to general taxation issues were very important. I went on to say that in that regard at EU level the code of conduct group on business taxation considered the various shipping regimes in existence in the EU and member states' views were divided on the matter. Some member states expressed the view that the tonnage regimes operated by various member states were harmful and should be lifted as per the report of the code of conduct group. The report of the code of conduct group noted this division among member states.

At OECD level a number of EU shipping regimes have been identified as preferential regimes and as such could be viewed as potentially harmful tax regimes. Mindful of the international view regarding special corporate tax regimes and taking into account recent international views expressed about our domestic corporate tax regime, I did not feel it was appropriate to introduce a special low tax rate regime for the shipping sector. In response to the work of the IMDO, I brought forward a 12.5% regime for the shipping sector from 2003 to 1 January 2001. This was an acknowledgement of the fact that while the sector currently pays tax at 10%, that rate ends later this month and after that date the sector was to face the standard rate of tax, which is 20%.

Furthermore, I took on board the call for a reduction in the number of days seafarers are required to be on voyage, which is now 161 days as recommended by the IMDO report. To that end I enclosed the relevant extract from the summary measures of the budget announcing those measures. While recognising the sector was disappointed with the measures, I hoped it could appreciate that I, as Minister for Finance, had to weigh up the overall cost and benefit to the economy of the introduction of changes to the tax code designed to benefit one specific sector. The answer was "no".

Did the Minister consider——

It is only fair to point out to my colleague and the IMDO that at another level in the European Commission there was considerable emphasis on encouraging Europe to become the place for people to flag their ships. I must take a broader view and given our difficulties with changes in business taxation I felt it was not right on this occasion to bring in a tonnage tax. I may review the situation later, but after yesterday's meeting Deputy Fleming raised some issues with my officials and at that level one can appreciate the difficulties we have at all levels with taxation that relates to the EU. One of my officials will go to Brussels later this afternoon to discuss another matter. We have had to negotiate every small issue over the past four and a half years and that takes a long time.

I do not want to detain the committee unduly on this section but the industry is obviously interested. On capital allowances, did the Minister consider the regime that was suggested or has he rejected that as well?

Yes, the change is made from seven to five. That benefits shipping also.

The industry wanted to set the capital allowances against income other than shipping. Is that not acceptable?

No. There are broader considerations there, which I successfully introduced and ring-fenced in my first Finance Bill in 1998. That cut out a lot of this. We did not get much credit for that.

There never is for the measures I support. There was an increase in seafarers' tax allowance from £5,000 to £15,000. Obviously the Minister rejected that.

No. I regret ever introducing this because I have requests from many different sectors, such as the main farming organisations. for special exemptions for people in hardship. If I had my way again, I might not introduce the seafarers' allowance, even though everyone involved recommended and applauded it. I might abolish it in future. That would stir them up.

Question put and agreed to.
SECTION 70.
Question proposed: "That section 70 stand part of the Bill."

This section gives commencement to the budget announcement that the rate of 12.5% applies to 1 January 2001 to trading income other than trading income taxed at the 10% or 25% rate of a company where that trading income does not exceed £200,000 in a year. When the trading income is between £200,000 and £250,000, marginal relief is available so that the rate of tax moves gradually from 12.5% to the standard corporation tax of 20%. Prior to 1 January, the 12.5% applied to the trading income of a company where that income did not exceed £50,000 and there was marginal relief when the income did not exceed £75,000. This measure will bring a greater number of small companies within the 12.5% corporation tax range which would not otherwise have applied to them until 2003 - it is said the number of companies is over 50, but I think it is over 90.

I appreciate that. I have always believed this is the way to proceed. It is preferable to giving the immediate big bang benefit to banks, building societies and so on which pay so much of the corporation tax.

In the previous year's budget I brought forward a 12.5% rate for companies where the total trade income did not exceed £50,000. It was estimated this measure was of benefit to about 18,500 small companies. This year I increased the limit to £200,000 and brought forward the rate of 12.5% from 2003 to 2001. It is estimated this will benefit about 27,600 companies. We can get the relevant number of companies.

Is it fair to say most Irish-owned companies are paying corporation tax at 12.5%?

Yes, and the bulk of corporation tax comes from a small number of very large companies. However, the bulk of Irish companies are within the limit of £200,000.

This requires us to make a decision as to whether some measures should be taken to tax undistributed profits. The Minister has been considering this for some years. Has he come to any conclusions?

When that announcement was made just before the calling of the general election in 1997, it was also announced that the Government would be considering taxation at a higher rate for other forms of income such as companies' passive income. Developing land was also included but I cannot remember the details. I will examine other areas.

Various studies have been conducted. I am not convinced whether we should implement a range of exemptions at the higher rate. From my experience in Europe, if we began to single out some areas for a higher rate, the EU would come down on us like a tonne of bricks and claim that we have differential rates.

In theory, we could have gone to a rate of 2% corporation tax for all companies. The EU would have no problem with that. It was not that the rate was going to be 10% or 12.5% but that it had to apply to all companies. Under our current rules of state aid, the EU could not claim we have a differential rate. That was how we fell foul of the EU. The 10% manufacturing rate was all right. We had received approval for the 10% rate in the IFSC and Shannon, but the EU wrote to the Government in 1996 as a result of great events which were impending in Mayo. The EU said that it was going to view this as state aid as we had a 40% and a 10% rate.

The call was as regards what the Government was going to do. The Government of the day decided to have a single low rate for all companies. That was a big surprise to everyone in Europe. The code of conduct and the question of harmonisation has been dealt with at a different level. However, we were not going to be in breach of state aid rules if all companies were going to be charged at the same rate. If we start singling out exemptions and say that there will be a 12.5% rate for some companies the Department could think up ingenious methods for all groups. My prediction would be that the EU would claim we cannot do so.

It could not do so if we are seeking to find measures to ensure people do not dress up income or deferred income as profit so as to pay a lower rate of tax on income. I accept that there are difficulties in devising a tax which decides on what constitutes undistributed profit as it has only been retained to obtain a tax benefit. However, there is scope for abuse which we should seek to close. I understood the Minister was looking at this issue.

In opposition I mentioned on Committee Stage that there is a closed company surcharge on the Statute Book. In my experience in my former profession I saw that this measure had outlived its usefulness and proposed its abolition.

The closed company relief seeks to do a number of things but it gives a surcharge to professions in which one can set up a limited company. It is to catch profits left in the company. I have not abolished this measure.

I have never heard of it.

It is used all the time. It only applies to passive income and not trading income. It is a useful device for dealing with this area. We are still examining the areas mentioned by Deputy McDowell but I have been persuaded against abolishing the closed company surcharge. That is one of the great successes of my officials. They have persuaded me for the moment on this issue. The reason for agreeing to it is that we are going to 12.5% and there is a need to keep it at that level.

Deputy Mitchell referred to a 25% rate for passive income. It is only passive income, such as rental income, in a limited company. The normal rates of personal income tax apply to individuals depending on income. However, this is passive income in a limited company. The debate is still ongoing in the Department but I am reluctant to start singling out measures to do what people felt should have been done in 1997. We have moved on.

Questions were asked on this issue in Europe in 1997 and 1998. European tax rates are moving downward because of the force of international circumstances. That is the way to go. I have never been convinced of the arguments put forward in 1997 before I became Minister as to why we should start singling out particular areas to counter people going to 12.5%. We either have a 12.5% rate or we do not.

I agree and my party has supported the 12.5% rate. When Minister for Finance, Deputy Quinn took the initiative in seeking the 12.5% rate.

That is not correct.

I know what the view in the Department was which was articulated by the Minister. When the collective decision was taken by Government, Deputy Quinn was the Minister. I know the Department was looking for a slightly higher rate.

However, I am making a different point. If there is evidence that the 12.5% rate is becoming an income tax rate for people who are in a position to defer the use of that income, we have to send a clear signal that such practices will be clamped down on. We do not know that yet as it is too early to say. However, we need to put down a marker that it will be clamped down on and that 20%, not 12.5%, is the standard rate of income tax.

I am prepared to keep the matter under review but I have given my general views. I will not go back over the history of the 12.5% rate to spare the Deputy's blushes.

The current Government and the Minister were talking about a 10% rate which they quickly forgot.

In the rush to provide lower tax rates in 1997, our then spokesperson on enterprise, trade and employment, the Minister, Deputy O'Rourke, announced three or more months before May that we were going to stay with the 10% corporation tax rate.

Having discussed it with her colleagues.

As I spared Deputy McDowell's blushes, Deputy McGrath can spare mine. A week before the election the rainbow Government announced that it was going to a rate of 12.5%. The only pity was that it did not tell Europe about it. A total of 87.5% of all companies benefit from the 12.5% rate.

Of Irish-owned companies?

All companies liable to corporation tax. Some 87% of such companies pay tax at 12.5 %.

What about the percentage of total profits?

That would affect less than half of companies. I am considering an amendment to the rules regarding the taxation of companies referred to in Part 13 of the Taxes Consolidation Act, 1997. I may table the amendment on Report Stage.

Question put and agreed to.
SECTION 71.
Question proposed: "That section 71 stand part of the Bill."

This section provides for tax relief on corporation donations made between 1 August 2000 and 5 April 2001 to the Foundation for Investing in the Communities. The relief is only available in respect of donations made until 5 April 2001, after which date tax relief will be available for donations made to the body under section 41 of the Bill which provides for a new uniform scheme of tax relief for all donations which qualify for relief. The relief mirrors that available prior to the publication of the Bill for donations made to Enterprise Trust.

The Foundation for Investing in the Communities is a company, limited by guarantee, established as part of a major employment commitment under Partnership 2000 in conjunction with the Department for Social, Community and Family Affairs. Its main objectives are to provide, assist, encourage or support initiatives which promote enterprise and employment in the community, social inclusion or children's welfare.

The principal feature of the relief is that where a company makes a donation, this is deducted from its income. Relief is only available for donations of £500 or more and is not allowed if, at the time of making the gift, the foundation has received more than £5 million worth of donations qualifying for relief.

What did the Minister say about £500?

The position is that relief is only available for donations of at least £500. This relief is not allowed if, at the time of making the gift, the foundation has received more than £500 million worth of donations qualifying for relief. This is a transitional arrangement for one company. Relief was introduced some years ago which required minimum donations of £500, but this relief applies only to the Foundation for Investment in the Communities.

Is the Minister sticking to the maximum of £5 million?

No, the maximum figure will be abolished for everyone.

How is the foundation scheme progressing?

I do not have that information. The Department of Social, Community and Family Affairs would have it.

Question put and agreed to.
SECTION 72.
Question proposed: "That section 72 stand part of the Bill."

This section amends section 130 of the principal Act which sets out the meaning of the term "distribution" for the purpose of the corporation tax Acts. Broadly, a distribution is any dividend or other distribution out of the assets of a company in respect of shares in the company. The scope of the definition is widened to include a variety of other payments treated as distributions. A distribution is not deductible in calculating a company's income. It is regarded as a distribution out of the company's income, rather than an expense in earning that income.

One of the categories of payment treated as a distribution is interest paid by a company on a loan if the level of interest on the loan depends on the results of the company's business. This is designed to prevent what are in reality equity investments being disguised by companies as loans in order to obtain an interest deduction.

A new type of loan, referred to as a "ratchet loan" which has been developed for commercial reasons, has a link between the level of interest on the loan and the borrowing company's profitability. The link is that a lower interest rate applies when the borrower's results improve - because the lender's risk thereby reduces - while a higher interest rate applies when the borrower's results disimprove. As the level of interest on the loan is linked to the borrowing company's profitability, the interest is technically "caught" by section 130 and treated as a distribution. As these loans are commercial in nature and not a mechanism to disguise an equity investment as a loan, the interest on them should not be recharacterised as a distribution. The section provides accordingly.

I only became aware of this type of loan relatively recently. It seems to be a particularly harsh way to do business that the less one can afford to pay, the greater the interest on a loan. How commonplace is this?

It has been raised by one firm of solicitors and the Revenue has allowed it in a couple of cases.

Question put and agreed to.
SECTION 73.
Question proposed: "That section 73 stand part of the Bill."

This section terminates the relief available under section 22 of the Taxes Consolidation Act, 1997, which provides for the exemption from tax of dividends received by Irish resident companies from their non-resident subsidiaries. The relief is only available in respect of dividends specified in the certificate given by the Minister for Finance. The Minister is entitled to give a certificate where an investment plan is submitted to him and he is satisfied that the plan is directed towards the creation or maintenance of employment in the State.

The measure was introduced in 1988 aimed at promoting inward investment and, thereby, much needed job creation or job maintenance while at the same time assisting Irish resident companies. In addition, the measure is included in a list of "measures with harmful features" attached to the EU Code of Conduct Group's November 1999 report to ECOFIN. ECOFIN did not make any formal decision on the cost and Ireland has not accepted that the measure is potentially harmful. Taking these factors into account and having regard to our improved employment position in recent years, it is considered that the relief has served its purpose and can be abolished.

Section 222 is being amended in order that dividends will only be exempt where they are specified in a certificate given by the Minister before the date of publication of the Bill.

Question put and agreed to.
SECTION 74.
Question proposed: "That section 74 stand part of the Bill."

This section rewrites section 452 of the Taxes Consolidation Act, 1997, which provides that certain interest which would normally be treated as a distribution for corporation tax purposes is not to be so treated. The interest concerned is interest paid by a certified IFSC-Shannon financial service company to, broadly speaking, a parent or other associated company resident in an EU member state other than Ireland or a country with which the State has a tax treaty where the interest concerned would otherwise be deductible as a trading expense of the financial service trade. The effect of not treating interest paid in these circumstances as a distribution is that the paying company would be entitled to a tax deduction which it would not otherwise receive.

Section 452 is rewritten to apply in two separate circumstances where interest is paid by a company to its foreign parent or other associate company. First, the application of the section is extended to companies generally, not just IFSC-Shannon financial services companies. This means that interest which would normally be treated as a distribution by virtue of section 130(2)(d)(iv) will not be so treated, provided the company concerned so elects and the interest is payable in the course of the company's trade to a parent or other associate company resident in a tax treaty country or EU member state other than Ireland, and the interest would otherwise be tax deductible as a trading expense of the company.

Second, the rewritten section places on a statutory footing a Revenue practice in regard to IFSC-Shannon financial services companies which went beyond the strict statutory position as previously set out in section 452 of the Taxes Consolidation Act, 1997. This practice allowed interest paid by such companies which would normally be treated as a distribution by virtue of section 130(2)(d)(iv) not to be so treated on election by the company, regardless of the country of residence of the parent-associated company receiving the interest. This treatment will only apply to certified IFSC-Shannon financial services companies and cease to have any application once these certificates expire in 2002 and 2005.

Are we talking here about circumstances where interest is paid on a loan provided by the parent company?

Yes.

The committee went into private session at 11.09 a.m. and resumed in public session at 11.11 a.m.

Question put and agreed to.
SECTION 75.
Question proposed: "That section 75 stand part of the Bill."

Section 75 puts on a statutory footing a long standing Revenue practice applying in the banking sector. This practice allows interest paid by banks to foreign parent and other associated companies which would under normal corporation tax rules be treated as a distribution by virtue of section 130(2)(d)(iv) of the Taxes Consolidation Act, 1997, not to be so treated, provided certain conditions are met. These conditions have been incorporated into this section. The effect of not treating interest paid in these circumstances as a distribution is that the bank paying the interest is entitled to a tax deduction which it would not otherwise get.

The conditions which a bank must meet in order to elect to get this treatment are as follows. First, the interest must be treated as a distribution by virtue only of section 130(2)(d)(iv) of the Taxes Consolidation Act, 1997. This provision treats as a distribution interest paid by a company to its foreign parent or associate company. The effect of this is that if the interest paid by the bank were to be treated as a distribution by virtue of some of the other rules contained in section 130 of the Taxes Consolidation Act, 1997, then that other rule would continue to apply notwithstanding this provision. In such a case the interest would be treated as a distribution and the bank would not be entitled to a tax deduction for the interest. Second, the interest must be payable by a bank carrying on in the State a genuine banking business and the interest must, if the original rule deny deductibility did not apply, be otherwise eligible for a tax deduction as a trading expense of the bank. Finally, the interest must not represent more than a reasonable commercial return for the use by the bank of the money borrowed.

I want to ask the Minister about the administrative practice in Revenue. None of us knew anything about this administrative practice which was of great concern to me in my capacity as Chairman of the Committee of Public Accounts. Under what authority does the Revenue have administrative practices which do not have statutory backing? Is there a mechanism whereby, if an administrative practice is introduced for expedient and good reasons, it is subsequently notified to the Department, the Committee of Public Accounts or is included as soon as may be in law thereafter?

I will ask my officials to give the Deputy more details in writing on this matter. Revenue's practice notes are published frequently in The Irish Tax Review indicating how different sections will be interpreted and so on. I assume administrative practice notes fall into the same category. I am sure the power in this regard is an interpretation of the various Acts and management’s function in relation to the Revenue Commissioners which it enshrines. I assume that is the basis of it.

I would not want to tie up Revenue but it must have flexibility. I am concerned that there would not be a recurrence of the symptoms about which people knew nothing until the DIRT inquiry took place. I would like some mechanism whereby there would be a register of administrative practices or interpretations of notes. When this Bill becomes an Act Revenue will issue notes of guidance to its inspectors. These notes should be made available to the Minister and the Committee of Public Accounts.

Under FOI legislation, all these notes are available and published, including notes relating to the generality of the scheme relating to TDs which are published on the website and in all the newspapers. The instructions to inspectors in the form of SIM 263 will be made available. In recent years Revenue has a book which includes a code of practice and other documents.

There are two aspects to this. Practices are introduced which are subsequently put on a statutory footing. There are other practices whereby the law as enacted is set aside as indicated in SIM 263. That is a concern which will be addressed in the final report of the DIRT inquiry.

Question put and agreed to.
SECTION 76.
Question proposed: "That section 76 stand part of the Bill."

This section amends section 847 of the Principal Act. That section provides for the exemption from Irish tax of foreign branch trading profits of an Irish resident company in certain circumstances. The company must submit an investment plan which involves substantial capital investment and employment creation in the State and the maintenance of that employment must be dependent on the carrying on of the foreign branch trading activities. On the basis of an investment plan, the Minister, following consultation with the Minister for Enterprise, Trade and Employment, may certify a company as a qualified company for the purposes of the section. Foreign branch profits will only be exempt if they arise in territories specified in the certificate given by the Minister.

The measure, which was introduced in 1995, was aimed at facilitating inward investment and job creation in the State. The measure is included in a list of "measures with harmful features" attached to the November 1999 report to ECOFIN from the EU Code of Conduct Group. ECOFIN has not taken any formal decision on the list and Ireland has not accepted that the measure is potentially harmful.

Taking these factors into account and having regard to our improved employment position, it is considered that there should be no new entrants to this scheme from 15 February, 2001.

Accordingly, this section changes the definition of a "qualified company" so that a company will be a qualified company only if the Minister had given a certificate before the date of publication of the Finance Bill.

Question put and agreed to.
NEW SECTIONS.

I move amendment No. 92:

In page 164, before section 77, but in Chapter 4, to insert the following new section:

"77.(1) The Principal Act is amended-

(a) in Part 8 by the insertion after section 243 of the following: ’Restriction of relevant charges on income.

'243A. (1) In this section-

"relevant trading charges on income", in relation to an accounting period of a company, means the charges on income paid by the company in the accounting period wholly and exclusively for the purposes of a trade carried on by the company, other than so much of those charges as are charges on income paid for the purposes of an excepted trade within the meaning of section 21A;

"relevant trading income", in relation to an accounting period of a company, means the trading income of the company for the accounting period (not being income chargeable to tax under Case III of Schedule D) other than so much of that income as is income of an excepted trade within the meaning of section 21A;

(2) Notwithstanding section 243, relevant trading charges on income paid by a company in an accounting period shall not be allowed as deductions against the total profits of the company for the accounting period.

(3) Subject to section 454, where a company pays relevant trading charges on income in an accounting period and, apart from subsection (2), those charges would be allowed as deductions against the total profits of the company for the accounting period, those charges shall be allowed as deductions against the amount of the relevant trading income of the company for the accounting period as reduced by any amount set off against that income under section 396A.',

(b) in Part 12-

(i) by the insertion after section 396 of the following section:

'396A.-(1) In this section-

"relevant trading income" has the same meaning as in section 243A;

"relevant trading loss", in relation to an accounting period of a company, means a loss incurred in the accounting period in a trade carried on by the company, other than so much of the loss as is a loss incurred in an excepted trade within the meaning of section 21A.

(2) Notwithstanding subsection (2) of section 396, for the purposes of that subsection the amount of a loss in a trade incurred by a company in an accounting period shall be deemed to be reduced by the amount of a relevant trading loss incurred by the company in the accounting period.

(3) Subject to section 455, where in an accounting period a company carrying on a trade incurs a relevant trading loss, the company may make a claim requiring that the loss be set off for the purposes of corporation tax against its relevant trading income-

(a) of that accounting period, and

(b) if it was then carrying on the trade and if the claim so requires, of preceding accounting periods ending within the time specified in subsection (4),

and, subject to that subsection and any relief for an earlier relevant trading loss, to the extent that the trading income of any of those accounting periods consists of or includes relevant trading income, that trading income shall then be reduced by the amount of the relevant trading loss or by so much of that amount as cannot be relieved against relevant trading income of a later accounting period.

(4) For the purposes of subsection (3), the time referred to in paragraph (b) of that subsection shall be the time immediately preceding the accounting period first mentioned in subsection (3) equal in length to that accounting period; but the amount of the reduction which may be made under subsection (3) in the relevant trading income of an accounting period falling partly before that time shall not exceed such part of that relevant trading income as bears to the whole of the relevant trading income the same proportion as the part of the accounting period falling within that time bears to the whole of that accounting period.’,

and

(ii) by the insertion after section 420 of the following:

'420A.-(1) In this section-

"relevant trading charges on income" and "relevant trading income" have the same meanings, respectively, as in section 243A;

"relevant trading loss" has the same meaning as in section 396A.

(2) Notwithstanding subsections (1) and (6) of section 420 and section 421, where in any accounting period the surrendering company incurs a relevant trading loss or an excess of relevant charges on income, that loss or excess may not be set off for the purposes of corporation tax against the total profits of the claimant company for its corresponding accounting period.

(3) Subject to section 456, where in any accounting period the surrendering company incurs a relevant trading loss or an excess of relevant trading charges on income, that loss or excess may be set off for the purposes of corporation tax against the relevant trading income of the claimant company for its corresponding accounting period as reduced by any amounts allowed as deductions against that income under section 243A or set off against that income under section 396A.

(4) Group relief allowed under subsection (3) shall reduce the income from a trade of the claimant company for an accounting period-

(a) before relief granted under section 397 in respect of a loss incurred in a succeeding accounting period or periods, and

(b) after the relief granted under section 396 in respect of a loss incurred in a preceding accounting period or periods.

(5) For the purposes of this section in the case of a claim made by a company as a member of a consortium, only a fraction of a relevant trading loss or an excess of relevant charges on income may be set off, and that fraction shall be equal to that member's share in the consortium, subject to any further reduction under section 422(2).',

and

(c) in Chapter 2 of Part 14-

(i) in section 448-

(I) by the substitution of the following for subsections (3) and (4):

'(3) For the purposes of subsection (2), the "income from the sale of those goods" shall be the amount determined by-

(a) firstly, calculating such sum (in this subsection referred to as the “relevant sum”) as bears to the amount of the company’s income for the relevant accounting period from the sale in the course of the trade mentioned in that subsection of goods and merchandise the same proportion as the amount receivable by the company in the relevant accounting period from the sale in the course of the trade of goods bears to the total amount receivable by the company in the relevant accounting period from the sale in the course of the trade of goods and merchandise, and

(b) then, deducting from the relevant sum-

(i) the amount of any relief for charges allowed under section 454,

(ii) the amount of any relief for a loss in a trade allowed under section 455, and

(iii) the amount of any group relief allowed under section 456, against income of the trade in the relevant accounting period.

(4) For the purposes of subsection (3), the "company's income for the relevant accounting period from the sale in the course of the trade mentioned in that subsection of goods and merchandise" shall be determined as an amount equal to-

(a) in any case where the income from the trade is derived solely from sales of goods and merchandise, the amount of the company’s income from the trade, and

(b) in any other case, such amount of the income from the trade as appears to the inspector or on appeal to the Appeal Commissioners to be just and reasonable, but shall be so determined as if-

(i) no relief for charges had been claimed under section 243A or 454,

(ii) no relief for a loss in a trade had been claimed under section 396A or 455, and

(iii) no group relief had been allowed under section 420A or 456, for the relevant accounting period.',

and

(II) by the substitution of the following for subparagraph (i) of subsection (5A)(b):

'(i) by any amounts allowed under sections 243A, 396A, 420A, 454, 455 and 456, and',

(ii) by the substitution in section 454 for subsections (2) and (3) of the following:

'(2) Notwithstanding sections 243 and 243A, charges on income paid for the purposes of the sale of goods by a company in a relevant accounting period in the course of a trade or trades, as the case may be, shall not be allowed as deductions against the total profits, or against the relevant trading income, of the company for the relevant accounting period.

(3) Charges on income paid for the purposes of the sale of goods by a company in a relevant accounting period which charges on income would, apart from subsection (2) and section 243A(2), be allowed as deductions against the total profits of the company for the accounting period, shall be allowed as deductions against the company's income from the sale of goods, as reduced by any amount set off under section 455, for the accounting period.',

(iii) in section 455-

(I) in subsection (2) by the substitution of 'Notwithstanding sections 396(2) and 396A(2) but subject to subsections (6) and (7), for the purposes of those sections' for 'Notwithstanding section 396(2) but subject to subsections (6) and (7), for the purposes of that section', and

(II) by the deletion of subsection (5),

(iv) in section 456-

(I) by the substitution for subsection (2) of the following:

'(2) Notwithstanding subsections (1) and (6) of section 420 and sections 420A(3) and 421, where in any relevant accounting period the surrendering company incurs a loss from the sale of goods or an excess of charges on income paid for the sale of goods, that loss or excess may not be set off for the purposes of corporation tax against the total profits, or against the relevant trading income, of the claimant company for its corresponding accounting period.

(2A)(a) Where in any relevant accounting period the surrendering company incurs a loss from the sale of goods or an excess of charges on income paid for the sale of goods, that loss or excess may be set off for the purposes of corporation tax against the income from the sale of goods of the claimant company for its corresponding accounting period, as reduced by any amounts-

(i) allowed as deductions against that income under section 454, or

(ii) set off against that income under section 455.

(b) Group relief allowed under paragraph (a) shall reduce the income from a trade of the claimant company for an accounting period-

(i) before relief granted under section 397 in respect of a loss incurred in a succeeding accounting period or periods, and

(ii) after the relief granted under section 396 in respect of a loss incurred in a preceding accounting period or periods.',

and

(II) in subsection (5) by the deletion of paragraph (b),

and

(v) by the deletion of section 457.

(2) Subsection (1) applies as respects an accounting period ending on or after 6 March 2001.

(3) Sections 454, 455 and 456 shall cease to have effect as on and from 1 January 2003.

(4) For the purposes of this section-

(a) where an accounting period of a company begins before 6 March 2001 and ends on or after that date, it shall be divided into 2 parts, one beginning on the date on which the accounting period begins and ending on 5 March 2001 and the other beginning on 6 March 2001 and ending on the date on which the accounting period ends, and both parts shall be treated as if they were separate accounting periods of the company, and

(b) where an accounting period of a company begins before 1 January 2003 and ends on or after that date, it shall be divided into 2 parts, one beginning on the date on which the accounting period begins and ending on 31 December 2002 and the other beginning on 1 January 2003 and ending on the date on which the accounting period ends, and both parts shall be treated as if they were separate accounting periods of the company.”.

This amendment inserts a new section into the Bill. The new section places a ringfence on the offset of losses and charges incurred by a company in an activity which is taxable at the standard rate of corporation tax or the 10% rate.

The general corporation tax rule in relation to losses is that where in an accounting period a company incurs a loss in a trade, the loss may be offset against the company's total profits of that accounting period and of the previous accounting period. In addition, such a loss may be offset under group relief rules against the profits of a fellow group company for a corresponding accounting period. Finally, where in an accounting period a company incurs "charges on income", the charges may be offset against total profits of the company for the accounting period. Any trading losses or charges incurred for the purposes of a trade which are not offset in this way are carried forward and offset against trading income of the trade concerned in subsequent accounting periods.

The 1988 and 1992 Finance Acts ringfenced the sideways and backward offset of losses and charges incurred in a trade which was within the 10% corporation tax regime. Such losses could only be so offset against income taxable at the 10% rate and not against profits taxable at the higher corporation tax rates. However, this ringfence has not worked satisfactorily in the case of charges and group relief since the introduction in 1999 of a 25% corporation tax rate on non-trading income. The legislation concerned is being amended to ensure that the ringfence works as intended. The amendment will prevent the offset of 10% losses of an accounting period against income of the accounting period, or of the previous accounting period, which is taxed at the 25% rate. It will also prevent such losses being offset against income taxed at the 20% rate in 2001 and the 16% rate in 2002. There will be no barrier on their offset against income taxable at the 12.5% rate from 2003.

The new section also ringfences the offset of trading losses and charges incurred in the trade subject to tax at the standard corporation tax rate. Where such losses and charges incurred in an accounting period are being offset sideways in that accounting period or backwards to the previous accounting period, they may only be offset against income taxable at the standard rate or the 10% rate.

A similar restriction applies to the offset of such losses under group relief. These restrictions apply to losses in an activity taxable at 20% in 2001, 16% in 2002 and 12.5% in 2003. This change will prevent manipulation by companies which might seek to shelter income within the scope of the 25% rate. The amendment also contains consequential changes to ensure the calculations on manufacturing relief result in an effective 10% rate of tax.

Is the amendment agreed to?

We are agreeing to it in absolute ignorance. What chance do we have of comprehending what it means?

Even though the amendment is seven pages long, the principle is simple.

Tell us in simple English.

I will give the example of a group of companies where one company pays the 10% rate while the other companies pay the standard corporation tax rate, which is 20% from 1 January 2001. We are endeavouring to ensure losses incurred by the company which pays the 10% rate will be offset against other companies which pay the 10% rate rather than offsetting them against companies which pay the 20% rate, which makes them more valuable. It is an anti-avoidance measure. We introduced provisions in 1992 and 1998 and this is a further measure to stop it happening. I intend to bring forward amendments on Report Stage in connection with the new section on the ringfencing of losses introduced to the Bill by amendment No. 92. It strikes me that someone has discovered another avoidance measure and the section is trying to cover everything.

Amendment agreed to.

We now come to amendmentNo. 93.

With your permission, Chairman, can we take amendments Nos. 93 and 94 together as they are related?

Not according to the officials.

Can we discuss them together?

Is that agreed? Agreed.

I move amendment No. 93:

In page 164, before section 77, but in Chapter 5, to insert the following new section:

77.-(1) Where land or property is to be acquired under a compulsory purchase order for infrastructural or like development and the consequential development is by way of Public Private Partnership the compensation or part thereof payable to the vendor may include, at the discretion of the vendor, shares or options over shares in the said development.

(2) The Minister for the Environment and Local Government with the consent of the Minister for Finance may draw up regulations to give detailed effect to this provision.".

Amendments Nos. 93 and 94 relate to compulsory purchase orders. A major problem is that infrastructural development is being delayed because of all sorts of problems in the planning process, the environmental impact statement process, the compulsory purchase order process, etc. The proposed road to Cork, a place the Chairman knows well, will require the compulsory acquisition of 25,000 acres. Unless we streamline compulsory acquisition and make it more attractive we will be held up all along the way. This is not the only change which needs to be made to speed up infrastructural development.

We are proposing in the case of roads built by way of public-private ownership that landowners who have had their land acquired may be compensated, if they so wish, by way of share options in the proposed partnership. As land is usually acquired against a landowner's will by compulsory acquisition, we propose that capital gains tax should be waived. These provisions would make compulsory acquisition more attractive and reduce resistance to these proposals.

I want to impress upon the Minister the importance of this amendment in terms of road building and what will happen in the next four or five years. In the next two or three years the Government will acquire, through local authorities, approximately 25,000 acres of farm land for the building of new roads and motorways. Some of these roads are in the Minister's constituency and he will be familiar with them. Let me put the matter in context. In County Westmeath the new motorway from Kinnegad to Athlone will affect 320 landowners, a large number of landowners in one county. In some cases there is huge severance, while in others, there is minimum severance.

The legislation governing compulsory purchase orders dates back to 1919. The original intention of the legislation was to enable authorities to buy land mainly to build council houses. It was later extended to cover the purchase of land for roads, etc. We all agree that roads and motorways need to be built for the common good and go along with the concept of compulsory purchase orders. Nevertheless, the PPP has introduced a new dimension. Landowners in County Westmeath will, by virtue of compulsory purchase orders, be paid a minimum sum for their land, perhaps £4,000 per acre plus severance costs. Under the PPP a company will build the road and make a profit. This is a speculative development; yet, those providing the land are not being adequately compensated. In the case of housing developments, a landowner in my area will receive £200,000 per acre, while in the Minister's area the price is £300,000 or £400,000 an acre and it is much higher again nearer Dublin.

Landowners whose land is acquired for infrastructural or similar developments are not being treated fairly, particularly as companies will make gains and there will be substantial profits. We are proposing a range of options for landowners who, probably, would not sell their land if they had a choice. However, as their land can be acquired under compulsory purchase orders, they should receive special treatment. It seems reasonable to offer them share options in the companies being established. If they do not wish to avail of that option, then they should be paid adequate compensation.

The proposal in amendment No. 94 relates to the treatment of the moneys these landowners receive. A farmer who loses 15 or 20 acres by virtue of the acquisition of land for a motorway will not be able to buy other land. If he does not reinvest the money, he will have to pay tax on it. However, if there is no land for sale, he will not be able to reinvest the money. Under the compensation rates paid under the compulsory purchase order scheme he will not be able to afford to buy other land. Deputy Mitchell and I agree that our amendments are not complete in terms of doing the job we want them to do.

I suggest that we also discuss section 80 as it deals with compensation.

It deals with roll-over relief.

It is tied with what we are discussing. We need to take a close look at what will happen. Moves are afoot to prevent purchase of land. I know it can be done by compulsory purchase order. Farmers are coming together to resist things like soil testing and so on. They feel they are being stampeded in the rush to complete these roads. I was contacted only yesterday by a distraught lady - I had a number of meetings with her and her family and the local authority - who will be living at the crossroads of two major roads; her 80 acres will be in the middle of the crossroads. We held negotiations on this matter with the local authority to ensure minimum impact but she discovered yesterday that new maps have been prepared with a different layout to that previously agreed without any consultation with the family. Toll road proposals have been published and she has been more or less told, we did not consult you, so what? We must take a different approach if we are to complete those roads on time. We must be very conscious of the rights of landowners and the obligations which we, as a Government and Legislature, have to see they are treated properly. The day of steamrolling people is gone. Should such action be challenged in the courts - I am not a lawyer, perhaps some of my colleagues might clarify this - I do not think the 1990 legislation would apply. We all support the concept of buying land for housing and so on but when one pushes it out for speculation and effect the ground rules are changed. We must tread very carefully. I ask that these amendments be given careful consideration, please.

As a member of the Government I must say I agree with everything said by the previous speakers. I have a bit more to add. The Minister resides in Kildare and I reside in Laois. The N7 and N8 pass through County Laois and we are in the firing line for new roadways. To ensure these roads are completed within the timescale of the national development plan we must remove every logjam in the system. I say that as a Deputy who is meeting groups on the ground every week about this issue. I become aware of new logjams every month. Whatever Cabinet sub-committee is dealing with infrastructure, everything must click into place to ensure we meet our deadline.

It is sufficient to simply extend the rollover relief period and I will give a few reasons. I know the situation has been improved and the Minister will say the IFA came with proposals before the last budget to extend rollover relief where they reinvest from two years prior to four years afterwards. By the time we reach the end of this process the IFA will have changed its view. The unconditional contract is given at the time agreement is reached but it can be several years before the farmer receives the money because of the IFA impact statement and the snails and butterflies we encounter along the way ——

Do not mention snails.

Members will notice I said butterflies. They found a butterfly in Laois to go with the snail in Kildare.

Neither Deputies McGrath nor Mitchell want to hear anything about snails.

I am sorry. We will talk about tigers instead. This will be a long drawn out process and we must do everything we can to help it along. We need to update our compulsory purchase order legislation which was introduced at a time when land was required for the building of a hospital or a housing scheme. It does not deal with matters of this scale. We should encourage farmers to agree voluntary sales with the relevant national authority. Rollover relief only applies in cases involving CPO so we must allow, where arrangements are entered into with the local authority, for voluntary rollover relief. This section deals only with cases involving CPO.

How much capital gains tax has been paid on motorways and roadways built to date? I am told the Kildare-Laois stretch of motorway might be one of the first stretches on which farmers became liable to pay capital gains tax. The Minister can come back to us on Report Stage with that information if he does not have it with him.

A fair amount.

Good, I am pleased to hear that. I have spoken to the Minister for the Environment and Local Government about toll roads and have advised him, in the interests of these roads being built, to withdraw the proposals for toll roads in relation to part financing under PPP arrangements. The IFA locally is saying to me that whatever about selling land for a road structure, people are now being asked to sell it for commercial development. It was not appropriate, from a Government point of view, to introduce proposals for toll roads. All we have done, in my opinion, is quadruple the purchase price.

How then does Deputy Fleming think PPPs will work?

He does not think——

Shall we knock out the middle P?

I will tell the Minister how it could work. The road user will pay more at the end of the day than he would have had to pay. That is how it will work. If one increases land acquisition tax because——

How does the private person come into this? How will he be repaid? All the people in Castletownbere will then be paying an additional tax.

There is an option. I am not necessarily saying——

I will take the Minister through it. Leaving aside PPP, if a toll road is to be built as part of this process that will change the whole approach of those selling the land which will result in the project taking many more years to complete. As far as the farmers are concerned, they are selling the land for commercial development hence their view that they should have a share in the new commercial development. They have to part with their land to allow somebody else make a profit. Landowners are making an input into this project and are part of the PPP. We need to take another look at that aspect.

As a result of a couple of hundred farmers selling part of their land, there will not be sufficient extra land in specific areas for them. We will have a number of farmers with extra money but there will be less available land because a great deal of it has been taken out of the market. Where will they go to get land? Under the current capital gains tax rules a farmer over 55 years of age does not have to pay tax. That is a good thing. A person retiring also does not have to pay nor does a person reinvesting in his business. When I discussed this with members of the local branch of the IFA in my area they laughed at me saying we are reducing their farming ability and asking them to build bigger dairies when they have less land. This provision should apply once the proceeds are reinvested in any other business or trade. Farmers may not be able to reinvest money in their farming business because their ability to conduct farming will be reduced.

That is the position. Rollover relief applies if a farmer reinvests in any trade.

Any trade?

It has to be trading income. A farmer will not receive relief if he invests in, say, a very well sold life insurance product or unit trust. A person is not trading in those circumstances.

It is not confined to farming?

I am pleased to hear that.

If I remember correctly, when capital gains tax relief was introduced in 1974 it had to be a similar trade.

The period needs to be extended because of the time it takes to complete these transactions. It takes longer now than a few years ago. Anything that can be done in terms of providing compensatioin should be done in an effort to speed up the road building programme.

The Deputy is correct.

Will the Deputy wait for a reply?

I am interested in hearing the Deputies' views on how the process could be speeded up to have these works completed. Deputy Fleming said that he represents a county in which this has been a problem. I represent a county where this has been——

A nightmare.

It has not, actually. There are more bypasses and more compulsory purchase orders in County Kildare than in any other county in the State. They include the Waterford road, the Naas bypass, the Cork road and the Galway road. The first bypass was built in the county. In fairness to the IFA in County Kildare, during the years it has successfully conducted negotiations for landowners. As with all new developments, such as the first super dump and first thermal treatment plant, when they proceed people do not feel as bad about them. A former colleague and Fine Gael councillor, the late Gerard Rehan from Naas, and a former Minister for Finance from the same parish as me, Mr. Gerard Sweetman, among others, were to the fore in preventing Naas from being bypassed in the late 1950s. I recall Gerard Rehen standing up many years later at a meeting in Naas saying, "I lived to see the day when, having campaigned for Naas not to be bypassed, I am pleading for it to be bypassed". When it was decided last year that the new Waterford road would take a certain route and be part of the PPP process, three eminent individuals from Castledermot were interviewed on "News at One". The interviewer thought they would say that this was terrible, but each of them said that it was the greatest thing that had ever happened. All the towns and villages that have been bypassed in County Kildare have grown and——

——prospered whereas in Border counties, including Deputy McGrath's, there has been uproar. The experience in Kildare, Kill and Naas is that everyone wants a bypass. This proves that people get used to the idea. There are parts of the country which have been bypassed for business and so on. In County Kildare people now beg for bypasses because they are aware of what has happened to the areas where there are no bypasses.

If infrastructure is to be developed and there is to be a good road network, PPP is an essential element. I have spent much time encouraging this concept. Whatever was alleged to be the attitude of the Department of Finance to public-private partnerships no longer holds true. The hold-up regarding PPP is in the line Department responsible, which for good reason is nervous. Any forward-looking proposals submitted ten years ago were eventually blocked because of a reluctance. A unit of my Department is dedicated to encouraging development in this area. We have been pushing Departments as hard as possible in an effort to have PPPs entered into. It forms a major part of our plan to provide necessary infrastructure.

Without a shadow of doubt, no matter what company wishes to borrow money, it cannot do so at as attractive a rate as the State. If that was the criterion used, there would be no public-private partnerships, but there are other good reasons, for example, speed and efficiency, for the State to put up the money. My advice to officials in Departments is grounded on this. My fundamental line in business is that every individual is entitled to lose his or her own money. If one is willing to put one's own money up and the idea is stupid, the State should not worry about it. What it should worry about is having the final product delivered on time and at reasonable cost. People are entitled to lose their own money.

Has the Minister lost much money during the years?

I have lost money during the years. If one has an idea, one should run with it and not worry about State involvement. Public-private partnerships are important. Everyone is encouraged to come forward with new and better ideas. We have learned from the experience in the United Kingdom where the process is called PFI. Mistakes have been made there from which we are trying to benefit. PPPs form an important part in the provision of national infrastructure.

If there is to be road development to enable people to travel around the country more easily, which would be good for business, the process will have to be speeded up. As Deputies Fleming, McGrath and others indicated, planning and environmental studies are holding it up. Much time has been devoted to developing a new planning structure. A balance must be struck between the rights of individuals to protest and the national imperative.

In the public interest.

It is very difficult to get the matter right in all areas, from dumps to roads. More than most, I am aware of the difficulties experienced in County Kildare where farms have been divided. I assure Deputy Fleming that capital gains tax has been paid. It has been paid by many clients of my practice who have roads running through their land. Farms have been divided in two, as a result of which some have been made uneconomical. It is a national imperative that the process be speeded up.

Deputies mentioned tolls. The people have moved on in this regard. It is my experience that in most instances the politicians will usually follow behind. Ten or 15 years ago when Deputy Spring was Minister for the Environment and Local Government the Department tried to persuade the council, of which I was a member at the time, to allow a withholding scheme on the Naas bypass, but this was rejected. My reason for voting against it——

Was there an election in the offing?

No. It did not become an electoral issue in County Kildare. Some voted for while others voted against. Part of the reason was that he wanted to start a roads fund. My theory was and still is that if the State and the European Union provide the money and a road is built, it is too late. The road would be open at this stage and——

People will pay for it.

Yes. If a company puts up the money and a scheme is flagged for a particular time, it is entitled to charge a toll. Deputy Fleming would be guaranteed a good crowd and plenty of headlines if he suggested that there should not be a toll on a particular section of road. I happen to believe, however, that the majority have moved on. Having travelled abroad more than they used to they want to get from A to B efficiently.

Since becoming Minister the concept of shadow tolling has been put to me by various organisations, but I have not bought into it because I am of the view that those who use a product, whether it be water or sewerage, should pay for it. I do not see why those living on the Ring of Kerry who will never have a bypass should pay an additional tax to benefit those who use the Kildare bypass. I do not follow that logic. As there may be exceptions when we will have to introduce shadow tolling, I am not ruling it out forever and a day.

Shadow tolling?

Shadow tolling is where it is not on the particular stretch of road or sewer but exists in some other form. Tolls are not collected, however, that is the main point. The operator gets it.

We are going away from the tax aspect but let us take the case of the Westlink bridge, with which I am very familiar. If the Government of the day had agreed to shadow tolling, there would be no tolls on the bridge. If we had been working off some index in terms of particular usage of cars, the company would be making even more profits than it is making today and all taxpayers would be contributing to that. It would be a charge on the Exchequer, a Department of the Environment Vote payment to national toll roads. That would be ridiculous. The people who use the bridge are willing to pay for that. That concept was around even then but the Government of the day must have rejected it. I was not in Cabinet then - I do not know who was in Cabinet at that time - but it would be a ridiculous idea and people should be reluctant to go down that road.

To come back to this amendment, I am willing to examine for Report Stage the possibility of a different time period. I accept what Deputies said about the time this might be negotiated and the difficulties of people getting land but they are all trading assets and I am willing to examine that.

Deputies Mitchell and McGrath put forward the idea that one could get shares in this particular toll company. That is an innovative idea, and I do not want to knock it, but I am not inclined to accept that amendment on a number of grounds. We have the difficulty of getting the PPPs up and running and there are also difficulties in terms of the Planning and Development Act. The Planning and Development Act, 2000, has brought in provisions to streamline the planning process for complex infrastructural projects. The proposal in amendment No. 93 would increase delays in the procurement process.

It would increase delays?

Yes. We would have to enter into negotiations for shares in this particular enterprise and we are trying to get people interested in putting forward a scheme for a PPP. If we put another imposition into the PPP process that we have to give to the people whose land we affect, we will never get anybody interested in it.

To take the example of the proposed Kilcullen-Waterford scheme, at one stage, until I put my foot down, it was intended that there would be 14 separate individual contracts, including bridges, etc. I said that nobody would apply and that it would be a nightmare. Now it is down to two and hopefully we will attract interests from abroad who will bring their own people with them.

Bring in their workers.

People in some organisations would like all the business to be done here but if they only use the same pool of workers, they will drive up the price. They will not come in for the £10 million or £15 million scheme, however, even though that is big by Irish standards, but they will certainly come in for a couple of hundred million pounds project. My amendment does not cover the NRA, and I will certainly examine that aspect for Report Stage.

An objective of mine would be to try to deal with the State banks. I thought I would fail, like other Ministers, and end up with three of them on my stocks before I left.

A close run thing.

Deputy McDowell is right. One of my other objectives is that I want to be the Minister for Finance to get some real public-private partnerships up and running before I end my term. I will go out and dig the trench myself if I have to. We have been talking about the idea long enough. There are pilot projects up and running but I am talking about major ones like——

Portlaoise Prison.

A more promising one was referred to by Deputy McGrath. I cannot accept the amendments but I will bring forward amendments on Report Stage to examine the ideas about extending the period. I will not accept amendment Nos. 93 because that would put another imposition on the PPP process, which we do not want to do. Amendment No. 94 is interesting in that it would exempt people from capital gains tax but I could not agree to that.

We were talking about seafarers' allowance earlier. If I bring in exemptions from capital gains tax for people who get money for land I will have to do it for everybody. I have reduced the rate of capital gains tax significantly in my time and it has worked fairly well. The proposal in the amendment will not speed up the process and in any event we could not justify doing it on the grounds of equity. If Deputy Mitchell wants to have partners on his right half at the next election, he should not go along with this either.

What about purchase orders?

The Minister has broadened the discussion considerably. I do not want to go on at length but I agree with most of what he said. I am committed to PPPs. They are a useful, innovative way of doing things which hopefully should bring on stream projects which might not otherwise have been brought forward as quickly or as effectively. In principle, we are very much in favour of them.

When talking about roads I would make one major exception. There is no tolling in Britain but in France they toll the major stretches of motorways between cities. They do not toll the route around the city, the by-pass, because they want to encourage people not to drive through town or city centres. We should bear that in mind. If memory serves me the Limerick relief road is one of the four pilot projects the Minister initiated more than a year ago——

——which, as I understand it, would be a ring road type development so I am not sure that would be one of the ones I would have chosen to start tolling on; it would be quite the opposite. There is a major exception which should be easier to implement if we are now going for longer stretches of road. In the NRA report recently there was mention of the Enfield bypass at the Kilcock Road. They had advertised for tenders and got a substantial amount of interest from abroad.

It is encouraging that we are finally getting there in terms of being able to bring in contractors from abroad, probably, as Deputy Mitchell said, with their own workforce. We are all at one on that.

On the specific issues in the two amendments, the first idea is a good one. The thinking behind it is fairly solid in that it is giving people a stake in the company that would run the enterprise. I imagine that many farm owners or landowners would be interested in that if it were available to them. We could not force them to take shares in the company or a stake in the development but if it can be offered as an option it would be an innovative way of doing things.

I am not without sympathy for landowners but if they know that the State has to get the land and that the compulsory procedure can take quite a while, particularly with appeals to the courts and so on, people will hang on until the last minute to extract a good deal. There have been some famous examples in Dublin of that happening where road projects were held up for a long time by people who own particular properties using every last legal option available to them. They are entitled to do that and we cannot complain if they exercise their legal rights but for some, at least, this is simply a bargaining process intended to extract every last penny. If many of us were in that position we would do the same so it is difficult to be critical but, from the public interest point of view, it is not something that is entirely desirable.

As the Minister rightly anticipated, I am reluctant to go down the route of exempting land from capital gains tax in any circumstances. We have reduced the CGT rate to 20%, half of what it used to be. That is not something I supported or would support even now. As the Minister pointed out to me once before to my horror because I did not know, my party leader, when he was Minister for Finance, increased agriculture relief for CAT purposes from 10% to 90%, or something like that.

From 50% to 90%.

It is time to call a halt on that particular drift.

It was on agriculture and business.

That is right. I am not inclined to go down that route any further.

This is an interesting discussion about a major issue if we are to remove the blocks to continued economic growth. I took a personal interest in this subject before I took over this portfolio. Some months ago I was speaking to a few young lawyers in King's Inns who happened to be in my constituency. We discussed this matter and they recommended that I speak to a young lawyer who is an expert in this field. If he happens to be a young Fianna Fáil lawyer, I might ask him to talk to the Minister. He did a paper for me on the subject. There are issues that can be addressed.

To short circuit this process, without interfering with anyone's rights, we could have one environmental impact statement rather than a series for each local authority. We could have one plan involving several local authorities rather than one process. We could get over the negotiation delays, to which Deputy McDowell referred, by making a payment for what the State considers the value of the land would be, subject to negotiation and arbitration, and the remainder being paid with interest subsequently. There are ways of avoiding delays.

Vexatious complaints and frivolous matters that cause delays must be addressed as the public interest demands such matters be addressed. We must distinguish between vexatious and unreasonable objections and objections where people have a genuine right, whether they will be directly affected or there is a genuine community or environmental factor that must be taken into account.

The Minister should not reject the idea of a share option. We do not want to complicate matters. The Minister should not say he will not accept it; he should go away and consider it. This type of measure, or some variation of it, might attract landowners into co-operating.

The Minister and Deputy McDowell are at one in rejecting the capital gains proposal, but I ask them to reconsider it. There is a difference in this regard. Other capital disposals are voluntary. This matter is compulsory. On that basis alone it deserves special consideration.

Anyone would opt for a CPO as it would be free of capital gains tax.

I refer to a valid point made by Deputy Fleming. A CPO can arise only if the public authorities want it for public purposes. Deputy Fleming made the point that would mean they would have to wait for a CPO, but if it was done by way of a CPO or was intended to be done by way of a CPO, it could be done voluntarily. The Minister might build in an incentive to do it voluntarily. This would be a useful and productive discussion if we considered such a measure. If people were to get wind that there is some movement on the way, they would wait for it. We need to move on this quickly rather than wait to include such a measure in the next Finance Act. It is too urgent for that. There are measures we could introduce that would have speedy and lasting benefits for the public interest. There is a sufficient degree of consensus around the table to do something quickly in this regard. I would like the Minister to take on board the points made by all of us on this matter.

I take on board the innovative idea regarding the possibility of people acquiring shares in the PPP arrangement, but that would depend very much on the consortium that would bid and the arrangement that would be in place. I will not give any signal about a reduction in capital gains tax as the next Minister for Finance, possibly Deputy Mitchell, might want to deal with that.

Or perhaps Deputy McDowell.

It will not be me.

Did I hear the Minister correctly?

I will stay with the tax rate of 20% as I like that figure.

I welcome what the Minister said and I am glad he takes a personal interest in this matter. From what he said, I am aware that he understands the difficulties. As a rural TD, he understands the difficulties concerning farmers which is a tremendous help.

Thanks very much.

It is very difficult for any of us sitting around this table to realise what it must be like, if one is living contentedly, running one's business and suddenly someone says they want to take away a part of their land, to take away one's livelihood, to take away the inheritance one would pass on to one's family.

Returning to the case of the woman and her family who has 80 acres. One road was to cross near the middle of the farm and would have resulted in her losing 25 to 30 acres of her best land.

Is the Deputy making a new point?

It is a new point on an important topic. There is a major interest in it in the House. I am sure that on Report Stage a flock of Members from all sides of the House, including Deputy McDowell's colleague, Deputy Penrose, will want to talk on this matter as it is a major issue.

That lady's land was being divided in that way and on the other side of her farm there was the other road. To cap it all Lagan Industries, which was developing a major plant there, had its access road through another part of her land and then suddenly the council decided to put another road through her farm. I can understand there are major difficulties. The family would be happy enough if an industrial plant or a distribution depot was built there as it would be a perfect location, given that there would be access to it from the two roads.

How is that related to the taxation side?

Returning to the taxation side, a special case could be made where land is compulsorily bought in that, if the families affected had the opportunity, they would not voluntarily sell their land. Why should such a situation pose major tax implications for them? Such a case deserves special consideration. Another valid point is, if this family's 80 acres were bought, where will they be able to buy a farm to resume their business? Land for farming purposes is not for sale and the cost of buying a farm is enormous. The chances of the 320 landowners in my area being compensated for what they will lose is virtually non-existent. They would have pay tax on whatever they would get; where else can they invest their money?

I am in favour of PPPs as I want roads to be built. We need to put in place a procedure that will streamline the process. The Minister will be aware from his experience of the local authority in his area and dealing with the building of the bypass in Kildare, that the local authority concerned will give the farmers affected approximately £4,000 an acre for their land, that farmers would reject that offer and go to their solicitors.

The Deputy is trawling through this.

I am but it is an important point in terms of PPPs. I ask for some leeway.

I have given the Deputy plenty of leeway.

A farmer would go to his solicitor who, in turn, would engage four or five advisers, all of whom would carry out surveys and produce reports. Instead of the £4,000 per acre originally offered, the farmer would get £5,000 an acre, but what would the boys gather? They would gather rakes of money. If the farmer had got——

The Deputy is expanding on the point.

I will finish now. If the farmer had been offered what all that would cost, £8,000 or £9,000 an acre, the deal would have been signed, sealed and delivered.

A mechanism needs to be put in place to provide for early settlement in such cases to facilitate the PPP process, otherwise it will be bogged down. I witnessed the start of that already where people are becoming entrenched and saying no, it is speculative investment and they will not co-operate under those terms. The group who deal with such matters in the Department of Finance need to urgently consider how they can free up the process to address the difficulties that will arise.

Mullingar bypass is open nine or ten years and there are still some deals which have not been concluded.

I appreciate the points made by the Deputy. I am interested in expediting the growth of the infrastructure and achieving the modern 21st century infrastructure the country needs for all types of reasons. The PPP idea is part of that. People referred to roads but it applies in other areas also.

The rail sector.

Yes. As the legal system is grounded on the Constitution it is difficult to balance the public interest against the rights of individuals. Various projects have been held up over the years. The Taoiseach constantly refers to the fact that years ago he announced the opening of the port tunnel but, ten years later, work has only started in the last few months. People have their rights and wish to protect them. Their solicitors, barristers and advisers will help them in that. The Cabinet sub-committee on infrastructure has given much thought to ways of expediting the problems while protecting those rights. The Attorney General looked at various constraints to see if he could come up with a process that would speed things up. Take the road from Kilcock to Athlone, for example. That will go through Kildare, Meath and Westmeath. There will be three local authorities involved.

No, only one.

One legal authority.

There could be a series of CPOs, planning objections and environmental objections. The issue is to devise a process whereby over six or nine months these matters will be dealt with in one forum, in Kinnegad or wherever, under one judge who would be involved with nothing else. These ideas have been put forward and the legal issues are still being considered. If we go through the present process, which has developed over a period of time and in which a body of law has built up, everybody at this meeting will be well out of politics, regardless of how successful they are, and probably gone to the other side before half the infrastructure will be developed.

I agree with Deputy McGrath that there will be a big debate about this on Report Stage. For a long time Kildare was probably the place where all these CPOs took place. The other counties are now being affected so there will be a big debate. I will not consider any further change in capital gains tax or giving a special rate here. One of my officials tells me that the road widening in Blackrock, which was part of the bigger development there, was held up for years. The Portuguese Embassy held it up because it was going to lose part of its garden. So it is not just Irish people who do it. The embassy was perfectly within its rights. However, we have to develop a legal process that will deal with EISs, CPOs and objections. Otherwise, we will be pushing up the daisies before it is done.

The Minister must use the carrot; the carrot must be there.

I will see what can be done but I am not giving a commitment. I am doing my level best to get real PPPs going——

The Minister has the expertise.

This is a useful and important discussion. I doubt that these things will necessarily be resolved by Report Stage but we would facilitate the speedy passage of a Finance (No. 2) Bill, if necessary, to give effect to this later or before the summer. It is a most important area. The Minister referred to capital gains but he might wish to reflect on that too.

I like to have certitude about these matters.

The Minister is not saying yes to it but I hope he is not giving it a definite no.

I am saying no to it.

Is the amendment being pressed?

No, but we will put down a refined amendment on Report Stage.

Amendment, by leave, withdrawn.
Amendment No. 94 not moved.
SECTION 77.
Question proposed: "That section 77 stand part of the Bill."

This section implements the recommendations contained in the report of the commission on the private rented residential sector regarding capital gains tax rollover relief. Capital gains tax rollover relief was, until now, only available in respect of the disposal of assets of a trade but will now be available in respect of the disposal of certain investment property. The property concerned must be a residential property in respect of which the person is entitled to rent and it must contain at least three separate residential units.

The relief provides that no capital gains tax is payable where the proceeds from the sale of such a property are reinvested in another residential investment property which has at least the same number of separate residential units as the property which was sold. Instead, the gain is deferred until such time as the replacement premises is disposed of.

The same conditions which apply to the existing rollover relief for trading assets will apply to this relief. The principal conditions are that the replacement property must be acquired in the period one year before and three years after the disposal of the original property. Partial relief is available where the property was not a qualifying property throughout the whole period of ownership of the person. If the property was not rented out by the person during the whole time the person owned the property or the property did not contain at least three separate residential units or did not meet certain housing regulations during all this time, the relief is only available for the period of time the property met all these conditions.

This was one of the recommendations of the report of the commission on the private rented residential sector. It suggested that capital gains tax rollover relief would be available in certain circumstances. The Irish Property Owners Association has been pressing me for a number of years in this regard so when the proposal surfaced in the commission's report, I agreed to do it.

I understand the reason for it. We will give it a chance for a few years and see how it goes.

In this area, Deputy McDowell might be surprised to discover that his views and mine coincide more than he might expect.

The Minister is examining his conscience.

I am going ahead with it as well. I have acceded to the commission's recommendation in this area.

Question put and agreed to.
SECTION 78.

I move amendment No. 95:

In page 168, to delete line 16, and substitute "(2), other than to his or her spouse, and".

Section 78 provides that where a parent transfers land to his or her child no capital gains tax accrues on the parent, provided that the land is valued at not more than £200,000 and the transfer takes place to enable the child to build a principal private residence. However, the gain which would have accrued on the parent accrues on the child where the child disposes of the land or part of the land without having first built and occupied for a period of at least three years a principal private residence on the land. This amendment provides that this gain will not accrue on the child where he or she transfers his or her interest or part of the interest in the land to a spouse.

It is a good idea.

It is my own idea. Most parents, including my mother, transfer sites to children and the children build a house on it. There has been an increase in the value of sites in recent years and although, strictly speaking, no money changes hands, the transfer triggers a capital gains point whereby that is deemed to be a sale at open market value. Therefore, one could get the house free from one's parents but a vigilant inspector of taxes or a vigilant accountant who does tax returns for the parents could say there is a capital gains tax charge involved. The site could be valued at between £60,000 to £80,000 and capital gains tax would have to be paid on something in which no money changed hands. That created all kinds of difficulty. I decided that a transfer from a parent to a child, provided the child builds the house on the site and lives in it for three years, up to a value of £200,000, would be okay for capital gains tax.

On Second Stage, Deputy McGrath mentioned gift and inheritance tax. I answered the question about capital gains tax but not the question on inheritance tax. Inheritance tax is a separate matter but it is unlikely a normal site would be caught. I have increased the inheritance tax thresholds with regard to a child inheriting from a parent to £318,000 so capital acquisitions tax should not come into it. It would not apply on the sale of a site under £200,000, but if it is aggregated with other gifts a child has received, it could possibly make him or her liable to inheritance tax. The Deputy raised this point earlier but I did not respond to it then because of time restrictions.

In this case, does "child" include a foster child?

Does it also include the child of a spouse?

And the favourite niece or nephew.

The favourite nephew or niece is covered under the capital acquisitions tax code relating to agricultural relief to which Deputy McDowell referred earlier.

What is the position regarding siblings, such as a brother and a sister or two brothers?

No, it only applies from parent to child.

Would it be worth considering extending it in certain circumstances, for example, if a brother gets married and they all agree a sister should move out of the house?

The Deputy appears to speak with some experience in that regard.

I have extensive farming in-laws.

The Deputy has a big family.

I am much more informed about agriculture than most people suspect.

The Deputy is doing all right.

I know why that is the case and the people would define that part of Ireland. I did not consider that aspect but I do not want to open up a new tax avoidance mechanism. I am aware that this problem is cropping up. The Chairman encountered a number of similar cases in his constituency in the last number of years and he brought them to my attention. In those cases, capital acquisitions tax had to be paid although no money passed and the site had been built on. There were also likely to be a few cases in my constituency if people complied with the full rigidity of the law. Most of these sites would not have been anything like as valuable then as they would be now. If one can get planning permission for a country site in County Kildare, it would be worth a colossal amount of money. A sum of £5,000 or £6,000 would have been a great price some years ago, but 20 times that amount would not cover the cost of a site now.

A site would be valued in that way and capital acquisitions tax would be charged if a person completed his or her form correctly. However, hundreds of people probably are not aware that they have an evidential capital gains charge because they would not have been aware of the position. Some solicitors are bringing it to the attention of their clients that the transfer of land may trigger a capital gains tax charge. My proposition of up to a value of £200,000 is reasonable for transfers from parents to children. However, in deference to Deputy Mitchell, I will consider whether it should be extended to others in the future.

I agree with the section but there is a real problem in this area and it is more acute in some parts of the country than others. We will consider tabling a Report Stage amendment, the purpose of which would be to extend the provision in certain circumstances to siblings.

I broadly support the principle behind the section. The only caveat I would enter is that, in circumstances where money changes hands, a charge of capital gains tax should arise as it would otherwise. The Minister's proposal obviously envisages voluntary transfers because no money changes hands, but that is not covered in the section.

It makes no difference whether money is transferred. However, the Deputy's point is reasonable.

If the parent is making a profit from the transfer, there is no reason that a capital gains tax charge should not arise.

Many elderly people live in poverty. They may be asset rich, but cash poor.

Some of them live in dire poverty. We need to consider ways to help them partly liquidate their assets to ensure they do not continue to live in poverty. This is also the case in urban areas.

The suggestion that old people should be allowed to sell their property without a capital gains tax charge is too much.

I know people in this city who are asset rich, but who are living in dire poverty.

That is true.

A later amendment seeks to give effect to a proposal in this area. Instead of the State having to bail them out by way of social welfare because their income is low, provision should be made where they can easily realise some of the value of their estate to pay their living costs or their health and care costs. One suggestion is that the State could pay their care costs or give them additional benefits by taking a lien on part of their property after they die. Many parents or elderly aunts or uncles are totally neglected. They are living in poverty and when they die, the estate goes to people who never cared for them.

There is a resonance about that in terms of a recent controversy.

I am aware of cases where there was much money but people were living in atrocious poverty.

This is a great section which deals with a real problem. However, why must there be three years occupancy? Why will it not apply to the first occupancy? Can people be forced to live in a house for three years?

A sum of £200,000 for a site without planning permission could comprise many acres in rural areas. A person could get the site free of capital gains tax and carry out a development. He or she could hold ten houses and sell them after three years. Can a person circumvent the measure by building houses and selling them after three years?

The principle behind the provision is where a father or mother transfers a site to his or her son or daughter to enable him or her to build a house for his or her use or occupation. This happens in most counties. I do not want to open up a situation where people transfer sites for a certain amount and then build many houses. That is not the intention of the provision.

It excludes that possibility.

It will only apply once.

That is necessary.

It is a reasonable proposition.

It does not specify that one can only build one dwellinghouse.

No, but it must be one's principal, private residence.

A £200,000 site is big in most cases.

It would be a very big site, but values are increasing in my county and roads to County Westmeath are being developed. I do not know how people can do it now, but people have bought a half acre site for £100,000 or more and then built a house on it. Deputy Mitchell referred to County Galway and I have heard of people paying large sums for sites there. However, it is very difficult to get planning permission.

That is the problem.

Yes. There are other environmental reasons.

If planning permission existed but has lapsed, it is not being renewed although more houses are required. This is a problem in Kildare also.

Amendment agreed to.
Section 78, as amended, agreed to.
SECTION 79.
Question proposed: "That section 79 stand part of the Bill."

In the Finance (No. 2) Act, 1998, the capital gains tax rate was reduced from 40% to 20% for the disposal of development land which had planning permission for residential development. It was provided for in the Act that this 20% rate would be increased to 60% for disposals after 5 April 2002. This was the carrot and stick approach recommended in the first Bacon report to bring to the market land suitable for residential development. The Finance Act, 1999, continued this approach by extending the 20% capital gains tax rate for disposals up to 5 April 2002 of land zoned for residential development and disposals to the National Building Agency and the voluntary housing sector. In the Finance Act, 2000, the rate of capital gains tax on disposed land generally was reduced to 20%.

The supply of residential land has considerably increased in the past two years and there was a big increase in the number of full planning permissions granted in 2000 compared to 1999. Some 86,500 housing units received planning permission in 2000, representing an increase of 13% on the 76,500 units granted permission in 1999. These figures compare to target output in the third Bacon report of 55,000 private house completions annually necessary to bring supply in line with demand.

In addition, if the 60% rate of capital gains tax was to apply from 6 April 2002, it would mean that a rate of capital gains tax on zoned residential land would be three times that on zoned commercial land. This could result in land being diverted from residential to commercial development. Section 79, therefore, abolishes the 60% capital gains tax rate on the disposal of residential development land which was to take effect for such disposals on or after 6 April 2002. The rate will now be 20% as it is for the disposal of land generally. I am sure Deputy McDowell wishes to say something.

Arising out of the discussion here, I will table an amendment on Report Stage.

Very good.

I am concerned about this matter. It is something that really deserves to be teased out more. I will raise it on Report Stage, also.

I am now required to put the following question in accordance with an order of the Dáil of 1 March: "That, in respect of each of the sections undisposed of in Part 1, the section or as appropriate, the section, as amended, is hereby agreed to."

Question put and agreed to.
Sitting suspended at 12.30 p.m. and resumed at 2 p.m.
SECTION 81.
Question proposed: "That section 81 stand part of the Bill."

The purpose of this Part is to consolidate and modernise excise legislation which dates back to the 1820s and has been supplemented and amended over time to the extent that it has now become very fragmented and disjointed.

This consolidation and modernisation will result in a streamlining and simplification of legislation. It will make it more transparent, accessible and manageable for the business community, administrators and enforcers. Consolidation and modernisation consist of weeding out obsolete legislation, reordering the remaining legislation into a more logical arrangement, making clearer the connections between provisions and using up to date terminology, including terms taken from EU law. The present exercise is phase 2 of a programme of excise law reform. Phase 1 consisted of a reform of mineral oil tax law. This was contained in the 1999 Finance Act. It is hoped to introduce phase 3, the reform of alcohol excise legislation, in the 2003 Finance Bill. The Part does not introduce any new duties on excisable products.

The opportunity, however, is taken to address some minor deficiencies in existing provisions. These concern section 115, the powers of mitigation of penalties imposed by a court are harmonised; section 116, a presumption is introduced in relation to proceedings in tobacco offences which will facilitate prosecutions; section 119 makes provision to enable a Revenue official to have a vehicle kept stationary or removed to a suitable place for excise control purposes and section 125 will enable the Garda Síochána, in addition to other existing rights of seizure, to detain unstamped tobacco products. The opportunity is also taken to standardise the level of penalties at £1,500 to be consistent with comparable penalties in other areas of excise law.

Question put and agreed to.
SECTION 82.
Question proposed: "That section 82 stand part of the Bill."

This section defines the excisable products covered by this Part. It also sets out the provisions of excise law which impose excise duty on them. The section also provides that the Revenue Commissioners can decide questions of an appropriate classification of excisable products or whether products qualify for relief for excise duty. No change of substance is involved.

In so far as there are very few changes of substance I see no merit in discussing the section.

I will bring changes of substance to the attention of the committee.

Question put and agreed to.
Sections 83 and 84 agreed to.
SECTION 85.
Question proposed: "That section 85 stand part of the Bill."

This section provides that excisable products on which duty has been paid in another member state are liable to duty when they are imported into the State. There is an exemption to this rule for alcohol and tobacco products acquired in other member states by private individuals for their own use and personally transported by them to the State. No change of substance is involved.

Does that mean if excise has been paid in another member state it can be levied again by this State?

Technically, yes.

Does that happen?

We repay the other member state. I am not an expert on excise duty.

Do repayments happen in practice?

Very few commercial transactions arise requiring repayment.

Are alcohol and tobacco included?

It covers all excise duties, including alcohol and tobacco. However, there is an exception to this rule for alcohol and tobacco products acquired in other member states by private individuals for their own use.

Question put and agreed to.
Sections 86 to 88, inclusive, agreed to.
SECTION 89.
Question proposed: "That section 89 stand part of the Bill."

This section provides for relief of excise duty in the case of delivery to diplomatic missions or international organisations based in the State. It also provides for relief from duty where excisable products are purchased by private individuals in another member state and personally transported by them to the State. No change of substance is involved.

Was there not a scam involving diplomats bringing in goods?

Perhaps it involved the former EU Commission.

The committee went into private session at 2.15 p.m. and resumed in public session at 2.16 p.m.

Question put and agreed to.
Sections 90 and 91 agreed to.
SECTION 92.
Question proposed: "That section 92 stand part of the Bill."

Are the provisions of the directive already in force?

Question put and agreed to.
Sections 93 to 95, inclusive, agreed to.
SECTION 96.
Question proposed: "That section 96 stand part of the Bill."

What is the position with goods purchased duty free in other member states?

The committee went into private session at 2.18 p.m. and resumed in public session at 2.25 p.m.

Question put and agreed to.
Sections 97 to 99, inclusive, agreed to.
SECTION 100.
Question proposed: "That section 100 stand part of the Bill."

When will the Minister equalise the cost of vehicles in Ireland with the cost of those in other EU member states?

I have been interrogated about that both inside and outside the Dáil, and about a year ago I was asked about it on television. It is not on my agenda. I have signalled what is on my agenda in the area of taxation and that is not on it.

So much for EU harmonisation.

That is the position in that area. Incidentally, Ireland is not the only EU member state which imposes such taxes. We call our tax VRT but in other countries there are other names given to a similar type of tax. In any case, the Deputy can rest assured that the issue is not on my agenda. Perhaps the next Minister of whatever party will have it on his agenda. It is not on mine.

While, on the face of it, it is an appealing argument to reduce the price of cars, it is impossible to construct an argument that the current VRT rate is a disincentive to buy new cars because the number of new cars is enormous.

That reminds me that I am waiting for a return on some wagers I placed in various parts of the country after my first budget, when I rebalanced this provision. I must collect some outstanding bets from people in my own party who kicked up a row about it. I wagered that car sales would increase and they did increase dramatically.

The Minister won that bet anyway.

They were all telling me that car sales would collapse. In fact, one retailer, who I think is a member of my party in the south-east although I did not know him, nearly cried about it on Today with Pat Kenny or some such radio programme, but sales have doubled since then.

I am surprised at the Minister.

While we are on the issue, if you will indulge me a little, Chairman, reading the TST paper on the issue——

On this issue of VRT?

I think it is on this issue or on the issue of green taxes, it is one or the other. Basically, the net issue is whether VRT might be reduced on vehicles which are more environmentally friendly.

I did introduce a provision in the budget to deal with hybrid vehicles. I had intended to try to introduce it in the previous Finance Act but the company which was pushing it at the time said that no matter what I change I brought in, they were not able to conclude a deal with their head office in Japan to charge a realistic price. In the year since, they have made further progress and I made a change in this year's budget, lowering the rate of VRT on what I called hybrid vehicles. I think there is a more technical term for them but that is the term I used in the budget. It is contained in section 153 of the Bill. The measure reduces the VRT rate by half in order to encourage sales of such vehicles.

For as long as I have been around, people have been thinking of ways vehicles could run on everything bar petrol. A colleague of Deputy McGrath was very interested in this area. In the audience there is an official of the Revenue Commissioners who would be quite expert in the area. It is an interest of his. There have been enormous developments in this area in recent years. Now they are able to produce vehicles which would be very environmentally friendly which will not need petrol or diesel. The market has progressed dramatically due to research over the years.

There are at least two models which will be sold on the Irish market. Since last year another major company has come forward with such a vehicle. Therefore in two years what was dreamt about years ago will become a reality. They think these products will sell well and that is why I have provided for this VRT relief.

Of course in doing this I must be conscious of the fact that if everybody turned to such vehicles and availed of this VRT relief, then the amount of money being collected in this area of taxation would decrease and I would have to look again at the matter.

I may have made a number of fairly significant changes in respect of taxation which may not have pleased some commentators or members or particular parties, but there is a certain logic to what I have done. There is no logic to the argument that we should continue to reduce direct taxation while at the same time reducing indirect taxation, such as VRT. The Exchequer has to obtain money from somewhere. If the market was transformed overnight, with people opting for these hybrid vehicles, we would then be obliged to take action. This is an incentive under section 153; it is a two year pilot scheme designed to encourage people to become involved in this market.

Question put and agreed to.
Sections 101 to 105, inclusive, agreed to.
SECTION 106.

I move amendment 96:

In page 187, line 32, to delete "96, 97, 98, 99, 100, 101, 102" and substitute "94, 96, 97, 98, 100, 101 or 102".

The purpose of this amendment is to prevent cross-referencing in the Bill as printed.

Amendment agreed to.
Section 106, as amended, agreed to.
Section 107 agreed to.
SECTION 108.
Question proposed "That section 108 stand part of the Bill."

This section makes it an offence to resist or obstruct a Revenue officer, or member of the Garda Síochána, exercising any power under Chapter 4. It is also an offence to fail to comply with any requirement of that chapter or to give false or misleading information to a Revenue officer or a garda. There is no substantive change from current law.

Question put and agreed to.
Sections 109 and 110 agreed to.
SECTION 111.

Amendments Nos. 97 to 99, inclusive, are related and may be taken together by agreement.

I move amendment No. 97:

In page 189, subsection (5)(a), line 16, after "proceedings" to insert "in respect of an excise offence".

These amendments are largely technical in nature. I am advised that the phraseology used in section 111(5)(a) is simply too broad and, presumably, it is intended to refer to summary proceedings in respect of an excise offence as opposed to more general summary proceedings.

In the past I have been happy to agree to such amendments but on this occasion I am not in a position to accept them. Amendment No. 97 is opposed because it is not necessary as subsection (1) provides that the scope of the section is this area of excise offences. There would also be a problem of consistency between the proposed reference to an "excise offence" and the more detailed and comprehensive description in subsection (1) of the offences concerned.

I accept that and I will withdraw the amendment.

Amendment No. 98 is also opposed. A time limit of three years for the institution of proceedings for an offence under this chapter is required in view of the nature of these offences and for consistency with the time limits which currently apply to offences of that nature.

The offences provided for are, for the most part, in the area of evasion of excise duty and illegal importation. By their nature they require more complex investigation, including inquiries abroad. A one year time limit would not be sufficient in many cases to complete these investigations and take the necessary steps to initiate proceedings. Proceedings dealt with under subsection (5)(a), which covers offences specific to the tobacco, alcohol or oils excise regimes, tend not to require such lengthy investigation and hence have a one year time limit. At present, a three year time limit applies for proceedings for offences of this nature because they are technically offences under customs law. They are now being consolidated and modernised as excise offences.

I am not sure I follow the Minister's point. Why do offences of this nature require a three year limit and greater investigation?

By their nature they require more complex investigations, including inquiries abroad.

Will the Minister expand on his explanation?

A one year time limit would not be sufficient.

Why is it that these particular offences require inquiries abroad, etc? As I understand it, the basic principle, on indictment, for offences which come before the Circuit Court is that there is no limit. Normal practice has been that minor offences dealt with in the District Court should be dealt with within six months or a year. In this section we are allowing the Revenue a liberal amount of time to mount a case or prosecute an offence. Three years is quite a long period.

I am advised that it is due to the sheer complexity of the crimes involved and the time required to investigate them. Under the Taxes Consolidation Act, we have up to ten years to initiate proceedings.

Income tax proceedings?

Am I correct in stating that we are discussing relatively minor offences in the excise area and District Court proceedings?

I am advised that there could be Circuit Court proceedings in this area.

Is it not correct that Circuit Court proceedings would not be summary and that this limit would not apply?

As I understand it, these are summary proceedings of a lower court so they must be of a more minor nature.

The Deputy's point is that the same length of time would not be required.

Precisely, because they are, by definition, minor offences.

Perhaps we will go into private session.

The committee went into private session at 2.37 p.m. and resumed in public session at 2.39 p.m.

Amendment No. 99 is opposed. The Probation of Offenders Act does not currently apply to any offence in relation to any tax or duty. The offences concerned are subject to mandatory penalties which can only be mitigated within certain limits set down in law. These provisions would be made meaningless if the Probation Act could be applied and no penalty imposed.

Again, I am not quite sure I understand the Minister's statement. The basic principle in the Probation of Offenders Act is to give the court, in circumstances where it chooses to use its jurisdiction or discretion, the power to give a person the benefit of probation where a first offence or minor offence has been committed or where the circumstances are such that the court is satisfied that they should not have a criminal record on foot of their offence. It seems there is nothing peculiar about customs and excise law or offences which would oblige us to exclude the possibility that a judge might decide to give somebody the benefit of probation under the Probation of Offenders Act. I do not understand why that discretion should be removed in these cases.

The Probation Act does not apply to any offence related to any tax or duty. That is a fundamental rule in regard to any tax or duty offence.

Because tax evasion is not regarded as such a serious crime in certain parts of the country.

In certain parts of the country it is not regarded as a crime.

We hope people will not repeat. The Probation Act does not apply to any tax or duty offence. That has been the case since time immemorial.

We will not get anywhere with this but on the face of it I do not see why a judge should not have the same discretion in customs and excise cases as he has in all other cases and should not use it in the same manner.

Amendment, by leave, withdrawn.
Amendments Nos. 98 and 99 not moved.
Section 111 agreed to.
SECTION 112.
Question proposed: "That section 112 stand part of the Bill."

Section 112(1) states that in the absence of a valid claim within one month the thing seized is automatically condemned and forfeited. Section 112(2) provides that where a claim is made the court shall determine whether the thing in question should be returned to its owner or condemned as forfeited. Section 112(3) states that where a thing is condemned by the court or by default this is effective from when liability for the forfeiture first arose. Condemnation proceedings were instituted in seven cases in 2000 with a further ten carried forward from 1999. One case was won, three cases were lost or settled out of court and a further 13 await hearing.

Question put and agreed to.
Section 113 agreed to.
SECTION 114.
Question proposed: "That section 114 stand part of the Bill."

This section is blunt in so far as it gives absolute protection to officers in circumstances where they have seized or detained anything which ultimately does not stand up in court. There is a requirement that the judge must certify there was probable cause for deceit. The stipulation in the section that the plaintiff is not entitled to any damages or costs in those circumstances is rough when it has already been established there was not appropriate cause for seizing the goods in question.

The section provides that where an action is successfully brought for wrongful seizure or detention the plaintiff is entitled only to restoration of the goods but only if the court also finds there was probable cause for seizure and detention in the first place. To effect the measures against the continuing threat of excise fraud it is essential that Revenue officers and gardaí can continue to exercise powers of seizure and detention where it is reasonable in the circumstances to do so. The section does not protect anyone who detains or seizes goods without reasonable cause to do so.

I anticipated the response. However, there are circumstances, for example, a car seizure and, notwithstanding the fact that Revenue might have had cause, people can be caused at the very least considerable inconvenience for the period they are deprived of their goods. They are not entitled to damages or the costs of taking successful proceedings. That loads the dice too much in favour of Revenue officers.

Does the Deputy think that if the section were amended Revenue officers would be more careful and, consequently. less effective?

How many cases have been taken which established that there was wrongful seizure? Where somebody goes to court and it is decided their goods were wrongfully seized, he or she should at the very least by entitled to his or her costs if he or she wins.

That is a reasonable point and I will consider introducing an amendment on Report Stage because an individual might not bother to go to the trouble of going to court and if he won it is a little much if he was not awarded costs for his trouble.

Question put and agreed to.
Section 115 agreed to.
SECTION 116.
Question proposed: "That section 116 stand part of the Bill."

The section relates to presumption. Much of this terminology is new to me. First, the section provides that in excise proceedings certain things may be presumed to be true until the contrary is proved. This allows cases to proceed without presentation of proof that a particular duty was not paid or the products are what they obviously appear to be. This represents no change from current law. Second, the section also provides that persons found in possession of excisable products which have been produced or imported other than under the required procedures are presumed to have failed to comply with those procedures. This represents no change from current law. Third, a presumption is introduced that in proceedings for any excise offence involving tobacco products anything which reasonably appears to be a cigarette or other tobacco product by virtue of its form, labelling or packaging shall be taken to be so until the contrary is proved.

I am persuaded by the force of the Minister's argument.

Question put and agreed to.
Sections 117 to 129, inclusive, agreed to.
SECTION 130.

Amendments Nos. 101, 103 and 104 are related to amendment No. 100 and all may be taken together by agreement.

I move amendment No. 100:

In page 200, subsection (5), line 26, to delete "30 days" and substitute "2 months".

These amendments relate to the manner in which an appeal is mounted. The section requires that an appeal should be lodged within 30 days. With regard to technical offences of this nature as the Minister described them, a longer period would be appropriate. Thirty days is a short time to reasonably mount an appeal. It often involves advice from accountants as well as solicitors. A longer period should be allowed for people to challenge Revenue decisions in that regard.

I agree to the amendment. In practice, the Revenue Commissioners have been flexible with time limits.

Does the Minister agree to amendment No. 101?

No, I oppose it.

Will the Minister read the note? It deals with the same point.

I am advised to oppose it. If the time limits set down in this subsection are to have any relevance, they must apply to the generality of cases. The amendment would give the Revenue Commissioners the power to ignore them at will.

Given that the Minister has accepted the previous amendment, I do not have a difficulty with that.

I also oppose amendment No. 102 because it would be contrary to the interests of the appellant unless he or she was told the reason. As it stands, section 130(12) provides that, where an appeal is not heard within the stipulated time, it is deemed not to have been upheld. In these circumstances, the appellant has the right to appeal to the Appeal Commissioners unless the commissioners belatedly make a determination in his or her favour. If the amendment was allowed, the appellant would not have access to a further appeal until the commissioners finally made a decision. A similar time limit is laid down in section 41 of the Freedom of Information Act, 1997.

What is the practice where a default decision is made? Is the appellant notified of the decision where the period expires? How often does this happen in practice?

They are notified.

Is the decision normally made within 30 days? Is a default decision of this nature normal practice or a normal occurrence?

I am told that it would be unusual, that a decision would usually be made within the deadline.

We are dealing, therefore, with circumstances where a small number of cases would arise.

The Deputy's amendment would be contrary to the interests of the appellant.

I am satisfied on the grounds that I am assured that appellants are notified of the default decision before the 30 day period for the second appeal begins to run.

Amendment agreed to.
Amendments Nos. 101 and 102 not moved.
Section 130, as amended, agreed to.
SECTION 131.
Amendments Nos. 103 and 104 not moved.
Question proposed: "That section 131 stand part of the Bill."

I propose to table a technical amendment on Report Stage to correct a drafting error in this section. It is proposed to amend the wording to ensure the 30 day time limit for giving notice of intention to appeal applies to both paragraphs of section 131(2).

Question put and agreed to.
SECTION 132.

I move amendment No. 105:

In page 202, line 30, to delete "such amount of duty" and substitute "the amount of duty which the person alleges to be payable".

I oppose the amendment. The requirement of prepayment of the amount in dispute is essential to prevent the appeals system being swamped by vexatious appeals. The majority of excise appeals relate to vehicle registration tax, especially the valuation for VRT purposes of imported secondhand cars. Without this prepayment requirement, it is likely that the majority of such valuations would be appealed as a matter of course, regardless of the merits of the case.

The amendment stipulates that the amount paid should be the amount the claimant believes is chargeable as opposed to the amount Customs and Excise believes is chargeable.

All taxpayers would like such a system.

Is the amendment being pressed?

No, at this late stage I could not summon the persuasive force to go for it.

Amendment, by leave, withdrawn.
Section 132 agreed to.
SECTION 133.
Question proposed: "That section 133 stand part of the Bill."

This is where criminal and civil proceedings run side by side. The section states that one must be completed before the other can begin. I indicated that I was opposed to the section because I was not sure I understood the logic behind it.

It is a basic legal principle that criminal proceedings take precedence over civil proceedings. Where the same facts give rise to both civil and criminal proceedings, the civil proceedings may not be heard until the criminal proceedings are completed. The section provides that, in accordance with this principle, excise appeals cannot proceed where the liability at issue is also the subject of criminal proceedings.

Where a matter is in dispute and the Revenue prosecutes a person, does that not also determine the civil case?

I am thinking of car accidents as an example.

At least in cases where an individual is successfully prosecuted, it would be a determinant.

I am told that the Appeal Commissioners could take a different view.

I suppose the standard of proof is different.

Question put and agreed to.
Sections 134 to 138, inclusive, agreed to.
SECTION 139.

I move amendment No. 106:

In page 206, line 44, after "Schedule" to insert "4".

The purpose of this technical amendment is to reinsert the figure "4" which was inadvertently omitted from the Bill at printing stage.

Does this section deal with VAT treatment?

I will read the speaking note which is not long. The budget provided for an excise duty increase on tobacco products which, when VAT was included, amounted to an increase of 3.1p on a packet of 20 cigarettes with pro rata increases on other tobacco products. This increase compensated for the lowering by 1% of the VAT rate applicable to tobacco products. The net effect of this offsetting measure was to prevent any change in the average retail selling price as a result of the VAT change. This section confirms the budget increases. The new rates are set out in Schedule 4.

We had a lengthy discussion last year on both the taxation and health implications of the substantial increase in excise of 50p. Does the Minister have any reflections on that move? I tabled a parliamentary question during the year, possibly last September, to which I received a response from his Department informing me that the number of cigarettes sold in the first three quarters of the year had increased by about 14 million.

It was a small percentage, about 0.34%.

The excise duty received had increased from £3.72 billion to £3.76 billion if memory serves me correctly. There had been a relatively small increase in consumption despite the increase of 50p. Has the Minister reflected on this experience? I presume his decision in December not to proceed further along these lines was dictated more by inflation than anything else.

I have been very open about this matter in previous years. The main determining factor in not increasing tobacco prices in previous years was partially related to the effect it would have on the consumer price index. It had been signalled well in advance of the budget in December 2000 that something would happen where cigarettes were concerned. As far back as May of that year, the then Minister for Health and Children, Deputy Cowen, signalled that the tobacco industry would have to be levied for the damage being caused to a person's health. It should not have come as a surprise then in the budget that I would do something about this. So far as my predecessors and I are concerned, any time we discussed this in relation to a previous budget, one consideration that weighed heavily on us in not doing anything about cigarettes was the effect such action would have on the consumer price index, because it is heavily weighted in the CPI. I decided that the overall health policy considerations were far more pressing than anything else and I wanted to give a clear signal. I did so by increasing cigarette prices by 50p. Unfortunately, it had the unintended effect and I was asked why I did not do so in previous years, though everyone knew why. It added at least 0.7% to the CPI - it was approximately 0.77% in the end. Everybody knew that but it stopped nobody from claiming renegotiation of the partnership agreement. They did not take that out and when quoting figures from the CPI they did not say it was almost 1% less because of tobacco.

Why did the Government not take that out?

There is no problem in doing so and the figure is produced without the tobacco weighting as well as mortgage interest. However, when people want to quote the headline rate they quote it with those in it. I announced in this year's budget that I was asking the CSO, which does not come under my remit but under the Department of the Taoiseach, to consider further this matter. It is a statistical exercise based on household surveys going back over time but I did this for reasons of health.

I do not expect the Opposition to deal with inflation as I mentioned but nobody came in leading up to renegotiation to say that 1% should be taken off the CPI. People did not want to hear about that even though many of the same people were complaining that we should do something about cigarettes. There is double think about this.

It is also ironic that the EU was blaming me for a health measure in effect, as almost 1% of the CPI headline increase related to the increased price of cigarettes. In the early drafts of the EU issue a headline rate of 7% was mentioned when the HICP rate should have been referred to, that is the common rate used throughout the EU. It includes certain figures and not others and was much lower. Sin ceist eile.

Excise duties on cigarettes are the second highest here in the EU after the UK. Mr. Kearney can give me the correct figure but in the UK it is €210.57 per 1,000 cigarettes and we are next with €148.80 per 1,000. The lowest is Spain with €48.44 per 1,000 and the EU average is €90.35 per 1,000, though it is very low in lots of countries. If one did a median of this without the UK and Ireland one would have a much lower figure than €90.35. The UK and Ireland are at the top and two-thirds are at half the Irish rate.

Is it possible to relate consumption to price at all?

The parliamentary question the Deputy put down showed that there was an increase of 0.34% in the first half of the year but the population is getting bigger and the economy is doing quite well also. I do not know if the 50p had any effect.

All the evidence suggests it did not.

It was always sold as not having the effect of putting smokers off but that it would stop people starting. I was a very heavy smoker and seven or eight years ago I would have had to have a cigarette during a meeting as long as this. I could not take a plane unless I knew I could smoke but I am eight years off them now. It is like being an alcoholic, staying off day by day. If anyone could produce a safe cigarette I would be its biggest advocate. There is nothing more pleasurable than a cigarette.

The pressure of the O'Flaherty affair did not put the Minister back on them.

Cigarettes are undoubtedly the most dangerous product. People have problems with drink, which can seriously affect people's health if taken in excess. However, people can smoke 60 or 80 cigarettes a day, as I did, but one would not last long on 60 or 80 drinks per day. One would be killed off much quicker. The enormous health costs make cigarettes a scourge. I took a chance in raising the price by 50p on the advice that it would stop young people from smoking. I agree with Deputy McDowell in that I do not think it did from what I see in my area and among my grown family. Given the growth in the economy it has not had much effect. The only young people inclined to stay away from cigarettes are those involved in sport. Those who started smoking early, as I did, cannot understand with today's advertising why people will not stay off cigarettes given the damage it does. I am sure I was aware of it when I was young also but the emphasis was not the same. I understand people who get into a habit find it almost impossible to give up. Those who have not smoked heavily have no idea how hard it is to give up cigarettes.

I go along with Deputy McDowell in that I am unsure it had any effect. Maybe I stopped many people from smoking but I am not sure. The down side was the headline CPI went up by almost 1%, which led to all kinds of difficulties.

The Minister ringfenced the extra take for the Department of Health and Children. Is that continuing or is it a once off?

No, it continues. It was £132 million.

Is it capped at that figure or does it depend on consumption? Does the extra take go to the Department?

We worked out the figure the 50p should take and our figure was £132 million. That was the budget estimate and that goes in, if the Deputy looks at the Department of Health and Children Vote, as appropriations-in-aid. The biggest factor there is the health levy but this is included.

So, into the foreseeable future that Department will receive the equivalent of that 50p increase?

I agree with the Minister that the figures are very disappointing. I asked last year if the Minister expected a significant decrease in consumption and he said probably not. Unfortunately he has been proven right.

I was told that it would stop people starting.

Maybe it is too early to say it has failed totally.

Maybe it did.

The early indications are disappointing.

The main thing about young people, having lots of children of my own, is that when they were between eight and 12 they were on to me to give up cigarettes. As they got older they all smoked bar one. The peer pressure comes in from the age of 13 on, while my younger children are horrified by the thought of someone smoking. As they get older they get into it.

Perhaps the Minister is saying the experiment in raising the price of cigarettes in the hope that it would have a long-term health benefit has been a failure and that the overriding consideration is the importance of the CPI. We must keep that at the right level. In the Minister's final budget we are not likely to have an increase——

As Deputy McDowell pointed out, the extra money it raised has gone directly to the Health Vote so there is some benefit there. The anti-smoking organisations wanted more increases in this budget and the last one. They produced good figures as to the effect of such increases. I did this on the basis that they would be correct but there is not much evidence that we have had an effect in stopping people from smoking, though there was an effect the other way. However, that should not prejudge what future Ministers for Finance, including myself, might do regarding tobacco products as they are so damaging. There is no doubt that price affects consumption. The task now is to try to keep young people at school because there are so many opportunities to work. That is a difficulty which future policy will have to address. Young people are being offered jobs paying good money when they are 17. This was not an issue when I was growing up because if one did not remain in education one knew one would not get a good job. Young people are now getting money for summer jobs which I could only have dreamt about. How can school or university compete with such incomes? These young people have money for cigarettes, drink and other things.

Perhaps the increase of 50p in a strong market would not have the effect it would have had if things were different. The jury is out on this issue. ASH puts in an extraordinary effort to discourage people from smoking and its members are upset when we do not increase the price of cigarettes in the budget. There is a reduction of 1% in VAT in this budget which would reduce the price of cigarettes. I compensated for this by changing the Estimate.

Official sales of tobacco were boosted last year by an increase in cross-Border sales and a decline in illegal sales. This is another issue which may be masked in the sales figures for last year.

I was surprised to see that the UK figure for excise duty is one-third higher than the Irish figure. Is the retail price in the UK one-third higher?

Yes. There is a huge market in people buying cigarettes. The equivalent price in punts of a popular brand of 20 cigarettes in Northern Ireland would be £5.27 as against £3.88 here.

Clearly if excise is paid in the North there is no benefit in importing cigarettes into the Republic.

No, the opposite is the case. There is a very large international business in cigarettes. The UK rate is at 210, we are at 148.80 and the next is Denmark at 124. It then goes to 109, 102, 86, 80, 76, 72, 68, 59, 56, 56, 55 and 48. Some of the countries are very large.

One could fill the boot of one's car with cigarettes and one is talking about serious money. One could make a profit of £40,000 or £50,000 with a small car load of cigarettes because the difference is so great.

How does Revenue account for the reduction in smuggling and illegal sales? Is it because of a clamp down or because it is less attractive in both instances?

About 19 million cigarettes were seized last year.

So it is due to better enforcement?

Yes. Internationally this is a very big business. We do not suffer as much as other countries but it is a serious business. Perhaps the private secretary could give some more details as there are some interesting facts.

The committee went into private session at 3.14 p.m. and resumed in public session at 3. 18 p.m.

Amendment agreed to.
Section 139, as amended, agreed to.
SECTION 140.
Question proposed: "That section 140 stand part of the Bill."

I wish to deal with the climate change strategy which the Government produced before Christmas and which commits it to increasing excise duties and carbon taxes generally, though not just yet. The increases take effect from next year. How does this strategy sit with what the Government did in this budget and what the Minister's general inclinations seem to be? Even assuming the Minister will be in power next year and the year after, I am casting aspersions and suggesting he is not serious about this strategy.

This section confirms the budget excise duty rate decreases on unleaded petrol and auto diesel. These decreases, when VAT is included, amount to 7.3p per litre and 2.4p per litre, respectively. Following the 1 January VAT decrease of 1% the cumulative tax reductions were 7.8p per litre and 3p per litre.

The reduction in the auto diesel rate to almost the EU minimum level will be of significant benefit to the haulage sector as well as to other diesel users such as coach operators. While the reduction applies to all diesel for the present it is proposed, for environmental reasons, that this lower rate will apply in the future to low sulphur diesel only. Such a differentiation in excise duty rates requires EU approval which will be sought later in the year. The decreases are expected to cost the Exchequer approximately £123 million for auto diesel and £39 million for unleaded petrol in 2001. The effect on the CPI will be a reduction of 0.2%.

There has been an ongoing debate in Europe for some time about the energy tax directive. We have not reached a conclusion yet. I signalled in the budget that my intention was to produce a budget which would preserve social partnership. In the interests of preserving social partnership, I concluded that significant action needed to be taken in regard to unleaded petrol and auto diesel. Protests were held here in recent months but, in comparison to other countries, the Irish haulage industry acted very responsibly and I demonstrated my good faith through this action.

The Minister appears to have confirmed, by omission, my suggestion that the climate change strategy is not uppermost in his mind. There is a real problem here, one which is obviously exercising the Department of the Environment and Local Government. It has produced a wonderful strategy predicated on increases in carbon taxation in two years' time but to say the Department of Finance is not keen on the idea would be an understatement. I suspect the Department of Finance is completely opposed to this idea and is, instead, wedded to the notion that economic growth depends on increased use of energy.

No, we are not, but we spoke earlier about the effect of a very worthwhile budgetary measure on tobacco on the CPI. That measure, with which most responsible people agreed, had an adverse effect on the CPI. Serious issues must be faced in regard to energy taxation which will affect the CPI and certain industries. Some of the proposals due to be advanced by the EU will not be palatable here. Oil prices were very high when the budget was introduced and these and other measures have helped to alleviate the burden on users.

The tension in this area is not between the Department of Finance and other Departments. The energy directive is based on the proposition that usage will decline if taxation is increased. I have some difficulty with that concept. For example, if one were to increase aviation fuel taxation, usage would not decline. I tell my European colleagues that Ireland is surrounded by water and it would take us some time to swim to Brussels. To get our goods to the market, they must be transported from remote parts of the country to the ports from which they are transported across the Irish Sea to the UK and across the English Channel to continental Europe. It is all very well for some countries to drive around Europe looking for markets but what about peripheral countries such as Ireland? If one were to dramatically increase the price of the product, people would have to stop using it altogether but that would bring the whole economy to a halt. We are obliged to meet our commitments under Kyoto but I do not believe taxation measures alone can achieve that.

Everyone agrees that taxation measures alone would not succeed but the strategy includes a very specific commitment on the Government's part to introduce carbon taxes. However, I have not seen any sign of that and have not received any indication from the Minister to suggest he is at all committed to this strategy.

I will make a deal with the Deputy. There will be one more budget prior to the next election and if the Labour and Fine Gael Parties can come up with propositions to increase taxes on various fuels and other products, we will consider them.

The point I am making is that the Government has already committed itself to introducing such taxes.

If the Deputy were prepared, prior to the next election, to go to the plain people of Ireland and publicise his party's intention to increase these taxes for the good of the climate, I would ask my party to go along with those increases.

I am merely asking the Minister whether he is committed to statements made by the Government only three months ago. That is a fair question.

Very fair, too fair.

I take it that means "no".

I agree that the increased taxes would not result in less fuel being used but everything we eat and wear would be affected by the increased cost of transport. I used to say that if one could lower the cost of transport, one could lower the cost of living.

That is an excellent point. Deputy McDowell also made a fair point. Our commitments under Kyoto must be met and there will have to be a big change in usage. However, carbon taxes alone will not achieve that.

Question put and agreed to.
SECTION 141.

Amendments Nos. 107 and 108 are related and may be discussed together by agreement. Is that agreed? Agreed.

I move amendment No. 107:

In page 207, subsection (1), to delete line 35.

This amendment relates to excise duty on LPG. I received a note from the IFA which I propose to read into the record.

In its budget submission, the IFA proposed that excise duty on non-automotive LPG be eliminated or rebated for agricultural use to enable the poultry sector to maintain competitiveness with poultry production in Northern Ireland and Great Britain. The level of excise duty on non-automotive LPG is 1.43p per litre or 6.5p per gallon. Council Directive 92/82/EEC allowed zero minimum rates of excise duty on LPG, methane and kerosene used for heating purposes from 1 January 1993.

At present in the Republic of Ireland there is no excise duty on natural gas; a rebate of excise duty on non-automotive LPG for mushroom and glasshouse production and a rebate of excise duty on kerosene for use in mushroom and horticultural production. There is no excise duty on non-automotive LPG in Northern Ireland. It is discriminatory to maintain excise duty on non-automotive LPG and kerosene for use in the poultry sector.

The Minister will be aware that Monaghan is the home of poultry production in Ireland and Deputy Crawford, whose name also appears on this amendment, is very anxious that it be accepted. The poultry sector in Monaghan feels hard done by in that non-automotive LPG costs more in the Republic than in Northern Ireland. LPG is much kinder to the environment than any other heating methods. The Irish poultry sector feels excise duty should be reduced in order that it can compete with its counterparts in Northern Ireland and the UK in an environmentally friendly manner. I hope the Minister will consider accepting this amendment.

Amendment No. 109a in my name also concerns this matter. As I understand it, it is not possible to add to the list of zero rated goods but my amendment seeks the reduction of the rate to 5% or alternatively the provision of the kind of rebate which already applies in the mushroom and horticulture industries. My colleague, Deputy O’Shea who represents Waterford where poultry is an important industry - particularly in the west of the county, asked me to table this amendment. The poultry business has been subject to considerable international competition in recent years. Ireland imports a great deal of poultry products from outside the EU, never mind outside Ireland, and poultry producers are finding it increasingly difficult to compete with a large volume of imports from Third World countries. The acceptance of these amendments would benefit producers in allowing them to reduce costs.

I oppose these amendments. I wish to indicate my intention to table a Report Stage amendment to section 183, following a request from my colleague, the Minister for the Environment and Local Government, which will allow for the introduction of a European Court of Justice judgment on the application of a standard rate of VAT on toll roads and bridges from 1 September instead of 1 July as currently stated in the Bill. The date change is intended to facilitate the administrative and other changes necessary to allow for the smooth introduction of this change.

As the Minister is not in a position to read his response, I would like to receive a copy of the substantive response.

As it is now 3.30 p.m., I am required to put the following question in accordance with an Order of the Dáil of 1 March: "That the amendments set down by the Minister for Finance to Parts 3 and 4, and not disposed of are hereby made to the Bill, and in respect of each of the sections undisposed of in the said Parts, other than sections 162 and 172, that the section or, as appropriate, the section, as amended, is hereby agreed to.

Question put and agreed to.
Sitting suspended at 3.30 p.m. and resumed at 3.45 p.m.
NEW SECTION.

I move amendment No. 120:

120. In page 224, before section 185, but in Part 5, to insert the following new section:

185.-Section 21(3) of the Principal Act is hereby amended by the insertion after 'assessment,' of 'or such longer period as the Commissioners may allow,',".

This amendment reflects the period of time available for appeal. I am seeking to provide the commissioners with additional discretion regarding the period allowed in which an appeal can be lodged.

Section 21 of the Stamp Duty (Consolidation) Act, 1999, provides that a taxpayer who is dissatisfied with a stamp duty assessment may appeal against that assessment within 30 days of the making of the assessment. The income tax appeals procedures provide that a late application may be made if there is a reasonable explanation as to reason the appeal was not lodged within the normal time limit of 30 days. Section 21 of the Stamp Duty (Consolidation) Act, 1999, specifically provides that the income tax appeals provisions shall, without any necessary modifications, apply for stamp duty purposes as they apply for the purpose of income tax. I am not aware that this provision is causing any difficulty to taxpayers and, consequently, must oppose the amendment.

Amendment, by leave, withdrawn.
Section 185 agreed to.
Sections 186 and 187 agreed to.
SECTION 188.

I move amendment No. 121:

In page 224, lines 19 to 23, to delete subsections (1) and (2), and substitute the following:

"(1) Section 79 of the Principal Act is amended-

(a) in subsection (7) by the substitution in paragraph (b) of ’subsections (3) and (4)’ for ’subsection (3)’, and

(b) in subsection (5) by the substitution in paragraph (a) of ’subsections (3) and (4)’ for ’subsection (3)’.

(2) (a) Subsection (1)(a) shall apply and have effect in relation to instruments executed on or after 15 February 2001.

(b) Subsection (1)(b) shall apply and have effect in relation to instruments executed on or after 6 March 2001.

The purpose of the amendment is to close a possible loophole in the stamp duty relief afforded for transfers between associated companies. Section 79(3) of the Stamp Duty (Consolidation) Act, 1999, defines the association necessary to come within the relief. Subsection (4) elaborates on that definition. This amendment ensures the wider definition prevails when construing certain anti-avoidance provisions relating to the relief.

Amendment agreed to.
Section 188, as amended, agreed to.
NEW SECTION.

I move amendment No. 122:

In page 224, before section 189, to insert the following new section:

189.-(1) The Principal Act is amended by the substitution of the following for section 99:

'99-(1) In this section "wholly-owned subsidiary" has the meaning assigned to it by section 9 of the Taxes Consolidation Act, 1997 (as amended by the Finance Act, 2001).

(2) Stamp Duty shall not be chargeable on any instrument under which any land, easement, way-leave, water right or any right over or in respect of the land or water is acquired by the Dublin Docklands Development Authority or any of its wholly-owned subsidiaries.'.".

Section 99 of the Stamp Duty (Consolidation) Act, 1999, exempts from stamp duty the acquisition of any land, easement, way-leave, water right or any right over or in respect of any land or water by the Dublin Docklands Development Authority. For commercial reasons the Dublin Docklands Development Authority needs to carry out certain transactions which are part of their core business through special purchases of 100% subsidiary companies. The purpose of the amendment is to ensure these subsidiaries also come within stamp duty exemptions.

Amendment agreed to.
Sections 189, 190 and 191 agreed to.
NEW SECTION.

I move amendment No. 123:

In page 228, before section 192, to insert the following new section:

192.-(1) Chapter 2 of Part 7 of the Principal Act is amended by the insertion of the following section after section 92B:

92C.-(1) The amount of stamp duty chargeable under or by reference to paragraphs (1) to (6) of the heading "CONVEYANCE or TRANSFER on sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance" or clauses (i) to (vi) of paragraph (3)(a) of the heading “LEASE”, as the case may be, in Schedule 1 on any instrument to which this section applies shall be reduced where-

(a) paragraph (1) or (2) or clause (i) or (ii) applies, to an amount equal to three-ninths,

(b) paragraph (3) or clause (iii) applies, to an amount equal to four-ninths,

(c) paragraph (4) or clause (iv) applies, to an amount equal to five-ninths,

(d) paragraph (5) or clause (v) applies, to an amount equal to six-ninths,

(e) paragraph (6) or clause (vi) applies, to an amount equal to seven and one half-ninths, of the amount which would otherwise have been chargeable but where the amount so obtained is a fraction of £1 that amount shall be rounded up to the nearest £.

(2) This section shall apply to any instrument which contains a statement, in such form as the Commissioners may specify, certifying that the instrument-

(a) is one to which section 29 or 53 applies, or

(b) gives effect to the purchase of a dwellinghouse or apartment on the erection of that dwellinghouse or apartment and that section 29 or 53 do not apply.’.

(2) Subsection (1) shall have effect as respects instruments executed on or after 27 February 2001 subject to the substitution in subsection (1) of section 92C (inserted by subsection (1)) 'of down to nearest €' for 'up to the nearest £', for instruments executed on or after 1 January 2002.".

This amendment reduces the 9% stamp duty rate for investors in respect of new residential property. The new rate will be 3% for properties up to £100,000 and the same rate as for non first-time owner occupiers for properties above that figure.

This change to the stamp duty regime will leave the investor rate unchanged in the secondhand market while reducing it somewhat for new property, thus providing a supply incentive in this area. Limiting the concession to new housing maintains the relative advantage of first-time purchasers in the secondhand market which accouts for two thirds of first-time purchase transactions. The Government has always been vigilant in introducing and amending policies to deal with the evolving market situation. There are signs, however, that housing supply may be affected by some of the measures taken to change the balance of the market between the investor and owner-occupier and we are refining the taxation regime to deal with this.

The imposition of the 9% investor stamp duty rate on non-owner occupied residential properties has resulted in a negative impact on developers and potential investors and there is evidence that this could have had adverse consequences on the prospects for overall housing supply, particularly for apartment developments because reduced investor demand makes apartment developments unviable. Last year, there was a significant fall-off in HomeBond apartment registrations in Dublin, down from 2,705 in the first six months of 2000 to only 1,162 in the latter half of the year. This confirms the drop in apartment development and investment and suggested that urgent intervention was needed to halt the decline.

Data available from the Irish Auctioneers and Valuers Institute indicate rent increases in the year to November 2000 of 14% nationally and 18% in Dublin. This upward pressure on rents is expected to continue in 2001 due to continued strong demand for rented accommodaton and the likelihood of only a limited increase in supply. There has been a largescale withdrawal of investors in the rental sector because returns are unattractive compared to alternatives such as investment in commercial development and in UK residential and commercial property. This is a problem in so far as it affects supply. There is evidence that applications are being made to local authorities for a change in planning permission from residential to commercial. There is some evidence that difficulties are also being experienced by developers of section 50 student accommodation in selling units to investors. This scheme should provide over 12,000 possible additional bed spaces for students. This potential accommodation is under threat, however, as sales in section 50 projects placed on the market have been slow. The reduction in the 9% stamp duty rate will also help to improve the attractiveness of investments in the provision of such student accommodation.

This is an issue we raised with the Minister in the House in recent months as it was causing much concern in the rural areas designated for renewal, the west generally and the midlands. As the Minister said, developers and auctioneers in the property business highlighted the fact that while on the one hand there were incentives and attractions, they were being taken away on the other. The Minister has moved some way towards addressing this matter. Certainly, rental properties were affected and there is no doubt that many were investing in property abroad. Stamp duty was one of the reasons for this. I welcome the change.

I have a real difficulty with this measure. There seems to be a developing consensus which accepts the argument made by developers and those involved in the investment market generally. It defies all the rules of supply and demand and suggests that a relatively small number of individuals have an undue influence on the market and policy making. Will the Minister explain the reason the Government decided last June to implement a 9% rate given that it was not contained in the Bacon report? The 9% rate was an imposition on which the Government decided. It would be useful for him to recap the reasons the Government took this decision.

The primary reason, as I understood it, and the reason my party supported the measure at the time, was that we recognised that it would remove some of the investor interest from the market. We wanted to do this because of the demand for housing from first-time buyers in particular; in other words there was a demand to buy up virtually all the apartments and houses that could be built. The level of demand has not changed. In my constituency between 500 and 1,000 apartment units are being built, in a part of the city where they would not have been built five or ten years ago. I have in mind areas such as Clontarf, where apartments have been a feature of the landscape for some time, but also Drumcondra and Artane where apartments are a relatively new phenomenon. Hundreds of apartments are being built in those areas and there appears to be little or no difficulty in getting people to buy them with a view to either living in them or renting them out.

For this reason it is strange that policy could be reversed so quickly; that within a matter of six months of implementing such changes the Government would decide to reverse them based exclusively on representations from the Institute of Valuers and Auctioneers and the HomeBond figures outlined by the Minister. At a time when plenty of people are seeking to buy homes for the first time and many are willing to pay what I consider to be extortionist rents of up to £1,000 for an apartment why is supply drying up? It defies all the rules. I always understood basic economics, that if there was someone willing to buy, somebody would produce the goods. Yet, we are being told by those who control supply that it is reducing dramatically, notwithstanding the fact that there are people willing to buy their product. I do not understand why that should be the case. If it is the case that there is a particular problem in the centre of Dublin, in areas designated for urban renewal before most of the tax reliefs were eliminated, we could have looked at the matter again in that context. If the problem is more widespread, we need to know the reason.

I understand the point made by Deputy Belton. I tabled an amendment to the Finance (No. 2) Bill last year to exempt the BMW area, but it did not meet with the approval of all my colleagues who live in that area. Nonetheless we anticipated that there might be a difficulty in the holiday home market. That was the reason I tabled the amendment. Looking at the urban areas with which I am more familiar and where the housing problem is most acute, I am not persuaded that the wrong policy option was taken last year. It is obvious, therefore, that I am not persuaded that there is sufficient evidence to reverse it.

The housing situation has taken up much of the time of the Government since 1997. We have had outstanding success in the economy which has led to a reduction in unemployment. There have been many benefits to which we have alluded. That success has also led to spiralling house prices as supply has not kept pace with demand. For many years, including during our term of office, Government policy has been to give the first-time buyer a chance. Any taxation changes that fall to be made by Government are the responsibility of the Minister for Finance who has to introduce changes either by way of stamp duty or other taxation measures.

There are as many opinions about housing supply and about what should be done as there are people in this room. The Department of the Environment and Local Government commissioned outside experts and Dr. Bacon has produced three reports with one of which the Department's answer was associated and the Finance (No. 2) Bill, 1998 was introduced. Following the Finance Act, 2000, the Finance (No. 2.) Bill, 2000, was introduced to provide for more of the changes to which Dr. Bacon alluded in his third report.

The Bacon reports stated that supply and demand were out of synch. Therefore, when demand is greater than supply, supply should be increased. The taxation changes agreed to by Government have to be introduced by me. I said in the House during the debate on the Finance (No. 2) Bill, 1998, and the Finance Bill, 2000 - and it was not included in the Department of Finance briefing notes - that if one interferes with the free market, it can have unintended effects about which nobody can speculate. I also said that it was deliberate policy to interfere and take the heat out of the market. I recall saying in the House in 1998 that it was intended that there would be a sharp short knock to temporarily distort demand. I went on to say that after a period the investor would be allowed back in. One of the changes made in 1998 was to remove interest relief as an allowable deduction against rental profits. What happened was that investors stayed out of the market for a short period, but as the yield increased they moved back in.

They were my own comments which had not been inspired by anybody else. I also made the point that interfering in the market could have an unintended effect. In 2000 a second report was published arising from which it was decided to give the market another jolt. It was decided that there would be a 9% stamp duty rate for any investor buying a property. We said that we wanted to put out the fire, which is what we did. Unfortunately, we do not have the luxury in 2001 of waiting for further reports and developments. There is evidence that the first-time buyer has an increasing share of what will be a smaller market. It is estimated that we will need 55,000 units of accommodation each year for the next few years. There was a record number of units last year, 50,000, which we will be lucky to reach this year. While the effect last year was to put out the fire, we do not want to put out the whole industry.

All the evidence suggests that the number of housing starts is falling sharply. I am not usually given to quoting from a certain national newspaper, but in today's edition there is a headline which reads, "Dublin Housing Starts Fall Sharply". The article by the property editor of the newspaper states:

New house starts are continuing to decline sharply in Dublin and other major cities despite Government measures to boost the supply of starter homes.

Figures to be published shortly by HomeBond, the national house guarantee scheme, will show that there has been a 40 per cent fall-off in new house starts in Dublin city and county during February compared to the same month last year. The slowdown was also evident in Cork, Galway, Limerick and Waterford, where there was 20% less activity than a year ago.

The reduced level of house-building has been evident for the past six months, according to the Irish Homebuilders Association (IHBA), but the combined figures for January and February suggest a worsening of the problem. New housing starts in Dublin city and county in the first two months of this year were almost 35 per cent down on 2000, while the figures for the provincial cities were 39 per cent lower.

There are as many opinions about that matter as there are people in this room. The answer to the problem in 1998 and 2000 was to increase supply. The problem is that the effect of the measures introduced last year has been to dampen down activity and if we do not complete the numbers of units of accommodation, whether rented——

I am sorry to interrupt the Minister, but I do not understand the reason supply should be reduced in circumstances where demand is still extremely high.

We all have an opinion on that matter. My opinion is that the industry has been good in recent years and people have made lots of money, but that the hunger is not the same as it was and that the taxation changes we have made over a period of time, including changes to the Planning and Development Act, and the difficulties perceived by some have led to developers not building houses for rent. It will be too late if we wait until June, July or August to receive another report only to find that the situation has worsened.

Policymakers and experts we engage forget that the construction industry cannot be switched on and off. I have to bring forward taxation changes for the benefit of everybody, and I am not necessarily speaking to the Opposition. If the tap is turned off, it cannot be turned on quickly again. It takes time. People may have made other arrangements, investments and decisions. The luxury of waiting to see what would happen was not available to the Government. It is obvious to most that there is a fall-off in activity which is not confined to the BMW region. It is happening throughout the country, but predominantly in the areas where I introduced attractive schemes for rural renewal. The effect of the anti-speculative tax and the 9% investment tax has led to many difficulties in those parts of the country. It is happening also in Dublin and surrounding areas. The problem is not caused solely by the taxation changes we have made. It is the combination of all these aspects which has led to the tap being switched off. In order to encourage the building of new homes for the market, we have provided for the same rate of stamp duty for the investor, with the exception of the lower end, as others for new houses. The 9% rate applies to investors buying secondhand houses.

In all these areas there are judgment calls and a lesson I have learned, although I did not necessarily need to learn it, is that there is no magic formula. The only answer is to continue to encourage supply. We have invested millions of pounds in water, sewerage and other infrastructural projects which will help to increase supply in time but, unfortunately, the output for 2001 will not be greater than that for 2000. I will be glad if it is up to the level for 2000, but it will still be less than the number of units of accommodation needed for this year. We can have a declining market and fewer units built, but people will not be housed.

This is not an exact science, but tampering with supply and demand is a fraught exercise. I read interesting comments recently about the Department of Finance, but all we have done is implement Government policy. We are not the Department which drives Government policy in the area of housing. Certain erudite individuals in the Department of Finance are not responsible for some of the taxation changes. The politicians are responsible for them. I can guarantee that they were not driven this year, last year or the previous year by the Department of Finance.

I think we are clear on that matter. I am aware that Deputy Mitchell wants to contribute, but I want to raise one last aspect about which I am very concerned. I suspect that a significant part of this slowdown must be that anticipated capital appreciation, obviously a major part of the market in the past three or four years, is not as strong as it was. People were buying and building houses in the belief that prices would increase considerably. It was a "no lose" investment which was based not just on rental returns, but also on capital appreciation. That is not as strong now as it was then, but it is appalling that supply dries up in such circumstances and that unless a market is out of control, people are not willing to build for normal profit. They are used to building for supernormal profits.

I do not know whether this matter comes up under the Freedom of Information Act, but from one week to the next I have seen eminent individuals in this field trying to do their best. I now realise that everybody, including the experts, has run out of ideas, that the solutions brought forward in week three were totally different from those brought forward in week one, and that the solutions brought forward in week five bore no resemblance to those brought forward in either week one or week three because we have all run out of ideas. We have tried every idea in the book. I am being very frank about this matter. This is not an exact science. I had to laugh at some of the comments reported. That is the reason I made the comments about the Department of Finance, the officials of which can be blamed for many things, but this is not one of them.

From experience every Government has to look at the overall position. With increasing traffic problems and congestion there is a desire to develop other growth areas throughout the country. That matter has to be examined also. Property development and the purchase of residential property must go hand in hand with investment and job creation in those areas. If there is not sufficient housing and proper development, people will not be attracted to a particular area. As the Minister said, this is a complex area and when prices increase and people complain, the Opposition blames the Government, but the reality is that a Government cannot meddle in what is an open market. The Minister has admitted that the further he delved into this area, the less he knew about it. The free market has its own way of sorting itself out. While a Government can exert some influences, it does not dictate price. I compliment the Minister on this issue. Certain facts were laid before him, that the Government was moving in opposite directions, that it introduced the incentive and then killed it off. The Minister has acted correctly in this case.

The changes the Minister has introduced, the reversal of the 1998 Finance (No. 2) Act provisions, as they relate to the 9% tax——

Not totally.

I appreciate that the Minister has not reversed all the changes which were sought by lobbyists with whom we are all familiar. The other major taxation change for which they have been pressing is a restoration of deductibility of interest on borrowings. Is the Minister considering this?

Not at present. The change I introduced in the second Finance Act in 1998 had a temporary distortionary effect. A certain segment of lobbyists have called on me to make the change mentioned. They want me to do this more than anything else, but I cannot see a good reason for doing so. Why should I? Virtually every economist in the world has been telling me and my predecessor for several years that we should abolish mortgage interest relief, but no Minister for Finance has gone along with this. If that is the view of economists on mortgage interest relief for personal mortgage holders, why should we allow unrestricted access to relief for those involved in the rental sector, although one could take a different view and say that it is a different business? I abolished the relief in 1998. The Government decided that the best thing to do was to reverse the stamp duty changes made and the 2% anti-speculative tax.

As recommended in the report of the commission on the private rental sector, we allowed interest relief for refurbishment of pre-1963 properties, but such relief does not apply generally and I do not intend to introduce such a measure. While I hope this Administration will make changes regarding fiscal measures related to property, I am sure the problem will not go away. This and future Governments will have to consider the matter again. If anyone has a panacea or magic solution, will they, please, send it to the Custom House, Dublin 1?

Amendment put and declared carried.
Section 192 agreed to.
Sections 193 to 195, inclusive, agreed to.
SECTION 196.
Question proposed: "That section 196 stand part of the Bill."

I give notice that I am considering a Report Stage amendment to cater for first-time buyers and other owner-occupier purchasers who obtain stamp duty relief and are required by their employer to spend a period abroad within five years of purchase when insurance considerations force them to rent a house during their absense.

Question put and agreed to.
NEW SECTIONS.

I move amendment No. 124:

In page 230, before section 197, but in Part 6, to insert the following new section:

197.-(1) The Second Schedule to the Principal Act is hereby amended by the substitution of the following paragraph for paragraph 3:

'3. Subject to the provisions of paragraph 6, the tax chargeable on the taxable value of a taxable gift of a taxable inheritance taken by a donee or successor shall be of an amount equal to the amount by which the tax computed at the rate or rates of tax applicable under the Table, on the aggregate of-

(a) that taxable value, and

(b) the taxable values of all taxable gifts and taxable inheritances (if any) taken previously by that donee or successor within the period of 12 years ending on the date of the gift or the date of the inheritance;

exceeds the tax, computed at the rate or rates applicable under the Table on the aggregate of the taxable values of all taxable gifts and taxable inheritances previously so taken included at subparagraph (b) of this paragraph;

Provided that the tax so chargeable on the taxable value of a taxable gift or taxable inheritance shall not exceed an amount equal to the tax computed at the rate or rates applicable under the Table to such part of the aggregate of the values referred to in subparagraphs (a) and (b) of this paragraph as is the highest part of that aggregate and is equal to that taxable value.

(2) This section shall not operate so as to increase the liability to tax of any person and where but for this section a person would be liable to a lower amount of tax he or she shall be charged tax at that lower amount.'.".

This amendment is similar to one I tabled last year to restrict aggregation for capital acquisitions tax purposes to a period of 12 years, largely for practical reasons. The Minister suggested that, at least, he understood the difficulties that could arise in aggregating for CAT purposes from 1988.

I made the change.

The Minister did.

The amendment proposes a rolling period of 12 years for aggregation purposes. All taxable gifts and inheritances, from whatever source, taken by a person on or after 2 December 1988 are aggregated together for the purposes of ascertaining the amount of tax payable on a current gift or inheritance. Last year's Finance Act introduced a simplified system of aggregation and a single 20% rate of tax which makes the calculation of a current liability much easier than before.

The restriction of aggregation to gifts and inheritances taken on or after 2 December 1988, which I introduced in 1999, was designed to address the problem of having to keep paper records for excessively long periods. It was not my intention then, nor is it now, that there should be a rolling 12 year period for aggregation purposes as this would open up considerable tax planning opportunities. In today's, world where almost everything is computerised, the keeping of records should not present the same problems. Accordingly, I oppose the amendment.

When preparing the December 1998 budget I said to my officials that aggregation going back in time indefinitely was creating terrible problems, mostly for solicitors. I agreed to go back ten years. When I suggested to my officials that each year we go back ten years, it was indicated to me that this would create great tax planning-avoidance opportunities. I introduced another significant change last year as the system of aggregation, about which solicitors would know far more, was very complicated.

It was desperately complicated. It was quite simple when introduced originally. Then, when a certain person was away, changes were made which made it quite complicated. It remained complicated within the various classes until I removed the complications last year.

I do not have a problem with what the Deputy is proposing, but rather than goi back ten years each year, it should be left to the Minister for Finance to review the matter every few years.

I presume that we are talking in terms of gift tax rather than inheritance tax.

One does not have much say in regard to inheritance tax, but one could play around with gift tax.

The thresholds are very high.

One would not think so given the level of house prices. This is a matter I will keep under review. I have nothing against the principle the Deputy has sought to introduce. I made the first significant change when the situation was becoming impossible for solicitors in regard to aggregation.

I accept what the Minister said. When he reduced the rate of CAT, as opposed to the other taxes he reduced, at least in the case of inheritance tax he was deprived of the argument that it would act as an incentive to make use of it.

Amendment, by leave, withdrawn.

I move amendment No. 125:

In page 230, before section 197, but in Part 6, to insert the following new section:

197.-Section 53(1) of the Principal Act is hereby amended by the insertion after 'taxable gifts' of 'or taxable inheritances'.".

The amendment proposes to introduce a small inheritance exemption similar to that for small gifts.

The intention of the amendment is to introduce a small inheritance exemption similar to that for small gifts. The Deputy tabled the amendment on both Committee Stage and Report Stage last year and I have reconsidered the matter again this year.

A gift of up to £1,000 in any one year may be taken by a donee from a disponer without incurring a charge to CAT. No such exemption applies in relation to inheritance tax. If the amendment was accepted, it would have the effect of increasing the three CAT thresholds by £1,000 at a cost of £5 million in a full year and open up substantial possibilities for tax planning. A discretionary trust established under a will could be used to appoint assets valued at £1,000 in successive years over a prolonged period and by so doing avoid a charge to mainstream inheritance tax. Accordingly, I oppose the amendment.

Given the changes I made last year in the inheritance tax by reducing it to a flat 20% and this year in abolishing probate tax, I believe I have done my bit regarding capital acquisitions tax.

The Minister has done more than his bit with capital acquisitions tax. The main reason I put down this amendment was that when people receive a very low inheritance, possibly hundreds of pounds or a gift of one hundred pounds, which is little more than a gesture, the forms still have to be filled. However, I accept the Minister's argument.

Amendment, by leave, withdrawn.
Section 197 agreed to.
SECTION 198.

Amendment No. 126 is out of order as it involves a potential charge on the people.

Amendment No. 126 not moved.
Question proposed: "That section 198 stand part of the Bill."

I accept that the amendment is out of order. The wording of the amendment does not convey what I am trying to do - we discussed this earlier - which is to provide for a situation where elderly persons are living in valuable property and have no assets to meet their care needs. It would allow the Minister for Health and Children to introduce regulations to provide for that. However, it is out of order.

I sincerely hope the Mitchell brothers will communicate a little better.

Does the Minister think there is a difficulty? I would like to hear about it.

This amendment was put down last Thursday or Friday but I heard another Mitchell railing against something on Monday morning.

I heard he was on the radio but I did not hear what he said. The Taoiseach also has a brother who——

He is the exact opposite.

There is something in scripture about not being one's brother's keeper.

Question put and agreed to.
Section 199 agreed to.
SECTION 200.
Question proposed: "That section 200 stand part of the Bill."

This section amends section 55 of the Capital Acquisitions Tax Act, 1976, which exempts from CAT certain objects of national, scientific, historic or artistic interest. The purpose of the amendment is to grant an exemption to an inheritance of a work of art which is on loan to an Irish institution at the time of the death of a foreign resident disponer.

I thought it a curious provision. Is it being made on foot of representations?

We did receive a representation.

The committee went into private session at 4.33 p.m. and resumed in public session at 4.35 p.m.

Question put and agreed to.
SECTION 201.
Question proposed: "That section 201 stand part of the Bill."

This section increases from three to six years the period during which Government securities must be held by an Irish domiciled or ordinarily resident disponer in order to qualify for CAT exemption in the hands of a foreign resident beneficiary. It applies to gifts or inheritances taken on or after 15 February 2001, but only where the securities are acquired on or after that date.

Is this an attempt to counter some type of abuse?

There was scope for abuse. There is exemption for Irish securities if held by foreigners but where they are Irish, they must hold them for three years. That was being abused.

The Minister is extending it to six years.

Yes, and we might abolish it totally.

Question put and agreed to.
Section 202 agreed to.
SECTION 203.
Question proposed: "That section 203 stand part of the Bill."

This section gives effect to the budget announcement that gifts and inheritances taken by foster children on or after 6 December 2001 will be entitled to the group 1 threshold, which is currently £316,800. To qualify for this treatment, the fostered person must have been cared for and maintained by the foster parent for a period or periods amounting to five years while under the age of 18 years and must also have resided with the foster parent during that period.

We are not requiring that they be formally fostered, as is the normal practice now? In bygone years fostering was an informal arrangement, frequently among people within the same family. An aunt, for example, might look after a nephew or niece.

The main thing is that the person is living with the person for a period of five years. That will deal with formal and informal arrangements. I wish to give notice that I am considering a Report Stage amendment to deal with situations where an adopted child receives gifts and inheritances from both the natural parent and the adoptive parent.

Will the Minister allow a double threshold?

No. My intention would not be to allow a double threshold, just one threshold.

Does the Minister reckon that a double threshold would be allowed at present?

No, there would be nothing. The natural mother would be a stranger in tax law to the adopted child.

The adopted or fostered child?

The adopted child.

There are cases. I am aware of one case where the child was legally adopted and if the natural mother leaves an inheritance to this child, the threshold that will apply is that of a stranger which is only £15,000. My intention is to put down a Report Stage amendment which will not allow two thresholds but allow for the same threshold. We have to get legal advice from the Attorney General on this issue.

The five year requirement is reasonable. What about where the parent dies within that five years? It should be that the child is living with the parent at the time of death and has been there for two or three years. A child might have the misfortune of losing the parent by accident or death.

We are trying to deal with the situation of people who were fostered in the past. That is the intention of introducing this rule. Before the age of 18 years they would have lived with the parent for periods up to or amounting to five years. They could be 40 or 50 years of age now as the case may be, but they may have been fostered while they were growing up. If they were fostered before the age of 18 years for a period of five years, they would qualify for the inheritance thresholds. The Deputy's point relates to a child who was fostered for three years between the ages of nine and 12 years, but the parent died.

I am aware of a case involving a man who is now married, has children of his own and lives in the Minister's constituency. He was an orphan and fostered with a view to adoption by an adoptive mother. She was killed in an accident when he was aged two years. He had the misfortune of losing his natural mother and also his foster mother. He was fostered with a view to him being the heir to the estate. It was not a huge estate and he inherited it, but this measure would not provide for such a child.

We will consider the matter again for Report Stage and perhaps lessen it.

Perhaps an exception could be made in cases, for example, where a death occurs in a shorter period.

We will consider it for Report Stage. Better rules have been in place since 1995, but it is difficult trying to deal with cases relating to 30 or 40 years ago. I will consider the Deputy's point.

If a formal fostering arrangement is in place, is the five year period still required?

Yes. That is more or less Deputy Mitchell's point.

Yes. I thought it might not apply in such cases. Regarding informal arrangements I appreciate——

It may be possible to introduce a suitable amendment on Report Stage relating to a situation where a death occurs.

Question put and agreed to.
Section 204 agreed to.
SECTION 205.

Amendments Nos. 127 and 128 are related and may be discussed together.

I move amendment No. 127:

In page 232, lines 32 and 33, to delete subsection (2) and substitute the following:

"(2) In relation to any unit of an investment undertaking comprised in a gift or an inheritance, section 85(2)(ii) (inserted by subsection (1)) of the Finance Act, 1989, shall, notwithstanding that the disponer was domiciled or ordinarily resident in the State at the date of the disposition, be treated as satisfied where-

(a) the proper law of the disposition was not the law of the State at the date of the disposition, and

(b) the unit came into the beneficial ownership of the disponer or became subject to the disposition prior to 15 February 2001.

(3) This section shall have effect in relation to units of an investment undertaking comprised in a gift or an inheritance where the date of the gift or the date of the inheritance is on or after 1 April 2000.

(4) This section shall have effect in relation to units of a specified collective investment undertaking comprised in a gift or an inheritance where the date of the gift or the date of the inheritance is on or after 15 February 2001 and the units-

(a) come into the beneficial ownership of the disponer on or after 15 February 2001, or

(b) become subject to the disposition on or after that date without having been previously in the beneficial ownership of the disponer.”.

Section 205 extends the UCITS capitalacquisitions tax exemption to units in investment undertakings which qualify for the new collective funds regime introduced in lastyear's Finance Act. As a preconsolidation measure, the section also deletes the reference to proper law from the qualifying criteria to introduce consistency between this exemption and that for Government securities. A foreign beneficiary can claim exemption even though the disponer is Irish resident and domiciled once the proper law of the disposition is foreign. The purpose of the amendment is to ensure persons who have purchased UCITS or units in investment undertakings prior to 15 February 2001 will not be worse off a result of the change.

Regarding amendment No. 128, section 207 removes the reference to proper law from section 133 of the Finance Act, 1993, which provides for a capital acquisitions tax exemption for certain policies of assurance. In future the disponer will have to be domiciled and resident abroad at the date of the disposition in order for a foreign beneficiary to qualify for this exemption. It will not be sufficient that the proper law of the disposition at that date is foreign. The purpose of the amendment is to ensure persons who have purchased policies prior to 15 February 2001 will not be worse off as a result of the change.

Amendment agreed to.
Section 205, as amended, agreed to.
SECTION 206.
Question proposed: "That section 206 stand part of the Bill."

I would not like to bid goodbye to probate tax without the Minister telling us the reason it is being abandoned. In the context of the comments the Minister made in the Dáil and elsewhere about this matter, he said that he was abolishing the tax because he believed it was invidious. However, that is all he said.

This section repeals Chapter I of Part VI of the Finance Act, 1993, which relates to the taxation of assets passing on inheritance as well as the various sections which amended the probate tax provisions in the Finance Acts of 1994, 1997, 1998 and 2000. These changes give effect to my budget announcement of the abolition of probate tax and are effective for deaths on or after 6 December 2000. I never liked probate tax.

It may surprise the Minister to discover that I am not a fan of it either. A proper capital acquisitions tax system would be better.

Some of the members remember the estate duty regime that was in place up to the 1970s. The 1973 general election was fought on the abolition of estate duty and it was a key issue in farming constituencies. Following the election, the Government, led by Mr. Liam Cosgrave, with Mr. Richie Ryan as Minister for Finance, introduced a number of taxation changes, one of which was capital acquisitions tax. Under the estate duty system, the value of all the assets was calculated and a rate applied to it. It closed down many farms and people had to sell up. Under the new regime of capital acquisitions tax, the rate of tax on a gift or inheritance was calculated on the basis of the relationship between the giver and the receiver. Changes have been made during the years in terms of rates and aggregations, etc. However, it was a fundamental change in the law.

As I was a member of the Government which introduced the Finance Act, 1993, I share collective responsibility for it. That Government decided that, due to financial considerations, probate tax at 2% was a reasonable idea. My view was that it was a return to the old estate duty regime. There were some exemptions regarding spouses and houses, but, in general, it was a reversal of the thinking that Richie Ryan had introduced in 1974 regarding capital acquisitions tax and the abolition of estate duty. The probate tax system was effective and collected small amounts of money, but I never liked it and have availed of this opportunity to abolish it.

Question put and agreed to.
SECTION 207.

I move amendment No. 128:

In page 233, lines 6 and 7, to delete subsection (2), and substitute the following:

"(2) This section shall have effect in relation to a policy comprised in a gift or inheritance where the date of the gift or the date of the inheritance is on or after 15 February 2001 and the policy-

(a) comes into the beneficial ownership of the disponer on or after 15 February 2001, or

(b) becomes subject to the disposition on or after that date without having been previously in the beneficial ownership of the disponer.".

Amendment agreed to.
Section 207, as amended, agreed to.
Section 208 agreed to.
SECTION 209.
Question proposed: "That section 209 stand part of the Bill."

This section amends the definition of relevant business property for the purposes of capital acquisitions tax business relief to enable businesses carried on wholly or mainly abroad to qualify for the relief.

Why is this being done?

My predecessor as Minister for Finance, Deputy Quinn, increased agriculture and business relief from 50% to 90%. Regardless of whether one likes the idea, the purpose was to allow family businesses to pass on. There was a major discussion about whether it was appropriate, but that is a matter for another day. In the meantime, many Irish businesses have expanded their operations abroad and it is impossible for them to qualify for the relief. Representations were made to me and the Department that this was inequitable for wholly owned Irish businesses which have expanded abroad. I considered it appropriate to make this change.

There is a question of scale in this regard. The main reason for the increase from 50% to 90% was, as the Minister said, to facilitate family run businesses to ensure they did not close. This is different from suggesting that multinational companies or large Irish companies that have interests abroad should benefit.

There is also the point about the movement of capital within the European Union. However, the purpose of the relief introduced by Deputy Quinn was to allow family businesses owned and operating in Ireland to pass on.

I understand the public interest motive for it, but the argument about the public interest involved in not taxing businesses which give employment abroad is less persuasive.

The original section was framed in such a way that any operation abroad would not qualify for it. They had to be wholly or mainly located in Ireland - 51% of the operation had to be located here.

That is a reasonable provision in the context of the public interest in maintaining a business that is giving employment. It is a reasonable policy goal rather than facilitating the transfer of assets.

I also received representations in recent days about other changes that would extend the concept of business relief. It raises the question of whether there should have been business relief at the extent at which it was set. Everyone wants to come within that ambit. Representations were made to me by a company which would be regarded as an Irish business. It stated that the system was unfair because it had expanded abroad to a reasonable extent, but it would not regard itself as a multinational business. I considered it reasonable that business relief should apply in this case. I thought it was a reasonable request and I have gone along with it.

Question put and agreed to.
Section 210 agreed to.
NEW SECTION.

Acceptance of this amendment involves the deletion of section 211.

I move amendment No. 129:

In page 234, before section 211, but in Part 7, to insert the following new section:

"211.-Anti-speculative property tax shall not be charged, levied or paid under section 6 of the Finance (No. 2) Act, 2000, by reference to any valuation date (within the meaning of section 5(1) of that Act) occurring on or after 6 April 2001.".

This amendment removes the provision for the 2% anti-speculative property tax due to come into effect next April. In light of developments in the housing market since last June, the Government has decided not to proceed with the implementation of this tax. There was some evidence to suggest that the anti-speculative property tax, taken together with other measures intended to cover speculative demand, was having a negative impact on investment in private rented accommodation and overall housing supply. The negative effect on the part of developers or potential investors could have adverse consequences on the prospects for overall housing supply and particularly for apartment developments because reduced investor demand makes apartment developments unviable. There was some evidence of a fall-off in apartment developments with a drop in home buying and new apartment registrations in the second half of last year, and developers changing the structural focus of residential to commercial.

We have had this debate already.

We had this debate earlier.

Amendment put and declared carried.
Sections 211 and 212 deleted.
Amendment No. 130 not moved.
Section 213 deleted.
NEW SECTIONS.

I move amendment No. 131:

In page 235, before section 214, but in Part 8, to insert the following new section:

"214.-Section 944A of the Principal Act (inserted by section 134(1)(a) of the Finance Act, 1998) is hereby amended by the deletion of ’may make arrangements for the publication of reports of such of their determinations as they consider appropriate,’ and the substitution of ’shall make arrangements for the publication of reports of their determinations,’.”.

We had this discussion last year and the year before last, which relates to the publication of reports by the Revenue Commissioners. My understanding is that they produced several dozen reports last year, but that practice has not been continued since then. It would be useful for taxpayers and practitioners if the Revenue continued to do so, however. In that way, they would be able to judge on what basis decisions are being made and to assess precedents as they are being set. These regular reports are an important part of the information provision the Revenue Commissioners engage in. I am concerned at suggestions that they might not have the resources to be able to do so in future. I would appreciate an updated report on this matter from the Minister.

The amendment proposes that, first, the appeals commissioners must, rather than may, publish their determinations and, second, that they must publish all their determinations rather than those they consider appropriate. It should be said at the outset that the role of the appeals commissioners is that of a fact finding body. They make their determination in relation to a tax appeal on the basis of the facts found in the hearing before them. A taxpayer is entitled to seek a rehearing before a judge of the Circuit Court where both the taxpayer and the inspector of taxes can appeal points of law by way of a case stated to the High Court. Some of the appeals on which the appeals commissioners make determinations find their way into the public arena if they reach the High Court. Hearings at the Circuit Court are held in camera. However, many of the appeals commissioners' determinations have no practical importance to anyone other than the taxpayer and the inspector of taxes, for example, in the determination of whether a taxpayer is entitled to a sub-contractor's certificate or whether a taxpayer lives on £15,000 or £20,000 per year. If the appeals commissioners were required to publish all the determinations it would be wasteful of their time.

In the Finance Act, 1998, I introduced legislation with the approval of the appeals commissioners to allow them to make public the determinations which they considered appropriate. As a result of that, cases were published on the web in May 2000. Whereas no further cases have since been published, I understand that some are now ready for publication. Earlier this year, the appeals commissioners appeared before the Committee of Public Account's sub-committee on certain revenue matters and advised of the resource constraints which have prevented them from making more cases available. To now oblige under law the appeals commissioners to publish details of all cases would not appear to be a sensible way forward. Perhaps the sub-committee, when it reports, will be making recommendations in this area. I think we should await that report. In the meantime, I cannot accept this amendment.

How stands the business of the appeals commissioners? It would be worrying if they were not able to do something they wanted to do because of resource constraints. Is that still the case?

The Deputy must remember that, in 1998, without any prompting and before there were any problems regarding DIRT, I tabled an amendment to the Finance Act to allow the appeals commissioners to publish their determinations. I thought this might be useful, particularly to tax practitioners.

It was lucky that I did so because all this controversy started afterwards concerning many issues, including the role of the appeals commissioners in a particular case. However, my decision to propose that change in 1998 was not based on any of those issues. It was fortuitous that I made that particular change. Over the years as a taxation practitioner myself, I felt that it might have been a help if that precedent had been established by the appeals commissioners. At least it deflected some of the criticism when the other controversy came about. The Committee on Public Accounts has debated this matter and I am awaiting its report. We will examine the resource constraints as we move along. Over the last few years, I have authorised a lot of extra staff for the Revenue Commissioners.

I have a special insight into the drafting of that report.

When is it expected to be published?

By the end of the month. That is my objective anyway. I want to take on the job of tackling the Minister every day. I wish I had the report already. Our earlier report proposed a reorganisation of the Revenue Commissioners. There will be further recommendations in that respect and in respect of the appeals commissioners. Inevitably, legislation will be needed to give effect to those changes. There will be an opportunity to make provision for structures and resources in any new Revenue Act if, indeed, the Government accepts those proposals.

I expect we will be coming back to this matter later this year.

Amendment, by leave, withdrawn.
Section 214 agreed to.

I move amendment No. 132:

In page 235, before section 215, to insert the following new section:

"215.-(1) In this section-

'Acts' means the Tax Acts (that is the Income Tax Acts and the Corporation Tax Acts, (other than those provisions which provide for tax collected under the PAYE tax deduction system and relevant contracts tax), the Capital Gains Tax Acts and the Capital Acquisitions Tax Act, 1976 (including enactments amending or extending that Act)). In addition any instrument (for example, a regulation or order) made under any of these Acts is included in this definition;

'approved body' means An Taisce - the National Trust for Ireland;

'arrears of tax' means tax (including interest and penalties) which at the same time the gift is made is unpaid-

(i) in the case of income tax, corporation tax and capital gains tax for the relevant period, and

(ii) in the case of gift tax and inheritance tax, before the calendar year in which the relevant gift is made;

'current liability' means, in relation to-

(a) income tax and capital gains tax, a tax due in the year of assessment in which the gift is made,

(b) corporation tax, a liability arising in the accounting period in which the gift is made, and

(c) gift or inheritance tax, tax owed for the calendar year in which the gift was made;

'approval of status as National Trust Property' means approval by the Minister for Arts, Heritage, Gaeltacht and the Islands or another appropriate agency nominated by the Minister for Arts, Heritage, Gaeltacht and the Islands;

'approved National Trust Property' means buildings or lands-

(a) of special, architectural, historical, archaeological, artistic, cultural, scientific, social, technical, natural or landscape interest, and

(b) the donation of which to An Taisce - The National Trust - is determined by the Minister for Arts, Heritage, Gaeltacht and the Islands to be in the public interest in all the circumstances.

(2) Acceptance of an approved National Trust Property by An Taisce, the National Trust for Ireland, by a donor under this provision shall be subject to the property being held by An Taisce in trust for the people of Ireland. In the event of An Taisce being dissolved, all property transferred to An Taisce under this provision shall revert to the State, either to be vested in the State or another appropriate body to be determined by the Minister for Arts, Heritage, Gaeltacht and the Islands.

(3)(a) The market value of any property shall be the price which, in the opinion of the Revenue Commissioners, the property would fetch on the open market on the valuation date (namely, the date of application to the Minister or agency for a determination).

(b) The Revenue Commissioners may ascertain the value in such manner and by such means as they think fit and for this purpose they may engage a person to inspect and value the item for them.

(4) Once a relevant property is transferred to An Taisce - The National Trust for Ireland - An Taisce shall issue a certificate to the person who transferred the property certifying the receipt of the relevant property and the transfer of the property to An Taisce. A duplicate of the certificate must be transmitted by An Taisce to the Revenue Commissioners.

(5)(a) Where a person makes a relevant property disposal the person is, on submission to the Revenue Commissioners of the certificate by the designated officer of An Taisce, treated as having made on the date of the submission a payment on account of tax equal to the market value of the relevant property on the valuation date.

(b) The payment on account of tax is to be set so far as it is possible:

(i) firstly against arrears of tax (including interest and penalties) and for an earlier period in priority to a later period; and

(ii) then, against any current liability to tax which the person nominates.

(c) For the purpose of determining whether a period is an earlier or later period, the date on which arrears of tax became due decides whether it is for an earlier or later period.

(d) The remaining balance is set off against such future liabilities to tax of the person who is treated as having made the payment as that person nominates.

(e) A person who has the power to sell an approved National Trust Property in order to pay capital acquisitions tax may make a relevant gift of that property in or towards satisfaction of that tax.

(6) There shall be no entitlement to a refund of tax in respect of a payment on account of tax made under this section.

(7) Interest shall not be payable should it be due, whether directly or indirectly, because of any set-off which arises in respect of a payment on account of tax.

(8) A person discharging tax by virtue of this section shall not be entitled to any other relief in respect of the gift.

(9) The Revenue Commissioners shall include the details of all gifts made in a calendar year under this section in the publication of their annual report to the Minister for Finance.".

I am sure most Deputies will have received letters from An Taisce concerning this matter, and it seems to me that it has made a very good case. The Minister for Arts, Heritage, Gaeltacht and the Islands has announced there will be no more Government funds available for the acquisition of buildings of public interest worthy of conservation. It proposes that where the owner such a property that is worthy of conservation donates the property, the value of that property as decided upon by the Revenue could be taken as a contribution towards any taxes owed to the Revenue, on the basis that if the taxes are less than the value of the property they will not receive any rebate. It seems worthwhile to me.

The amendment also proposes that should, for instance, An Taisce ever cease to exist, the ownership of the property would revert to the Minister for Arts, Heritage, Gaeltacht and the Islands. That would be a very good thing to do. It is a good proposal from An Taisce and I hope the Minister will accept the amendment or, at least, the principle behind it.

The amendment proposes to insert a new section 215 in the Bill, the purpose of which would be to allow certain liabilities to be discharged by way of a donation of heritage property to An Taisce. Essentially, what is being proposed is that such a donation be treated as a non-refundable payment on account of tax of an amount equal to the value of the property donated. An Taisce would then be required to hold the property in trust for the people.

In response to a parliamentary question tabled by Deputy McGuinness on 20 February last, I indicated that I had received a proposal from An Taisce seeking the introduction of the tax relief proposed in the amendment. I informed the Deputy that I had considered the An Taisce proposal during the preparations for the budget and the Finance Bill, but that I had no plans to introduce such a relief.

As the committee will be aware, section 41 provides for a new tax relief for donations of money to certain bodies. Relief will be available at a taxpayer's marginal rate of tax for both personal and corporate donations. The minimum qualifying donation will be £250——

It will be £200.

I agreed to reduce it to £200 on Report Stage. There will be no upper limit on the amount of a donation which qualifies for tax relief. The relief will apply to a wide range of bodies, including charities which have exempt status for tax purposes for at least three years and educational establishments. The new measure will be of significant benefit to private organisations and charities, such as An Taisce, in raising money for worthy causes. In the circumstances, I am not prepared to accept the amendment in the names of Deputies Mitchell and McGinley.

If somebody donates a property, is it caught by the donations——

No, it has to be cash. What has been proposed by An Taisce, which has corresponded with me and other Deputies, is that the value of a heritage property donated by a donor be written off in full against tax liabilities and that relief should not be confined to the marginal rate; in other words, that it be the same as a tax credit. If the value of the property was £100,000, there would be a corresponding reduction in one's personal tax liability. It would be a full tax credit. This would have all kinds of implications. I considered the proposal in detail prior to the introduction of the budget and the Finance Bill.

Every day of the week, the Department of Arts, Heritage, Gaeltacht and the Island is inundated with requests from local authorities, in particular, to take over buildings, some of very dubious architectural or heritage character. If they ended up being taken over by the State or An Taisce, it would result in a further charge on the State which would have to keep them in order. The changes I have made in regard to charities, which we have discussed in detail in recent days, will enable individuals to donate plenty of money and avail of a tax deduction. While I understand what An Taisce is trying to do and have some sympathy for the principle, I have decided to take the other route regarding donations.

If a person owns a property, but does not have enough money to discharge his or her outstanding tax and the property is deemed to be worth preserving, surely it would be much better for the State to preserve it rather than leave it to be sold to a speculator.

There are preservation orders on buildings which are also listed. This prevents anything speculative——

It does, but it also allows buildings to deteriorate. The Broadstone building owned by CIE is supposed to have been listed, but the Minister would want to see the state of it. It is in public ownership. There are many buildings worthy of conservation that are deteriorating. This is an area which has not been adequately resourced during the years. I would have thought that now that we have the resources, it would be a tremendous day if we could take a really big leap forward. An Taisce has earned a very good reputation. The proposal is a very reasoned one and I ask the Minister to think about it.

I will think about it for the future, but the supply of expenditure by the Exchequer is not endless. I do not want the Exchequer to end up having commitments to a range of buildings in public ownership, from Ballymore in Westmeath to Donard in County Wicklow, with a multiplicity of people repairing them. We will try to create a more attractive way of doing it. If people want to donate money to An Taisce, they can do so by way of a cash donation. They will be given a big tax break at the marginal rate after the passing of the Bill. I cannot agree to the amendment.

This shows a surprising side to the Minister - a philistine.

Who would be surprised at that?

Amendment put and declared lost.
Section 215 agreed to.
Sections 216 and 217 agreed to.
SECTION 218.
Question proposed: "That section 218 stand part of the Bill."

Is Revenue geared up to allow people to file——

I launched the ROS, the Revenue on-line service, in Blackrock many months ago. Approximately £50 million has been paid by way of the system since September.

How many taxpayers have used it?

Approximately 2,000. I should have said that over £100 million has been collected.

It is starting to happen. That is serious money.

I am aware from practitioners in the business that it is being used. It only covers VAT and PAYE; we have not extended it to other areas yet.

Question put and agreed to.
Section 219 to 222, inclusive, agreed to.
SECTION 223.

I move amendment No. 133:

In page 249, subsection (2), lines 24 to 26, to delete paragraph (j).

This section provides legal authority for the replacement of Irish pound amounts in tax and duty legislation with convenient euro amounts with effect from 1 January 2002. The various amounts being replaced, with the new euro amounts, are set out in Schedule 5. The purpose of the amendment is to delete from the section the provision which commences the amendments in so far as they relate to anti-speculative property tax. As that tax will not come into effect, there is no need to provide for convenient euro amounts.

I made the point at the start of the debate on Tuesday that I had difficulty in adapting to the euro threshold equivalents which will have to be rounded up in the next while. I appreciate that what one can do in a budget is limited.

When it comes to the budget, from 2002 figures will be in euros. We will have to take this into account in making decisions in regard to credits, bands, allowances, etc. However, I take the Deputy's point.

Amendment agreed to.
Section 223, as amended, agreed to.
Sections 224 to 226, inclusive, agreed to.
FIRST SCHEDULE.

I move amendment No. 134:

In page 265, to delete lines 23 to 28 and substitute the following:

"(b) For the purposes of paragraph (a), no account shall be taken of-

(i) any Carer's Benefit payable under Chapter 11A (inserted by the Social Welfare Act, 2000) of Part II of the Social Welfare (Consolidation) Act, 1993, or

(ii) any Carer's Allowance payable under Chapter 10 of Part III of that Act.".

The First Schedule, among other things, rewrites a number of the personal reliefs provisions to provide for tax credits. Paragraph 1(m) deals with section 466A which provides tax relief for home carers. There is an income qualification test of £4,000 for the relief and in determining that, income amounts receivable as carer's allowance under the social welfare system are to be ignored. Similar treatment is now to apply to the carer's benefit, which was introduced by section 10 of the Social Welfare Act, 2000.

Amendment agreed to.
First Schedule, as amended, agreed to.
SECOND SCHEDULE.

Amendments Nos. 136 and 137 are related to amendment No. 135 and amendments Nos. 135 to 137, inclusive, may be taken together by agreement.

I move amendment No. 135:

In page 278, line 4, to delete "subsection (4B)" and substitute "paragraph (b)".

These amendments, which are of a drafting nature, related to paragraph 16(b) of the Second Schedule which amends section 258 of the Taxes Consolidation Act, 1997, by inserting into that section two new subsections, (4A) and (4B). The amendments rectify minor drafting errors in the new subsection (4B) of section 258. First, the reference in line 4 of page 278 of the Bill to "subsection (4B)" should be to "paragraph (b)”, being paragraph (b) of the new subsection. Second, two references in the new subsection (4B) to “section 258”, lines 15 and 18 of page 278 of the Bill, are changed to “this section” as the new subsection (4B) is part of section 258.

Why is it that all tax allowances, or credits as they are now to be termed, are allowable at 74% whereas the PRSI ceiling is not?

It was my policy decision.

It is highway robbery.

A person earning more than £26,000 be likely to have a PRSI holiday in the period from 1 January to 5 April. In 2001 that person would have a PRSI holiday at around this time. Is it suggested that he can avail of another PRSI holiday in the period September to December?

The Minister is referring to calendar years and tax years. The tax year 2000-01 finishes early next month. Some 304,000 will have a PRSI holiday at around this time. My daughter recently told me she now understood what that meant. Her take home pay has improved while she is on the PRSI holiday. The Minister has decided that in the tax period April 2001 to December 2001, such people will not be treated in the same way.

Twelve months becomes nine months.

Whereas some will be entitled to a PRSI holiday, the great majority will not get it because of the Minister's decision to increase the ceiling to £28,250. The Minister rightly says that some will have got a PRSI holiday this year and will also get one in 2002. However, that encompasses three tax periods over two calendar years, with the second PRSI holiday occurring some time towards the end of 2002.

The reason for my decision is to ensure that people do not get two PRSI holidays in 2001. There is a simple remedy to this for the future.

That would mean removing the ceiling for employees. I dare the Minister to do that.

Deputy McDowell favours it.

We should remove the ceiling.

I reduced the ceiling for the self-employed and proprietary directors.

The ceiling should be removed and the rate reduced.

That was the Deputy's proposal in respect of the budget for 1998, along with a reduction of the top rate.

Reducing the top rate would make the abolition of the ceiling achievable, but that is not what the Minister proposes.

We are at least clear where the decision on this originated.

All decisions are Government decisions.

Except those that originate in the Customs House apparently.

Amendment agreed to.

I move amendment No. 136:

In page 278, line 15, to delete "section 258" and substitute "this section".

Amendment agreed to.

I move amendment No. 137:

In page 278, line 18, to delete "section 258" and substitute "this section".

Amendment agreed to.
Amendment No. 138 not moved.
Question proposed: "That the Second Schedule, as amended, be the Second Schedule to the Bill."

The Second Schedule deals with the various provisions that must be made to align the tax year with the calendar year. I am not a tax practitioner or an accountant, but what is involved is highly complex.

It was a dreadful job.

I had a headache by the time I had finished reading these provisions and I compliment those involved. They have done a very good job. I am sure when the Minister decided on this alignment a couple of years ago he could not have imagined the work involved.

The staff involved started working on it then. The main official had a very understanding wife.

Question put and agreed to.
Third and Fourth Schedules agreed to.
FIFTH SCHEDULE.

Amendments Nos. 139 to 154, inclusive, form a composite proposal and all may be taken together by agreement.

I move amendment No. 139:

In page 292, to delete lines 4 to 6, and substitute the following:

"Income tax, corporation tax, capital gains tax, provisions in the Inland Revenue Regulation Act, 1890 and the Taxes Consolidation Act, 1997 applying also to other taxes and duties, and related matters".

These amendments relate to the Fifth Schedule which is concerned with replacing Irish pound amounts in tax and duties legislation with euro amounts. Amendment No. 139 amends the title to part 1 of the Fifth Schedule to reflect the inclusion of the provisions of the Inland Revenue Regulation Act, 1890, in that part of the Schedule by amendment No. 140.

Amendments Nos. 140, 145, 148, 149, 150, 151, 152 and 153 add items to the list of provisions which are amended by the Fifth Schedule. In any of these amounts in the Schedule the rules requiring replacement to be in favour of the citizen have been observed. Amendments Nos. 141, 142 and 154 delete items from the list of provisions to be amended by the Schedule. The deletions made by amendment No. 141 are necessary as the amounts in question do not appear in the provision indicated.

Deletion provided for by amendment No. 142 arises because the provisions concerned have already been repealed. The deletion provided by amendment No. 154 is consequential on the decision to abolish anti-property speculative tax. Amendments Nos. 142, 144, 146 and 147 correct typographical errors. I commend these amendments to the committee.

I move an oral amendment to the Fifth Schedule to correct a typographical error, involving the use of the pound symbol instead of the euro symbol, which has only recently been brought to my attention. The amendment reads:

In page 305, line 12, to delete "£250" and substitute "€250".

The exchange rate has not been used in all instances where pounds have been converted to euros. Is there a reason for this?

Perhaps we could enter private session for a moment.

The Select Committee went into private session at 5.20 p.m. and resumed in public session at5.21 p.m.

Was it necessary to proceed in the way outlined in the Bill or could a conversion table, for general purposes, not have been introduced?

For tax purposes, the mechanisms outlined in the Bill must be used. Matters should be dealt with in the same way in terms of social welfare. The Euro Changeover (Amounts) Bill, which has been published and which will be debated before Easter, came about as a result of the trawl we had to make of all legislation, relevant to every Department, dealing with conversion amounts. It was decided to deal with tax matters in the Finance Bill, social welfare matters in the Social Welfare Bill and that the Euro Changeover (Amounts) Bill would cater for all other areas. Legal advice was taken in respect of this issue.

It sounds quite cumbersome, particularly when one considers the various fines outlined in the other legislation to which the Minister refers.

That matter will be dealt with in the Euro Changeover (Amounts) Bill.

Were civil servants obliged to examine every Act——

——rather than merely drafting a Bill which stated that €10 is equal to whatever amount of punts?

The Euro Changeover (Amounts) Bill is an omnibus measure which will insert into all other legislation the lengthy Schedules it contains. However, it was felt that taxation and social welfare matters would have to be dealt with separately.

I believe it is far too cumbersome and almost certainly unnecessary. For example, a fine of £5 in legislation introduced in the 1920s is still a £5 fine because there is no mechanism to update the amount involved. There should be some way to automatically update fines every two years or five years.

There would be a need to take legal advice on that matter.

This is not my area but I understand that fines in criminal cases have to be specified in legislation; there cannot be an automatic update.

But it gives rise to an enormous amount of work.

Amendment agreed to.

I move amendment No. 140:

In page 292, between lines 9 and 10, to insert the following:

"Inland Revenue Regulation Act, 1890 (53 & 54 Vict. c.21) (as amended):section 10(1)

section 10(2)

section 11

section 25(2)

section 32

five hundred pounds

five hundred pounds

one hundred pounds

one hundred pounds

fifty pounds

€630

€630

€125

€125

€65

".

Amendment agreed to.

I move amendment No. 141:

In page 301, to delete lines 18 and 19.

Amendment agreed to.

I move amendment No. 142:

In page 301, line 32, to delete "(Vict." and substitute "Vict.".

Amendment agreed to.

I move amendment No. 143:

In page 302, to delete lines 41 to 44.

Amendment agreed to.

I move amendment No. 144:

In page 303, line 4, to delete "1998" and substitute "1988".

Amendment agreed to.

I move amendment No. 145:

In page 303, between lines 9 and 10, to insert the following:

"

Finance Act, 1997 (No. 22 of 1997):section 89£10,000€12,695

".

Amendment agreed to.

I move amendment No. 146:

In page 303, line 11, to delete "Regulations", and substitute "Regulations,".

Amendment agreed to.

I move amendment No. 147:

In page 303, line 21, to delete "Regulations", and substitute "Regulations,".

Amendment agreed to.

I understand the Minister wishes to move an oral amendment to correct a typographical error.

I move the following oral amendment:

In page 305, line 12, to delete "£250" and substitute "€250".

Amendment agreed to.

I move amendment No. 148:

In page 308, between lines 31 and 32, to insert the following:

"

section 43(2)(a)£5€7

".

Amendment agreed to.

I move amendment No. 149:

In page 309, between lines 38 and 39, to insert the following:

"

section 120(2)(d)(ii)£5€7

".

Amendment agreed to.

I move amendment No. 150:

In page 311, between lines 24 and 25, to insert the following:

"

section 98(1)

section 99(1)

£4.40

£17.90

€5.58

€22.72

".

Amendment agreed to.

I move amendment No. 151:

In page 311, between lines 33 and 34, to insert the following:

"

Schedule 2£256.14€325.23

".

Amendment agreed to.

I move amendment No. 152:

In page 312, between lines 6 and 7, to insert the following:

"

section 141(2)(a)

section 141(2)(a)

section 141(2)(a)

section 141(2)(a)

section 141(2)(a)

section 141(2)(a)

section 141(2)(a)

section 141(2)(a)

section 141(2)(a)

section 141(2)(a)

section 141(2)(a)

section 141(2)(a)

section 141(2)(a)

£361.36

£274.44

£357.22

£180.68

£196.14

£256.14

£25.00

£10.60

£37.30

£41.75

£14.30

£196.14

£37.30

€458.83

€348.46

€453.57

€229.41

€249.04

€325.23

€31.74

€13.45

€47.36

€53.01

€18.15

€249.04

€47.36

".

Amendment agreed to.

I move amendment No. 153:

In page 313, between lines 21 and 22, to insert the following:

"

section 27(4A)£500€630

".

Amendment agreed to.

I move amendment No. 154:

In page 320, to delete lines 1 to 13.

Amendment agreed to.
Fifth Schedule, as amended, agreed to.
Title agreed to.

We commenced this debate three days ago with a discussion on the short notice given in respect of a number of extremely lengthy amendments. It is deeply unsatisfactory that we were presented with a list of amendments 113 pages long at 11.30 p.m. on the night before our deliberations were due to commence. I accept that we must adhere to a schedule because there are constitutional deadlines by which the different Stages of the Bill must be passed. However, we have agreed that it is reasonable that there should be a minimum of 14 days between the end of Second Stage and——

I suggested that it should be a week.

We should aspire to having a gap of two weeks because there is an enormous amount of work to do. The Finance Bill is quite large and the amendments tabled by the Minister alone would constitute a sizeable Bill. Opposition spokespersons were expected to take on board those amendments. Were we supposed to stay awake into Tuesday morning in order to read them? Difficulties arise when legislation of this nature is rushed through. This Bill has not received the type of consideration it deserves. The Minister accepted this point at the commencement of Committee Stage.

This point is raised annually but this year the situation was particularly bad——

The Deputy was not a member of the committee for the past two years.

——because Committee Stage commenced less than a week after the conclusion of Second Stage. There should be a gap of at least two weeks between Stages. Will the Minister consider bringing forward an amendment to allow us to impose that discipline upon ourselves?

I will endeavour to ensure that there will be a gap of at least one week next year. I hope we will all be here next year in the same capacities. I will also try to ensure that the deadlines are changed. We do not have any say about how the Bills Office operates, but we will try to give Opposition spokespersons next year's amendments in draft form. It took the Bills Office until 4.30 a.m. on Monday to have the amendments printed. I agree that the position is unsatisfactory.

Members must accept that difficulties arise in respect of the Finance Bill every year. For example Deputy Fleming referred to the chapters in last year's Bill dealing with urban renewal——

Which only arrived on the Thursday morning.

I will definitely try to achieve what is being asked of me.

I commend the Minister because we have just passed the Committee Stage of a hugely important Bill. I am glad that a number of journalists appeared in the Public Gallery to witness the conclusion of our deliberations.

I thank the Minister and his officials for the assistance they provided during the past three days. It would not be possible for Opposition Members to do their job properly without receiving advice from officials, particularly in terms of the way the dynamic develops during Committee Stage of a Finance Bill. I hope this is the last occasion on which I will be dealing with Committee Stage of a Finance Bill, with the current Minister in place, in my present capacity. Why is the budget being introduced on 5 December and when will the next Finance Bill be introduced?

The budget will be introduced on the first Wednesday in December, namely, 5 December. Since I took office, the budget has always been introduced on that day.

When did the Minister change his mind about this year's budget?

I never changed my mind.

Replies to parliamentary questions earlier in the year indicated that it would be introduced earlier.

On account of the convergence of the tax and calendar years, it was thought that the budget could be introduced on an earlier date. However, if the Deputy reads the documentation I provided when it was announced that the budget would be introduced on 5 December, he will note that there were a number of factors involved. A working group involving officials from my Department and the Department of Social, Community and Family Affairs was established to consider this matter and it has produced documentation which indicates the various things that must be changed.

There are a number of reasons 5 December was chosen. We considered introducing the budget either on 24 October or 5 December. There are many reasons for choosing the later date. If we consider the position from the point of view of social welfare, it would not make any difference to long-term social welfare recipients with payment books if we introduced the budget on 24 October or 5 December. The budget would have to be introduced in June or July to allow the relevant printing firms to change their payment books. The Government decided to introduce the budget on 5 December and has authorised the Minister for Social, Community and Family Affairs, for the following year, to try to alter the position vis-à-vis those payment books. A total of 620,000 people would not have been——

How can it make no difference if the Minister will have an additional six or eight weeks to draft the budget?

Because the budget would have to be introduced in July in order for the payment books to be changed.

Will that not also be the case in subsequent years?

We are going to try to have the Department of Social, Community and Family Affairs and the printing firm involved correct the position for the following year. It was decided to introduce the budget on 5 December this year and introduce next year's budget on an earlier date in 2002. There are pros and cons to introducing the budget on the earlier or later date. These are set out in the working group's report.

Is that report available?

Yes, it can be made available.

All social welfare payments should be delivered via swipe cards, which would remove the need for payment books.

The Minister for Social, Community and Family Affairs dealt with this matter on Committee Stage of the Social Welfare Bill. I understand that 110,000 people receive their social welfare payments via the medium of electronic funds transfer. If we introduced the budget on 28 December these people's increases could be paid on 1 January. The fact that we cannot introduce the budget on an earlier date because of the difficulties with payment books will lead to a major push for people to be paid through the medium of electronic funds transfer because increases can be paid immediately. However, the introduction of this method of payment has implications for rural post offices.

I can make the relevant documentation available to Members. The Government press release signalled some of the difficulties involved and the Minister for Social, Community and Family Affairs indicated a number of the problems which exist on the social welfare side. The Government eventually made a balanced decision. Regardless of the date on which the budget is introduced, 620,000 people will not receive their increases on 1 January. However, social welfare and tax changes will take effect from that date.

Will these people receive their lump sum payments before the general election?

They will receive them well in advance. The election will not be held until the summer of 2002.

This will give rise the strange situation where we will be debating the Finance Bill after all of the changes have been introduced.

When Deputy Mitchell and I entered the House, the budget was not introduced until April and the Finance Bill did not appear until May. Both were debated right up to the summer recess and put through at that point, despite the fact that the tax year commenced on 6 April. The position has changed since, with the budget being introduced in February and latterly in December.

We have gone backwards ever since.

I thank the Minister, his staff, the Bills Office, the Clerks to the Committee who assisted us in our deliberations over the past three days and the Opposition spokespersons for the courteous and, at times, jovial manner in which they made their contributions.

I dealt with three Finance Bills as an Opposition spokesperson and I am aware of the difficulties faced by Members on the other side of the table. The Minister has all the relevant expertise available to him while Opposition spokespersons may have only one or two advisers to assist them in a part-time capacity. The most difficult job in the Dáil is Opposition spokesperson on Finance because of the considerable amount of legislation to be dealt with. I thank the Opposition spokespersons for the way they dealt with the debate on the Bill. In addition, I thank my officials, those from the Revenue Commissioners and the Chairman for their assistance.

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