Finance Bill 2006: Committee Stage.

I welcome the Minister for Finance, Deputy Cowen, and his officials to the meeting, the purpose of which is to consider the Finance Bill 2006. The Bill was referred to the select committee by Dáil Éireann on 8 February 2006. The select committee is required by the Dáil to report the completion of its consideration of the Bill not later than Thursday, 23 February 2006. The times by which the committee must have completed its consideration of specific groups of sections and the amendments tabled thereto are determined by an allocation of time order which was made by the Dáil on 16 February 2006. This order has been circulated to members.

The order of the Dáil further provides that any division claimed on the proceedings of the Bill must be postponed until immediately before the time set for the relevant guillotine or, if proceedings conclude before the time for the guillotine is reached, on completion of those proceedings. The putting of any question which is contingent on a postponed division must similarly be postponed.

Before commencing on section 1, I ask members to agree to our working timetable. We are working today from 12 noon until 2 p.m. and from 3 p.m. to 8 p.m. During the course of the afternoon session there will, when members consider it appropriate, be a coffee break. We resume our deliberations tomorrow at 11 a.m. until 1 p.m. and from 2 p.m. to 8 p.m., with a break when deemed convenient. On Thursday, we will resume at 11 a.m. and must conclude by 1.30 p.m.

The grouping schedule has been circulated. Are members agreed on the grouping schedule for discussion purposes? Each amendment must be moved separately but the grouping schedule is for discussion purposes. Is it agreed? Agreed.

We have received individual letters on the disallowance of certain amendments. Is there a single sheet showing all the amendments that were disallowed?

No, I have not received one. I normally send a letter to each member stating the amendments in his or her name that are being disallowed. Other members will be aware of amendments being disallowed and it is not normal practice to circulate the kind of list the Deputy is seeking. As soon as is practicable, I will circulate a detailed note, similar to the one I received as Chairman, stating specifically why various amendments are being ruled out of order, be it through a charge on people or the Revenue or otherwise. This note is being worked on at present and might be helpful to members during the course of our deliberations.

On a separate matter, it has been flagged this morning that serious errors have been encountered in the system of the Office of the Revenue Commissioners, resulting in underpayments and overpayments of tax. Incorrect tax certificates have been issued and we do not know the extent of the problem. It is clear that it is extensive within the system pertaining to the Houses of the Oireachtas but inquiries I have made indicate that it goes way beyond the Houses. Will the Minister shed any light on it? Is he in a position to do so?

I am not ruling that matter as relevant at this stage. The Deputy may be able to make his point under relevant sections of the Bill as we address them. This is not a question and answer session and we must deal with the Bill section by section.

Are all the amendments listed on the green document that has been circulated?

Yes, it is a compilation of amendments from all sources and, therefore, the Deputy may disregard the white sheets. The green sheet is the official list.

NEW SECTIONS.

I move amendment No. 1:

In page 9, before section 1, to insert the following new section:

"1.—The Ombudsman shall include in her annual report a special report on the overpayment of tax by PAYE taxpayers, and on the take up of credits by such taxpayers, and the branch of her office dedicated to ensuring that the take up of credits is readily available to all taxpayers, and refunds made as rapidly as possible where this arises, shall be known as the taxpayers' advocate office.".

This amendment is to establish, as an adjunct to the Office of the Ombudsman, an office for advocacy on behalf of taxpayers. This is important to ordinary people in ordinary jobs who pay bin charges and incur medical expenses, not just millionaires who receive massive tax breaks. The amendment seeks to afford a space between the Office of the Revenue Commissioners and individual taxpayers, particularly those with small businesses and individuals on salaries. People in these categories do not really have anyone to speak on their behalf when they find themselves confused with regard to their tax position as set out by the Revenue Commissioners.

I acknowledge that the Revenue Commissioners have made significant progress in recent years in providing on-line information and services, particularly for businesses and also for the self-employed and others subject to self-assessment. Every year, ordinary taxpayers do not avail of hundreds of millions of euro in tax breaks to which they are entitled. The reason is very simple. If, for example, one visits a doctor in January or February and pays €50 for the visit, and does so again on a couple of occasions thereafter, perhaps owing to a sports injury, one is unlikely to keep records of these visits. Most younger people do not routinely keep records of their medical expenses, unless they have a medical condition. As a consequence, there is a significant level of under-claiming of medical expenses which have been provided for. Under the Bill, big developers who invest in psychiatric clinics or hospitals will get a very generous 42% off the top rate of tax, whereas ordinary citizens on ordinary salaries are most unlikely to be facilitated in claiming their medical expenses, although I accept taxpayers have to take responsibility for claiming the tax credits to which they are entitled. If one examines the amount people pay for GP visits and in other medical expenses and the amount actually claimed back from the Revenue Commissioners, one will find that there is an enormous gap between the two sums. General practitioners do not have to issue receipts. We do not have a generalised system like that in France where one's payment to one's GP is automatically recorded in the system. In some more modern medical centres one can pay a secretary at the reception desk at the front office, but in most cases one has to give the money to one's GP as part of an old and fairly informal system. As people do not get receipts in such circumstances, they are unable to claim the tax break to which I refer. The Minister for Finance gets approximately €200 million from ordinary taxpayers every year as a result.

On many previous occasions, including on Second Stage of this Bill, I asked the Minister specifically about the approach of the Revenue Commissioners to tax free certificates. Numerous employers and other individuals have contacted me because they simply cannot make sense of their tax credits and certificates. The Revenue Commissioners are aware that the tax credits have been unusually late this year. Many are confused. Every Member on the payroll of the Houses of the Oireachtas has received a letter in the last day or two saying that if his or her tax certificate is wrong, he or she should contact the Revenue Commissioners in order that they can change the certificate on their computer system. I would like the Minister to explain what has gone wrong this year with the Revenue Commissioners' system of issuing tax certificates to taxpayers, particularly employees. This problem is a prime example of why the establishment of an office of an advocate for taxpayers is required. Such an office could contact the Revenue Commissioners to get a statement from them on what is happening.

I have been given various explanations for the problem with the systems used by the Revenue Commissioners. I have been told that it relates to a computer overload. I acknowledge, given that there are 2 million people at work, that the volume of transactions being handled by the Revenue Commissioners has increased. I have also been told that problems with telephone cables and lines, particularly in the Dublin area, are affecting the operations of the Revenue Commissioners' offices. If that is the case, we should be told about it. Firms of accountants and architects, for example, are having trouble as they try to sort out where people stand. The Revenue Commissioners have issued a number of public advertisements stating that if one's certificate has not arrived, one should not panic because it is on its way. That is not good enough, particularly for the many employers who are trying to organise their employees' tax status. The Minister would be well advised to consider the establishment of an office of an advocate for taxpayers, along the lines of similar offices in other jurisdictions, particularly the United States. It could do some good work in acting as an independent voice for small-scale taxpayers, individual employees and small businesses which need someone to make their case to the Revenue Commissioners.

There is a process in the Revenue for those who have serious difficulties with their tax position but it only applies to businesses. Officials are appointed by the Revenue to go through the scenario with people and explain to them how to resolve their tax situation. That system has been in operation for a number of years and it has helped many people. However, the Minister must take several more steps to end the scandal whereby he keeps money which should be paid back to the ordinary taxpayer, especially that relating to health expenses and refuse charges, which are very significant. What is the point of increasing some allowances in the budget if many people have never managed to claim them? We should examine a new way of giving these allowances directly to people at the point of payment. It is ridiculous that they are not actually claimed. If we are calling for tighter enforcement on people paying their proper share of tax, the Revenue Commissioners must do their bit by ensuring that people receive all of the benefits, tax refunds and credits to which they are entitled.

I hope the Minister will make a statement about tax certificates and the problems that have arisen. The advertisements in the paper are not good enough and the buck stops at the Minister's door. He should tell us what exactly is happening. I raised this issue with the Minister on Second Stage and he chose not to reply. I challenge him to do so now.

I support the amendment. The Revenue needs to take more seriously their obligation to refund to people money that is rightfully due to them in tax relief because it rightly ensures that people who owe money pay up. I did a rough calculation, having looked at household budget surveys, spending on medical relief, rents and other CSO returns on items that are tax allowable. It is clear that the level of under-claiming is substantial, with 60% of allowances being unclaimed and possibly 75% of medical relief unclaimed. Some of that may be due to landlords not being registered. Not only is the person renting failing to obtain tax relief but the Revenue Commissioners are failing to get declared income. It may not all be a one-way street if greater attention is devoted to this.

I am keen to support any move, such as that proposed by Deputy Burton, to have the Ombudsman take a role in respect of this issue. However, that is the second best option. The Revenue Commissioners should be aware that their obligation to compliant taxpayers includes making it as easy as possible for people to claim reliefs to which they are entitled. The medical relief scheme is not structured in an easy fashion. When a person goes to see a doctor, there is no chit to sign and keep as a return for medical relief at the end of the year. The Revenue Commissioners have set no expectation in doctors' surgeries that tax relief will be available. They are hiding behind this threshold of €125 that must be clocked up before relief is granted, feeling that they do not have to do anything to promote the relief. We need to go a long way further to stop collecting money that is not due. By and large, it is the less informed, the less articulate and the less well off who fail to obtain their reliefs. People who have access to accountants get everything they are due, and more power to them.

We need to shift the balance in the Finance Bill towards an expectation that the Revenue Commissioners will do more in this area. I will table amendments later which will seek to accomplish that goal. However, this is long overdue. I appreciate that the Revenue Commissioners have made a great effort recently to investigate all the abuses, but there should be a parallel approach, ensuring compliant taxpayers receive the support they might reasonably expect.

I also support amendment No. 1. I know the Minister presented a robust defence of the missives the Revenue Commissioners send out each year and sometimes more often. However, many are unaware of the various reliefs to which they are entitled or what they can claim against regular expenditure and outgoings. We must have a system such as the amendment proposes, a taxpayers' advocate office. I would go further, as I did last year, in arguing this point with the Minister. We should adopt a proactive approach, properly informing people. The missives or presentational format used are not sufficient. People must be educated and introduced to the detail of the tax system. It would prove a very worthwhile undertaking if it were embarked on.

Deputy Bruton has referred to the many who can avail of the support of an accountant. However, accountants cost money and the fee involved is prohibitive for many. What little gain there might be would be eroded absolutely by such a course. There is no mystery about why the uptake is so low when it comes to claiming back one's entitlements under the taxation code. It is patently obvious to each of us why that is happening and equally obvious what must be done to address it. It requires proactivity, since there is no other approach.

The errors in the new Revenue system to which I referred before the commencement of detailed consideration of the Finance Bill are another example and the matter is not confined to the Houses of the Oireachtas. Anyone in the taxation net could have received a tax certificate showing major deviations regarding cut-off points for tax credits, net pay and so on. These matters must be addressed, but the internal missive to all staff states it is up to each employee to take the initiative by contacting the Revenue Commissioners before taking the matter up with the salaries section in the Houses of the Oireachtas. There is individual responsibility rather than a collective approach when it comes to seeking redress for errors that may have been made.

Revenue must know what mistakes it has made. It should be able to compute them and emerge with clean hands. Now the responsibility is, as always, on the individual, although the discrepancy may not be apparent to everyone. Even our own salaries unit is unable to act in the interests of staff across the Houses, unless the individual has already contacted the Revenue Commissioners and been issued with a new taxation certificate.

I would appreciate hearing the Minister's commentary in this regard. Might some other formulation be arrived at to address the errors? What is the extent of the problem? What information is available to the Minister to indicate how many may be involved as a result of the errors?

I recall that Deputy Burton proposed a similar Committee Stage amendment last year. However, I am not in a position to accept it. In common with the public sector generally, the Ombudsman's remit covers the Revenue Commissioners but what is proposed in the amendment is different. The Deputy's suggested use of the Ombudsman's office in the manner proposed would be inappropriate and probably require a legislative change in the extent of her remit.

As I told the Deputy last year, the PAYE system is not a tax system, merely an income tax collection mechanism. It was designed to collect, in so far as is possible, an employee's correct liability to income tax for a year within that year. However, the system's ability to operate in the manner intended in individual cases is dependent on the taxpayer concerned supplying to the Revenue Commissioners correct and full information on his or her income and tax entitlements. Without such information, the system is prone to throw up underpayments or overpayments. In the case of the vast majority of taxpayers, the system acts as intended.

It is the position that some reliefs need not be claimed or need be claimed only once. Claims are not required where the relief is given at source, for example, pension contributions, permanent health insurance, medical insurance and mortgage interest. Reliefs that need only be claimed once are those that will remain constant in the taxpayer's profile over the year, for example, basic tax credits, PAYE credit, trade union subscriptions and so forth. In this instance, once claimed, the reliefs are automatically carried forward from year to year.

In general, overpayments arise where a taxpayer does not notify the Revenue Commissioners of his or her full entitlements by the start of the year or notifies the Revenue Commissioners of a change of circumstances during the course of the year, for example, entitlement to additional reliefs or a cessation of employment. In some instances a notification from the taxpayer will be received too late to allow the employer to grant the relief during the year. In a considerable number of cases the overpayment arises from relief that can only be claimed or fully quantified after the end of the year, for example, medical expenses. In other instances what may be thought to be an overpayment may turn out to be an underpayment because non-PAYE sources of income have not been taken into account or fully taken into account in the deduction of tax under the PAYE system.

The vast majority of taxpayers are conscious of the credits and reliefs to which they are entitled and, where claims are necessary, take the required action. In ensuring the proper operation of the PAYE system and the tax system generally the Revenue Commissioners are proactive in advising taxpayers through various forms of media communications of their entitlements and obligations. In this regard, the most direct and beneficial notification is the notice enclosed with the annual notice of tax credits and standard rate cut-off point which contains details of all the tax credits relevant to an employee in the context of the operation of the PAYE system. This leaflet also contains details of how to claim an adjustment to tax credits.

The Revenue Commissioners' website provides easy to access customer service information on the full range of reliefs available to taxpayers, together with a range of claim forms for download and completion. The home page on the website contains a "What's new" section where the Revenue Commissioners alert customers to timely items of interest. The website also contains full details of the appropriate contact point should taxpayers wish to telephone, call in person, write to, e-mail or fax the Revenue Commissioners. There are 600 PAYE customer service staff available in the PAYE regional offices to deal with taxpayers' queries, amend tax credits, process repayments and so forth.

The Revenue Commissioners will shortly extend their present PAYE computer system to allow any PAYE taxpayer to access his or her Revenue records, that is, allowances or credits given and details of pay and tax, over the Internet at any time. They will also provide assistance for people to amend their tax credit certificate on the web, either to claim an allowance or credit not included in the certificate or to change the amount involved. They will enable them to request an on-line review or balancing statement based on the Revenue Commissioners' records and confirmation that the details are correct and complete and to receive an automatic repayment in certain cases where the Revenue Commissioners are fully satisfied from their records or recent contacts that a repayment is due.

Part of the new PAYE computer system will involve details of pay and tax from employers' P35 returns becoming available much more quickly than previously. The combination of on-line access and amendment, together with the availability of quicker and more reliable information on pay and tax, should help increase the reliability and accuracy of the PAYE system and reduce the number of PAYE overpayments that remain unclaimed. The new computer system will not change the fact that ultimate responsibility rests with the PAYE taxpayer to ensure that his or her tax credits certificate is correct or seek an end-of-year review if he or she feels that there has been an overpayment. Ultimately, where a taxpayer has overpaid tax for a year under the PAYE system, he or she is in the best position to know. In many instances, the taxpayer will be the only person who knows that tax has been overpaid.

Medical expenses reliefs are the subject of a later amendment for which a full reply has been prepared. I will address the issue at that stage; it is amendment No. 30. GPs provide receipts for attendance, and one can go to one's pharmacist at the end of the year and ask for a read-out of the tablets or medication that one has received during that time. People can take practical steps to ensure that they fully avail themselves of that relief.

Deputy Ó Caoláin mentioned the change-over to the new PAYE system. There have been some instances of errors, and they have received substantial media attention, particularly in the case of teachers. However, of the 2 million certificates being issued, instances of error involve a tiny percentage. They have been remedied without delay when identified and brought to the notice of the Revenue.

I am disappointed by the Minister's reply, since I would have expected more of him. Perhaps I might give him some examples of the need for an advocate's office. We have tens of thousands of young men working in the building industry who, for the most part, are extremely confused regarding their tax position. Most are being forced by contractors to become subcontractors in circumstances where they do not wish it. Since they are paying more than the standard rate, for most the process of securing the refund, because of all the scams that the Revenue has experienced in that regard, is now quite difficult. They are young men in their early 20s who are earning good money working in construction. They do not know where they stand on social insurance or regarding their capacity to get a refund. They pay 35% in deductions made by contractors.

There is a serious need for the office of an advocate to act on behalf of such taxpayers. The Department of Finance is not worried, since the Revenue Commissioners are getting more than their pound of flesh, 35% gross from those young men, as well as whatever PRSI contributions they may be making as self-employed workers. In reality, they are employees, and in many cases they will be due substantial refunds.

I am sure that there is not a Deputy present who has not tried to explain this scenario to younger people working in the construction industry. A very significant number of taxpayers are getting a raw deal. The contractors are delighted, since they could not give a damn. However, those who are working are inserted into the system willy-nilly. They do not know how to go about becoming an employee.

The second area also relates to many young people who work on contract jobs and move from employer to employer or have arrangements with employers whereby they are telephoned and told what hours they are to work. That happens in the fast-food and hotel industries. As many of these people change jobs frequently, the issue of tax certificates is an important one for them, particularly if the person involved is trying to pay for rented accommodation and finds that he or she is on an emergency rate because a tax certificate has not been sorted out as a consequence of previous employment. The Minister is proud of the flexibility in the labour market. Flexibility in the labour market requires an equally flexible response of behalf of the individual workers who work in that market but the Revenue's performance is not up to scratch.

There is a third scenario which affects couples, namely, where the woman has taken time out of work, either for maternity leave or to stay at home with children, and then returns to the labour market. Many such women are in for a shock due to the mess made of tax certificates this year. I know of several cases where the husband's tax certificate was issued with last year's details. As the wife is returning to the labour force and the tax certificate is not responding on time, she will potentially build up a high rate of tax. Therefore, the husband will get a nasty shock when the allowances are adjusted some months from now and what he thought to be his tax allowances are reduced considerably in order to be transferred to his wife.

Each of the scenarios to which I have just referred is real. If there was an independent office riding herd on the Revenue Commissioners, we would see many improvements. The Minister's statement of explanation about the difficulties being experienced at present with regard to tax certificates is totally inadequate. I challenge the Minister to explain what has gone wrong this year. I have not experienced anything like this situation for a long time. When the changeover to tax credits happened some years ago, people braced themselves for major difficulty but the Revenue Commissioners handled the changeover well. This year there are problems throughout the system yet we have no serious explanation from the Minister.

Perhaps the establishment of emergency hotlines is needed. At present people trying to telephone the Revenue Commissioners are not able to get through — one would need to call 12 times to get through. I do not know whether the Minister would consider a hotline for people who are experiencing the kind of difficulties to which I have just referred. However, if he was willing to establish an office of taxpayers' advocate, it is structural areas such as those to which I referred that the advocate would examine with a view to minimising any negative impacts caused by the Revenue Commissioners.

I wish to raise the issue of payment of rent. We all know that many landlords are not registered and while a tax allowance for rent is in operation, we have no information on the real-time take-up of that allowance. As with medical expenses, there is much initial evidence to suggest that many people do not claim the rent allowance tax credit to which they are entitled.

It is wrong on the Minister's part to fail to understand how ordinary taxpayers and small businesses experience our tax system. Small businesses in particular have much onerous paperwork because they act as tax collectors for the State. The Minister's response is far from adequate and he has no sense of what the experience is like on the ground for people trying to do business or work. The Revenue Commissioners are not helping many people at present.

I do not understand why the Minister should have an objection to an advocate's office, which exists in many other jurisdictions. We have much experience in this country with regard to ombudsmen and similar offices in different areas of activity. For the most part, they have proven their worth in giving people, particularly those in small business, the ability to interact with bodies like the Revenue Commissioners, which are all-powerful when compared to the individual position of a taxpayer unless, of course, the taxpayer happens to be a tax exile. As always in Ireland, there is one law for the ultra rich and another for the ordinary Joe.

I have indicated that the remit of the Ombudsman extends to the activities of the Revenue Commissioners. The job of the Ombudsman is to act as an arbitrator, as it were, between the citizen and proper administrative law to ensure proper customer service and fair play. Where that does not happen, the Ombudsman can make recommendations. The Ombudsman's remit extends to individual taxpayers who have a grievance in respect of how their tax matters are being handled. That issue, therefore, is covered.

The Deputy suggests the Ombudsman should have an additional advocacy role. That could, in fact, compromise the Ombudsman's basic role which is to act as arbitrator between an aggrieved taxpayer and the State agency or institution with which it is liaising in an investigation initiated on foot of a complaint from the citizen. Another bureaucratic response is not the way to deal with this.

The Deputy has said there are no flexible responses. She should look at the number of tax reviews which have resulted in a refund. There were 386,131 flexible responses last year by the Revenue Commissioners. That is not an indication of a rigid approach but of a capacity to deal with that level of review which was required for a range of reasons. A total of 386,131 used the system and benefited from it out of a total PAYE complement of 2 million. The suggestion that there is an inflexible or inadequate response is not borne out by the evidence.

The rate of increase in the number of reviews leading to refunds is much smaller than indicated in some recent newspaper reports. The increase in 2005 was influenced by the reduction of the time limit from ten years to four for claiming reviews. As has been widely reported, there has been substantial growth in the number of PAYE employees, with many holding more than one job. This might partly explain the increase in the number of claims for refunds as employees look to spread their credits and allowances over a number of employments and seek refunds and reviews when they leave employment. It should also be noted that the increased value of credits or allowances would partly account for the increased amounts being repaid in refunds.

The bulk issue of tax credit certificates to employees is well under way, with 1.6 million of over 2 million certificates already issued. The full issue will be completed by the end of this week at the latest. The certificates will contain the credits and allowances in individual cases based on the most up-to-date information the Revenue Commissioners have on an individual. Proactive initiatives have been taken by the Revenue Commissioners to assist taxpayers in bringing to the attention of the Revenue Commissioners all relevant information that would be germane to them making a tax claim or seeking an amendment to their tax credit certificate, as required. This responsibility remains primarily with the taxpayer, based on a good information system. We will continue with further initiatives which the Revenue Commissioners believe to be of assistance, based on their experience. The Revenue Commissioners are just as interested as anybody else in everyone getting his or her just entitlements. They are not in the business of doing it in any other way. However, there is a responsibility on the citizen, in interacting with the Revenue Commissioners, to bring to their attention any up-to-date information or change in circumstances not known to them.

Taking all of this into account, it is a different picture from that portrayed by Deputy Burton. Once again, that is the methodology used. I deal with taxpayers' queries with the Revenue Commissioners as often as the Deputy. I am a Deputy of 22 years' standing and aware of the issues that arise. These are not the preserve of any party or individual in any part of the country. Deputies of all parties and none must interface with the Revenue with regard to queries, and parliamentary questions are put down to try to ensure that the updated information is fed into the system and people get whatever rebate, relief or review to which they are entitled.

Having considered the role of the Ombudsman and her existing remit, the importance of maintaining her independence, the crucial role of the Ombudsman's office, the proactive initiatives taken by Revenue itself, the ability of people to deal with Revenue directly online, including the 386,131 who availed of that opportunity last year and obtained refunds on the basis of their reviews, it is a very efficient system which has the capacity to deal with that level of query and amendment, and is one to be congratulated. We will continue to do all we can in a sensible fashion to bring their entitlements to the attention of taxpayers. All the State seeks from any citizen is their just liability to tax based on their particular circumstances.

With regard to the question of rent relief and landlords, the Bill introduces the requirement of registration for landlords to qualify for interest relief. That kind of issue is also being proactively dealt with.

I thank the Minister for that information. Today is 21 February and the budget was on 7 December. Did I understand the Minister correctly when he stated that of approximately 2 million taxpayers, 400,000, or 20%, have yet to have their tax certificates finalised and that he hopes this will happen later this week? That is a very significant problem. I would like the Minister to explain to the committee whether it affects particular areas of activity or sections of Revenue, or particular employment, or whether it is spread evenly throughout the system.

I acknowledge that people are now working varied employment patterns. As the Minister noted, there are many different jobs, including contract jobs where the employer may not be the same at all times. This is a major problem for the Revenue Commissioners — nobody suggests otherwise. However, genuine problems arise for individuals and employers with regard to tax certificates.

I want to particularly hone in on the position of taxpayers in their earlier twenties who may be away from home and renting an apartment or otherwise in a town or city and get a job in, for example, a shop, boutique, department store or in similar employment. If their tax certificates are not dealt with, they will be put on emergency tax. Such workers are not earning large sums of money and will be earning at or close to the minimum wage. It is difficult for them to pay their way if they are on emergency tax and it takes a long time to resolve this. Last year, the cases of many taxpayers ran over into the new year which puts them into a repayment situation rather than giving them a fresh certificate.

I am glad the Minister has outlined the figures because many people, particularly middle and small sized employers, have drawn my attention to this situation for months. The Minister attends functions with employers regularly and I am sure they have a word in his ear in this regard. Will he give us a breakdown of the figure of 400,000? Does it relate to people in specific employments or particular regions or is it spread across the board?

I return to my point about an advocate's office. The role of an advocate would be to act on behalf of taxpayers to ensure they secured a good deal from the Revenue Commissioners. The Ombudsman only intervenes in a case when all other remedies have been exhausted and there is a dispute between the Revenue Commissioners and a taxpayer. Members of the committee have gone to great lengths regarding a number of such cases which, while generally important, tend to be one-off and of an unusual nature. The office of an advocate would take a much broader approach.

When members of the committee visited the United States several years ago, we had an opportunity to visit the advocate's office. I have since become aware of similar offices in other jurisdictions. Will the Minister provide details on the 400,000 who do not have tax credit certificates?

I do not have the detailed information to hand. It was brought to the attention of members that the final tranche of the 2 million tax credit certificates would be issued before the end of this week. The great majority of those who have received their new tax credit certificate have had their existing tax credits automatically carried forward and will not be subject to emergency tax. The question of the time involved in issuing the certificates is one of workload, logistics and other factors. Paying emergency tax — the extreme case — is not a problem for the vast majority of those awaiting their tax creditcertificate.

Amendment put and declared lost.

Amendments Nos. 2 and 3 are out of order as they involve a potential charge on the Revenue.

Will the Chairman explain his ruling on amendment No. 3, a proposal to establish a standing tax commission?

Amendment No. 3 proposes to establish a commission on taxation. The effect of the proposal would be to establish a body with associated costs. The amendment must, therefore, be judged to be out of order as it has the potential to impose a charge on the Revenue.

On a point of order, the effect of establishing a standing commission on taxation would be to save a vast amount of money in ridiculous, uncosted and unexamined tax breaks. In making his ruling the Chairman failed to examine the role of a standing commission. This year the Minister, at a cost of approximately €500,000, commissioned a number of firms of consultants to prepare a report on tax breaks. We have all learned how much these tax breaks cost and how little they have contributed. For instance, the tax break available in the area of child care drove up construction and site costs.

The Deputy's statement does not constitute a point of order.

The Chairman has not examined the issue. The effect of his decision to rule out a significant number of amendments has been to throttle debate and, incidentally, cost ordinary taxpayers a great deal of money.

I made my ruling in accordance with established precedent and would have made the same ruling in previous years if the Deputy had tabled a similar amendment. If she seeks to debate amendments of this nature, she should word them in such a manner as to preclude them being ruled out of order.

On a point of order, the purpose of amendment No. 4 is to seek to introduce a method of indexation. The Chairman refers to a charge on the Revenue. I am trying to avoid a hidden charge on the people because unless indexation is introduced to take account of the ever increasing cost of living, people's entitlements will continue on a downward spiral. I seek to ensure exemption limits, tax bands and tax credits keep pace with inflation as failure to introduce indexation will negatively affect every tax compliant citizen, which is patently wrong. Indexation is critically important and refusing Deputies an opportunity to voice their arguments on the issue and listen to the responses of the Minister and his colleagues is to kill off debate. I am disappointed at the Chairman's ruling.

The position is clear and in line with that adopted on previous occasions. As I indicated, I will circulate a written document outlining the reasons for my rulings which are in accordance with Standing Orders. I do not have discretion to allow debate on amendments which involve a potential charge on the people. Amendment No. 5 is also out of order because it is declaratory in nature as it seeks to require the Minister to undertake a review of the taxation system and would not extend or amend existing law. It is not specific to the Finance Bill and must, therefore, be ruled out of order.

There is a precedent in this regard. Last year the Chairman allowed debate on amendment No. 13 to the Finance Bill tabled in the name of Deputy Bruton. It was more specific than mine because it dealt with a review of the tax relief arrangements for private nursing homes, whereas my proposition is not as restricted in scope and covers the full raft spectrum of the taxation code. I do not understand the reason the Chairman has disallowed the amendment on the overall taxation system when he allowed a similar amendment last year. Regardless of how he responds, a precedent was set when debate was allowed on a similar amendment last year. The rulings show no consistency. Surely the committee can find agreement on this matter, on which I had hoped the Minister would respond positively.

While I understand the Deputy's position, the amendment is out of order because it is declaratory in nature in that it does not involve a specific amendment to the Finance Bill.

Will the Chairman refer to the precedent I cited?

The amendment makes no specific proposal to amend the law which is the purpose of Committee Stage debates.

I dispute the Chairman's position inasmuch as the Finance Bill reflects intent in a number of areas. An amendment which signals the intent to carry out a comprehensive review of the overall taxation system properly belongs in the Bill because it is in this legislation that the Minister would signal such intent if he were so disposed. With all respect, I fail to follow the logic of the Chairman's argument. Given that the amendment does not involve a charge on the Revenue or the people, he found a new mechanism for rejecting it. Surely amendment No. 5, one of a long list of my amendments the Chairman rejected again this year, merits inclusion in the debate. There is no consistency in the position taken by the Chairman. Last year he allowed a debate on specific tax reliefs. Here we are discussing the question of an overall review. I do not see the difference.

As I have explained, as Chairman, I am ruling on the matter, in which I have no discretion. I must follow the rulings of the Ceann Comhairle, which I am doing faithfully.

Amendment No. 6 in the name of Deputy Catherine Murphy involves a potential charge on the Revenue and is similarly deemed to be out of order.

May I speak to the amendment?

No debate on the amendment is allowed but in the interests of justice, I will allow a quick comment.

Deputy Murphy is the standing member of the committee. Many of the amendments in her name were submitted by me, a non-member of the committee. While I do not challenge the Chairman's ruling on amendment No. 6, I ask the Minister to report on the fiscal aspect of what is contained in the amendment, given that it was proposed by a social partner, Chambers Ireland. I ask him to come back to the committee with a view on the impact of what is proposed in the amendment, without referring to the commission mentioned in it.

I will not allow the Minister to respond, as the amendment cannot be moved. The Deputy may ask parliamentary questions and has other mechanisms to seek the information required.

Amendment No. 7, in the name of Deputy Catherine Murphy, is out of order as it is merely declaratory in nature, a point I have covered. It does not seek to amend existing law but merely seeks to obtain information that can more appropriately be obtained by other means.

May I ask a question on the amendment?

No. I will allow a point of order, but not a question.

The Bill does not deal with the budget day announcement of the fund to assist in meeting commitments under the Kyoto Protocol. What opportunity do members have to discuss the fiscal arrangements the Minister intends to make in this regard?

The joint committee would have no problem in putting such matters on its agenda for consideration.

The Bill follows through on the Minister's Budget Statement. The Minister spoke about the creation of a sinking fund to meet our commitments under the Kyoto Protocol. The details of the fund are not included in the Bill. How are we, as Members of the Oireachtas and members of this committee, meant to examine the detail of what the Minister has proposed without any legislative instruments before us?

I received a letter indicating that almost all my amendments had been ruled out of order. However, amendment No. 7 was not mentioned in the letter. Why was it not included in the original list? Is it certain that this amendment has been ruled out of order?

While I do not have the letter before me, I am ruling amendment No. 7 out of order as it does not seek to amend existing law but merely seeks to obtain information that can more properly be obtained by way of parliamentary questions, an Adjournment debate or further discussion at the joint committee.

A substantial question is——

An amendment to the Finance Bill is not a mechanism for a discussion on this topic.

However, this topic was mentioned in the Budget Statement, to which the Bill is meant to give legislative form. However, the Bill makes no mention of the sinking fund or any other fiscal measures the Government is considering in this regard.

If the Deputy wished to raise the topic, he should have tabled an amendment, rather than seeking a general discussion on it.

On a point of order, I presume we received these letters to ensure we could have a rational debate. Can I rely on the other information given in the letter or have other amendments also been ruled out of order?

There may be more.

I seek clarification that the amendment has definitely been ruled out of order.

The precedent is that I am entitled to deal with each amendment as it comes up for discussion. I have given the Deputy advance notice of what I intend to say. It is possible that during the course of the three day debate I may rule further amendments out of order as we come to them.

If this had been prepared as an amendment to a specific section, would it have been allowed?

I understand so.

Does that mean it could be resubmitted on Report Stage?

Yes, in an appropriate manner. I suggest the Deputy should consult the Bills Office on the format of the wording.

If the Bill makes no mention of the fund, I am at a loss to know where the amendment could be included.

The Deputy could propose the insertion of a new section, once it was appropriately worded.

It was only when we arrived this morning for the commencement of business that the Chairman gave each of us a letter indicating the amendments he would not accept as valid. One of my colleagues has asked for a composite list, as we do not know which amendments have been disallowed. We now find that amendments are disallowed other than those shown in some of the missives, which is unsatisfactory, as I am sure the Chairman would accept. We should receive better advance notification. What is the point in preparing for some of these amendments which can take considerable time that we do not necessarily have if the Chairman is to rule so many of them out of order? Even if this had been e-mailed to us 24 hours in advance, it would have been better. The list should be comprehensive. We should know every amendment that is not to be allowed. This proposal would facilitate the better running of business.

Many amendments have been received. Normally during Committee Stage amendments can be tabled up to the day before the debate takes place. It is only during the course of the night that matters are fully examined in detail. Often we would not have 24 hours to give advance notice. This morning each Deputy received notice in respect of his or her amendments, which is normal procedure at every committee. I propose to go one step further and notify every other member of the committee of my ruling in respect of each amendment, which is not normal practice in the House. I will try to facilitate this proposal when we take a break during the day. This is not normal procedure and I am taking an extra step that the Deputy recommends. Some amendments are received very late and decisions are made at short notice.

Amendments Nos. 2 to 7, inclusive, not moved.

I move amendment No. 8:

In page 9, between lines 17 and 18, to insert the following subsection:

"(2) In this Part "tax cost" of a relief is defined to be the next Present Value of revenue foregone plus the cost of administration; the benefit of a tax relief is the Net Present Value sum of—

(a) the value of underutilised resources brought into active use by the relief,

(b) the value of the social benefits derived from additional activity.”

Amendments Nos. 8 and 9 are related. The Minister will admit that for years Ministers for Finance have stridden in here with ideas for new tax reliefs and changes without any notion of the cost or benefits of their proposals. They do not know the cost and benefits of many tax relief schemes already in place. Last year I suggested the Minister should have capped some of the reliefs and placed curbs on the amount taxpayers could get in individual reliefs, some of which are well past the point of usefulness. However, the Minister refused on the basis that he rightly wanted to undertake a comprehensive review which is now complete. The reliefs have fallen like ninepins in that virtually none of them has stood up to scrutiny. The Minister is mending his hand to a certain extent, although he has increased the period for which some can continue to be claimed.

We cannot proceed with a Finance Bill that we debate solely in terms of amendments to the existing tax code and never in terms of whether the existing code is adequate. I note that the Minister has pointed out that the Estimates debate is inadequate and that we do not debate whether the money we spend is yielding results and performance. Equally, the debate on the Finance Bill and the annual debate on the tax code should be informed by an evaluation of the cost and benefits in order that we understand what we are getting back for the huge amounts of money forgone.

The value of the various property-based tax reliefs dwarfs the expenditure of five Departments. Larger amounts are chucked about on these tax reliefs than is spent in several Departments. All Departments are required to take part in the annual contest with the Minister and his officials to ascertain whether their spending is justified. It will be 2007 before we see any changes in performance of the tax code, which date is grossly inadequate but that is another day's work. Surely, the point from all of this is that we need to reform the way we debate the Finance Bill. We really need to debate the tax code and in that context of the performance of the tax code talk about the necessary changes. Some of the amendments the Minister will furnish today are not of such substantive interest to merit the time we devote to them compared to the overall code and its impact on the performance of our society and its economy. We need to change the way we handle the tax code from year to year. I propose that an annual review be provided which would be a companion document before the publication of the Finance Bill. It would show an annual evaluation of the performance of the tax code and particularly the special reliefs for tax exemptions or investment incentives. In that way we would begin to build up a picture of how good and appropriate is our Finance Bill. That would greatly improve the quality of spending of tax reliefs which are, effectively, the same as public spending. Tax expenditure is the same as public spending in the sense that some other taxpayer has to shoulder the cost. I hope the Minister will agree, even if he will not agree to the specific amendments today, to a process whereby we have a much more informed debate on an annual basis of the tax code. Against the background of that debate, we should make a number of changes in the Finance Bill.

It is frustrating to come in here for 15 hours to debate issues which are often not of great interest in terms of the overall performance of the tax code, such as sanctioning some minor changes in VAT regulations; this is not what politicians ought to be doing. It is not the sort of scrutiny and holding to account I wish to see. Would the Minister, therefore, consider rearranging the way taxation is examined from year to year? Of course we have to do the work, that is legitimately made our function, of sanctioning changes but we could do it on the basis of an annual review and see whether various elements are justified. While the work on these three reports is admirable, the report on private hospitals, about which there is some controversy, assumed certain benefits; the benefits were not established. Assuming that these benefits exist the report concluded that the relief is justifiable but, of course, the assumption might be unfounded. Next year we ought to come back with a review from the Revenue Commissioners as to whether those assumptions are properly founded in observation of the health system. I would like to see that type of change introduced by the Minister as part of a reform of the way we do our business on the tax code.

I strongly support Deputy Bruton's amendment. The Labour Party put forward proposals for a standing tax commission which would be another mechanism by which the cost, values and benefits of such reliefs would be established independently and reviewed on an annual basis. That is the key point. We all know that tax incentives from time to time work in creating extra supply but we also know that some tax incentives have been gravely abused on behalf of particular groups. We all know the construction industry is booming and, therefore, there has to be a question mark over the value of adding, on a blanket basis, tax incentives, regardless of location or region, where the sector is already fully stretched.

The Minister's predecessor went for tax breaks on the basis of letters written to him by doctors who asked him to have a go and to take a flutter. Essentially two years after his predecessor left office, and following our calls on the matter for a number of years, the Minister wisely — I presume because people in the Department of Finance were getting worried about the impact of some of these tax incentives — carried out a review. The review shows what we expected, that some are successful and produced additional activity, either in a region or at a time when activity was extremely depressed, and some show a significant cost to the taxpayer and have benefited developers and almost nobody else. For example, the report on the issue of tax breaks for investment in child care facilities is an interesting one and shows exactly what we are talking about. While the report said these created extra supply it notes, on the part of everyone involved in the child care business, that it significantly increased site costs and construction costs and had no impact on the price of child care services. All we are seeking is a rational examination by the Department of Finance of the costs and benefits associated with these tax breaks to be published in or around the time of the budget and on an annual basis.

There was universal agreement in the committee last year and the year before on providing tax incentives in the area of research and development. The committee had a long discussion and reached agreement on tax incentives and employment in film making. Nobody is arguing there is a black and white case, rather that there is gross abuse of some of these reliefs, which the studies confirm. The person who pays for them is the ordinary taxpayer. They are causing a scandal in terms of confidence in the integrity of the tax system.

A single person earning approximately €30,000 per annum under the present tax regime will pay tax at the rate of 42% on bonuses and overtime whereas a person who invests €100 million in a private hospital will generate significant tax breaks over a period in the region of €42 million. Where does the Minister stand and will he show us the figures on the costs and the benefits? This year a whole section of the Finance Bill is devoted to mental health care centres and psychiatric institutions. Is the State so poor that it can only provide psychiatric institutions if tax breaks are given to developers? It is an extraordinary concept of medical care. We all know it is a political deal between the Progressive Democrats and Fianna Fáil. That is the actual reality because the Minister for Health and Children is unable to make headway with the health service. If we have a circus and provide a few tax breaks for psychiatric institutions that will take people's focus off the accident and emergency trolley disaster but at a cost.

I support the very reasonable proposal made by Deputy Bruton. I do not know what Fianna Fáil has to be afraid of in putting the figures and information into the public domain. It had to be beaten into last year's review. The review shows an extraordinary range of costs for these tax breaks, shouldered by the taxpayer, some valuable and some an absolute waste of space. Unfortunately, the Minister wants to include more such reliefs in this Finance Bill and still does not want to tell us anything about their costs and benefits or how they will impact upon the services they are supposed to improve.

The Labour Party, in particular, regularly imposed a tax on schemes that benefited rural constituencies, namely, the rural renewal scheme and urban renewal scheme for county and associated towns. Anybody who crosses the Shannon or travels to within ten miles of it will note the benefits and very positive results of the schemes. The response by individuals to them has been noteworthy and they have assisted in addressing the massive decline in population throughout the midlands and west. I am at odds to know why the Labour Party representatives in Dublin criticise the schemes, while those in County Westmeath promote them constantly and were part of a group which called for their extension.

The urban and rural renewal schemes benefited greatly parts of counties Roscommon, Longford, Leitrim, Cavan and Sligo. This has had a positive effect on the whole BMW region. It is totally wrong of people who have not lived in the region and not tried in their political lives to enhance economic activity and thereby increase its population to attack the schemes constantly. The Minister is phasing them out, which I regret, but at least they are to be phased out over time. They have evoked and continue to evoke a very positive response. I am sick and tired of the Labour Party attacking them at meetings of this committee and the joint committee.

I support Deputy Bruton's amendment because it is important that we measure the cost of tax reliefs. While the amendment refers to ascertaining the value of tax reliefs in terms of social benefits and, by implication, social costs, it should also refer to the environmental costs and benefits that arise, if any. There is no doubt that the published reports on the review initiated by the Minister state the tax reliefs have had an economic impact. However, it can be argued that tax incentive driven planning has had a detrimental social and environmental impact in several cases. In Cork city, for example, reliefs for car parks were made available in excess and more car park spaces were created than were planned for in the land use and transportation plan of 1975. Consequently, traffic in and around Cork city centre is heavier than it needs to be to fill the car parking spaces provided. Public transport has suffered as a result.

On the seaside resort renewal scheme, the provision of temporary accommodation in coastal towns, particularly those along the west coast such as Kilkee and Kilrush, has meant that property prices have increased exorbitantly in those towns and at a higher rate than in the rest of the country. Thus, owing to a tax incentive meant to increase tourism potential, people living in the rural communities concerned, to whom Deputy Finneran referred, cannot afford to buy permanent accommodation.

In considering the effects of tax reliefs that have had a severe environmental impact it is clear that the review undertaken was inadequate because it only measured tax reliefs in an income and expenditure context. It did not take on board the individual and collective effects of the reliefs on our environment and society. Even the mildest of rebukes in the three reports suggest tax reliefs can at best be described as an ineffective way of achieving many of the economic goals set out. However, there is little reference to the social and environmental impact. On these grounds alone, Deputy Bruton's amendment is much needed. It would assist in the future consideration of tax reliefs, many of which continue to be politically suspect and questionable in their societal effects.

The reports do not mention the social and environmental context. This points to the likelihood that economists do not believe there is such a phenomenon as society. The political debate has resulted in our feeding the economy and forgetting about or ignoring the fact that we have a society. Therefore, I support wholeheartedly what Deputy Bruton is trying to achieve in his amendment.

I acknowledge that the review of tax reliefs was very a comprehensive undertaking. There is no question about this. The reports received make for very interesting reading. Let me reflect on an earlier point regarding what I would like to see adopted in the overall taxation system. A number of critical points have been made and, while I concur with Deputy Finneran on the urban renewal scheme, the specific advantages of which I have noted, all too sadly it has benefited too few people, mostly those in the higher income brackets, with a resultant increase in the cost of property. This is demonstrated in the report. I understand why one could argue in favour of the scheme in practical terms because I have noted its advantages, but I have also noted where it has not worked as was hoped or intended.

There is within the body of the reports a very important proposal, outlined firmly on foot of the absence of proper evaluation and a cost-benefit analysis of the reliefs. It recommends very firmly that where there is justification for Government incentives, the option of direct public expenditure as an alternative to tax incentives should be considered. This important principle which represents the preferred approach is not reflected anywhere in the Bill.

I believe in supports that will encourage activity in areas of neglect but the penchant for tax incentives as the singular methodology of address is simply not valid. In line with the recommendations contained in the reports, I reiterate that there are other methods available. Bearing in mind that we are dealing with public moneys, I certainly favour opting for careful and value conscious selection in terms of a cost-benefit analysis. In the absence of this approach Deputy Bruton's amendment which I support presents an opportunity to carry out a more detailed evaluation. What is the Minister's response to the aforementioned point in the review of tax reliefs, which point I have made previously?

I thank the Deputies for their contributions. Deputy Bruton has proposed amendment No. 8 to define "tax cost" and "the benefit of a tax relief". His amendment No. 9 proposes that the Minister for Finance should be obliged to "publish a review of the tax cost and the benefit of tax exemptions, capital allowances and investment incentives" before the Finance Bill is published each year.

I am committed to ensuring that issues of effectiveness, equity and value for money are kept under review in the context of the operation of the tax system. That is why I announced in budget 2005 that tax schemes would be reviewed externally by two firms of consultants and internally by officials in the Department of Finance and the Revenue Commissioners. I do not think Deputy Burton can claim with credibility that she achieved the establishment of this review while she was in Opposition, given that she omitted to engage in such a review while she was in Government. One gets an opportunity to do things when one is in Government. I am not prepared to give the Labour Party credit for my decision to undertake a review. It was probably the first strategic decision I took after I became Minister for Finance. If Deputy Burton wants to suggest that her influence is such that she can achieve more in Opposition than in Government, I will agree with her. It is not the case in this instance, however.

The current review process is the most comprehensive and intensive review process for more than a decade. Action has been taken across a number of fronts in budget 2006 and in the Bill under discussion on foot of the various reviews. Some tax schemes have been terminated and transitional measures have been put in place in other cases. A number of significant amendments have been made to the remaining tax schemes. On foot of its review, Indecon has recommended that tax incentive schemes should be introduced on the basis of a formal assessment of costs and benefits and that tax schemes should be subject to review after a defined lifespan. I confirmed in December's budget that I intend to follow that advice, as appropriate.

It is not necessary to write a law to regulate every aspect of administrative practice. I contend that it is not even desirable in many cases. A sensible approach should be taken to facilitate a balanced and proportionate approach to different aspects of the tax code. In making an administrative judgment on when and whether to undertake a cost benefit assessment, regard needs to be had to the nature of the tax scheme, the sums of money involved and the time horizon within which decisions must be made. I refer the Deputy to table B23 of the budget 2006 booklet, which sets out the allocation of €10.8 billion in tax expenditure in the tax year of 2002. The table indicates that most tax expenditure benefits ordinary taxpayers, an issue that is not often mentioned in debates on this matter. I do not think it is feasible to conduct major reviews of all tax reliefs every year.

That is not what is proposed in the amendment. If the Minister reads the amendment——

In any event, procedures are already in place to undertake reviews. For example, tax reliefs are generally reviewed in the context of the budget. Many of them are kept under review. Policy papers which have been considered by the tax strategy group are normally published on the website of the Department of Finance. I contend that it is for the Minister for Finance of the day to decide which reliefs, if any, should be subject to a detailed review and cost benefit analysis at any particular juncture. As far as I am concerned, decisions about tax policy are matters primarily for the Minister for Finance and the Government. Changes to tax law are decided by the Oireachtas. I do not see any reason to depart from that position.

I wish to respond to some of the comments which have been made. I assure Deputy Burton that there is no question of providing tax incentives in respect of property investment "on a blanket basis". The opposite is the case — most of the incentives are being phased out in an orderly manner and some of them are being phased out immediately. If the duration or scope of incentives is being extended, that is accompanied by a clear commitment to monitoring their value in terms of costs and benefits, including social benefits.

I have already responded to the suggestion that the Government was forced last year to decide to initiate a review. This is the first Government to undertake such a comprehensive review using independent consultants. The reviews have been carried out and their findings have been examined. The Government has decided to make a comprehensive set of changes to ensure that incentives continue to deliver value to the economy and to society.

Deputy Boyle spoke about the tax incentive scheme relating to the construction of multi-storey car park projects. The application of the schemes in question in Cork and Dublin was terminated some years ago. Various Governments have introduced tax incentive schemes in various areas and sectors over the years. The seaside resorts scheme, to which Deputy Boyle also referred, was introduced by the rainbow coalition Government in 1995 and terminated by the former Minister for Finance, Mr. Charlie McCreevy, at the end of 1999.

The core point I want to make about Deputy Bruton's amendment is that it relates to something that is a matter for the Minister for Finance of the day to review on an ongoing basis. I do not think the Deputy's suggestion that we should provide for an annualised review of all these issues represents the best way forward. I will incorporate the recommendation made by Indecon in my future practices.

I have to say — and I do not say it lightly — that the Minister has given an extraordinarily arrogant reply. It is an abuse of power for the Minister of the day to retain the sole right to make a decision on the collection and release to the Dáil of information on whether the costs and benefits of a tax relief balance each other, or whether the benefits of the relief outweigh the costs. It is not the role of the Minister to decide whether the Dáil should know whether taxpayers' money is being spent well. The Revenue Commissioners and the Department of Finance are obliged to furnish such information to the Dáil. We have operated for many years on the basis that the Department and the Revenue Commissioners do not feel they have such an obligation. I do not agree that the role of the Minister of the day is to decide whether information on the costs and benefits of a tax relief should be released to the Dáil. That would allow a Minister to say, in an imperial manner, "I think this is good value and, therefore, ‘hump you', I am not going to have an evaluation".

The Minister started his response well by saying he is committed to the effectiveness of the tax system, but he then said it was up to him to decide whether the Government will bother to review tax reliefs or to let things roll on. We should not forget that last year's review outlined the scale of the contrast between the costs and benefits of some tax reliefs, after ten or 15 years of their operation. The Indecon report, which relates to eight or ten reliefs, found that the benefits amounted to half of the costs in such cases. We were trundling along by renewing tax reliefs every year and saying they were great. Deputy Finneran was as happy as Larry because his constituency was benefiting, and more power to him. Why would one not be happy to have extra things going on? However, the Members of the Oireachtas have a responsibility to every taxpayer. We cannot afford to think about a single scheme, even though some people are benefiting from it. We have a duty to ensure that the benefit that is conferred in individual cases is matched by the cost and that we are not paying too much. The consultants in question found we were paying far too much through the various tax reliefs. I did not bring a copy of the report with me, but I am aware there were many examples of the State paying too much in deadweight costs in areas which we intuitively knew to be problematic.

The Minister and his predecessor said they would operate at their discretion without having a serious look at the reliefs. I commend the Minister for deciding to initiate a review, but I do not agree with his decision to take anà la carte approach to future reviews. He has said that in his role as Minister for Finance he will decide whether to look at certain reliefs. He has said he will continue the film relief. The Taoiseach said everyone was delighted by that wonderful approach because they were up in arms when Charlie McCreevy tried to bring the relief to an end. It is a popular relief, but that does not necessarily mean it is a good one. The Oireachtas has an obligation to examine any relief, regardless of how popular it is in an individual constituency or among the scribblers in the newspapers. The Minister still has an obligation to prove that this is good public policy. While the Minister is trying to honour some parts of what is being presented to him, he is wriggling out of what does not suit him. That is not acceptable. We need to grow up when dealing with the tax code. It is not the fiefdom of any Minister for Finance. It is the way in which we spend taxpayers’ money. Just as he rightly demands that other Ministers justify what is happening in their Departments, the same must apply to the Minister for Finance when he is maintaining a tax code that is not performing. We now know that many elements of the code are not performing.

I am disappointed in the Minister's response. He recognised that what Indecon stated is correct, namely, that we should have sunset clauses. When the Minister brings in enhanced film relief, he should be outlining what he believes are its costs and its benefits. We should be able to test that, come back in three years time and decide if he was right. The Minister now seems to be saying that he does not feel that obligation is necessary, or that it is only necessary when it suits him. He will decide when it suits him from year to year, but that is not good enough. The Minister is not the only one with a mandate because he is appointed by the Taoiseach. We all have mandates to defend the public purse and taxpayers' money.

We are at cross purposes to some extent. I do not believe that good administrative practice must be put into law in the Finance Bill 2006. As a matter of administrative practice in the future, I will follow the recommendation of the Indecon consultants. The existing tax reliefs have been comprehensively examined. They were not examined when the Deputy was a member of the Government and it was not something about which he felt strongly at the time. I commissioned a comprehensive review and I made decisions in the fullness of the recommendations that were brought to me. I have done this to ensure that we have a transition period where we do not have a sudden halt and these issues can be dealt with in an orderly fashion. My difference with the Deputy is not that I arrogate to myself the absence of a cost-benefit analysis, because as I said that is an administrative practice that I will follow. The Deputy wishes to regulate that in law.

He is not following it. He has come in this year with tax reliefs in some areas and he is making no effort to——

Will the Deputy let me answer that? All of the relief schemes were reviewed. Specific recommendations were made on some of them. Recommendations were made to continue others and the Deputy may not agree with that. Others are amended on a competitiveness basis following representations made to me, specifically the scheme mentioned by the Deputy. This is not because I find them unpopular and I agree with the Deputy when he says that there are some who regard such reliefs as beyond discussion. It feeds into a certain constituency where it is hip to be critical. However, I made those changes on the basis that we need to continue activity in that area, due to changes made in other jurisdictions. It was intimated to me that if we do not make the changes, we would lose the business. That is a judgment I must make. These issues come up in the preparation of a budget and I must make a political judgment on them. There seems to be a logic in the Opposition position that, having reviewed these reliefs, those which continue must be subject to another review. We have done that and we have made our decisions. We can agree or disagree on them if we want.

That is not the case. According to the Minister's own report, the Government will spend €554 million in tax relief on private hospitals. That investment will continue in other areas such as nursing homes and so on. There will be €1 billion in investment and we will give investors an ongoing subsidy of 42% in tax relief. If those reliefs are to be maintained every year, the Minister should be required to explain why it continues to be good value. The three year sunset clause will make the Minister honest. A point will come in three years time where the Minister will have to justify continuing a 40% subsidy into these particular activities. The Minister might say — his predecessor would certainly say it — that he does not want to have any such review. The Minister may say that we do not want it on a statutory basis. He states that he will put this into administrative practice, but he refuses to state that he will have a review of the hospital relief, the nursing home relief, the child care relief and so on. He states that he will build it into his practice but God knows what that means.

I will keep these matters under continual review. There are some schemes which may be reviewed within three years. We must balance the requirement of certainty for investors to know what we are doing with the promotion of that area of activity for the purpose of a wider good. That must be put into the balance as well.

There is no harm in the Minister saying there will be a three or five year review——

The terms of offering some sort of short-term certainty to those investing their money in Government incentives mean that it does not make sense to review every incentive every year. It would not be possible to do so unless it was in a superficial manner. Information will be available on the cost of tax reliefs from now on, due to the changes made by the Revenue Commissioners in the tax returns in the last few years. That information will be published in due course. The idea that there is no information available is not correct. However, we need to deal with this matter in a sensible, proportionate and systematic way. We should not provide for it through legislation as I believe it is a matter of administrative practice. As Minister for Finance, I am setting out my stall about how I will deal with things. The difference between us is not one of principle, but one of method. Indecon recommended the continuance of the tax reliefs for private hospitals and nursing homes, which will be kept under continual review by my Department. When I feel that these reliefs have served their purpose, then I will have no interest in continuing with such reliefs. In other words, it will be a sensible approach and exercise. In respect of any new area, I will take on the recommendations of Indecon as I requireex ante evaluation of the relief to satisfy myself as to whether I would support it. That is a fair, sensible and improved position on the Deputy’s critique of the past, although he and Deputy Burton notably excluded Ministers for Finance under whom they served. Those Ministers had the same attitude and approach that the Deputies now criticise. That is the way it was done. The suggestion that I am resiling from an approach I initiated upon taking office is not supported by the facts. There is a difference of opinion in terms of the Deputy wanting to incorporate this as part of the Finance Bill this year. I outlined an alternative approach which does not involve an abeyance of the consideration the Deputy seeks. I dealt with it on the basis of my judgment. The fact that we disagree does not mean I am arrogant.

The point is not that we disagreed but that the Minister said the review and whether the Dáil has access to information regarding tax relief schemes is his decision. He said it was up to him to decide whether a review takes place. That is not the case. We have the same mandate as the Minister. We have the same obligation to try to hold spending to account. I do not, therefore, accept that the Minister can operate at his discretion. Based on a better framework for evaluating these, there is an obligation on the Minister to ensure that the information we get when we annually vote on this material, that will cost thousands of millions of euro over time, is of a standard that gives us confidence. If the Minister is committing to that——

As it is now 2 p.m., I am required to put the following question in accordance with an order of the Dáil of 16 February: "That in respect of sections 2 to 3, each section undisposed of is hereby agreed to."

Question put and declared carried.
Sitting suspended at 2.05 p.m. and resumed at 3 p.m.
NEW SECTIONS.

Amendment No. 16 is out of order as it is declaratory in nature.

On a point of order on amendment No. 16, the Minister told us earlier that he proposes the possibility of a cost benefit analysis of some tax breaks but he refuses to commit himself.

We are not having a discussion on this.

I am challenging why this has been ruled out of order because the amendment is not declaratory, it cuts to a key point. The Minister for Finance has responsibility for Government expenditure as well as for the Finance Bill. He proposes a huge extension of health care-based tax reliefs for property investment but we are not getting any information on how this ties in on the voted side of medical expenditure by the Minister in terms of his budget. We are promised new tax breaks in health as well as the roll over of existing tax breaks while getting no information on their costs and benefits for health care and the health budget. I do not have to remind the Chairman that if his local hospital was looking for €10 million or €20 million, there would be an enormous effort by the Department of Finance to explain why he would not get it. When it is a tax expenditure there is no information at all. This is a crazy way to govern.

The Deputy has made her point of order. I have ruled this amendment out of order because it is merely to seek information that can be obtained more properly by other means.

How do I obtain it?

By parliamentary question, Adjournment debate or putting it on the agenda of the joint committee.

I have asked dozens of questions, I can get nothing.

Amendment No. 16 not moved.

Amendments Nos. 17 and 18 are related and will be taken together by agreement.

I move amendment No. 17:

In page 11, before section 4, to insert the following new section:

"4.—No deduction, allowance or relief that would, but for this section, be allowed or available in computing profits or gains arising from rental income or in assessing liability to tax on that income shall be allowed or made available to a landlord of a tenancy, within the meaning of the Residential Tenancies Act 2004 and to which Part 7 of that Act applies, who has failed to comply with the requirements of that Part."

The purpose of this amendment is to ensure that when people are calculating profits or gains from rental income, or assessing liability to tax on rental income, they must comply with the Residential Tenancies Act 2004, particularly Part 7, which makes provision for registration. We have created through the structure of tax breaks introduced and expanded by the Minister's predecessor a scenario outlined in the report commissioned by the Minister and published recently where individuals have accumulated tens of millions of euro in tax breaks, many of which relate to a capacity to write off tax breaks against rental income. We do not know if these people are in compliance with the requirements of the Residential Tenancies Board or if the Revenue Commissioners are getting sufficient information from these landlords to ensure the tenants who are paying the rent get the tax break on rental income to which we referred earlier. All the evidence shows that many tenants in private rented accommodation do not receive the tax credit to which they are entitled. The Minister has buried his head in the sand on this issue and appears to believe that if he tells taxpayers to check their entitlement, they will do so. We need a reporting mechanism which maximises the number of taxpayers who receive their entitlement to tax relief. We must also ensure landlords are registered for the purposes of landlord and tenant legislation.

In estates in many constituencies, including mine, it is not unusual for private landlords to own 30% of houses and up to 60% of apartments. The State pays €400 million in rent subsidies to approximately 60,000 individuals and families in receipt of rent supplement through the social welfare system. In my constituency the rent supplement for a family with one child is €950 per month and €1,200 per month for two adults and two children. Many of the landlords who receive this money are not registered with the Revenue Commissioners for tax purposes and the State has no information to demonstrate they are fully tax compliant. This issue must be subject to a cost benefit analysis — a term the Minister does not like — because the State is handing out large sums to private landlords in rent supplements without having any clue as to whether they are tax compliant. Landlords who own investment properties which attract tax breaks are more likely to be tax compliant because those with multiple properties, for which they can avail of tax breaks, are anxious to be tax compliant to maximise their use of the tax breaks.

We have turned over our social housing system, which used to be provided by local authorities, over to landlords. Despite the State paying out €400 million per annum to landlords, it has no idea how many of them are registered for tax purchases, paying tax on their properties or registered with the Private Residential Tenancies Board. The Minister is making some attempt in the Bill to ensure some degree of landlord registration with the board takes place.

Community welfare officers pay a rent supplement of, for instance, €1,200 per month to the tenant who then hands it over to the landlord. The Department has contrived a scenario in which there is no trail for the purposes of tax compliance between the rent supplement granted by the community welfare officer to 60,000 tenants and their landlords. The Minister will be aware that a person who takes up a part-time cleaning job for €120 per week will — correctly — fall within the PRSI net. The day will come when he or she will be contacted by the Revenue Commissioners and asked whether his or her tax liability has been met. The local authority will also revise his or her rent supplement based on the fact that he or she has been recorded as having some income. In contrast, landlords are completely unregulated, with community welfare officers paying out large sums without requiring that the money be fully accounted for for tax purposes.

The availability of investment tax breaks means many landlords have multiple property holdings and are anxious to be tax compliant. Equally, however, many landlords are not tax compliant. As a result, a tenant who is working and paying rent may be dissuaded from claiming rent relief from his or her tax bill or may not know it is available. The statistics show that the take-up of rent relief among tenants paying rent is very low.

The purpose of the amendments is to introduce a higher level of compliance among landlords. I hope the Minister will avail of the opportunity to comment on the complexities of the current rental system. We used to rely on local authorities to build houses. While some affordable housing is being built, the bulk of rental properties are provided by private landlords. In some cases, they provide fine accommodation at a reasonable price, while in others, the tenants and State, which pays much of the rent, are grossly abused. Moreover, the State has no idea whether the landlords in question are tax compliant or registered for the purposes of the ResidentialTenancies Act.

In many estates owner occupiers who experience problems with tenants or rented properties face grave difficulties in tracking down the landlord because the obligation on landlords to register with the Private Residential Tenancies Board is limited and enforcement of compliance minimal. This is a massive problem in housing estates in my constituency and throughout Dublin. I do not know if that is also true of the Minister's constituency but I suspect it is in some estates. It is the cause of major dissent and unhappiness, particularly among owner occupiers.

In some new developments investors have queued up alongside purchasers who wish to occupy the units being sold and bought ten, 20 and 30 units off the plans. When people come to live in a duplex or triplex in a housing estate in which landlords have bought vast numbers of apartments, difficulties can arise because many landlords churn tenants, that is, they turn them over once a year or thereabouts, which makes it extremely difficult to build any kind of sustainable community. In addition, if problems arise in keeping properties clean or maintaining gardens and so forth, local residents and residents groups have no recourse. I ask the Minister to respond to these pressing social problems affecting many cities and towns.

I welcome the provision in section 11 that certain deductions will not be authorised on money borrowed for the purchase, improvement or repair of a rented property, unless the person chargeable has registered with the Private Residential Tenancies Board. That the persons concerned will have to be registered with the board is useful. Amendments Nos. 17 and 18 would provide for an extension of this provision. Previously there was self-regulation. Given the financial advantage in being registered, what can be done should be done to have properties registered. Often people are excluded where landlords say they do not want a tenant who is in receipt of rent assistance. One can almost gamble that they will not be registered with the Private Residential Tenancies Board. Essentially, this limits people's opportunities in finding accommodation. I echo the points made about the rental market. There is almost a return to the pre-1930s in that in some housing estates the dominant group is comprised of renters rather than purchasers.

I was disappointed when the Residential Tenancies Act did not require persons to maintain the outside of their properties. Often residents associations believe they are paying for the upkeep of estates while others are free-loading in maintaining the value of their property because the estate looks nice. It is in everyone's interest that everyone complies. In walking around an estate one can pick out the rented houses, given the lack of attention paid to the cutting of grass, emptying rubbish bins, cleaning windows and so on, all of which makes an estate look poor.

Landlords will often sign the form for the community welfare officer with the amount capped in terms of what will be paid by way of subsidy but that does not give the true picture in many cases. When people know there is a cap, they make up the shortfall in all kinds of ways. In actual fact, more money is being sought. The landlord will sign the form and the tenant will approach the community welfare officer to say the rent is €900 when it is actually €1,100. If the amendments were to be accepted, we might have a true picture of the actual amounts being paid. Given the movement away from home ownership towards rental properties, more attention will have to be paid to that sector. Anything that can be done to ensure landlords will register should be done and would be welcome.

The question is how we can establish an appropriate focus for a linkage with the statutory registration requirement. Section 11 of the Bill addresses this issue in so far as the key tax relief involved is concerned. Its provisions provide that in circumstances where a landlord has failed to meet his or her registration requirements in respect of an individual tenancy, the interest deduction that might otherwise have been granted will be disallowed. The section also requires that in such circumstances the landlord be required to prove, if necessary, by way of written communication from the Private Residential Tenancies Board that each such tenancy has been duly registered. The intent of the legislation is to ensure this will happen without impacting on tenants and that will it achieve this objective by making the linkage between registration, on the one hand, and eligibility for mortgage interest tax relief for landlords, on the other. This is the major tax relief available to landlords and the appropriate focus of the linkage with landlord registration. Some of the reliefs relate to legitimate letting expenses such as the costs associated with day-to-day upkeep and repair of premises. It would not be appropriate to disallow these legitimate reliefs which in some cases operate to improve the rental property in question to the benefit of the tenant.

I am interested in establishing how this new provision in section 11 will operate. It will be monitored by the relevant areas in the Private Residential Tenancies Board and the Department of the Environment, Heritage and Local Government. On that basis, I do not accept the Deputy's proposal. It would be wrong to start attaching new conditions to minor reliefs where landlords who undertake appropriate investment for the upkeep of their property should be facilitated, not hindered, by the tax code.

Amendment put and declared lost.

I move amendment No. 18:

In page 11, before section 4, to insert the following new section:

"4.—Where a person avails of tax relief relating to income including or consisting of rental income pursuant to the Principal Act, he or she shall furnish to the Commissioners sufficient information to demonstrate that he or she has complied with any requirement of the law regarding registration as a landlord."

Amendment put and declared lost.

Amendment No. 19 in the name of Deputy Burton is out of order because it involves a potential charge on the Revenue.

On a point of order, will the Chairman explain how the amendment which concerns women who can avail of the new childminder's allowance which was proposed by the Labour Party and discussed at some length in the debate on the Finance Bill last year by the Minister and acknowledged by him, particularly on Report Stage, would impose a cost on the taxpayer? I recall the very productive debate the Minister and I had on the issue on Report Stage. Will the Chairman explain how the amendment which seeks to bring women who have been operating in the black economy within the PRSI structure would impose a cost on the taxpayer, given that in later years they may benefit from pension entitlements? I do not understand how it is possible to rule the amendment out of order.

The effect of the amendment would be to make the individuals concerned liable for PRSI and eligible for social welfare benefits. As it would have the potential to impose a charge on the Revenue, it is, therefore, judged to be out of order. The amendment would not be confined to women in that it includes the word "person" which also includes men.

It is shameful that Fianna Fáil, in particular, takes that attitude to women working in the home who left——

Let us move on.

Amendment No. 19 not moved.

I move amendment No. 20:

In page 11, before section 4, to insert the following new section:

"4.—Where an employee provides a childcare facility directly, or pays the childcare costs of an employee to a third party, the provision or payment shall not constitute a taxable benefit in kind."

I hope the Minister will accept this amendment if I can explain it, particularly to Fianna Fáil which seems to be all at sea on the issue of child care. Where an employer provides child care facilities directly and partly subsidises the cost to an employee, the person in receipt of that benefit — be it the mother or father — is not deemed to be benefiting from a benefit in kind. Therefore, the payment is not subject to tax. The allowance particularly suits large employers, including financial institutions and big technology companies, which may subsidise places for their employees' children in professional crèches of the kind we see in the vicinity of industrial estates. I am sure the Minister will be familiar with some of them. However, if an employer gives an employee money which the employee uses to meet child care costs, the employee is subject to benefit in kind. There is, therefore, a clear anomaly between employees who work in a particular type of institution where child care provision is made and no benefit in kind is deemed to arise and employees who work for employers, usually those with a small number of staff, who cannot make direct child care provision. If the Minister addressed this issue, he would address an anomaly in the child care sector.

In the budget for this year the Minister extended a number of child care provisions but the issue is very complex. Some employees gain benefits, while others are locked out and subject to benefit in kind. It would be well worth the Minister's while to address this anomaly, just as it would be well worth his while to ensure all child care workers are fully entitled to avail of PRSI and brought fully into the system. Many of those who offer child care services are women working from their own homes. They left the workforce to look after their own children, have been out of it for a long time and have no independent status as regards PRSI.

When the Minister introduced the welcome child care provisions in the budget, they were discussed at some length, thus demonstrating the benefit of these debates. He has recalled that discussion but has not gone far enough in considering the anomalies in the child care sector and the different experiences of the tax code of parents using child care services. It requires a little imagination on his part to address them.

Organisations such as the The Chambers of Commerce of Ireland have mentioned the anomaly to which I referred. It affects employers with small numbers of employees, in particular, and would be well worth addressing.

I support Deputy Burton's case. On the issue of the child care services relief which is allied to the argument presented by the Deputy, it is appropriate to thank the National Women's Council of Ireland for highlighting a number of deficiencies and anomalies in the Minister's proposal, particularly in so far as it is expected that the relief will encourage more people to get involved in the child care sector. Childminders will not have the opportunity to make PRSI contributions and avail of the benefits a self-employed person can otherwise avail of. We want to encourage more people to become involved in the childminding sector, in all its dimensions, yet the relief the Minister has proposed does not afford them the guarantees afforded to other workers.

This is a very serious matter as childminders will fall outside the PRSI net and the relief will fail in its stated intent. The relief should be linked to social insurance to ensure all childminders would be covered and reap the benefits. Anything less, clearly undervalues the very valuable work they do which I hope they will continue to do.

Amendment No. 20 is preparatory to amendment No. 28 which I submitted and which, sadly, the Chairman has ruled out of order. He has ruled out of order all of the good amendments. I ask the Minister to respond.

I support the amendment. The anomaly in question seems to have emerged from a good idea, that is, to encourage employers to provide child care facilities on their premises. The anomaly is such that some employers who are trying to facilitate their employees in meeting their child care needs find that their employees are attracting benefit in kind. There needs to be a consistent approach which Deputy Burton's amendment seeks to achieve.

Consider the issue raised by Deputy Ó Caoláin, the subject of the disallowed amendment. I understood from the Minister when I raised it in the Dáil that his colleague in the Department of Social and Family Affairs was making provision such that the childminders in question would not be disadvantaged. To be honest, I have not read the Social Welfare Bill to see whether such a provision has been included. Perhaps the Minister will outline the position.

The Government's principal child care philosophy, which I would not want to adopt, is about getting people to participate in the workforce rather than adopting a child-centred approach. Employers have no incentive to provide child care facilities if their doing so will result in their employees incurring benefit in kind charges.

I am surprised that the Labour Party wants to take ownership of a tax exemption limit of €10,000, given that it is substantially less than the minimum wage. I can only criticise the value this places on the minding of children. It is substantially lower than it ought to be and some believe it is an insult because they believe they are not valued to the same extent as those on the minimum wage.

I am sorry amendment No. 19 was ruled out of order because the legislation does not even afford childminders protection by way of making PRSI contributions.

The current reliefs and incentives for those involved in the provision of child care are designed to increase the supply of child care places. New facilities are involved in obtaining the benefit in kind exemption. The two amendments would increase demand without increasing supply, thereby increasing child care costs and displacing existing users not subsidised by their employers. Amendment No. 20 would not achieve the objectives it is claimed it would achieve.

The Deputies are probably aware that the Finance Act 1999 introduced an exemption from benefit in kind charges where employers provide free or subsidised child care for their employees. The exemption applies regardless of whether the employer provides the facilities in-house or in a premises made available by the employer in another location. The exemption also applies if the employer provides child care facilities jointly, for example with other employers. The exemption was extended in the Finance Act 2001 to provide for circumstances in which an employer makes a contribution to the capital costs of an independent supplier of child care facilities. Following an indepth examination of the issues relating to giving additional financial support to the parents of young children, I announced in last December's budget that a new early child care supplement will be introduced in respect of all children aged six and under.

I will outline the main difficulties with any relaxation of the current employer-based scheme. The potential costs of doing so might make it a form of salary substitution. While it would benefit those employees whose employers availed of the scheme, it would not increase supply, which is the key issue. The payment of child care costs by an employer could result in an employer paying the cost of an employee's child care in return for the employee foregoing an equivalent amount of income. In such circumstances, the employer would save on PRSI at 10.75% while the employee would save on the amount of the child care costs at his or her marginal rate of income tax. That would amount to the equivalent of marginal tax relief for paid child care, plus relief from the employer and employee PRSI and health levy, for the subset of employees whose employers co-operate. It would be difficult to impose limits on the amount of relief provided.

Such a scheme would be of benefit mainly to the employees of larger companies which can afford to subscribe to it, but it would not increase the supply of child care places — it could lead to the displacement of places. It would be unfair to those employees whose employers were not in a position or unwilling to provide the scheme because it would be likely to reduce the supply of places available to them. It also would be likely to lead to an increase in the cost of places because people whose costs were being subsidised could afford to pay more. The scheme would be of little or no use to those who are not in the tax net. It is inevitable that such a change would lead to pressure for full tax relief plus PRSI on levies relief for those paying their own child care costs. While I understand the argument that has been made as part of this debate, when one analyses the situation to consider its wider implications it is clear the proposed system would not increase the supply of child care places. That is the critical issue as far as I am concerned.

I would like to address the PRSI question. This matter is covered in the Social Welfare Law Reform and Pensions Bill 2006, as I indicated recently on Question Time in the Dáil.

Is the Minister saying an employer who makes a capital contribution to a child care facility will get tax-free child care for his employees, in effect, whereas an employer who is not in a position to enter into such a capital arrangement will find his employees will be fully taxed? That sounds like a charter that will allow cute employers to make the arrangements about which the Minister says he is worried. We need to take a more consistent approach. One of the merits of Deputy Burton's amendment is that it is consistent about all employer-provided child care. It seems the key to the Minister's scheme is that employers will do a deal of some sort that involves a capital transfer. They will get tax-free child care for their employees for the price of that deal. I do not know what capital limit will be involved. It seems like a funny sort of arrangement.

The key issue is the question of increased supply, to be provided by employers within their own premises, by employers at another premises or by employers in conjunction with a service provider. That is the issue. The extension took place in 2001.

One can put in a small amount of money and get tax-free child care for one's employeesad infinitum. It sounds like an extraordinary type of system.

Why would a commercial operator do that? We are talking about encouraging employers to provide more places at a capital cost. In other words, if they want a benefit-in-kind that will attract tax reliefs, they have to provide places by themselves or in conjunction with others. The amendment under discussion proposes that a benefit-in-kind be given to any employer who enters into an arrangement that, as I have already outlined, would involve salary substitution but would not help to create places. It would provide subsidised child care for those who would be engaged in the arrangement without any increase in supply.

When the word gets out, many people will enter into phoney child care arrangements.

No. It has been there since 2001. One of the problems we have encountered since then is getting more employers to show an interest in providing more places. We are not in the business of providing tax reliefs in the absence of increased supply.

I welcome the Minister's honesty in acknowledging that the supply initiatives the Minister has in the legislation are basically inadequate. I agree with his indication that we need to increase supply. It would be of benefit to the committee to get a list of the employers who are availing of this scheme. Could members be given an indication of the number of employees involved and the number of child care places which have been created?

We do not have that information.

Is the Minister suggesting the employers who avail of the scheme do not have to even make a return? If an employee gets a benefit, including a child care benefit, it is treated under benefit in kind legislation. I am trying to address a clear anomaly in the arrangements which were put in place by the previous Minister, Mr. McCreevy.

There is no such anomaly.

I beg to differ. My view is shared by many employers and employees. I am aware these arrangements apply to very large companies, such as financial institutions and large technology companies. That is reflected in some of the crèches which have been developed as a result of large-scale investment in industrial estates throughout the country. I am sure many members of the committee are familiar with such developments. If employers provide child care facilities directly, employees do not incur any tax charges in respect of the benefit-in-kind. If employers pay the employees' child care costs to third parties, it is deemed to constitute a taxable benefit-in-kind. It is not a level playing pitch. This clear anomaly favours employees who work for large corporations. I am surprised the Department of Finance is not aware of the beneficiaries of this benefit-in-kind legislation. I broadly know who the beneficiaries are — they are big companies such as banks and large-scale technology companies. Everyone is delighted large companies can provide some element of child care, but smaller employers face a very different scenario.

I agree with the Minister that the supply measures are inadequate. Such measures have relied on tax breaks relating to the construction of child care facilities to date. The consultants pointed out in their report that such tax breaks have had two effects — they have increased site costs because they are led by developers and they have increased construction costs. When the consultants who compiled the report surveyed child care providers, the observation I have made was made by community-based child care providers and their counterparts in the private sector. I am trying to help the Minister by pointing out that there is a clear anomaly in this regard. I am sure the Minister must have been approached about this. He claims that the pitch is not level and is geared towards bigger employers because they are taking part in the construction of the facilities and in obtaining the tax breaks. In many respects, they are getting a double benefit, whereas the smaller employer who may want to contribute to employee costs will see his employee charged a tax on the benefit-in-kind. I ask the Minister to undertake a slightly detailed consideration of what is going on.

I have given it very detailed consideration. The amendment proposed by the Deputy suggests that I provide a tax relief on benefit-in-kind for employers who do not provide any extra places.

No, I am stating the opposite. I am saying that in that scenario, they would not be subject to benefit-in-kind taxation.

I have explained the rationale for the benefit-in-kind. It is not true to state that small employers cannot avail of this because they can. They can group together as a number of small employers and provide a crèche facility. To the extent that an employer subsidy is provided to the qualifying premises, the relief is proportionate to the employer's expenditure on the child care facility concerned. It is available to small employers if they are interested. We provide an incentive and it has not been taken up. Now I am being told to provide the incentive regardless of whether places are provided. That is nonsensical. Far from providing more places, it would increase the cost of places. It would put those who are in that scheme at an advantage over other employees in smaller firms who are not taking it up and who currently have the places, but who might not be able to afford the increased costs that the subsidised child care would provide for those who would be the beneficiaries of this amendment.

There is a range of means by which we are trying to increase the supply, all of which have been welcome. When we discussed this in Dáil, I said that we had to look at how we can improve places both formally and informally and how we can provide more child care facilities through the existing reliefs. I said that we would look at all options, such as an increase in maternity benefit, for which I provided. We are also looking at the informal arrangements for the €10,000 disregard, which will try to facilitate family arrangements. We are doing everything possible to try to increase places. However, the litmus test of providing a tax relief to benefit-in-kind must be the provision of more places. What is the point in giving the tax incentive otherwise?

Let us take an example of a lone parent who takes up employment and obtains a place in a community based crèche. The costs of those crèches under the county child care committee structure — where people are in employment for a period of time — are now moving to commercial prices. They are probably still cheaper. If that lone parent takes up a job and his or her employer offers to meet some of the child care costs, that parent will have a benefit-in-kind which will be subject to taxation. However, if someone is lucky enough to work in a financial institution or a semi-State body, where child care facilities were built under the old NOW programme, that person will not will not face a tax on benefit-in-kind. That is an anomaly.

I know the situation is difficult because the Government's child care provision is all over the place. The Labour Party made seven proposals on child care and I am glad to say that the Minister partly addressed four or five of those points.

Where would we be without the Labour Party?

Absolutely. The Government benefited from our discussion last year. The NESF has produced very detailed documentation on all of this.

It has been very successful.

The Minister should not get grouchy just because we are talking about child care and issues that are of interest to women at work. He should just relax.

If anyone is relaxed this morning, it is me.

There is a clear anomaly. I am not surprised the Minister is a bit at sea. Our child care provision is terribly complex and I am just trying to point out an anomaly. I ask the Minister to look at it and take into account that what I am saying has merit. He may address it in a different way if he feels that he does not want to extend the tax relief on benefit-in-kind that he gives to certain employees. He may decide on another road and I accept that. However, the purpose of the Labour Party amendment is to point out that there is a clear anomaly that needs to be addressed.

The Deputy's amendment is a double-barrel one. The first part states "where an employer provides a child care facility directly for an employee". That is already exempted from BIK. If they supply a place, they will get the BIK.

Correct, we know that.

The second part of the amendment states "pays the child care costs of an employee to a third party". That is a straightforward reimbursement on a tax-exempt basis of costs to each employee and that would simply drive up prices. The reason I do not accept the amendment is that part of the Deputy's amendment does not increase places at all, while the first part of her amendment is already exempt. If she wants to continue arguing about it, she can do so. However, I have explained why I am not accepting the amendment. I have consistently explained what is informing the policy for the provision of a tax-exempt BIK in the first place. I have explained why I will not accept a simple salary substitution arrangement between an employer and an employee, as I do not see the link with the extra places. If employers provide extra places, whether they are big employers, small employers or groups of employers, they will get the exemption proportionate to their contribution to the qualifying premises. That is a very clear statement of policy. That is the basis on which we provide the tax incentive in the first place.

We have already heard about the abhorrence of tax incentives for no obvious reason. I am providing a tax incentive when child care places are increased. If child places are not increased, there will be no tax incentive. Maybe one could get an incentive from the Labour Party, but not from me.

Amendment put and declared lost.
Section 4 agreed to.
SECTION 5.
Question proposed: "That section 5 stand part of the Bill."

What is the take up on this move? It is a good move and I welcome it. It is worthwhile and it will help people look after relatives in their family home. However, I have not met anyone who has taken it up.

Approximately 500 people have taken it up.

Has the Minister any evidence to believe that the increase will encourage a greater number to take it up? Did he just feel that it was a good thing to do?

I hope it proves more attractive to people who are not taking it up at present or provides increased relief to those who already have taken it up. It is a good effort to encourage and support families who have a difficult situation with which to contend.

Question put and agreed to.
Section 6 agreed to.
SECTION 7.
Question proposed: "That section 7 stand part of the Bill."

While the Minister did not so indicate, is it his intention to gradually eliminate the gap between tax relief on rent paid and tax relief on mortgage interest?

The section amends section 473 of the Taxes Consolidation Act 1997 which grants relief to taxpayers for rent paid in respect of private rented accommodation which is their sole or main residence. With the increasing population living in the private rented sector, the number of people claiming rent is increasing annually and, in particular, there has been a steady increase in the number of people under 55 claiming the relief.

Affordability has become a particular issue for private tenants in recent years. That has given rise to calls for measures to support an increase in the supply of quality affordable rented accommodation to address rent burdens in the private rented sector.

The maximum level of rent paid for private rented accommodation on which rent relief can be claimed will be increased by 10%. We are satisfied that these increases in the relief may go some way towards alleviating the burden of rent for tenants in the private rented sector. The cost of the relief is €3 million in a full year.

On the question Deputy Bruton raised, it is important to note that if any significant change is made in rent relief, the question of whether there would be implications for mortgage interest relief for owner-occupiers may need to be considered. The maximum value of mortgage interest relief for first-time buyers is set out in a table for illustration and there have been suggestions in the past in public debate that there should be equivalence between the mortgage interest relief and relief on rent paid. The rent relief for those over 55 is broadly in line with the mortgage interest relief for buyers other than first-time buyers in the first seven years but the rent relief for those under 55 is less. Obviously, it is a matter I will keep under review to ensure that we can find a balance for both sectors in the relief available.

I will not make a meal of this. The Minister will be well aware that the total value of this relief to a single person is no more than €6 a week. A considerable number of people are forced into private accommodation. If such people are on supplementary welfare, they get on average 90% of the rent paid. When they take up employment the supplement towards their housing cost is reduced to €6 a week. This cannot be solved in the tax code alone but this anomaly, where people who try to better themselves by taking up a job move from having 90% of their rent supported by the State to having virtually none of it supported by the State, is a considerable trap which ought to be removed. The Minister, in conjunction with this colleague, the Minister for Social and Family Affairs, Deputy Brennan, should look hard at that policy and come up with a package which gives a reasonable housing credit support to working people on low income in the private rented sector.

We increased the rent relief by 10% this year but it is an issue we should discuss in a considered way.

On the same point, I put it to the Minister that the scale of the rent relief, at €6 a week, is not a real incentive for people to claim it. While the Minister may say the number of recipients is increasing, would a higher rate of rent relief result in more landlords getting into the tax net? With rent relief at such a low level, will the Minister find that this relief is not being claimed with the result that he will not get the landlords concerned into the tax net? If there was a greater incentive for the tenant by way of a higher rent relief, the tenant would be more likely to claim it and hence the Revenue would gather in the landlords.

Does the Minister agree that the Private Residential Tenancies Board has fared disastrously in registering landlords? The shortfall in the registration of tenancies by the board is dramatic and the number of registrations has not risen anywhere near the level expected considering the number of landlords. According to anecdotal figures, there are between 60,000 and 70,000 landlords registered.

There are 86,000 now but there were only 23,000 when the local authorities were responsible.

Yes, but the estimate from the auctioneers' association is that there are in the region of 150,000 landlords. Would a better incentive for people to claim tax relief on rent paid, which incidentally would be self-financing, ensure that the Minister would get a higher proportion of landlords into the net, resulting in them registering, paying tax, etc.?

There are two points here. Earlier we discussed section 11 which makes the link between the main interest relief — mortgage interest relief — and the requirement of registration of landlords which is having an effect in terms of increased registrations. There is certainly more than three times the level of registration under the tenancy board than was the case under the old system, and there is still more to be done. The linkage that has now been established to get mortgage interest relief as a landlord, where such a person must register with the board, is proving a good mechanism in terms of the registration which in turn will reflect on standards and statutory requirements in that entire area. What one must watch, if one looks at doubling the rent relief, is that it could result in higher rents. If the landlord knows the tenant will be in receipt of even more rent relief that can have an effect on price. That is an issue one must watch and that is why there is a balance to be struck.

While one must reckon that if one doubles the relief it could encourage landlords to increase rent, it could also encourage the purchase of properties for the purpose of making them available to rent, thereby reducing supply of accommodation available to owner-occupiers wishing to buy. One must watch the impact of these proposals on the market.

At present, approximately 95,000 individuals under 55 are availing of the relief and 2,000 individuals over 55, at a cost of €26.4 million to the Exchequer. I increased the relief available on rent paid by 18%.

One must watch the impacts here, which are not relevant simply to the rental sector and which can have a wider effect on the housing market available for others as well. It is a matter we should discuss in more detail at another time.

While I am sure there is a sort of logic in terms of there being a new liability if the Minister extends the relief to people, I can never understand the logic by which the Minister will pay an amount of money for someone on rent support, essentially to keep him or her from paying income tax because the person cannot work due to the poverty trap. I cannot figure out why that has not been addressed clearly by giving an incentive where the person's income increases so that he or she does not experience the disadvantage of having to pay the entire rent. Surely there is the other positive goal of having people working and paying income tax. A substantial number of people in that poverty trap want to work.

The section provides tax relief at the standard rate to individuals for rent paid for private rented accommodation which is their sole or main residence and the level of rent qualifying for relief under the section depends on the individual's marital status and age. Looking at what it is costing, as I stated there are issues at which one must look such as its impact on the housing market generally and on individuals' rents because the person who benefits from the relief could be the landlord, not the tenant. These are considerations in how the market will react depending on how far one goes with this at a given time. I increased the relief by 18% in the 2005 budget and by 10% in this budget. I am trying to ensure the benefits remain with the tenant, not the landlord.

Question put and agreed to.
NEW SECTION.

I move amendment No. 21:

In page 12, before section 8, to insert the following new section:

"8.—The Principal Act is amended by the insertion of the following new section 15A.

"15A.—(1) In any year of assessment where monies are paid to any state or other body in respect of which the individual making such payments would be entitled to a tax credit or an allowance for income tax the Minister for Finance may direct that such state or other body shall make a return of such payments made by such persons in such format and shall be determined by regulations as shall be made by the Minister for Finance to enable a tax credit or deduction to be made or allowed.

(2) In respect of any such information provided to the Offices of the Revenue Commissioners no liability shall attach to the Office of the Revenue Commissioners or otherwise for failing to provide such tax credit or allowance to the person who made the payment.".".

The amendment is intended to help people obtain tax relief due to them on medical expenses and bin charges where the providers are easily identifiable. It would give the Minister the power to make arrangements with the providers to make a return on behalf of the person making the payment and, thereby, the tax relief would be obtained by the payee.

A total of 80% of householders are compliant and pay their bin charges, which means at least 1 million households pay such charges, less the number in receipt of waivers. The latest figures provided by the Department, which are a number of years old, suggest the number of people obtaining tax relief on bin charges is a tiny fraction of 1 million. Clearly, there is a breakdown between people paying the charge and claiming the tax relief. The payment is made to another State body in the form of a local authority. The purpose of the amendment is to get the Revenue to enter into arrangements with providers in order that these returns are made automatically and the tax relief is credited to individuals. The Minister might decide to provide the tax relief at source, similar to VHI payments and mortgage interest relief. It would be a considerable administrative requirement of medical providers such as general practitioners and it would not be reasonable to expect it but making a simple return using the PPS number of the individual involved would not be as onerous and could trigger the relief.

Approximately 120,000 properties are registered by landlords and, according to the Minister's figures, only 97,000 avail of tax relief. A total of 23,000, therefore, do not avail of the relief. There may be opportunities to ensure relief is availed of by those who are entitled to it through an initiative or mechanism such as this. I encourage the Minister to examine this. It could be done over time and he should begin with local authorities. It should not be difficult for them because they have good administrative structures for the collection of bin charges. Perhaps the Minister will look on the amendment sympathetically, as it provides for an enabling power over time.

The Deputy is proposing that where moneys are paid to State agencies in respect of payments which subsequently qualify for tax relief, the Minister should make regulations that would require such bodies to make returns on all such payments and the format of such returns would be determined by the Minister. It would then allow the necessary relief for credit to be granted by the Revenue Commissioners. It would considerably increase the burden of administration of the PAYE system. The Revenue is developing a self-service facility for taxpayers, particularly those dealt with under the PAYE scheme, which should greatly enhance their ability to make claims for relief electronically or on line. That would ensure any necessary amendments are made as soon as the individual taxpayer has identified his or her entitlement to it. Involving State agencies in determining if the claimant qualifies for relief might not meet the Deputy's objective in that a significant number of claimants could be given relief in error, which would subsequently have to be withdrawn. Checking the validity of claims would also increase the administrative burden on Revenue. I would prefer to see how the latest developments being embraced and utilised by Revenue, including the self-service facility under development, for taxpayers work before considering the measures proposed by the Deputy, who has raised this issue on a number of occasions.

By this time next year, if we are all alive and still in our respective positions, will the Minister request from Revenue an estimate of the number of bin charges paid, the tax allowed, the amount spent on medical expenses that is not reimbursed and the amount claimed in tax and the amounts claimed and allowed in relief relating to tenancies? When we revisit this issue next year, the Minister should be armed with a reasonable amount of information of the extent to which tax relief is being pursued. His predecessor decided to do a deal with the VHI and mortgage companies, which I presume generated administrative costs, to administer the reliefs. All the difficulties outlined by the Minister were overcome because those reliefs are deducted at source and the Revenue has not collapsed under the burden of administration. The schemes run quite smoothly. Perhaps there is more scope than Revenue is letting on in the detailed notes it is providing to the Minister and this time next year we can explore the issue further and take a fresh look at it.

Tax relief at source works in a number of the sectors mentioned by the Deputy but it is not suitable for all reliefs. Tax relief at source operates more easily where there is a limited number of service providers, as in the case of mortgage and health insurance sectors. A large number of operators are involved in the areas mentioned by the Deputy and the problem of convincing private operators to administer tax relief at source where they have no obligation to do so is another issue. The tag system would make the operation of tax relief at source cumbersome in quantifying charges as local authorities would need to collect details of tag sales from numerous retailers to calculate the relief. Extending the tax relief at source to waste collection would be costly for the Exchequer, as it would require extending relief also to individuals who are not liable to tax. Tax relief at source has been successful in a number of sectors because of the availability of information from a limited number of service providers together with collection procedures that enable us do that accurately but that is not uniform across all potential areas where this might be a good idea when one gets into the entrails of the issue. However, I will put on my thinking cap to ascertain whether there is a way through that maze.

With regard to the tag system, I was informed in reply to a parliamentary question that the tax relief covers only the flat charge and does not take account of the pay by weight or lift elements of waste collection.

The number of people who pay by weight adds another complication and does not make this any simpler. If one were to apply it to the present system of tags, there would be great difficulty collating the information to make it an effective system in providing the tax relief at the appropriate rate at source for each individual. Although giving tax relief at source has worked in the case of mortgage interest and medical costs, this does not necessarily mean we can apply it in other areas. On initial observation one might ask why not, but when we check it out, one can see the problem. Some issues affect how this would apply at source which do not apply in other cases where it has been successfully introduced. We need to think our way through the issue to see if there is a way around the problem of the number on whom one is dependent to get the information and the arrangements in different places and authorities. It is not as simple as it sounds.

How many households avail of tax relief on refuse charges? What is the percentage take-up rate of this tax break and what does it cost on an annual basis?

It is estimated by Revenue that there are approximately 120,000 claimants.

The Minister has mentioned that there are 2 million at work in the State. If we allow for three workers per household, this would give us a potential 700,000 claims in respect of this relief. Does this not suggest there is a very low take-up? Three people in employment per household is a generous guesstimate on my part. Because it is not part of a tax credit system, we know that the people who do not pay tax but who pay charges get no benefit from this relief. Will the Minister comment on this?

The latest statistics we have are for 2002 when there were 125,000 claimants at an estimated cost of €5.2 million for that year. There has been an increase in take-up of the relief. In the previous year the figure was 75,000 and the year before, 44,000. Therefore, the take-up trebled in two years. We do not have statistics beyond 2002, but the figure could be much more.

Does the Minister agree the take-up is very low considering that with 2 million in the workforce and perhaps three working people per household there should be between 600,000 and 700,000 claims? The Minister's figure indicates the take-up is very low.

It is a household charge.

That is what I am saying. Three employed persons per household is a high average.

One must factor in entitlement to a waiver also. It is clear the relief is not being fully taken up, but it is available and people are aware of it. We will be happy to provide it if it is applied for. That is as much information as I have available.

The tax relief being provided is less than previously because of the change to a pay by weight and tagging system. Previously, if people paid €300 in charges, they were able to set aside the €300 against income tax. Now, if they pay a flat charge of €170 and the rest by way of tags or otherwise, they are only allowed to claim the flat charge. Therefore, there is a saving for the Department of Finance due to the changed system and it has become less attractive for people to claim because the relief is worth less. I presume the Department has estimated that the relief will cost less as a consequence of this.

What we are trying to do is accommodate the move to a pay by weight system. Previously, people got relief on the flat charge, but now we are trying to accommodate whatever amount people pay under the pay-by-weight system. If they pay more, they can claim for that amount. Until now, the statutory limit was the flat charge, but we are building flexibility into the system in an effort to improve the situation for taxpayers.

The situation improves for taxpayers when they end up with more money in their pockets as a consequence of claiming relief. However, they are entitled to claim less now because of the change in Government policy, the "polluter pays" principle, with regard to the means by which they pay charges.

I understand they can claim double what they could have claimed previously under the pay-by-weight system. That is the purpose of the amendments. The Deputy's interpretation is that we are trying to reduce the cost of the tax relief, but we are not. We want to ensure it is not limited to a fixed amount unrelated to the pay-by-weight system where people may pay more. If I had left the system as it was, taxpayers would get the maximum relief at the flat rate, and if they paid more under the pay-by-weight system, that would be their problem. I am trying to facilitate flexibility on the basis that the pay-by-weight system does not indicate a flat annual charge. The charge depends on what people put in their bins and how often they put them out for collection. Relief is based on how much people pay.

Given that amendment No. 24 has been refused and knowing the Minister's disposition, I do not anticipate a positive response from him. Nevertheless, I will outline my stance. We should encourage a full review of this area. The Minister used the word "double", but all I can see that has been doubled is taxation. While we have seen a widening of bands during the years, other means of taking money in tax from people have been introduced. Bin charges are just one of these. They are a form of double taxation; they are not a stealth charge, as they are blatant and overt. They are also a crude and cruel instrument and have not helped in the safe and managed disposal of refuse. We see examples of the abuses they encourage in many parts of the country.

Is it not the case that private providers determine the reliefs in terms of public expenditure? This is what it amounts to in that reliefs equal public expenditure in this regard. There is no democratic accountability and control. What we have is taxation without representation, due to increased privatisation of the service throughout the State. While I do not anticipate a positive response, the issue should be revisited because the current approach is patently flawed and does not serve our overall needs on a number of fronts.

Up to now, where waste charges were levied by other means, relief was limited to expenditure of €195. The Bill provides for a general upper limit of €400 per annum on which relief can be claimed, irrespective of how the charge is determined. I am doubling the limit for which people can claim. To suggest I am reducing it is incorrect. I am more than doubling the limit.

The whole business of stealth taxes and double taxation in the provision of a critical service that has always been the responsibility of local authorities should be reviewed in the context of many of the abuses witnessed, if not on a point of principle. I argue with that principle and know that the Minister and I would be at different ends of the spectrum in that regard. I am prepared to concede that point but in the overall context of the abuses that we continually see, the organised and contracted illegal disposal of waste and the efforts made to avoid the current and ever spiralling costs being imposed, particularly by the private sector, are defeating the objective of the safe, managed and controlled disposal of waste. I ask the Minister to consider undertaking a review of the matter in that context if he will not accept the argument that I have traditionally made that we should revert to the system whereby waste disposal was part of the service provided by the local authorities at no additional cost to householders because people paid for it through the taxation system, a fair and progressive system that was based on ability to pay.

The Government's record on helping working families to increase and retain the greater part of their income cannot be challenged by anybody. On the issue of waste charges, we must take account of the "polluter pays" principle, the movement to full cost recovery for waste management services and the fact that higher environmental standards are being demanded by regulatory authorities and society generally. Waste charges also include the cost associated with the proper operation of landfill sites, their closure and ongoing management thereafter and the need to contribute to the cost of provision of appropriate recycling facilities. All of these are important considerations in how we deal with and pay for this issue. There are also many EU requirements to be met.

It is easy for a party of protest to suggest a nice, handy way of solving this problem without anyone having to pay. That is one of the luxuries of opposition; there is always enough money for what one wants to do but never enough for what someone else wants to do. I must disagree with the Deputy. He knows that I must make sure the service is paid for and funded, whereas he does not have to do so.

Is the amendment being pressed?

No, the Minister has said he will conduct research and revert——

That is a word I never use as freely as the Deputy.

I think the Minister said he would look at the issue.

I will put my thinking cap on and try to deal with all the difficulties that the Deputy threw at me.

Amendment, by leave, withdrawn.
SECTION 8.

Amendments Nos. 22 and 23 form a composite proposal and can be discussed together.

: I move amendment No. 22:

In page 12, lines 28 to 30, to delete all words from and including "the" in line 28 down to and including "(a)” in line 30.

This is a very simple amendment which seeks to remove the €400 limit and make the relief allowable on whatever amount people pay in bin charges.

I have explained that I have increased the limit from €195 to €400. The amendments are suggesting I go beyond this but I do not propose to increase the limit set in the Bill. A transitional regime is being applied to those subject to fixed-rate charges in excess of €400 in 2005 to allow them to claim tax relief on the full charge in 2006. My officials will continue to monitor the adequacy of the proposed upper limit against the way in which charges will be levied in the future.

Amendment, by leave, withdrawn.
Amendments Nos. 23 and 24 not moved.
Section 8 agreed to.
Section 9 agreed to.
SECTION 10.

I move amendment No. 25:

In page 14, subsection (1), to delete line 33.

This amendment seeks to remove an unintended duplicate reference to the National Roads Authority from the list of bodies in Schedule 13 which are required to operate the professional services withholding tax.

Amendment agreed to.
Section 10, as amended, agreed to.
Section 11 agreed to.
NEW SECTION.

I move amendment No. 26:

In page 16, before section 12, to insert the following new section:

"12.—The Principal Act is amended by the insertion of the following new section 657B:

"657B.— (1) In this section—

‘relevant individual' means an individual who is in receipt of—

(a) a relevant payment or relevant payments, and

(b) a payment under the EU Single Payment Scheme operated by the Department of Agriculture and Food under Council Regulation No. 1782/2003 of 29 September 2003, in respect of both of which the individual would be, apart from this section, chargeable to income tax on the profits or gains from farming for the year of assessment 2006, but does not include an individual who in the year of assessment 2006 is chargeable to income tax in respect of profits or gains from farming in accordance with subsection (5) of section 657;

‘relevant payment' means a payment made at any time in the calendar year 2006 to an individual under the EU Single Payment Scheme operated by the Department of Agriculture and Food under Council Regulation No. 1782/2003 of 29 September 2003.

(2) A relevant individual may elect to have the aggregate of all relevant payments made to the individual treated in accordance with subsections (3) to (6), and each such election shall be made in such form and contain such information as the Revenue Commissioners may require.

(3) Notwithstanding any other provision of the Income Tax Acts apart from subsection (4), where an individual elects in accordance with subsection (2), the relevant payment or relevant payments shall be disregarded as respects the year of assessment 2006 and shall instead be treated for the purposes of the Income Tax Acts as arising in equal instalments in the year of assessment 2006 and in the 2 immediately succeeding years of assessment.

(4) Where a trade of farming is permanently discontinued, tax shall be charged under Case IV of Schedule D for the year of assessment in which such discontinuation takes place in respect of the amount of any relevant payment which would, but for such discontinuance, be treated by virtue of subsection (3) as arising in a year of assessment or years of assessment ending after such discontinuance.

(5) An election under subsection (2) by a person to whom this section applies, shall be made by notice in writing on or before 31 October 2007 and shall be included in the annual statement required to be delivered on or before that date under the Income Tax Acts of the profits or gains from farming for the year of assessment 2006.

(6) Subject to subsection (4) an election made under subsection (2) cannot be altered or varied during the period to which it refers.".".

On Second Stage I spoke about this amendment which is a very simple one. Last year the Minister made provision in section 27 for the introduction of a new section, section 657A, to the Taxes Consolidation Act 1997 to allow farmers who had received a single farm payment and subsidies under the old subsidies scheme to avail of an averaging provision over a three year period. This will be of direct benefit to farmers who will be able to avail of the provision from 2005. However, there are 10,000 farmers to whom the Department of Agriculture and Food did not issue payments before the end of last year. These farmers cannot avail of the averaging provision, even though they will receive a double payment in 2006. It is unfair, because of the failure of the Department to issue payments within the calendar year, that the farmers concerned should lose out on a benefit that the Minister believed last year was a worthy one for farmers. I ask him to provide relief for those farmers who did not receive their single farm payment by the end of 2005. I know he will be aware of some such farmers in County Offaly and hope he will look sympathetically at the amendment.

The Deputy's concern is that if a payment due in 2005 is not provided until 2006, farmers will not be able to average their incomes over three years. We are catering for this situation without the need for his amendment. Perhaps I should explain this because it is a practical issue that must be addressed. The farmers who will receive a payment in 2006 which was due in 2005 will be allowed to consider that the payment was made in 2005. In that way, the practical problem will be addressed. We do not need the amendment and I will outline why that is the case.

When I introduced section 657A of the Taxes Consolidation Act 1997 last year, it was intended to smooth the once-off farm income peak in the changeover year from the old farm support system to the new single farm payment. The solution was a form of temporary income averaging. At the time it was understood that the 2005 single payment would be paid to all farmers in that year but for a variety of reasons, some have experienced delays and did not receive the payment due for 2005 in that year. Only farmers operating on a receipts basis are likely to have a problem. All full-time farmers can avail of the normal income averaging arrangements and will have no difficulty. In addition, farmers who operate accruals or annual accounts can attribute income to the correct year, regardless of when it was actually paid. Therefore, the issue does not arise for them either.

I am advised by the Revenue Commissioners that the current difficulty for some farmers can be easily overcome. They have recently covered the issue in an article inTax Briefing. They will allow a farmer taxed on a receipts basis to account for the single farm payment on an annual basis provided taxpayers apply the basis consistently commencing in 2005 and that there is no significant loss of revenue over that which would arise if the accounts were prepared on a full earnings basis. They have also advised that they need only be notified of this when the farmer’s tax return is being submitted. In effect, farmers who operate on the receipts basis can include in their tax returns for 2005 delayed 2005 single farm payments received in 2006 with other farm receipts for 2005. As a consequence, there can be no additional tax liability involved where farmers have experienced delays in receiving their single farm payments. Given that this potential problem is being addressed, it is not necessary for me to accept the amendment, although I recognise the spirit in which it was tabled.

I thank the Minister for addressing the issue.

Amendment, by leave, withdrawn.
SECTION 12.
Question proposed: "That section 12 stand part of the Bill".

During the Second Stage debate I raised the difficulty being experienced in relation to farm leases, in particular the exclusion of tax relief where land was leased within family units. A farmer who, on retirement, leases his or her land to a neighbour or another person living further down the road is entitled to claim tax relief on the leasing income. I welcome the increase in that regard. However, if the farmer concerned wishes to lease the land to his or her son or other family member, he or she cannot claim tax relief. That is not fair and creates a situation where it is more advantageous for farmers to lease land to strangers rather than keeping it within the family. Previously, one could obtain relief having leased one's land to a family member. However, this provision was changed in the Finance Act 1992 as a result of abuses in the system.

I have met many farmers who are aggrieved by this and believe the legislation is anti-family, as it prevents their leasing their land to their children. Many farmers — I am sure the Minister is aware of this — do not wish to hand over land directly to their sons or daughters but prefer to give them time to ease their way into the business and reassure themselves they will not be turfed off the land. Farmers often provide their children with a lengthy lead-in time when taking over the farm. We should legislate to ensure leasing to a family member is at least on a par with leasing to strangers.

I do not understand how the Minister can defend the indefensible. How can one defend a system under which tax relief is provided for farmers who lease land to strangers rather than their own children?

I am sure the Deputy is aware of the principle of not leasing to connected persons for obvious reasons. It is an anti-avoidance measure, apart from anything else. The same principle applies throughout the tax system in respect of leasing.

The provision was introduced by way of amendment to the Finance Act 1992.

It has been in place for 14 years, which some regard as a lifetime political career, while others will leave the hustings satisfied with far less.

Does the Minister not see the merits of my argument?

I know the argument the Deputy is making. The provision is an exceptional one which applies to all leasing arrangements for farming purposes. I am not in a position to justify the exception against all other leasing arrangements. Leasing arrangements must be on a transparent and unconnected basis. For 25 years I have heard the argument about easing the next generation into the business gently.

That could be——

If we treat farms as businesses, farmers will be required to overcome their traditional and outdated concepts.

I am disappointed the Minister will not concede. I am sure he will read about this in the media next week.

I am sure I will — another attack, another broadside from Mullingar about the Minister who will not listen. The Deputy will get a nice article out of that one.

I will say the Minister is anti-family.

The Deputy can say I am against all families. He can include all of them.

I wish to raise two points on this section, the first of which relates to what Deputy McGrath had to say. I accept that there has been difficulty in this area but believe abuse of the system could be restricted if we were to link tax relief on income in leasing to one's family with the farm retirement scheme. An example would be a 55 year old farmer who enters the farm retirement scheme at a time when a number of his children are younger than the individual who decides to take over the farm. That farmer who needs an income has no other choice but to sign up to a leasing arrangement over a ten-year period but it could be linked to the farm retirement scheme, thereby ensuring there would be money available to educate other family members. I am sure such a provision could be facilitated on a restricted basis and would assist those genuinely affected by the current provision.

Many solicitors have expressed the view that farmers are extremely slow to sign over land to a son or daughter, given the difficulties that could arise following marriage break-up. We must take such matters as the revenue implications of marriage break-up into consideration when drafting finance legislation.

Amendment No. 76 deals with suckler cow quotas. As this is the only section that deals with tax relief for farmers, I want to speak briefly about that amendment. I have spoken to the Minister about farmers who purchased suckler cow quota during the subsidy era. That scheme has no net value. There is a precedent for introducing a change, given that farmers who purchase milk quota are given relief. The same situation arose a number of years ago with taxi drivers who, having purchased taxi licences at a significant cost to themselves, had to make repayments net of tax on their income. A capital write-off was allowed in that instance. In the case of suckler cow quota, farmers make repayments based on their income net of tax. There is, therefore, an anomaly in the system.

I am disappointed we cannot discuss this issue in more detail. I ask the Minister to give serious consideration to addressing this anomaly which would not cost a substantial amount to rectify. Farmers should not be treated differently from taxi drivers.

The policy of providing for capital gains tax exemptions for those who transfer land extends to farmers of 55 years and over. There is in place a policy initiative to encourage the transfer of land to younger farmers. Macra is forever speaking of the need to get land into the hands of young farmers. If we were to promote one initiative, apart from extending the general principle, we would negate the effectiveness of availing of capital gains tax exemptions in transferring the property rather than leasing it and retaining it in the name of the older farmer. Depending on which policy objective one is pursuing, they sometimes conflict when applied in this way. That is a further consideration which dissuades one from taking the route of the lease rather than encouraging the transfer. The Deputy referred to concerns about modern societal trends. While it is fair to say those may be a consideration for some people, we must apply general principles in the tax code rather than try to accommodate nuanced positions which individual representations throw up from time to time.

We cannot solve the other problem. Perhaps, the taxman bought a milk quota. I will speak to the Deputy about the matter and provide him with detailed consideration subsequently.

There is a further matter to consider in the context of the change to the tax relief in respect of leasing, which is on the same net point. It also affects the farming community. A farmer, taxi driver or anyone else who operates a business will have a certain number of goods on lease. On making his or returns, a business person will receive a certificate of net income from the Revenue Commissioners which accounts for the fact that leasing arrangements are tax deductible. However, when that certificate is produced to a local authority where a person's income is below the threshold which qualifies his or her child to receive grant aid for third level education, the authority will ask instead to look at the business person's full accounts. When the accounts are examined, any leasing arrangements will be added back on to his or her net income for the purpose of assessing the grant entitlement. In effect, the Department of Education and Science is telling people it does not believe them or the Revenue Commissioners as to their level of annual income. Instead of accepting that a person's income is, for example, €35,000 per year, it decides his or her income is €41,000 and refuses to provide a grant.

A division has been called in the Dáil.

It is not right that these circumstances should obtain. There should be equality of treatment across the board.

The omnipotence of Revenue should be challenged from time to time.

Question put and agreed to.

As there are no pairing arrangements in place, we must go and vote.

Question put and agreed to.
Sitting suspended at 4.45 p.m. and resumed at 5.15 p.m.
SECTION 13.

Amendment No. 27 in the name of Deputy Catherine Murphy is ruled out of order as it is merely declaratory in nature and I have given the Deputy a note to that effect. Amendment No. 28 in the name of Deputy Ó Caoláin is out of order as it involves a potential charge on the Revenue.

Amendments Nos. 27 and 28 not moved.
Section 13 agreed to.
NEW SECTION.

I move amendment No. 29:

In page 18, before section 14, to insert the following new section:

"14.—The Principal Act is amended in section 462—

(a) in subsection (1), by the deletion of paragraph (b), and

(b) in subsection (2), by inserting the words “unless in the latter case, one or other does not have a taxable income” after the word “wife” at the end of the subsection.”.

This is a provision by which the Minister would allow the one parent family tax allowance to unmarried couples who are living together with children where there is only one earner. An extraordinary anomaly exists in instances where couples living together and rearing children have only single personal tax allowances. If such couples split, which certainly would not be a good policy to promote, they would move from getting one tax free allowance to potentially getting four because each member of a couple would claim his or her own personal allowance and the one parent family tax credit. It is strange that two people who are not married and who have children with each other and live together can get one allowance but if they separate, they can get four. This is an effort to at least provide that a couple living together with children would get the one parent family tax credit. It would still not be equivalent to being treated as a married couple but it would at least recognise something of their situation and encourage them to stay together.

The effect of Deputy Bruton's proposal would be to transform the one parent family tax credit into a single income tax credit and to broaden its focus so that it would no longer be exclusively targeted at the intended beneficiaries, namely, lone parents raising children on their own. If I understand the proposal correctly, it would mean that cohabiting couples with dependent children where there is only one earner would be entitled to receive the new credit but married couples in the same circumstances would be excluded. This would be likely to raise questions of constitutionality as well as social policy issues. In any event, it would entail a significant cost, in the region of €40 million annually assuming that approximately 25,000 cohabiting couples are in a position to qualify for it. Given these significant issues, I am advised that accepting the amendment would have some of those effects.

Deputy Bruton raised an issue in terms of the current effect of the one parent family tax credit and this would require some consideration on my part.

It is a strange situation. If the 25,000 couples living in these circumstances can present themselves as living apart, each party ends up getting the one parent family tax credit. It is in no way intuitive that we should support a policy of that nature. The Minister is incorrect in stating that married couples would not receive it. Married couples get a married benefit; they effectively obtain two credits in any event. They also would have the right, if they were both earning, to exchange their band credit.

This is a particular group. Some 25,000 is not an insignificant number of families that are in a trap here. I accept that it would represent a significant change in policy but perhaps it is on occasions such as this that we should examine the need to change policy.

Would the best way to approach this be to introduce into the Finance Act a general arrangement whereby a couple that is recognised as cohabiting, whether or not they have children, is given the same tax position as a married couple? The Department of Social and Family Affairs has no difficulty in doing this for the purposes of social welfare assessment.

I do not want to go into the deliberations of the Oireachtas all-party committee on matters such as the recognition of a family but there is a difficulty in that there are now so many cohabiting couples, many of whom have children and whose family circumstances are as complex as persons who are married. In the social welfare code, cohabiting couples are assessed as a single unit. I presume this is on the basis of the adage that two can live more cheaply than one and because the social welfare model is an old one which recognises one head of the household. For tax purposes, however, the Government has had a policy of individualisation over a long period in order to encourage women into the labour force where the limited advantages currently in existence are for married couples. This particularly applies to people who have young children. Where people in a relationship — there are many in second relationships — have young children, both parties simply cannot go out to work because of the cost of child care and one parent stays at home. We all favour that but they lose out in every respect whereas if they were both unemployed and sought social welfare payments, including the rent supplement, they would be significantly better off. However, in the scenario outlined by Deputy Bruton, where one person works and the other stays at home to look after children, they are at a distinct disadvantage in our system. For instance, the person at home does not qualify for a social welfare payment because his or her partner is working. A social welfare payment will be granted only in special circumstances such as for caring. Our system is as we find it and it has become more complex over the years, but Deputy Bruton's argument has a great deal of merit and the issue could be approached by way of his amendment or by providing for recognition of cohabiting couples in the Finance Acts. The Minister could make arrangements regarding how they are recognised and that could then apply also to same sex couples. I welcome that the Minister might examine this and come back to the committee with ideas regarding how this might be addressed.

One must stick to the principle on which the one-parent tax credit is based. If the individualisation issue is brought into that, it confuses the issue. The issue was that single parents were rearing their children and there was a need to recognise this by providing a tax relief in the system, which was done through the one-parent family tax credit. A problem arose when the relief was introduced regarding providing a similar relief where couples were separated and the child was living with one or other spouse or at different times of the year with either spouse. It was decided at that time that rather than apportioning the tax credit, each parent would be given the benefit of the credit, as they were living as single parents rearing the child for whatever period of the year, thereby avoiding complications. A compassionate rather than a strictly mathematical view was taken to avoid getting into a range of further complications.

However, Deputy Bruton proposes to extend the remit beyond the single parent family tax credit to a single income tax credit and this gets us into the individualisation argument.

It does, in a real, social situation. A total of 25,000 families are affected.

Yes, but a benefit is provided where a single parent looks after a child. We decided that, rather than being pedantic or didactic, the tax credit would be given to each parent. By doing so, they were differentiated from single parents in the original sense of the term and the tax relief provision aimed at filling that gap was composed that way. One gets into difficult circumstances when one goes beyond that. The single person tax credit was introduced where parents were separated and the children were being raised separately. We decided to give the tax credit in full to both parents.

Life is full of difficult circumstances such as this. The State is treating a spouse who supports his or her partner and their children as a single person without any obligations. That is not sensible social policy.

If they dispense with those obligations, they will both get the double credit.

Defining "cohabitation" for the purpose of qualifying for relief is not easy. In the absence of criteria, there is always the possibility of contrived arrangements and, ideally, a form of registration would be desirable but that issue also extends beyond the tax system. The Deputy is proposing a different tax credit and whether that should be available is a matter for consideration or examination to ascertain its implications and impact because of the myriad arrangements that exist. Deciding to change the nature of the single person tax credit to cover these scenarios needs more consideration before I could include it in a way that is sensible or meets the requirements.

The cohabiting restriction in the one-parent family tax credit is an essential feature of the relief, as it focuses the relief on the intended beneficiaries — lone parents raising children on their own. It is also essential to adhere to the principle outlined in the Murphy judgment, which held that it was unconstitutional for a married couple, where each partner has an income, to pay more tax than two single people with the same incomes living together and, therefore, it is not possible to remove the restriction from the relief. The options are to leave the relief as it is or to remove it entirely.

My proposal would not disadvantage married couples. Married couples are in receipt of the married couple allowance, which is equal to the single person tax credit plus the one-parent family tax credit. They receive the full benefit. Cohabiting couples with one earner should not be treated as if they were single and had no obligations.

Could the Minister not allow them to register as cohabiting couples, whether they are same sex couples——

That is an even broader issue.

People consider these reliefs practically in terms of how they are affected. I know people who have not disclosed that they are cohabiting because they would be worse off financially. This is an anti-family approach. I do not care if people are married or cohabiting. The State does not discourage two parents from raising their children but they are not encouraged to make a declaration. People who do so are visited by officials to examine the arrangements they make and if they do not, they have to look over their shoulders.

The Minister for Social and Family Affairs recently stated he was examining a payment that would be financially neutral because it is happening anyway. That is more or less looking at a situation where people are cohabiting and not declaring their circumstances.

A tax credit is specifically focused on the intended beneficiary, who is a single person rearing children alone.

We should provide a stable environment in which children can be raised rather than pretending they do not exist.

I am not saying that.

The Minister's colleague, the Minister for Social and Family Affairs, stated in an interview on radio that 40% of people regarded as lone parents, from the point of view of social welfare records and benefits, were not actually in that situation. However, they were not defrauding social welfare because they were cohabiting partners. If the Minister for Social and Family Affairs is aware that 40% of people who claim lone parent benefits are cohabiting partners, there should be some line up between social welfare and tax policy to ensure we do not discriminate, to the tune of a couple of hundred euro a week, against couples where both parents live as a family unit with their children. That is what this is about.

Not to get into a social welfare debate, if the Minister for Social and Family Affairs wants to consider how he can change the criteria for lone parent allowance, that matter should be brought to Government to be figured out. We all know society has arrangements and we try to fit in our laws with the existing arrangements as best we can. If there is to be a change in the criteria for these arrangements, it must be considered in full. Change cannot be made on the basis of its being a good idea, but must be worked out. If there is an issue to be considered, let it be considered in due course. I do not have the answer to it now, nor does anyone else.

The solution Deputy Bruton seeks to apply involves changing the current remit of the single parent tax credit and grafting onto it the proposal for a single income tax credit for a defined set of circumstances he feels is worthy of consideration. If it is worthy of consideration, it should be worthwhile on its own merits to see what impact and interaction it has with tax laws and rules. However, it is not feasible to do it on the basis that we have a single person family tax credit and to extend that remit. We need to know it meets a certain set of criteria and to see what other circumstances may emerge that we need to sort out. I do not have a clear view on that tonight or on how it might be sorted out. Should we go the full individualisation route altogether and forget about the current modified arrangements? That would be another way of solving the problem. However, in solving it the Deputy's way we would create another set of problems. It is not a simple matter.

As it is now 5.30 p.m. I am required to put the following question in accordance with an order of the Dáil of 16 February: "That the amendments set down by the Minister for Finance to sections 4 to 14, inclusive, and not disposed of are hereby made to the Bill, and in respect of the said sections undisposed of, that the section or as appropriate the section as amended is hereby agreed."

Question put and declared carried.

We will suspend the sitting now. As we must complete sections 15 to 32 by 8 p.m., we will return at 6.30 p.m.

Sitting suspended at 5.35 p.m. and resumed at 6.30 p.m.

The select committee will resume its deliberation of the Finance Bill 2006, at section 15. The next amendment is amendment No. 56, in the name of Deputy Burton.

I wish to make a brief comment. We did not deal fully with section 14, which is all about pensions, before the meeting was interrupted. One aspect of that section deals with approved retirement funds and a number of anomalies have arisen with the Minister's new proposals in the budget. I ask him to examine that issue before Report Stage.

NEW SECTIONS.

I move amendment No. 56:

In page 55, before section 15, to insert the following new section:

"15.—The Minster shall by regulations determine the form of tax returns in such a way as to facilitate the compilation of statistics on the extent to which tax reliefs are availed of by taxpayers.".

This amendment is similar to others I moved in previous years. Its purpose is to improve the statistical information available on who avails of various tax reliefs. The studies done by consultants show that, by and large, the various property based tax breaks were availed of only by people with an income in excess of €200,000 per annum. We have also had various reports from the Revenue Commissioners showing how people with very high incomes, because of property based reliefs, end up paying little or no tax. Information was disclosed to me in October 2004 regarding 11 millionaires who paid no tax and those figures have persisted. I am aware the Minister intends to introduce regulations in this area. However, we have not yet seen the benefits of reliefs incorporated into last year's Finance Bill. I remain unclear about such issues as medical expenses relief. In practice, the bulk of these reliefs are only available to exceptionally wealthy individuals such as major property developers who have the capacity to invest approximately €750,000 to €1 million per bed. The reliefs are out of reach to those we would consider well off. Perhaps the Minister can tell the committee what progress has been made in this area and, in particular, if information is available on the extension of property-based tax reliefs to cover not only medical hospital centres but also mental care centres as announced in the budget.

I have stated the continuation of certain reliefs will be the subject of ongoing review once operable. My predecessor introduced various initiatives in the Finance Acts 2003 and 2004 as a means of trying to collect further information to assist the Revenue Commissioners, the Minister, the Department and those interested in compiling statistics on the cost and take-up of tax reliefs and in an effort to prevent tax returns from becoming so complex it would be difficult for taxpayers and their agents to deal with them. I intend, on the basis of increased information as a result of the initiatives introduced by my predecessor, to make that information available. I do not, therefore, regard as necessary the amendment of the provisions beyond the initiatives already introduced.

Will the Minister collect information on the breakdown of tax relief between persons claiming relief in respect of rental income and personal earned income? A feature of the tax code which I do not understand is that what one can put into these schemes in terms of rental income is open-ended. Many of the tax schemes attempt to cap the amount which a person can put in from earned income. The amount for film making is approximately €31,000, as in the case of many other reliefs. The treatment of rental income in many of these schemes, however, is much more liberal and open-ended. It is a type of self-fulfilling operation in that those who have rent books can continually increase the amount they claim. This appears to be investment support for those who have substantial rent books in that it allows them to claim enormous relief on their turnover. Despite the Minister's proposed amendments, the legislation continues to provide the renter with more attractive tax concessions than those earning their income. One of the reports commissioned by the Minister expressed reservations about this feature. In the context of collecting information, can the Minister tell us how much tax relief for renters is costing the State as opposed to the cost for those in receipt of earned income and why that distinction is made?

We must look at this matter in the context of what may happen in the future. Indecon referred to making the relief available to a wider category of income sources than rental income. There must be a trail-off in access and costs, namely, the numbers availing of the relief and the amount provided for in the amount of relief one can claim. An issue which warrants further consideration is how this will impact on the market.

The cap in many schemes is set at €31,000 for an individual. Under the new scheme for rental income, the cap will be set at €250,000. The Minister appears to be making fish of one person and flesh of another in that the person with an earned income who is usually regarded as more worthy in our tax code will only receive approximately one eighth of the concession available to a person with an extensive rent book.

I do not make distinctions between rental and earned income in that once a person reaches a certain level of income, the horizontal measure will kick in.

Relief for an individual wishing to invest in film making and avail of relief is capped at €31,000. No such cap applies to rental income in many cases. I do not understand why we are giving better concessions to those with better sources of income than others.

My predecessor, in the 1998 budget, restricted the capital allowances available every year to passive individual investors against non-rental income. The new horizontal measure makes no distinction. My predecessor put a limit on the amount of money invested by passive investors based on the fact that they would be high income earners.

My question is why he did not put a cap on those with rental income.

He wanted to make sure it was paid on earned income. As regards relief on rental income, the policy adopted is a form of ring-fencing. The relief will be subject to the cap being introduced this year. As regards ring-fencing, it is an allowance against the income from investment in property. That is the distinction made. I will come back to the issue on Report Stage with a fuller response.

It is not as clear-cut as that. The allowance is not ring-fenced to the specific investment. One could have a rent book of residential property and roll it into a private hospital or nursing home and yet be treated differently.

Previously, before the introduction of the 1998 budget, a person could claim capital allowances against all income. Currently, one can only claim against non-rental income.

Perhaps the Minister will communicate with me on the matter between now and Report Stage.

I would like to return to the principal issue. The consultants' report shows comprehensively that the vast bulk of property-based reliefs are only availed of by those with an income in excess of €200,000 per annum. By Irish standards, that is a relatively high income. In essence, we want information that indicates who benefits and whether it is correct that they should benefit to the extent that they do. I have no doubt that those who have accumulated so much through the property-based tax breaks constitute a very powerful lobby. They form a powerful lobby in respect of private hospital development because they are in search of more tax-break products. Once one gets into the system, the more one possesses the greater the relief to which one is entitled. It is a bubble. We need information on those benefitting from reliefs at the upper end of the scale. No one is interested in people with very modest claims.

The consultant report is one thing but there is a fascinating third volume by officials in the Department which sets out extraordinary information on the subject of pension funds and outlines the capacity of certain individuals to have a pension fund of €100 million and receive a tax-free payment of €20 million. Examples involving lesser sums of money are also set out. This has implications regarding fairness in our tax system, particularly as people on ordinary incomes in the higher band pay tax at 42%. It is a gross inequity between the two classes of people. If the State is giving a select group, presumably consisting of a couple of thousand people, the bulk of the extraordinarily generous reliefs available, the case for making full statistical information available is very strong. It should be remembered that while the Minister is phasing out the reliefs, it will be over a three-year period and all the accumulated capital allowances and breaks currently enjoyed will continue. A new door is also opening with the extension of the private hospital and care breaks.

Some information finally became available from the Department as to who benefitted from the artist's tax relief. We were then able to see that while the majority of artists had relatively small earnings to exempt from tax, a very small group had very high earnings. It might be interesting to see if most of that group's earnings did not attract taxation either. We cannot know that at present because there is a dearth of statistical information. In the past two years, we have been promised that information would be forthcoming on the income generated by people involved in stud farming. We have no information on the sector as of yet. If we are to have a grown-up debate on our tax system, information of this sort is critical to people who wish to ensure that the system is fair to everybody. The system must be fair to the ordinary person and not excessively lenient on those who can well afford to make some contribution in tax.

The historical position has been that, by definition, those with higher incomes were able to avail of the tax reliefs that were in place. The purpose of the reliefs was to incentivise the use of available capital in areas of activity in which the Government sought to promote greater economic participation. By definition, it is the nature of tax incentive schemes to ensure that those with disposable income use it for a purpose which will have a wider community benefit. There must be a return for the investor, otherwise the relief scheme will not be a success. The Government is the first to introduce a cap across the board on the benefit people can enjoy from incentives and exemptions. I am the first Minister who has taken that step. The cap will ensure that no one can cover more than half their income through incentives and will strike a balance between equity and desirable incentive considerations. Where one is trying to direct capital into an area of activity to promote a wider benefit in pursuance of Government policy, one will also wish to ensure that the mechanism by which a scheme becomes operable allows people to make a contribution year on year rather than use up without a cap their available income and direct it exclusively towards the incentives provided for tax relief schemes.

We are addressing the issue for the first time in the Finance Bill. The changes introduced in the Finance Acts 2003 and 2004 allow certain information to be made available once it has been collated by the Revenue Commissioners. They are in the process in the current tax year of obtaining the information from the past tax year based on the extra information required in tax returns as a result of changes made by my predecessor. For example, the benefits of the rural renewal scheme were distributed among non-high earners. Capital investment schemes are more likely to be used by higher earners. Varying evidence across the schemes suggests that there is no uniform experience of them and that, contrary to what Deputy Burton stated, they are not solely used by high earners. We know how the schemes work, what the dynamics are and what changes we are to bring forward. The changes are of a kind which have never been brought forward before.

If Carrick-on-Shannon, for example, received a grant of €1 million from the Government, either directly or through an agency, to undertake some task, there would be disclosure in the Government's accounts or those of one of its agencies. If individuals arebenefiting to an extraordinary extent from tax breaks, the public has an interest in knowing about it. In the same way that we know about the details of ordinary budget expenditure, there is a strong argument for explaining where tax expenditure goes and who benefits from it. While I do not have time to put forward statistics now, I have read the Revenue report and been made aware that the schemes from which those on lower incomes have benefited have principally been those that are capped and sold popularly. It should be noted, of course, that the incomes in question are still well above the industrial average. The schemes in question range from film relief to BES investments. The key reliefs on property are for those who earn more than €200,000. If the Minister wishes, I can show him the information on another occasion. There is a clutch of schemes in which those availing of them have a salary in excess of €100,000. While I accept that the latter would be a fairly average income in the upper echelons of the public service, there continue to be relatively few people earning at that level.

As previously stated, table B23 in the budget 2006 booklet classifies the tax reliefs and sets out where tax expenditure was directed in 2002, the latest year for which statistical data are available. Of the €10.8 billion, €4.7 billion went on basic personal credits, €115 million on personal reliefs, and €2.7 billion on pensions. More than €1 billion went to companies in capital allowances. Another €547 million went to the self-employed and farmers, €433 million to SSIAs, and €239 million to Government savings schemes. A total of €38 million went on profit-sharing schemes, €40 million on charities, €24 million on artists, €22 million on films, €20 million on BES and €13 million on maintenance of spouses. There was expenditure on heritage items, stock relief etc. of €92 million, totalling €249 million. The overall total is €10.8 billion.

Item B23 in the budget tables sets out where these tax expenditures go. The majority of them go to ordinary people. The debates we have on capital schemes might give the impression that is where all the money goes. It does not. It was on my initiative that a comprehensive review was undertaken. I made the change and brought in the horizontal limit. I am trying to address this balance. It is a judgment in terms of the balance between ensuring fairness, equity and integrity in the tax system on the one hand, and providing incentive reliefs for those who have disposable income to direct it towards areas of economic activity which will bring a return to the investor and benefit to the wider community. That is the sectoral type approach that has been adopted. It is reviewed from time to time individually and collectively. This year's review is the most comprehensive done in over a decade. My predecessor brought forward changes to tax return forms to try to glean further information in respect of the issues that have been raised. When that information is available and collated it will be provided. This situation has emerged as a result of proactive initiatives taken by successive Ministers for Finance in this Administration.

I support amendment No. 56 in the name of Deputy Burton. There are two key recommendations in the recent review. The first was that there should be full disclosure to the Exchequer by all investors and promoters to enable the full cost of the impact of the scheme to be assessed. I do not see how that requirement is being met by the Minister's proposals. The second recommendation is that there should be a cost benefit analysis in regard to any extension of any of the existing schemes. That is not happening either.

We had a cost benefit analysis of these schemes this year and recommendations have been made. It has been suggested by certain sectors of the Opposition that I should do another cost benefit analysis of a recommendation to proceed. We have an independent cost benefit analysis and recommendations have been made. If I were not following the recommendations there would be another line of criticism.

The Minister has not. Goodbody's recommended that these should come to an end towards the end of 2007.

Another company recommended that they should be continued.

Did the Minister split the difference?

I exercised my judgment as Minister for Finance in assessing the economic requirements of the situation, taking on board recommendations. When one appoints consultants, one does not absolve oneself of one's own responsibilities or transfer those responsibilities to others. One takes the analysis and adapts it and assesses it on advice not only from consultants but from Department officials. I stand over the outcomes of decisions I have made based on many of these recommendations which were very comprehensive and detailed.

I acknowledge that.

The decisions I have made are broadly in conformity with the analysis. One must also take into account, something not within the terms of reference of the consultants, namely, the role the construction industry currently plays in our economy, its employment content and the fact that a quarter of a million people are in the industry. One must take into account what effect a sudden change of policy would have. These are proper considerations and factors to be taken into account in the round by any incumbent Minister for Finance. Such considerations are not necessarily within the remit of consultants who are simply asked to analyse the operation of existing schemes.

With regard to private hospital tax relief, one of the key recommendations was that any new schemes would have a life of three years before formal review. That does not seem to be the case with regard to the introduction of private mental health care as an extension of existing private hospital tax reliefs. What cost benefit analysis has been employed in this area? What are the criteria employed with regard to developers and speculators taking up the opportunities those reliefs offer? The criteria that apply to the delivery of public health care do not take into account population numbers, specific needs or demographics. The only consideration seems to be the number of beds and facilities. Their geographic location in terms of need and health care provision are not elements within the overall consideration. Cost benefit clearly has not been employed in this area.

The bizarre extension into the mental health services, which are totally underfunded in the public system, must be of great concern. There will now be a two-tier system of mental health care delivery in this State, something that has not been the case heretofore. It is very disconcerting, an incredible departure. I do not believe the Minister is taking on board the very wise recommendations that were contained in the Goodbody and Indecon reports.

It is quite the contrary. Tax relief in the form of capital allowances for the construction and refurbishment of private hospitals was introduced in the Finance Act 2001. This scheme was one of the schemes reviewed last year by the economic consultants in the reports mentioned. The review recommended this scheme should continue as there was a need for ongoing investment in private hospitals. The economic consultants observed that the construction of private hospitals could free beds in public hospitals used by private patients. That is the reason we are examining how we can involve private sector investment. It is for the purpose of converting what is currently used by the private sector in public hospitals into more public beds in public hospitals and using the extra complement of private beds under these schemes to replace the existing use of those beds or a percentage of those beds in public hospitals currently designated for private patients. The reason we are doing this is not to create a two-tier system but to provide more public beds as quickly as possible.

Capital allowances for psychiatric hospitals are essentially a variant of the scheme for private hospitals. For a psychiatric hospital to qualify it must, among other things, be an approved centre within the meaning of section 63 of the Mental Health Act 2001, that is, it must be registered under the Act, have a minimum of 20 in-bed patients, and 20% of psychiatric beds must be available for use by the public sector at a discount. I understand the small number of beds reflects best practice in the area of modern psychiatric care. The cost of this measure is estimated at €2 million in a full year and its benefits are likely to be similar to those identified by the economic consultants in the review of the scheme for private hospitals. I would remind Deputies that this amendment was sought by the Opposition last year and I stated that I would consider it in the context of budget 2006.

I also received numerous representations seeking capital allowances for the construction of private psychiatric centres for children and other representations in respect of psychiatric facilities for elderly people. On 3 March 2005 a parliamentary question was tabled to me by Deputy Tom Hayes. There was another from Deputy Olivia Mitchell. Senator Browne raised it in the Seanad.

The Opposition is a coat of many colours.

It is. A rainbow is what they call it.

Certainly none of those was mine.

A rainbow that will not include Deputy Ó Caoláin's variant of green, from what I understand.

I obviously note that. It is a good thing, perhaps.

It is certainly a unique colour, all right.

The Minister ought not to peer at me just yet, since they could misinterpret it.

The cost and benefits of this scheme will be reviewed in any case in a number of years' time. In order to facilitate such a review I have specifically included a provision in the legislation that the cost and the number and nature of claimants of the relief be provided to the HSE in order to assess the cost and benefits of the scheme, and the result of such a review will be made public. That is the factual position. The suggestion that all this is coming out of the blue is not correct.

I should add that section 34 which deals with tax relief for private hospitals includes a provision requiring investors to provide full information about the amount of capital expenditure involved, the number of investors involved and whatever other information may be deemed useful for the purpose of evaluating the cost and benefits of the tax scheme. That takes place in the context of the existing certification requirement within the Health Service Executive.

This shows that we have no difficulty whatsoever in requiring taxpayers to provide full information about costs. We need to implement this principle in a sensible way, having regard to the way in which each tax scheme is structured. We need smart regulation and that involves having a considered look at each tax scheme rather than introducing a blanket "one size fits all" provision.

I thank the Minister for his reply. I must attend the opening of Private Members' business. I am sorry.

I thank Deputy Ó Caoláin.

One noticeable aspect of the ending of all the schemes is that while the Minister obviously made a judgment call, they all end on the same day, even though each of them has a different impact or a different value. It strikes me that in the case of some of them it is difficult, unless there is a contractual obligation already entered into, to make an argument for them to be continued for one day extra. I wonder why the Minister decided to conclude them all at the same time.

The Minister stated that he looked at the impact of these schemes on the construction sector. There is significant inflation in the construction sector, as is evident from house prices and so on. There may well be a benefit gained by reducing the burden on the construction sector rather than extending it for another two and a half years. What will be the impact on the construction sector of the discontinuation of these schemes?

I took into account the role the construction sector is playing in the economy currently and the high content of employment that it provides. It would be irresponsible of me to ignore it.

Various schemes were looked at by consultants, who had proposals to make on how the transition towards the termination of the schemes should be dealt with. We must remind ourselves that those for which planning applications were made before 31 December 2004 were deemed schemes which would be eligible based on my predecessor's proposals. What emerged in that regard was that there were variant times in which planning permissions were obtained and where appeals were undertaken, either on the basis of a refusal or a permission under which a third party or parties took appeals. There was due process under the planning laws of which account had to be taken and therefore the question was how to deal with all these pipeline projects. If one were not to deal with them in the way that I am suggesting, I would contend that there would be a stream of activities ongoing until June 2006 which would not have allowed orderly transition in a way which would not have effects inimical to either the operation of the economy and the sudden impact of the workload being undertaken. That was the general view of the consultants as well and they made certain proposals. I considered all of those in the context of all the factors I must take into account and I came down with a solution, which meets all the requirements of the situation consistent with the advice I was receiving, both from the economic consultants' study and from my own officials, and our consideration and analysis of what was being suggested to us. It has been acknowledged as a fair and considered outcome, given the challenges that the transitional measures pose for me, consistent with meeting our obligations, respecting due process and understanding the fact that the planning system provides for various circumstances, in that not everyone is at the same starting gate in respect of every individual project. It was a question of also ensuring that we did not see such a quick uptake in an attempt to finalise projects which would have fed construction inflation into the equation because of the overheating that would cause in order to meet a previously announced date for termination. It is not an exact science but it is a judgment call based on all of the factors one must take into account, and I believe it was a responsible call.

Many of the tax breaks that evolved over recent years benefited individual house buyers rather than those who are sometimes portrayed as great financiers or whatever. The urban renewal schemes and the rural renewal schemes gave an opportunity to individuals who owned houses to develop over the shop and if they constructed a new building, then in most case these were sold subsequently and the individual picked up the benefit. In the case of the rural renewal scheme it was specifically the person, family or couple who built a house who gained the benefit. This is sometimes not appreciated in the overall debate.

The decision taken in the budget is to be complimented because it gave a soft landing to the schemes, particularly those to which I referred. There were situations which needed to be taken into consideration. I am glad that the Minister has done so because there were good cases made, by individual county managers and indeed groups of county managers, to show that in some cases sewerage and waste water systems were not in place and there were planning difficulties. In other cases termination at a particular point could create a glut or a difficulty in the construction industry and undermine the very industry that has been fuelling the economy in recent times. While I support the decisions in the budget on the schemes and how some of them are being phased out, I still see opportunity for some of them and it is still in the common good that some remain. A number of us come from parts of the country where schools have been closed because of a lack of numbers and Garda stations have closed because of a lack of activity. Football teams could not be fielded because villages were deserted. If it were not for a number of the schemes introduced by recent Governments, rural areas would still be in decline. Thankfully, these schemes have renewed areas. John Healy called for a stop to such decline years ago and the urban and rural renewal schemes were an attempt to halt the decline. They have been effective and the proposal to phase them out means communities that have not taken full advantage of them can do so and this will also prevent a glut of property on the market in June 2006.

There is a little unreality about this debate. I wonder whether members have read the same reports about these tax reliefs as myself. I refer to hotels and holiday homes. The consultants found that in the past five years, the economic benefit was €83 million less than the tax forgone. The taxpayer, therefore, lost that amount on this investment. Similarly, the taxpayer lost €127 million on the student accommodation scheme. Following investment of €1 billion under those headings, 20% was lost.

The extension of these schemes means that in the case of holiday homes an amount greater than that spent in the past five years has yet to be spent and, in the case of student accommodation, twice as much will be spent in the remaining period of the scheme than has been spent. Despite knowing the schemes are a waste of taxpayers' money, the Government is extending them. I appreciate people have made commitments under the schemes and the Minister is correct that he must let them continue but it is frightening that under many tax relief schemes, which have been found to be wrong and well past their sell by date, the bulk of the investment has yet to be made and, therefore, the bulk of the taxpayers' loss has yet to be incurred. It is self-delusional to pretend the report has not found what it has found.

The urban and rural renewal schemes were found to be a negative contributor but it was not clear, as the consultants had not conducted as much analysis. However, they also signalled more would be spent over the remainder of the lifetime of the schemes than had been spent thus far. People must get that into their heads when we discuss this issue. We have allowed this to continue for too long but we are allowing it to continue. It is not praiseworthy that the Government is spinning the schemes out until 2008. We have discovered they are loss making and we should do the best job we can to discontinue them rather than incur more losses. That is where we are at following the reports.

In the context of data collection, the Minister is extending film relief. Will the Minister present to the committee his analysis of the competition between Ireland and other countries in order that we can see where Ireland stands in the competitive league? We ought to see that before the scheme is closed in order that there will be a record of why we have made a decision on behalf of taxpayers, which will cost a certain amount, and we have a sound reason for doing so. I seek an assurance in this regard.

The committee will not reach the amendments on caps and so on. A taxpayer who makes a charitable donation, from which he does not derive benefit, is caught up in such caps. If someone is giving money to a charity recognised by the Minister for Finance, that should not be affected by a cap. I do not know whether the Minister has considered this but he is not conferring a benefit on the investor and the same issue is not at stake.

The analysis shows the gap that existed has been filled by some of these schemes. If we were depending on the Department of Education and Science to provide student accommodation out of its capital budget in UCD and elsewhere, would anyone seriously suggest that would be its priority, given that the capital programme, which was been greatly enhanced in recent years, is finite? The Department caters for 4,000 primary schools as well as post-primary schools. It must provide for 45,000 additional third level students this year compared to 1997. A total of 135,000 students are attending third level this year compared to 90,000 in 1997. Is that where the capital moneys would have been spent within the Department?

I do not know based on this finding.

For example, in the context of the provision of extra facilities for the expanded student population in UCD, if additional student accommodation had not been provided, parents would have been faced with a serious burden. In addition, universities use the student accommodation to generate much needed income on an ongoing basis.

Is the Minister saying student accommodation schemes were good investments, given that the reports state they were bad investments?

The reports state their usefulness has been met and to continue with them would require a change of policy. We are changing policy.

The reports state the schemes were a net drain on the Exchequer and the taxpayer in the past five years. They do not state they were good.

In the absence of tax incentive schemes in those areas, public provision would not have been made.

The Government would not have done so.

Nor would the Labour Party. When that party was in Government, it introduced the seaside resorts scheme. I will go through it and we will see how much thought was put into that with Labour and Fine Gael Ministers deciding who got what. We can all play that game. Let us recognise the situation as it stands.

The Minister's schemes are a waste of money and we have a report telling us that but he continues to try to justify them.

I undertook the review. The activity generated by the schemes, which has been mentioned by Deputy Finneran and others, needs to be taken into account along with increased employment and the return to the State on this activity.

The consultants did that.

Yes, and that is all part of the assessment. I undertook the review, which states it is time to move on to other areas of activity, which was my intuition anyway. That was provided through independent analysis and that is how we should proceed. However, I do not accept these schemes should never have been introduced. Members speak out of both sides of their mouths on this issue. For example, plenty of members who have excoriated tax relief schemes come to the defence of the film relief scheme the minute it is mentioned. It has been reviewed three times in the past eight years. This committee had a discussion about film relief in the autumn of 2004, prior to the budget, and all the parties favoured its continuation.

Will the Minister present to this committee the justification, information and comparisons made with other countries?

All we want is the information on which to make a judgment.

I have no problem in explaining the representations made to me on why we should change the film relief arrangements based on the level of competition and the changed context in which film producers must operate in other jurisdictions.

Will the Minister provide that information?

I can provide the rationale behind it.

Will the Minister send us a note on the issue?

That will not present a problem.

On the review of section 23 relief for student accommodation, since the creation of tax incentives in 1999, 15,000 new student bed places have been created. The extent of investment in the sector has transformed the availability of high quality student accommodation. This has occurred at a time of significant improvements in the wider stock of private rented accommodation. The estimated capital spend is €510 million, with a gross Exchequer cost of an estimated €214 million. The indirect Exchequer tax revenues and the net tax forgone estimates are adjusted for opportunity costs and dead weight. We estimate the capital spend on likely future projects at €936 million. That is what is said about section 23 relief for student accommodation.

Yes, but we lost €127 million, a negative result.

People may feel we would have achieved this without tax incentive schemes, but I contest that view.

What they are telling us is that taxpayers spent more on the scheme than it was worth.

We have secured 15,000 high quality student places as a result that we would not have if we had waited for public provision.

The State paid €127 million too much for them.

We are winding down the schemes based on a comprehensive analysis undertaken by the Government. That analysis was not undertaken in 1994, 1995 or 1996 when Deputy Bruton was a member of a Government dealing with these issues, although he has often mentioned the growth rates that Government was able to achieve.

Let us be clear. Successive Governments have used tax incentives as a means of generating much needed activity. I have conducted a comprehensive review of the incentives, on which we have taken certain decisions. Some of the criticisms of my decision-making are not credible based on the actions of the people concerned, who, when in government, did not believe it was worthwhile reviewing the incentives but extended certain schemes after only a cursory analysis, if any.

Amendment put and declared lost.

Amendments Nos. 57 and 74 are related and will be discussed together.

I move amendment No. 57:

In page 55, before section 15, to insert the following new section:

"15.—The provisions of the Principal Act regarding travel benefit in kind shall be extended to make provision for disregarding the benefit of monthly and quarterly tickets provided by an employer.".

The Minister will be delighted to return to earth. Instead of dealing with millionaires, this amendment deals with those who catch the train to work, perhaps from Portlaoise or Portarlington. Perhaps the amendment could be put more elegantly by the Minister's officials and I am open to their advice if they can offer a more precise formulation.

If people buy a yearly travel ticket and their employer is recognised under the tax relief scheme, they can get tax relief on the amount paid for the ticket. If the individual concerned does not have an employer who is willing to be part of the scheme, no tax relief is available. Will the Minister cast the scheme more broadly to ensure as many as possible who use public transport regularly will get the tax benefit associated with travel? We have talked about incentivising behaviour and there is a role for incentivising it through the tax system. One way this has been done around the world is through the provision of incentives to use public transport, something which should be done here.

The scheme depends on the purchase of an annual ticket. Large organisations such as the Civil Service are well geared to dealing with this because persons are in such employment for year-long periods. However, many are in atypical employment. Will the Minister, therefore, consider extending the scheme to the purchase of monthly tickets or, if this is too difficult, quarterly tickets? It would be good to provide this further encouragement for workers.

It does not take much more than an hour to travel by train from Portlaoise, Portarlington and similar areas to Dublin. In my constituency there is a huge demand for the train service from Maynooth to Connolly Station. It is so crowded that it is known locally as the Calcutta Express. We need to keep encouraging people to use public transport. The Minister has said he is strongly in favour of incentivising behaviour by the occasional and appropriate use of tax incentives. I hope we can find common ground on these two amendments. As I said, I am open to advice on finding a more elegant way of putting my amendment.

Amendment No. 74 in Deputy Catherine Murphy's name was submitted by me. I submitted a similar amendment last year for the reasons outlined by Deputy Burton. There is a great difficulty with regard to how the scheme works. The incentive for an employee is not as great as one would think. My secretary travels by bus to my constituency office every day. When one factors out her holiday periods which amount to little more than the statutory entitlement and the periods during which she does not use the bus to travel to and from work, the benefit is non-existent. She decided, therefore, not to renew her pass for the past tax year. This is the case for those to whom the scheme is directly applicable.

Others who should have this benefit do not have employers willing to join the scheme under current conditions. There are also difficulties for those whose work is seasonal in nature or who work on short-term contracts or monthly. The provision should be extended to cover such persons. As a result of the lack of a Government spatial policy, people spend more time in their cars here than in any other European country or the United States. The Minister is a direct beneficiary of this because the more time people spend in their cars, the more they pay for fuel and the more the Department's coffers accumulate VAT and excise duties.

The argument the Minister should be making is that if VAT is now the tax from which the State benefits most, largely from the consumption of fuel, we should try to put in place some sane transport policies that would justify collecting that tax. On these grounds, the Minister should give some thought to providing for an extension of this relief. If anything, it can provide relief for those who travel long distances to and from work from what can only be described as bed and breakfast communities because of the effect of the Government's policies.

Under the legislation, it is not necessary to purchase an annual ticket. It could be a monthly ticket.

However, for administrative purposes, some employers, particularly in the public sector, provide only annual passes. Nonetheless, it is possible to claim the benefit on the basis of a monthly ticket. That is provided for in the legislation as things stand. The Finance Act of 1999 provided an exemption from taxation as benefit-in-kind for certain commuter travel passes given to employees by employers. This allows employers to incur the expense of providing the employee with a monthly or annual bus or rail pass without the employee being liable for benefit-in-kind taxation. One of the reasons it is done on an annual basis is that the salary sacrifice method is used as a means of obtaining the travel pass. However, it is possible for people to obtain it on a monthly basis as well, as things stand and it is, therefore, not necessary to insert a provision in the legislation for a monthly pass. The method used is often annual rather than monthly because of the salary sacrifice arrangements, but it can be done on a monthly basis for those who require it.

I ask the Minister to give us a note on that because the general understanding is that unless a yearly ticket is purchased, the relief is not available. When one considers the enormous amount of development in north County Dublin, people are travelling every day from places like Balbriggan, Rush, Skerries and so forth and their commuter tickets, as with those from Portlaoise, are relatively expensive but the monthly facility is not available to them, in practice. The Minister now appears to be telling us there is a way, which none of us has discovered yet, of claiming the relief on a monthly basis as an individual, even if one's employer is not a member and not signed up to a scheme. If so, I would welcome that information, which would be enormously useful to a considerable number of people.

I favour a monthly scheme because many women, teachers and so forth do not work for a number of months during the summer. Also, people who work atypical hours are not in a position to benefit from the relief scheme. Many employers will not facilitate a monthly rather than annual arrangement, as the Revenue Commissioners are no doubt aware. The public service facilitates the scheme, but my understanding is that it also insists a yearly ticket is purchased.

Under the salary sacrifice arrangement, the benefit to the employee is that he or she pays tax only on net salary, after the deduction of the cost of the travel pass. Therefore, using the annual figure is a better arrangement, in that sense.

Does the Minister recognise that such an arrangement does not suit a lot of people, for instance, those who are in job-sharing or parental leave arrangements in the Civil Service? The scheme could be made more flexible to encourage greater use of public transport.

In 2005 approximately 40,000 travel saver tickets, both monthly and annual, were sold at a cost to the Exchequer of €7.1 million in tax revenue forgone.

The purchasers must be civil servants.

The note does not specify.

The take-up by the private sector is very low, unfortunately. I know, for instance, that for civil servants and others who work in the Dáil, there is a good system in place and no doubt that is also the case in the Department of Finance.

There is a need for clarity regarding access to a tax relief which has social and environmental benefits for employees in all circumstances, regardless of whether their employer is involved in the scheme. The issue of access to specified transport modes has generated much confusion because it is unclear which modes of transport qualify under the scheme. The involvement of specified transport companies is also an issue that is up in the air, so to speak. This is the reason the amendment was tabled. Its aim is to encourage the Department to examine the scheme and come up with one that is more workable and fairer.

The basis of the exemption is that the employer bears the cost and in those circumstances, multi-tickets can be used if the employer pays for the monthly ticket. Where the employer's funding is financed by the employee's salary sacrifice, the employee must sacrifice at intervals of not less than 12 months. There are two arrangements available. If one uses the salary sacrifice arrangement, the cost of the yearly ticket is deducted and tax is paid, net of the cost of the ticket. Under the monthly arrangement, the employer must proactively pay for the cost of the ticket every month. That is the way the scheme operates, one way or the other. Many people, for the sake of efficiency and the removal of an administrative burden, opt for the salary sacrifice arrangement, which is why there is a predominance of annual as distinct from monthly tickets. Under the law, if an employer wants to pay for a monthly ticket and give it to the employee, that can get the benefit of the legislation. The salary sacrifice arrangement is done on an annual basis. That is as much clarity as I can bring to the issue.

Yes, but if the employer is unwilling to co-operate-----

The basis of the exemption is that the employer pays. If the employer does not pay for the commuter pass, the employee has a problem. The whole reason for the exemption is that the employer pays. If the cost of the pass is taken out of an employee's annual gross salary, the tax liability will be compiled net of that cost. If the employer pays for a monthly ticket, the benefit accrues also. The whole point of introducing the exemption was to encourage employers to pay for their employees' travel costs.

Is the Minister aware, in the context of using public transport, and particularly with CIE companies, that tickets available and routes travelled by workers are not always straightforward? Workers may have to change routes. Sometimes the ticket, whether monthly or annual, applies to a route, whereas a more general ticket is much more expensive, certainly with Irish Rail. Sometimes a journey might be cross-modal and people would need a monthly or annual ticket for both bus and train in order to make the necessary connections.

Our rail network is a radial one, with Dublin at its core. Most of the west coast has no rail connection at all. If people want to use public transport and avail of a scheme like this one, it is quite feasible that many would have to use both bus and rail, often with a number of changes in a single journey. The current scheme does not allow for that type of flexibility.

Is the amendment being pressed?

Amendment put and declared lost.

I move amendment No. 58:

In page 55, before section 15, to insert the following new section:

"15.—Where an employee incurs travel costs in connection with his or her employment, which are not reimbursed by an employer, the employee may be afforded a relief on such travel costs against his or her liability to income tax in connection with the employment.".

The rule relating to the granting of a deduction in respect of expenses related to Schedule E income, that is, employment income, is that employees' travelling expenses qualify for deduction only where they are necessarily incurred in the performance of the duties of the employment. On this basis, travel costs that are incurred by an employee in actually performing the employment duties are allowable for tax purposes. If the amendment refers to expenses incurred by employees travelling to and from their place of employment, this is an entirely different matter. Such expenses are not, and have never been, allowable as a Schedule E expense because they are not regarded as being incurred in the actual performance of the duties of the employment. They are looked upon as an expense incurred in enabling an employee to be in a position to carry out his or her employment duties but not an expense of the performance of those duties. This is a fundamental rule as far as Schedule E is concerned and is one which, I am advised, I should not be disposed to change.

I ask the Minister to review this area if he is serious about encouraging people to use public transport. We have a scenario where, because of the cost of houses, people are being pushed further and further out to satellite towns and villages of our larger cities. Instead of clogging up the roads with cars, it makes more sense to give as much advantage as possible to those who are willing to use public transport. If the officials can come up with a better wording and the Minister is prepared to review the scheme, I would be happy with that. As things stand, we have one of the worst participation rates in Europe in terms of public transport. The number of people using our buses comes nowhere close to the numbers using them in other countries. I am aware a lack of buses creates a problem. My own constituency is short by approximately 50 buses. One could travel alongside the quality bus corridors for close on half an hour and not see a bus. The situation is farcical. As Deputy Boyle said, many people have to make cross journeys from one form of transport to another.

We have spent more than €30 million on consultancies relating to the introduction of an integrated ticketing system for Dublin. The Minister does not appear to be able to sort out the differences between the warring parties. Unless one purchases a yearly ticket one's capacity to change from one form of transport to another in Dublin is limited. The requirement to make separate payments for different transport modes makes the journey so expensive that people return to using their cars. I appeal to the Minister to give serious consideration to this issue. He could perhaps engage consultants to report on it. I do not normally advocate the use of consultants but we at least obtained some information from the consultants' review of tax. Other countries manage to provide attractive packages of incentives to employers and employees who use public transport. Given that we could be paying costs of approximately €50 million per annum in a couple of years' time the Minister would be more than justified in taking another look at this issue with a view to taking some action on it.

When the Government took office, it was a matter of regret that the previous Administration had made no investment in public transport. The Government commenced its action by undertaking a rail safety programme and has since made unprecedented investment in public transport. Capacity on Luas, the DART and commuter trains has increased and many tracks have been extended, with much more to be done. The Government is committed to investment in our public transport system despite its being left behind the black ball by the previous Administration.

It is important we provide quality public transport modes and we are making unprecedented investment in that regard. Obviously, we must increase competition and provide more choice for the commuter in areas where gaps are identified if we are to encourage more people to use public transport. We would like to pursue a whole range of issues in the spirit of social partnership and it is hoped we will get the co-operation required to do that.

Is the amendment being pressed?

I cannot accept the Minister's remarks. The Government has been in office for nine years during which time car usage has increased. The amount of time spent by people in their cars has increased. The Government has not produced an inch of extra railway line despite the Minister's reference to the Cork-Midleton line and the Western rail connection. We continue to exist on the same network dismantled by Mr. Todd Andrews in the 1940s and 1950s.

There was significant investment in public transport in 1994, 1995 and 1996. The socialists were in Government for three years but did not put one cent into public transport.

The Minister should cease his petty political point scoring. The Government's transport policy is atrocious.

No, it is not.

We understand the Minister for Transport, Deputy Cullen, has enormous responsibilities. The Minister cannot pretend the transport policy is working and meeting the needs of the people. That statement cannot be allowed to stand on the record.

What can stand on the record is that there was no investment in public transport by the previous Administration. More people than ever are using public transport in this city as a result of this Government's investment. Despite the Deputy's criticism the Government has, during the nine years about which he has spoken, improved the quality of our transport system through the introduction of the Luas, the extension of the DART line, the increase in capacity and so on. I accept there has been an increase in car usage. Transport 21 sets out for the first time a ten-year perspective on investment in road and rail transport including public and private transport modes. I will not be lectured by those who, when in power, made no investment in public transport.

During the term of the previous Administration it was at least possible to travel on the M50 and not have to pay for the most expensive traffic gridlock in Europe. That is the reality of the Government's investment. The journey times to town on the so-called quality bus corridors on the west side of Dublin have increased by an average of 20 minutes per journey and, in some case, by up to 45 minutes. That is this Government's legacy.

New Labour in England have no problem with regulated transport.

The current Minister for Transport is probably one of the most helpless members of this Government. The Minister for Finance should wake up and smell the coffee in terms of people's experience of gridlock in this and other cities.

The Deputy's party must have been growing coffee when in office because it was not investing money in public transport.

I doubt many would go along with Deputy Boyle's conspiracy theory that the Department of Finance and the Revenue Commissioners want people to continue using their cars as it creates more revenue for the State. Perhaps one reason for the increase in car usage is the increase in our population during the past eight or nine years.

I recall that in 1997 the then Government suggested we should not invest any further west than Mullingar on the Sligo line and no further west than Athlone on the Westport line.

They might as well have closed the line all together. It was Fianna Fáil that closed down the railways in this country.

It was suggested publicly — it is a matter of public record — that to do so would not be economical. We then had the famous crash outside Knockcroghery following which the rail safety report determined the lines in that region were not safe. I am pleased to say some €300,000 per mile has been invested on the line from Athlone through Westport to County Roscommon. The same applies in relation to the line from Mullingar to Sligo. There has been significant investment in the area since 1997.

When did Deputy Finneran last travel on the Westport train?

That may not be considered important in Blanchardstown but it is important in Roscommon, Leitrim, Sligo and Mayo.

The Deputy should travel on the Westport train some day.

That is a big turnaround from what was previously suggested. The then Government did not believe investment in the region was necessary.

People should stick to the unpalatable facts.

We should go back to 1932 when protectionism was introduced.

Let us return only to the time when Deputy Bruton's party was in office and cried crocodile tears for public transport.

We were in office between 1922 and 1932.

Look how much harm was done that time.

What about Ardnacrusha?

They were lucky there was someone to represent the plain people of Ireland.

On section 25 and some of the other sections of the Bill which relate to hotels, the urban renewal scheme, town renewal scheme and rural renewal scheme, the committee should note I expect to table an amendment on Report Stage arising out of discussions with the EU Commission about state aid clearance for such schemes.

As it is now 8 p.m., I am required to put the following question in accordance with an order of the Dáil of 16 February: "That the amendments set down by the Minister for Finance to sections 15 to 32 and not disposed of are hereby made to the Bill and, in respect of each of the said sections undisposed of, that the section or, as appropriate, the section as amended is hereby agreed to."

Question put and agreed to.

The committee will now adjourn its consideration of the Bill. I propose to resume consideration at 11 a.m. tomorrow morning.

Progress reported; committee to sit again.
The select committee adjourned at 8 p.m. until 11 a.m. on Wednesday, 22 February 2006.