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Tuesday, 20 Feb 2007

Finance Bill 2007: Committee Stage.

I welcome the Minister for Finance, Deputy Cowen, and his officials to the meeting. The Finance Bill 2007 was referred to the select committee by the Dáil on 7 February 2007. The committee is required by the Dáil to report on the completion of its consideration of the Bill not later than Thursday, 22 February 2007. The times by which the committee must have completed consideration of specified groups of sections and the amendments addressed to those sections were determined by an allocation of time order made by the Dáil on 15 February. The order has been circulated to members. The order provides further that any division claimed under proceedings on 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 be similarly postponed.

The proposed amendment groupings have been circulated. Are they agreed? Agreed. Some members have received correspondence from me regarding amendments disallowed for various reasons. If Members wish to know those reasons I can supply them later. I will circulate a note if that is required. Members will understand the format from previous occasions.


Amendment No. 1, proposed by Deputy Bruton, is on the list of additional amendments circulated on 19 February. Amendment No. 106 is related and both may be discussed together.

I move amendment No. 1:

In page 11, before section 1, before Part 1, to insert the following new section:



1.—The Act of 1999 is amended—

(a) by the insertion of the following section 94(1);

" "blended mineral oil" means any blended mineral oil, a proportion of which is made up of biofuel;",


(b) by the insertion of the following after section 98A (as inserted by section 50 of the Act of 2004):

98B.—(1) All mineral oils used in motor vehicles shall be blended with a proportion of biofuel.

(2) The proportion by volume which shall be blended with mineral oils referred to in subsection (1) shall be set and subject to review by the Minister.

(3) Where such blended mineral oil has been used as a fuel for a motor vehicle, a relief from mineral oil tax shall, subject to such condition or conditions as the Commissioners may impose, apply to such constituent component of the blended mineral oil as is made up of biofuel, and the Minister shall review the level of relief on an annual basis at least.".".

In 2000, the Government set out its climate change strategy, stating its intention to reduce carbon emissions by 20% from the "do nothing" scenario. Now, at the half-way stage of that climate change programme we find that Ireland is above the "do nothing" level. We have not succeeded in making any impact on carbon emissions in line with the carbon change strategy. Any progress made on some fronts was lost on others.

We have a serious problem in the area of fuel use in transport. Emissions from Irish vehicles are approximately 50% higher than in the United Kingdom and even higher than in France or Germany. Much of this is due to the system of development we have allowed to occur which has led to extraordinary urban sprawl. By using the tax code in a judicious way to promote higher standards and lower emissions, there is scope to achieve some of our Kyoto Protocol targets.

Ireland has failed dismally to meet even the low standards set by the European Union for the penetration of the motor fuel market by biofuels. We are nowhere near the achievements of higher level countries, such as Germany. We need to move vigorously to improve our standards. Countries which delay adjustment to the requirements of climate change will face much higher costs in the long term. We need to move swiftly.

This amendment seeks to nudge forward the penetration of biofuels into the fuel market and create a market by requiring blending levels to be secured. We could pursue this policy more vigorously in years to come but we need to make a start. We must create a more vigorous marketplace for biofuels and allow them to penetrate the transport market. I hope this amendment recommends itself to the Minister.

It is not possible to support amendments Nos. 1 and 106 as they clearly contravene EU law. Deputy Bruton will be aware that the Minister for Communications, Marine and Natural Resources, Deputy Noel Dempsey, has primary responsibility in this area. He responded in the House last week when these amendments formed the core of a Bill put forward by Fine Gael.

I will again point out to the Deputy the problems to which the amendments would give rise. Deputy Dempsey published the Green Paper, Towards a Sustainable Energy Future for Ireland, in October 2006. The Green Paper outlines the options for the development of the biofuels market in Ireland and states that it should be noted that "mandates where fuel suppliers are required to produce a percentage of biofuel in each litre of fuel sold are not currently permitted under EU law". There is no doubt about that matter. I refer the select committee to the public consultation document on the biofuels directive published by the European Commission in April last year. In that document the Commission notes that biofuels obligations and excise relief programmes are the chosen bio-fuel policy instruments of many member states.

In regard to the question of a mandate in the form proposed by Fine Gael, the Commission makes the following statement:

A third approach would be to require each litre of petrol or diesel sold to contain a given proportion of biofuel. This "mandate" system has been used in Brazil and elsewhere. In Europe, however, it would contravene the EU fuel quality directive 11 as presently drafted. In addition, without EU wide harmonisation of the minimum proportion per litre, such an obligation would constitute a serious internal market barrier.

We have taken a clear and ambitious approach regarding the development of a biofuels market in Ireland. On 12 February this year, the Minister for Communications, Marine and Natural Resources announced that the Government would introduce a biofuels obligation that will ensure that biofuels represent 5.75% of Ireland's transport fuel market by 2009 and 10% by 2020. Unlike the mandate system proposed by Fine Gael, the biofuels obligation will require fuel supply companies to ensure that biofuels represent a certain percentage of their fuel sales on an annual basis. By 2009 that will be 5.75%. Companies will have to account for their fuel mix on an annual basis. If they do not reach the obligated limit they will have to pay a fixed amount penalty per litre for the amount of the target they do not achieve.

The obligation will allow Ireland to achieve the EU bio-fuels directive target a year in advance of the 2010 deadline. The establishment of a further target for 2020 is in line with EU thinking on biofuels policy. Critically it provides long-term market certainty that will allow market players in Ireland to develop economically viable scale in their projects. This in turn will assist industry and the farming sector in developing appropriate financing, planting, refining, storage, distribution and supply chain logistics.

Member states across Europe are increasingly opting for biofuels obligations as the preferred policy route. Nine other member states have now signalled their intention to introduce biofuels obligations, including the UK, Germany, France, Poland, the Czech Republic, The Netherlands, Slovenia, Austria and Finland. We are not aware of any member state that has proposed a mandate system as proposed by Fine Gael.

The introduction of the obligation follows the successful roll-out of two biofuel mineral oil tax relief schemes in 2005 and 2006. Under those schemes almost €220 million in excise relief is being provided over a six year period for a range of biofuel projects. The projects range in size and structure and include biodiesel, bioethanol and pure plant oil projects. The Government is to the fore in developing a domestic biofuels industry. The announcement by the Minister for Communications, Marine and Natural Resources, Deputy Noel Dempsey, that the Government will introduce a biofuels obligation will ensure the sector grows rapidly in the coming years and that it does so in a manner that complies with EU law, unlike the proposed amendment. For that reason I oppose the amendment.

I welcome last week's announcement by the Minister. We can afford to be more ambitious in this area. I know that biofuel penetration is not the be all and end all in regard to the issue of emissions, but it can make a contribution. I would have thought that with some countries achieving higher penetration than Ireland, setting the target for 2020, which is below that being already achieved in some countries, does not show a great deal of ambition in this area. While I do not intend to press the amendment, this policy issue should be revisited by the Government with a view to accelerating its programme. This is one of a number of tools that needs to be used more vigorously to achieve targets to which we have committed internationally.

I note Deputy Bruton does not intend to press his amendment. However, I would like to ask the Minister some questions in regard to his original response. He states he is confident the Government can meet a target that is modest in itself. I do not share that confidence, given the Government's record in regard to similar targets in managing to overshoot the country's commitments under the Kyoto Protocol. The issue in regard to biofuels is not only about how it has been framed in Deputy Bruton's amendment. It is also about our energy mix. The statement by the Minister for Communications, Marine and Natural Resources, Deputy Noel Dempsey, is only one element in this mix. The Minister indicated that the measures announced in budget 2006 would help meet the target. Is it not the case that the measures were only announced in the week prior to the budget and only a small proportion of the funding allocated to them has been spent?

The 16 projects under way do not appear to be diverse and, as a rule, involve large agribusinesses, whereas small providers involved in the sector did not receive support in the original allocation. In addition, the 16 enterprises selected under the budget 2006 measures tend to import the raw materials they need for the production of the various types of biofuel. This undermines one of the potential benefits of developing a biofuel industry. Does the Minister accept that large scale producers have benefited from the measures, the sum of €200 million allocated under them has not been spent and the companies awarded concessions are operating in ways that do not benefit the economy, specifically the rural economy, to the extent they could?

I do not agree that the measures are not significant. The €200 million in excise relief is a multiannual commitment to enable proper planning to take place in an industry in its infancy to ensure it can be structured in such a way as to be viable and make an increasing contribution to the energy mix. The scheme includes four different categories, namely, diesel, petrol, captive fleets and pure plant oil. It is important to note that 102 applications for funding were received under the relief scheme, of which 11 were in the bioethanol category, 26 in the diesel category, 18 in the pure plant oil category and 37 in the captive fleets category. A panel comprising officials from the sponsoring Departments, Sustainable Energy Ireland and Enterprise Ireland is assessing these applications. The Minister has announced the 16 biofuel projects that will be granted excise relief under the scheme.

As regards what will happen when the projects reach full capacity in 2008, the scheme will result in 2% market penetration of biofuels in the transport fuel market and deliver savings of more than 1.2 million tonnes of polluting CO2 over the five years of the programme. In terms of eliminating pollution this is the equivalent of removing approximately 70,000 cars from the roads for each year in the lifetime of the scheme. This is one of the more significant measures being taken by the Government to reduce CO2 emissions as part of its commitments under the Kyoto Protocol. The €200 million provision made in the budget will be allocated over a six-year period until 2010.

Amendment, by leave, withdrawn.

I move amendment No. 2:

In page 11, 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.".

I moved the amendment on behalf of Deputy Burton. The overpayment of tax has been discussed with the Minister in the Dáil and elsewhere. During our most recent discussion of the issue, I was pleased that he indicated a willingness to reconsider his view that Revenue should not undertake a study of the amount of tax overpaid by PAYE workers. This is a core issue because if Revenue commits to carrying out such a study, it will create considerable momentum towards reform. In my humble estimation, the Revenue Commissioners probably receive €350 million more than they should from PAYE workers. If the Minister agrees to have the Revenue Commissioners undertake this study, it would be an essential input to the Ombudsman producing a report on the issue. That would crack it once and for all. I commend Revenue for its action since the debate commenced. The Opposition deserves some credit for pioneering the tax-back issue for people who have overpaid. It is something that I have consistently pursued and the Revenue Commissioners are cottoning on to the importance of the issue. While we all support Revenue being tough on anyone trying to evade his or her responsibilities, it should be equally dedicated to ensuring that no one who is entitled to relief should go without it.

I know the Minister will respond, as he has done in the past, by saying that it is a voluntary code and people must make their applications. Ultimately, however, the Minister and his officials have the power to create a framework within which it will be much easier to make such claims.

The move towards deduction at source is welcome. The Minister should, however, get Revenue to undertake a study of the extent of overpayments by PAYE workers so that we could have an authoritative basis for moving this issue forward, as I know the Minister wants to do.

Before the Minister responds, I call Deputy Burton. We are dealing with her amendment No. 2.

I apologise for the delay, Chairman, as I had another meeting to attend. This is the fourth time I have tabled such an amendment both to the Minister and his predecessor to create the office of taxpayers' ombudsman or advocate. In the four years during which this proposal has been debated, the Government initially refused to accept that there was any serious issue concerning PAYE taxpayers not claiming all of the potential tax breaks and credits due to them. In fact, however, the Government and the Revenue Commissioners have attempted to play catch-up by introducing welcome advertising schemes and other publicity to advise taxpayers on their rights to claim tax refunds or credits on medical expenses, bin charges or private rented accommodation.

That progress has largely been made because during the debate on the Finance Bill the Opposition repeatedly made this proposal. The Minister may well argue that an information culture has now developed to such a significant point within the Revenue Commissioners that having an independent taxpayers' advocate is no longer required. That is what I understood the Minister to say in the context of the debate on Second Stage but I do not agree. There needs to be a non-punitive culture on the part of the Revenue Commissioners towards compliant taxpayers who are paying their fair share of taxes, and particularly those in the PAYE sector.

In addition, many such people do not have access to a battery of tax advisers and schemes, as do millionaires who pay little or no tax. It would be too expensive for PAYE taxpayers, whether in the public or private sectors, to check their entitlements through an accountant. We need a cultural shift within the Revenue Commissioners whereby it would be acknowledged that compliant taxpayers pay a lot of tax and are entitled to have an independent office which would chase the Revenue Commissioners to ensure taxpayers receive their entitlements.

I acknowledge the improvements made by the Revenue Commissioners on foot of the debate we have had here for over four years. However, as in other countries, an independent taxpayers' advocate who will assert the right of compliant taxpayers to be dealt with in a friendly manner by the Revenue Commissioners is needed.

We recently heard a presentation on the new systems advocated by the Revenue Commissioners, some of which are excellent. The texting service which will allow taxpayers to receive a designated time to call the Revenue Commissioners is a fine development. The Minister for Finance, Deputy Cowen, should acknowledge, however, that the bulk of these developments have come about because we in this committee have pointed out that between €100 million and €250 million every year goes uncollected by compliant taxpayers who have paid refuse charges, rent and medical fees. A private visit to a doctor in Dublin costs, on average, between €50 and €60 depending on whether one lives on the north or south side of the city. Illnesses in families that do not have a medical card and earn over €40,000 to €50,000 can cost over €200 in visits to the doctor.

For all these reasons I think this proposal is a good one and the Minister has his head stuck in the sand in not accepting it. There are various other offices of advocacy including the Office of the Ombudsman, the Office of the Information Commissioner and the Office of the Ombudsman for Children. I have been part of a Government, and people in Government sometimes become annoyed at excessive scrutiny. However, if people are to be confident in asserting their rights and claims, independence from the Office of the Revenue Commissioners is needed. This will help encourage the Revenue Commissioners to collect taxes.

The Minister's standard reply is that the Ombudsman will take cases relating to perceived injustices in taxpayers' dealings with the Revenue Commissioners. We in this committee know that such cases are relatively few and far between and seem to be reserved for particular instances, perhaps where people have the will to pursue the Ombudsman's procedures. We are talking about an actual office with a plate on the door that will be advertised and aimed at taxpayers, particularly those in the PAYE sector, who wish to know their entitlements and wish to receive them in as easy a manner as possible. I do not believe there would be a significant administrative cost attached to this proposal and feel it is worth the Minister's consideration as he struck it down too easily in suggesting that the Revenue Commissioners are perfect and that the changes that have occurred due to these debates address all of the issues. This is not the case.

The Minister should remember some significant changes affecting ordinary people that have come about during the life of this Government. The period for claiming tax refunds has been reduced to four years by the Minister. Many of us keep pieces of dishevelled paper in boxes and do not always pursue them as we might but refunds must be claimed within four years. The Government has also introduced much tighter limitations on other legal matters and advocacy can play a key role in advising the public. The Minister will be aware, in regard to legal claims involving issues of medical malpractice, that the period is two years unless there is proven negligence. For taxation purposes it is four years unless one can put forward a good reason to have a case reopened. To many people, they are not lengthy periods. On the other hand, no real time limit applies in respect of those in business and not on PAYE. There is no real time limit involved for such people and their advisers who deal regularly with the Revenue Commissioners. However, the ordinary taxpayer who may be faced with complications in regard to his or her personal affairs is up against a real time limit of four years. People often neglect their tax affairs and are not aware, until it is explained to them, that their allowances may cover their tax liability. I am sure the Chairman has had experience of this. The four-year limit is tighter than that previously applied. For those reasons, perhaps the Minister would, even at this late stage, reconsider the Government's approach on this issue.

As the Deputy stated, amendments similar to amendment No. 2 were tabled to previous Finance Bills. It is an issue on which I replied during the Second Stage debate and in response to parliamentary questions. Deputy Bruton raised the possibility of our conducting a study of the matter. To go that route would involve basing data on a very high level of aggregation. Many assumptions would have to be made in estimating unclaimed reliefs and the final result would be a broad and, possibly, inaccurate estimate.

We are discussing how to alert people to reliefs which may be unclaimed. We could conduct a study using broad aggregated data but that would not make us any wiser or may not result in even one cent being repaid to taxpayers — it would be an academic exercise. Alternatively, we can continue the prompting mechanisms undertaken by Revenue in an effort to ensure taxpayers are aware of their rights and entitlements. These prompting mechanisms resulted, in some instances, in an increase of up to two thirds in the number of cases being reviewed last year and also to an increase in tax credits. We need to develop these measures as we continue to try to improve the system, recognising as we all do that the primary obligation rests with the individual taxpayer to claim credits. That is the only way the system can work. We must also ensure taxpayers are broadly aware of their entitlements in the interests of the efficiency and efficacy of the service. The prompting mechanisms, advertising campaigns and so on have brought about measurable improvements. I am not sure what is being suggested would have the same effect.

On the amendment, the statutory remit of the Ombudsman incorporates both of the roles proposed for a taxpayers' advocate. The Ombudsman can act for taxpayers and can investigate actions contrary to fair and sound administration. Significant numbers of taxpayers have exercised their right to make complaints to the Ombudsman's office since its inception. The Ombudsman has undertaken a number of special investigations of our initiative under the Ombudsman Act. For example, the Ombudsman carried out an investigation of the repayment of tax to certain widows.

Following calls for the establishment of a taxpayers' advocate, the then Ombudsman drew attention to the duplication of the role and responsibilities such a development would involve. It is not a question of people having their heads in the sand, it is a question of listening to those who have a statutory remit in this area.

Apart from the Ombudsman's statutory procedures, other avenues are open to taxpayers to make complaints and seek satisfaction for perceived unfair treatment. A taxpayer may lodge, for example, a customer service complaint on the standard of service received in his or her personal contact with the Revenue Commissioners, whether such contact was by telephone, correspondence, fax, e-mail or in person. The complaint may be made to a Revenue public office.

A taxpayer may also request a review by Revenue of any aspect of the way in which his or her tax affairs have been handled. Such reviews are undertaken by a senior Revenue official who was not involved in the original decision or, at the taxpayer's request, jointly by an external reviewer and senior official. Taxpayers who are dissatisfied with specific treatment by Revenue may make an appeal under statutory provisions which grant access to the appeal commissioners who are completely independent of the Revenue Commissioners.

The fact that not everyone, naturally, is enthusiastic about paying taxes is all the more reason to provide effective channels of complaint and appeal by taxpayers against poor service or unfairness. Given the comprehensive and accessible system already in place for complaints or appeals by any taxpayer who feels unfairly treated by the tax system, the case for putting in place a tax advocate's office on the lines suggested is far from obvious. It was also suggested that such an advocate would have a role in the evaluation of the fairness and efficiency of our tax administration at a systemic level, but there is nothing to stop the Ombudsman making general remarks on the same subject. The Ombudsman has made such remarks in the past. It is unclear what role a tax advocate would play in the general evaluation of tax administration which is not already provided for in the existing political and administrative structures.

In countries which have an independent taxpayers' advocate, the role of the office is to deal with complaints by individuals on administrative matters and does not include addressing systemic or policy issues. There are various fora in which the workings of the tax system and policy are discussed, including the National Economic and Social Forum and social partnership. In addition to a formal requirement to report to the Minister for Finance each year, Revenue is subject to annual audit examination by the Comptroller and Auditor General who reports on tax collected and Revenue's systems, procedures and practices. The chairman of the Revenue Commissioners is always examined by the Committee of Public Accounts on the Comptroller and Auditor General's report.

If one considers other English-speaking countries, it is clear that the approach to taxpayers' complaints varies widely, as does the use of taxpayers' advocates. Neither Australia nor New Zealand has a taxpayers' advocate nor do they have an equivalent ombudsman dedicated to tax issues. As is the case in Ireland, those jurisdictions have put in place complaints procedures within their tax administration systems and employ ombudsman's offices which are not confined to tax issues.

While the USA's Internal Revenue Service operates a taxpayers' advocate service headed by a national taxpayers' advocate, the service is not external to the IRS. The US service deals with individual taxpayer's problems, problems affecting multiple taxpayers and flaws in the tax code, which is referred to as systemic advocacy. The service is not a substitute for established IRS procedures or a formal appeals process.

In the United Kingdom, an adjudicator's office, which is separate from the tax administration system, deals with complaints by individuals on administrative matters but does not address systemic or policy issues. Thus, many countries do not have a tax advocate along the lines proposed and even where one exists in the United Kingdom, it is not clear that a separate function has been identified which does not involve significant duplication or overlap with existing offices, especially that of the ombudsman

The Revenue Commissioners have been active through various media in advising taxpayers of their entitlements. They have recently undertaken an extensive advertising campaign on various reliefs to alert taxpayers to entitlement claims they may have overlooked. Every year the tax credit certificate issued to each PAYE customer includes an insert setting out the main allowances and reliefs available. Apart from that insert there is an easily accessed and comprehensive range of material on allowances and reliefs available on the Revenue website, from Revenue offices and by phone, together with a range of claims forms obtainable by telephone or by download for completion. New on-line and text messaging self-service channels have been rolled out to make it as easy as possible for PAYE customers to establish that they are getting the reliefs to which they are entitled and to make any additional claims relevant to their circumstances.

For those who prefer person-to-person communication there are currently 600 PAYE customer service staff available in PAYE regional offices to deal with taxpayers' queries regarding amending tax credits, processing repayments, etc. Where Revenue is aware of circumstances that apply beyond one year, the necessary reliefs are carried forward from one year to the next.

As I announced in the budget, the Revenue Commissioners will begin to roll out a new initiative this year which, over the next two years, will see the introduction of DIRT-free accounts for the over 65s and incapacitated persons. We will also see all age-related credits and credits for trade union subscriptions given, as far as possible, automatically to PAYE taxpayers. There will be automatic repayments in respect of certain health expenses such as drugs and hospital charges and tuition fees.

These are all important improvements from which taxpayers derive benefit. We need to continue with our effort to acquaint people with their entitlements. For these and the other reasons given I do not propose to accept the amendment.

The Minister has conceded much of the case put forward by the Labour Party. He talked about the Department of Finance and the Revenue Commissioners receiving representations and having dialogue on taxation issues with various fora, such as the National Economic and Social Forum, which is a very important forum. However, the overwhelming bulk of the representations received by the Minister and the Revenue Commissioners are from accountancy, taxation and business representative bodies and groups, such as the Institute of Taxation, the Irish Hotels Federation and various chambers of commerce. These usually encourage the Minister to change or adapt an area of taxation which affects the particular case they wish to put forward.

I am not talking about people who have accountants and tax experts to advise them. I am talking about compliant taxpayers in the PAYE sector who may, for a variety of reasons, have difficulty accessing their entitlements. In many cases these taxpayers will not use the services of the Ombudsman's office, if they know what the Ombudsman's office is, because the procedures of that office are reserved, by and large, for clearly defined cases, of which one or two a year have been heard by this committee in the past four and a half years. That is how infrequently such cases arise. They often raise important points of principle but they occur infrequently.

I am talking, for example, about the hundreds of thousands of young people, particularly men, employed in the building industry who, because of the way the industry has changed, are largely working on certificates. When they are in their 20s these young men are happy to work the certificate system but if they have an accident they find that their entitlements are severely restricted and their earnings have evaporated. There is a culture of co-operation between the Revenue Commissioners and the various taxation bodies in regard to information. However, there is no sense of empowerment for the little people in the tax system to find out their best options and improve their position. That is what an advocate office would do.

The Minister cited examples from other countries, including the United States. In the United States people have a much closer connection to the process of making tax returns because everybody does it. Freedom of information clauses in the United States constitution also mean that tax information is freely available in the United States in a way that it is not in Ireland. Having a culture of information, entitlement and empowerment for ordinary taxpayers who pay their taxes but may not know what their entitlements are would rebalance the scales in their favour. I am glad that this year the Irish Taxation Institute, having discussed the Labour Party's proposal, came out in support of it and presented it to the Minister, commenting that it was a balancing mechanism to give more power to the ordinary taxpayer. The Minister is wrong to oppose it.

The improvements the Revenue Commissioners are making on foot of these debates are long overdue, but they are very welcome. However we still have a long way to go. The Minister still cannot tell me, and I challenge him to do so, the amount unclaimed by the PAYE sector in terms of tax credits, tax breaks and allowances in respect of rent, bin charges, medical costs and so on. It is estimated at between €100 million and €250 million. Over a four-year period that would amount, at the lower estimate, to €400 million which, if not claimed within four years goes back into the Exchequer. In the interests of creating a culture of fairness and compliance in regard to taxation it is critical that we ensure taxpayers are aware of their entitlements. Many wealthy people say income tax is only for the little people. If one can afford a tax adviser, one can whittle one's tax liabilities down very significantly to below 10% using various schemes available. We are told these schemes are being rolled back but today we see an expansion of the nursing home tax breaks in the Committee Stage amendments.

In the case of a person with an income of €250,000 plus a year and a net worth of, say, €10 million plus outside of the family home, I could do schemes on the back of an envelope that would significantly reduce his or her income tax liability. All we are asking for is a rebalancing of the scales in favour of the little people for whom income tax is a pressing issue but which they pay willingly to fund schools, hospitals and so on. They need empowerment and an assertion of their rights to balance the extensive services available through the taxation industry to people who are much better off. I am glad the Irish Taxation Institute supports this proposal. It did so having examined its merits in detail. It is feasible. The Minister is sticking his head in the sand in refusing to acknowledge it.

The problem with discussing matters with the Deputy is that every time one disagrees with her she accuses one of having one's head in the sand. I have given reasons for my belief that the proposal is not the answer and explained the significant progress made on the issue. I am not aware of the data or analysis on which the Deputy bases her estimates or the claim that a percentage of taxpayers are unaware of their tax relief entitlements. One can make as many assumptions as one likes to try to present that argument but the vast majority of PAYE taxpayers receive their full entitlement every year. It is policy to reflect these entitlements in the annual tax credit certificate issued to each taxpayer.

The Deputy referred to a culture of compliance. Compliance in the area of tax administration has greatly improved. Recent figures indicate that the level of non-compliance stands at 2%. This is a major turnaround from the position 20 years ago when there was a real crisis of confidence in the efficacy, fairness and efficiency of the tax administration system. The culture of compliance here compares very favourably with that of the United States.

As I indicated, taxpayers are encouraged to contact Revenue or make a self-service claim if the certificate issued to them contains errors or omissions. In general, overpayments arise when the taxpayer fails to notify Revenue of his or her full entitlement or any change in his or her circumstances by the start of the tax year. Many PAYE taxpayers wait until the end of the tax year to claim relief such as medical expenses relief owing to them or to request balancing statements. Many benefits have derived from the initiatives taken. Given that any study to determine the amount of unclaimed relief would be based on considerable aggregate data, it would have a large margin of error.

The Deputy stated that ordinary taxpayers do not make representations. The Ombudsman's report on the taxation of payments to widows resulted in substantial changes in respect of repayments and interest in the Finance Act 2003. This was an example of the Ombudsman's remit on taxation matters bringing about a clear community benefit. The prerogative to take such action or initiatives remains with the office of the Ombudsman. It is not necessary, therefore, to establish an office to perform this function because a statutory office is in place with the capacity to do this work when required. When this work was required it was delivered and the system provided a clear response in respect of substantive and meritorious recommendations that addressed the issue which gave rise to the investigation in the first instance. The only outstanding question is why we must establish another statutory office to do the same work as the Office of the Ombudsman. Unlike some parties I am not addicted to quangos.

It is important that the work referred to in the amendment is done by a body or individual with statutory powers. I understand the reason the Deputy supports the proposal stems from a visit abroad by a delegation from the Oireachtas. Having observed the system in other countries, the delegation returned believing it would be a good idea to establish a new body. As I have explained, the remit for performing the function provided for in the Bill is within the scope of the Ombudsman Act. The equivalent structure in the United States is not independent of the Internal Revenue Service, whereas the Office of the Ombudsman is independent. If we wish to prioritise independence, incorporating the US model would not be the correct approach.

The next suggestion to emerge, as incorporated in the amendment, is to establish a unit within the Office of the Ombudsman to deal with taxation matters. The office already has this remit and it is a matter for its internal management to take a decision to establish a new unit.

Statutory powers under the Ombudsman Act are used. When they were used, a proportionate response was forthcoming. Quite apart from that, initiatives are taken by the Revenue Commissioners who are interested in ensuring that all taxpayers, including PAYE taxpayers, obtain their full entitlement and relief. The initiatives — including prompting mechanisms — they have taken have brought results. They will do further work in that area over the next two years. It is a matter of concern to politicians of all parties to ensure we have an efficient and efficacious tax system. I want to see all PAYE taxpayers getting their relief. Initiatives have been taken on my watch that confirm that there have been improvements in those areas and we will continue to support them. We happen to have a policy disagreement over whether another office set up within the existing Ombudsman's office is required. Where appropriate, the Ombudsman has shown the ability to do that job quite competently and effectively. It is not a question of having my head in the sand, I just happen to disagree with the Deputy.

Does the Minister have an estimate of the amount of unclaimed allowances and credits due to PAYE taxpayers over the past four or five years? We have heard various estimates.

The only way I could have an estimated figure is on the basis of the claims made. In trying to deal with the issue of making sure claims are made, we have provided the existing prompting mechanisms. In some cases, when people inquire they do not have any further entitlement than what was originally on the certificate. Quite clearly, the Deputy has posed a question to which I do not have an accurate answer because she assumes that I have knowledge of what has not been claimed or what should be claimed. The real question is whether we are doing everything possible within the tax code to alert people to claim their full entitlement and the answer is that we are. There is more to be done and we will try to devise even more effective mechanisms for doing it.

Does the Minister agree there is an issue of people not claiming?

I agree that—

Has the Minister asked the Revenue Commissioners to carry out a survey? My perception is that it is quite significant.

If one was to make a survey based on information that was not available, one would deal with macro-data and aggregate data, make certain assumptions and come up with a broad figure. One could pick any point in the spectrum to see which one is the right figure but that would not make a person any the wiser, nor would it put one cent back into taxpayers' pockets. In fact, it would cost more money. We need to devise mechanisms whereby people will respond and undertake further investigations to ensure they are getting their full entitlements. One can only know one's full entitlements on the basis of a claim. If I do not get a claim from PAYE person Mr. A for medical expenses relief, am I to assume that he had medical expenses but did not claim them? Alternatively, must I assume that he did not claim such expenses because he did not incur them? In other words, the Revenue Commissioners' state of knowledge does not enable them to know what is the case — whether expenses were not claimed or whether there were no such expenses at all and that is why the claim did not come in. That comes back to the basic point which is that the primary responsibility on all of us as individual taxpayers is to bring to the attention of the Revenue Commissioners any item of relief we have under the tax code in order to obtain it. That being the case, the only other thing one can do is to bring to the general attention of all taxpayers their entitlements in the hope they will claim them. We have been doing that through tax certificates. Over the next couple of years, automation concerning certain relief will become available that was not available up to now. That will bring about improvements for age-related credits and other expense reliefs that we are trying to incorporate into the tax code. We are doing everything possible to ensure that people are aware of their entitlements and get them. No part of the public administration system regards it as other than correct that full entitlements should be obtained. When the primary responsibility is on the individual taxpayer to bring the information, we must ensure they know they are entitled to certain relief in certain circumstances if the required information is produced. We must make the Revenue as accessible as possible. In terms of providing appeals mechanisms through the Office of the Ombudsman, customer complaints procedures and transparent, objective assessments of the fairness with which individual cases are addressed, we must have the necessary procedures in place. We are and have been putting them in place.

The marketing campaign by Revenue last summer and autumn was value for money because it produced the requisite response. The thrust of it was to improve taxpayer awareness of tax credits and to encourage taxpayers to claim their entitlements and it led to an increase in the numbers claiming various tax credits. We will continue with this campaign as it has been successful. There are cases of people not claiming their credits but we try to ensure they do so by bringing what we can to their attention.

We have discussed the topic at length.

Amendment put and declared lost.

Amendment No. 3 has been ruled out of order because it involves a potential charge on the people and Deputy Burton has been sent a letter to that effect. Amendment No. 4 has been ruled out of order because it involves a potential charge on Revenue.

May I make a brief point? Amendments Nos. 4 to 6, inclusive, in my name have been ruled out of order. They all require information on how the tax system operates and amendment No. 5 addresses the issue of the impact of tax schemes on carbon emissions. The issue of individualisation and how it affects single-income married couples paying €5,000 to €6,000 more per year in tax than double-income married couples is also addressed.

This ruling makes it is impossible to discuss issues that are important, pertinent and at the heart of a balanced and fair tax system and it makes a mockery of the committee's proceedings. We have put forward the notion of a tax commission and the Chairman is suggesting this would be a charge on the State. The launch of the national development plan, not including the Civil Service time, cost over €300,000.

I am cutting the discussion short.

We cannot have a discussion and I want to challenge the Chairman's rulings as they are extremely unfair.

The Deputy cannot do that as I have given a definitive ruling and am moving on. The Deputy is a Member of the House long enough to word amendments in a manner she knows will be accepted.

On the Finance Bill, is there a way to word amendments that would be acceptable to the Chairman? Can he give us advice in this regard?

The Deputy knows that only the Minister for Finance, or a Minister acting on his or her behalf, is empowered in the Constitution to raise a charge on the people.

Why does the Chairman deem a report to be a charge on the people?

It represents a cost to the taxpayer.

Lots of other costs do not exercise the Chairman’s attention. Is the Chairman here to protect the Minister or serve the members of the committee?

I am here to protect the Standing Orders of the House and the Constitution of Ireland which gives power to Ministers to raise tax.

The Chairman is here to protect his constituency colleague.

That comment is uncalled for.

The Deputy knows how to word amendments.

Can the Chairman advise what wording would be acceptable to him to allow discussion of the impact of individualisation on single-income families as opposed to double-income families?

Deputy Burton, I will give you one sentence of advice. It is to discuss the matter with the Bills Office in advance in future. The staff of that office will assist you. The amendment is out of order. Amendment No. 4 is out of order as it involves a potential charge on Revenue. Amendments Nos. 5 and 6 are out of order as they are merely declaratory in nature.

Amendments Nos. 3 to 6, inclusive, not moved.

Amendment No. 7, in the name of Deputy Bruton, proposes the addition of a new section. Amendments Nos. 18 and 19 are related and these three amendments may be discussed together.

I move amendment No. 7:

In page 11, before section 1, to insert the following new section:

1.—In this Part—

"Principle Act" means the Taxes and Consolidation Act 1997;

"special educational needs" has the meaning assigned to it by section 1 of the Education for Persons with Special Educational Needs Act 2004.".

This amendment proposes the amendment of the medical relief scheme which grants tax relief on medical expenses. Under the present provision, tax relief is available for spending in excess of €125 for an individual and €250 for a family. The Minister proposes to consolidate the two into a single threshold of €125.

In this series of amendments I make two proposals. One is to abolish the €125 threshold so that all medical expenses are tax allowable and €125 is not deducted from claims. The €125 threshold is a ridiculous sum. Its only virtue is to prevent the simple and efficient deduction for medical expenses at source. If it were abolished it would be much simpler for Revenue to provide that all out-of-pocket medical expenses be tax allowable at the taxpayer's marginal rate. My first proposal is to abolish the €125 threshold.

The Minister already acknowledges that something needs to be done about it but his offer of half a loaf has almost no merit. The simple solution is to make all medical expenses tax allowable so that anyone who incurs medical expenses can claim them back. This would make the administration of the scheme much easier and would reduce under claiming, much of which arises because people must add up their claims over a period to see if they exceed the appropriate threshold before making a claim. If there were no threshold, a claim could be made at the point of payment by filling in one's PRSI number on the payment chit. If the Minister is sincere in his wish to get money back into the hands of PAYE taxpayers he should accept this amendment.

The second proposal refers to children with special educational needs. The Minister may say it is not his business if the Department of Education and Science cannot deliver many of the interventions required by children with special needs. Parents are spending huge amounts of money to provide speech therapy and other services to children who need them. I am sure the Department will say this is a matter for either the Minister for Health and Children or the Minister for Education and Science. When Deputy Cowen had responsibility for the health service he made it one of his priorities to improve services to children with special needs. Since the Minister left the Department of Health and Children, a five year plan on disability has been published. Despite this, the level of provision in the plan has been far below the provision Deputy Cowen made during his brief period as Minister.

Given his actions, I do not question the Minister's commitment in this area. At least for a period of a few years we need to allow parents whose children's needs are not being met within the existing system to gain some level of tax relief on payments for such services. I am sure the Minister has heard harrowing accounts from parents who are trying to do the best they can for their children. Parents must first face long delays waiting for assessments, although I acknowledge that the Minister has allowed tax relief on the cost of assessments. When an assessment has been made parents often find that speech therapy is not available for their child.

There are huge gaps in speech therapy services and similar support services for children with special needs. I acknowledge that the Department of Finance has said it should not be a permanent feature of the code. Perhaps in that area the State should provide. However, for the time being until we start to fill the large number of vacancies in these areas and get a service that meets needs, it would be honouring the spirit if not the letter of the legislation on people with a disability if the Minister were to make this change. It has the support of groups such as the Dyslexia Association of Ireland. A number of other associations have sought this. I hope the Minister can see his way to examining this issue, if not today, between now and Report Stage, and perhaps doing something significant on those two fronts. They are small things but they would make a very significant difference and the Minister could look back and say the Finance Bill 2007 was worthwhile.

I support amendment No. 7. It is a very practical measure and will go a significant way towards simplifying the claiming of tax relief on medical expenses. However, given what was spent on advertising how to obtain tax reliefs in the recent very successful campaigns, it would seem that eliminating the need to do that by enabling people to claim at the point of receipt of a service would be the most desirable way to proceed.

I would be supportive of the proposal in amendment No. 18 but I have a reservation about it. A service such as speech and language therapy is expensive and it is an ongoing process for children who require it. This measure would afford some element of relief to families. However, it should be seen as an interim measure until there is adequate provision of services because a service such as speech and language therapy should be provided as a matter of entitlement where the need for it has been assessed.

I wonder how sectoral plans and so on can kick in if an assessment identifies a need and the service cannot be provided. I have letters of regret from the Health Service Executive to parents informing them that it can give them the names of private speech therapists where a child needs speech therapy but the service is not available. That is appalling. Every child who needs it should be entitled to such a service.

The Deputy is proposing two amendments the effect of which will be, first, to remove the de minimis amount so that taxpayers could benefit from a full deduction in respect of their health expenses in the tax year and, second, to broaden the relief significantly to include expenses incurred in the provision of assistance to children with a wide range of special educational needs as set out in the definition of such needs in the Education for Persons with Special Educational Needs Act 2004. When looking at the proposed changes to the system of health expenses relief it is worth keeping in mind that since its introduction in 1967 the general focus of the relief has been to provide tax relief in respect of heavy or exceptional expenses, with those of a routine or minor nature being excluded. In terms of the CPI, the amounts excluded from relief would be approximately €900. It is important in examining these issues to focus on the original purpose of the relief. The original focus of the scheme was to provide tax relief in respect of heavy or exceptional expenses rather than all expenses incurred regardless of income.

The current two-tier system under which thresholds of €250 and €125 are applied for married couples and single persons, respectively, indicates that the scope of the relief has broadened significantly since 1967. If the consumer price index had applied, a threshold of €900 would be in force. I found it preferable to eliminate the two-tier system by equalising the thresholds at the lower level.

As regards the minimum expenditure rule, is the Deputy suggesting that two visits to a doctor per annum should attract tax relief? The purpose of the rule is to enable those who encounter a persistent problem or spend more than a minimum amount to benefit from tax relief. This is the basis on which I removed the two-tier system but retained the minimalist principle. I kept in mind what was contemplated under the original provision and the level at which the threshold would have been reached if the consumer price index had applied from the outset.

With regard to the second relief, a welcome move has been made from the individual allocation of resources for children with special needs on foot of a psychological assessment to a more general allocation model, under which all schools are allocated resources without individual psychological assessments being required for high instance categories of need, such as dyslexia or borderline or mild general learning disability. The new system has worked well since its introduction in 2005 and has been favourably received by schools because it is a much better approach to the allocation of resources. Its predecessor created problems in a range of areas, both in terms of individual requirements and in planning it throughout the school system.

As a result of the new allocation system, the Department of Education and Science has allocated €820 million from this year's Estimates to disability and special needs at primary and second levels. As with many areas for which State support may be required, a question arises as to whether this support should be more effectively provided through the direct expenditure route or the tax system. One of the advantages of the former is that the support may be better targeted at those in need, irrespective of family income, whereas support through the tax system can only benefit those whose incomes are sufficient to benefit from tax relief.

The Deputy indicated the proposal is intended as a temporary arrangement to address a current problem. A further widening of the relief, as proposed, would extend health expenses relief considerably beyond its original purpose and duplicate provision through the direct expenditure route. The general allocation model is working well and has been well received by schools. The direct expenditure route is, therefore, the most appropriate model for allocating resources. The problem one always encounters when one uses a tax-based model is that it benefits those whose incomes are sufficient to obtain the benefit of the scheme, whereas those who do not have taxable income in the relevant range do not benefit. For these reasons, I do not propose to accept the amendment.

The Minister takes a keen interest in this matter and I ask him to reconsider his decision. An increasing number of voluntary organisations are entering the field and trying to develop good practice programmes. These are parent supported initiatives with significant parental involvement. It is part of 1,000 blossoms blooming in this area.

Groups like the Dyslexia Association of Ireland are developing programmes outside the Department of Education and Science. That Department is a centralised body and will never get into the business of pump-priming initiatives. It has a rigid approach to what it does or does not recognise. There is scope for the Minister for Finance to be innovative in this respect. He should try it for a while to see what sort of activity is generated. I accept that those on higher incomes can get tax relief but we do not have easy vehicles for doing this. Most parents at work will be eligible for tax relief. The programmes are largely run by voluntary organisations that will not take a hard view that if someone does not have the income and cannot contribute they will be excluded. These voluntary organisations are trying to address a problem, rather than making a commercial killing out of this. It is different to the Minister's general brief which is that it is better to have direct, targeted expenditure. This is an area in which many dispersed groups, including parent support groups and friends of the disabled, are trying to do things differently. This is a way of pump-priming their activity. I cannot imagine that it would be very expensive for the Minister to concede this for a while to see what comes of it. On Report Stage, the Minister ought to examine what has come in from groups such as the Dyslexia Association of Ireland to see whether he is persuaded by them. I have found them to be persuasive. Many good people are working in this field on an entirely pro bono basis. It is not like a tax relief for something that is in the commercial arena. I ask the Minister to re-examine this matter.

To return to the previous point, I cannot understand the Minister's position. He says he has made a decision in this year's Finance Bill that four doctor's visits per year is too much to be excluded from tax relief. He referred to two doctor's visits or one visit with a prescription, which would be about the same at €125. If one has a sick child, paying €85 for a prescription together with €50 for each doctor's visit, one could easily reach €125 for one child. The Minister is saying we need to reduce this barrier to people claiming and need to be more generous by going from €250 to €125. That is the thrust of his proposal, yet he states that the focus should be on people with chronic problems. The truth is that we have promoted this and today the Minister is moving to reduce it to make it accessible to someone with a child who has two bouts of illness per year. Most children would have two bouts of illness per year, so it is an illusion to talk about this being focused on people with exceptional, chronic or long-term illness. We have brought it to the point where a standard family should get this relief. The fact that one leaves that barrier, however, means that many families — I would say 95% — who have sick children during the year will not make such claims. That is because the Minister has introduced a de minimis proposal which is a barrier to stop people making claims. That is all it is and that is why it is being left there. The logic of what the Minister is doing in the Bill is to go the whole hog and scrap the proposal. The Minister could then tell the Revenue Commissioners that they will have no difficulty in having a deduction at source scheme. The Revenue Commissioners could then go for the sort of proposals they say they want to implement to help PAYE workers. At a stroke, the Minister could solve much of the existing administrative inertia. I do not know if I am persuading the Minister but I think these are simple amendments that are well worth accepting and that will not cost the State a fortune.

I support what Deputy Bruton has said. I also accept what the Minister is saying, namely, universal provision directed by the State is the preferred model. The constituency I represent has a chronic shortage of schools and school places and the infant classes have many children belonging to newcomers and immigrants. The schools do their best to cope but the end result is that special resources such as English language teachers for children who do not learn English at home are urgently required. From 50% to 80% of pupils from junior infants to first class in many schools in west Dublin and the city centre fall into this category. I know the Minister takes an interest in this area because it is a sensitive issue.

This causes a problem that may not arise in the context of improvements described by the Minister. Often local children with special needs, such as dyslexia, from homes where English is spoken do not qualify for special assistance in the school while newcomer children who do not speak English qualify for assistance.

Deputy Bruton correctly pointed out that various organisations, such as the Dyslexia Association of Ireland, provide an important port of call for parents. Special education assistance in schools has been growing for the past ten years but it has become more acutely needed in rapidly expanding areas like west Dublin where the bulk of extra resource teachers are English language teachers. I do not expect an answer from the Minister now but it is important that children, whatever their origin, particularly Irish children, get appropriate support for identified needs. This is a particularly important matter when parents are not sure if they have a place in a school for their child. Once a child gets a place in a west Dublin primary school he or she is likely to be in a class of 30 to 31 pupils and if he or she has dyslexia or a speech and language difficulty it can be extremely difficult to find extra resources for him or her.

It would be very useful for parents if the Government were to send a message that their children's needs will be identified and met, even in areas of rapidly growing population with greater demand for school places for children. This matter merits serious consideration from a broad social point of view.

It is important to point out that the Government has responded clearly in this area and has greatly improved the situation it found on taking office. The new general allocation method is far better than the system that had developed in previous years which saw people waiting for assessments and not knowing when resources would be provided on receiving assessment. These problems were individualised and we came up with a systemic response. One in five primary school teachers now work in the area of special educational needs and this represents a significant turnaround in the space of seven or eight years.

The new scheme for allocating resource teachers was introduced in all mainstream primary schools in September 2005. Children with special needs such as dyslexia and mild learning disabilities are found in almost every school so it makes sense that every school should have a number of resource teaching hours based on the number of pupils in the school.

Let us acknowledge that the change in the system was needed and that we now deliver a better service which is well received by the schools concerned. Research shows that some children with special needs will respond better to one-to-one tuition while others do better when taught in a small group. The type of response needed depends on the child. We now have approximately 5,500 teachers dealing directly with children with special educational needs in the primary system, compared with fewer than 1,500 when the Government took office. This is a significant increase, which was needed. More will be required but the current problem is qualitatively different from that which existed previously. Since 1999 alone, the number of learning support resource teacher posts in primary schools has increased by 230%. In that year there were 1,662 such posts and there are now 5,500. There are more than 1,000 teachers in special schools and more than 2,300 whole-time equivalent teachers working with pupils with special educational needs in second level schools. That compares with approximately 200 such teachers in 1998. There are 8,200 special needs assistants supporting pupils in primary and post-primary schools, compared with 300 before. Last year, €50 million was spent on school transport for special needs pupils. The general allocation system is qualitatively capable of delivering a far better system than was the case in the past. We need to continue to improve on that.

I will reflect on what Deputy Bruton said on the other issue. Over time, the scope of this expenses relief has greatly broadened because it is not included in the consumer price index. I listen to what people have to say on these matters and I will reflect on it further.

There is no doubt that substantial additional resources are now available. This is primarily due to court cases taken by parents who did not accept that certain services were not on offer to their children. One mother told me her main objective was to ensure that her child became a taxpayer. Some time ago this committee considered the spending of €20 million on legal fees relating to parents fighting for appropriate education for their children. While we must acknowledge what the Government has done in this area, we must remember that the Government has acted in response to the actions of parents.

Many of my constituents would find the Minister's figures irrelevant. There is, for example, a two year waiting list for an assessment for speech and language therapy. A three year old child who is assessed as needing therapy will be in school before he or she receives that therapy. There are still significant shortcomings. This amendment will plug the gap for some families.

I fully acknowledge that the best way to deliver this service is on the basis of need and not on the basis of whether a parent is in the tax net. However, if a significant number of people can be assisted by such a measure it is reasonable to seek it, particularly when the existing service is inadequate.

I endorse the point made by Deputy Burton. I frequently come across children whose first language is not English. The number of such children in our schools is much greater than any of us would have expected.

The Government states constantly — I can understand why — that we need people to do the jobs Irish people will not do and that we need to expand our work force. Similarly, we must deal with the consequences of that, namely, that we have a significant number of people coming into the country, who do not speak English as their first language. We need to count that as a separate issue to be provided for in the school system. I do not understand the rationale behind the first point made. I endorse the point Deputy Bruton made. I cannot see what benefit there is in retaining the €125. What is proposed in the amendment would be a very practical measure that would cut out all the red tape in claiming tax relief on medical expenses. It would cut out administration. It would cut out the expense of PR campaigns. A cost benefit analysis would probably show there would not be much difference in expenditure. This measure would go some way towards addressing the points made in regard to tax equity.

I thank the Minister for agreeing to reconsider the de minimis limit in regard to tax relief on medical expenses. I will hold over all of these amendments until Report Stage. I acknowledge the Minister’s recitation of all the things that have been done. However, I agree with Deputy Catherine Murphy that when one encounters hard cases on the ground people tell one of a two year waiting list to be assessed and of the lack of a speech therapy service. In my area 30% of approved speech therapy posts are vacant because the Health Service Executive cannot fill them. We have certainly aired the issue. I will resubmit these amendments on Report Stage when the Minister will have had a chance to reflect on them.

Deputy Bruton commented on the lack of qualified speech and language therapists. There has been a response in that regard. The number of training places has been increased but it will be several years before qualified people come through the system. Expenses for speech and language therapy carried out by a speech and language therapist have been provided for in health expenses relief since the early part of this decade. The issue of availability of trained people to do the job is being addressed but, because of the inadequacy of numbers in the past, it will take some time for sufficient numbers to come through the system to meet the identified need.

In regard to what other Deputies have said, many resources are being allocated to teaching people whose first language is not English. Having listened to a Cabinet discussion with the Minister for Education and Science, Deputy Hanafin, I understand there are 800 teachers, if my memory serves me right. That is a very significant number of teachers who are devoted to that task precisely because it is one of the requirements of facilitating the integration of people who have come to these shores and who are making a contribution to the economy. It is not that the Government has not been proactive in this area. It certainly has been. While Deputies may point to individual cases where there is concern about delays, they cannot argue with the fact that this Government has greatly enhanced the special educational needs capabilities in the Department of Education and Science. Compared with its predecessors it is of a qualitatively different nature in terms of commitment, resources and planning. There was an absence of planning and we waited for individual psychological assessments and did not know when we would receive the resources. We inherited an ad hoc individualised system which is now in a far better shape. Through our disability strategy we have a multi-annual resource allocation that provides the funds to put in place a better and more sustainable model for the future. In the context of these debates, I often hear people say they would not argue with this but that it is a problem. It was 90% of the problem beforehand but if it is 10% or 20% now then there is a qualitatively different type of problem to be solved than was the case when we inherited it. It is my job to keep that perspective in mind during the debate when people are talking about it. I will come back to the Deputy on the other point.

Amendment, by leave, withdrawn.
Amendments Nos. 8 to 11, inclusive, not moved.
Section 1 agreed to.
Amendments Nos. 12 to 15, inclusive, not moved.
Section 2 agreed to.

I move amendment No. 16:

In page 13, subsection (1), between lines 11 and 12, to insert the following:


Section 466A €770.00 €1,760.00


This amendment concerns the treatment of people who opt to become home carers. When the Minister introduced individualisation some years ago, he acknowledged the anomaly, albeit a little belatedly after some of his backbench colleagues drew his attention to the way individualisation treated home carers. He introduced a home carer's tax allowance, which subsequently became a home carer's tax credit. It has been frozen at €770 for many years. At the time the home carer's allowance level was introduced, the PAYE allowance was about €100 lower. In the intervening period, the Minister has added €1,100 to the value of the PAYE credit but has left the home carer's credit entirely static. I cannot see the logic behind this. It is an additional twist to the individualisation approach whereby not only does one face a tax penalty of up to €5,250 on the band, but one will also face a tax penalty of €1,000 in credits if one decides to give up work and care for one's children for a period. I am sure the Minister will recite the improvements he has made in child benefits, but even if one puts all the child benefits and the under-six allowance into paying for child care, in Dublin one would fall short by €145 per week. The shortfall to put one child into child care amounts to €13,500 gross, whereas with two children it is up to €26,000 or €27,000. At that point, many parents with two children, who are working for the average industrial wage, find it is not worth their while shelling out €27,000 gross for child care while earning €32,000 or €33,000. They would actually be in a negative position after paying tax. It would not pay them to opt for child care services. Perforce, people must examine the option of providing home care themselves. Some do so by choice while others are forced to do it. It is a perverse family policy that imposes a tax penalty on those who, for whatever reason, make this choice. Other countries rue the fact that their birth rates have collapsed, yet we are placing obstacles in the way of those who are trying to care for their children. It does not stack up as a coherent family policy.

This approach was cooked up by the Minister's predecessor with the interests of producers in mind, rather than families. One of the defects in the so-called consultation with social partners is that social partnership includes IBEC, whose interests do not lie in family policy, and do not include anyone representing the interests of ordinary families trying to cope with child care and other problems. This is an anomaly. At minimum, we must provide that those working in the home should be treated the same as those working outside the home in terms of tax credits. The logic for taking this approach is simple and straightforward. I do not understand the reason this is not acknowledged.

The question of how to address the individualisation of tax bands is a matter for another day. I do not know whether the Minister's spouse works in the home but my wife does. If I were to tell her she does not deserve the tax credit provided to those working outside the home, I know what would be her justifiable response. We should put our policy where are mouth is, so to speak, and recognise that people are doing a job by at least giving them the same tax credit as those working outside the home.

I welcome the opportunity to discuss this issue with the Minister. Under the current system a couple with no children who are each earning €34,000 will pay €5,000 less in tax than a single income family with one spouse earning an income of €68,000. In addition, if the single income family has children it will receive a tax credit — a reduction in its tax bill — of €770 for caring for children in the home. Each spouse in the couple with both partners working outside the home will receive a PAYE tax credit of €1,760. The tax advantage to the double income couple — both of whom earn €34,000 and have no children — is the difference between €1,760 and €770 which is €990. This is a significant sum.

We know the former Minister for Finance, Charlie McCreevy, introduced individualisation for two reasons. At the time, the tax system for single people was less advantageous than it is now because they had to pay high marginal rates, as they still do to an extent. The Minister was very open about the second reason which fitted in with representations made by IBEC and employers, namely, to encourage more women to enter the workforce regardless of whether they had access to satisfactory child care. The Government has tried to catch up on the child care front by making available more provision. The problem is that, parents, generally women, want to stay at home with their babies during the first and perhaps the second year after birth. Although some men stay it home, more than 90% of those who want to stay at home are mothers. Well over 90% of this relates to mothers who wish to stay at home with their babies for at least the first year, if not the second year.

The financial penalty if they give up working is €5,000, in terms of the difference in allowances, and nearly €1,000 in terms of tax credit. I have always wanted a standing commission on taxation because this variation has grown in every budget since. The Bill states in section 3 that the one-parent family tax credit is €1,760 and this is extra support that the State gives to separated parents. I understand that both parents are entitled to this if they have joint custody. Is this the case and in how many instances does it occur?

Compare this with a single-income couple who have bought a house in Kinnegad or Gorey. It may be easy to afford child care for one child but it is not so easy with two or three children. From a social policy point of view all of the parties are encouraging couples to do this but the financial penalty is very high, unless they have accessible, reasonably-priced child care.

The Minister said it would be very expensive to reverse and deal with this matter but what Deputy Bruton is suggesting merits serious consideration. Tax is all about balance and things change with regard to it. The home carer's credit has not changed over time so it has become a significant tax penalty to single-income families on €68,000 or more.

This is always the problem when trying to deal with individual issues. One brings forward a tax package in a budget which hangs together or hangs apart and then one is asked to move it around, incurring further costs for further relief, beyond what was in the budgetary figures. This is a difficulty faced by all Ministers for Finance in discussing these matters ex post facto.

The income tax and levy changes I made in the budget in December were about €1.25 billion for the full year which is almost 40% greater than the previous year's total. A significant amount of tax changes have been made available to taxpayers in that package, including for married, single-income earners. They will reap the benefits of changes in tax bands and other changes including increasing employee and personal credits. These benefits are available to married, single-income earners as well as other couples. This is a point Deputy Bruton has raised on a number of occasions and the issue is that the individualisation route was taken.

Individualisation was introduced to try to take account of societal attitudes, not to increase female participation in the labour supply, though that is a consequence of the moves we have made. There was also a question of trying to help single people who were bearing a far heavier burden of taxation through the availability of the double allowance to married, single-income earners. It was a matter of apportioning the burden more equitably given issues of lifestyle choice, whether one stays in the workforce and the fact that it was felt single people had borne a greater share of the tax burden than could be regarded as equitable in the circumstances. While it is often portrayed as simply a labour force move, that was not the issue that determined the policy. That outcome was a consequence of policy, which was recommended by the OECD and others who had looked at our tax system and considered the need to increase female participation rates.

One must also take into account societal attitudes regarding the choices people make and try to respect those choices. Such measures are never an exact science. One must compare the effect of one relief with another. The differentiation in the tax system takes account of the increased cost faced by those who travel to work compared with those who make the choice, as Deputy Bruton has mentioned, to stay at home. Caring for the home and going to work must be equally valued by society. I respect that point.

I stand over the decisions taken in the budget. The full year cost of moving to the point suggested by Deputy Bruton would be approximately €73.6 million, in addition to the package already approved in the budget.

As it is now 2 p.m., I am required to put the following question in accordance with an order of the Dáil of 15 February 2007: "That the amendments set down by the Minister for Finance to sections 1 to 13 and not disposed of are hereby made to the Bill, and in respect of each of the said sections not disposed of, that the section or, as appropriate, the section, as amended, is hereby agreed to."

Question put and declared carried.
Sitting suspended at 2.05 p.m. and resumed at 3 p.m.
Amendments Nos. 22 and 23 not moved.

I move amendment No. 24:

In page 19, before section 14, to insert the following new section:

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

This topic was discussed at length last year during the debate on the Bill. It was outlined at the time that the existing law already provides exemption for an employee benefit-in-kind charge where employers provide free or subsidised child care for their employees. The exemption applies where the child care facilities are made available solely in-house by the employer, or made available by the employer jointly with other participants, or made available with other persons and the employer is wholly or partly responsible for financing and managing the child care service, or made available by other persons and the employer is wholly or partially responsible for capital expenditure and the construction or refurbishment of the premises. For the exemption to apply the employer must be involved in the provision of the facilities or their management or funding. The Deputy's amendment in regard to the provision of child care services by employers is, therefore, already provided for in tax legislation.

The Deputy is also seeking that employers be permitted to purchase child care for their employees from third parties. I have indicated that it is a requirement of the current exemptions that employers be involved in the provision, management or funding of facilities. Apart from this, the main difficulty with the Deputy's suggestion is the potential cost to the Exchequer in that it could give rise to salary sacrifice by employees. Salary sacrifice would involve the employer paying the cost of the child care in return for the employee foregoing an equivalent amount of income. In effect, the employee rather than the employer would end up bearing the cost of the child care. The procedure would result in a win-win situation for employers and employees at the expense of the Exchequer and the Social Insurance Fund. The employer would avoid employers PRSI of 10.75% on the salary foregone, while the employee would obtain relief from income tax at the marginal rate and also from health contributions. Such a provision is more likely to be of benefit to the better paid employees who could afford to enter salary sacrifice arrangements. It would be inequitable to those employees who were not in a position to participate in such a scheme.

It would have no impact on the supply of child care places and could lead to some displacement. There would also be a knock-on effect on the cost of child care as people who are being subsidised, possibly by the Exchequer, might be prepared to pay even more for the service. Ultimately, such a provision, if introduced, would be likely to lead to pressure for full tax relief for all those paying their own child care costs with the associated costs being borne by the Exchequer. As the Deputy is aware, current policy is designed to increase the supply of places and not to use resources to grant tax relief for child care costs per se. In these circumstances I am not disposed to accept the amendment.

The current situation favours employees who work for large institutions and corporations where economies of scale exist to provide child care directly. I do not know whether the Minister recognises this anomaly exists. Smaller businesses cannot provide a child care facility on their premises whereas, in large corporations, the provision of child care facilities may be part of the employers' overall provision. This gives their employees a significant advantage over employees of SMEs. It is worth thinking about, given the impact of tax individualisation. Mothers who work in SMEs may want to continue to work full-time or, more often, part-time, but their inability to access child care makes this very difficult.

This morning, and previously in reply to a parliamentary question, the Minister referred to lifestyle choice. The complex issue of having a family is not simply a lifestyle choice. The Minister may feel critical of women in particular who want to have it all or to have a bit of it all, that is, they want to have a family and to maintain contact with the work force, for reasons of cost — particularly if they have more than one child — for reasons of distance, and simply wanting to have a better quality of life. These should not be lumped together as some kind of lifestyle choice as though it were not a lifestyle choice we as a society have a strong interest in promoting.

To return to the proposal the Minister ruled out, we need something like a standing commission on taxation to examine these very complex issues over a period and decide how best to facilitate the entirely legitimate lifestyle choices and needs of the people who miss out in the patchwork of benefits and facilities that are created. This will not be easy, but it is an issue that needs to be addressed.

The Minister spoke this morning about involvement in social partnership. The problem with social partnership is that it comprises predominantly people who represent employers, trade unions and other people on the work side of the equation. In recent years trade unions have made great strides in addressing child care needs. However, unless there are people at the table with specific ongoing personal experience that they can bring to that table there will not be much specific consideration given to the issue at policy level. This morning the Minister referred to the advice offered by the OECD. I saw a summary of the OECD report last week. Having read it I felt the OECD should just get up the yard. It made two disgraceful suggestions. One was that home carer's credit should be abolished and the PAYE tax credit for those in work retained. The other was that to further enhance labour supply measures there should be a two-tier child benefit system in which people in work would get a higher level of child benefit than people who care for children at home.

The issue of lifestyle choices is a very complex one. It is one reason we should have a standing commission on taxation rather than the OECD taking the extreme dominant neoliberal view that the market and the needs of the market come before the needs of any family or of children. The Minister is cognisant of these issues, which need ongoing examination as new patterns emerge. How child care in the context of people in SMEs is dealt with in the tax code is a big issue. People employed in the public service enjoy relatively more child friendly arrangements in terms of parental leave and so on. Many large companies also have good arrangements in place. However, in regard to the SME sector it is very difficult for families with children, particularly women who, in the early years of a child's life, are usually the principal carers.

It is not merely a question of large companies. The exemption applies to those who fund facilities or are involved in the management of them or to those who provide facilities in-house. It is open to SMEs to join other businesses in the area to provide collocated facilities and contribute proportionately, taking account of the fact that they are not as well resourced as larger companies. There is no anomaly in the system in that sense. Equal provision is made for all businesses. Given the size of some small businesses, work with others in the management, funding or provision of child care services will obtain the exemption also. The problem with the amendment is its failure to refer to the link between the provision of services or the funding and management of services and the provision of the exemption. We must create the link for the reasons I have stated.

While it is more likely that larger scale employers will provide facilities, the likely result of exempting child care paid for by smaller companies would be higher child care costs as it would do nothing to increase the supply of child care places. The objective of public policy is to increase the supply of places and to link funding, management and provision of places within the workplace to the exemption. We will also allow small and medium enterprises to provide services in groups and, thus, obtain the exemption. It is this approach that will address differences of scale in the provision of facilities.

I made no comment in favour or against any set of circumstances within a family. I made the simple point that people make decisions in this area for their own purposes, which I respect. I do not make any judgment one way or the other. To suggest I did is incorrect as the record will demonstrate.

We did not take on board any of the OECD recommendations. My comment in that context was a general one in response to the interesting points Deputy Bruton made.

Amendment, by leave, withdrawn.

I move amendment No. 25:

In page 19, before section 14, to insert the following new section:

"14.—The Minister for Finance may by regulations provide that the tax relief for childminding shall be available to persons who have care of children in accordance with conditions prescribed by such regulations, irrespective of the number of such children.".

When the Minister introduced the home carer's relief last year, I supported him, having discussed the matter with him on the occasion of the previous budget. While the extension of the relief this year is a positive development, there continues to be a problem of marginal eligibility in the current all or nothing approach.

The provision of after-school services is a significant problem for many parents, especially those with younger children. The Minister may know that there is now strong demand for what one might call "part-time atypical child care". A mother may work for the bulk of her children's school hours and there may be a gap of an hour or two before she can get home, which creates a requirement for after-school services. I am advised that the manner in which the Minister has set out the regulations means there is an upper limit of three children per child minder. I ask the Minister to review the regulation to remove the upper limit.

Like all politicians currently, I have been talking to people on the doorsteps and have heard stories which illustrate the point. For example, a three or four day work week is quite achievable in large sections of the public service. On the days when civil servants working to this schedule are at work, they may need one or two hours of after-school care to stretch the time until they get home, especially if they live in Dublin west where commutes are very long. According to the way they are currently interpreted, the regulations create an upper limit of three children per minder. A local neighbour providing an after-hours service from home could end up making arrangements for several people for a limited number of hours.

The purpose of the Labour Party amendment is to allow for greater flexibility, especially in the provision of part-time child minding services. It would still be subject to regulation by the relevant authority, be it the HSE or county child care committee, but would not restrict the numbers so as to make part-time after-school care much more difficult. While I am advised that the amendment as drafted is sufficient to address the matter, if the Minister has a better proposal I will accept it. Under the current child care regime, it is almost impossible in Dublin west and possibly in the Minister's county to obtain part-time child care for after-school and sometimes even before-school periods. A great deal of flexibility is required. If people must be registered appropriately, we should ensure that the regulations do not permit abuses. However, the current problem with Irish child minding structures is real.

Most crèches will not undertake any part-time care or provide after-school services of the kind I describe once a child has been more than one year in primary school. Crèches will often facilitate parents while a child is in junior infants and take a child from school to provide additional time to parents in constituencies like mine who have long commutes to and from work. The amendment will provide the sector with enhanced flexibility and is worth considering on that basis. I recommend it to the Minister.

Under the current arrangements, those providing care for four or more children are required to register with the HSE. The facilities used to provide the service are subject to detailed controls on standards of care and health and safety of children and regular scrutiny by officials to help maintain proper standards. These controls are important for smaller operations that provide services on an entirely different basis than the more organised, large scale operators. The new arrangement was introduced in recognition of the fact that there are some cases in which services can be provided informally. However, when one gets beyond three children, the public policy objectives are not simply about child care but protection of children and wider issues. Deputy Burton's suggestion, while well intentioned, implies that the informal arrangements should apply to four or more children in circumstances where people want more flexibility. The problem is that where more than three children are in care, formal requirements are brought to bear.

We are addressing these issues as best we can. Last year, we introduced arrangements which were not as successful as one would have liked. It has been suggested that if I raised the limits it might help by allowing people to take on more than one or two children, thereby increasing the number of places for the limited number of people who would be interested in providing services on an informal basis. Raising the threshold to €15,000 gives us the opportunity to have a greater throughput of places, acknowledging that there is a limited number of people available or willing to provide the service informally in any event. Certainly, there have not been as many as one would have hoped thus far.

We are trying to see how we can facilitate a less formal approach while not crossing other public policy objectives. In regulating the numbers of children under care, albeit in an informal setting, the same protection and safety considerations could well arise. I would not like to change the thresholds for standards of care and inspection regimes which exist in the formal setting simply in the interest of flexibility or of meeting a need that has been, or could be, identified. These balances must be maintained. I suggest that the current provision be allowed to stand to see if it will encourage the provision of more places in the informal sector without increasing the threshold to four or more children. That would raise a wide policy problem regarding standards of care and issues covered by existing legislation.

Will the Minister ask his officials to examine this situation? I draw his attention to the before and after school service. In several primary schools parents band together to have children minded for an extra hour or two after school. This can bridge a gap, particularly in areas where workers commute for long distances. More than three children may be involved but only for a period of one hour or an hour and a half. I do not say this practice should not be regulated and subject to the safety considerations referred to by the Minister. However, the limit of three children could be unnecessarily restrictive. In such a scenario it should be possible to propose a scheme and have it permitted by the county child care committee or the HSE. The children of a few working parents are very often taken care of by another parent in the same school. A group of five to eight children is not untypical. The period of time involved is short and sometimes school premises may be used. It is desirable that school premises should be available to parents for such a purpose.

There are atypical working patterns, particularly in the public service. A teacher might finish teaching and a nurse might complete a shift at 2.30 p.m. while their children might finish school at 2 p.m. For many families there is a gap of one hour or an hour and a half when a child must be taken care of. If that gap can be bridged the possibilities for parents working are much greater. There may also be play benefits for the children. These arrangements would be subject to regulation but a little flexibility would allow for greater provision of part-time child care. In formal crèches, particularly in cities, almost no part-time childminding is provided. I know of many families who pay a full week's child care even though they are working only four days. This is because they will lose their child's place if they do not pay for a full week. Some degree of flexibility is required.

I ask the Minister to ask his officials to examine this matter and return to it on Report Stage.

We established an informal system to avoid the regulatory requirements. It is now suggested that we have regulatory requirements in an informal system in addition to the regulatory requirements in the formal system. I am sounding like a character from "Yes Minister". Members can see where the difficulties would arise.

I understand that Deputy Burton is trying to achieve flexibility in an informal system which is outside the regulatory system although reporting to a child care committee. I do not know if discretion can be allowed to a county child care committee, with prior notification, to expand the number of children being cared for beyond three if the income from child minding is under the €15,000 threshold. I will examine that matter, in the interest of trying to be helpful. I do not want a confused policy position. If an arrangement is informal it should be outside the strict regulatory regime. The current regulatory regime is quite inflexible. A childminder who is caring for four or more children is in the regulatory regime. If a childminder is taking care of four or five children for an hour or two can a prior notification to the county child care committee deal with such an arrangement? Could such a sui generis arrangement be given prior approval before it was brought into the system? The school setting would not be possible. The informal system was not intended to accommodate an after-school service in a school setting. It is intended for private individuals who take care of three or fewer children informally and earn less than €15,000. I will ruminate further on the matter.

Amendment, by leave, withdrawn.

I move amendment No. 26:

In page 19, before section 14, to insert the following new section:

"14.—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.".

Public service employers are excellent in this regard. A scheme has been established to give income tax relief to public service employees who buy a travel ticket for commuting purposes. However, no tax relief is given to an employee who works flexible hours and does not need a full year's ticket or who works for a small private employer who is unwilling to go in to the bigger scheme. A degree of flexibility is required to provide the same kind of benefit to an employee in a small or medium-sized firm or to someone who works atypical hours.

Although my proposal offers more administrative challenges to the Revenue Commissioners, it would be worthwhile. I remind the Minister of the de minimis rule he cited this morning. A taxpayer who spends more than a specified amount in a year on public transport commuting should be granted tax relief on the amount spent. The current system is excellent for some employees. Many employees in Leinster House use it and it is provided by many large employers. However, it is not available, in practice, to small employers. Neither is it available to public servants who job-share, work three days a week or take parental leave during school holidays. Such people may do a substantial commute and such a scheme would encourage them to use public transport. Extending the scheme would also reduce the carbon footprint. Many public servants avail of the scheme. The Revenue Commissioners administer it well and it would be worthwhile to extend it.

Are we discussing amendments Nos. 26 and 27 together?

Yes. The amendments are related and may be discussed together. Is that agreed? Agreed.

Travel expenses incurred by an employee in the performance of the duties of his or her employment are already deductible for tax purposes under existing law and to that extent, amendment No. 26 is unnecessary. However, if the Deputy is seeking to extend the present provision to cover the cost of travelling to work, which is not regarded as being in the performance of duties, this would have serious cost implications for the Exchequer. We could not agree to it on those grounds.

In respect of amendment No. 27, tax law currently provides for an exemption from an employee benefit-in-kind tax charge where employers provide their employees with monthly or annual travel passes. For the exemption to apply, the employer must bear the cost of the travel pass. Subsequent to the introduction of the scheme, representations were made to Revenue to see if there was the possibility of employers providing what were known as free passes within existing employment costs. Following consideration of that matter, Revenue approved arrangements known as salary sacrifice whereby employees could renegotiate their remuneration package to accept a reduction in salary and obtain a travel pass of equal value in return. To ensure the renegotiated arrangements are genuine they must last for at least 12 months. Under the salary sacrifice arrangement, the employer is regarded as incurring the cost of the travel pass and accordingly the exemption applies. The full salary sacrifice arrangement was set out in tax briefing No. 41, copies of which are available for committee members and is well publicised by transport companies. It is the 12-month duration period of salary sacrifice that appears to have given rise to the unfounded assumption that annual tickets only may be used in the scheme. As I already indicated the legislation provides for both monthly and annual passes to be used. In general where salary sacrifice is in place, it would be more effective from a cost angle in respect of employees and an administrative angle for employers to use annual rather than monthly passes. On the basis that the scheme is available for monthly as well as annual passes, the amendment is not as necessary, as has been suggested.

Amendment, by leave, withdrawn.
Amendment No. 27 not moved.

Amendment No. 28 was ruled out of order.

Amendment No. 28 not moved.

I move amendment No. 29:

In page 19, 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 amendment was discussed last year and the Minister, at that stage, indicated that he was not disposed to alter the tax treatment of cohabiting couples until the direction of Government policy in regard to civil unions was clearer. It seems very clear in which direction the Government is going and there is an intention to confer more tax benefits on cohabiting couples where a commitment is made to each other. It is wholly unjust that people who are living together and have children, are confined to a single person's tax credit and tax band, if only one of the couple is working. If the couple separated, they would become eligible to four single person's credits and two single person's tax bands. It is bizarre that we are putting obstacles in the way of stable relationships outside marriage. While changes in the civil law on the marriage contract is coming, a blatant injustice is being done to families who are trying to rear their children. We should not persist with this very discriminatory tax treatment. I cannot see such a change opening up a major precedent that would justify the Minister's apparent caution in not taking action until a range of complex legal issues are resolved. This ought to be dealt with and I do not understand why couples should be treated so unfairly.

Co-habiting couples are treated separately as unconnected persons for tax purposes. I made the point before as a general policy position that we should not make changes in the tax code ahead of developments in other areas of law that are under consideration as it sets a headline. As a matter of principle and to avoid further problems that might arise, I avoid setting a headline in advance of developments in other relevant areas of public policy, for example, in the area of legal recognition of relationships other than marital relationship. We will await a Government decision before considering changes in the tax code.

If the couple separate and set up two different households, they are immediately given the lone parent tax credit, so each gets a double tax credit, while the couple is confined to one tax credit while they are together.

If they were married beforehand, that would be the case.

Regardless, if a co-habiting couple—

They are unconnected.

If only one of the couple is working, one tax credit is paid.

If people change their circumstances in terms of co-habiting arrangements, that is a personal matter. The tax code, as it stands, treats people as unconnected persons in the absence of the Government making wider public policy decisions.

They are unconnected persons if they are apart and deserving of four tax credits, whereas if they are together they could be reduced to one.

My understanding is that it is not as a result of separating that one incurs more favourable treatment. People who are not in a marital relationship are treated as unconnected persons in the tax code. If we want to give legal recognition to relationships other than marital relationships, that is a public policy issue that must be decided upon. We do not proceed with changes in the tax code beforehand. As a matter of principle, the tax code should not headline prospective developments in that area. We need to bring clarity to our position as to what legal recognition we want to give to non-marital relationships before we start changing the tax code.

Could this be done in another way? If a non marital couple were alone and supporting children, they would get two tax credits each. Surely we can find some way to recognise that two people living together and supporting children will each get a tax credit, without opening up a Pandora's box?

It is not a question of opening up Pandora's box. We have a one parent family tax credit that was introduced in the past for reasons that were well intentioned at the time. As I see it, the Deputy wishes to expand it into a tax credit for couples with children who have one income. Does the Deputy see the point I am making? We have a one parent family tax credit.

Maybe the Minister has the solution.

As the Deputy knows there are many one parent families. When one looks at socio-economic circumstances — as seen in a range of reports on social welfare and elsewhere—

I am not asking the Minister to take the tax credit from the one parent families.

I know that, but the Deputy is asking me to extend its scope so that it becomes a one income tax credit.

That is an issue the Deputy can argue, but I do not see why a tax credit which has a certain scope is transformed into something else. If one wants to make the arguments, they should be made separately. I will not change the single parent family tax credit. We will retain that provision. Issues arising from non-marital relationships, as the Deputy has pointed out, must be decided upon in public policy terms before the tax code intercedes. We should not use the tax code to solve problems that arise without examining their wider policy implications. Changes to the tax code should not precede efforts to address problems through public policy decisions to regulate social change.

While I understand the Minister's position, it reflects saying, "Nero fiddled while Rome burned". I could take the Minister to visit some of the families experiencing this problem whom I have met on the doorstep. It is impossible to rationalise the problem to them. It used to be possible to enter into covenants as an informal escape clause but this option appears to have been closed down.

Beyond the scope of the Finance Bill, a number of recent reports should help inform our deliberations in this general area. They include the tenth progress report of the Oireachtas All-Party Committee on the Constitution entitled The Family, which was published early last year, the options paper presented to the Minister for Justice, Equality and Law Reform by the working group on domestic partnership in November last year and a report published by the Law Reform Commission in December last on the rights and duties of co-habitants.

Do any of the reports propose the measure I have suggested?

No, none of them makes that specific proposal. However, substantial detailed policy work has been done on the general principles that need to apply. It would be preferable if the tax code were to fit into these subsequently rather than the select committee trying to deal with them at this stage. Let us deal with the issues requiring address through public policy during the year if people are so minded. We can ascertain how the tax code can reflect the wider policy decisions thereafter, rather than headlining them now without knowing where we are going in the more general issues that arise.

It would help the debate if the Minister were to clarify a matter I raised before lunch. Every person in employment receives a PAYE tax credit of €1,760. In single income families the male usually works while the woman stays at home to mind children, particularly when the couple has more than two children given the cost of child care. In these cases, the spouse who stays at home receives a home carer's credit of €770. Based on these figures the single income family will pay additional tax of €990, the difference between the PAYE tax credit and home carer's credit, as well as an additional €5,000 if its income is €68,000 or more because of differences in allowances. The Minister has increased the one parent family tax credit from €1,630 to €1,760. To clarify matters for those who may not understand the position, is it correct that in the case of a co-parenting couple, that is, a couple who live apart but share responsibility for raising their children — a frequent and welcome approach taken by many couples — both parents qualify for the lone parent's tax credit of €1,760?

They can both claim the tax credit.

We all support lone parent families. Does a family where the parents have split up receive two child credits of €1,760, in other words, the same amount as the PAYE tax credit? Is it not the case that they also qualify for the PAYE tax credit if they are PAYE employees?

The former Minister for Finance, Charlie McCreevy, introduced individualisation for two reasons, namely, to address the high marginal tax rates paid by single income earners as opposed to single income families and on foot of representations made by a variety of bodies, including the employers' representatives, calling for measures to make work pay and encourage more women to enter the workforce. In every budget in the six years since the introduction of individualisation, the position of the single income family with one earner has significantly worsened in comparison to that of the two income family. The so-called DINKs — couples with double income and no kids — are in the best position because they will receive two PAYE allowances if both partners work. Single income families in which one parent stays at home pay significantly more tax than double income families. They pay €990 more in tax because they do not benefit from two PAYE tax credits and a further €5,000 if their income is between €43,000 and €68,000. The impact of taxation on families and individuals does not stand still.

The Labour Party will tonight introduce a Bill to provide for civil recognition of same sex relationships on the grounds that living in a stable relationship is better for the individuals in question, their children and society. My party has a social policy to include and sponsor stable relationships, whether marriage, co-habiting or same sex unions.

The consequence of the former Minister's individualisation policy has been to severely penalise parents who stay at home. While it would be expensive to reverse the policy in one step, as with many other features of the tax code, it must be reviewed on an ongoing basis. The proposal by Deputy Bruton to provide family tax allowances for single earner families would give parents who stay together to parent their children under one roof the same recognition in the tax code as the single parent family which can benefit from more allowances. If each family has one child, a single income family pays €990 more in tax, the double income family pays €990 less and two lone parents raising their child or children conjointly but apart end up with relief worth almost €2,000 in tax savings. The Minister referred to the numbers involved. I understand there are 307,000 single income families, most of whom are PAYE earners. Incidentally, this provision does not apply to people who have family companies. If one has a family company the solution is very simple: one makes the spouse who is caring for the child or children a director working part time for the firm on a salary of up to €25,000 and he or she will then receive the allowances. This issue affects people in the PAYE sector who have no flexibility in the arrangement of their tax affairs.

When one extrapolates away from the basic principle of the one family tax credit one can make any argument one wishes. The one family tax credit sought to give a tax credit based on specific circumstances and this was the preferred route in the late 1960s. We could have decided to split this tax credit between spouses when a separation occurs and they are co-parenting but we did not. We decided instead to give both parents a tax credit because the breakdown of the family unit, whether in a marital or non-marital situation, is difficult and people do not create such circumstances for the purpose of getting an extra tax credit. The decision is a matter of public policy — should the credit be split because the family is split or should each parent be given a tax credit because they are taking joint responsibility for raising the child? We took the latter option.

These are matters that are always up for review. If a couple is living together each receives a single employee credit if each is earning and this also applies if they are living apart. To go beyond such scenarios, to try to cover other exceptional situations people think up, is to prejudge the general legal issue on the legal status of cohabitation. If we want greater clarity and to make changes in policy in this area we need to decide upon the general legal status we wish to give to cohabitation as a principle in our law. Our tax laws can then follow. Suggesting the tax code can take on the responsibility for dealing with this wider social policy issue is unfair to the tax code, is unlikely to bring clarity and consistency and could bring another set of inconsistencies when there is a subsequent breakdown.

That is possibly the case.

In other words, the tax code is not the best place to decide the principles that should apply. It should reflect the general principles the Oireachtas decides should apply to the status of cohabitation as a legal general principle. It is true that we are trying to tackle issues of social change that would not have been contemplated in previous decisions on tax code.

We should not react to this matter on an incidental basis, we should decide the general principles that need to be applied in this area and then we will have clarity and consistency in how the tax code responds accordingly. We could then discuss the matter on a more solid footing because otherwise one can end up in circular arguments that go over everyone's heads. We must first be clear on the legal status of cohabitation and the impact it will have on the constitutional provision protecting the family, marriage and so on.

I cannot think how one would work from first principles to a point where one can give expression to co-habitation as a principle reflected in law, as I am sure we all would like to do, without discriminating against people in what would be termed more traditional relationships. These are deep social questions and significant policy analysis has been conducted in this area by the Oireachtas All-Party Committee on the Constitution and others I mentioned in an earlier reply. A fair degree of consideration is required before we try to solve problems through this mechanism.

I would like to press my amendment. I know the Minister feels he is in a bind and I understand that but I would like to see this change made.

The net result, over the years since the introduction of individualisation, is a significant bias against married couples running through our tax structure and social welfare code. Some weeks ago I met a couple who have three children and would like to get married. I think it would be a successful marriage; the man is working in a good job, the woman has lone parent's allowance and some community employment, CE, work and the children are of school-going age. The woman receives a rent supplement at the moment worth €1,200 a month for a person with three children in west Dublin. The man is living with his mother and is paying a single person's tax and so on. The woman does not intend to work when married and will lose her CE work because she will no longer qualify as a lone parent. She will be a stay-at-home parent because the couple could not afford additional child care, even gap child care that would involve one child on a full-time basis and two children on a part-time basis. They will lose the €1,200 per month received as rent supplement and will also go into the tax situation facing single income families.

This shows how times change because years ago one received something of a tax bonus the year after one married. The State gave couples a pat on the head, said "great" and wished them good luck. A few years ago the situation described above, a man and woman who would like to get married and who have a child or two, applied largely to urban areas of Dublin, nowadays it is the case in every small town around the country. Often one of them is working and the other receiving social welfare and there may be rent allowance involved. When one adds up the cost of giving up one's book in terms of child benefit and one's housing allowance, the penalties are enormous.

Earlier we only discussed penalties facing single income families on more than €68,000 that are well off and providing their own housing. Social welfare does not know individualisation. A cohabiting couple on social welfare consists of the principal person and the cohabiting dependant. The tax system is drifting towards full individualisation and the social welfare system is still based on the beverage view of the a male breadwinner model. The Minister for Social and Family Affairs, Deputy Brennan, keeps saying he will change the co-habiting rule and, God love him, I do not know how he will do it but I wish him well. He has made this announcement about five times and has not clarified how he will do so.

This is a major social issue affecting families in every town and area of Ireland. I am not suggesting we should solve it in this Finance Bill but our society must acknowledge and value family relationships, marriage relationships and civil unions, particularly for the sake of children. We must not put a vast financial penalty on such families but, unfortunately, that is what we are doing at the moment. The cost of getting married can be highly punitive in complex situations where there is a mix of employment, social welfare and housing entitlements. Getting married is a massive income penalty for a couple. I have performed calculations, and where housing benefit is involved, one would need to earn another €34,000 to €40,000 to make marriage worthwhile, owing to what one loses. I will show the Minister the calculations.


Thankfully, the Minister is not in that situation.

Thankfully, that sort of arithmetical approach does not dictate everyone's behaviour. Marriage is usually a lifelong commitment, regardless of the economic consequences.

I suppose that we are pulling at an ivy root here, in that it is a very complex matter, but there are all sorts of elements. For example, making idleness a condition to receive rent supplement is bizarre. People on low incomes in private rented accommodation are treated like pariahs. It is ludicrous that they must be idle to receive support. It is too important an issue to discuss today, however.

Amendment put and declared lost.

I move amendment No. 30:

In page 19, before section 14, to insert the following new section:

14.—The Principal Act is amended in section 779 by inserting the following new subsection:

"(3) A person, none of whose taxable income is chargeable at the higher rate, who makes a pension contribution within the limit set out in this section, shall be entitled to receive a tax credit contributed to the pension scheme equivalent to relief at the higher rate.".".

This amendment seeks to address the stubborn anomaly whereby someone on a low income who makes a contribution to a pension fund receives only 20 cent tax relief for every €1 contributed, whereas those on higher incomes receive relief at the higher rate, as well as the social insurance concession. I see that Fianna Fáil's partners in Government are well disposed to something along these lines. They are talking about a 33% relief, with €1 for every €2 contributed, but the principle is certainly emerging.

This will be a major issue. I do not know whether the Minister's colleagues can yet tell us when the returns from pensions and the income distribution of pension tax relief will emerge. I have the Minister's tax booklet where he states how much tax forgone costs. The total that we give in tax concessions on pension contributions is truly phenomenal, being approximately €3 billion or €4 billion. When the data emerge, the extent to which that is skewed toward very high-income earners will shock people. We continue to fail to produce effective tax and pension vehicles that give some sort of pension cover to those on low incomes.

The last data I saw showed that a little more than half of all those outside the public sector had some form of private pension cover. It did not detail income distribution, but I suspect that, as one goes down the income scales, the percentage with no pension cover becomes very large. In low-income categories, it may be as high as 80% or 90%. I contrast the State's generosity towards them in pension provision with that shown towards those far up the income scale. It is so starkly different that we must move from the present situation towards schemes that I have supported in the past, with €1 relief for every €1 invested. I have often advocated that, both here and elsewhere. I see that the Progressive Democrats have even offered €1 for every €2 invested, which is less generous.

We must have €1 for every €1 invested, and even that is only the start of our reforms to pension contributions. It will be mentioned in the Minister's briefing notes that there is to be a Green Paper under the heading of social partnership. Such papers often seem to postpone rather than accelerate action. At the very minimum, this is the sort of change we should make, and we should produce much more flexible vehicles to allow those on low incomes to build up and access pension funds. By making them more flexible, people could balance lifestyle problems throughout their lives.

They would provide a flexible vehicle to support long-term saving with a view to a pension while not penalising people in any other way. In the UK, there was an anomaly with a perverse incentive. Schemes were established to encourage people to build up nest-eggs, only for non-contributory elements to be removed. The only such anomaly that we have is the fuel scheme, which would no longer apply to many people if they had €100 more; we must keep an eye on that too.

I regret that the Government has decided not to address this issue until after the election. We should have started to make progress, and we will be forced to move very rapidly when the income distribution figures for pension relief are issued. I expect them to be extraordinarily skewed towards the very well-off.

I support the Minister examining this. For the top-rate contributions of the self-employed, the State currently pays approximately 85 cent for every €1. If one takes into account how that is structured, one sees that capital appreciation may also be involved. The State is, therefore, very generous, but that is much less true for those at the bottom end of the scale.

It would be interesting to hear the Minister's views. There have been various reports, including one from the Pensions Board, on how the situation might be improved, particularly in favour of the lower-paid. I am also very concerned about people in the construction industry. Traditionally, younger people working in it do not place much emphasis on accumulating pension contributions, often until it is too late. While they earn good money in their 20s and early 30s, many do not put enough aside in a pension fund. That area too must be addressed.

This issue is being examined very comprehensively. We made a commitment during the Towards 2016 negotiations to consult after the national pensions review from the Pensions Board in an effort to build consensus around dealing with such issues.

There are very serious policy questions involved regarding the provision of adequate pensions coverage, how we can best do it, the affordability mechanisms, and what commitments and contributions would have to be made by the State, if any. This is an extremely complex and difficult area, and not easily amenable to an easy or quick solution, although this amendment obviously gives us an opportunity to discuss it.

We do not have precise data, as has been said. Obviously, one would know from looking at them peremptorily that this proposal would cost several hundred million euro if one made relief available to everyone at 41% regardless of their income tax bracket. We must reach conclusions about the appropriate incentives to encourage greater supplementary pensions coverage among the lower-paid. They will be dealt with in the context of the Green Paper being prepared by the Minister for Social and Family Affairs. He will produce pensions policy proposals, and the Green Paper will set out the options. We are moving towards producing solutions in the area. People have come up with various ideas, and this one was mentioned in the national pensions review by the Pensions Board, if my memory serves me right.

We must ensure that actuarial work in the context of the Green Paper setting out accurate options can be put into the public domain so that we can decide how to act. In the context of that policy review, I am obviously not able to accept the amendment.

I do not wish to prolong the discussion unduly, but tax relief at the top end, which amounts to a subsidy by the taxpayer of an upper earner's pension fund, is potentially €42,000 each year on payment into the fund, plus the tax relief of the income earned on the accumulated fund. We are dishing out substantial tax subsidies at the upper end. I accept that the Minister has capped pension funds at €5 million. To most ordinary people this seems an enormous pension provision. About one third of taxpayers are on the 20% tax rate and between 60% and 70% of them have no tax relief on pension provisions. Those who are getting tax relief are receiving about €1,000 in tax subsidy on their pensions. The contrast between the two arrangements is enormous and is not sustainable.

If the Minister were to present these figures in an Estimate the proposal would be laughed at. I do not blame Deputy Cowen for a practice which has grown up over many years. We must find a vehicle for this group of taxpayers who have been out in the cold for so long. It is a pity we must now wait for the Green Paper because a sense of urgency is required. Otherwise the political system will be excoriated when the data on this issue becomes public. There is no justice in the current arrangement, which has grown up under the cover of years. We need to deal with this issue politically rather than consign it to some partnership mechanism.

Amendment put and declared lost.

Amendment No. 31 was printed in error. It has been substituted by amendment No. 48.

Amendment No. 31 not moved.

I move amendment No. 32:

In page 19, before section 14, to insert the following new section:

14.—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 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.“.”.

I ask the Minister to respond to this amendment. It is outside my sphere of expertise.

I assume the amendment refers to the single farm payment and the FEOGA payment in 2006. The amendment would have the effect of allowing farmers to average over any number of years all single farm payments received in 2006 and any outstanding arrears of FEOGA payments received in the same year.

I have already explained the background to this issue and I have made adequate arrangements in the Bill to accommodate farmers where an interaction of the timing of the FEOGA arrears payments and the farmers' own accounting year could push them into a higher tax bracket. I am taking account of that possibility.

I cannot agree that there is any case to be made for averaging the single farm payments in the way suggested in the amendment. These payments relate to individual farming years and are correctly taxed on an annual basis. The provisions I brought in last year, and which I have supplemented in this Bill, provide for three year averaging for the final instalment of the old FEOGA payments and are more than adequate to cope with any difficulties that might have otherwise arisen. For that reason, based on the adequacy of where we are, I do not believe this amendment is necessary.

I will discuss this with my colleagues and consider resubmitting the amendment on Report Stage.

Amendment, by leave, withdrawn.
Sections 14 and 15 agreed to.
Amendments Nos. 33 and 34 not moved.
Section 16 agreed to.
Amendments Nos. 35 and 36 not moved.

Amendments Nos. 37 and 38 are related and may be discussed together.

I move amendment No. 37:

In page 38, to delete lines 41 to 48, and in page 39, to delete lines 1 to 3, and substitute the following:

"SR is the aggregate of the amounts of the deductions the individual was entitled to deduct under sections 372AP and 372AU, for the tax year 2006 and each of the 3 preceding tax years, and".

These amendments, which relate to the restriction on the use of tax reliefs by high income individuals, are technical in nature. They seek to amend the meaning of two terms used in the formula at line 38 of page 38 of the Bill as published. This formula, which relates to tax reliefs used in the property rental business apportions relief brought forward from the tax year 2006 to the tax year 2007 between reliefs to be restricted, called specified reliefs, and reliefs which are not to be restricted where the amount brought forward derives from both types of relief. The apportionment works by reference to the amount of specified reliefs, referred to in the formula as SR, used by the individual over a four year period, compared with the individual's overall use of property related tax reliefs in the same period, referred to in the formula as TR. In some circumstances, although the reliefs used consist of a mixture of restricted and unrestricted reliefs, the formula as set out in the Bill as published gives the same amount both above and below the line resulting in no apportionment being made. This is not what was intended.

These amendments will ensure that the formula works as intended and I commend them to the select committee.

Does the Minister have an estimate of the tax saving secured by these ceilings, compared with what was happening before? We have always had the top 400 and high earners' reports. By applying this cap are meaningful tax evaders being caught? Does the Minister consider the cap to be at the appropriate level or should it be at a lower level? Substantial amounts of income continue to be tax sheltered under this arrangement. The effective rate of tax, which the Minister describes as 20%, only applies above a very high limit. Much of the income remains tax sheltered. Income is taxed only if it exceeds €500,000. Has the Minister considered whether these are appropriate thresholds? They seem to me to be extremely high.

The yield has increased by about €70 million in a full year. That is an estimate.

Could the Minister give Members a copy of his explanatory note because this is a complex issue. The restriction on the relief to produce the minimum payment had a roll-over, or carry-forward, mechanism. If people are restricted they can carry their property based relief forward indefinitely. Has the Minister clarified that matter? Is the relief restricted simply in time or is there an indefinite carry-forward mechanism?

What is the significance of the reference to the three preceding tax years in the amendments? Does it relate to a carry-back as well as a carry-forward?

This is a very technical issue. In last year's Finance Act I introduced a provision to implement the budget announcement of a restriction on the ability of high income individuals to reduce their tax bills to zero or very low levels by sheltering income from taxation through the excessive use of tax incentive schemes. The effect of the measure introduced last year is that such individuals will pay, with effect from the tax year 2007, an effective rate of tax above 20% on the income previously sheltered by such schemes.

Section 17 does not alter or dilute the fundamentals of the restriction measures introduced last year. The purpose of the section is to provide for a number of supplementary matters, not dealt with last year and to make a number of miscellaneous clarifications, corrections and modifications. The section amends the restriction measure in five respects. It clarifies the interaction of the restriction with the provisions relating to the taxation of married couples. It introduces a requirement to report information relevant to the restriction to Revenue and to require taxpayers affected by the restriction to provide estimates of the additional tax payable as a result of the restriction. The section also allows Revenue to acquire information to ensure the restriction is being applied correctly. It sets out a series of rules to allocate relief brought into the tax year 2007 from the tax year 2006, between reliefs subject to the restriction and reliefs not subject to the restriction, where the relief brought forward derives from a mixture of restricted and unrestricted reliefs. The amendments we are now discussing relate to this aspect.

Section 27 makes a number of other miscellaneous clarifications, corrections and minor modifications to last year's legislation.

If a person were to end up with a charge of 20% so that he or she has unused allowances, he or she can carry them forward indefinitely. The Minister estimated that an extra €70 million was generated by virtue of the restrictions, but is the restriction absolute? If one has an allowance under the various property based schemes that was not utilised, can one subsequently carry it forward indefinitely, so that in fact the restriction is a timing restriction and would even out tax payments over a lifetime?

There are two issues, the technical issue and the carry forward of reliefs. On the technical issue, we are apportioning reliefs between what is brought forward into 2007, which is the first year of the restriction, between restricted and unrestricted reliefs. One is applying a formula to apportion reliefs from what is restricted from the year 2007 and what is unrestricted.

On the carry over of reliefs, reliefs which are restricted to 2007 and subsequent years can be carried forward to later years, but the restriction will apply to ensure 20% in each year. There is a carry forward provision but the restriction will apply to ensure 20% in each year. The technical point is how one apportions reliefs between restricted and unrestricted reliefs in the first year of operation of the new arrangements. In cases of restricted relief for this and subsequent years, one can carry forward but the restriction will apply to ensure 20% each year.

Does the Minister have an estimate of the number of taxpayers affected by the restriction?

We have estimated that approximately 600 taxpayers will be affected.

About €70 million.

Amendment agreed to.

I move amendment No. 38:

In page 39, to delete lines 4 to 10 and substitute the following:

"TR is the aggregate of the amounts of the deductions the individual was

entitled to deduct under section 92(2), including deductions authorised

under that section by virtue of sections 372AP and 372AU, for the tax

year 2006 and each of the 3 preceding tax years".

Amendment agreed to.
Section 17, as amended, agreed to.
Amendments Nos. 39 to 42, inclusive, not moved.

I move amendment No. 43:

In page 40, before section 18, but in Chapter 3, to insert the following new section:

18.—The Principal Act is amended in section 6 by the insertion of the following after paragraph (b):


(c) where a person who constitutes a child under this section is deceased, a child, stepchild or adopted child of that deceased person,”,”.

This amendment relates to a capital gains tax concession. The categories that should get relief should include the child of a deceased child. Will the Minister comment on whether this is a fair concession?

This amendment proposes a change to section 6 of the Taxes Consolidation Act 1997, which provides a rule for the construction of references to the word "child" in the tax Acts and the capital gains tax Acts. This rule is that unless the contrary intention appears in the provision, a reference to a child, including a reference to a son or daughter, is to be taken as including a stepchild and a legally adopted child. The purpose of the provision when enacted in 1977 was to put a child that was formally adopted in a position in all respects similar to that of a child born within marriage for the purposes of the taxes concerned.

The aim of the amendment is to widen this provision so that it will extend to a child, stepchild or adopted child of a deceased person, who in turn had been treated as a child of a person in accordance with section 6. In other words a person's grandchild would be treated in certain circumstances as the person's child for the purposes of the tax Acts and the capital gains tax Acts. This would broaden very significantly the effect of section 6 and could result in unintended or unacceptable consequences in other parts of the Acts and for those reasons we are not prepared to accept the amendment.

I should point out that section 47 makes an amendment to section 599 of the Taxes Consolidation Act 1997 along the lines of Deputy Bruton's proposed amendment. Section 599 gives a general relief for capital gains tax in the case of a disposal of a business or a farm by an individual aged 55 years or over to a child. This is being amended to ensure that a child of a deceased child will qualify for relief under section 599.

That was the intention of my amendment.

Unlike the change proposed by Deputy Bruton this is a narrow and focused one with a specific intention in mind. Deputy Bruton's amendment would apply right across the income tax Acts, corporation tax Acts and the capital gains tax Acts and as such would have considerable ramifications in the tax system, and the extent of these could not be determined without a detailed and thorough examination being undertaken. There may be a case for such examination, but apart from the particular and specific capital gains aspect, which has been addressed by section 47 of the Bill, the issue has not been identified as giving rise to any particular difficulties.

Amendment, by leave, withdrawn.
Amendments Nos. 44 and 45 not moved.

I move amendment No. 46:

In page 42, subsection 1(b)(ii), line 44, after “agency.” to insert the following:

"Recycling cannot be taken to mean the end disposal of waste, in particular through incineration.".

This amendment relates to one of the proposed changes that is being made to the business expansion scheme and the related seed capital scheme in section 18 of the Bill, whereby certain recycling activities are being brought within the scopes of the schemes. The amendment seeks to ensure that the end disposal of waste, in particular such disposal by way of incineration, will not qualify. Section 18 spells out what the term recycling activities in relation to waste material means. A key requirement is that the waste material must be treated or processed in a way that results in the production of value added material that is reusable. The section lists various types of waste material that may be processed. The measure is specifically and solely targeted at recycling of waste and not its disposal. As I indicated it requires the recycling process to produce from the waste resultant material that is of more value and is capable of being reused. The activity mentioned in the amendment, namely, the end disposal of waste and whether the disposal is by way of incineration or otherwise, is outside the ambit of what is being provided for in section 18 and the amendment is therefore unnecessary.

Amendment, by leave, withdrawn.
Amendment No. 47 not moved.
Section 18 agreed to.
Sections 19 to 21, inclusive, agreed to.

Amendment No. 48 is not in order because it involves a charge on Revenue.

Amendment No. 48 not moved.

I move amendment No. 49:

In page 48, to delete lines 24 to 29 and substitute the following:

"(e) Bachelor of Science (Honours) in Land Management, Agriculture;

(f) Bachelor of Science (Honours) in Land Management, Horticulture;

(g) Bachelor of Science (Honours) in Land Management, Forestry;”.

This is a minor technical amendment to section 22 which is concerned with the schemes of relief for farmers for year on year increases in trading stock values. The names of three courses in paragraph two of the table to the newly introduced section were incorrect in the Bill, as published. The amendment corrects these errors.

Amendment agreed to.
Section 22, as amended, agreed to.
Section 23 agreed to.

I move amendment No. 50:

In page 53, line 20, after "of" to insert "the initial value of".

This is a minor amendment to section 24, as published. It is concerned with the new taxation scheme for stallion profits and gains. In circumstances where a stallion dies or is sold it is technically necessary to halt future deductions placed on the cost of the animal. In certain circumstances the provision that achieved this purpose has gone too far and denied all deductions in the year in question. This was not the intention and the amendment remedies the problem.

The Minister has probably been in receipt of returns from stud farms for some time. Will he make available information concerning the number of stud farms likely to be affected by the new arrangements?

To return to the Minister's comments on section 17 and the limitation of the amount of relief available in any one year, does the minimum tax payment of 20% apply to stud farm operator owners' personal tax position? I presume the provision does not apply to non-resident stud farm owners. The note on section 17 also refers to the provisions governing the taxation of married couples. With regard to tax avoidance, how many stud farms are likely to be affected by the new measures? How many of these are large and how many are small operators with limited operations? Does the 20% minimum tax payment apply to such owners who have income from stud farms, stud farm directorships or shares in stud farms?

The Minister indicated that those who benefit from various tax avoidance schemes will have to pay a minimum tax rate of 20%. In this context, the note refers to married couples. Was the reason for including this reference that people were off-loading items to their spouse? If not, why was this reference included?

In what context was the reference to married couples made?

Married couples were referred to in the note on amendments Nos. 37 and 38 to section 17. The note refers to issues arising out of the treatment of the taxation of married couples. Were some of the people in question availing of reliefs, namely, the various investment schemes that attract high levels of tax relief? Did some couples have a capacity to split income?

No, that was not the case. The purpose of the change was to avoid people receiving a double threshold.

Did some people seek a double threshold?

No, this is a pre-emptive measure.

On amendment No. 50 the Indecon report stated there were 89 stallion farms in Ireland and that 128 persons, both companies and individuals, made returns to the Revenue.

I welcome this section. I come from an area of north Cork where racing is strong and many famous horses, including College Rake, Royal Tan and Early Mist which won great races at Cheltenham and the English Grand National, were born many decades ago. I support the Minister's decision to provide for equity in this sector. The tax breaks for stallion owners were strongly criticised over the years. The amendment and section are worthwhile and address criticisms and allay the fears of members of the public.

We must recognise that racing is an important industry and we need good sires and stallions to capitalise on the market. Stud farms, including those in the Fermoy area of east cork, such as the Glanworth and Grange studs, most of which are operated by the Magnier syndicate, have been responsible for many imports. I congratulate the Minister on introducing equity.

Are greyhounds at stud covered by the section? How is the greyhound industry being treated?

The Bill does not include similar provisions for the taxation of stud fees or income from the sale of stud greyhounds. We will examine that issue when negotiations with the Commissioner regarding the proposed tax treatment arrangements of stallion income and gains have concluded. The issue of greyhounds was not raised by the Commission at the time.

Greyhounds are not included in the review.

The issue of greyhounds will be addressed. It is a much smaller operation.

It is a very good operation.

I agree and share Deputy Bruton's avid interest in the area. I hope he is getting more winners than I am.

How is the dog doing?

Dogs are the poor man's horse.

I apologise for missing the discussion on amendment No. 46. I had to attend a debate on the Social Welfare Bill and was also trying to keep an eye on the Order of Business.

The Deputy's amendment was moved and discussed.

I may have an opportunity to revisit it on Report Stage if the Minister is so disposed. On amendment No. 50 to section 24, I oppose the section and reaffirm comments I made during the Second Stage debate. The Minister has not made a convincing case as to the reason the horse breeding industry, above all other industries, requires the support provided for in the Bill. A high quality international industry such as horse breeding should not need this type of support and should be able to benefit from the standard of its own work.

The Minister, in his proposals, appears to bend over backwards to ensure the sector does not pay any tax. For example, the provisions will take effect in 2008 and expenses can be used against the termination of profits and, subsequently, in the determination of tax liability. Most perversely, the capital allowance for stallions, which the Minister explained on Second Stage, will not apply to the full value of the stallion after four years. This measure will undoubtedly create a market for trading in stallions once they reach four years because the value of such stallions will have reached inflated prices. For this reason, the profit margin on stallions will increase every four years and will be subsequently written off. Stallions will then be traded between stud farms every four years. The Minister is creating a needless anomaly. People are already able to make use of double claims in terms of ordinary expenses and it seems everything, including the kitchen sink, has been put in this provision to ensure the horse breeding industry is not asked to pay tax in future. I cannot see the economic or social basis for this and believe there must be scores of other industries that would like to be treated similarly.

I find it extraordinary how people try to rationalise their antipathy towards something in an effort to convey a conspiracy theory to the rest of us. This issue could not be clearer and Deputy Boyle is incorrect on a number of points. If a stallion is sold after four years, the full sale price is taxable, so there is no question of a carousel of stallions travelling between stud owners.

Does the Minister remember Daisy the cow?

I understand that Deputy Boyle wishes to continue his antipathy towards this industry and thinks this is all a scam. We have a world class horse breeding industry in this country that has been built from a cottage industry and the tax exemption regime in force since 1969 has been very helpful in bringing us to that point. The arrangements I am now putting in place are totally in line with general taxation principles and accountancy practice regarding capital allowance provisions for plant and machinery and so on in other lines of business. They cover the economic cycle of the asset, as is the case in other types of business, and the industry employs many thousands of people.

There is a perverse, illogical and continuing antipathy towards this matter emanating from part of the political system in this country and it persists no matter what one does. I find this a blinkered view of the world that I cannot understand.

The Minister is not explaining why this industry receives tax breaks. He is merely giving a diatribe on why I might oppose such concessions. I asked a question relating to the horse breeding industry and I have not heard any justification for the concessions suggested.

I have given replies to the Deputy. My first reply, on Second Stage, simply asserted that the Deputy is wrong on this issue. If he wishes to go to the Green Party conference this weekend and discuss the matter further he is welcome to do so as he clearly gets a kick out of it. The full sale price of a stallion sold after four years is taxable.

The Minister is not explaining why this capital allowance is being created in the first place, why there will be double allowances against profits and taxation, why the reliefs from the existing system are being carried into the new system, and why this is not being introduced until 2008. Why is the horse breeding industry to receive all of these special treatments?

I must apologise for my leaving at this point, I have raised a matter under Standing Order 31 relating to the Government's position on Cork Airport.

I hope it is a far more urgent matter than this.

I do not wish to take advantage of Deputy Boyle's absence but would like to speak on the matters he raised for the record of the House. The principles that are being applied to this business are the same as any other business. The economic cycle of the asset is what is relevant and I am glad that Ireland is the third largest producer of thoroughbreds in the world, accounting for 42% of total EU output. I am glad that up to 70% of the world's top stallions have been located in Ireland and I am glad that Irish trained horses are among the dominant forces in world racing. I am glad that we have, hopefully, come up with a solution to this problem that meets with EU approval, is consistent with state aid rules and deals with an issue that has generated far more heat than light in the past, without anyone giving credit for the fact that we have an industry here that works well.

Whatever differences of opinion there have been in the past, I have brought forward changes. I said, in the context of the review of tax reliefs and tax exemptions, that this would apply from mid 2008 to give a normal transition period that would enable the industry to adapt to the situation. I am confirming this in this Finance Bill. People are entitled to disagree as to whether there should ever have been an exemption and may, for some reason, have an antipathy towards the racing industry that means they cannot deal with this issue in a logical and rational way. I do not agree with such people but I accept their right to disagree.

It is hard to listen to some of the things said by people who are trying to perpetuate conspiracy theories to justify craziness they put forward previously.

I support the Minister on this matter. Perhaps all of us believed the myth that concessions and tax breaks benefit the industry but the reality is that equity is being applied. It is a high-risk, precarious business and many people with stallions do not make the millions that are suggested because there can be breakdowns in health. The Minister pointed out that the industry has grown from small beginnings to what it is today and that is why it is successful. It needs some concessions if it is to survive because Ireland has one of the most highly regarded racing industries in the world. Horse breeding here is first class and the industry is a large employer in many rural areas such as County Kildare. I am disappointed Deputy Catherine Murphy is not here because it is thriving in her constituency and is very important in my area.

The Minister has removed the secrecy from the issue, brought it back to basics and introduced a tax that will make things equitable and fair, for which I thank him.

Is there an anti-avoidance mechanism included in the process identified by the Minister for valuing stallions and subsequently valuing capital allowances? When we had this discussion previously a distinction was made between very large operations and smaller operators. If the key issue in capital allowances is the value of the stallion then that value is subject to the possibility of genuine variation if the horse proves not to be as hoped at stud. Equally, the value is potentially subject to a great deal of manipulation if there are transfer arrangements which see the value of the stallion being increased.

This is a genuinely difficult, technical issue but there is enormous scope for avoidance if anti-avoidance measures are not implemented. The Minister made a reference to the Revenue Commissioners consulting appropriate persons in identifying the value of a stallion and perhaps he could give a specific indication of how this will work. There are genuine problems in the continuing valuation of stallions depending on their performance at stud. There may be great hopes for a stallion that goes to stud that are not realised. Equally, values can rise substantially.

The issue relating to the equity argument and the business case argument is to create a system that is fair and not wide open to avoidance. This seems to be at the core of this matter so perhaps the Minister could expand on it.

Before the Minister speaks Deputy McGrath wishes to contribute.

Many of our top stallions do business in Australia in the off season from which a substantial proportion of their income comes. Since a top stallion can earn about €20 million, between €7 million and €8 million of which could be generated in Australia, does this provision take money earned by such a stallion abroad into account or is it dealt with in a separate return? How will charges be dealt with? Some charges associated with operating out of the country can be built in. Will the profits also be returnable on accounts in Ireland?

This would be a non-resident stallion.

We have many of those.

If a stallion is an Irish taxable entity it is dealt with in Ireland. If it is an entity incorporated elsewhere it is dealt with elsewhere. Australia also has its ways and means of raising money from this activity.

If the stallion's primary residence and domicile is the Republic of Ireland and it then goes offshore for a period of the year-----

The stallion does not dictate that. The owner of the stallion dictates that.

The Minister's predecessor drew the EU's attention to this area by creating additional benefits for non-resident stallions, as I recall. He tried to be too clever and gave rise to complaints from other member states.

He was a very clever person.

He overdid it that time.

Mr. Alan Dukes was very helpful on this issue in the 1995 Finance Act. He has been quite articulate and informed on the issue.

I thought the Minister might say that.

The Kildare connection is important. Their knowledge base is greater than ours.

Mine is a genuine query. I am trying to alert the Minister and his officials to what is happening. A great deal of money is being generated abroad by the same stallions. We must not create loopholes to allow profits to be manipulated. The situation in Australia should be investigated. Are taxes levied on fees charged there?

There is a protocol between Ireland and Australia.

If the individual or the corporation is resident here the charge is worldwide.

That answers the question.

The stallion is deemed to be domiciled in Ireland.

Any Irish stallion which stays on this planet during the course of his career will attract tax liability. Does that cover everything of concern to Members and bring finality to this age-old argument?

The charge on fees from a stallion in Ireland is paid to the Revenue Commissioners. If an Irish stallion is domiciled for a season in Australia, is the tax on its fees not returnable to the Australian revenue rather than to the Revenue Commissioners?

That is not correct. I presume we are talking about an equine stallion.

An equine stallion is a horse.

Income will be returnable in both places but if the taxable entity which owns the stallion is incorporated in this country we impose a worldwide charge.

If I have a stud farm registered in Australia and take a stallion to service horses there for a season, surely that income is returnable in Australia rather than in Ireland?

Revenue has a worldwide reach if the owner of the stallion is resident in Ireland.

The taxpayer pays the tax and not the stallion.

The tourist activities of a stallion do not escape the attention of the Revenue Commissioners in Dublin Castle.

I wish to give notice that I am considering an amendment on Report Stage to deal with the taxation arrangements for the payment of compensation to sugar beet farmers. I mention this in the context of some of the agricultural provisions already discussed.

Amendment agreed to.
Section 24, as amended, agreed to.
Amendment No. 51 not moved.
Question proposed: "That section 25 stand part of the Bill."

An issue has arisen regarding foreign charities operating in Ireland. If the EU believes they are registered within the EU they qualify for all relevant tax reliefs available to charities. Has concern been expressed in security circles, and perhaps among some of the Minister's officials, regarding the status of some of these foreign charities? Will the Minister comment on this matter? I believe there is concern that some may be connected to other organisations whose purpose may not be entirely charitable or that some may be linked to terrorism or to organisations whose objectives and actions would not be endorsed in this country. I understand the EU has required the Minister to grant tax relief to all charities registered in the EU if they apply for such relief in this country.

From time to time concern is expressed about charities which could be linked to Islamic extremism and ultimately to terrorism. Can the Minister comment on this matter, which relates to this section of the Bill?

The Commission has indicated its view that our tax relief on donations to approved bodies must apply to all such bodies throughout the European Union and the European Economic Area. In its view we are in breach of the treaty article on the freedom of the movement of capital. Neither Ireland nor a number of other member states which are in the same position have conceded that point.

We have informed the Commission that we can satisfy it on some fronts and that is what is being done in this year's Bill. We have removed references to "in the State" in various places, for example, regarding schools following a course of education approved by the Minister for Education and Science. In practice, removing the reference to "in the State" in the Schedule will have the effect of allowing tax relief on donations by Irish taxpayers to certain schools in Northern Ireland and to the European School in Brussels. This is an extension of the scheme which I am happy to make.

We have a particular problem with allowing tax relief on donations to charities which are not established in the State. Under existing arrangements, for control purposes a charity must be established in the State. This is intended, first, to ascertain that it is a charity as we define it and, second, that it applies its moneys as it promises in its memorandum and articles of association.

In the absence of special arrangements the Revenue Commissioners cannot be expected to perform those functions, particularly the latter, if a charity is established outside the State. Revenue would be unable to be certain that cross-border donations were not financing money laundering, fraud or terrorism. Officials from my Department are in negotiation with the Commission, along with the United Kingdom and others, to explore whether an acceptable system might be developed to allow cross-border donations. A system of bilateral treaties would be one possibility.

The Irish requirement that charities be established in the State is proportionate and necessary to prevent misuse of funds. In practice, we have no obstacles to charities establishing in Ireland or with their money being used for charitable purposes outside the country, for example in the Third World. We are prepared to work with the Commission to see if some other arrangement acceptable to all concerned would be possible, that would allow for donations to charities outside Ireland and that we could be confident would work properly and not give rise to the kind of problems mentioned.

Question put and agreed to.

As we have completed our discussion of section 25, I propose that we suspend the meeting until 6 p.m. Is that agreed? Agreed.

Sitting suspended at 5.12 p.m. and resumed at 6 p.m.

I move amendment No. 52:

In page 55, before section 26, to insert the following new section:

26.--(1) Part 9 of the Principal Act is amended

(a) in section 268

(i) in subsection (3A)

(I) by substituting "Subject to subsections (3B) to (3E), in this section" for "In this section", and

(II) by substituting the following for subparagraph (i) of paragraph (d):

"(i) is leased to a person and, as the case may be, the spouse of that person

(I) who is or, as the case may be, are not connected (within the meaning of section 10) with the lessor,

(II) who has or have been selected as the occupant or occupants of the house by the registered nursing home, and

(III) either the person or the spouse of that person has been certified by a person, who is registered in the General Register of Medical Practitioners, as requiring such accommodation by reason of old age or infirmity,or",

(ii) by substituting the following for subsection (3B):

"(3B) (a) For the purposes of this section ‘house’, in relation to a qualifying residential unit, has the same meaning as in section 372AK.

(b) For the purposes only of the making of allowances and charges under this Part but subject to subsection (3C) and sections 270 and 316 (as amended by the Finance Act 2007), as respects capital expenditure incurred in the period commencing on 25 March 2002 and ending on 30 April 2010, a house in use as a qualifying residential unit shall be deemed to be a building in use for the purposes of a trade referred to in subsection (1)(g).”,


(iii) by inserting the following after subsection (3C):

"(3D) Where the relevant interest in relation to capital expenditure incurred on the construction or refurbishment of all qualifying residential units in a development is held by a company (within the meaning of section 4(1)) then subsection (3A) shall apply as if subparagraphs (iv) and (v) of paragraph (c) of that subsection were deleted.

(3E) A house shall not be a qualifying residential unit for the purposes of this section unless

(a) the following information has been provided to the Health Service Executive, by the person who is entitled to the relevant interest in relation to the capital expenditure incurred on the construction or refurbishment of the house, for onward transmission to the Minister for Health and Children and the Minister for Finance:

(i) the amount of the capital expenditure actually incurred on the construction or refurbishment of the house;

(ii) the number and nature of the investors that are investing in the house;

(iii) the amount to be invested by each investor; and

(iv) the nature of the structures which are being put in place to facilitate the investment in the house, together with such other information as may be specified by the Minister for Finance, in consultation with the Minister for Health and Children, as being of assistance in evaluating the costs, including but not limited to exchequer costs, and the benefits arising from the operation of tax relief under this Part for qualifying residential units,

(b) the Health Service Executive, in consultation with the Minister for Health and Children, gives a certificate in writing after the house is first leased or, where capital expenditure is incurred on the refurbishment of a house,first leased subsequent to the incurring of that expenditure stating that it is satisfied that

(i) the house and the development in which it is comprised complies with all the conditions mentioned in paragraphs (a), (b), (c) and (d) of subsection (3A), and

(ii) the information required in accordance with paragraph (a) of this subsection has been provided,


(c) an annual report in writing is provided, by the person who is entitled to the relevant interest in relation to the capital expenditure incurred on the construction or refurbishment of the house, to the Health Service Executive, for onward transmission to the Minister for Health and Children and the Minister for Finance, by the end of each year in the 20 year period referred to in section 272(4)(fa) (inserted by the Finance Act 2007), which—

(i) confirms whether the house and the development in which it is comprised continue to comply with all the conditions mentioned in paragraphs (a), (b), (c) and (d) of subsection (3A), and

(ii) provides details of the level of occupation of the house for the previous year including the age of and, as the case may be, the nature of the infirmity of the occupants.",

(b) in section 270 by inserting the following subsection after subsection (7):

"(8) Where capital expenditure is incurred on or after 1 May 2007 under a contract or agreement which is entered into on or after that date for the construction, refurbishment or development of a qualifying residential unit as is referred to in subsection (4)(i), then--

(a) subsection (4) shall apply as if the reference to ‘31 July 2008’were a reference to ‘30 April 2010’,

(b) subsection (5) shall apply as if—

(i) the reference to ‘subject to subsections (6) and (7)' were a reference to ‘subject to subsections (6) to (8)', and

(ii) the following paragraphs were substituted for paragraphs (a) and (b):

‘(a) in the case of expenditure incurred by a company(within the meaning of section 4(1)) in the period from 1 May 2007 to 30 April 2010, to 75 per cent, and

(b) in the case of expenditure incurred by a person other than a company (within the meaning of section 4(1)) in the period from 1 May 2007 to 30 April 2010, to 50 per cent,’,”,

(c) in section 272(4)—

(i) in paragraph (f), by inserting “subject to paragraph (fa),” before “in relation to”, and

(ii) by inserting the following paragraph after paragraph (f):

"(fa) where subsection (8) of section 270 applies in relation to a qualifying residential unit as is referred to in subsection (4)(i) of that section--

(i) 20 years beginning with the time when the unit was first used, or

(ii) where capital expenditure on the refurbishment of the unit is incurred, 20 years beginning with the time when the unit was first used subsequent to the incurring of that expenditure,",

(d) in section 274(1)(b)--

(i) in subparagraph (ii a), by inserting “subject to subparagraph (iib),” before “in relation to”, and

(ii) by inserting the following subparagraph after subparagraph (ii a):

"(iib) where subsection (8) of section 270 applies in relation to a qualifying residential unit as is referred to in subsection (4)(i) of that section--

(i) 20 years after the unit was first used, or

(ii) where capital expenditure on the refurbishment of the unit is incurred, 20 years after the unit was first used subsequent to the incurring of that expenditure,",


(e) in section 316(2B)--

(i) by deleting "or" at the end of paragraph (b) and by substituting “31 July 2008, or” for “31 July 2008,” in paragraph (c), and

(ii) by inserting the following paragraph after paragraph (c):

"(d) where subsection (8) of section 270 applies in relation to a qualifying residential unit as is referred to in subsection (4) (i) of that section, the period from 1 May 2007 to 30 April 2010,”.

(2) Subsection (1) of this section applies as respects capital expenditure incurred on or after 1 May 2007 under a contract or agreement for the construction, refurbishment or development of a qualifying residential unit (within the meaning of section 268(3A) of the Principal Act) which is entered into on or after that date.”.

This amendment inserts a new section 26 in page 55 of the Bill. The new section amends Part 9 of the Taxes Consolidation Act 1997 in order to extend the qualifying period for the scheme of capital allowances for qualifying residential units associated with registered nursing homes from 31 July 2008 to 30 April 2010, and to insert new conditions and requirements which must be met to qualify for capital allowances in respect of future expenditure.

These amendments are being made following a comprehensive review of the scheme by Indecon Consultants which has recently been presented to my Department. This review found that the tax incentive involved has been effective in increasing the level of supply of residential unit spaces in the period since the introduction of the scheme in the Finance Act 2002.

The review recommends a number of changes be made to ensure that, among other things, the scheme achieves the objective for which it was introduced. The main changes being made include the following: the selection of residents of units must be made by the nursing home involved and such units may not be connected with the lessor of the unit; in future the spouse of an aged or infirm person may also live in a qualifying unit in circumstances where the spouse would not be entitled to the necessary certification from a medical practitioner; the holding period of these buildings is being increased to 20 years; and the level at which capital expenditure may qualify is set at 50% for individuals and 75% for companies.

Additionally, in order to qualify for relief, residential units will have to be certified by the HSE as meeting the relevant conditions set out in the legislation. As part of the certification process, information on the nature of investors, whether they are individuals or companies, and the amount of capital expenditure incurred will have to be provided to the HSE. This information will be passed on to the Minister for Health and Children and to my Department in order to inform future policy decisions in a timely manner.

In addition to the initial certification requirement the section introduces an annual reporting requirement by claimants of capital allowances during the 20 year period referred to in the Bill. This report will include a requirement to confirm whether the conditions of the legislation are still being satisfied. These changes apply to capital expenditure incurred under contracts or agreements entered into on or after 1 May 2007.

I am not fully aware of what the Minister intends by his amendment. I note the part that extends the time in which a nursing home must operate as a nursing home from ten to 20 years. Recently, there were several high profile nursing home closures. I tried to extract information from the Minister regarding the clawback of tax relief from nursing homes which close before the end of the ten year period. I was disappointed to find it impossible to get this information. Can the Minister confirm that relief can be clawed back when a nursing home does not operate for ten years? Can he give a rough estimate of the amount involved?

I welcome the scheme which improves facilities to elderly people. I ask the Minister to examine the system of sheltered accommodation which operates in the United Kingdom. I visited one such scheme. A two storey building stood on an extensive site. There was a single exterior door inside which a number of self-contained units led off a corridor. These were generally apartments consisting of a bedroom, living room, bathroom and small kitchen. A warden system existed within the scheme with a bell in each apartment. Occupational therapy was provided on several days, a hairdresser was available and meals were served on two or three days per week. There were also three or four extra bedrooms so that visitors could stay overnight. All of this was funded by various groups, mainly pension funds, but a subsidy was also paid by the State so that the rent was kept within reason. I was impressed by this system. Each resident was called every morning by the warden. The fact that there was only one outside door gave residents a sense of security. Residents seemed to be happy with the scheme and an occasional Darby and Joan romance had developed.

A similar type of facility does not exist in Ireland. A gap exists between those who are in need of nursing home care and those who can live independently in their own homes. Those in the interim period of needing some form of help but not nursing home care are not being catered for. Such a system would also free up other forms of residential facilities.

Many old people's flats are located in the centre of towns. These are single storey buildings, usually built on very valuable land. The provision of the type of accommodation I have seen in the UK would free up land in town centres to provide a better type of accommodation for families in these more valuable locations.

Does the Minister's proposal envisage accommodation of the type I have described? I urge him to ask his officials to investigate the UK schemes of sheltered accommodation. His successor might act on their findings. Such schemes work extremely well in the UK.

I understood that the Indecon report advised that the life of schemes should not be extended indefinitely. The principal objective of the Minister's amendment is to extend the scheme by several years to allow more investment to qualify. We no longer know whether the Government supports the idea of a public care sector or prefers to link care with capital based tax allowances. A capital allowance is granted for building which, particularly on the fringes of towns, is not a high risk proposition. Nursing homes are generally exempt from planning restrictions which would otherwise exist, particularly near towns and in areas zoned for amenity or green belt purposes. Many nursing home developments are, in effect, staging posts on the road to gaining wider planning permission for the properties concerned. Many old houses are refurbished and extended as nursing homes. North County Dublin and the fringes of the city are littered with such institutions. They are often run for a period of time by a developer's relatives and, after that period, the further development of the land is easy to achieve.

There has been a series of scandals in nursing homes, not least in the Leas Cross nursing home. These nursing homes were capitalised at a high level, presumably partly tax driven, but the care provided was entirely unsatisfactory and did not meet the needs of the people being cared for. Leas Cross was a large private nursing home built with tax designation, tax breaks and qualifying capital allowances, and the State felt obliged to supply patients to it, particularly from the nearby institution in Portrane. It is difficult to run a health and care system over a long period on a purely for-profit basis. It is possible to make a profit out of caring and health services but the current Government seems hopelessly confused. There is an initiative to establish private hospitals on public land. Does the Government want entirely separate private and public systems with no cross-over between the two? We have a long tradition of religious and voluntary trusts providing care facilities, but the Government seems determined to make the provision of care an attractive tax avoidance option. According to many traditional private nursing home proprietors the two do not mix. There are many people in the nursing home business who have given excellent care over a long time. They now face severe competition from, in some cases, private sector equity investors. Under the new equity arrangements we see Mr. Goodman moving out of meat and into the care industries on foot of tax concessions. He and other high net worth individuals are creating private equity vehicles. As the tax experts here know, not alone do they get capital based tax breaks but they have significant capacity to leverage debt for the investment in a very tax efficient way.

I do not know exactly what the Government is thinking about in handing over significant sectors of the care market to investor led private equity driven vehicles. They may be very good business people with a very strong business sense and they see an opportunity the Government wants to promote. However, the long-term care ethos which should be the driving force of such institutions is not there. Private equity vehicles bought and sold Eircom to another private equity vehicle. That is how it will go down the years in regard to the private equity health investment vehicles we are creating. We will see more examples like the Leas Cross one. I saw the Leas Cross accounts published in The Irish Times as part of disclosure in regard to the company. Leas Cross made extraordinarily high operating profits. The State provided generous tax breaks for the capital investment and significant numbers of patients and subventions. Its gross and net profits were very high, and there was almost no tax because of the tax breaks. In that kind of ethos that this Government has set out, where care is purely profit driven, we should not be surprised if the investors exit when more profitable opportunities arise, such as other development proposals for the land on which the nursing home is built. These investors are not carers. They are primarily investors.

More and more people are being driven into these situations and there is very little public space for the long-term care provision. Not only that, we also have a situation where the Government is paying in order to clear bed blockers — it is a horrible phrase but the Minister used it. These include people with long-term care needs, people who might be comatose following accidents and so on. They are moved out into care facilities and again the State is paying. It is an amazing change of ethos in this country from a long tradition of care driven services to profit and tax incentive driven services. The Minister is on the wrong road in this. There are local authorities in Ireland, particularly Dublin City Council, who have exemplary schemes available under which individuals, when they sell their own home, can make a contribution to the cost of a unit in extremely high quality sheltered accommodation that would rival anything I have seen in other European countries. We have good models. Organisations such as FOLD and various other not-for-profit organisations have operated around this country and offer an alternative model where families can be assured that there is likely to be a long-term care ethos. Many of the traditional nursing homes that have provided excellent care require, in some cases, to upgrade their premises. However, they are not able to compete with the model the Minister is building, these equity driven investor led developments we are now seeing.

The Minister is not being quite fair in quoting the Indecon report which stated, in a very narrow way, that extra beds had been created. It said nothing about the sustainability of the extra beds created. The former Minister for Finance, Charlie McCreevy, together with the current Minister for Health and Children, had a particular take on this which was that if something is private and profit driven it has to be better than something which is public and care driven. The Minister is making a serious mistake and it is to be regretted. Contrary to what he said last year, that he would not significantly expand the very lucrative capital tax breaks, we have the same old story. He is extending the date and keeping the tax incentives flowing. If investors can no longer invest in hotels, they can invest in nursing homes. As his distinguished Fianna Fáil colleague and member of this committee, Deputy O'Keeffe, said last year, nursing homes are the new hotels. The Minister has included some limits but they do not address the problem of profit driven institutions as opposed to care driven institutions.

I can understand where this has come from. In my constituency we have virtually no public nursing home beds. The only relief for Beaumont Hospital, which operates at 99% capacity, has been the private nursing home provision. It was proposed to have nine 50 bed units, probably back in the Minister's time as Minister for Health and Children, only one of which is now in place. This was a short-term expedient and it has delivered in that there are now nursing homes on the ground, many of which are providing a good service.

We should have had a much more serious look at this from a health policy point of view rather than the very narrow Indecon assessment. The Indecon report made royal assumptions about the health benefits. It did not mention a serious health policy. As Deputy Paul McGrath said, there is an approach to caring for older people which starts with independence home care packages. Nursing homes are a last resort. We are giving funding priority to what is the last resort. We are not giving the same tax driven incentives to independence and home care packages which are the kinds of things we want to drive.

Earlier today we discussed special education. I made the point that there is a crisis and that we should try to do something in the short term. The Minister is now on the other side of the argument and saying we should go for the tax relief option. If he was being consistent with what he said this morning he would say the State should first make direct provision, as the Department of Education and Science is doing. The second preference would be to have over the line subsidies in respect of whatever it was desired to promote. Tax incentives to the property dimension would be very much down the line. The Minister is taking a very different approach to the one he took this morning in regard to special education.

This issue deserves re-examination from a health policy point of view. The funding basis of nursing homes has been completely changed this year. Up to now public nursing homes were funded virtually entirely by the State. In July 2005, the Government introduced a charge of €120 per week but the State picked up the rest of the tab of €850 or €900 per week. In private nursing homes, on the other hand, the cost of care was funded almost entirely by residents as the subvention available covered only a small portion of the charges. I estimate that the State covered 80% of the cost of care in public nursing homes, with the individual being cared for paying the remainder, whereas it covered only 20% of the cost of private nursing home care, with the individual paying the remaining 80%.

The Minister has decided to fund all forms of care equally. In other words, the State will commit the same level of funding to public as to private beds. Admittedly, a private resident will effectively pay the full cost of care for the first three years through clawback from the policy of mortgaging patients' properties. In the long term, we are moving towards a single basis of funding for public and private residential care. The short-term expedient was to establish a scheme the State did not have to bankroll and in which capacity could be delivered quickly. The position is changing and the State now proposes to bankroll the private and public sectors on an equal basis. We must step back and examine the health policy dimension of our approach to the provision of care for older people.

I share Deputy Paul McGrath's belief that we need layers of different types of provision and should not rush to adopt a tax driven provision of last resort. I am uneasy about the latter approach. While I can understand the reasons it developed and accept that it has delivered results in the short term, we need to take stock and carry out a serious health-based examination of this policy. The Indecon review was a tax-based examination of nursing home care, which examined the level of take-up and number of beds provided. These were deemed to be ipso facto positive. Indecon did not, however, weigh up the merits of the policy in a health policy context. We need to take a step back and do so.

While tax incentives still have a role to play, it will be different from the role they have played in the past ten years during which they have been the only show in town in terms of the rapid expansion of provision for older people. We are moving towards new approaches. Home care packages, for example, are emerging as a more interesting State-funded programme. The Government is creating a somewhat uneasy relationship between the proper policy range we should develop and the tax incentive approach. I am uneasy with the current approach rather than violently opposed to it. A serious study based on health policy factors rather than taxation matters is required. Let us think through the objectives we want to achieve in this area.

I share some of the concerns expressed by the two previous speakers. I am also concerned that a detailed amendment of this nature is being introduced on Committee Stage. Where stands Government policy given that this provision was not included in the original text? The issue of nursing home care and the need to provide care for a significant section of the population, either through public or private sources of finance, has been with us for a while. Why did the Minister believe it necessary to introduce the amendment on Committee Stage rather than including the provision in the original text?

I am reluctant to accept another tax relief measure as a means of bringing about health policy objectives, particularly in such an important area. In addition, the amendment appears to be open-ended as the relief has been extended. This will have significant implications for taxpayers. We must determine the policy goal of this tax relief.

A Bill before the House provides for the establishment of the Health Information and Quality Authority. Speaking on Second Stage, the Minister for Health and Children, Deputy Harney, outlined her vision for Government policy in this area. She indicated that while the elderly population, those aged 65 years and over, and those in need of nursing home care will increase dramatically over the next 25 years, it is Government policy to ensure this group declines, as a proportion of the population. She stated that while it currently accounts for 4% of the population, the figure should decline to 3.6% or thereabouts. Is it Government policy to increase the number of nursing home places on the basis of projected population trends? Has it identified the number of places that will be required in 20 or 25 years? Why is it offering an open-ended tax relief for developing nursing home places? If it has such a policy, why is not focused? What is the Government trying to achieve with this measure?

I share Deputy Bruton's more philosophical disagreement with the measure and concur that it is not the best approach to funding health policy measures. It is ill thought out and has been belatedly introduced. I question whether it will have the intended effect. On those grounds, the Minister owes Deputies several explanations before we can consider adopting it.

I understand what the Minister is seeking to achieve. I also appreciate the point made by Deputy Paul McGrath. He used an argument I have used during debates on previous Finance Bills. Having taken stock of the position in other countries, I strongly believe that nursing homes should not be the only form of accommodation available to older people. Alternatives are available and it is a matter for communities and local authorities to exploit all available opportunities. The home care package, for example, has received massive investment of more than €150 million. It is an innovative and welcome programme aimed at those who wish to remain in the family home and require support to do so. These packages have been used in my area and the staff members involved deserve great praise. However, we do not have sufficient staff to implement the packages.

Given that the amendment relates to the care of the elderly in the nursing home context, it is also worthwhile examining the area of social and voluntary housing. This sector presents opportunities which are being exploited. For example, 100% grants are available to communities to develop this type of housing. Some local authorities are not as good as others in providing dwellings for elderly persons. Part V provisions should be used to require that all developments include housing for the elderly. I have made this view known to my local authority. Very few villages do not have a small housing estate. There is no reason that 5%, 10% or 15% of the houses in such developments should not be made available to older people.

I am a chairman of a housing agency. Substantial housing grants are available from the Department of the Environment, Heritage and Local Government. Agencies that co-operate with local authorities are able to provide housing for people who want to move from their homes, perhaps because they feel unsafe or insecure. This may not be the proper forum for debating housing and nursing homes but it needs to be discussed.

I disagree with some of the comments on nursing homes, particularly regarding the involvement of investors in providing facilities. In many cases, it is not the investor's fault if something goes wrong because, at a later stage, they may not be the person running the institution or nursing home. It is the State's fault that until now we did not have a proper inspectorate. It does not matter who is in charge if we have a proper inspectorate. Up to now we had no inspectorate in the public sector and a limited one in the private sector. The kernel of the matter is whether people are cared for properly. A proper inspectorate must carry out its work diligently and efficiently, thus ensuring an appropriate level of care. Some of the buildings erected are top class. I have been in some of them but buildings are not what care is about; we must have the inspectorate in place. The steps being taken by the Department of Health and Children are welcome. Perhaps the inspectorate should have been there before now but at least it will apply to both the public and private sectors.

This provision relates to residential units associated with nursing homes and not nursing homes themselves. We undertook a review of nursing homes last year and the economic cost-benefit case for them was made that they should continue with a review after three years. Subsequently, we asked Indecon to do a report on this aspect also — that is, residential units that are associated with nursing homes. We did not have the study back from them before publication of the Finance Bill and that is why it is not in the Bill as published. We received the report in the interim period and have studied it. Indecon confirmed that it believed this should be continued on the basis I have outlined, with certain recommendations which are reflected in the speaking points I have provided. That is the explanation. The Department of Health and Children and the HSE were both consulted by Indecon in connection with the study. The clawback period for the new scheme of residential units is 20 years. Tax relief for nursing homes was subject to a ten-year clawback rule and after the Indecon report into the scheme for the 2006 Finance Act, that period was extended to 15 years for new nursing homes. It said the clawback scheme should be 20 years for residential units associated with it. It has a certification procedure whereby these homes do not qualify unless the HSE gives its prior certification that they meet the requirements and conditions that apply. I have outlined those in the initial points I made.

In contributing to this section, people have referred specifically to the nursing home issue and have suggested that we should not have done what we did. I would hate to think where residential care provision in this country would be without the initiatives introduced by the former Minister, Mr. McCreevy, in order to accelerate the provision of nursing home beds through this scheme. That scheme has since been continued. The State would not have provided the numbers in the same time frame. That is confirmed when one considers the figures for the public and private sectors. In recent times, the Minister for Health and Children has brought uniform rules to bear on the subvention issue to try to ensure there is equality of treatment and that we get some proper basis upon which provision can be made and support given by the State in future for families, whether in public or private nursing home care. The decentralised health board system did not have a uniform application of rules, which caused further confusion in terms of the delivery and implementation strategy.

There have been several major initiatives, including the one referred to in previous discussions by Deputies. As Deputy Finneran said, over the past ten or 15 years we have seen a much greater diversity of accommodation provided for elderly people, whether it be in sheltered homes, voluntary housing schemes or private nursing home care. Without the latter sector we would not have been able to meet existing demand. The inspectorate has been brought into play, which will apply to both public and private sector accommodation.

There is also the question of ensuring that we examine this provision, which concerns people who are medically certified as requiring this type of accommodation but who may not yet be totally dependent on a nursing home bed and are in accommodation attached to a nursing home centre. They would have allied medical and other supports available to them, as required. Certification by the HSE confirms that only genuine cases would occupy such new spaces.

Under the provisions, an investor would clawback in the event of an onward sale within the time frame beyond which the relief was given. That is all provided for. The issue here is whether there is a benefit to be derived from continuing a scheme similar to the extension we have seen for nursing homes for residential accommodation connected or associated with a nursing home. The study by Indecon indicates that we should continue it. The review in three years' time can coincide with the review that will take place in the private nursing home care sector. One should not stop everything to see if it all fits in because it does fit in. According to our population demographics the demand for more places will continue.

The HSE's continuing care section has greatly increased other provisions to ensure that the elderly are not simply moved from the community straight into full-time residential care. There has been an increase in home help and public nurses who provide assistance in the community. There is a spectrum of activity and it is not simply a question of providing public or private nursing home care or people living at home with the support of their families and health professionals.

There are other issues, including voluntary accommodation and sheltered housing connected to nursing homes, which have been mentioned. We did a study on this which is now to hand. I have inserted a provision in the Bill which is in line with the recommendations I received as a result of that study. It is the right thing to do as it will provide a diversity of care options for people in this situation. It is the right way to go. The suggestion that there is no public capital programme for nursing units is incorrect.

The number of public beds has been reduced.

I can confirm that Birr has a 90-bed community nursing unit, which is as good as any one will find in the country.

The numbers have been reduced.

In addition to nursing home care, that unit also provides other community care facilities, including physiotherapy and other care for the elderly in a community centre. A great deal of investment is going into the community sector. This is a specific provision concerning an exercise we asked Indecon to do, over and above the private nursing home care provision, in order to examine residential units which formed part of past tax reliefs. They confirmed that we should proceed with the sort of recommendations that are outlined in the section.

Deputy Bruton has indicated that he wishes to contribute. I ask Deputy Finneran to assume the Chair in my absence.

Deputy Finneran took the Chair.

Can the Minister indicate the level of investment in nursing homes and residential units in terms of the number of units or beds provided? I did not see the Indecon report. Has it been published? I may have missed it.

No, it has just come in draft form for us to make a decision on it. I will put it up as soon as we have finalised it.

Perhaps the Minister could circulate it because it would be relevant. Has the Department considered the implications of the change in funding rules, because effectively the State is funding private and public nursing homes on the same basis? This radical change will take effect from next year.

It is a radical change and we looked at it in the context of the Department of Health and Children drawing up the proposal and estimating the requirement.

Does it change the justification for the tax relief for nursing homes?

It does not change it in any material respect. The purpose of the relief is to ensure that public and private nursing home provision is available to meet the need and that access to nursing home care is based on need. In the past, the subvention scheme was administered by the area health boards and subvention rules were different in each area. As there was no uniform application of the subvention rules, anomalies were created. We had to come up with a common system to ensure that beds are available for those who require them. This will involve continued capital investment in community nursing units, continued support, subject to review, of the nursing home scheme, which — from memory — has delivered some 7,000 beds in a very short period. If we had taken the public procurement route, we would not have been able to have 7,000 public beds commissioned in that timeframe. I do not know how bad the crisis would have been if we had not tried to meet that need.

We know from the demographics that care of the aged will be a continuing issue and we must find a continuum of care that provides not only residential nursing home care but other sources of care. Provision of care and support is being developed by voluntary organisations, the HSE community care and the private sector in order to support families who wish to keep the aged at home. This is a matrix of care that will change as levels of dependency and needs change. The fact that people are living longer means a continuing commitment to investment is required over time. Recent figures show we are spending 10.5% of GNP on this broad area of health care for the elderly. By 2050, this will rise to 20% of GNP. That gives an indication in present day terms of what will be required to ensure we have the funds available to meet the needs of an aging population. From the demographics one can indicate in macro terms where the increasing social costs will arise.

The demographics give a different picture depending on the starting point. If one had looked at the demographics from the early 1980s one would have formed a certain picture. Starting from the 1990s one would have got a more positive picture. A different picture emerges if one starts at the year 2000. It is possible to predict needs for 20 or 25 years ahead, but beyond that it is guesswork.

What is beyond argument is that the demographics are changing, society will be getting older, dependency ratios will change.

Improving for the next 20 years.

The numbers of people who will require care will increase. The challenge to society is to provide appropriate care at the appropriate time and to ensure that people who become ill do not have to go straight into a long-term residential setting when an intermediate care setting might be more helpful in getting them back into the community. We are building that spectrum of care through a range of initiatives from the Department of the Environment, Heritage and Local Government, the Department of Health and Children and through the tax system in terms of beds provided by private nursing homes and associated residential units. Real beds have been provided in a short time by the private sector. I do not know where we would be if the then Minister, Charlie McCreevy, had not taken that initiative, in the teeth of opposition from people who are now bemoaning the shortage of beds.

We have done an analysis of this specific provision, which is in addition to the wider extension of private nursing home tax relief schemes. The intermediate type of provision should be proceeded with. I put in a certification procedure and a review procedure after three years. There is no doubt that we should do it.

One size does not fit all in this situation. People want to have a choice. Was the review of a purely financial nature? Planning applications for new nursing home indicate that some of them are in areas outside towns on land not zoned for residential development. In some cases the locations are very isolated. While it may be that the units are of a good standard, we might achieve much more by a holistic approach which would keep people connected to the community. What that a consideration in the review? We have signed up to a UN charter which refers to the quality of life for people living in nursing homes.

I do not doubt that there is a role for private nursing homes. It is nearly impossible to get a bed, public or private, in my area. Nursing homes are becoming step-down facilities from hospitals. There is now a much more dependent group of people in nursing homes. Small housing units attached to nursing homes will be more attractive to the able-bodied. I am curious as to whether the social aspects were considered, such as quality of life, proximity to a town and associated services, which would enable people to retain their independence. Financial incentives might be geared to a better quality of accommodation.

Must these residential units be associated with a nursing home or can they be independent?

They must be associated with a nursing home.

I think independent units can have a role for the in-between stage where somebody is relatively independent but wants to be in semi-sheltered accommodation, where he or she might live for years. Limiting this to nursing homes only implies one must reside on a campus and so on. There may well be other providers who would like to provide alternative accommodation. Deputy Murphy made the point that nursing homes are often relatively isolated from the rest of the community. Would it not be better for people wishing to remain fairly independent to be in accommodation that allows them to go out to get their own shopping and so on rather than being in isolated nursing homes? Can this provision be extended to include accommodation outside the nursing home context?

The provision relates to a particular need that has been identified and the construction of a building on a nursing home site or a site adjacent to it. The conditions to be met in that regard include the following: certification by a medical practitioner that the occupant requires such accommodation by reason of infirmity or old age; that the development includes a day-care centre; that it be operated by a registered nursing home with an on-site caretaker; and that there must be back-up medical care, including nursing care. These conditions are not for the purpose of facilitating tax-led schemes that have no reference to health need, health need criteria must be met before certification allowing benefits to be derived from the scheme can be obtained.

I am not opposed to considering other ideas that may be working elsewhere in regard to assisting independent people to move, in their old age, towards temporary or permanent nursing care in a residential or respite capacity. However, it could be argued that this would be far more tax-led or open to being tax-led than what is being proposed.

This provision applies to registered nursing homes and meets all the requirements set out in that regard. We are seeking to assist people not alone by helping them to obtain a nursing home bed, but through building units attached to a nursing home with all the supports required. We must ensure what is provided meets genuine need and is certified by a medical practitioner and includes nursing home supports, thereby confirming that health criteria are determining certification in the first instance and that the occupants require such care.

If we are talking about trying to diversify the provision of care in terms of choice and meeting particular stages of dependency until ultimately full-time nursing home care is required, that is precisely what I am doing. I have done so on the basis of a study which suggests it is worthwhile doing, that it makes sense and that there will be a return from it. The private sector has provided us with approximately 7,500 beds in respect of residential nursing care provision. Had we not requested that it do so, we would not have as many beds in the public sector today and many people would be raising the issue with Members in their clinics. Let us cut out the ideology and get down to practicality. We will need many more nursing home beds in the future. A study in that regard has confirmed their efficacy and efficiency. We are putting measures in place in terms of management, certification and quality based on the health reforms being introduced. We are suggesting this is another gradient of accommodation which may be suitable for people requiring care and provision. Why not agree this and get on with it? Is this not what we want?

I am being asked on the one hand why I am denigrating the provision of private nursing home care and on the other I am being asked to introduce something which would not require any nursing home provision. It has been suggested a similar system is working well in England. I am not disputing that that may be the case. However, I am hearing five different arguments from five different angles. No one is prepared to accept that what I am trying to do is right. I have done the cost benefit analysis yet people continue to have a problem with this approach.

The Minister is misjudging what we are saying.

I do not think I am.

I am not suggesting that what the Minister is doing is wrong. I recognise that additional nursing homes have come on stream. However, I also recognise that some of the private nursing homes in provincial areas are struggling and that there are many empty beds in such homes. I know the situation is different in cities. However, many nursing homes in provincial areas are finding it very hard to survive.

I am suggesting that the Minister is confining this additional scope for development to people in the last third of the graph. An opportunity exists to provide for people wishing to downsize and move to sheltered accommodation where they can obtain companionship that need not necessarily be tied to nursing homes. The Minister's provision is good.

It came about as a result of a review of an existing provision which attracted tax relief. This is what the review of the tax relief schemes was about. If the Department of Health and Children and the Department of the Environment, Heritage and Local Government raise with me as Minister for Finance the view that X,Y or Z needs to be considered in the context of tax relief schemes, I will consider such a proposal. However, I can only respond to what I am being asked to do.

The Deputy asked about the health input into this approach. It is the responsibility of the Department of Health and Children to seek my assistance in obtaining the involvement of the private sector in respect of the provision of respite and residential care where a need has been identified. We have done this already. While it did not work in every instance, it worked in the majority of instances. The scheme has worked well and we should continue it and review it after another three years. If the Department of Health and Children wishes me to consider any other spectrum, I will do that too. I will do my job but I cannot act as clairvoyant. I am open to all of these things.

I do not believe this provision should be tied to people with health problems. That is the point I am making. We will move on.

Two places in my constituency come to mind. One is located in the middle of Naas and this allows people to go out to the shops and so on and have a good quality of life as a consequence. Another nice nursing home recently opened in Celbridge. It is not located close to bus stops or any other facilities. Many of the people living in small houses adjacent to that nursing home expressed to me on the day the facility was opened their desire to be able to go to the shops and so on. There is a vast difference between the two facilities in terms of quality of life.

Can we provide financial inducements to developers who take into account the proximity of their development to services? This would allow people to remain semi-independent while residing in sheltered accommodation. People often go into nursing homes because they are afraid to live alone and they feel isolated and want to avail of support services. The Bill presents us with an opportunity to set out the criteria for independent units. Such units should not be constructed five miles from a bus stop because that does not provide people with the quality of life they deserve.

That is a reflection on planning and local authorities or those who make land available. It also reflects the fact that land may only be available in certain places. The question which follows is whether we provide places or not.

We would all like to have optimal scenarios where all places are provided in the middle of towns where people could come and go. If one can achieve that, it is fine. I hope there are enough planners with foresight and responsible local authorities to ensure it happens when towns and village extensions are being planned. However, my predecessor was faced with circumstances in which if something was not done quickly, we would not have been able to accommodate people anywhere in any home no matter where it was sited. We had to deal with those circumstances.

There are occasions when the private sector, due to its expertise and skills, can get the job done. The job was done and it did not obliterate public nursing home care, which is still in place. I recall when I was Minister for Health and Children that people spoke of public nursing home care in glowing terms, but we did not even have a maintenance, never mind a capital programme. I visited many homes in my time as Minister for Health and Children and encountered old buildings. The Deputies know what I am talking about and could name the homes I mean. A great deal of refurbishment and new building has gone on in the public sector since, including at Thurles, Birr and Mullingar.

I remember visiting a nursing home at the county hospital in Roscommon on one occasion which, while it provided a good service, was not in optimal condition. We did what we did with whatever we had. It is now the case that there is a capital programme for elderly provision in both the public and private sectors. We are moving to a position where we will cover the various types of care setting.

I have no objection in principle to any local authority, Minister or other person approaching me to discuss a localised solution. I am a great believer in such solutions and initiatives. I was in Kilrush and New Ross when public authorities intended to close district hospitals. Voluntary effort in conjunction with general practitioner access units have provided care for the elderly far more economically than the public authorities before or since and in a far more personal setting and care environment. It is a great credit to the communities in question which adapted systems which were less than optimal. The care setting, commitment of people to provision and community support are much more important than the tax-led scheme or new building. While I am under no illusions about the need for improvement in a number of areas, we should acknowledge the constructive role the private sector has played. Without that input, the people of Ireland would be in even greater difficulty given the inability of the public sector to deliver in time.

We are now discussing the putting in place of monitoring and quality structures to ensure the high standard of care setting we expect will be maintained. On foot of court intervention, we are also getting our act together on the way we support care and ensure there is no discrimination against people on the basis of where they are from and what beds are available. Frankly, provision was formerly very ad hoc and has been greatly improved.

Amendment agreed to.

I move amendment No. 53:

In page 55, before section 26, to insert the following new section:

26.—Where a taxpayer claims relief based on the construction of any premises, he or she shall furnish to the Revenue Commissioners sufficient information to demonstrate that he or she or any relevant contractor is complying with any relevant requirement imposed by the Health and Safety Authority or by law in respect of the construction.".

Amendment No. 53 is similar to an amendment put forward on Committee Stage of last year's Finance Bill when a lengthy and wide-ranging discussing on the proposal took place. While I restate that I agree that safety in the workplace, especially on construction sites, is of the utmost importance, my position on the proposal remains the same. I do not agree that the Revenue Commissioners are the competent authority for the receipt or evaluation of the information in question. Revenue's role is to administer the tax system and collect the appropriate tax due under the law. The Health and Safety Authority is the specific body charged with the promotion and enforcement of workplace health and safety. The authority monitors compliance with occupational health and safety legislation and takes enforcement action, including prosecution where necessary.

We must take care in defining the statutory roles of the various authorities involved. We should not dismiss the work of the Health and Safety Authority. The complexity and nuances of the system of compliance with HSA rules are such that a link with claims to the Revenue Commissioners would not be practicable. The tax code is not a universal mechanism for implementing every other area of the law. One applies statutory functions to those who have responsibility in the relevant area and ensures they are provided with the resources they need to be effective, efficient and to apply the law proportionately and rationally. Including in the Finance Bill a role for Revenue in the health and safety area would not be an appropriate approach. Revenue staff do not have competence in such matters.

I am further prevented from accepting the amendment by the fact that many claimants of tax relief will have had no responsibility for the construction of the building on which it is claimed. In such cases, the buildings will have been constructed before the interest in it was acquired and the tax relief claimed. There is not necessarily a direct link between claimants of tax relief and those responsible for the construction of a building which is the subject of it. Both statutory bodies in question should be allowed to get on with their respective jobs, for which reason it is not appropriate to accept the amendment.

I am standing in for Deputy Burton for a short time. The amendment has been submitted two years in a row on foot of the very poor standards observed in certain sections of the construction industry. There is a lack of inspectors in the area of health and safety. While I understand perfectly the Minister's points, which one could accept in an ideal world, the amendment is required to ensure that people comply with certain standards.

While the Minister is correct to point out that such standards are a matter of health and safety, Deputy Burton believes that the penalties and sanctions should be financial and would best be applied by Revenue. Given the lack of inspection systems, it is often the case that the only people with whom the construction industry has contact are the Revenue Commissioners. Not only does Revenue have direct contact with the industry, it has the ability to impose penalties. If we lived in an ideal world and had an inspectorate which was sufficient to cover the whole industry, the amendment would not be before the committee. While the inspectors who are in place are very active, their numbers are insufficient and the amendment should be accepted.

I have set out my position. I respect that Deputy Lynch has reiterated the argument Deputy Burton made last year. I have set out the reasons we should allow each authority to exercise its remit. The Revenue is not in the business of enforcing employment and health and safety law, it is in the business of administering our tax system. If problems arise in those areas, there are statutory authorities in place to address them. The system avoids confusion, produces clarity of purpose and ensures that each organisation has a clear mission and knows what is expected of it. Interagency co-operation brings matters to the attention of respective organisations all the time and initiatives and policy changes often result.

I have outlined in my response the reasons it would not be appropriate to accept the amendment. I understand the well-intentioned thinking behind it, but separate agencies with separate remits, which is the means by which matters are dealt with currently, provide a far better prospect of dealing with matters with the required clarity. It would not be useful to duplicate responsibilities across agencies, especially given the Revenue's lack of competency in the area of health and safety.

Amendment put and declared lost.
Amendment No. 54 not moved.

I move amendment No. 55:

In page 55, before section 26, to insert the following new section:

26.—Pending a report from the Minister for Finance to both Houses of the Oireachtas on the matter, a caravan park approved by Fáilte Ireland and included in its register of approved caravan parks could be regarded as a holiday camp for capital allowance purposes.".

Section 34 of the Finance Act 2005 introduced a number of changes to the capital allowance regime for hotels, guest houses, holiday hostels and holiday camps. First, registered guest houses and registered holiday hostels were specifically brought into the capital allowances regime for the first time. Second, the entitlement to the capital allowances for hotels and holiday camps was made contingent on such buildings being registered in the appropriate Bord Fáilte register. Prior to these changes, in the case of these hotel type capital allowances a building had only to be in use "for the purposes of the trade of hotel keeping" in order to qualify. The meaning of this term was open to various interpretations and provided little certainty, either for the Revenue Commissioners or for tax practitioners. In addition, a practice existed whereby Revenue allowed claims for capital allowances in respect of buildings and structures erected in a registered caravan park.

In the Finance Act 2005, it was decided to confine the list of tourism related premises that would qualify for hotel type capital allowances in future years to hotels, guest houses, holiday hostels and holiday camps, but only where they were registered in the appropriate Bord Fáilte register. A number of other tourist accommodation facilities which are registered with Fáilte Ireland, such as registered apartments, youth hostels and caravan parks, were not included. In addition, at that time the scheme of capital allowances for registered holiday cottages was being phased out and is now due to cease on 31 July 2008.

Following the Finance Act 2005 changes, the Revenue administrative practice of granting capital allowances in respect of buildings and structures erected in registered caravan parks was reviewed, in consultation with my Department and the Department of Arts, Sport and Tourism. As a result of these deliberations and on the basis that hotel type capital allowances have been put on a statutory footing, it was decided that retention of a non-statutory scheme for caravan parks was not appropriate. This non-statutory practice was withdrawn by way of publication in the Revenue Commissioners' tax briefing No. 60, dated August 2005 and with effect from 31 December 2005. Accordingly, capital allowances were available in respect of capital expenditure incurred up to 31 December 2005.

Some of the expenditure that would typically be incurred by caravan park operators may be eligible for the plant and machinery capital allowances but this would not generally include any buildings or structures. Therefore, for the reasons outlined I am unable to accept the amendment but I bear the position of caravan park operators in mind for future consideration.

The amendment was tabled because of the very poor quality of Irish caravan parks, although they are improving dramatically. Compared with the European mainland we have a huge amount of work to do to improve caravan parks and to promote this type of holiday, which is of great economic importance to the tourism industry.

Why was this provision withdrawn when there is such an obvious need for development in this area? Was it being abused? The Minister referred to consultation between himself and the Minister for Arts, Sport and Tourism on the matter. Thousands of people take holidays in Irish caravan parks every year, despite the weather.

The allowance was available because caravan parks were regarded as hotel type accommodation, although they are not hotel type accommodation and their buildings and structures are temporary. For some remarkable reason, Revenue was generous in this regard in the past and allowed hotel type allowances to apply to caravan parks. The poor standard of caravan parks is not a reason to retain the allowances, as they obviously have a dead weight effect. I accept that some caravan parks are well run.

Allowances for hotel type accommodation should apply solely to that type of accommodation. Caravan park operators were given 12 months notice of the change of regime and had until 31 December 2005 to complete applications. People considering investing in caravan parks have been made aware that hotel type tax relief will not be available to them because they are not providing hotel type accommodation. The purpose of the measure is to ensure that the provisions of the legislation are applied more rationally and rigidly as the wider interpretation has run its course.

It staggers me to think that tax relief is given to poor quality hotels in some areas. Tax relief can be obtained for building a nursing home although good quality care is not always provided.

Amendment put and declared lost.

Amendment No. 56 has already been discussed with amendment No. 51.

I move amendment No. 56:

In page 55, before section 26, to insert the following new section;

26.—The Finance Act 2006 is amended in section 20(1) by the substitution of "€100" for "€250".".

This amendment proposes the reduction of the amount of a charitable contribution which would qualify for a tax allowance from €250 to €100. This measure has been requested by many charities. The amount of €250 is felt to be too high and it is felt that many people would make a contribution to charity of €100. The measure would ensure an increase in funding to charities.

I have already spoken on this matter. The proposal was discussed with amendment No. 51.

Does the Minister reject the proposal?

Unfortunately, even I cannot accommodate Deputy McGrath at this hour of the evening.

Amendment put and declared lost.

Amendments Nos. 57 and 58 are related and may be discussed together.

I move amendment No. 57:

In page 55, subsection (1), line 30, to delete "Part 10 of the Principal Act" and substitute "The Principal Act".

These amendments relate to section 26 and are to correct a technical drafting error. Currently section 26(1) indicates that Part 10 of the Taxes Consolidation Act 1997 has been amended while section 26(1)(a) inserts a new Chapter 12. Subsections (1)(b) and (1)(c) make amendments outside of that Part. Accordingly these amendments move the location of the reference to Part 10 from the beginning of section 26(1) to section 26(1)(a). This is a technical issue.

Amendment agreed to.

I move amendment No. 58:

In page 55, subsection (1)(a), line 31, to delete “by inserting” and substitute “in Part 10, by inserting”.

Amendment agreed to.

I move amendment No. 59:

In page 58, line 10, to delete "guidelines" and substitute the following:

"guidelines which shall be approved by a resolution of Dáil Éireann, and".

My colleague, Deputy Bruton, suggested that the guidelines associated with this scheme should be laid before the Houses for discussion and agreed by the Houses before they go into the public domain and come fully on stream. It is a reasonable suggestion. I am sure many people living along the Shannon Basin would want to have the guidelines discussed so that there can be an input from Members who live along the Shannon, Deputy Finneran and I being two. We may be able to put forward good suggestions for making this scheme work better. The scheme is welcome, but we would like to see a greater input into it.

Deputy Cregan took the Chair.

I welcome this scheme. I compliment the Minister on his forward thinking in regard to the further development of tourism infrastructure on the lower Shannon. It will prove to be a major boost to tourism and to the development of products in many areas. It has particular positive implications for my constituency of Roscommon. It involves a large section of the county, including the area from Roscommon town south. It is ideal territory for the development of tourism facilities in so far as it covers an area that lies between the River Shannon and the River Suck. There is enormous potential there. It has not been developed to date. In the whole region there are only two areas where one can slip a boat onto the river. The absence of tourism infrastructure in the region is notable. The local authority, our county manager and the tourism interests in the county have warmly welcomed this decision by the Minister. It will create much new development and many existing structures will be refurbished and extended.

I have been requested by tourism interests from west of Lough Ree, north of the existing line, to ask the Minister whether there are any proposals to extend the line further north. I refer in particular to the areas of Ballyleague, Lanesboro, Tarmonbarry and Rooskey. I am aware that the area was the subject of the rural renewal scheme.

I warmly congratulate the Minister. I believe the county development plan being discussed in my county at the moment will attempt to reflect the opportunity for tourism development.

Deputy Finneran took the Chair.

I will deal with the amendment which specifically proposes that the guidelines shall be approved by resolution of Dáil Éireann. Let me make it clear that people are not being given a free hand. Section 26(3)(a) to section 26(3)(i) of the principal legislation set out the guidelines which may include criteria in relation to the following: the contribution which the project makes to tourism development; coherence with national tourism strategy; environmental sensitivity, having particular regard to national heritage areas; the specific standards of design and construction in relation to buildings and structures; and relevant planning matters, including the need for consistency with the requirements of a development plan or a local area plan.

There is a clear set of parameters set out in the principal legislation, quite apart from the more detailed guidelines that will follow. This is precisely the point we were recommended to take into account in the context of looking at the role of tax relief schemes in particular targeted areas as suggested here. They should be time limited. Certain certification criteria should be required. It should not be a question of people constructing whatever they wish and then claiming an allowance. There will have to be prior approval by a certification body before proceeding to construction. This is about quality assurance and ensuring that we build a viable number of tourism product type arrangements along the Shannon which will not be in conflict with one another or threaten each other's viability.

That basic construct of what a new tax relief scheme should look like emerged from our general review. The recommendations of the general review are very much part of this arrangement and are what I would insist upon, namely, that the tax relief should be time limited, focused upon a particular requirement and with the necessary provisions in place to avoid willy-nilly development that is not channelled in a certain direction to ensure that we achieve the optimum benefit in terms of badly-needed tourism infrastructure investment. Everybody in the midlands on all sides recognises that there is an undertapped potential for water-based tourism both adjacent to the river and in the immediate vicinity within a corridor that is well within the consultants' recommendations.

The purpose of the scheme is to encourage the development of tourism infrastructure in the mid-Shannon area. The guidelines in question will be drawn up by the Minister for Arts, Sport and Tourism in consultation with the Minister for Finance to provide assistance to the independent mid-Shannon tourism infrastructure board in its work of approving in advance those projects which will be allowed to avail of capital allowances under the scheme, and certifying that the building work which has been carried out is in accordance with the criteria of the relevant guidelines, having regard to any conditions in the advanced proposal.

Deputy Bruton's amendment suggests that the guidelines for the scheme will only take effect if approved by way of resolution of Dáil Éireann. This is a somewhat unusual proposal in that I am not aware of any precedent for guidelines which are administrative in nature to be approved by the Dáil in such a way. The legislation clearly sets out in subsections (3)(a) to (3)(f) of the new section 372AW the criteria which are to be specified in the guidelines and which must be taken into account by the board in deciding whether a building or structure will qualify for certification under the scheme.

The requirement for the board to give approval in principle to projects in advance of any expenditure being incurred is an additional safeguard built into this scheme which did not apply in regard to other schemes. The legislation is fairly restrictive in regard to the types of facilities that can qualify. Licensed premises are excluded, as are buildings which facilitate gaming or gambling. Tourism facilities that already qualify for capital allowances, such as hotels, guesthouses and holiday hostels, are also excluded. While other accommodation facilities that are provided as part of a qualifying tourism project may qualify, expenditure on such accommodation facilities cannot be more than 50% of the overall expenditure on the project or cannot be more than the expenditure on the non-accommodation facilities of the project.

All of these safeguards are already contained in the legislation which is before the committee. In view of this I do not consider it appropriate that the guidelines, which are administrative in nature, should need to be presented before the Dáil for approval. The guidelines will be prepared over the coming months and, when approved by the respective Ministers, they will be made available on the websites of both Departments. A certification body will be established comprising individuals with experience in tourism, for instance, officials from Bord Fáilte or Shannon Development, the body which originally developed the concept and has supported efforts to develop a project of this nature over many years. I recall meeting officials from Shannon Development before being appointed Minister for Finance to discuss potential measures we could take in this area. It has competence in tourism and industrial development in south-west County Offaly and the mid-west region.

The Department has considered the view of economic consultants that the proposal has limited potential. My view is that the scheme is a question of nothing ventured, nothing gained and is not a panacea for all our problems. Tourism development has been primarily coastal in nature. The largest river in Ireland flows through the area covered by the scheme and the wider region of south Roscommon, west Offaly, north Tipperary and east Galway is known as lake country. Apart from the natural beauty of its lakes, there are few reasons to stop in the area. While Clonmacnoise attracts some heritage tourism, this is mainly based on tourists entering and leaving the region by bus without delivering much benefit to Shannonbridge or other local towns that would benefit from increased activity.

The proposal is transparent, focused and will be subject to quality assurance. I accept Deputy Finneran's point and having examined the matter, lessons have been learned from the upper Shannon scheme. Although the scheme delivered many economic benefits to the counties in which it operated, much of the investment was accommodation based. The focus on accommodation was probably too strong in some places and the scheme did not bring the economic benefits one would expect from the tax expenditures incurred. The proposed scheme is not accommodation based, although it does not exclude tax relief for the provision of accommodation. If, for example, a proposal were made to develop a resort, including an accommodation component, the Department would be prepared to look favourably on the project provided the total benefit did not exceed 50% of the total expenditure that would be incurred. I do not want the scheme to be used solely for the purposes of standalone holiday home or hotel-type structures as these are being provided for in the private sector and do not need tax-based support.

I will consider the point raised by Deputy Finneran before Report Stage. Rooskey has taken a big hit with the closure of the town's Glanbia plant following a fire at the site. The local community is making efforts to give a lift to the town through its main amenity, access to the River Shannon. Several similar towns were covered by the north Shannon scheme but areas to the south of it, for instance Tarmonbarry and Ballyleague, did not benefit to the same extent as Carrick-on-Shannon or Longford.

Perhaps they were lucky.

That is true to some extent. Carrick-on-Shannon is a magnificent town when compared with 20 years ago and has been turned inside out. As I indicated, lessons are being learned from the previous scheme and have been taken into account in developing the new scheme.

I will consider extending the scheme to areas where help would not go astray and may make amendments on Report Stage. However, I do not intend opening up the scheme to the upper Shannon region. I will consider extending it to include a few townlands slightly north of the cut-off point at Lough Ree. This point was chosen because it is where the previous scheme ended. Given that the scheme's purpose is to encourage tourism infrastructure investment, as opposed to replicating the accommodation experience prevalent in the other scheme, I am prepared, with the agreement of Members, to try to accommodate genuine need by sending a positive signal on Report Stage to people in Rooskey, Tarmonbarry, Lanesboro and other towns. It would not do harm to do so.

The Minister should consider including parts of County Longford on the other side of the river.

I will seek cross-party support for any decisions I may make in this regard as I am not prepared to be lambasted for doing so. While I do not wish to set a precedent, I realise that a couple of small areas near Lough Ree could benefit from the scheme. I am also aware that certain townlands covered by the current proposal will not benefit from the scheme.

A large number of them will not benefit.

Towns and villages in the vicinity of the River Shannon could benefit if they offered tourists using the River Shannon a tourism product. For example, they could be encouraged to visit Clonmacnoise, use the bog railway outside Shannonbridge or travel to Shannon Harbour where the canals meet the river. Shannon Harbour has not been developed in recent years, although it was a hive of development 100 years ago.

While it is possible to envisage investment at a conceptual level, it must also make commercial sense. The provision sets out a series of robust parameters for the scheme, the purpose of which is to attract tourism infrastructure rather than to encourage investment in accommodation. Apart from exceptional cases, such as the resort-type proposal I outlined, accommodation-type investment does not require support through tax expenditure. I do not have any knowledge of what, if any, proposals will emerge. By providing a year within which projects will be considered by the certification body and two years for construction thereafter, we will quickly find out whether the scheme is of benefit. Without some form of incentivisation we will not achieve outcomes that will deliver community benefits in addition to the personal benefit the scheme offers those who invest in projects. If everyone is agreeable to the approach I have outlined, I will examine whether I can make changes on Report Stage.

Is the amendment being pressed?

The amendment is not related to the discussion we have had for the past ten minutes. It provides simply that the guidelines to be issued by the Minister for Arts, Sport and Tourism must be passed by resolution of the Dáil, a simple procedure which takes place daily in the Chamber. The Fine Gael Party is anxious to have the amendment accepted in the interests of openness and transparency.

Amendment put and declared lost.
Amendment No. 60 not moved.
Section 26, as amended, agreed to.
Section 27 agreed to.

Amendments Nos. 61 to 63, inclusive, are related and may be discussed together.

I move amendment No. 61:

In page 76, subsection (1)(b)(i)(II), line 14, after “charter” to insert the following:

"and funded wholly or mainly out of moneys provided by the Oireachtas".

Amendments Nos. 61 to 63, inclusive, relate to section 28 which amends the law on relevant contracts tax, generally referred to as RCT. The amendments remedy certain difficulties with the measures contained in section 28 that have come to the attention of officials since the Bill was published.

Amendment No. 61 inserts some additional wording into section 28(1)(b)(i)(II), which extends the list of principal contractors who are obliged to operate RCT to boards or bodies set up under royal charter to clarify that it affects only such boards or bodies that receive most of their funding from the State. As originally drafted, the measure would inadvertently have had much wider application and would have brought within the scope of the provision boards or bodies operating in the private sector as set up under royal charter but which are privately funded. Examples would include the Bank of Ireland and the Institute of Chartered Accountants in Ireland. This was never the intention.

Amendment No. 62 inserts a new paragraph (ii) into section 28(1)(b). Existing RCT law provides that persons engaged in the construction of buildings are principal contractors for RCT purposes. However, specific provision also exists to ensure that a person does not have to operate RCT by reason only of the fact that the person has arranged to have buildings constructed for his or her own, or their employees’ use or occupation. This exclusion ensures that persons not involved in the building trade do not have to operate RCT. Section 28 has made explicit the requirement for land developers to operate RCT. Amendment No. 62 is consequential on this. Its purpose is to make corresponding provision, like that for building construction, to exclude from the requirement to operate RCT any person who would otherwise come within its scope by reason only of developing land for his or her own, or their employees’ use or occupation. The amendment will ensure that persons not involved in the business of land development are not caught by RCT by virtue only of developing facilities for themselves or their employees.

Amendment No. 63 simply adjusts the section 28 commencement provision to reflect the previous amendment. I commend these amendments to the select committee.

Amendment agreed to.

I move amendment No. 62:

In page 76, subsection (1)(b), between lines 15 and 16, to insert the following:

"(ii) in subsection (2), by inserting "or develops land" after "buildings",".

Amendment agreed to.

I move amendment No. 63:

"In page 76, subsection (2)(b), line 35, to delete “and (b)(i)” and substitute “, (b)(i) and (b)(ii)”.

Amendment agreed to.
Amendment No. 64 not moved.
Question proposed: "That section 28, as amended, stand part of the Bill."

That point is topical at the moment because it refers to the tax liability of subcontractors. According to recent media coverage, some of our friends joining us from other parts of Europe are operating as subcontractors. It is timely to refer to the issue of subcontracting. Many people are now coming here to join us from other parts of Europe. There has been media speculation recently that many of those subcontractors are not operating or registering properly and, hence, they are perhaps depriving taxpayers of money that is legitimately due to the Revenue Commissioners. In that context, the Minister might wish to comment.

We can all look back to a time in Britain, 25 or 30 years ago, when many Irish worked there as subcontractors. Many students were able to get holiday employment through subcontractors in Britain, working away to their heart's content. They came home with a few bob ready for the new term. Nonetheless, is the Minister aware of the difficulties that have been highlighted? Can any measures be taken to ensure that, first, the Revenue Commissioners will collect what is due to them and, second, but probably more importantly, that legitimate Irish subcontractors who are competing for the same work will do so on the famous level playing pitch? People from Poland, Lithuania or elsewhere who set themselves up as subcontractors here do not have to meet the obligations faced by, for example, electrical or plumbing contractors who work within the Revenue Commissioners' guidelines. In that way, they can undercut Irish contractors, taking away their business and leaving them with redundant workers. Will the Minister assure us that the system is sufficiently robust to withstand such practices so that everybody will operate on a level playing pitch? It is an important issue.

Even though the amendment was considered to be out of order under this section, I am an accommodating man. The question raised by the Deputy concerns seeking a comprehensive review of the subcontracting system with a view to determining whether it is being abused by employers to evade tax. There is also a suggestion that any such review should include proposals to amend the definition of "worker" for PAYE, PRSI and employment law purposes. It seems there is a concern about subcontracting in the construction sector, given that it is the sector where subcontracting is probably most prevalent. The whole issue of the correct classification of individual workers, as between employee or self-employed status, is one of concern. It would be naive to think that there is no abuse in this area. The issue is not new and has been the subject of increasing focus in recent years, not only from agencies with an interest in the correct classification of workers — such as the Revenue Commissioners, the Department of Social and Family Affairs, and the Department of Enterprise, Trade and Employment — but also from the social partners.

In that regard, the issue features prominently in Towards 2016, the social partnership agreement, as regards the area of employment rights and compliance generally. The agreement contains a major package of measures, much of which is reflected in section 28. The social partners are agreed on the need for greater co-ordination between organisations concerned with employment rights compliance with a view to realising the considerable potential for synergy in this area. To that end, the existing joint investigation units, which currently operate on a regional basis between the Revenue Commissioners and the Department of Social and Family Affairs, are to be expanded to include authorised officers of the Department of Enterprise, Trade and Employment and the new national employment rights authority. The role of the joint investigation units will be to address areas where evidence suggests there is non-compliance. In particular, the employment status of workers is to be a major focus of these joint investigation units.

In 2004, the employment status group was set up under the Programme for Prosperity and Fairness because of a growing concern about increasing numbers of individuals being categorised as self-employed, when the indicators suggested that they might be more appropriately classified as employees. The employment status group drew up a code of practice for determining the employment or self-employment status of individuals to provide some clarity on the issue. Part of the commitment in the Towards 2016 social partnership agreement is to review the application of this code of practice with a view to its more effective implementation.

In that regard, the issue features prominently in Towards 2016, the social partnership agreement, as regards the area of employment rights and compliance generally. The agreement contains a major package of measures, much of which is reflected in section 28. The social partners are agreed on the need for greater co-ordination between organisations concerned with employment rights compliance with a view to realising the considerable potential for synergy in this area. To that end, the existing joint investigation units, which currently operate on a regional basis between the Revenue Commissioners and the Department of Social and Family Affairs, are to be expanded to include authorised officers of the Department of Enterprise, Trade and Employment and the new national employment rights authority. The role of the joint investigation units will be to address areas where evidence suggests there is non-compliance. In particular, the employment status of workers is to be a major focus of these joint investigation units.

In addition, section 28 makes provision for the extension of the existing fixed penalty of a fine of €1,265 on summary conviction for the offence of failure to comply with regulations requiring the making of an RCTI declaration and for an offence of failure to comply with regulations requiring the delivery of RCTI declarations to the Revenue Commissioners. The RCTI declaration form itself is also being reviewed to require the inclusion of additional specific information as to why a proposed contract is considered by the parties involved not to be a contract of employment. The Department of Social and Family Affairs will also intensify its efforts to ensure the correct classification of workers for purposes of pay-related and social insurance.

Legislative provision is also currently being made in the Social Welfare Bill for the information accruing from RCTIs to be shared in the context of the joint investigation units, to which I referred earlier. All of these developments are a manifest demonstration of the determination of the Government and the social partners to stamp out abuse in this area and I suggest they will be of more immediate impact than the review being suggested in the amendment. That sets out what is happening in this area and why we think we should proceed on the basis of social partnership commitments with the resourcing and extra personnel that will be involved.

I wish to advise the committee that I may table a Report Stage amendment to section 37 of the Bill in regard to the application of exit tax payments to the National Pensions Reserve Fund. I will also table a Report Stage amendment with regard to the tax exemption for patent income as a result of EU considerations. I will also table an amendment to section 36 to correct a minor drafting issue.

As it is now 8 p.m., I am required to put the following question in accordance with the order of the Dáil of 15 February 2007: "That the amendments set down by the Minister for Finance to sections 26 to 40 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.
Progress reported; Committee to sit again.
The select committee adjourned at 8 p.m. until 11 a.m. on Wednesday, 21 February 2007.