Finance Bill 2007: Committee Stage (Resumed).

NEW SECTIONS.

I move amendment No. 90:

In page 106, before section 41, but in Chapter 4, to insert the following new section:

41.—Where an Irish citizen resident abroad for the purposes of the Principal Act is within the State for a period exceeding 10 days in any year of assessment he or she shall, for statistical purposes, give to the Commissioners on or before the 31st day of October in the following year a statement of his or her profits or gains outside the State.".

This amendment seeks to provide that where an Irish citizen who is tax resident abroad visits the State for at least 11 days in any tax year, he or she shall, for statistical purposes, give to the Revenue Commissioners, on or before 31 October in the following year, a statement of his or her profits or gains outside the State.

It is important that in considering this amendment one stands back to apply a reality check. As Deputies are aware, Irish citizenship can be obtained through birth or descent, through marriage to an Irish citizen or through naturalisation. While citizenship through descent can be a complex area, suffice to say for present purposes that one is entitled to Irish citizenship if one was born in Ireland to an Irish citizen parent, if either of one's parents was an Irish citizen at the time of one's birth, irrespective of one's place of birth, or if one was born outside Ireland to an Irish citizen who was himself or herself born in Ireland.

One is also entitled to Irish citizenship if one was born outside Ireland to an Irish citizen who was himself or herself born outside Ireland and any of one's grandparents were born in Ireland, or if one is of the third or subsequent generation born abroad to an Irish citizen, that is, one of one's grandparents was an Irish citizen but none of one's parents was born in Ireland and if one's name is registered in a foreign birth register. This extensive access to Irish citizenship for those who do not live in Ireland is a recognition of our history of emigration which in recent years, thanks to unprecedented economic prosperity, has become a matter of choice rather than economic necessity.

The data available on the website and published by Fáilte Ireland shows that 52% of the total of 809,000 visitors from the United States in 2003 claimed to be either Irish born or of Irish ancestry. The number of visitors from the United States rose to 867,000 in 2004. In the case of the United Kingdom, the percentage claiming Irish ancestry was 35% of some 3.5 million visitors in 2004. The number of visitors from the North was close to 600,000 in 2004. I do not contend that all or most of these visitors who might claim to have Irish ancestry are also Irish citizens. I am confident, however, that some of those who are would soon abandon that citizenship if they were required to file a statement with the Revenue Commissioners every time they take a holiday in Ireland regarding profits or gains earned in their country of residence. Alternatively, they might choose to cease holidaying in Ireland.

This amendment does not take on board that basic reality check. Its attempt to link tax liability with citizenship is totally out of line with the normal practice in nearly all other OECD countries, where tax liability is based on residence rather than citizenship. As far as I am aware, the United States is the only OECD country to base tax liability on citizenship. I have no intention of changing the normal residence rules for taxation or even for statistical purposes. I do not accept the amendment.

The Minister is picking holes in an amendment the purpose of which is to ensure some tax is paid by those people who, for all practical purposes, live in this country. These are the people who are frequently photographed at race meetings, confirmations, christenings and weddings. Whenever there is a high society event, there they are gathered, with many members of the Minister's party in attendance. Lower marginal rates of taxation are generally more transparent and make it easier for people to calculate their tax liability. In addition, keeping tax rates low helps ensure everybody pays some tax. A coach and four is being driven through the residency rules for taxation purposes for the benefit of a golden circle.

The Minister fought for a long time against the notion that people involved in the stallion industry and stud farms should make any tax contribution. There was not a whimper out of him yesterday, however, as he spoke about the regime that will apply in this regard in some 18 months time. I have no doubt that its introduction may disturb some of those who benefited so much in the past 40 years in a disproportionate way. Taxation should be about balance, fairness, transparency and equity. It is a contract between the State and the taxpayer whereby the latter hands over money for certain services for the common good of the Republic and, in return, is given a degree of assurance that what is being done is fair and effective and that the money is well spent.

The Minister seems unwilling to address the basic point of this amendment. It has nothing to do with people of Irish generation who have Irish citizenship and who come on occasional holidays to the State. The issue we seek to address is the notoriety that attaches to a group of people who can come into and out of the State at will, who can leave on a helicopter or aeroplane five minutes before midnight and be out of the country. These people face no tax liability while the rest of us pay for roads, hospitals and the education system, and do so willingly when we see some return. These elite people — comprising, for the most part, friends of Fianna Fáil — live in a different world and can give two fingers to the rest of us as they pop in and out of the country.

The Taoiseach told me repeatedly two or three years ago that the Government does not approve of millionaires who pay no tax. The Minister for Health and Children, Deputy Harney, who was then Tánaiste, took up the chorus line to repeat this mantra. It is a fundamental breach of republican trust that there is one rule for the vast majority of people in a republic while another set of people can give two fingers to the compliant majority. The Minister is corroding the very element and core of a democratic republic, which is based on a contract between the citizenry and its government that taxation should be fair, visible and equitable.

The Minister sounded in his response like the Minister for Justice, Equality and Law Reform, Deputy McDowell, and it ill-becomes him. If he has technical quibbles about this amendment and wants to negotiate a format that will address the underlying principle, there are rows of people in this room and many hundreds more behind them, all with first-class brains and capable of devising a balanced formula that will require people who are, to all intents and purposes, living in this State to contribute to taxation.

We must keep our eye on the ball in regard to equity and fairness. It seems ten years in government can wear on the brains of even the most intelligent people such as the Minister for Finance. I do not want Michael McDowell "cleverality" from the Minister, Deputy Cowen, about the X millions of people of Irish descent who could claim citizenship. We saw that attitude from the Minister for Justice, Equality and Law Reform during last night's Private Members' debate. His formula involved a postponement of Second Stage of the Labour Party Bill for six months, a technical measure that will allow the Bill to fall.

I accept that the Minister for Finance may have technical points to make about the Labour Party amendment. He has the best of advice available to him. What I do not accept is that he should hide behind a cloak and subterfuge of technicality to say he is unwilling to address this fundamental defect, inequity and unfairness in our taxation system whereby people who are, to all intents and purposes, living in the State pay no tax.

The Minister wrote me a detailed three page letter last week which pertains to this issue. He stated that in regard to private airports, Weston Airport in particular, people would be subject to some type of regime of planned and unplanned customs visits based on intelligence. The newspapers report this morning, however, that the Minister for Justice, Equality and Law Reform says there is no provision for customs personnel to enter that particular private airport. This reflects the point I am making about these "non-resident" tax exiles. They can come and go as they please and are driving a coach and four through regulations to which the rest of us, as ordinary compliant tax-paying citizens, are subject.

Leaving the technicalities aside, does the Minister believe the people to whom I referred should contribute to taxation? Many of them have houses here and although they may not make dinner there regularly, I am sure they have the odd drink of water. Should such persons contribute to taxation in the same way that a young single person earning some €20,000 will pay tax and a single person earning €34,000 will pay 41% on overtime? I require a straightforward "Yes" or "No" reply. Is this fair? In the remaining months of the Government's term, does the Minister intend to address this anomaly?

It is a bit early in the morning to expect a tirade of abuse, but I suppose that is the way it must be. It is not picking holes in the Deputy's suggestion. There are hundreds of thousands who would be liable to the regime outlined in the amendment, which would be nonsense. It does not even pass the reality check stage. The Deputy is responsible for tabling the amendment. I am just responsible for pointing out its impact and consequences. Dressing up assertion as fact does not make it fact. I reject the Deputy's assertion that a coach and four is driven through the tax code because it indicates a suggestion that the Revenue Commissioners do not fulfil or discharge their duties in these matters and they do.

We have non-residency rules. Such rules apply in every tax jurisdiction of which I am aware. Ours stand up to robust scrutiny compared with international comparators in this area. Reviews have been undertaken by the Revenue Commissioners, which continue to monitor the situation and continue to be satisfied that those non-residency rules are being complied with. It is an appalling abuse of privilege to continue with these sorts of political tirades in an effort to satisfy one's political prejudice that I am engaged in golden circles with unnamed individuals — whoever they are. It is the same old claptrap that unfortunately has been an excuse for political discourse in this country for some time on these matters. That does not stop individuals having the right to continue with that sort of stuff. I will listen to it. I would not dress it up with a response. I will deal with what is before me.

The amendment is wrong. The last time the residency rules were reviewed and updated in the Finance Act 1994, the Deputy's party was in Government. It was a very comprehensive review of the matter by the Revenue Commissioners and the Department of Finance at the time. It depends on what side of the fence the Deputy is on, what time of the day it is or where she is in the political spectrum to decide what type of argument she wants to use. Her position has no consistency or credibility. The Revenue Commissioners believe the statutory powers available to them and the inquiry and audit programmes being operated should have the capacity to detect breaches of residency rules. The review undertaken last year by the Revenue Commissioners established there was no reason to conclude that non-resident individuals who had been audited failed to comply with the statutory rules governing non-resident status. The chairman of the Revenue Commissioners advised that they would continue to include within their regular audit programme the examination of a cross-section of cases involving a claim of non-resident status with a view to monitoring compliance with the statutory provisions.

The idea that people who are non-resident escape Irish tax is a common misunderstanding. All income earned in the State is normally taxable here. Therefore if an individual is employed in the State, tax is paid on his or her employment income. If an individual is resident in another state that person is then taxable in the other state but gets credit there for any tax paid in Ireland on such Irish income where a double-taxation agreement exists between the two states. Even if non-resident in Ireland, Irish people are liable to Irish income tax on Irish income, for example income from directorships, rented property etc. Where Irish individuals have made themselves resident in tax havens they continue to be subject to a 20% withholding on dividends paid to them by Irish companies. However they are not liable to Irish income tax on their income from anywhere else in the world.

Non-resident Irish people are liable to Irish capital tax on gains from land, buildings, business assets, minerals and exploration rights in the State or from unquoted shares which derive the greater part of their value from assets in these categories. They are not liable to Irish capital gains tax on gains from the disposal of quoted shares or unquoted shares which do not derive their value from such assets. Those are the facts. I am under no illusion that it will enable people to desist from the sort of attacks, personal or otherwise that are involved in these issues regarding my integrity or that of the Revenue Commissioners. I suppose we live in a democracy and thanks be to God we all have freedom of speech.

Deputy Nolan took the Chair.

I am not aware that in addressing the Minister's political judgment to favour a group of exceptionally wealthy people with, in effect, residency while awarding them non-resident status for tax purposes it constituted an attack on the integrity of the Revenue Commissioners. I am not particularly concerned about the integrity of the Revenue Commissioners, whose job under the Constitution is to carry out the law as set by Government. They make clear and direct attempts to do so. Based on the long history of tribunals, etc., I am certainly concerned about the integrity of some political parties being so close to some business figures that it clouds their judgment as to what constitutes the public interest. We get confusion between the legitimate interests of business — which is fair enough — and the overall public interest.

On tax matters, my issue with the Minister is his failure and refusal to address the issue of non-residents who are resident for all practical purposes but do not make a contribution. I got similar abuse on the millionaires who pay no tax until the Taoiseach actually agreed with me, which was followed by a dawn chorus from the then Tánaiste to further back up the point that she also felt that millionaires should not avoid paying tax. I have no problem taking abuse from the Minister. However, I have the right to question him.

I have tabled a technical amendment, seeking that this area be examined. The Minister said he is satisfied the Revenue Commissioners carried out all the checks, etc. I have correspondence from the Minister as recently as ten days ago setting out checks on private aircraft entering airfields such as Weston Aerodrome. A report on the front page of today's edition ofThe Irish Times states that contrary to the impression given in the Minister’s letter — backed up by what he just said — that the Revenue Commissioners are perfectly satisfied with the intelligence and broad checks carried out, the Tánaiste and Minister for Justice, Equality and Law Reform stated that there are no landing rights for people arriving at that airport from outside the common travel area, other than the special arrangements that applied in the period when the Ryder Cup competition took place here.

While the Minister can abuse me as much as he likes, I want the critical point addressed. Why should some people be facilitated with a regime when clearly they live in the country and yet for tax purposes they are non-resident so that they pay very often less tax than a waiter on very modest wages might pay in PAYE?

Taxation is a contract. By and large, all parties in the Dáil want to maintain a low-tax regime. The simple rule is that with lower tax rates, everyone must make a fair contribution. That is my only point. I am sorry if the Minister regards that as being dog's abuse, but that is my viewpoint, which I am entitled to give. The Minister has not addressed the issue. He has addressed some issues in the Finance Bill. He has gradually started to consider the regime of tax write-offs and incentives without costing, etc.

In previous years there was much hullabaloo from Fianna Fáil that the Irish horse racing and stud industries would collapse if there was an attempt to vary the tax regime. This year the Minister did it without a whimper. Time moves on and if the Minister does not address it, somebody else will. I hope there will be an opportunity to address it soon.

The Deputy is entitled to her opinion and I am entitled to defend my position in the same robust fashion. I will do that. I am never intimidated by such tactics and I will strenuously defend my and my party's integrity, as well as the integrity of those who work with me and under me, for so long as I have this responsibility.

The Deputy can continue to assert that there are different rules for different people but the facts do not support that. The non-resident rules are as outlined. I have explained that they were reviewed in 1994, when the Deputy's party was in Government. That party approved them and voted for them. I will not charge anybody with political hypocrisy but I will not be accused of double standards from that quarter. That is not abuse, but me defending my position on the basis of the line of attack the Deputy chose to pursue.

The Deputy has repeated it and will probably repeat it under the privilege of the House on many occasions in the future. It has become part of the political culture of attack against me, and who and what I represent. That is fine. The people have made their decisions on these matters in the past and they will make them again this year. I will respect those decisions. Any initiatives I take as Minister for Finance are my initiatives. I am always amused at the idea that any changes I make are at the Opposition's behest. I notice that when those parties are in Government they do not do much about these matters. By that definition, perhaps they are more effective in Opposition than in Government. However, we will leave that argument to the public and let the public decide who has credibility on these issues.

From my point of view, I am simply responding to an amendment which does not meet the efficacy criteria for its adoption or acceptance. I have explained the factual position with the non-residents' rules as they apply in this jurisdiction. I have confirmed that they compare favourably with the criteria applied by every other democracy with a credible tax regime such as ours. I have explained the facts and if the Deputies wish to continue making assertions in the face of those facts, that is fine. I cannot accept the amendment.

The Minister is foolish not to acknowledge the past 20 years of our taxation history. When people participated in the tax marches because of the unfair tax regime, we were told by people in the Minister's party, particularly by the likes of Mr. Haughey and Mr. McCreevy, that there was no pot of gold in unpaid taxes. Shortly before Christmas the report of the Moriarty tribunal was published, at great cost to the public. It laid bare how much money wealthy supporters invested, donated or gave to Mr. Haughey. It also laid bare evidence of extraordinary courage on the part of some Revenue Commissioners officials in proceeding to deal with the taxation affairs of notable parties. On the other hand, the serving Prime Minister was able to pick up the telephone and arrange that certain millionaires could, at Mr. Haughey's request, have a word in the ear of Revenue Commissioners officials at the highest level. The Minister would be foolish to deny that sequence of events and the close association not just of his party but of his then party leader with that culture and climate in Ireland.

It is perfectly reasonable to propose that, as the grosser examples of that type of carry-on recede, we must address the issue of people living in and making a great deal of money out of this country who can put two fingers up to the rest of us, to all intents and purposes, by living here, attending every function and event, flying in and out of private airports at will but not making a fair contribution in taxation. That is a reasonable point of view. We have gradually addressed other areas of gross abuse of the tax system, and we should continue to do so. There might be other areas that nobody knows about at this point in time but when we become aware of them, we will discuss them.

Amendment put and declared lost.

I move amendment No. 91:

In page 106, before section 41, but in Chapter 4, to insert the following new section:

41.—The Revenue Commissioners shall publish, at least annually, a list of all schemes approved under Part 30, Chapter One, Taxes Consolidation Act 1997.".

This amendment is the same as one proposed on the Committee Stage debate on last year's Finance Bill. At that time the Deputy's interest related primarily to small, self-administered occupational pension schemes or SSASs, which are generally one person schemes, and to approved retirement funds. The basic proposal appears to be that the Revenue Commissioners would publish details of SSASs approved by them each year. During the course of last year's discussion it emerged that the Deputy would be happy to limit the publication of information to those schemes and approved retirement funds which accumulated funds of €5 million or more.

My views on this proposal remain the same. The fundamental difficulty I have with it is the issue of taxpayer confidentiality with regard to SSASs in particular. There is a real risk that in publishing the information sought individual taxpayers could be identified. The protection of individual privacy in dealings with the Revenue Commissioners presents a strong argument against releasing a taxpayer's personal information to third parties. All taxpayers have legitimate expectations of privacy in their dealings with the Revenue Commissioners and releasing a taxpayer's personal information in this way would undermine those expectations. Issues of confidentiality must be respected.

The main thrust of last year's pension provisions was to close off excessive funding for pensions, to limit the amount that could be drawn from pension products by way of tax free lump sums and to restrict the capacity of individuals to use ARFs as purely long-term tax exempt vehicles. I am confident these changes will have the intended impact and create greater equity in the area of pensions tax relief. Accordingly, I am not prepared to accept the amendment.

The Minister had a year to think about this and I am disappointed with his response. It is a complex area but it deals with a point of principle in our taxation system. We offer valuable incentives, running into billions of euros, to people who take advantage of certain schemes available through the tax system. I used this analogy last year, but if a GAA club gets a grant of €50,000 or if a local Alzheimer's day centre gets such a grant, all the details of State aid are published in footnotes somewhere. It is possible to find out who is the beneficiary of State assistance and State schemes.

Tax foregone is as valuable as a direct grant payment, although the behaviour of people is incentivised in a slightly different way. It is extraordinary that when the report was published, and that section of the report was produced by the Minister's officials with regard to pension schemes, it disclosed that a number of individuals had extremely valuable pension arrangements funded by their companies, on which the tax advantage was extremely significant.

The Minister has moved, in the context of reforming what were perceived to be loopholes, to limit the value of the new schemes to €5 million. That is still a great deal of money in the opinion of most people. What real arguments are there against identifying the numbers and values attached to such schemes? The Minister has suggested that there is a problem with identifying the individuals but could he even go for a half-way house initially, whereby the number and tax incentive value of such schemes are identified? This is important because a significant number of people in the labour force have no pension coverage. They include women who left the labour force to look after families and now have limited pension coverage.

I have already referred to the many people, particularly young men in the construction industry, who have limited pension coverage. We have a system which is highly incentivising to people who own their own companies, whereby as they approach their mid to late 50s, the company can make significant payments into a chosen vehicle such as a small self-administered pension fund. These are extremely lucrative and valuable, and even more so if one was to leave the country and live abroad for two, three or more years while the capital tax end of the business was also addressed.

I find it difficult to understand why, from a policy point of view, the Minister is reluctant to release the information in broad terms. I have tabled many questions about this but the answers I received are limited. From a public policy viewpoint, why should we not know the precise number and value of such schemes, as well as the tax breaks attributable to them? We should know the top 30 such schemes, as well as the average and lower numbers.

From a policy viewpoint, it would make for a much better debate on how to fine tune incentivisation to develop pension plans, which we all agree are socially necessary. We end up with a system, however, which is heavily skewed towards high income earners and those who own companies. As they approach retirement age there is a significant incentive for them to convert into a pension scheme running into millions of euro. As a matter of public policy we should know what these schemes are, their value and who benefits from them. It is only in that way that we can decide to do something on pensions for those earning much less money — who may have a higher need for pensions as they become older and approach retirement — rather than people who are pretty wealthy.

It is difficult to judge the efficiency of these schemes unless the data is published. Simply hiding behind commercial confidentiality, as the Government increasingly does to limit information in a whole range of areas, means that it will only be in many years to come that we will discover in retrospect what these schemes cost. We will also discover that the beneficiaries were a limited group in society, while significant numbers of people had little or no pension provision or incentivisation to provide for a pension.

Would the Minister consider a half-way house arrangement whereby such data could be published? Would he agree to answer in detail a parliamentary question on the issue? That would be another way of approaching the matter and providing the information. At least it would be a start towards putting the debate in context. The report published by the Minister's officials last year gave a valuable insight into this area. However, it is still difficult for myself and other Opposition colleagues to understand the extent of the matter, including who gains by it. In particular, we cannot see what lessons that provides for people on lower salary levels who need to build up pensions for their retirement.

This is an important issue. I accept that the Minister cannot publish the names but Deputy Burton is talking about publishing the extent of exposure in this area. It is a matter of public policy and should be available to us. I presume it will become available as soon as the Minister has these returns.

At the top level one can get a subsidy equivalent to €40,000 towards one's pension each year on the money one is putting in in that year. On top of that, one can get tax relief on the money that is in the fund. If the fund contains the limit of €5 million to which the Minister referred, the tax subsidy each year for the money in the fund is worth at least €50,000 — assuming a 1% tax on a fund of €5 million. Many funds would be doing better than that, so potentially we are giving an annual subsidy to individuals at the top end of €90,000 a year. What is the rationale for that? Why do people so high up the income scale warrant a subsidy of €90,000 a year towards their pension provision? What is the economic case for it? It is hard to see one.

I know the Minister has inherited this feature of the scheme. The changes by the former Minister, Mr. McCreevy, while well intended in terms of encouraging pensions, were not capped at any level. The cap was high and the fund cap only came in last year and is at an extraordinarily high level. That means that we are paying extraordinary subsidies. The Minister would not give anything like that if it was above the line. If we had to vote on an Estimate proposed by the Minister which had a subsidy for high earners of €90,000 towards their pension, no one would feel there was any rationale for doing so. We need to consider seriously what we are trying to promote and why we are doing it.

According to the latest available Revenue figures for 2003, the cost to the Exchequer of pension provision was €3 billion in tax relief on pension contributions and money in pension funds. That is more than we give each year to the hundreds of thousands of people on social welfare pensions but this provision is focused on a much narrower group. We need to consider why we are doing this from an economic and social perspective.

The practice has grown whereby companies see it as a good way of giving bonuses and inducements to employees, which from their viewpoint is perfectly rational. Is it equally rational from the taxpayer's point of view that we should be devoting so many resources to this? It goes back to the fundamental principle which the Minister threw up last year — that tax expenditure is the same as real expenditure. One cannot draw a distinction between something one gives as tax relief or as a subsidy. They are the same from the taxpayer's point of view. We should apply the same scrutiny to money we dish out in tax expenditure or in departmental expenditure.

Last year the Minister introduced the ceiling of €5 million. What briefing did the Minister get from the Revenue Commissioners as to the extent of pension funds that are, for example, over €2 million? How many people have individually accumulated funds worth more than €2 million? Does the Minister have that sort of data so that we can get a ballpark figure on the extent of what is happening? If so, we could start to make political judgments, which all parties will want to do, as to whether this continues to be a rational vehicle, or whether we should begin to phase it back or modify it. Obviously, the Minister cannot pull the matter from under people straight away but if it is not paying us, one must begin to create the clear belief that we are going to change the rules in order to have a more equitable system. The sooner we get the information out there, the sooner we can begin to formulate sensible policies in this area.

Many of the points I wished to make were raised by the previous two speakers. I have tabled several parliamentary questions to the Minister on this theme, and I support the amendment. There is a need for general information in this area, including, the number of people who benefit; the average size of the pension plan supported and the highest cost of an individual plan supported. Data should be put into decile groups of the size of the pension plans. This information could be readily to hand and should be made publicly available on a regular basis.

One of my parliamentary questions related to the number of people who have received special dispensation since the cap was introduced in last year's Finance Act. I understand that of a group of 116 who had applied for that dispensation at the time my question was answered, some 40 were given a positive decision by the Department in terms of that €5 million cap being breached because of the circumstances of their application. One individual in that small group of 116 had a personal pension plan of €20 million. The average value of the pension plans among the group was €8 million. This data relates only to the circumstances of a group of people following the 2005 decision. We have no information on what those averages are like since the introduction of this tax relief by the Minister's predecessor. That information should be to hand for the purposes of analysing public expenditure.

Members will be aware that the Finance Act 2006 provided, for the first time in the tax code, for limits and fixed amounts beyond which the State would not provide relief for pension provision. I commissioned an internal report on pensions which was carried out jointly by my Department and the Revenue Commissioners as part of the overall review of tax incentives and relief that I initiated. I acted on its findings in introducing this measure. The main thrust of last year's pension provision was to close off excessive funding for pensions to limit the amount that can be drawn from pension products by way of tax-free lump sums and to restrict the capacity of individuals to use approved retirement funds, ARFs, as purely long-term tax-exempt vehicles. The changes we introduced will have the intended impact of creating greater equity in the area of pension tax relief.

Given increased longevity rates, a pension fund of €5 million, less the lump sum, will provide a male retiring at age 60 an annual pension of approximately €110,000 for life. Where such a male retires at 65 years, his annual pension will be approximately €135,000. The average life expectancy is based on Central Statistics Office data. A male aged 60 in 2001 has a life expectancy of 19 years, and the figure at 65 years old is 15.4 years. There is a general consensus that life expectancy will continue to improve; the CSO assumes that by 2030, average life expectancy for a male aged 60 will be 25 years.

As Deputy Boyle said, I have given replies to parliamentary questions in this area which provide aggregate data without divulging confidential data on individuals. On 22 November 2006, the Deputy asked about the 117 individuals given permission to seek tax relief on pensions with a lifetime cost of more than €5 million prior to the passage of the most recent Finance Bill, the highest amount of relief given to any one individual in this group and the average amount of tax relief given. I replied:

I am informed by the Revenue Commissioners that 116 individuals applied for personal fund thresholds under the provisions of section 787O of the Taxes Consolidation Act 1997. However, as the Deputy will appreciate, the individuals concerned will not be identified for reasons of confidentiality. I am further informed that to date, 76 certificates confirming the amount of personal fund thresholds have been issued. The remaining 40 applications for certificates are at various stages of inquiry by Revenue.

In regard to personal fund thresholds for which certificates have been issued to date, the value of the highest fund is €20,792,709 and the average value of the funds certified is €7,988,409. The Revenue Commissioners have also informed me that the reference to a figure of 117 individuals applying for personal fund thresholds in my reply to a recent Parliamentary Question from the Deputy was the result of a clerical error in the Revenue. The figure should have read 116 individuals.

To bring committee members up to date on the data since November, of the 116 individuals who claimed personal fund thresholds in excess of the €5 million standard fund limit, Revenue has issued 81 personal fund threshold certificates with a total value of just over €770 million. Of these, 60 certificates were for fund values of less than €20 million, a further 16 were for fund values between €10 million and €20 million, three related to fund values of between €20 million and €30 million, and two had values of between €50 million and €55 million. Of the remaining 35 cases still under inquiry by the Revenue, 19 are in respect of fund values of less than €10 million, 13 are for fund values between €10 million and €20 million, and three are for fund values of between €20 million and €30 million.

I thank the Minister for that interesting information. Will he make the note available to members?

I could not catch all the figures. I understand the Minister said the €5 million cap would give a person aged 60 an annual pension of €110,000, or €135,000 at 65 years. Is that correct?

The Minister referred to persons with pension funds of more than €50 million, which I calculate would give them an annual pension of €1 million. By reference to both the input and output tax situation, I understand the current reckoning is that the State contributes up to 79 cents in every euro. As far as I am aware, this is the figure that actuaries and brokers use. That is nice money. It is a good job we are all politicians and do not have to worry about reaching this category.

We need not aspire to it. We have good pensions, however.

Does the Minister have a figure in this regard? Would a pension fund of €50 million provide an annual pension of €1 million when retirement is at 60 years? I am merely multiplying by ten the figure of €110,000 in the Minister's example.

I will have to check that.

Will the Minister get us the figures? In terms of public policy, the objective must be to discover who benefits, how and why and, after this, to make reasonable decisions that are fair to as many people as possible. We all share a common objective in this. In the context of a pension fund of €50 million, am I correct that the State's tax forgone is 79 cents in every euro? Perhaps the Minister will check that figure and we can return to this issue on Report Stage.

It is important to bear in mind that since I introduced the limit last year, the holders of such pension will, apart from the lump sum, also pay tax on the amounts coming out every year. Pension provision is deferred taxation in this respect. An amount of €5 million is a large lump sum and it gives one an annual pension of approximately €110,000 for life at age 60 or €135,000 from age 65. Those annual amounts are taxed as they are taken from the fund. Much of the rationale behind pension provision and incentivisation of pensions is to ensure that rather than people increasing their personal consumption during their working lives, we incentivise pension provision so they can continue with a standard of living post-retirement based on their own savings, which are incentivised but also subsequently taxed. Pensions represent a deferred tax instrument in place of taxing immediately and perhaps being obliged subsequently to provide State provision in the event of income decrease. That is the general policy principle behind private pension provision.

The Minister is offering a rationale but we do not encourage people to save money. The SSIA scheme was regarded as an extraordinary breakthrough in offering a concession of €1 in every €4 to encourage people to save. If Deputy Burton's figures are correct, in this area we are offering €4 in every €5 as an incentive to saving. It is on a completely different scale to anything we would consider in the context of trying to promote prudent behaviour and encouraging people to save for a rainy day. It is in an entirely different league. I was not aware that people might have accumulated funds of €50 million or €55 million with that level of State support. That is, in any objective sense, a pretty appalling use of public money. I am not blaming the Minister but we have allowed this matter to get out of hand and we must start reining it back in.

People will state that there is also a debate with regard to public service pensions, which I accept. In that context, one could state that a Deputy's pension is a fund that is worth approximately €2 million. There are issues relating to various parts of the pension system which must be the subject of debate. However, there is no doubt that we must be more prudent in the way we provide incentives for people. We must also ensure that such vast differences are not created between pensions of €135,000 that are 80% funded by the State and the standard pensions of €10,000 given to normal pensioners.

Vast differences have come into play in terms of the way we do business in this area. I agree that incentives relating to saving for the future, particularly in the context of pensions, should, by all means, be very generous. However, such incentives should be the subject of reasonable caps. I have not been following this debate as closely as I should, particularly when I realise that people have accumulated and stashed away extraordinary amounts of money. There are tax accountants who do nothing but examine these provisions and find ways to exploit them and we created the incentives so we cannot blame people for taking advantage of them. However, as gatekeepers of the system, we must take a fresh look at this matter.

The Minister will be obliged to return to this topic because I do not think he could conceivably state, particularly on the basis of the figures provided, that he dealt with it in the context of what he did last year. We must move towards creating a more sensible and balanced regime that will attract broad social acceptance. We cannot decide, here and now, what will be the nature of that system. However, consideration will have to be given to this matter in the forthcoming Green Paper on pensions and a balanced approach, which will be seen as equitable, will have to be arrived at.

We have an ageing population and, even though it is of far less significance in Ireland than in most other countries, we must make plans in respect of the so-called pensions timebomb in a way that is sensible. We should not examine global figures and state that the value of pension funds is, for example, €40 billion and that we must, therefore, make sensible provision. How can we do so if half of that money is owned by a tiny minority of people?

We must take another look at this matter. I accept that we cannot do so in the context of the Bill before us. However, we will be obliged to return to this issue when the Green Paper on pensions is published later in the year.

The very high funds to which the Deputy refers were created under a long-standing regime that remained in place under successive Governments. Action was not taken until I moved to change the system. It was not possible to simply withdraw benefits that, based on the former arrangements, had accrued up to 2006. We stopped people growing their funds without limit for the future and we imposed the cap. It was not possible to make the latter retrospective.

The former Minister for Finance, Mr. McCreevy, changed the system.

He did so early this decade.

It was also the case that we moved to place an annual charge on approved retirement funds, ARFs, and reduce the attraction of very high pension fund provision for the future. There is not much point in focusing on exceptional pension fund provision because, essentially, it is a legacy from an older regime that we have closed off. Going forward, the personal funds mentioned will, as I said, not arise because we have put the cap in place. I moved to deal with the situation as I found it. The sorts of figures under discussion will not appear in the future as a result of the putting in place of the cap.

From a tax efficiency point of view, would it not be very attractive for people exiting from such high-value pension funds to, under the current regime, claim non-resident status and buy achateau or two in some nice location with a warm climate?

If a fund exceeds the allowable limit, there is an effective tax rate on the excess of approximately 66%.

What is the position if a person becomes non-resident?

I do not know but I will obtain an answer for the Deputy.

I think I have an idea.

In respect of non-residency, the charge on the ARF will remain in place.

However, it will still be attractive — if it is at the very high end — for someone to go away for a number of years.

The point I am making is that once someone begins extracting moneys from an ARF, regardless of whether he or she is resident, the charge relating to that ARF remains and it is not affected by residency or non-residency in that respect.

Amendment put and declared lost.
Amendment No. 92 not moved.
Question proposed: "That section 41 stand part of the Bill."

I wish to ask a question on-----

As there is a vote in the Dáil, we will suspend the meeting and return when it has been completed.

Sitting suspended at 12.08 p.m. and resumed at 12.33 p.m.

On section 41, will the Minister give us some information on the take-up of the research and development tax credit to date? The tax relief only applies on marginal or increased incremental spending and he is changing the base year. What is the level of take-up and what sort of impact has the credit on research and development activity compared to what might have been his hope or expectation?

Some time ago, some people advocated that the research and development tax credit should be against payroll rather than profits tax because it would be a more valuable concession with our low corporate tax rates. Did the Minister assess that when deciding to take this route?

The latest data, from 2004, is that the credit cost €70 million and was used by 74 companies, based on tax returns received to date for that accounting period.

Is that what was spent or is that the concession we gave?

That is the tax credit cost to us, €70.5 million. Figures for subsequent years are not known yet. The credit is important in terms of foreign direct investment and getting people to reinvest and develop their research and development facilities. More and more companies in the multinational sector are doing this now. In the past, company structures meant that a research and development plant was in country X and all the manufacturing plants were in lower cost countries elsewhere.

Many of the chief executives who come here to talk to us find that they will now more often co-locate research and development facilities with manufacturing plants because of the interaction between research and development teams and those involved in manufacturing. This brings some cost savings rather than when they are in different locations or countries. The model has changed and a change has taken place in multinational thinking on the most competitive means by which research and development can be generated. Many now believe that it is good for researchers as well as those in the manufacturing units to be closer geographically and in terms of strategy, etc., than in the past when research facilities were looked upon as independent autonomous cost centres.

It was suggested that because of our low corporation tax rate and low write-off, we would not get research and development facilities but only certain types of multinational activity. That thinking is changing. Therefore, there are companies that utilise the research and development tax credit and are prepared to deepen their roots in our economy by bringing their research and development capacity to Ireland. We believe this is an important means of locking-in for direct investment over a longer timespan. We need to be cognisant of that trend when talking about the role of research and development. Sometimes we were inclined to look at the issue as simply a cost issue. Multinationals no longer look at it that way in terms of what they believe. Their overall competitive position is best served by more co-location of research and development plants with manufacturing than in the past.

As Deputies know, the base year was included to ensure we got incremental research and development rather than simply conceding to a mechanism that would just provide tax relief for what was being called research and development but which was not incrementally adding to the capacity of the Irish location. It is felt now that it should be more widely available and should also help SMEs. People from the Small Firms Association and chambers of commerce asked me in their budget submissions this year and last to look at how the credit could be made more effective for them. One of the ways of doing this was to leave the base year as of the original year when we introduced the measure, rather than roll it over in a three-year cycle which would require incremental research and development being moved up the ladder, based on different base years being applicable depending on when the research and development began or was continued.

From this point of view, having listened to the business community and to people in the business of trying to meet public policy objectives of adding value and bringing in new product lines, it seems the tax credit is an important component in assisting the process.

It seems to me that if €70 million is multiplied by five, then €350 million in new research and development does not look like a hill of beans in terms of what we might expect companies to invest in research and development, if we are to meet any of these targets that Forfás and the like recommend.

That is the incremental spend.

The last figures which I presume were the base figures show the proportion of turnover devoted to research and development in Ireland is minuscule compared with our main competitors. We are coming from a very low base. I am not pretending that tax leverage is the sole or even the best way of dealing with this but it strikes me as an alarmingly low level of incremental spend to be coming from companies that are supposed to be producing the products of tomorrow for their Irish-based operations. If the strategy is deepening rather than having companies coming in and spending a life cycle and moving on, it does not look like we are quite getting the act together.

I do not want to hold up the committee and I acknowledge this is a good provision. However, it strikes me that Government needs to revisit this issue of company-related research and development. I refer to the National Competitiveness Council reports which showed that while the State was improving its performance through the universities, there was very little company input. Ireland stood alone as one of the countries where the links between university research and companies is declining rather than increasing.

Government needs to look afresh at this area because it is an area in which we must gain a lead, given the trends in our costs. Those figures show that we are not achieving that lead.

Were it the only initiative I would agree with the Deputy. My point is —

I presume everything that is done on an incremental basis will go for this credit. There is not a lot of research and development being carried out that is not leveraging this credit.

We have put into place a strategy on technology, innovation and research which is a far more comprehensive strategic approach of which this is simply a part. The point is well made by the Deputy. Our SME sector has not been research-led as it has been instead involved in traditional areas. The idea of the National Competitiveness Council and IDA Ireland and the Kerr report on industrial policy is about identifying Irish winners and trying to internationalise Irish business. This will require a qualitative change in the capacity of research and development in our industrial base and even more in our service base. There is agreement by Government to significantly increase our capacity in that area through a whole range of means which was outlined by the Minister for Enterprise, Trade and Employment and passed by the Government within the past six months.

Some SMEs prefer grants for research and development rather than tax credits, for a variety of reasons. Our low rate of 10% has in the past militated against research and development because of the low write-off value of research and development costs to which I referred before. Many multinationals regard Ireland as a good base for research and development activity because of the people we have, despite the fact that we are by no means the lowest cost unit in their operation. We are in the business of building capacity in this area and there is a wider strategic context in which this is being considered.

I refer to paragraph (b) of section 41 of the Bill. I presume this is in the context of research and development in universities. Will the Minister say if this section was the subject of representations or is there a particular problem about how the tax credit works when it is sub-contracted to third level institutions. Was this a specific problem or issue which arose or is it to do with sub-contractors in general?

It is not specific to universities. It is a question of where SMEs would say they wished to avail of this tax credit but they did not have the full capacity in their own operation and wished to sub-contract out some of the activities on a practical basis in order to investigate new product lines or whatever. We are simply providing in paragraph (b) that expenditure by companies on sub-contracting research and development work to unconnected parties will qualify up to a limit of 10% of qualifying research and development expenditure incurred by the company in any one year. In other words, a company can give up to 10% of its expenditure to unconnected persons outside the company to assist in whatever aspect of research for which it does not have an internal competence. A company will not be allowed sub-contract out everything and then claim a credit when none of the work has been done in the company. If up to 90% of the work is done inside a company then that is fine. We allow sub-contracting of up to 10%. Universities already qualify for up to 5% of the research and development work.

Question put and agreed to.
SECTION 42.

I move amendment No. 93:

In page 108, line 42, after "period" to insert the following:

"if 100 per cent of the tax payable by the claimant company for the relevant period, disregarding this subparagraph, is paid on or before the specified return date for the relevant period".

This is a technical amendment with the purpose of mitigating interest on any balance of tax payable by a company for an accounting period where the company has not paid sufficient preliminary tax. It applies where the company is a member of a group or another member company of the group has paid more preliminary tax than is required.

The section provides that for the purposes of calculating interest payable on any balance of tax outstanding, the excess preliminary tax paid by one of the companies can be regarded as a preliminary tax payment by the other. The amendment provides that the mitigation of interest will not be available unless any balance of tax payable for the accounting period is paid when it falls due.

Amendment agreed to.

I move amendment No. 94:

In page 108, line 44, to delete "section" and substitute "subsection".

This amendment corrects a drafting error.

Amendment agreed to.

I move amendment No. 95:

In page 109, to delete lines 11 to 15 and substitute the following:

"(f)(i) This subsection shall not affect the liability to pay corporation tax of any company to which the subsection relates.

(ii) Where this subsection applies, the amount on which, but for this subsection, the claimant company is liable to pay interest in accordance with section 1080 shall be reduced by any relevant balance deemed to have been paid by that company in accordance with paragraph (d)(i).”.

This is a technical drafting amendment to section 42 of the Bill to remove an ambiguity in the wording that appears to suggest that a liability of interest might be a liability to tax.

Amendment agreed to.
Question proposed: "That section 42, as amended, stand part of the Bill."

I note the start-up companies are given this advantage. Are there protection provisions to ensure against artificial use of these mechanisms as tax avoidance or perhaps this is not credible?

These are questions of fact. The Revenue will decide as a matter of fact—

Will the Revenue decide the definition of a start-up company? Phoenix companies might try to use it as a way of pretending they were start-up companies.

This would not prove to be advantageous. The Revenue will examine the circumstances to ensure it is not a set-up situation.

Question put and agreed to.
SECTION 43.

Amendments Nos. 96, 97 and 98 are related and may be discussed together by agreement.

I move amendment No. 96:

In page 112, to delete line 6 and substitute the following:

"that the condition in subsection (2)(c) is satisfied in relation to the loss at that time,”.

These are technical amendments relating to section 43 of the Bill which amends the provisions relating to group relief for companies in order to comply with a ruling of the European Court of Justice on foreign losses. Subject to certain conditions being met, the new provisions allow Irish companies to offset against their taxable income the losses incurred by their subsidiary companies that are resident outside Ireland in EU member states and the European Economic Area states with which Ireland has a double taxation treaty. The general rule is that companies must claim the relief within two years of the loss being incurred. However, late claims are allowed where circumstances change in the territory where the loss-making subsidiary is located.

Amendment No. 97 removes one of the conditions that must be met in respect of these late claims under the Bill as published. I am advised that the condition may go beyond the judgment. Its removal brings the section more in line with the European Court of Justice judgment. The other amendments are consequential drafting amendments.

Amendment agreed to.

I move amendment No. 97:

In page 112, to delete lines 7 to 16.

Amendment agreed to.

I move amendment No. 98:

In page 112, line 17, to delete "then".

Amendment agreed to.

I move amendment No. 99:

In page 112, subsection (2)(b), line 41, to delete “Where” and substitute “For the purposes of this subsection, where”.

These are technical drafting amendments.

Amendment agreed to.
Section 43, as amended, agreed to.
Sections 44 and 45 agreed to.
SECTION 46.

I move amendment No. 100:

In page 114, subsection (2), line 4, after "operation" to insert " no later than 30th May 2007,".

The effect of the amendment would be to insert a deadline of 30 May 2007, before which a commencement order for the extension of the scheme of tax relief for corporate investment in certain renewable energy projects must be made. This section provides for a five-year extension to 31 December 2011 of the deadline for corporate investments in renewable energy projects. This extension is subject to a commencement order. The requirement for a commencement order is necessary as the extension of the scheme is subject to EU clearance from a state aid perspective. In view of the requirement to consult the European Union on the proposed extension of the scheme, it would be imprudent to adopt a deadline. This consultation with the Commission will be carried out as before by the Department of Communications, Marine and Natural Resources. However, the intention is to obtain the EU clearance as soon as possible. Therefore, I must reject the amendment.

Amendment, by leave, withdrawn.
Section 46 agreed to.
SECTION 47.
Amendment No. 101 not moved.

I move amendment No. 102:

In page 114, to delete lines 16 to 36, and substitute the following:

" "(v) land which has been let by the individual at any time in the period of 15 years ending with the disposal where—

(I) immediately before the time the land was first let in that period of 15 years, the land was owned by the individual and used for the purposes of farming carried on by the individual for a period of not less than 10 years ending at that time, and

(II) the disposal is to a child (within the meaning of section 599) of the individual;",".

Section 47 amends sections 598 and 599, which are contained in Chapter 6 of Part 19 of the Taxes Consolidation Act 1997. Those sections provide relief, often called retirement relief, to an individual aged 55 years or over who is disposing of a business or farm assets. Section 598 exempts from capital gains tax disposals outside the family where the consideration does not exceed €500,000. Section 599 applies to a disposal to a child, which includes certain nephews and nieces, and certain foster children. Where the disposal is to a child, full capital gains tax exemption applies. Subject to certain exceptions the assets being disposed of must be used in the business up to the time of the disposal.

This amendment recognises that the occasional letting of parcels of land by farmers is a relatively common practice and endeavours to ensure that such lettings will not exclude the farmer from retirement relief. The amendment ensures that relief will apply to a disposal of land by an individual at any time in the period of 15 years ending with disposal where immediately before the time the land was first let in that 15-year period, the land was owned by the individual and used for the purposes of farming, carried out by the individual for a period of not less than ten years ending with the time the land was first let and secondly that the disposal is to a child, within the meaning of section 599 of the Taxes Consolidation Act 1997, of the individual making the disposal.

Amendment agreed to.
Section 47, as amended, agreed to.
Sections 48 and 49 agreed to.
SECTION 50.

I move amendment No. 103:

In page 116, lines 19 to 21, to delete subsection (1) and substitute the following:

"50.---(1) Section 746 of the Principal Act is amended---

(a) in subsection (5) by substituting “resident or ordinarily resident” for “ordinarily resident”, and

(b) in subsections (5) and (6) by substituting “sections 806, 807, 807A, 807B and 807C” for “sections 806, 807 and 807A” in each place where it occurs.”.

This is a technical drafting amendment relating to section 50, which amends section 746 of the Taxes Consolidation Act 1997. Section 746 applies various provisions of the capital gains tax code for the purposes of charging gains on disposals of interests in offshore funds where the disposals are made outside the State for the benefit of persons resident in the State. Subsection (5) provides that offshore income gains which would be outside the charge to tax proposed by section 746 may be chargeable under anti-avoidance legislation relating to the transfer of assets abroad.

Amendment agreed to.
Section 50, as amended, agreed to.
Section 51 agreed to.
Sitting suspended at 12.55 p.m. and resumed at 2.30 p.m.
NEW SECTIONS.

We will resume our consideration of the Finance Bill 2007. A revised grouping list was circulated to members before we broke for lunch. We will discuss amendments Nos. 110 and 111 together when we reach that stage. As amendments Nos. 116 and 117 are related to amendment No. 104, in the name of Deputy Burton, amendments Nos. 104, 116 and 117 may be discussed together, by agreement.

I move amendment No. 104:

In page 117, before section 52, but in Part 2, to insert the following new section:

"52.—The Minister may make regulations providing relief in respect of VAT for registered charities provided that such charities comply with such requirements including requirements as to accountability and financial transparency as may be prescribed.".

I am moving the amendment on behalf of Deputy Burton.

Are we taking amendments Nos. 104, 116 and 117 together?

I oppose the amendments before the committee. I will explain the VAT regime. The rating of goods and services is subject to the requirements of EU VAT law, with which Irish VAT law must comply. Council Directive 2006/112/EC provides that charities, bodies supplying educational services and non-profit groups engaged in non-commercial activity are exempt from VAT in certain respects. They do not charge VAT on the services they provide and they cannot recover VAT incurred on the goods and services they purchase. Essentially, only businesses which are registered for VAT purposes can charge VAT and recover it thereafter.

Ministerial orders have been used in the past in a limited way to provide refunds of VAT on certain aids and appliances for the disabled, medical equipment donated voluntarily to hospitals, equipment and buildings used by water rescue organisations and humanitarian goods for export. Such focused orders are designed to target specific circumstances. Under EU law, it is no longer possible to introduce new schemes within the Value-Added Tax Act 1972 to relieve charities or other exempt bodies from the obligation to pay VAT on the goods and services they purchase. Furthermore, under EU law it is not possible to remove or reduce the VAT rate for a particular customer — in this case, charities or educational institutions — because the rate of VAT that applies to a particular good or service is determined by the nature of the good or service and not by the category of customer. Therefore, it is not possible to remove or reduce the level of VAT paid by charities.

In summary, EU law precludes removing or refunding the VAT that charities and exempt bodies are required to pay under the taxation system. This view is also held by the European Commission, which has stated that while charities cannot be refunded through the VAT system, there is nothing to prevent national governments from paying charities a subsidy to compensate them for the irrecoverable VAT they have incurred, provided that State aid rules are observed.

I understand that the Irish Charities Tax Reform Group accepts that charities cannot be granted VAT refunds through the tax system. However, the group is seeking the introduction of a grant or subsidy in lieu of the VAT paid by charities on their business inputs. It is estimated that such a grant or subsidy would cost the Exchequer €18 million per annum in respect of the bodies represented by the group. Given that Exchequer funding is made available to many charitable organisations, this is already happening, in effect. The 140 bodies represented by the tax reform group acknowledge that charities receive funding of €9 million from the Exchequer, directly or indirectly. Approximately 7,000 charities are registered with the Revenue Commissioners. It is likely, therefore, that the introduction of a scheme along the lines proposed by the Irish Charities Tax Reform Group would cost the Exchequer significantly more than the €18 million estimate put forward by the group in respect of the bodies it represents.

The Irish Charities Tax Reform Group will argue that it represents the largest charities but this is not the case because many health, educational and sporting bodies are also registered with the Revenue Commissioners as charitable or not-for-profit organisations. Therefore, the introduction of grant in lieu of VAT paid by registered charities would undoubtedly lead to other exempt bodies, such as schools, hospitals and sporting organisations, many of which are already registered as charities, seeking to benefit from such a system of refunds. These exempt bodies already receive considerable Exchequer funding.

In addition, the tax code provides exemption for charities from income tax, corporation tax, capital gains tax, deposit interest retention tax, capital acquisitions tax, stamp duty, probate tax and dividend withholding tax. Moreover, charities benefit significantly from the uniform scheme of tax relief for donations introduced in the Finance Act 2001 which, for the first time, allowed tax relief on personal donations to domestic charities and other approved bodies. The relief is based on the taxpayer's marginal rate which, for an individual donor, could be as high as 41%. In the case of donations from the PAYE sector, the relief is given directly to the relevant charity. Even if funds were available for grant-aiding charities and other voluntary groups, I am not sure the most appropriate use of the funds would be to relieve them of the VAT paid on inputs, as opposed to grant-aiding their activities using other criteria.

It is the role of Government and the Oireachtas to decide on the distribution of tax revenues for the public good. We should not lightly relinquish this role in the case under consideration. A grant scheme, the only mechanism available, would require the Government to agree in advance to give grant aid to a set of bodies, based not on an understanding of public policy priorities or the efficiency of the body concerned but on their spending profiles. The proposed amendments do not conform with the principle that the Government and Oireachtas must decide on the distribution of tax revenues as the mechanism proposed would be a most unusual type of grant scheme. For this reason, I cannot accept them.

I have heard the Minister use these arguments on previous occasions when the matter was discussed. Since last year's debate on the Finance Bill, the joint committee has heard representations from the Irish Charities Tax Reform Group and from charities working on the frontline. They left members in no doubt that the VAT incurred by voluntary organisations creates major obstacles in securing accommodation and across a range of areas. They presented strong evidence that many charities, most of which live from hand to mouth, feel the squeeze on the input side, although some of them are able to manage the wage side of their expenses by employing volunteers to supplement their paid staff.

The Minister gave the impression that the Government should show largesse on the wage side of charities' operations. This is not the point at which the boot is pinching for many of the charities whose representatives appeared before the committee. They regard getting to first base, that is, securing accommodation and meeting the cost of other items they need to get off the ground, as the main problem. They argued cogently that the system does not work well for charities. The relief proposed in the amendments would be fair as it would also be available to charities that may not have strong fund-raising capabilities. They could utilise the donation relief under which people who contribute more than €250 per annum can obtain tax relief at their marginal rate of taxation. Many charities are not in a position to run high profile, high contribution donation schemes and the proposed VAT concession would be a targeted support for their activities.

It is not fair to argue that the Government would not choose relief on VAT on inputs as the basis for making donations to charities or contributions to their work. Instead, one would examine their activities and draw up a list of the most deserving of them. VAT is an imposition which adds to costs. The Government is not neutral as regards charities because the Revenue Commissioners intervene to make it more expensive for them to operate. The Minister can pretend he will dream up a scheme for assisting charities. The proposal simply asks him to stop making life more difficult for them by amending the VAT code.

I do not find the Minister's arguments convincing. He also pointed out, for example, that the €18 million could mushroom into a much bigger figure. The merit of the proposed scheme is that it can be designed in such a way that it is ring-fenced to apply only to certain activities. Deputy Boyle has proposed a type of ring-fencing by specifying activities. The Minister will argue that pressure will be applied to treat other charities equally. The proposal at least provides that we will not extend a scheme without the Oireachtas having an opportunity to assess how it is working.

The Irish Charities Tax Reform Group has invited me and, I am sure, the Minister to attend a forthcoming event which will be addressed by a speaker from Denmark where a similar scheme to that proposed has been introduced. The Danish model appears to have secured widespread public support and overcomes many of the concerns the Minister raises. Perhaps the Minister could speak to the Danish Minister for Finance to try to learn how the Danish Government managed to ring-fence the scheme in a manner that supports public policy.

Ireland has a strong tradition of regarding the voluntary and charitable sectors as significant partners in addressing many social needs. To find ourselves in the position of hand-tripping charities with VAT obligations is out of kilter with public thinking on this issue. There is a growing sense that we should roll up our sleeves and sketch out a scheme. Even if the Minister will not agree to introduce a scheme this year, let us develop a targeted, ring-fenced model to be introduced at a later date.

Every time a proposal to provide VAT relief for charities is raised, the Minister reads the same briefing note. His predecessor took the same approach. Members of the public do not believe this is a good policy. I ask the Minister to design a suitably targeted scheme and ascertain if it can command support in the committee and House.

I outlined the position as it applies in terms compliance with European Union VAT law. Everyone, including lobby groups, accept that the objective the Deputies seek cannot be achieved through a VAT refund system. I have also outlined the problems associated with introducing a grant-in-aid scheme. I will examine the Danish model to which the Deputy referred.

Is the amendment being pressed?

No, but it will resurface on Report Stage, by which time the Minister may have had an opportunity to examine the Danish model. I understand the Danish guests of the Irish Charities Tax Reform Group will be here next week. Deputies will, therefore, have an opportunity to receive a briefing on the position in Denmark before Report Stage.

Amendment, by leave, withdrawn.

I move amendment No. 105:

In page 117, before section 52, but in Part 2, to insert the following new section:

52.—Where a vehicle not already registered in the State is brought into the State for a continuous period of more than 42 days and relief is claimed under section 135 of the Finance Act 1992, the vehicle shall be presented to the Revenue Commissioners within 7 days of the expiration of that period, and at such further or other times as may be directed by them, together with proof of compliance with the provisions of the Road Traffic Acts regarding road tax, insurance and driver licensing, and relief shall be allowed only if and to the extent that the Commissioners are satisfied that the use or proposed use of the vehicle is or would be in compliance with those provisions.".

As the Deputy is probably aware, Council Directive 83/182/EEC of 28 March 1983 provides for tax exemptions within the Community for means of transport temporarily imported into one member state from another. The purpose of the directive is to ensure the proper functioning of the Internal Market. In so far as Ireland is concerned, the directive provides for an exemption from both VRT and motor taxation. National legislation must conform with EU legislation and compliance with the provisions of the Road Traffic Acts regarding insurance and driver licensing is not required by the directive to qualify for the exemptions. The imposition of requirements on the citizens of other member states that are not imposed on our own citizens would almost certainly be contrary to the freedom of movement provisions of the treaties. In so far as insurance and driver licensing are concerned, these are respectively matters for the Minister for Transport and the Minister for the Environment, Heritage and Local Government.

I can accept what the Minister is saying, that they perhaps do not fall to be dealt with within the Finance Bill, but there is no doubt there is a sense that this is a loophole and people are driving a coach and four through the system. Efforts to tighten up not only the collection of tax, insurance, etc., but to enforce road safety and penalty points are being undermined in this area. While I accept the Minister may not wish to do something in this regard in the context of the Finance Bill, he ought to have some discussion with his colleagues to see whether he can achieve greater momentum in terms of bringing forward proposals that would tighten up this area which has clearly been open to abuse.

Amendment, by leave, withdrawn.
Amendments Nos. 106 and 107 not moved.
Section 52 agreed to.
SECTION 53.

I move amendment No. 108:

In page 117, line 20, to delete "The Liqueur Act 1848" and substitute the following:

"With effect from 1 July 2007 or such earlier date as the Minister for Finance may by order appoint, the Liqueur Act 1848".

The purpose of the amendment is to create the appropriate linkage, timewise, between the coming into operation of section 53 and the Statute Law Revision Bill 2007, when enacted. If the Finance Bill were enacted before the Statute Law Revision Bill, the Liqueur Act 1848 and the Bonded Warehouses Act 1848 would have to be repealed by this Finance Act before they were stated to be continued by the Statute Law Revision Act 2007. The commencing of section 53 of the Finance Bill at a later date will allow time to ensure the Statute Law Revision Bill 2007 is enacted before section 53 comes into operation.

Amendment agreed to.
Section 53, as amended, agreed to.
Sections 54 and 55 agreed to.
NEW SECTION.

I move amendment No. 109:

In page 119, before section 56, to insert the following new section:

56.—(1) Chapter 1 of Part 2 of the Finance Act 1999 is amended—

(a) in section 102---

(i) in subsection (1) by substituting the following for paragraph (b):

"(b) to use as a propellant or to keep in a fuel tank---

(i) any mineral oil on which mineral oil tax at the appropriate standard rate has not been paid,

(ii) any mineral oil containing one or more of the markers prescribed by regulations made under section 104, or

(iii) any substance where the importation of mineral oil containing such substance is prohibited by regulations made under section 104, ",

(ii) in subsection (1) by inserting the following after paragraph (d):

"(da) to contravene or fail to comply with a temporary prohibition of trade order under section 102A, or”,

(iii) by inserting the following after subsection (1):

"(1A) It shall be an offence under this subsection—

(a) to invite an offer to treat for, offer for sale, keep for sale, or to sell, or

(b) to deliver, keep for delivery, or to be in the process of delivering, or to keep,

for use as a propellant—

(i) any mineral oil on which mineral oil tax at the appropriate standard rate has not been paid,

(ii) any mineral oil containing one or more of the markers prescribed by regulations made under section 104, or

(iii) any substance where the importation of a mineral oil containing such substance is prohibited by regulations made under section 104.",

(iv) in subsection (4) by substituting "subsection (1A) or (3)" for "subsection (3)",

(v) in subsection (5) by substituting "subsection (1), (1A) or (3)" for 2 subsection (1) or (3)",

(b) by inserting the following after section 102:

102A.—(1) Where a person licensed under section 101 is convicted of an offence under subsection (1A) or (3)(b) of section 102 of this Act, or an offence in relation to mineral oils under section 119 of the Finance Act 2001, then the Court shall, in addition to any other penalty imposed, make an order, referred to in this section as a temporary prohibition of trade order, prohibiting the sale or supply of any mineral oil from any premises licensed in respect of such person under section 101 and concerned in the offence, for a period of—

(a) not less than one day and not more than 7 days for a first offence by such person,

(b) not less than 7 days and not more than 30 days for a second or subsequent offence by such person,

and the Court may also by such order prohibit the sale or supply of any mineral oil from any other premises so licensed in respect of such person.

(2) In determining the duration of a temporary prohibition of trade order the Court may seek, from an officer involved in the investigation of the offence, a report on the circumstances in which it was committed and any other information which the Court may consider to be relevant.

(3) Where a person is convicted of more than one offence to which subsection (1) applies, and all the offences were committed on the same occasion, then only one temporary prohibition of trade order may be made in respect of such offences.

(4) The prohibition period specified in a temporary prohibition of trade order shall commence---

(a) where no appeal is made against the conviction or the prohibition period, on the 30th day after the order is made, or

(b) where such an appeal is made, and the conviction or prohibition period is affirmed, on the 30th day after such affirmation,

and it shall end on the expiry of the period specified in the order, unless such period has been varied on appeal, in which case it shall end on the expiry of the period so varied.

(5) (a) If, on appeal, a conviction resulting in a temporary prohibition of trade order is reversed, such order shall thereupon cease to have effect.

(b) On any appeal—

(i) against a conviction resulting in a temporary prohibition of trade order, or

(ii) relating to the period specified in such order, the Court may vary the period specified in such order.

(6) A temporary prohibition of trade order in respect of any premises shall, for the purposes of this Chapter and any regulations made under section 104, have effect as if that premises were not licensed under section 101 for the period specified in such order.

(7) During the period specified in a temporary prohibition of trade order, the person in respect of whom the premises is licensed under section 101 shall ensure that a prominent notice, stating that the closure is in compliance with the order and specifying the period of prohibition of trade, is affixed to the exterior of the premises in a conspicuous place.

(8) Where a person is convicted of---

(a) an offence under section 102(1)(da), or

(b) a third or subsequent offence to which subsection (1) applies,

the Court shall revoke any licence granted to such person under section 101, and no such licence may at any future time be granted to such person.",

and

(c) in section 103 by substituting the following for subsection (4):

"(4) Where, in any proceedings for an offence under subsection (1)(b) (i) or (1A)(i) of section 102, it is proved that the mineral oil that is the subject of the offence is heavy oil other than fuel oil or kerosene, with a sulphur content exceeding 50 milligrammes per kilogramme, then it shall be presumed, until the contrary is proved, that mineral oil tax at the appropriate standard rate has not been paid on such mineral oil.”

(2) This section only applies to offences committed on a date subsequent to the passing of theFinance Act 2007.”.

This proposed amendment introduces a new section into the mineral oil tax chapter under the 1999 Finance Act. This will provide that where a person licensed to trade in mineral oils is convicted of a serious mineral oil tax offence, the court shall, in addition to the existing penalties for such an offence, by order prohibit trade in mineral oil at the licensed premises. The prohibition period is one to seven days for a first offence and seven to 30 days for a second and subsequent offence. For a third or subsequent offence or for breach of a court order, the mineral oil trader's licence is to be permanently revoked. The court may also extend the prohibition order to any other premises for which the offender is the licensee. The measure is intended to help combat the trade in laundered diesel from retail and distribution outlets.

I am not familiar with this licensing procedure. Can the Minister clarify who will be the policeman for this system of withdrawing licences? Will it be the courts and will there be a right of appeal if people feel they have been hard done by?

Customs and Excise will be the agency with responsibility to ensure the system is being run properly, and in the event it is not, it will bring the summonses and prosecute offenders in court. The penalties we are setting out are proportionate to the seriousness of the offences and take into consideration how widespread laundered diesel trading might be. It is a question of strengthening the hand of the enforcement agencies to deal with this matter so those who might be tempted to get involved in this illicit trade would desist on the basis they could lose their business rather than just be fined and continue on as before.

Amendment agreed to.
Sections 56 to 59, inclusive, agreed to.
SECTION 60.

Amendments Nos. 110 and 111 are related and will be discussed together by agreement.

I move amendment No. 110:

In page 121, line 16, to delete "or" and substitute "and".

The proposed amendments to section 60 as initiated substitute the word "and" for "or" at the end of paragraphs (a) and (b)(i) of subsection 1A to be inserted in the Betting Act 1931. They are technical amendments suggested by the Parliamentary Counsel after concerns were raised that the use of the word “or” might have the effect of weakening the new section 1A leaving it open to possible challenge. It is considered the proposed amendments remove the perceived potential weakness.

Amendment agreed to.

I move amendment No. 111:

In page 121, line 20, to delete "or" and substitute "and".

Amendment agreed to.
Question proposed: "That section 60, as amended, stand part of the Bill."

To quote the Minister, the poor man's horse has been running for years under floodlights and never got this concession. It is remarkable that it took the rich horse to prise this concession out of the Minister.

I agree. Unfortunately, it is difficult to get betting offices to stay open late at night for greyhound betting only, probably because the Deputy and I could be the heaviest punters there on the night.

Question put and agreed to.
Sections 61 to 69, inclusive, agreed to.
SECTION 70.
Question proposed: "That section 70 stand part of the Bill."

Does this section relate to the area of limits for services and businesses? On a previous occasion when amendments were tabled to increase the threshold for goods and services, the Minister indicated that EU rules restricted the level to which he could raise them. The thresholds have been raised in this year's budget. Have they been raised to the maximum permissible level under EU regulations? I refer to the registration threshold for VAT.

I will have to check that. I cannot recall the details although I do recall discussing the matter with officials when I made the changes. Memory suggests I brought them up as far as was possible. I understand the issue will come up in a later section.

I am sorry, I see they are covered under section 72.

Question put and agreed to.
Section 71 agreed to.
SECTION 72.

I move amendment No. 112:

In page 127, paragraph (b), to delete lines 4 and 5 and substitute the following:

"(ii) by deleting paragraph (c), and ”.

The purpose of this amendment is to ensure all business entities, including holding companies, can be included in the VAT grouping provisions provided for in section 8(8) of the VAT Act, thus ensuring there is no distortion of competition between groups formed under the current rules and groups formed under the rules to be introduced in this Finance Bill.

Does the Minister have a briefing note on whether we have reached the limits on those thresholds?

The increases in thresholds are in line with the recommendations contained in the small business forum report published earlier this year. In last year's budget the VAT registration thresholds were increased from €25,500 to €27,500 for services and from €51,000 to €55,000 for goods. The increases announced represent a further increase of over 27% on those thresholds.

If the increases made last year are also included, the VAT registration thresholds have been increased by over 37% in the two budgets. The sixth EU VAT directive permits the value of VAT registration thresholds to be maintained in line with inflation. If the thresholds that have been announced were increased in line with inflation they would rise to €36,900 for services and to €73,800 for goods. The additional cost would be approximately €20 million in a full year and could remove 3,500 businesses from the VAT net. We are not quite there yet.

Is it the Minister's intention to move towards the maximum limit?

Yes, I have increased the limits by 37% in two budgets. Those who are just above the threshold, regardless of what it may be, always argue they are caught. There is no graduated line of compliance in that one is in or out.

The point has been made to me that a different threshold applies in Northern Ireland, particularly for guesthouses and bed and breakfast accommodation. Operators in the Republic are at a competitive disadvantage compared to those in Northern Ireland. I do not know whether this is because they have always had a different threshold and are locked in at a different level. Can the Minister clarify this?

The problem concerns the starting position at the time the sixth directive was adopted. We can only make increases in line with inflation from the point we were at originally. It may well be that the North had a higher threshold historically. When the sixth VAT directive was enacted, we could not play catch-up; we can only try to close the gap within the constraints of the directive's provisions. We have the third highest threshold in Europe.

Amendment agreed to.
Section 72, as amended, agreed to.
Sections 73 to 79, inclusive, agreed to.
NEW SECTION.

I move amendment No. 113:

In page 130, before section 80, to insert the following new section:

80.—Section 14 of the Principal Act is amended with effect from 1 March 2007 in subsection (1) by substituting the following paragraph for paragraph (b):

"(b) the total consideration which such person is entitled to receive in respect of such person’s taxable supplies has not exceeded and is not likely to exceed €1,000,000 in any continuous period of 12 months,”.”.

This amends section 14 of the principal Act, which deals with the cash basis of accounting for VAT. Traders on the cash basis of accounting must account for VAT only when they receive payment from their customers rather than when the invoice is issued. This has cash-flow advantages for businesses. I announced in the Budget Statement that I am increasing the turnover threshold of this provision from €653,000 to €1 million, with effect from 1 March 2007.

Amendment agreed to.
Sections 80 to 88, inclusive, agreed to.
SECTION 89.

I move amendment No. 114:

In page 132, line 23, to delete "is revoked" and substitute "are revoked".

This amendment is to correct a minor typographical error in the Bill.

Amendment agreed to.
Section 89, as amended, agreed to.

I propose to introduce Report Stage amendments on the designation of places for the storage of seized or detained goods in the care of the Revenue Commissioners in anticipation of a move of the State warehouse to a new premises. I propose a Report Stage amendment to sections 61 to 67, inclusive, relating to excise duty on firearms certificates. This would change the introductory date for the sections. I also propose an amendment exempting privately provided home care services from VAT.

NEW SECTIONS.

Amendment No. 115 not moved.

Amendment No. 116 was grouped with amendment No. 104 but as the grouping was made during a previous session, during which Deputy Boyle was not present, it is only reasonable to allow him to discuss it at this stage. The amendment, in addition to amendment No. 117, was discussed with amendment No. 104, to which the Deputy may refer.

I move amendment No. 116:

In page 132, before section 90, but in Part 3, to insert the following new section:

90.—The Minister shall introduce a VAT refund mechanism for at least that part of the unrecoverable VAT liability of Irish charities funded from public fundraising.".

I thank the Chairman. I thought it unusual that the amendments would be grouped although they were to be discussed in two different sessions. I will be brief because I appreciate that the discussion of amendment No. 104 has already taken place. I am led to believe that consideration is being given to the Danish model, an example that did not figure in previous Finance Bills. If the model is being used elsewhere, we should consider whether it could apply here.

Amendment No. 117 operates on the same principle but applies to schools, particularly voluntary schools. The Irish Primary Principals Network estimates that the average spend by primary schools in excess of the capitation grant, which amounts on average to €48,000, is €25,000 per year. This results in the schools having to raise, through fund-raising and voluntary contributions, approximately €75 million per year in addition to what they receive from the State, which is mainly for salaries. Given that most schools pay VAT at 13.5%, the Irish Primary Principals Network estimates that the VAT-related portion of the expenditure on schools is in the region of €10 million per annum.

The Primary Principals Network, groups such as Educate Together and representatives of Gaelscoileanna and faith schools are arguing that the full capitation grants do not meet the costs of running their schools, yet, of the additional funds raised by the schools themselves, a high proportion is taken in VAT. I am not sure whether the charities formula and the Danish example apply directly in this case but it is fair, given that this campaign is running on a national basis, that the Minister use the opportunity presented by my tabling this amendment to respond to the arguments and indicate whether the Government is in any way disposed to considering necessary changes in the Bill to help the sector, which, after all is providing a very important public service.

Answering that would require me to re-read my extensive speaking note on amendment No. 104. Suffice it to say that under EU law, it is not possible to reduce or remove the VAT rate for a particular customer, in this case charities or educational institutions. The rate of VAT that applies to a particular good or service is determined by the nature of the good or service and not by the category of customer, regardless of the fact that his or her motivation may be well-founded. This view is also held by the European Commission, which has stated that while charities cannot be refunded through the VAT system, State aid rules are to be observed. It is a question of trying to find some way of compensating them for irrecoverable VAT. A substantial number of groups would be claiming a refund. One must consider the extent to which grant aid recoupable to organisations could be based on their spending profiles rather than their actual needs. It would not be a very good principle on which to try to design a scheme. There are many reasons why the amendment cannot be accepted but I have made the basic point.

Deputy Bruton stated the Danish Government had sought to devise a scheme to address this matter. I am not veryau fait with it and I said that to be helpful, I would check it to determine whether it could apply here. Perhaps I will have information next week but this would be a high mark to hit.

The Irish Charity Tax Reform Group is bringing a member of either the Danish Department of Finance or Parliament to speak on this mechanism next week. It might be opportune for the Department to arrange a meeting with him and discuss the option at hand.

Does the Minister accept the argument that capitation grants are only two thirds of the overall expenditure per pupil in these primary schools and that a high proportion of the third made up by voluntary fund-raising on the part of school boards of management and their officers comes back to the State through VAT? This area should be examined on its own.

The capitation grants question is perennially raised by those involved in education. They have been considerably extended and extra resources have been applied to that whole area by the Minister in terms of her Estimates campaigns. On every occasion she has increased the capitation fund and provided other assistance such as secretarial payments and assistance with administration expenses for schools. She recognises the costs involved. The capitation grant does not simply go towards those costs but towards broad maintenance costs for schools which depend on the state of the school. A record capital refurbishment programme is under way in schools so I hope it will deal with that historical deficit.

The level of capitation grant is a policy issue dealt with by the Minister and she has increased it on several occasions. I doubt there will ever be a situation where everyone is totally satisfied with the level of grant aid.

There are many school boards of management and parents' committees that raise funds in the community to enhance the capability of the schools in terms of study time and other extra-curricular activity. That is to the benefit of the students' education outside the system and, therefore, under VAT law it is not possible to exempt them from the VAT element of any goods or services they purchase as part of their operation to assist in the better educational facilities for their children. The capitation scheme will continue to be a matter for debate year on year.

In light of the examination of the Danish model, I will not press amendment No. 116.

Amendment, by leave, withdrawn.

I move amendment No. 117:

In page 132, before section 90, but in Part 3, to insert the following new section:

90.—The Minister shall introduce a VAT refund mechanism for at least that part of the unrecoverable VAT liability of educational institutions, recognised by the Department of Education and Science, for spending funded from public fundraising.".

Amendment put and declared lost.
Amendment No. 118 not moved.
Sections 90 to 93, inclusive, agreed to.
SECTION 94.

I move amendment No. 119:

In page 146, to delete lines 21 to 26 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 amendment makes a minor technical change to three of the course titles contained in the Schedule.

Amendment agreed to.
Section 94, as amended, agreed to.
NEW SECTION.

I move amendment No. 120:

120. In page 147, before section 95, to insert the following new section:

95.--(1) The Principal Act is amended by inserting the following after section 81B:

"81C.--(1) (a) In this section--

‘conditions of consolidation' means the conditions of consolidation as set out in guidelines;

‘consolidation certificate' means a certificate, issued for the purposes of this section by Teagasc to a farmer in relation to a sale and purchase of qualifying land both of which occur in the relevant period and within 18 months of each other, which identifies the lands concerned, the owners of such lands and certifies that Teagasc is satisfied, on the basis of information available to Teagasc at the time of so certifying, that the sale and purchase of qualifying land complies, or will comply, with the conditions of consolidation set down in guidelines;

‘farmer' means a person who spends not less than 50 per cent of the person's normal working time farming;

‘farming' includes the occupation of woodlands on a commercial basis;

‘guidelines' means guidelines made and published pursuant to paragraph (b)(i);

‘interest in qualifying land' means an interest in qualifying land which is not subject to any power (whether or not contained in the instrument) on the exercise of which the qualifying land, or any part of or any interest in the qualifying land, may be revested in the person from whom it was purchased or in any person on behalf of such person;

‘PPS Number', in relation to a person, means the person's Personal Public Service Number within the meaning of section 262 of the Social Welfare Consolidation Act 2005;

‘purchase of qualifying land' means a conveyance or transfer (whether on sale or operating as a voluntary dispositioninter vivos) of an interest in qualifying land to a farmer and includes a conveyance or transfer where the qualifying land is conveyed or transferred to joint owners where not all the joint owners are farmers; and the date of the purchase of qualifying land shall be the date on which the conveyance or transfer is executed;

‘qualifying land' means relevant land in respect of which a consolidation certificate has been issued by Teagasc;

‘relevant land' means agricultural land, including lands suitable for occupation as woodlands on a commercial basis, in the State and such farm buildings together with the lands occupied with such farm buildings as are of a character appropriate to the relevant land but not including farm houses or mansion houses or the lands occupied with such farm houses and mansion houses unless such farm houses or mansion houses are derelict and unfit for human habitation;

‘relevant period' means the period commencing on 1 July 2007 and ending on 30 June 2009;

‘sale of qualifying land' means a conveyance or transfer (whether on sale or operating as a voluntary dispositioninter vivos) of an interest in qualifying land by a farmer and includes a conveyance or transfer where the qualifying land is conveyed or transferred by joint owners where not all the joint owners are farmers; and the date of the sale of qualifying land shall be the date on which the conveyance or transfer is executed;

‘valid consolidation certificate' means a consolidation certificate which, on any day, has not been withdrawn as at that day.

(b) For the purposes of this section--

(i) the Minister for Agriculture and Food with the consent of the Minister for Finance may make and publish guidelines, from time to time setting out-

(I) how an application for a consolidation certificate is to be made,

(II) the documentation required to accompany such an application,

(III) the conditions of consolidation, and

(IV) such other information as may be required in relation to such application,

(ii) where an application is made in that regard, Teagasc shall issue a consolidation certificate in respect of a sale and purchase of relevant land, where they are satisfied, on the basis of information available to Teagasc at that time, that the sale and purchase of such lands complies, or will comply, with the conditions of consolidation, and

(iii) Teagasc may, by notice in writing, withdraw any consolidation certificate already issued.

(2) This section applies to a purchase of qualifying land by a farmer on any day (in this section referred to as the ‘calculation day' falling within the relevant period.

(3) Subject to subsections (4) and (5), stamp duty shall be chargeable on the instrument giving effect to the purchase of qualifying land to which this section applies as if it were a purchase of qualifying land made in consideration of a sum determined by the formula—

where—

P is the aggregate of—

(a) the value of the qualifying land being purchased, and

(b) the value of all other qualifying land purchased by the farmer in the relevant period where the date of the purchase falls in the period of 18 months ending on the calculation day, and

S is the aggregate of the value of all the qualifying land sold by the farmer in the relevant period where the date of the sale falls in the period of 18 months ending on the calculation day.

(4) Where an amount of duty has been paid in accordance with subsection (3) and is not repayable (in this subsection referred to as the ‘relevant amount') on a purchase of qualifying land by a farmer on a calculation day (in this subsection referred to as the ‘first calculation day'), the duty chargeable on a purchase of qualifying land by the farmer on a later calculation day, which falls within the period of 18 months commencing on the first calculation day, shall be reduced by the relevant amount.

(5) Where at any time in the period of 18 months commencing on a calculation day, qualifying land is sold by a farmer, that sale shall be treated as if it were a sale made on the calculation day and the duty chargeable, in accordance with subsection (3), on the instrument giving effect to the purchase of qualifying land made on the calculation day shall be recomputed in accordance with subsection (3) and an amount equal to the difference between--

(a) the duty charged on the instrument prior to the recomputation, and

(b) the duty that is chargeable on the instrument after the recomputation,

shall, subject to compliance with the conditions set out in subsection (6), be repaid by the Commissioners where a claim for repayment is made to them in that regard.

(6) A claim for relief under subsection (3) or a claim for relief by way of repayment under subsection (5), made to the Commissioners under this section, shall be allowed on the production to them of—

(a) the instrument giving effect to the purchase of the qualifying land,

(b) a certified copy of the instrument giving effect to the sale of the qualifying land,

(c) a valid consolidation certificate in relation to the purchase and sale of the qualifying land in respect of which the claim for relief is being made,

(d) a declaration of a kind referred to in subsection (7), made by each farmer who has purchased the qualifying land referred to in paragraph (a),

(e) a declaration made in writing by each person, who has purchased the qualifying land referred to in paragraph (a), in such form as the Commissioners may specify, declaring that it is the intention of such person—

(i) to retain ownership of his or her interest in the qualifying land, and

(ii) that the qualifying land will be used for farming, for a period of not less than 5 years from the date on which the first claim for relief in respect of the qualifying land is made, and

(f) the PPS Number of each person who has purchased the qualifying

land referred to in paragraph (a).

(7) The declaration referred to in subsection (6)(d) is a declaration made in writing by a farmer, in such form as the Commissioners may specify, which—

(a) is signed by the farmer, and

(b) declares that the farmer—

(i) will remain a farmer, and

(ii) will farm the qualifying land referred to in subsection (6)(a),

for a period of not less than 5 years from the date on which the first claim for relief in respect of the qualifying land is made.

(8) This section shall not apply to an instrument unless it has, in accordance with section 20, been stamped with a particular stamp denoting that it is duly stamped or, as the case may be, that it is not chargeable with any duty.

(9) (a) Subject to paragraph (b), where any person who purchased qualifying land by any instrument in respect of which relief was allowed by the Commissioners, disposes of such qualifying land, or part of such qualifying land, within a period of 5 years from the date on which the first claim for relief in respect of the qualifying land is allowed, then such person or, where there is more than one such person, each such person, jointly and severally, shall become liable to pay to the Commissioners a penalty of an amount equal to the amount of the difference between—

(i) the duty that would have been charged on the value of such qualifying land, if such qualifying land had been purchased by that person or, where there is more than one such person, each such person, by an instrument to which this section had not applied, and

(ii) the duty, if any, that was charged and is not repayable on the instrument concerned, together with interest charged on that amount, calculated in accordance with section 159D, from the date of disposal of the qualifying land or, as the case may be, a part thereof, to the date the penalty is remitted.

(b) Paragraph (a) shall not apply to any disposal of qualifying land which is being compulsorily acquired but subsection (5) shall not apply to give relief, after that disposal, in respect of the duty already charged on the purchase of qualifying land.

(c) Where any claim for relief from duty under this section has been allowed and it is subsequently found that a declaration referred to in paragraph (d) or (e) of subsection (6)—

(i) was untrue in any material particular which would have resulted in the relief not being allowed, and

(ii) was made knowing same to be untrue or in reckless disregard as to whether it was true or not, then the person or persons who made such a declaration, jointly and severally, shall become liable to pay to the Commissioners a penalty of an amount equal to the amount of the difference between—

(I) 125 per cent of the duty that would have been charged on the instrument had this section not applied due to all the facts not having been truthfully declared, and

(II) the duty, if any, that was charged and is not repayable on the instrument concerned, together with interest charged on that amount, calculated in accordance with section 159D, from the date when the claim for relief was made to the Commissioners to the date the penalty is remitted.

(d) Where a consolidation certificate, purporting to be valid at the date when a claim for relief under this section is made to the Commissioners, is furnished to the Commissioners and it subsequently transpires that the consolidation certificate was not a valid consolidation certificate on that date, the parties to the instrument who have purchased the qualifying land, jointly and severally, shall become liable to pay to the Commissioners a penalty of an amount equal to the amount of the difference between—

(i) 125 per cent of the duty that would have been charged on the instrument had this section not applied to it, and

(ii) the duty, if any, that was charged and is not repayable on the instrument concerned, together with interest charged on that amount, calculated in accordance with section 159D, from the date the claim for relief is made to the Commissioners to the date the penalty is remitted.

(10) Notwithstanding subsection (9)—

(a) where relief under this section was allowed in respect of any instrument, a disposal by a farmer or other joint owner of part of the qualifying land to a spouse for the purpose of creating a joint tenancy in the qualifying land, or where the instrument gave effect to the purchase of the qualifying land by joint owners, a disposal by one joint owner, to another joint owner (being a farmer) of any part of the qualifying land, shall not be regarded as a disposal to which subsection (9) applies, but on such disposal, such part of the qualifying land shall be treated for the purposes of subsection (9) as if it had been purchased immediately by the spouse or other joint owner by the instrument in respect of which relief was allowed,

(b) a person shall not be liable, in respect of the same matter, to more than one penalty under paragraph (a), (c) or (d) of subsection (9),

(c) a person shall not be liable, in respect of the same matter, to a penalty under paragraph (a) of subsection (9), if and to the extent that such person has paid a penalty under paragraph (c) or (d) of subsection (9),

(d) a person shall not be liable, in respect of the same matter, to a penalty under paragraph (c) of subsection (9), if and to the extent that such person has paid a penalty under paragraph (a) or (d) of subsection (9), and

(e) a person shall not be liable, in respect of the same matter, to a penalty under paragraph (d) of subsection (9), if and to the extent that such person has paid a penalty under paragraph (a) or (c) of subsection (9).

(11) This section shall not apply to any instrument effecting a purchase of qualifying land where the party or, as the case may be, any of the parties to such instrument, is a company.

(12) This section applies as respects instruments executed on or after 1 July 2007 and on or before 30 June 2009.".

(2)Subsection (1) comes into operation on the making of an order to that effect by the Minister for Finance.”.

This is a detailed amendment relating to farm consolidation. Section 81B of the Stamp Duties (Consolidation) Act 1999 contains a stamp duty relief on exchange of farmland between two farmers for the purposes of consolidating each other's holding. Under the relief no stamp duty is charged where such lands being exchanged are of equal value. Where the lands are not of equal value, stamp duty is charged on the amount of the difference in the value of the lands concerned.

The refund under section 81B is due to expire on 30 June this year. There was a limited take up of the relief in the 19 months since its introduction which was largely due to the fact that both farmers had to consolidate their own holdings to qualify for the relief. Arising from this, section 95 of the Bill as published contains changes intended to allow relief in cases where only one farmer involved in the exchange consolidates his or her farm. Following consultation with farming interests, I have decided to make further practical changes to the relief which will replace the changes made to the Bill as published and this I hope will encourage improved take up of the relief.

The policy objective is to recognise that modern agriculture in Ireland requires consolidated holdings to establish viability. We are aware of the historical fragmentation of land ownership in Ireland and there is no doubt it is a major structural challenge to maintain as many viable farmers on the land in the years ahead in the context of the radically and rapidly changing costs environment in which they must operate and price environment for commodities in view of WTO and CAP reform changes that continue apace.

The changes being brought forward under this amendment involve a new section 81C being inserted into the Stamp Duties (Consolidation) Act 1999 that will apply from 1 July 2007 to 30 June 2009. The section will allow a farmer to claim relief where he or she sells land and purchases land where both the sale and purchase occur within 18 months of each other to consolidate his or her holding. The relief will apply provided Teagasc has issued the farmer with a consolidation certificate in respect of that sale and purchase.

As with the current provisions of section 81B, the new section will apply to land in the State which is agricultural land with no residential buildings on it and will include lands for occupation as woodlands on a commercial basis. The relief will operate where there is a purchase and sale of land within 18 months of each other that satisfy the conditions of consolidation. Stamp duty will only be paid on the purchase to the extent that the value of the land that is purchased exceeds the value of the land that is sold. If the sale takes place before the purchase, relief will be given at the time of purchase. However, if the purchase takes place first then stamp duty must be paid but on the subsequent sale a claim for repayment can be made to the Revenue Commissioners.

To qualify for relief under the new section 81C, where a claim for relief arises on a purchase for land or a sale of land has already taken place, or where relief is claimed on the purchase where the sale of land occurs after the purchase, certain main conditions must be satisfied. A valid consolidation certificate must be issued by Teagasc for the purchase and sale of land occurring within 18 months of each other in respect of which purchase relief is sought. This certificate is to be submitted to the Revenue Commissioners in support of an application for relief, together with the instrument giving effect to the purchase of the land and a certified copy giving effect to the sale of the land. The Minister for Agriculture and Food, with the consent of the Minister for Finance, will make the necessary guidelines detailing how applications for consolidation certificates are to be made to Teagasc under this new section and also setting out, among other things, the conditions of consolidation.

The second condition to be satisfied is that the farmer, or each of them if there is more than one, involved in the purchase of the land must sign a declaration for submission to Revenue to the effect that each of them will spend at least 50% of their normal working time farming and will farm the land purchased for at least five years from the date on which the first claim for relief in respect of the purchase of the land is made to Revenue.

All joint owners of the land purchased, including the farmers, must make a declaration for submission to Revenue to the effect that it is the intention of each of them to retain ownership of their interest in the land and that the land will be used for farming for at least five years from the date the first claim for relief in respect of a purchase of land is made to Revenue. The instrument giving effect to the purchase of the land must be submitted to the Revenue for adjudication.

The section also provides for a claw back of the relief where the land or part of the land purchased is disposed of or partly disposed of before the end of the five year holding period. Such a claw back will not occur where the land purchased is compulsorily acquired. The section provides for penalties to apply where a false declaration is made or where an invalid consolidation certificate is used to obtain the relief.

The relief will apply on instruments executed on or after 1 July 2007 and on or before 30 June 2009. The commencement of the section, however, is the subject a ministerial order.

Will this apply where a farmer has two sons and they want to swap land? If a farmer in Marshalstown has two sons, one of whom lives in Ballindangan but who wants to come back to Marshalstown and wants to swap his land because it would suit him better, will there be any relief for them? Consolidation is the word.

If one of the farmers concerned meets the conditions for consolidation this relief will be available to him.

I raise this matter because as a result of our history our land has always been severed. The Minister is as much a rural person as I am and understands rural Ireland. This is a great opportunity to bring all severed land into line. The local authorities and the National Roads Authority own land across the country but leave corners and angles which could be swapped. The Minister is innovative in bringing this about but it might need more refinement.

Local authorities should be encouraged to get farmers together in their areas to put land together rather than have farmers drive back and forth. For example, they spend a great deal of money building underpasses under roadways. This would be unnecessary if the land were put together in a more orderly way through liaison between local authorities, farming organisations or the farmers themselves. There would also be a saving to the State. For years we have been trying to do something like this and it may need more refinement.

I agree with the Deputy. In my three budgets I have tried to recognise that we must try to incentivise farmers to consider how they can improve viability by a greater consolidation of their holdings. The initial point was raised in respect of an exchange between farmers but that was not well taken up because there were too few instances of contemporaneous exchanges that represented consolidation in both cases and suited both people at the same time.

Two farmers are no longer necessary for an exchange that merits this relief. One can operate alone by buying from farmer A and selling to farmer B. If one can get a consolidation certificate to show that one has improved the consolidation of one's holding one is entitled to stamp duty relief.

This is very innovative and welcome.

Farming organisations, through their networks, can bring this to the attention of farmers and work with Teagasc, rather than local authorities, to investigate how, in terms of land ownership patterns in their own area, they might consider working to improve the consolidated holdings of several farmers, if broad agreement can be obtained. When it comes to dealing with land, however, it is not easy to get co-operation on all sides but this would help.

I would like to see this being advertised in such a way as to make people in rural Ireland aware of it. Finance Bills are comprehensive documents and contain many good provisions but much of that does not reach the public.

The Deputy's leafleting operation in his constituency would be an outstanding example of how to do this in an accurate and non-expansive way.

I do not have an urban constituency and do not distribute leaflets.

In other words, the Deputy will continue to make representations on this matter throughout the year.

I might write to the Minister if he will spell out the letter to me.

Amendment agreed to.
Section 95 deleted.
SECTION 96.

I move amendment No. 121:

In page 149, subsection (2), line 41, to delete "the date of the passing of this Act" and substitute "7 December 2006".

This section inserts a new section 82B into the Stamp Duties Consolidation Act 1999. The purpose of the new section is to provide for an exemption from stamp duty for acquisitions of land by a sporting body approved under section 235 of the Taxes Consolidation Act 1997 where the land acquired will be used for the sole purpose of promoting athletic or amateur games or sports.

The purpose of this amendment is to provide that the new section will apply to instruments executed on or after 7 December 2006, that is, after the 2007 budget, and not just to instruments executed on or after the date of the passing of the Finance Act 2007 as provided for in the Bill as published. I commend this amendment to the committee.

I welcome this far-sighted amendment. This is another topic that we have discussed for some time with the Minister and he has yielded to our demands. Anything that helps reduce costs for sporting people must be welcomed so I say well done to the Minister.

I raised this matter for two years in a row. I am glad that the Minister has taken into account my representations and those of sporting bodies. It was an issue of particular concern in Deputy Ned O'Keeffe's constituency where one of the GAA clubs wanted to buy a pitch but was faced with prohibitive stamp duty arrangements. It is appropriate that the Minister does this, and that we acknowledge that he has responded to our representations.

Does the reference to athletic or amateur games imply that for-profit sports are included, or is this confined to amateur sports? Developers are interested in the lands of golf clubs and make regular offers to swap land. Would a private golf club benefit from this exemption? Deputy Ned O'Keeffe and I were making representations for GAA clubs and the like.

Mallow GAA club. That goes back some time, the Deputy has a good memory.

Yes, it was nearly two and a half years ago.

It affects the GAA club in Portlaoise too.

What is the situation regarding private golf clubs? In Dublin, developers haunt the doorsteps of these clubs seeking land swaps and offering the members of private golf clubs quite lucrative arrangements if they sell the land. Has the Minister considered the implications of this provision for such clubs?

If developers buy golf clubs they pay stamp duty whereas sporting bodies—

Yes but I am asking about the phrase "athletic or amateur".

That is a definition taken from the tax Acts, section 235. I can give the Deputy a copy of this established definition.

If the club sells the land it must use the proceeds for the sport to get an exemption.

If a club buys 70 or 80 or maybe 100 acres, will it be exempted from stamp duty on the roll-over purchase?

Yes, if it builds a golf club in that place.

That was more or less my question as well because with the buoyancy in the economy, through the Minister's great efforts in driving the country forward, many sporting organisations are selling their premises in town centres and moving out and putting the money into developing their property so the roll-over will apply in those cases. We cannot welcome this too much because we were a long time looking for it. I made representations to the previous Minister for Finance on behalf of clubs and organisations in my area and now we have it. This will be better in the leaflet than the other news.

I included an anti-avoidance section in section 49 of the Finance Act in respect of capital gains tax on the proceeds.

It would be better to put this in the leaflet than the other story.

The Deputy can put that on the other side of the leaflet. For the sake of accuracy I also thank Deputy Aylward who made strong representations on this point.

Amendment agreed to.
Section 96, as amended, agreed to.
Sections 97 and 98 agreed to.
SECTION 99.

Amendments Nos. 122 to 126, inclusive, will be taken together as they are related.

On a point of order. I am slightly confused. Has section 97 been disposed of?

We are on section 99.

I move amendment No. 122:

In page 150, line 29, to delete "paragraph" and substitute "subsection".

Amendment No. 122 amends first-time purchaser relief in section 92B of the Stamp Duties Consolidation Act 1999. Under section 92B, a person whose marriage breaks up, whether by way of a decree of divorce, a decree of judicial separation, a decree of nullity or a deed of separation, may avail of first-time purchaser relief when buying another house to live in. The condition of the relief was that the person no longer retained an interest in the former marital home and, at the time of the new purchase, the spouse, or former spouse, of that person continued to occupy the former marital home, which both of them occupied prior to the marriage break-up.

Section 99 relaxes this latter condition to provide that the spouse or former spouse does not necessarily have to be still occupying the former marital home at a time when the person is seeking relief purchases his or her new home. If party A in a split-up purchases a home, he or she can only get first-time buyer's relief again if party B is living in the original home they shared as a couple. If party B has also moved and disposed of the house, neither of them can receive first-time buyer's relief.

This was an issue that arose from a parliamentary question from Deputy Carey regarding a constituent of his. I was not in a position to retrospectively solve her problem because she did not meet the condition.

What is the new condition? Is it that she did not get the proceeds of the sale?

The condition is that it is not a requirement for the former partner to be still in the original home.

Can one avail of the relief even if they have a share in the proceeds?

That is not relevant to the availability of this relief.

The original provision also denied first-time purchaser relief to an individual who left the marital home before the date of decree or the deed of separation was made and the person had an interest in another house or apartment apart from the former marital home. The purpose of this amendment is to cater for the situation where a person leaving the marital home would be denied first-time purchaser relief on the purchase of a new home for the sole reason that he or she goes ahead and purchases a new home in anticipation of, but prior to, the actual granting of the decree or the making of the deed of separation.

Traditionally, in a break-up the wife might stay in the former marital home. If she leaves the former marital home and purchases a new home, will she now merit stamp duty exemption?

For example, if I left the marital home and bought a second house, the condition of my getting the first-time buyer's relief was that my former wife was in the original home. There were situations where people could have disposed of their homes and gone their separate ways and neither of them were entitled to first-time buyer's relief. If I bought a home in anticipation of my separation or divorce coming through, I would not receive first-time buyer's relief. There were situations occurring which were not contemplated when the legislation was drafted.

In view of the situations in which people can find themselves, it should not be a condition for first-time buyer relief that those whose estranged partner remained in the original home could get the relief and those in different circumstances could not. It was an arbitrary condition on which to decide entitlement to relief. It was determined by another party, over who one had no control. The matter was brought to my attention through a parliamentary question. I contacted the Revenue Commissioners but I could not resolve the matter. I felt it necessary to introduce this amendment to rectify an unjust situation.

Do both parties get first-time buyer relief?

Only one of them, the person who left the marital home.

Yes. The other spouse keeps the house as part of the deed of separation. The person leaving is entitled to first-time buyer's relief.

Provided he or she was not a first-time buyer or owner of a house other than the marital home.

Yes. Normally, a wife who left the home and was buying another house, was entitled to first-time buyer's relief if her husband remained in the original home. However, in the case highlighted to me by a parliamentary question, the husband disposed of the home and went into another relationship. This meant his former wife was ineligible for first-time buyer's relief simply because her former husband had disposed of the original martial home. What did that have to do with her?

Where the separation agreement provides for the dividing of property, the relief does not apply. Is it neutral on that?

They would have already received first-time buyer's relief in such a case and would not be eligible for it. The retention of the house in the name of one of the parties in that case is not part of the separation arrangement. If they dispose of the house that is the end of it.

Amendment agreed to.

I move amendment No. 123:

In page 150, line 33, to delete "paragraph" and substitute "subsection".

We are dealing with section 99.

We are on amendment No. 123, about changing "paragraph" to "subsection".

Amendment agreed to.

Amendment No. 124 is in the name of the Minister and has already been discussed along with amendment No. 122.

I move amendment No. 124:

In page 151, to delete line 26 and substitute the following:

"clause (II).

(aa) (i) Where, by reason only of the fact that the first conveyance or transfer (referred to in paragraph (a)(i)) of a

dwellinghouse was executed on or before the date of the decree, and as a consequence the claimant cannot satisfy the conditions set out in subparagraphs (I) and (III) of paragraph (a)(ii), the claimant shall be deemed to be a first time purchaser for the purposes of the definition in subsection (1), where the first conveyance or transfer is executed in the period of 6 months ending on the date of the decree and the conditions set out in subparagraph (ii) are satisfied.

(ii) The conditions required by this subparagraph are that—

(I) the first conveyance or transfer was made in anticipation of the decree, and

(II) immediately before the date of the decree, the claimant was not beneficially entitled to an interest in any dwellinghouse other than the dwellinghouse referred to in subparagraph (i) and the dwellinghouse referred to in clause (II) of paragraph (a)(ii).

(iii) Where by virtue of subparagraph (i) a claimant is deemed to be a first time purchaser in respect of a first conveyance or transfer, the Commissioners, on a claim being made to them on that behalf and on the conditions set out in subparagraph (iv) being satisfied, shall cancel and repay such duty or part of such duty as would not have been chargeable had paragraph (a) applied to the conveyance or transfer when it was first presented for stamping. (iv) The conditions required by this subparagraph are that the claimant, when making a claim for repayment, shall produce to the Commissioners—

(I) the stamped instrument,

(II) a copy of the decree,

(III) a declaration made in writing by the claimant, in such form as the Commissioners may specify, confirming to the satisfaction of the Commissioners that—

(A) the conveyance or transfer was made in connection with the decree,

(B) immediately before the date of the decree, the claimant was not beneficially entitled to an interest in any dwellinghouse other than the dwellinghouse referred to in subparagraph (i) and the dwellinghouse referred to in clause (II) of paragraph (a)(ii),

(C) the dwellinghouse referred to in clause (II) of paragraph (a)(ii) did not cease to be occupied, at the date of the decree, by the spouse of the claimant as his or her only or main residence and the spouse was beneficially entitled to an interest in the dwellinghouse on that date or acquired such an interest after that date by virtue or in consequence of the decree,

(D) at the time of making the claim for repayment, the claimant was not beneficially entitled to an interest in the dwellinghouse referred to in clause (II) of paragraph (a)(ii),

(E) since the date of execution of the conveyance or transfer, the conditions referred to in subsection (3)(b)(ii) or, as the case may be, section 92(1)(b)(ii) have been complied with and will be complied with for the remainder of the 5 year period referred to in the subsection or, as the case may be, the section,

(F) the conveyance or transfer is one to which subsection (3A) does not apply, and

(G) where the dwellinghouse was conveyed or transferred to the claimant and another person, that the other person was a first time purchaser within the meaning of subsection (1), immediately prior to the date of execution of the conveyance or transfer concerned,

and

(IV) the PPS Number of the claimant and any other person to whom the dwellinghouse was conveyed or transferred, and

(V) such other evidence that the Commissioners may require for the purposes of this subparagraph.

(v) Subsection (4) shall apply to a conveyance or transfer to which subparagraph (ii) applies as it applies to an instrument to which subsection (2) applies, with any necessary modifications.",".

Amendment agreed to.

Amendment No. 125 has already been discussed with amendment No. 122.

I move No. 125:

In page 151, line 38, to delete "apartment."." and substitute "apartment;".

Amendment agreed to.

Amendment No. 126 has already been discussed with amendment No. 122.

I move amendment No.126:

In page 151, between lines 38 and 39, to insert the following:

" 'PPS Number', in relation to a person, means the Person's Public Service Number within the meaning of section 262 of the Social Welfare Consolidation Act 2005.".".

Amendment agreed to.
Section 99, as amended, agreed to.
SECTION 100.

We shall now take amendments Nos. 127 to 134, inclusive. As they are related, they shall be taken together.

I move amendment No. 127:

In page 152, lines 44 and 45, to delete "referenced to securities" and substitute "referenced directly or indirectly to securities".

Amendment agreed to.

I move amendment No. 128:

"In page 152, line 48, to delete " ", of an exchange or market,"..

Amendment agreed to.

I move amendment No. 129:

In page 153, line 13, to delete "title to".

Amendment agreed to.

I move amendment No. 130:

In page 153, line 24, to delete "on a transfer of title to securities" and substitute the following:

"on an instrument of transfer whereby any securities are on the sale of such securities transferred".

Amendment agreed to.

I move amendment No. 131:

In page 153, lines 35, to delete "the transfer" and substitute "the transfer of securities".

Amendment agreed to.

I move amendment No. 132:

In page 154, line 1, to delete "the transfer" and substitute "the transfer of securities".

Amendment agreed to.

I move amendment No. 133:

In page 154, line 9, after "market" to insert thee following:

"One of the conditions for such recognition is that the member firm consents in writing to make available for inspection, when so requested, such books and records of the business of the member firm as are relevant for the purposes of the Commissioners ensuring compliance by the member firm with this section.".

Amendment agreed to.

I move amendment No. 134:

In page 154, to delete lines 28 to 55, to delete pages 155 and 156, and in page 157 to delete lines 1 to 20, and substitute the following:

75A.—(1) In this section—

‘clearing house' means a body or association which provides services related to the clearing and settlement of transactions and payments and the management of risks associated with the resulting contracts and which is regulated or supervised in the provision of those services (in this section referred to as ‘clearing services') by a regulatory body, or an agency of government, of a Member State of the European Communities;

‘clearing participant' means a member of a recognised clearing house who is permitted by the clearing house to provide clearing services in connection with a transfer of securities;

‘client' means a person who gives instructions for securities to be sold;

‘nominee' means a person whose business is or includes holding securities as a nominee for a recognised clearing house acting in its capacity as a provider of clearing services or, as the case may be, a nominee for a clearing participant or a non-clearing participant;

‘non-clearing participant' means a member of an exchange or market;

‘recognised clearing house' means-

(a) Eurex Clearing AG,

(b) LCH.Clearnet Limited,

(c) SIS SegaInterSettle AG, or

(d) any other clearing house designated as a recognised clearing house for the purposes of this section by regulations made by the Commissioners.

(2) Stamp duty shall not be chargeable on an instrument of transfer whereby any securities are on the sale of such securities transferred in the circumstances referred to in subsection (3) where the conditions referred to in subsection (4) are satisfied.

(3) The circumstances referred to in this subsection are that the transfer of securities is—

(a) from a clearing participant or a nominee of a clearing participant, to another clearing participant or a nominee of that other clearing participant,

(b) from a non-clearing participant or a client, to a clearing participant or a nominee of a clearing participant,

(c) from a clearing participant or a nominee of a clearing participant, to a recognised clearing house or a nominee of a recognised clearing house,

(d) from a person other than a clearing participant, to a recognised clearing house or a nominee of a recognised clearing house, as a result of a failure by a clearing participant to fulfil that clearing participant’s obligations in respect of the transfer of securities to the recognised clearing house or a nominee of the recognised clearing house,

(e) from a recognised clearing house or a nominee of a recognised clearing house, to a clearing participant or a nominee of a clearing participant, or

(f) from a clearing participant, or a nominee of a clearing participant to a non-clearing participant or a nominee of a non-clearing participant.

(4) The conditions referred to in this subsection are that the person to whom the securities are transferred under a transfer of securities referred to in paragraphs (a) to (f) of subsection (3) (in this section referred to as the ‘relevant transfer’) is required on receipt of those securities to transfer securities under a matching transfer to another person, or in the case of a relevant transfer falling within paragraph (d), would have been so required if the failure referred to in that paragraph had not occurred.

(5) For the purposes of subsection (4), a ‘matching transfer' means a transfer of securities under which—

(a) the securities transferred are of the same kind as the securities transferred under the relevant transfer, and

(b) the number of and consideration paid for, the securities transferred are identical to the number of and consideration paid for, the securities transferred under the relevant transfer.

(6) (a) The Commissioners may, from time to time, make regulations to designate a clearing house as a recognised clearing house for the purposes of this section.

(b) Every regulation made under this section shall be laid before Dáil Éireann as soon as may be after it is made and, if a resolution annulling the regulation is passed by Dáil Éireann within the next 21 days on which Dáil Éireann has sat after the regulation is laid before it, the regulation shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.”.”.

Amendment agreed to.
Question proposed: "That section 100, as amended, stand part of the Bill."

Was this on foot of representations and in practice, what are the implications of the changes in the system? The Revenue Commissioners announced last year they were looking at certain new arrangements. They subsequently withdrew from this position around Easter time, the Minister may recall. Was this part of that review?

Yes. Over the past number of years, culminating with the issue early last year regarding stamp duty and the hedging of derivatives, it became obvious that our stamp duty code had not kept pace with the development of financial makets both in terms of its technology and products. In March 2006 I indicated that in view of uncertainties and difficulties I had become aware of, that I planned to review the laws in relation to stamp duty and share transactions, which underlined trading and contracts for difference based on Irish equities. My main concern was that the market in Irish equities should continue to be a modern liquid market conducive to capital acquisition by Irish firms.

Following consultation with the Revenue Commissioners, and with market participants at budget time, I announced that consideration was being given to introducing a new stamp duty relief for members of stock exchanges which would consolidate and replace existing outdated reliefs. The new relief for stock market intermediaries would better reflect modern share dealing practices. Arising out of that consultation process the changes made to the stamp duty code, as it affects the trading of Irish equities are as outlined in my previous statement.

Is this just in relation to contracts for difference and derivatives or does it apply generally?

It applies to everything.

Is there a loss or gain of revenue as a consequence of these changes?

As far as we know it is neutral.

Will it affect nominee investor?

Question put and agreed to.
NEW SECTION.

I move amendment No. 135:

In page 157, before section 101, to insert the following new section:

101.—(1) The Principal Act is amended-

(a) by inserting the following after section 31:

31A.—(1) Where—

(a) the holder of an estate or interest in land in the State enters into a contract or agreement with another person for the sale of the estate or interest to that other person or to a nominee of that other person,

and

(b) a payment which amounts to, or as the case may be payments which together amount to, 25 per cent or more of the consideration for the sale has been paid to, or at the direction of, the holder of the estate or interest at any time pursuant to the contract or agreement, and

(c) within 30 days of the first such time a conveyance or transfer, made in conformity with the contract or agreement, and executed by the parties to the contract or agreement is not presented to the Commissioners for stamping with ad valorem duty chargeable on it, then the contract or agreement shall be chargeable with the same ad valorem duty, to be paid by the other person, as if it were a conveyance or transfer of the estate or interest in the land.

(2) Where duty has been paid, in respect of a contract or agreement, in accordance with subsection (1), a conveyance or transfer made in conformity with the contract or agreement shall not be chargeable with any duty, and the Commissioners, on application, either shall denote the payment of the ad valorem duty on the conveyance or transfer, or shall transfer the ad valorem duty to the conveyance or transfer on production to them of the contract or agreement, duly stamped.

31B.—(1) In this section ‘development', in relation to any land, means-

(a) the construction, demolition, extension, alteration or reconstruction of any building on the land, or

(b) any engineering or other operation in, on, over or under the land to adapt it for materially altered use.

(2) Where-

(a) the holder of an estate or interest in land in the State enters into an agreement with another person under which that other person, or a nominee of that other person, is entitled to enter onto the land to carry out development on that land, and

(b) by virtue of the agreement, otherwise than as consideration for the sale of all or part of the estate or interest in the land, the holder of the estate or interest in the land receives at any time a payment which amounts to, or as the case may be payments which together amount to, 25 per cent or more of the market value of the land concerned, then within 30 days of the first such time, the agreement shall be chargeable with the same ad valorem duty, to be paid by that other person, as if it were a conveyance or transfer of the estate or interest in the land.”,

(b) by deleting section 36,

(c) by inserting the following after section 50:

50A.— An agreement for a lease or with respect to the letting of any lands, tenements, or heritable subjects for any term exceeding 35 years, shall be charged with the same duty as if it were an actual lease made for the term and consideration mentioned in the agreement where 25 per cent or more of that consideration has been paid.",

and

(d) by substituting “section 50 or 50A” for “section 50” in paragraph (4) of

the Heading "LEASE" in Schedule 1.

(2) This section comes into operation on such day or days as the Minister for Finance may by order appoint and different days may be appointed for different purposes or different provisions.".

The amendment inserts a new section into the Finance Bill 2007. The purpose of the section is to address arrangements used by some developers that, under current law, do not involve a liability for stamp duty. Stamp duty has been in existence for 100 years and has been an important source of revenue for the Exchequer. Stamp duties are imposed at various rates upon specified categories of instrument, subject to a range of exemptions. An instrument is included in every written document and liability for stamp duty arises when an instrument that attracts a charge is executed. For real property such as lands and buildings, the document that attracts a charge is the instrument by means of which legal title to land is conveyed or transferred from one owner to another.

In recent years, anecdotal evidence has surfaced which suggests that some developers have been entering into certain arrangements with the owners of the lands that are to be developed in order to ensure that the developer does not incur a liability for stamp duty. I asked the Revenue Commissioners last year to review these arrangements and the extent of their use. Arising from that review, the Revenue Commissioners have concluded that the bypassing by developers of a stamp duty liability is relatively common. For land developers who do not want to incur the stamp duty liability that would arise if title to the land concerned was taken, their objectives are to acquire rights that are sufficient for them to be able to enter the land in order to develop it and construct buildings, and to ensure that title to parcels of the land can be conveyed to purchasers along with the buildings.

The main arrangements used to achieve this objective include resting in contract. In this case, the developer contracts with the landowner to purchase the land, but does not take a conveyance of the lands. Another arrangement is by way of a licensing agreement. In this case, the developer obtains a licence from the landowner that entitles the developer to enter onto the land and direct buildings.

In these scenarios, the developer or the developer's bank would need to be guaranteed that legal title to each plot of land, including a newly-constructed building, can be conveyed or transferred in due course from the landowner to the ultimate purchasers of the new buildings. The usual way of achieving this is for the landowner to grant a power of attorney to either or both the developer and the bank, allowing them to execute a conveyance or transfer of the legal title to the ultimate purchaser without further recourse to the landowner.

The co-operation of the landowner is necessary to enter into such arrangements. This co-operation is generally assured when the developer pays to the landowner the full value of the land at the time the arrangements are entered into. From the landowner's viewpoint, the same economic benefits have accrued to him or her as if the land had in fact been conveyed to the developer.

Another way in which stamp duty liability is being circumvented, especially in respect of tax-driven developments, is the use of agreements for lease. For historical reasons, agreements for lease are only liable to stamp duty where their term is 35 years or less.

This new section treats each of these arrangements as giving rise to a stamp duty liability. This is in the case of a contract where 25% or more of the contract price has been paid over to the landowner, in the case of a licensing agreement where 25% or more of the value of the lands concerned has been paid over to the landowner, and in the case of an agreement for lease where 25% or more of the consideration has been paid over.

Deputy Nolan took the Chair.

From the Revenue point of view, I can understand the thinking behind this amendment. This was a way of avoiding the burden of tax. However, looking at it from the point of view of housing affordability, it seems that the Minister is getting an extraordinary whack even out of new housing. The site tax is 9% and in an earlier section he spoke about sites being worth up to €254,000, so we could be talking about €20,000 just on this element of the house price. Then there is the 13.5% VAT on the building cost, as well as the development levies and the Part V obligations for the houses, which are not in the affordable category, so the Part V obligation is obviously carried by the purchaser of the house. It all tots up to a very high burden on the cost of housing.

This is something of an accelerator. It is remarkable that figures for the past couple of years show a 75% increase in property values but the stamp duty take has grown by nearly 250%. There is a dramatic acceleration, although that is related to the structure of the stamp duty on houses. There is no doubt this raises an issue. The State has become extraordinarily dependent on taxes derived from the property boom. Different estimates will suggest 20% to 25% of State revenues now come from the property boom. With the best will in the world, it is hard to see that the level of activity and house price inflation will continue. To a degree, we are out on a limb in regard to this dependence.

We have a double problem in that these high taxes are contributing to the unaffordability of homes yet we also have the State becoming increasingly dependent on this source of revenue to keep everything going. There are issues around the taxation of housing. Obviously this cannot change abruptly but we feel stamp duty for first-time buyers needs to be radically changed. We have published our proposals in that regard, as have other parties.

Deputy McDowell has done so.

Yes. We are reaching a point where there needs to be more coherent consideration. The Minister's predecessor used to say stamp duty came in with William of Orange, in that it was one of his innovations in the tax code. That happened in 1693 but I wonder whether the tax designing capabilities that existed in the 17th century are still appropriate. There is a sense that this tax, while it has grown significantly and raises over €1.5 billion from the housing sector alone, as well as extra earnings from the rest of the construction sector, needs to be examined and brought into a more coherent shape.

The extraordinary ratchet effect is not welcome. If prices started to fall, there would be the opposite effect. Stamp duty would collapse quite quickly as we ran back down the staircase, and revenues would fall. Is the Minister considering a more rational structure for stamp duty to reduce the dependence on this type of tax, particularly the dependence on the ratchet effect? The notion that a 70% increase in the property market brings in three or four times that increase in stamp duty is not a healthy feature in a tax code in which one wants to have certainty and stability.

The Minister is correct to introduce this amendment. In my constituency there were serious problems with regard to developments on development land which had at their heart the avoidance of stamp duty by developers or those in the chain of development, who were inhibiting and hindering the acquisition of land, particularly for general communal purposes, such as school sites. Despite land being reserved in local area action plans and development plans, the developers were fundamentally reluctant — they still are to some extent — to sell the land, not at a reduced price, but at full market value to the Department of Education and Science because they wanted to enter licensing arrangements in regard to the development and sale of the land and, subsequently, the development of the school.

There is a view that this was closely related to various avoidance mechanisms they were utilising in regard to stamp duty, which made the withholding of even very attractive offers by the State to purchase land for community purposes inherently unacceptable to them. In places like west Dublin, tens of thousands of houses are being developed every year with the support and agreement of all the parties on the council, but it is proving impossible to acquire sites for school buildings. If this amendment goes some way to addressing those issues, it will be welcome.

I have raised this issue several times with the Minister's colleague in the Department of Education and Science and also with the Department of Finance. Does the Minister have figures on the extent to which this practice was used? My impression is that in west Dublin it was being used in 100% of cases. One might say that in the end the State was simply postponing the receipt of stamp duty but, in effect, because it was all new build, we cannot know what the net effect was on the State's take. Certainly, the situation where developers were unwilling to sell to the State for full market prices was becoming almost impossible. They were holding up sales for up to four years, presumably because of these stamp duty considerations.

Did the Minister commission a study on the impact or examine the files? Does he know how many instances of this practice happened? It would be interesting to know because there are many cases where developers can still avoid stamp duty. Another practice is to use the transfer of shares in a company as opposed to selling the underlying property. This attracts a rate of 1% rather than 9%, which is a very lucrative avoidance mechanism. Did the Minister get the figures on the extent of this practice? Did it mainly apply in developing areas like west Dublin?

To take Deputy Bruton's point, the question of how stamp duty and the tax base operate are matters for budgetary consideration at any time and every year. It is not helpful for me to speculate on what, if any, reforms are being considered for stamp duty in the future. These are matters for any incoming Minister for Finance during budget deliberation, based on what the overall parameters of the budget should be and what reforms are envisaged for it. Adding to the speculation would not be helpful because it gives a view to the marketplace that may not in fact emerge, and people might take behavioural decisions based on assessments which do not pan out.

I made my decision in regard to the last budget in terms of assisting purchasers, which brought a moderation in price increase to the market, sent a clear signal as to the direction of the policy and brought stability to the market at a time when there was volatility due to speculation about stamp duty.

The windfall gains do not form part of our budgetary parameters. By definition, we do not budget on the basis of windfall gains being with us every year. A windfall gain cannot be taken into account in the way a predictable, normal stream of expenditure would be included in the figures. We do not budget on the basis of windfall gains continuing; we budget on the basis of the underlying position. It is the only way that one can provide a stable budgetary framework into the future.

In reply to Deputy Burton, the Revenue Commissioners undertook this exercise on a sampling basis. They established that this was a common practice and devised this proposal to deal with it. Based on the sampling undertaken, they estimated that anything up to €40 million was involved. We expect the provisions we are now making will deal with that situation.

Amendment agreed to.
SECTION 101.
Question proposed: "That section 101 stand part of the Bill."

The purpose of this section is to amend section 159A of the Stamp Duties Consolidation Act 1999, which restricts the repayment of stamp duty to a claim made within,inter alia, four years of the date of stamping of an instrument by the Revenue Commissioners.

The amendment being made to the section would mean that a young trained farmer who is entitled to a repayment of the stamp duty paid on an instrument at the time of the transfer of land, would have a period of four years from the time he or she becomes the holder of the required educational certificate. For the purposes of the new section 81AA being inserted in section 94 of the Bill, top make the repayment claim to the Commissioners.

On a parallel matter which I have raised before by way of a parliamentary question, the Revenue Commissioners are carrying out a review of first-time buyers who are letting under the rent-a-room scheme or, otherwise, who are in breach of the rules of that scheme. I have had a number of inquiries where people have changed work and been relocated, some have been decentralised. As a consequence they may leave their home in west Dublin, for example, and relocate to Mallow. As I understand it, if they go over the rent-a-room scheme limit within the first five years of acquiring the home under the first-time buyer's relief, they are technically in breach of the regulations and there can be a clawback of the stamp duty relief they got as first-time buyers. In the answers to my parliamentary questions it was noted that the clawback amounted to couple of million euro

Banks and solicitors have a responsibility in this regard in that there are regulations applying to stamp duty relief for first-time buyers. This is a problem for some people. In other parts of the tax code there are relief provisions where someone genuinely, certifiably moves. I am not talking about people parading themselves as first-time buyers, who may be first-time buyers on behalf of their parents who are, essentially, investors.

Has the Minister given any consideration to this situation? I have raised it a number of times and I do not know the position of the Revenue on this issue. If people rent a room under the rent-a-room scheme, that is fairly clear as there is no tax liability. However, if they go a euro over the limit, they are in breach of the first-time buyers regulations on stamp duty relief. The Revenue may review their situation and claw the relief back.

There were a couple of hundred such cases last year. I dealt with five or six cases last year in parts of my constituency where there are vast numbers of new houses and apartments. One could argue that it is the job of mortgage providers and solicitors to tell people that the first-time buyer stamp duty exemptions are accompanied by fairly strict conditions which must be complied with. Has the Minister looked at this issue or has he been apprised of it by his officials?

No, I have not. I am not aware that the Financial Regulator has issued any guidelines on this matter. It is a question of customer protection and consumer interests in which he has a role. We could, perhaps, bring this issue to his attention to see if he feels it is an issue on which he should issue guidelines to legal practitioners to bring to the attention of purchasers the fact that there are terms and conditions applying to the eligibility for first-time buyer grants.

It is a question of whether this is something that we could communicate to the Law Society that it should directly contact practitioners about or whether the Financial Regulator would regard it as something he should issue guidelines about. I am not so sure.

The relief is granted where the purchaser or purchasers at the time of the execution of the deed had not individually or jointly with any other person or persons, previously purchased another dwelling house or apartment, or part of another dwelling house or apartment. The relief is granted to owner occupiers or where the property is occupied by some person in right of the purchaser. It is clawed back if the purchaser is in receipt of any rent from the dwelling house or apartment, other than rent under the rent-a-room scheme within five years of the date of execution of the deed. It is something about which people would need to obtain advice. They get a first-time buyer's grant on the basis that they will occupy the house. If they change the circumstances of their ownership or the tenancy of that house, they would need to take tax or legal advice on their obligations or the possibility of clawback arrangements.

Would the Minister consider asking the Revenue Commissioners to give guidance and advice to first-time buyers on the website? Mortgage providers, banks and solicitors should also give people very clear guidance on this. The affordable housing partnership is currently offering three-bed affordable houses in west Dublin for €320,000. That is almost ten times the average industrial wage. It is very expensive for the people who qualify to buy it. Many mortgage brokers and advisers are taking into account additional rental income that the person can generate and effectively adding that on to the consideration of income. The problem is that they are not advising people that if they exceed the limits set by Revenue, they can subsequently face a very substantial clawback. There are a number of such cases in my constituency.

A second issue arises where young people have mobile jobs and they can either go abroad for a while or they might decentralise, and it may take time before they finalise whatever arrangements they are making. If they let the house when they are abroad, they are at risk of forfeiting their stamp duty relief under the first-time buyer's guide. The Revenue Commissioners should issue some strong guidance on this, especially to mortgage providers and solicitors. A considerable number of people are not aware of the conditionality involved. There is a measure of avoidance when parents buy houses for children and those houses are let, but that is a separate avoidance issue. There are genuine people who are not sufficiently informed of their position in this regard.

It is important to point out that when someone obtains first-time buyer's relief, the purchaser certifies in the deed that he or she will not get rent other than on the basis of the rent-a-room scheme.

I know that.

There is not a quantum limit on rent-a-room receipts where the first-time buyer continues to occupy the house. It is the responsibility of people and their legal advisers to draw attention to these matters. If the Revenue Commissioners start asking solicitors to do their job to give full and frank legal advice on all the implications of a house purchase, that would be akin to micro-management. If solicitors reach their professional standards, they will make sure these things are brought to the attention of prospective purchasers. Revenue has no responsibility for this, but solicitors do. We could write to the director general of the Law Society stating that this matter was raised on Committee Stage of the Finance Bill 2007 and that a practice note should be put in the Law Society Gazette about it.

Question put and agreed to.
Section 102 agreed to.
SECTION 103.
Question proposed: "That section 103 stand part of the Bill."

I have some concern about the way capital acquisitions tax can impinge on families. In both my own and the Minister's constituencies many people move from Dublin to areas on the western side of counties Offaly and Westmeath and commute to work in the city on a daily basis. People in such circumstances sometimes subsequently inherit the family home in Dublin. Even a modest home in Dublin may well be valued at above the capital acquisitions tax threshold of €470,000 for an individual. If Johnny living in Kinnegad inherits his mother's house in Dublin that is valued at €700,000 or €800,000, for example, he must pay tax on the balance of that amount.

Would it not be of benefit to the State if people in those circumstances, instead of commuting on a daily basis from Kinnegad or elsewhere, could move back into the parental home in Dublin that they have inherited as sole recipient? If a condition were imposed that the person must live in that home for a specified substantial period, the capital acquisitions liability might then be waived. This does not arise when two or more children inherit a family home because in such cases, it will be sold and the Government will take its slice in stamp duty. It is also only relevant to Dublin city because house prices there are so much higher than elsewhere. In rural areas, a family home may include a parcel of land in which case farming relief will apply, thus lifting the threshold substantially. Does the Minister agree there is merit in this proposal? I ask him to consider it either on Report Stage or at a later time.

The Deputy's proposal relates to the value of inheritance and the point at which public policy requires a contribution to be made to the Exchequer in respect of the value of that inheritance as part of our capital tax code. The threshold for capital acquisition tax is nearly €0.5 million per child. This means that if three children inherit a family home worth less than €1.5 million, no capital acquisition tax applies. Where there is only one child and the threshold does not meet the full value of the inheritance there is a 20% liability. The basic principle is that in reducing rates from 40% to 20%, as we have done, in order to maintain the base we must avoid exceptions.

Exemptions may come into the tax code when rates are high in an effort to meet various situations where an injustice applies because of the rate of tax one imposes. My predecessor moved swiftly, however, to lower the rate, and this brought in far more tax. Capital taxes now represent nearly 16% of total tax take as against 4.5% when we took office. It is right that it should be so because as wealth increases, it is to be expected that there should be a greater tax on wealth. People have become more income-rich because we have a tax system that rewards work and enterprise and stimulates the employment rates that, in turn, fund the Exchequer to make the investments in public services on a sustainable basis that were aspirational in the past.

One of our objectives is to simplify the tax code to avoid situations where exceptions are made depending on particular circumstances. By establishing an affordable tax rate at which to charge and incur liability for tax, we have greatly increased compliance, the volume of transactions and revenue receipts. This affordable rate has also ensured a contribution is made from those who inherit the wealth that has become available to some families as a result of the increased property values that now pertain throughout the State, particularly in the greater Dublin area. That is the rationale for how the system is structured.

I see Deputy McGrath's point that his proposal offers a way, in the limited circumstances he has defined, to reduce commute times and facilitate people in moving back to Dublin. However, my doubt that anyone would ever want to leave Kinnegad weakens the Deputy's argument considerably. We should avoid particularising and exceptionalising the code even for the purpose of meeting a social objective, in this case, reducing commuting times for people in the particular circumstances to which the Deputy referred. One must balance any such proposal against the extent to which it would upset the basic structure and direction of the taxation system. I do not accept that such exceptional provisions are merited.

Rather than finding an exceptional case in which tax liability would not arise in respect of family home inheritance, capital acquisition thresholds should be raised to cover those circumstances to which the Deputy referred. That is a matter of policy consideration for the future. I am grateful for inheriting a simplified system from my predecessor and I am not minded to complicate it.

I take it the Minister intends to increase the threshold from €470,000 to something more manageable in the Dublin context. We will watch this space.

I did not say that. That is the second consecutive attempt by Fine Gael to find out what is in my election manifesto.

We are trying to discover what the Minister will do. His partners in government obviously do not know.

I am steady Eddie — Mr. Stability.

Question put and agreed to.
Sections 104 and 105 agreed to.
SECTION 106.

I move amendment No. 136:

In page 159, to delete lines 20 to 30 and substitute the following:

" "(3A) For the purposes of subsection (3)(a), in the case of a gift—

(a) any period during which a donee occupied a dwelling-house that was, during that period, the disponer’s only or main residence, shall be treated as not being a period during which the donee occupied the dwelling-house unless the disponer is compelled, by reason of old age or infirmity, to depend on the services of the donee for that period,

(b) where paragraph (a)(i) of subsection (3) applies, the dwelling-house referred to in that paragraph is required to be owned by the disponer during the 3 year period referred to in that paragraph, and

(c) where paragraph (a)(ii) of subsection (3) applies, either the dwelling-house or the other property referred to in that paragraph is required to be owned by the disponer during the 3 year period referred to in that paragraph.”.

(2) This section applies to gifts taken on or after 20 February 2007.".

This amendment has two purposes. First to ensure that any period during which a beneficiary of a gift of a house occupied a house that was, during that period, the only or main residence of the disponer, will not be regarded as a period during which that beneficiary occupied the house, unless the disponer is compelled, by reason of old age or infirmity, to depend on the services of that beneficiary.

The amendment also provides that the house must be owned by the disponer during the three-year period or periods in which the beneficiary must have occupied the house to qualify for exemption under section 86 of the Capital Acquisitions Tax Consolidation Act 2003. I commend the amendment to members.

This arrangement was introduced to facilitate those who cared for aged relatives in cases where the latter's intention was to gift the house to their carers. The Minister may be able to enlighten members. I understand there was a significant amount of avoidance activity in respect of parallel provisions that pertained to capital acquisitions tax involving the transfer of valuable houses, worth considerable sums, in the best parts of Dublin 4. By virtue of occupation under the capital acquisitions tax arrangements, such transfers were effectively avoiding capital acquisitions tax.

I raised this issue with the Minister last year and he replied to the effect that he had asked for some kind of examination or study on the matter to be carried out. While it does not equate exactly to this provision, can the Minister comment on this issue?

I do not recall the specific reference made by Deputy Burton.

The Revenue Commissioners were concerned about transfers to children of extremely valuable houses. I refer to extremely valuable houses rather than to the common or garden variety. Very wealthy individuals, who could afford to buy another house, could put their children to live in valuable houses, thus avoiding effectively any capital acquisitions tax issues by virtue of the rules in respect of occupation and the passage of time.

Some changes will be made on foot of examinations made by the Revenue Commissioners in this respect. Some changes are envisaged in the Finance Bill to deal with some of these matters and this amendment relates to both the issues raised by the Deputy and co-habiting couples. This provision is also directed at their circumstances and the amendment's purpose is to cover such broad situations.

Is the Minister concerned about avoidance? I do not necessarily refer to this provision, but to parallel arrangements.

No. This pertains to shared homes, co-habiting couples, siblings, children looking after parents and similar circumstances for which the relief is available. This provision addresses some anomalies that have arisen as a result of our efforts to accommodate such situations. We do not discern endemic fraud in this regard. It is simply a question of—

I refer to avoidance. In other words, it is possible for those with property worth €10 million to €20 million to avoid capital acquisitions tax by virtue of making arrangements. The purpose for which this measure has been introduced is clear and there is no disagreement in that respect.

Deputy Paul McGrath gave the example of someone from Kinnegad who inherited a much more modest property in the Dublin suburbs. There has been much discussion regarding the use of this provision by those with extremely valuable properties as a mechanism to avoid capital acquisitions tax. Rather like stamp duty, those on lower rungs of the ladder tend to be caught for capital acquisitions tax, whereas those who possess extremely valuable properties and have other incomes that enable them to buy other properties or live abroad can avoid it.

As I noted, this provision is in response to certain situations that came to the attention of Revenue. For example young people in their 20s moved from the family home to a gifted house, which constitutes an avoidance of inheritance tax if the value of the house was such that it would otherwise attract it. Therefore, we are introducing a provision to deal with such manufactured situations that came within the scope of a section that was contemplated for a completely different, more bona fide set of circumstances. An amendment has been tabled to close off any use of this provision in a manner that was not contemplated originally.

In a scenario in which a house is worth €10 million to €20 million, there is no limitation on value in respect of making arrangements that will completely mitigate capital acquisitions tax. Is that correct?

Revenue has not experienced any such instances. Dwelling-house relief for capital acquisitions tax was introduced for inheritances in the Finance Act 1991 and was considerably extended and widened to include gifts in the 2000 budget and the Finance Act 2000.

The features of the relief are: that the beneficiary must live in the gifted or inherited house for three years before and six years after the gift or inheritance; that the beneficiary must not have an interest in any other house at the time of the gift or inheritance and there is no limit in either the value of the house or the extent of the land surrounding the house; and the donor or the deceased is not obliged to live in the house prior to the gift or inheritance. According to a survey undertaken recently by Revenue, the cost of the relief in respect of gifts and inheritances in the year ended 31 December 2005 was up to €28 million. The number of properties involved in respect of gifts and inheritance is 189 and 346, respectively.

In the case of gifts, changes are being made to tighten the current provision relating to the replacement of one dwelling house with another to ensure that both houses are required to be owned by the disponer. This is to copperfasten the existing legislation to ensure that an individual who, for example, owned and sold his or her home cannot claim that a house that is subsequently gifted to him or her within weeks, is directly or indirectly replacing the home he or she sold for the purposes of the three-year condition.

A child is not treated as occupying a dwelling owned and lived in by his or her parents for the purposes of this relief. This is to deal with the situation in which a child has been living at home with his or her parents, the parent buys a house that is then gifted to the child. The legislation combines the period of occupation in the new dwelling house with the period of occupation in a dwelling house that has directly or indirectly replaced other property for the purposes of the three-year period.

Some scenarios have been encountered that were outside the original scope of the section and we are closing that off.

The Minister referred to 189 gifted properties and 346 inherited properties that availed of this section. What were the highest values associated with such properties?

I do not know. A total of 189 properties were gifted and the aggregate value was approximately €32.7 million. The value of the 346 inheritances was approximately €107.3 million.

What was the value?

The average value in respect of inheritances was approximately €300,000 apiece. As for the gifted properties, if one considers approximately 200 houses with an aggregate value of €32 million, the approximate average value is €160,000.

Amendment agreed to.
Section 106, as amended, agreed to.
Sections 107 and 108 agreed to.

We have completed the next section that was scheduled to be completed by 8 p.m. tonight. We were scheduled at this stage to sit at least until 5 p.m. We will keep going.

Amendment No. 137 not moved.
Section 109 agreed to.

I wish to advise that I will table Report Stage amendments in respect of sections 95, 100 and 101. I will bring forward two amendments on Report Stage in respect of the designation of places for the storage of seized or detained goods in the care of the Revenue Commissioners in anticipation of a move to a State warehouse. I believe I already mentioned this.

NEW SECTION.

I move amendment No. 138:

In page 160, before section 110, to insert the following new section:

110. — The Minister shall make regulations to require the National Pension Reserve Fund to adopt an ethical investment policy and to comply with such requirements and subject to such conditions as may be prescribed.".

I will not take too long in respect of this amendment, which has been submitted in previous years. As was seen in respect of the VAT situation earlier, where we had an example of how Denmark dealt with that particular situation, since the last Finance Act, we have seen how the Norwegian Government asked its national pensions fund to introduce a set of guidelines on ethical investment. Where this issue has come up in the past from the perspectives of the Minister, the Department and the National Pensions Reserve Fund, the question has always been asked about defining ethics. This amendment does not seek to get the Minister to do this but seeks to place an obligation upon the NPRF with regard to the ethical framework it thinks can and should be operating under, given international practice.

We have had a UN charter in respect of this, but this is non-binding. They are only guidelines. I ask the Minister to give active consideration to the situation that pertains in Norway and make regulations that would ask the NPRF to come back to him with information regarding how it thinks this can be done in the future.

Deputy Boyle knows I take a different view on this matter. The National Pensions Reserve Fund Act 2000 gave absolute discretion to the NPRF commission to control, manage and invest the assets of the fund. When the legislation was being drafted, the question of whether the investment policy of the fund should be strictly commercial or whether it should take account of ethical, environmental and other public policy criteria was considered.

The major difficulty in deciding on an ethical investment policy is where to draw the line in defining the parameters of the policy, given that there will always be different opinions as to what constitutes ethically and socially responsible investment. It is unlikely that there will be a broad consensus on any one ethical investment policy because the points on the list of what might be considered unacceptable investments are likely to change continually in light of developments in the political, social and scientific spheres. Any attempt to define appropriate investments for the fund in legislation and regulations would bring with it significant danger of dragging the NPRF commission into public controversy and paralysing its investment procedures.

An ethical investment policy could raise significant operational issues for the fund by ruling out the use of equity futures to head against market exposure because such futures contracts are linked to broad market indices inevitably containing some prohibited investment. There would also be less opportunity to undertake crossing transactions where equities are traded directly with other funds, thereby cutting out brokers, reducing fees and increasing the return on the moneys invested.

Clearly, there would be significant difficulties in incorporating an ethical policy into the investment mandate, no matter what approach is taken in pursuing such a policy. Accordingly, the investment mandate included in the legislation was modelled on the standard commercial mandate for private pension funds to maximise returns, subject to prudent risk management.

I take the view that any move towards imposing an ethical investment policy on the fund would politicise the investment mandate, and give rise to significant difficulties in its interpretation and implementation. The NPRF joined a group of the world's largest institutional investment funds in signing the UN-sponsored principles for responsible investment at their launch in April 2006. The aim of the principles is to integrate the consideration of environmental, social and governance issues into investment decision-making and ownership practices and, thereby, improve long-term returns. The principles reflect the fiduciary duty of investors to their stakeholders as their first responsibility and deliberately do not call for screening or avoiding stocks. Instead, they promote a policy of engagement with companies where shareholders regard themselves as long-term owners of companies and raise concerns directly with company management.

The NPRF has taken specific measures to implement the principles. Actions it is currently taking include the development and implementation of a comprehensive proxy voting policy and development of an engagement capacity with investee companies on environmental, social and governance issues. The NPRF has decided to contract third-party service providers to deliver these services with the fund's policy guidelines. It anticipates that the proxy voting and engagement services will be in place by September 2007. I recommend that we let the NPRF commission continue with this worthwhile initiative for the reasons I outlined and which I also outlined last year. I do not wish to accept the amendment.

I do not think the Minister and I are going to agree on this. Not having a policy on ethical investment is itself a political action. It sees investment as an amoral activity. It seems we are going to have a divergence of views on this. It is something that can and is being done by other jurisdictions. I will constantly make the argument that we should do something similar here. I have drafted a Private Members' Bill which I may have the opportunity of presenting to the House. Somewhere along the line, we need to ask questions as to whether we should be sponsoring tobacco companies through our investment properties or sponsoring companies engaged in helping governments such as that in Sudan inflict genocide on hundreds of thousands of people. If one has a pension fund investment policy that does not have a value basis, one is cheating the people of the country who are said to be benefiting from that pension fund. I hope that, some day, we will have more clarity on this and a more open attitude towards the idea of ethical investment.

Amendment put and declared lost.
Section 110 agreed to.
SECTION 111.

Amendments Nos. 138a to 138f, inclusive, are out of order because they involve a potential charge on the revenue.

Amendments Nos. 138a to 138f, inclusive, not moved.
Question proposed: "That section 111 stand part of the Bill."

In respect of section 111, I want to bring to the attention of the Minister a situation which I believe is covered under this section. Three or four years ago, a clause was introduced by his predecessor whereby tax credits could only be claimed back for four years. In other words, if I identified in 2007 that I overpaid tax in 2002, Revenue would not have to pay me back. It could say "Hard luck" and tell me that I am outside the four-year time limit and will not get the tax repaid. I believe this provision was introduced three years ago.

A terrible situation then arises. If an audit then identified that I owed €1,000 in tax to Revenue in 2002, Revenue would come after me for that money plus a 100% penalty of €1,000 and interest from 2002. The fact that I overpaid tax by €1,000, €2,000 or €5,000 will not be taken into account. The attitude of Revenue is "That is gone, hard luck". I have lost it and Revenue is starting afresh and has identified that I owe it so I must pay it a penalty plus interest. This is very harsh on people who have found themselves in this type of situation.

Is it not unfair that the taxpayer identified as having a credit should be treated in this way? The sum of money involved might be smaller than the credit, but the taxpayer would be pursued for a 100% penalty and interest. It is rubbing salt into wounds.

The reduction of the restriction on repayments to four years is causing difficulties. Will the Minister comment on and examine this matter? Practising accountants have identified it for me, but perhaps some of my colleagues have encountered it also. It causes angst among taxpayers who believe it is grossly unfair to be caught in that way. Revenue has an open book in terms of the time period over which it can pursue someone, but this four-year clause tells the taxpayers that if they do not have their credits, good luck.

The normal Revenue audit does not go back beyond four years unless fraud or neglect is involved, in which case it would be right to go beyond four years.

On the general issue, the Finance Act 2003 provided taxpayers for the first time with a general statutory right to repayment. Prior to the Act, there was no statutory entitlement to the repayment of tax where the tax concerned was paid in accordance with the prevailing practice in applying the relevant provisions of the law at the time of payment. The Act's provisions were partly in response to the Ombudsman's criticisms of the previous regime which evolved in a piecemeal fashion, provided no general statutory right to repayment, comprised provisions enacted over time for different purposes and varied within and across tax heads.

In place of the regime, the Act introduced a uniform scheme that was fair and reasonable for taxpayers and took account of the Exchequer's position. The latter aspect of providing necessary protection for the Exchequer had been acknowledged in the decisions of the Irish and UK courts that upheld the common law right of taxpayers to the repayment of overpaid tax. There could be serious implications for the Exchequer if tax collected and spent by the State on the basis that it was properly due could fall to be repaid many years later. In addition to providing a uniform scheme for repayment with interest across tax heads, the scheme has been welcomed by the Ombudsman as meeting his recommendations fully.

The Act also provided a basic parity of treatment in respect of tax underpaid and overpaid. Except where there was fraud or neglect on the part of taxpayers, Revenue would not amend assessments to collect tax underpaid more than four years after the tax year or period concerned. This was the other side of the coin of protecting the Exchequer from unlimited claims to repayment in respect of back years with a four-year time limit on repayments.

When we examine the proposals to change this situation further, it is not clear that the intention is to legally recognise neglect to make a timely claim as a valid basis for going beyond the four-year limit. That would effectively mean the repeal of the necessary protection of the Exchequer provided by the limit. It is not appropriate that the Exchequer should be exposed to unlimited claims on foot of decisions of the courts, including the increasingly numerous decisions of the European Court of Justice. For this reason, VAT repayments in the UK are subject to a three-year limit.

If Revenue has not queried their returns within a fixed period, taxpayers who exercise due care in discharging their tax liabilities should have assurance that the matters are closed. Where they do not exercise due care and are negligent in their tax affairs, they cannot reasonably expect such assurance. It is hardly a reasonablequid pro quo that where a taxpayer neglects to claim relief in a four-year period, he or she should be entitled to further time to claim. There are good reasons for the time limit on claims, but neglect is not a good reason for the limit’s removal.

The argument that there is a disparity in treatment between the time limit for repaying overpayments to taxpayers on the one hand and the qualified time limit of collecting under payments from taxpayers on the other focuses on the fraud or neglect qualification of the four-year time limit in respect of the collection of under payments. To suggest that the qualification should work both ways does not bear scrutiny, as it ignores the good reasons for not rewarding neglect that leads to an under payment of tax. It then proposes rewarding neglect where a claim to repayment has not been made in the four-year period allowed. While it may be motivated by a sense of fairness on the part of Deputies, the parity of treatment proposed is more apparent than real and, therefore, I was not of a mind to accept Deputy Bruton's amendments.

The Minister is pointing the finger towards the identification of neglect or fraud, but genuine errors rather than fraud arise in many audits. If a credit is identified, it cannot be written off against the deficit. This is the annoyance.

Fair enough, but that situation involves people looking for parity of treatment on the basis that we have not seen them for years, he or she appears and we figure out what he or she owes us orvice versa. Good citizenship demands and legal obligations require the person to take due care in the payment of his or her taxes. If people do so and pay in a timely fashion, we must avoid circumstances where we fool ourselves into giving a concessionary arrangement to those who do not bother to go near a tax office until, for example, they find out that we thought they had 50 sheep whereas they actually had 40 sheep. It is a question of insisting on a certain standard of interaction with Revenue so that the Exchequer knows where it is going.

The legal situation is a result of the Ombudsman pointing out rightly that the oldad hoc practice grew up over many years and was inconsistent across tax heads. In 2003, we decided not to go back beyond four years unless there is neglect or fraud involved and to allow taxpayers to claim on the same basis. There is parity of treatment, but there is a basic insistence that citizens are required to maintain contact with revenue authorities and to the discharge their liabilities in a timely fashion. Given that we are obliged to submit annual returns, four years is not a bad concession for a hard regime.

Could anything be done in respect of interest rates? If I owe money to Revenue, it would charge me a high rate of interest, but if it owes me, it pays at a lower rate. I do not know the exact figures, but given that Revenue would charge me a substantial amount of interest on outstanding tax, could we bring the repayment rate into line with that?

If the Deputy were to make a lodgment with Revenue, he would get a better interest rate.

I am discussing aquid pro quo.

Some 2% per month is not—

The Exchequer imposes penalties for the late payment of tax.

The penalties are separate to the interest.

Revenue would pay an interest rate of 4% on money it owed me, but the rate would be substantially higher if I owed it. Could the two be brought into line?

We are the Exchequer. We must win.

We should cherish all citizens equally.

I shall revert to the Deputy on Report Stage. I have heard the criticism before, but I am afraid of being here at 5 p.m. and needing to come back at 6 p.m.

Question put and agreed to.
Section 112 agreed to.
SECTION 113.

I move amendment No. 139:

In page 163, paragraph (b), line 35, to delete “sections 891 and 898” and substitute “sections 891, 892 and 898”.

This corrects a drafting error.

Amendment agreed to.
Section 113, as amended, agreed to.
Sections 114 to 118, inclusive, agreed to.
Schedule 1 agreed to.
NEW SCHEDULE.

I move amendment No. 140:

In page 174, before Schedule 2, to insert the following new Schedule:

SCHEDULE 2

MISCELLANEOUS TECHNICAL AMENDMENTS IN RELATION TO ARRANGEMENTS FOR RELIEF FROM DOUBLE TAXATION

1. The Taxes Consolidation Act 1997 is amended in accordance with the following provisions:

(a) in section 23A(1)(a) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “arrangements”;

(b) in section 29A(4) by substituting “section 826(1)” for “section 826(1)(a)”;

(c) in section 44(1) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “relevant territory”;

(d) in section 130(3)(d) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “relevant Member State”;

(e) in section 153(1) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “relevant territory”;

(f) in section 172A(1)(a) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “relevant territory”;

(g) in section 198(1)(a) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “arrangements”;

(h) in section 222(1)(b) by substituting “section 826(1)” for “section 826(1)(a)” in both places where it occurs;

(i) in section 246(1) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “relevant territory”;

(j) in section 267G(1) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “arrangements”;

(k) in section 410(1)(a) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “relevant Member State”;

(l) in section 411(1)(a) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “relevant Member State”;

(m) in section 430—

(i) in subsection (1)(da) by substituting “section 826(1)” for “section 826(1)(a)”, and

(ii) in subsection (2A) by substituting "section 826(1)" for "section 826(1)(a)”;

(n) in section 452(1)(a) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “arrangements”;

(o) in section 481(2C)(b) by substituting “section 826(1)” for “section 826(1)(a)”;

(p) in section 530(4) by substituting “section 826(1)” for “section 826(1)(a)”;

(q) in section 579B(1) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “arrangements”;

(r) in section 613(6) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “arrangements”;

(s) in section 616(7) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “relevant Member State”;

(t) in section 626B(1)(a) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “relevant territory”;

(u) in section 627(2)(a) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “relevant territory”;

(v) in section 630 by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “bilateral agreement”;

(w) in section 690(2) by substituting “section 826(1)” for “section 826(1)(a)” in both places where it occurs;

(x) in section 730H(1) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “offshore state”;

(y) in section 747B(1) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “offshore state”;

(z) in section 787M(1) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “resident”;

(aa) in section 817C(3) by substituting “section 826(1),” for “section 826(1)(a),”;

(ab) in section 825A—

(i) in subsection (1) by substituting "section 826(1)" for "section 826(1)(a)” in the definition of “qualifying employment”, and

(ii) in subsection (3)(b) by substituting “section 826(1)” for “section 826(1)(a)”;

(ac) in section 829(2) by substituting “section 826(1)” for “section 826(1)(a)”;

(ad) in section 830(2) by substituting “section 826(1)” for “section 826(1)(a)”;

(ae) in section 831(1)(a) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “arrangements”;

(af) in section 865(1)(a) by substituting “section 826(1)” for “section 826(1)(a)” in the definition of “correlative adjustment”;

(ag) in section 917B by substituting “section 826(1)” for “section 826(1)(a)” in subsection (1);

(ah) in Schedule 24—

(i) in paragraph 1(1)—

(I) by substituting "section 826(1)" for "section 826(1)(a)” in the definition of “arrangements”, and

(II) by substituting "section 826(1)" for "section 826(1)(a)” in the definition of “relevant Member State”, and

(ii) in paragraph 5(2) by substituting "section 826(1)" for "section 826(1)(a)".

2.Paragraph 1 has effect as on and from the passing of this Act.”.”.

Amendment agreed to.
Schedules 2 and 3 agreed to.
Title agreed to.
Bill reported with amendments.

I thank the Chairman and the members for the nature of the interaction, even if it was quite robust on occasion.