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SELECT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE debate -
Tuesday, 19 Feb 2008

Finance Bill 2008: Committee Stage.

We have a quorum and the select committee is in public session. I welcome the Minister for Finance, Deputy Cowen, and his officials. The purpose of this meeting is to consider the Finance Bill 2008. The Bill was referred to the select committee by Dáil Éireann on 6 February 2008 and the committee is required by the Dáil to report the completion of its consideration of the Bill not later than Thursday, 21 February 2008. The times by which the committee must complete its consideration of specific groups of sections and the amendments addressed to those sections are determined by an allocation of time order made by the Dáil on 14 February. This order has been circulated to members. It further provides that any division claimed on the proceedings of the Bill must be postponed until immediately before the time set for the relevant guillotine or, if proceedings conclude before the time for the guillotine is reached, on completion of those proceedings. The putting of any question contingent on a proposal must similarly be postponed. A list of amendment groupings has been circulated. In this session we will deal with sections 1 to 13, inclusive.

NEW SECTIONS.

Amendment No. 1 is not being moved.

May I move it in Deputy Burton's absence?

We have already dealt with it. Is the Deputy proposing to move amendment No. 2?

I propose to move amendment No. 1 and comment briefly on it.

I move amendment No. 1:

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

"PART 1

TAXPAYERS' ADVOCATE OFFICE

1.—The Ombudsman shall include in her annual report a special report on the overpayment of tax by PAYE taxpayers, and on the take up of credits by such taxpayers, and the branch of her office dedicated to ensuring that the take up of credits is readily available to all taxpayers, and refunds made as rapidly as possible where this arises, as well as ensuring the availability of a ready mechanism for informing taxpayers (particularly pensioners) who are entitled to a refund of DIRT tax, shall be known as the taxpayers' advocate office.".

The amendment seeks to have special measures put in place to ensure people would be able to claim their entitlements as quickly as possible. It reads, "...a special report on the overpayment of tax by PAYE taxpayers, and on the take up of credits by such taxpayers, and the branch of her office dedicated to ensuring that the take up of credits is readily available to all taxpayers...". I merely make the point that this would be a simple measure.

The Revenue Commissioners engage in heavy advertising in the national media each year in respect of P35 and other returns. It would be appropriate at this time of year for them to do likewise in terms of credits and tax free allowance certificates. They should undertake to properly advertise on television and radio in this regard to ensure taxpayers check their credits to ensure they are receiving the credits and reliefs available to them. I would encourage such an advertising campaign.

I apologise; I did not realise the select committee was in public session.

Amendment No. 1 deals with an issue I have raised previously, that is, the establishment of a taxpayers' advocate who would be independent of the Revenue Commissioners, would make the case independently on behalf of taxpayers, ensure they were dealt with in a fair and transparent manner and assisted in obtaining refunds of taxation. Clearly, the most effective way to obtain tax refunds from the Revenue Commissioners in respect of many payments would be to introduce a mechanism similar to that which applies in respect of mortgage interest relief. In this regard, payment is made centrally and taken into account in the payment made to the bank. This would be the proper way to deal with refunds in respect of doctors' fees, bin charges and so on. The current system is cumbersome with taxpayers having to apply to Revenue for relatively small refunds of tax paid. The process could be overseen by a taxpayers' advocate who might spur on the Revenue Commissioners to overhaul their systems. The Revenue Commissioners, following repeated debates in the Oireachtas in the last three years on the question of a taxpayers' advocate, have, in fairness, made efforts to overhaul their systems and ensure people receive the tax refunds to which they are entitled. However, the system is still extremely unwieldy.

A person in receipt of the average industrial wage of approximately €34,000 per year is highly unlikely to qualify for a medical card. If such a person is married with one or two children and every member of the family has to attend a doctor with flu, for example, the cost will be significant. Such a person can claim a tax rebate of 20% in respect of medical costs but it is onerous to do so. Many forget to do this. People, typically, get flu during January and February and again in the weeks before Christmas. The standard general practitioner's fee on the north side of Dublin is €55 for a very quick visit. The cost of GP visits, if a family of four are sick, is likely to be between €200 and €300. It is worth people's while claiming tax rebates. However, we do not have a system whereby that can be done automatically, which is how it should be done. If GPs' practices were computerised, a tax rebate could be given immediately as patients pay their fee.

We need to establish a taxpayers' advocate. The Irish Taxation Institute and various other bodies advocate endlessly and tirelessly on behalf of the very wealthy in society, some of whom, if they have the bonus of living in Ireland while not resident for tax purposes, pay no tax at all. Such persons have large numbers of corporate and personal tax advisers, many of whom are now, at the Minister's request, gracing the Commission on Taxation. The Minister has made a political statement on where he stands. The Commission on Taxation is loaded with some of the most elegant and intuitive tax planners and tax avoiders in the country. There is not one, but many on the Minister's personally selected commission. However, no one is arguing the case for the ordinary taxpayer, saying things could be done better, that tax credits could be given more effectively and at source.

I saw the Minister's statement relating to the commission which is stuffed with people who have made a business out of tax planning and tax avoidance. The only equivalent political commission is the famous commission on the environment set up by the Vice President of the United States, Mr. Cheney. Famously, once President Bush came to power, Mr. Cheney appointed all the advocates of the oil drilling industries to his commission. The Cowen commission and the Cheney commission have very close parallels. The Cowen commission is stuffed with tax planners. The only difference is that were we in the United States the members of the commission would have to come before a committee of this House to declare their vested interests and we could ask them if they were ever involved in active tax planning, tax architecture or tax minimisation for clients, in other words, if they have a vested interest in the tax avoidance industry. Unfortunately, this committee does not have the power to meet or vet the members of the commission and hear what their vested interests, if any, are. In many ways it marks the changeover from the current Taoiseach who painted with a broader social brush than the current Minister for Finance. Many people were surprised by the terms of reference of the commission and by the extraordinary weight of people from professional tax planning and taxation advisory services who have vested interests. They are very good at what they do. I admire a number of them for the schemes with which they have been associated over the years. There is no doubt that they are very clever people. However, they have a vested interest in terms of being involved in tax planning and tax avoidance. It might be understandable if there were a couple of them on a commission of 18 members. That would reflect their numerical percentage in society. However, given its membership, there is no mandate in this commission to improve things for the ordinary person on the average industrial wage of €35,000. That is why the Minister should establish a taxpayers' advocate office. There is nothing that prevents him from doing so, outside of the work of the commission.

The Revenue Commissioners have listened to previous debates in this committee and have done much to improve the capacity of taxpayers to collect the tax rebates to which they are entitled, but it is nowhere near enough. There are still many hundreds of millions of euro unclaimed, outstanding over many years. The Minister may argue that somebody earning €34,000 a year has a very low overall effective tax rate. However, in contrast with the millionaire who is non-resident for tax purposes, somebody earning €34,000 very quickly pays 41% if he or she gets a bit of overtime, a bonus or if he or she is single. It might not be a great deal of money to the very wealthy people to whose interests the Minister is seeking to attend in terms of the membership of his commission, but it is to somebody on the average industrial wage. A taxpayers' advocate office would seek to redress the current imbalance that is particularly apparent in the terms of reference of the commission.

I hope it is not too late for the Minister to acknowledge that we need tax reform for the little people in addition to the type of tax planning the Minister envisages for the better off in society.

The Minister does not deserve that sort of diatribe in regard to this commission. He has an exemplary, egalitarian record as Minister for Finance. Furthermore, we have the best record in the European Union in terms of people being taken out of the tax net. Our record of reductions in the standard rate of income tax over the past 18 years has been very good, whereas when the Labour Party was in office it contributed a cut in the standard rate of only 1%.

There was an article in one of the newspapers within the past week showing how much the Revenue Commissioners were giving back to taxpayers. The work of this committee has helped to encourage that. I was disappointed, however, that another newspaper that listed ten allowances that PAYE taxpayers could claim omitted two important ones. One was highlighted in discussions last year. A public transport commuter ticket can be automatically offset against tax. The other glaring omission was the charitable contributions above a certain de minimis level. It is not popular to point this out, but some PAYE taxpayers from time to time have what one might call incidental income for which, given that they do not make tax returns, they are not generally pursued unless it comes to the light of the Revenue Commissioners. There may be some unclaimed taxes but I suspect on the other side there are probably also some unpaid taxes as well. It would be absurd to establish a commission that mainly consisted of people who had no practical or operational experience of the tax system. This is a straightforward down the line thing. The idea that this is some vast right-ring conspiracy on behalf of the wealthy has no foundation.

I wonder what relevance the commission has in regard to amendment No. 1 which refers to a taxpayers' advocate office. I would have thought that matter should have been raised under another section but, nevertheless, I echo what Senator Mansergh has said in regard to the formation of that commission. On the proposed amendment, it is slightly ironic that last week in the House many of Deputy Burton's colleagues made the point that we have far too many administrative bodies, quangos as they were called, and yet in the first section here there is a proposal from the Labour Party for another quango.

Amendment No. 1, as Deputy Burton said, is an amendment she has moved to the past few Finance Bills and, I suppose, it will come as no surprise to her to hear that I am still not convinced of the case for a taxpayers' advocate, as suggested by the amendment.

The statutory remit of the Ombudsman already incorporates both of the roles proposed for a taxpayers advocate, namely, acting for taxpayers and investigating actions contrary to fair or sound administration. Since the inception of the Office of the Ombudsman, significant numbers of taxpayers have exercised their right to make complaints to that office. Furthermore, the Ombudsman has carried out several special investigations on her own initiative under the Ombudsman Act 1980 such as into the operation of schemes for disabled drivers, repayment of tax to certain widows, for example. When calls were previously made for the establishment of a taxpayers' advocate, the then ombudsman drew attention to the duplication of role and responsibilities that such a development would involve.

Apart from the statutory role and responsibility of the ombudsman, other avenues are also open for taxpayers to make their complaints and to seek satisfaction for perceived unfair treatment. They can lodge a customer service complaint about the standard of service received in their personal contact with the Revenue Commissioners by telephone, correspondence, fax, e-mail or in person to a Revenue public office. They can request to review by Revenue of any aspect of the way in which their tax affairs have been handled. Such reviews are undertaken by a senior Revenue official who was not involved in the original decision or at the taxpayer's request, jointly by an external reviewer and a senior official.

Taxpayers who are dissatisfied with treatment by Revenue can also make an appeal under statutory provisions that grant access to the appeal commissioners. The appeal commissioners are completely independent of the Revenue Commissioners. The fact that few people are enthusiastic about paying taxes is all the more reason for effective channels of complaint and appeal by taxpayers against poor service or unfairness. However, given the comprehensive and accessible system already in place for complaints or appeals by any taxpayer who feels unfairly treated by the tax system, it is not obvious to me that there is a case for putting in place the additional layer of a taxpayers' advocate office.

I am disappointed the Minister has not had either an opportunity or the instinct to examine this matter. When reliefs are introduced for taxpayers, especially small-scale reliefs to encourage people, for instance, to pay bin and service charges, this places an intensive administrative burden on the Revenue Commissioners and their computer systems. Every year at this time Revenue has much difficulty getting tax certificates to everyone working in the country. The administrative burden it is carrying is significant and it creaks from time to time. It is self-evident that many of the reliefs and credits offered to taxpayers in the PAYE sector could be best provided at source through an overhaul of the system. That would take some time to complete but it is not a priority of the Revenue Commissioners because nobody who is independent has said to them that they should continuously examine how the tax system could be made easier for taxpayers in the PAYE sector.

In his rush to defend the Minister, it would have been preferable if Deputy Power had taken the time to read the amendment and notice that it would not involve another quango. The office would to be located in the Ombudsman's office. I am aware of the 840 quangos the Government has in place. As we attend local functions, Deputies, including Government Deputies, are frequently confused as to who are the people they meet, especially when it comes to the Health Service Executive. I am sure Deputy Power suffered occasionally as he met his 15th new local manager for something or other in some very worthwhile local quango or other. Members on all sides are very familiar with this, as one of the consequences of how government has changed.

I am disappointed the Minister does not sense an issue of tax justice. On the one hand, some of the most wealthy and powerful individuals in society — good luck to them for doing so well and making so much money — have the ability and the resources to fund top of the range advice in arranging their affairs. They are permitted to do this under tax law. The Minister set up a commission comprised of many of the great and the good in the tax advice and tax planning industry, presumably to smooth their path even more. However, I have a job to do on behalf of the Labour Party to talk about ordinary people who pay tax under the PAYE system and how their lot in life might be made a little easier.

I refer to the specific issue of medical relief. Despite Deputy Mansergh's reassurance that the Minister is more centrist than he would otherwise appear, the Government has reduced medical cards, even when one includes "yellow pack" medical cards, to their lowest number historically. This means that for families on very modest incomes of up to €34,000, the average industrial wage, especially those with a couple of children, who if they all have a bout of flu, at a cost of €55 per GP visit on the north side of Dublin, which cost is among the cheapest in the country — by and large, such visits are between €5 and €15 cheaper than elsewhere — they will rapidly run up a bill of €200 to €300 on medical fees. Why can they not obtain a tax refund there and then? That is what we are talking about in terms of a taxpayers' advocate. Instead they must go through the process of submitting it at the end of the year. Leaving the politics out of it, this makes sense, but the Revenue does not have the power, nor does it traditionally seek additional resources except when it comes from its political masters or the Department of Finance. Such tax reform has not been a political priority of the Minister or staff in the Department of Finance.

The Minister has sent out a conscious political smoke signal with his Cheney-style commission on taxation. Deputy Mansergh knows the history of the Cheney commission. It was intended to reform environmental legislation and practice in the United States but instead it was dominated by the oil industry and its counterparts. The result of the Cheney commission was more environmental damage than practically everything else that had happened over the previous 20 years. The point is that, wittingly, the Minister—

This is a coalition with the Green Party, not the Bush-Cheney Administration.

That is the point. Deputy Mansergh should read the popular articles in Vanity Fair on this commission. The Cheney commission was meant to be President George W. Bush’s green response. I do not know what the parallels are between the Minister and President Bush, but that is what this commission is like. A number of its members wear a social partnership hat, but they are outweighed by others who have a particular history. If we were in the United States we could call them before the committee and ask them about the work they have previously done in tax planning and whether there are vested interests.

I proposed the commission over many years as a way of continuously updating and reforming our tax laws on a standing and permanent basis. One of the ostensible reasons for the commission is to introduce green taxation. The parallel with the Cheney commission is that after the election of President Bush it was intended to address the protection of the environmental heartlands of the United States and to control the exploitation of vast natural reserves in places such as Alaska. We have a Minister for Finance introducing a commission on taxation ostensibly to look at carbon tax, but members should look at the people on it. Are we going to get a debate? The Minister has an opportunity with the taxpayers' advocate to do something for PAYE taxpayers.

This is absurd. On a point of order, it is absurd to impugn the reputations of a known and specified group of people. Deputy Burton is hanging their reputations out to dry and it is unfair.

No names have been mentioned here.

We all know who they are.

I disagree that we need to establish an independent office to ensure there is proactivity on ensuring people are paid the right amount in reliefs and entitlements. Revenue has made a real effort in recent years, listening to all the concerns including those raised by the Irish Taxation Institute. Deputy Burton regards the Irish Taxation Institute as representing a certain interest group but it instigated a proactive campaign to assist the debate on how we can ensure as effectively and efficiently as possible that people take up their reliefs. The argument that it is required for this to happen does not stack up with prior experience or present practice.

We are already granting certain reliefs at source, including mortgage interest, pensions and health insurance reliefs. We have explained in previous debates on the Finance Bill what the requirements are to assist reliefs being paid at source. The new statement setting out the strategy of the Revenue between 2008 and 2010, which I was glad to launch with the chairman of the Revenue Commissioners last Friday, is proactive and ambitious in this regard. It is recognised that Revenue, as a public service organisation, has been to the forefront in using technology to assist it in becoming a more customer friendly organisation in the interface of the taxpayer with the Revenue Authorities. It is greatly to the credit of Revenue officials that rather than resiling from this responsibility, they have been proactive and paved the way for other public service organisations to follow suit. I listened to some of the Second Stage debate as I worked in my office and Deputy Róisín Shortall of the Labour Party was very complimentary of the information leaflet that was now being provided by Revenue to individual taxpayers in terms of ensuring they would be aware of the relief available. She regarded it as a further effort in good communications.

In terms of helping taxpayers to claim their entitlements and pay the correct amount, Revenue plans to better target communication and information dissemination at individual needs. The initiatives in this area will include a major redesign of Revenue's website to improve the quality and timeliness of information and to present information and services on a more customised basis. Local and national Information campaigns on tax and customs system will be run and will include programmes directed at non-Irish nationals. Revenue has an initiative to use a plain English standard to improve the communication of information which will be validated by customer surveys and structured feedback from representative groups. It intends to make it easier to use PAYE self service channels which will lead to greater take up and to have tax credits and other relief given increasingly on an automated basis or prompted on foot of third party data. Revenue has made some progress on that important matter and intends to learn from that experience and build on it. Revenue is making arrangements with appropriate third parties to assemble details of relevant expenditure and where circumstances warrant it to make an automatic repayment to those individuals who do not claim their entitlements for specified expenses. For example, in 2007 more than €9 million was refunded to 50,000 taxpayers as a result of an automated scheme based on details received by Revenue of medical expenses incurred in pharmacy costs. During 2008 it hopes to be in a position to make automatic refunds in respect of tuition fees paid for third level colleges and universities. The feasibility of extending this approach to nursing home fees, medical and dental practitioner expenses will also be examined. The concern raised is being acted on under present structures. That is a more balanced perspective on what it is intended to achieve during the years of the current strategy statement.

I raised an issue during the past few years and l must acknowledge the Revenue Commissioners has set about addressing some of the more blatant issues, yet there is a long way to go. The annual debate on Committee Stage of the Finance Bill is one of the few opportunity members get to comment on the good and the bad in terms of tax administration. Mentioned specifically in the amendment is one area that remains of concern and involves elderly people who pay DIRT but who, because of their tax allowances, are not liable to income tax and are unlikely to become liable in the future. The legacy of DIRT is a difficult one. After I raised the issue last year the Revenue Commissioners made an effort to ensure more pensioners became aware that they did not necessarily have a liability to DIRT and were unlikely to have one if their income comprised an old age pension in addition to some small private pensions. I thank the Revenue Commissioners for that.

However, I have a specific question for the Minister. With interest rates rising, the number of pensioners returning to the category whereby DIRT is deducted is likely to increase again. The fact that DIRT is deducted from the savings of some older people, who do not know how to go about ensuring it is not, is an important issue. Has the Minister had a look at this area? There is no reason an old age pensioner with finite income, made up of an old age pension and maybe a small private pension, should not have this matter dealt with fairly rapidly. The amount of interest involved is relatively small. I am sure the Minister has elderly relatives who, when they see the DIRT deducted on their statements from the bank, ask why they have to pay something they should not have to pay. It requires a great deal of bother to collect the tax and a targeted approach would quickly lead to a good system that would address the needs of pensioners.

The Minister for Finance, Deputy Cowen, referred to the various proposals put forward by the Irish Taxation Institute, an independent body, one of which concerned the need for an advocate for taxpayers. Deputy Burton's proposal to use the Office of the Ombudsman to create a new section, in the interests of a more efficient use of the existing office, is eminently sensible. Recent reports show the number of people who applied for refunds up to 2005 but are figures available for 2006 and 2007?

In connection with Deputy Burton's point I mentioned in the House recently that there was no link among the systems serving people over 65. The Department of Social and Family Affairs must have the PPS numbers of all people coming up to age 65 and an integrated service would mean they would not have to worry about having to apply for their pensions. They should be contacted a year before the date of eligibility for a State pension to ensure it is received on time. Equally, DIRT exemptions should be automatic because people's details, such as their age, should be on the Revenue system. What specific procedures have the Revenue put in place to publicise the way people can apply for the tax credits due to them? Do the Revenue Commissioners put the same effort into letting people know what credits they can apply for as they put into the area of tax collection? They could use various media, such as television and radio, and have already used the print media by way of issuing leaflets. There is large-scale advertising when P35 tax returns are due to be filed, rightly so. However, many find the Revenue system a little abstract. The situation might improve if they were shown by way of visual media how to deal with it. There are few credits and reliefs for which one can apply. I find it difficult to understand why credits in respect of bin charges cannot be granted at source. Perhaps the Minister will tell the select committee the number who claimed credits and reliefs in 2006-07 and whether he will take on board the recommendation of the Irish Taxation Institute on the establishment of a tax advocate. Also, what specific measures has Revenue put in place to ensure people can obtain their tax credits and tax cut-off details now issuing to PAYE taxpayers?

The service provided by the Revenue Commissioners, in terms of its helpline, is excellent. However, taxpayers often have to wait up to 20 minutes to get through to Revenue. The average person cannot wait that length of time for a reply. These issues need to be addressed.

With regard to DIRT free accounts, up to 2006 DIRT was deducted from a customer's deposit interest, regardless of whether he or she was liable to tax. At the end of the year some account holders, provided they met certain conditions, were entitled to claim a refund from Revenue of DIRT deducted during the year. The numbers who claimed refunds in the years 2002 to 2007 were outlined in response to parliamentary questions. For 2006 the amount repaid was €1.19 million in 883 repayments. The figure for 2007 was €2.2 million in 920 repayments.

Section 34 of the Finance Act 2007 introduced a new scheme to allow the operation of DIRT exempt savings accounts, subject to two conditions, namely, that the account holder be aged 65 years or over or permanently incapacitated and that the account holder's total income did not exceed the relevant exemption threshold — €19,000 for an individual and €38,000 for a married couple. Provisional figures show that in 2007 some 47,218 DIRT free accounts were operated. The figure will increase as the remaining financial institutions file returns for 2007.

In 2007 Revenue widely publicised the changes in information leaflet DE1, a copy of which I have before me. The leaflet which provides information for qualifying taxpayers on how to have interest credited to the savings account without deduction of DIRT was made available at Revenue offices. Information on the DIRT exemption was also included in the Revenue website at www.revenue.ie. Application forms and information leaflets were also made available at most financial institutions.

In 2007 Revenue issued approximately 100,000 information leaflets to social welfare customers in receipt of State and other pensions. It will continue to publicise the facility offered by the accounts through appropriate channels, including contact with representative bodies, other Departments and agencies and relevant advertising. It is actively organising a further campaign this year and intends to consult further with financial institutions and organisations representing the elderly. It alsos plan to make available a poster for display in citizens' advice offices nationwide. Ongoing work in this regard is providing significant results and will continue.

Deputy O'Donnell raised the issue of customer service as provided by the Revenue Commissioners. For those who prefer person to person communication, there are 600 PAYE customer service staff available in the PAYE regional offices to deal with taxpayers' queries, amendments to tax credits, the processing of repayments and so on. Where Revenue is aware of circumstances that apply beyond one year, it carries forward the necessary reliefs from one year to the next.

For the reasons I gave in my original statement, I cannot accept the amendment.

I raise a point of information. Have these amendments been grouped?

They are not grouped. The amendment is being discussed singly.

The sheet I have been given indicates amendments to sections 1 to 13, inclusive, are being discussed between noon and 2 p.m. Is that correct?

Correct.

At 2 p.m., if we have not completed discussion of the amendments within that grouping, do they fall?

They do.

We should know that.

I explained the order of the Dáil of 14 February which has been circulated.

That means we may never get to debate some amendments. Let us be clear about this.

It is a matter for members how long they spend debating each amendment. They need to be conscious of this.

We have been here for one hour and have one hour left.

Deputy O'Donnell, do you wish to speak?

I think we should move on.

I have one further query for the Minister. The figure of 47,000 for those who have taken up DIRT free accounts is far in excess of the number of DIRT refunds being claimed, as provided for me by the Minister. The annual number of DIRT refunds has been less than 1,000.

There were fewer than 1,000 repayments. There were 47,000 DIRT free accounts established.

Does that not suggest a strong case for the Revenue Commissioners to look back or, as part of the information campaign, to tell older people that if they had such an account in the past, they should recheck and see if money is still owed to them?

No, it suggests there are 47,000 people who have opened accounts and are under the necessary exemption limits, based on the change I introduced in the Finance Act 2007, and that there are fewer than 1,000 who must be repaid DIRT, totalling €2.2 million last year. It also suggests the information campaign is bringing to the attention of pensioners and also those under 65 years who are permanently incapacitated that they can have this facility made available to them.

Amendment put and declared lost.

I move amendment No. 2:

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

"PART 1

Commission on Taxation

1.—The Minister shall in establishing the commission on taxation include in its terms of reference the following matters:

(a) to examine anomalies arising from the tax treatment of married persons where one spouse remains out of paid employment in order to attend to child care duties;

(b) to examine the treatment of unmarried persons living together including gay couples in long term relationships;

(c) to examine the operation and possible reform of stamp duty particularly the capacity of property developers to avoid stamp duty on certain transactions and the exclusion of certain financial transactions (e.g. contracts for difference) from the lower rate of stamp duty applied to financial transactions;

(d) to examine the need to ensure that carbon tax proposals have due regard to the ability of less well off individuals including pensioners to meet the cost arising from increased taxation on carbon based fuels such as coal and gas;

(e) to inquire into the fairness and equity of the overall tax system and to provide for the evaluation of tax breaks and other provisions permitting tax payers to mitigate their tax liabilities and the impact in particular of provisions for exemption from tax and residency rules and shall publish at regular intervals the outcome of their enquiries into the tax system.”.

The Minister has, to some extent, anticipated this amendment by announcing, after it had been submitted, the terms of reference of the Commission on Taxation. I have given my general views. The narrowness of the terms of reference is extraordinary. A number of critical issues affecting tax justice in Irish society should be included.

Tax individualisation results in extra tax payments of up to €600 or €700 per year by married couples where one parent chooses to stay at home to look after children or dependent relatives. Such a person only qualifies for the homemaker's allowance. Such couples are significantly penalised. We have had many debates in the Dáil about this issue. The Fianna Fáil election manifesto contained a promise that this unfairness in the tax system would be addressed. I have spoken about this issue at length on previous occasions.

Where a family has one baby, it is often viable for both parents to continue to work for a period and afford child care. In the Dublin area child care typically costs more than €200 a week. Even community child care places where people are working cost more than €150 a week. The issue — it is a difficult social one — is that we want to encourage people to have children and have time with their children. We also want to encourage women, in particular, to stay connected to the workforce. However, where families have more than two children, particularly if they live some distance from their place of work and are commuting for an hour or two, the child care cost is astronomical, unless the second spouse, the mother, has a very high income of, say, €60,000 or €70,000 a year as a partner in a firm of accountants or solicitors and the family can afford to pay very high child care costs. I am astonished that the Minister saw fit not to mention this pressing social issue in the terms of reference of the commission.

The Labour Party has introduced a Bill in the House on successive occasions to provide for civil unions for same sex couples. That would carry with it consequences in regard to taxation and inheritance where, for example, they do not currently enjoy protection to the same extent as married persons in respect of the family home. There has been informed debate in the House on this issue and most are agreed that change is appropriate. The Green Party has stated the Government intends to introduce civil union legislation. It was promised to introduce it in March but I now understand it will not be ready for a number of months. The Commission on Taxation needs to examine these issues but they are absent from its terms of reference.

In one of a number of contributions to recent finance debates the Minister promised a couple of years ago that contracts for difference would attract low levels of stamp duty at 1%. The Revenue Commissioners prepared a notice for publication. After pleading by investment brokers and the like, the Minister withdrew that very modest stamp duty on what is actually a form of Stock Exchange gambling. I believe it was one of the reasons the Irish Stock Exchange went wild on gambling on CFDs and many came a cropper. They were probably individuals of high net worth who could afford to gamble on contracts for difference. Subsequently, this year the Minister promised and committed into law in last year's Finance Bill a number of proposals to address the scandal, whereby property developers could enter into contracts to purchase land or property and avoid paying stamp duty on it by a series of arrangements well known to a number of the people appointed to the Commission on Taxation. This is happening at a time when a family trading up in the Dublin area or any other major town or city must pay stamp duty. The Minister's two attempts to change the stamp duty regime, unfortunately, probably killed the housing market for the time being, although he can say he did not initiate the change, that it was initiated by his former colleague in Government, Mr. McDowell. Again, there is no reference in the terms of reference of the Commission on Taxation to stamp duty.

Carbon tax proposals ought to have reference to those less fortunate in society because as we discussed before at various committees, such a tax should impact mainly on those who pollute and use carbon more heavily. Persons such as old age pensioners and those who live in old houses around the country who have to use coal, turf and briquettes are among the heaviest carbon polluters. I heard Senator Boyle say his party would increase their social welfare payments. If that is the only response to the need to have a fair and balanced carbon taxation system, it is completely inadequate.

Why should the terms of reference of the Commission on Taxation not provide of an examination of the ongoing scandal whereby very wealthy and high net worth individuals pay no tax? The happy band of people who jet in and jet out before midnight — to all intents and purposes, they are living in the country, their children are attending schools and other institutions within it — are, in the Minister's world, non-resident for tax purposes. I do not deny that this is a delicate issue and one for which it is difficult to legislate, but it is extraordinary that all of these items should be excluded from the terms of reference of the Commission on Taxation.

During the general election campaign Fianna Fáil promised to be open to change, to ensure fairness and so on. In particular, progress on the first three issues was promised. The Minister might be more reluctant to be convinced on the last two but in the interests of justice and equity all three deserve to be central to the considerations of the Commission on Taxation. I ask that, even at this late stage, the Minister reform its terms of reference.

Given the limited time available, I hope we will be able to deal with all the amendments tabled up to section 13.

I wish to make two points. As a party, we had a difficulty with the concept of individualisation but it was introduced. For two income earners there has been an increase of €294 in tax credits at the standard rate, whereas in respect of the home carer's tax credit, which was supposed to cater for a one income household with the spouse in the home taking care of the children full time, there has been an increase of only €130. Does the Minister regard this as fair? For various reasons people may wish to stay at home to care for their children. They should not be penalised. As Deputy Burton said, certain individuals cannot afford to go out to work because the cost of child care is prohibitive. There was very little in the budget in terms of extra credits and benefits linked to child care.

I refer to stamp duty and ask the Minister to look at the issue before Report Stage. There are people with disabilities living in two storey houses. I came across a case recently where a person with MS was required to move to a bungalow. Could some measure be introduced under which such persons would be exempt from stamp duty when buying a second-hand house? I will seek that by way of amendment on Report Stage.

Amendment No. 4 under section 3 is in the name of Deputy Bruton. It concerns home carers. One of the greatest scandals of all time was how people who stayed at home to pursue a long and distinguished career as home-makers or home carers, be they men or women, but mainly women, were treated by the State. We talk about equality, but this was the greatest example of inequality that was ever introduced. Arguments can be made about people who want to work or follow a profession outside the home and I have no problem with that. They should be treated equally in the tax system. However, if one stays at home to pursue a career of rearing a family and running a home, the State does not recognise this as making a contribution to society. That is effectively what we are saying. Let us not beat around the bushes here.

We are doing this at a time when drug taking and anti-social behaviour are on the increase. Despite the progress we may have made in the world, things have not changed. Everybody in this room can recall the days when they went home from school and welcomed the fact that their mother, mainly, was there to greet them, look after them, feed them and help them with their homework. It happened to us all. We are now saying that person is useless to society in terms of the tax system and then we wonder what is happening to society. We are introducing allowances for carers, for somebody else to look after the children. This is the greatest contradiction of all time. Everybody is bleating on about the cost of putting children into care.

Where are we going as a society? This is a major issue and the sooner we deal with it the better. We should accept we made a huge mistake and restore the same benefits to home carers as to anybody else who is working as we perceive work to be in the commercial world. What do we expect if children come home and both parents are away and come home tired in the evenings after a full day's work, in the commercial sense, after a long-distance commute, having spent hours on a train or in a car? Why are we amazed children are falling by the wayside when people are not there to give the normal human care that is necessary? It may sound old fashioned but I will keep going on about it until people recognise the mistakes made.

We made a mistake by not giving the home carer the same recognition in the tax system as any individual who is supposed to be working. I maintain the home carer is doing as important a job and is in as important a profession as any other person. The sooner we acknowledge our mistake the better. I do not care how much it costs; at the end of the day we will save in what it is costing society in terms of the increased use of drugs and anti-social behaviour and all the other horrible things that are happening around us. I do not know whether we will get the chance to get to our amendment, which is a first step in trying to restore some semblance of recognition to the role of home carer. Increasing the tax credit by €130 is not the point; the point is recognising we made a mistake and that society should say we want recognition for the person who stays in the home. Every day we hear about inequalities in life. I was amazed that the great campaigners for equality remained silent when this happened. There were no marches or pickets outside. It went through because somebody else was getting a benefit. I do not want to take a benefit from anybody. If somebody wants to pursue a career and make their arrangements I cannot stop them. However I will campaign for the person who stays at home and carries out an important function, and it goes beyond the money.

I welcome the terms of reference of the commission being focused because otherwise it might wander beyond the realm of political practicability. Being of a similar generation to Deputy Barrett I share some of his sentiments. However, the argument is a lament for a lost world. In the younger generation the vast majority of spouses go out to work and the pre-individualisation system was unfair to working spouses, mostly women, who immediately went on to the higher rate of tax. That needed to be addressed. In the budget the Minister increased the child care provision for children under six by 10%. On part B of the amendment, siblings living together under one roof deserve the same treatment as gay couples. I expressed this in the debate in the Dáil. Regarding what Deputy Burton calls the ordinary taxpayer, the stamp duty reform has taken place.

It is obvious that the carbon tax proposals will have to take into account the effect on pensioners. Any commission that reported without taking that into account would be in dereliction of duty. One need not go to lengths to spell out the obvious. In some ways I have sympathy with Deputy Burton's last point, but I point to the difficulties of the British Labour Party Government on the so-called non-doms. It is not a simple matter without causing much damage. None of us is an island in dealing with the issues on the very wealthy. People say the very wealthy pay no tax, but if they employ many people they pay much PAYE and PRSI for their employees.

To correct Deputy Mansergh, I did not object to anybody getting the same treatment in the tax system. He missed my point. I recognised there was need to afford the same allowances to a person who goes out to work whether male or female and I have no difficulty with that, but we should not gloss over the argument, which is the recognition of people who follow a profession called home caring.

In some of the amendments there is an underlying implication that the tax system is unfair or lacks equity. That is an unfair portrayal of the tax system. It is becoming increasingly fair and people have benefitted greatly from the tax changes introduced over the past five and ten years. Deputy Barrett stated we should make changes whatever the cost. I imagine there would be a rapid retreat from this sentiment if the need for an increase in tax rates arose. It is quite simplistic for people to claim they would make a change whatever the cost. It does not stand up to reality. We know changes will not be made to any particular area regardless of cost.

It is unfair to state that parents working in the home have not been well served by this and the previous Government. It is important it is recognised they have received substantial increases in their income. Mothers who stay at home recognise their level of income has increased as a result of additional payments during recent years.

The figures do not stand up.

Rather than throwing money at people through financial measures, we must examine the issue of responsibility. I agree with Deputy Barrett that life has changed and it is quite difficult for many people. However, we have more choices now than ever before and we must take responsibility for the choices we make. The situation is not as bleak as people imply. The amendments before us suggest things are pretty harsh. I do not accept, and I do not believe most people would accept, this is the case.

The figures as outlined do not stand up to examination. Currently, a married couple both of whom are working receive approximately €4,500 more in tax relief, if their income is high enough, than a married couple with one earner. A situation is developing now whereby a spouse of a two-income family opting to remain in the home to care for their children full time cannot afford to do so because there are no measures in place to enable them do this. These people are being fleeced in terms of child care costs. The model pursued in terms of individualisation did not take account of this situation. We are seeking redress in this regard. It is a valid point. The arguments made do not stand up. The arguments we are making are straightforward and coherent. People who wish to remain in the home to care for their children should receive recognition for it. We should allow for choice. People will choose to remain at the home to care for their children if we make it financially beneficial for them to do so. Currently, this is not the case.

I will restrict my comments to the amendment. Issues have been raised that might be better dealt with in respect of amendment No. 3 which deals with exemptions, bands and increases in credits.

The amendment suggests we have set out very narrow terms of reference for the commission. I reject the assertion that the focus of the commission is too narrow. The terms of reference are broadly defined, far-reaching and allow for consideration of all aspects of the taxation system. The commission's terms of reference are to consider how best the tax system can support economic activity and promote increased employment and prosperity while providing the resources necessary to meet the cost of public services and other Government outlays in the medium and longer term; to consider how best the tax system can encourage long-term savings to meet the needs of retirement; to examine the balance achieved between taxes collected on income, capital and spending; to review all tax expenditure with a view to assessing the economic and social benefits they deliver and to recommend the discontinuation of those that are unjustifiable on cost-benefit grounds; to consider options for the future financing of local government; and to investigate fiscal measures to protect and enhance the environment, including the introduction of a carbon tax. These matters are to be considered having regard to the commitments on economic competitiveness and on taxation contained in the programme for Government, in particular the commitment to keep the overall tax burden low and to implement further changes to enhance the rewards of work while increasing the fairness of the tax system and ensure our regulatory framework remains flexible, proportionate and up to date. I find it difficult to imagine how a commission with such broadly defined terms of reference could be considered to have a narrow focus and I do not accept the assertion. The terms of reference are also dictated by the programme for Government as negotiated by the parties in Government. The terms of reference are a faithful replication of the commitments set out in that programme. That being the basis on which the Government is bringing forward the initiative, we will stick to those terms of reference.

The work of the commission will help to establish the framework within which tax policy can be considered over the next decade or so. It is important the commission takes a strategic, considered and balanced perspective and recognises the evolving challenges we face. The terms of reference are broadly defined, are far-reaching and allow for consideration of all aspects of the Irish tax system. The introduction of the very specific terms of reference the Deputy proposes would only serve to restrict the work of the commission and place it under unnecessary constraint. To make the terms of reference so specific as to remove discretion from the commission would beg the question as to why the commission was established in the first place.

As I indicated last week the members of the commission are drawn from the social partnership process and the accountancy profession and include accomplished people with environmental and economic expertise, as well as people with wide experience in central and local government. I am sorry to hear some of the sentiments expressed by some of those present this afternoon. The wide range of skills and knowledge of the members of the commission will help to ensure a report which can help shape future policy in a positive manner. Therefore, I do not accept the amendment.

Is the amendment being pressed?

In case the Minister has forgotten, I remind him that his Finance Bill provides for allowances for a married couple, where both are earning, of €70,800 compared with €44,400 for a married couple where there is only one earner. That is a difference of €26,400 which is equivalent, at the standard rate of tax, to €5,280. The tax credit for one-parent families, which I have raised with the Minister on a previous occasion amounts o €1,830 which is exactly the same as the employee tax credit. However, the home carer tax credit is €900 and that creates differences between the tax credits for home carers and those for families who, either by choice or otherwise, pay for child care. Where there are two or more children the cost of child care is almost impossible to meet. Child care for three children in Dublin will cost approximately €600, which is more than the mortgage on a house worth €500,000. I do not know if the Minister understands these realities for families.

There is no need to patronise me, Deputy.

I have to ask the question.

I represent far more PAYE workers than the Deputy. In fact, I represent more than any member.

I accept that but the Minister does not represent their interests by setting up his Cheney-style commission.

The Deputy can take me on in an election and find out.

The Minister is not expressing—

We can all play this game. I do not need to be patronised. Let us deal with the merits of the issue.

I do not need to be patronised either.

That is fair enough; I will not be patronising. I have been listening to the Deputy's remarks since the beginning of the meeting.

Sorry, Minister. I said earlier that in fairness the Minister has, during the past three years, listened to some of the debate here and has, at least — I pay tribute in this regard to the Revenue Commissioners — brought in some additional facility to assist people in obtaining their tax rebates.

On the issue of individualisation, the Minister has done far less than he indicated as Fianna Fáil's director of elections at the time of the recent election. The gap is enormous and it has serious social consequences for families throughout the country. I do not know if the Minister has been the caring spouse for his children at home but growing numbers of men are. Perhaps the Minister believes he is being patronised by the suggestion he may be a stay at home spouse. However, many women remain at home to care for their children.

The Deputy should speak to the amendment.

I have been listening to this abuse since the meeting started.

Many women are doing it.

Deputy Burton should confine her remarks to the amendment.

From a tax point of view, they are being fleeced. They are being asked to pay large additional amounts of taxation. In setting up a fundamental commission, what is more important beyond our economic well-being as a society than the well-being of the families in which we bring up our children? There is nothing more important in terms of the broad brush of society. Many women want to work and to have the right to remain at home with their children particularly when they have a couple of children which makes the cost of child care prohibitive. It is beyond disappointing that the Minister has chosen to explicitly exclude this area from the commission's terms of reference.

Savings for pensions is written into the commission's terms of reference and this is good. There is a great deal of tax avoidance in this area which could be better targeted as discussed previously at this committee. I am profoundly disappointed that the Minister has chosen to exclude an explicit reference to families with children from the commission's terms of reference. It is a bad call on his part from a social point of view.

The Minister should, even at this late stage, consider writing to the Chairman of the commission to specifically request it to re-examine this area.

I am conscious that under the order of the House many of our amendments may collapse. I would like to speak to a number of the amendments we may not reach. Some of these amendments are germane to what we are now speaking about.

We must first deal with the amendment before us.

I will deal, if I may, with some of my suggestions under the rubric of the commission. I know that the order of the House is restrictive.

It is a matter for members how much time they spend discussing amendments.

Yes, but the reality is that the guillotine will result in our not reaching many amendments or sections. The points I wish to make relate to the commission in one sense. We need to examine the issue of rent relief and why in an era when Ireland is changing rapidly and more people are renting, either because they cannot afford to purchase or by choice, as some people now do, rent attracts such low levels of relief. I am aware the allowance has been increased this year by a small amount. We have had this debate before.

When we debated this issue before, the Minister gave the impression he was open to consideration of why we treat rent payments so differently from mortgage payments. I have proposed in a later section that this be evened up with what pertains in respect of people who are not first time buyers, recognising that the first time buyer remains in a special category. I believe more and more people will opt to rent accommodation. Through neglect of this sector, the State has made a series of higgledy piggledy interventions. Rent supplement applies when a person is unemployed and the rent accommodation scheme applies if a person has not been working for 18 months and then finds employment. We recognise the inequity of treatment of people who rent but we come at it in a series of ad hoc measures. The Minister must look at this issue.

The child care issue will not go away. The Minister has taken the view which is not sustainable in the long term that support to child care will be uniform, regardless of family circumstances. In the modern era, in most families both spouses must go out and work. We must recognise that the cost of child care is now immense. Fine Gael has advocated the use of vouchers which would be redeemable against child care. A family with two children will pay child care costs of €15,000 of pre-tax income for each child. We will quickly find that the notion of having more than two children has become a luxury. We are moving to a stage where the population bulges in the 30s age group, which is the child rearing category. We must take account of that. In other countries the birth rate has collapsed and governments are moving mountains to revive it. We still have a high birth rate and we need to make it easier for people to continue to have children.

I return to the issue of home carers, which the Minister has been debating with Deputy Burton. We have discussed this issue on previous occasions but the situation gets worse every year. This year, the gap between the standard rate bands for a single and a married earner has increased from €25,000 to €26,400. I recall the hue and cry from Fianna Fáil backbenchers when former Deputy, Charlie McCreevy, introduced what was then a gap of €7,000. As a result of the feelings that were then very live on the Fianna Fáil backbenches, a tax allowance of €3,300 was introduced, roughly halving the band expansion and making the cash benefit for each roughly equal. That has dramatically changed. The tax credit now given is only €900. The discrepancy is becoming progressively worse. Added to that, all tax free allowances are piled into the PAYE allowance, which is not open to the home caring spouse.

We must recognise that home caring for a couple of years is absolutely socially sound and we should not put barriers in its way. The system must be sufficiently flexible to meet all families' needs, whatever they might choose. This economic engineering of the tax code was introduced at a time when we were trying to stoke up the economic engine. We have thrown out something of value in that process. The Minister should look at this issue from a political as well as a taxation perspective. He must take a leadership position on several items in the tax code. The level of income below which a person is not required to make a tax return has not been raised for a couple of years. It is time the Minister raised it, at least in line with the increase in the minimum wage. It should be attached to something which changes from year to year.

I have noted what members have said. The full remit of taxation policy is available for consideration by the commission. The general terms of reference, which I have outlined, ensure non-exclusion rather than exclusion of a whole range of issues. These are matters to be left to the discretion of the commission, based on the terms of reference we have given it. I am being asked if this, that or the other will be considered. All aspects of taxation policy are up for discussion by the commission. Submissions will be made and the commission will organise its work according to the issues raised, consistent with its terms of reference. Not accepting the amendment does not mean these matters are not to be considered. The commission has discretion. I have explained that the terms of reference were taken from the programme for Government and will inform the work of the commission.

In regard to other points raised, rent relief was increased in the last four budgets by 57%. The home carer's credit was increased by just under 17% this year. The Government made a commitment in its programme to work on that issue which was debated before and during the general election. I have begun that process. There had not been an increase in the home carer's credit since 2000, the year of its introduction.

Regarding the issue of burden sharing in respect of the taxation of various taxpayers and families in different situations, the standard rate band structures are €35,400 for a single person, €39,400 for a lone parent, €44,400 for a one-income married couple and up to €70,800 for a two-income married couple. The difference in the band, based on a figure of €26,400 at 21%, can mean that a two-income couple with the same combined income as a single-income couple will pay up to €5,544 less in tax. Where the one-income family has dependants, the difference can be reduced to approximately €4,644 when the home carer's tax credit of €900 clicks in.

In the context of the burden of taxation on one income married couples, it is worth pointing out that according to the OECD, Ireland has the lowest tax rates among all of the OECD countries for a married or unmarried couple with two children on average earnings, while such couples receive more in cash benefits from the State than they pay out in tax and social security contributions. This country is unique among OECD countries in that respect.

We have not moved to full-blown individualisation. It is an issue on which a balance must be struck between assisting families with a spouse caring in the home and recognising other families where both spouses work outside the home. We have heard both sides of the argument from the Opposition. Deputy Barrett and Deputy O'Donnell to some extent made the point that both types of family were being treated unequally in the different circumstances that pertain for couples where both spouses go out to work and for couples where one spouse stays at home.

Deputy Burton argued simultaneously for both sides of the issue. At least the Fine Gael members brought forward different arguments at different times. I understand Deputy Burton's argument to be that the difference of €5,544 is simply not sufficient to meet the very high child care costs of two income couples. On the other hand, she berated me for not increasing the home carer's credit for one income couples. People have it every way. The point is that a balance must be struck. The differential between the band relating to one income married couples and that relating to two income married couples only impacts on incomes higher than €44,400. That is more than 30% greater than the average industrial wage which for 2008 is estimated at approximately €34,000.

It is important to stress that the current structure of the tax bands means that one income married couples on average earnings are not affected by the different standard rate bands. In 2008 it is estimated that approximately two thirds of all one income married couples, those with incomes at or below €44,400, are not affected by the structure of the standard rate band. Having said that, this difference in treatment may be attributed at least in part to the fact that there are costs associated with earning an income such as travel and child care costs and such costs are likely to be greater if two persons rather than one work outside the home to earn the same gross income.

In defence of my 2008 budget I have introduced several income tax changes that will exclusively benefit one income married couples. One might complain about their extent but they are in place. By virtue of the increase in the home carer's tax credit one income married couples with children received the most significant increase in the value of their credits in comparison to single people and two income married couples. In addition, the personal and employee tax credits for married persons were increased by €140 and €70, respectively. For the fourth consecutive year one-income married couples have seen substantial increases in their credits and standard rate bands. The standard rate band for such couples was increased by €1,400 to €44,400. These changes ensure that a married single-income couple in the PAYE system who receive the home carer's tax credit can earn up to €31,950 without any liability for income tax arising. For a married single-income couple with an income in excess of €44,400 per year, their income tax bill is reduced in 2008 by an additional €634 per year as a result of the budget so I do not accept that nothing has been done.

I have mentioned the international context. The latest data available from the OECD show we are quite unique in that respect. The claim that individualisation was introduced in 1999 to increase the female labour supply is not the full story. The weakness of our income tax system at that time was how heavily it bore on single people because in order to improve their position we had to give double increases to married single-income earners and this used up scarce tax resources. If we want to go back on individualised tax bands we will inevitably raise the relative burden on single-income earners for a given amount of tax relief. While I accept that people may make life choices at different times in their lives and, as I said before, I am not sure if we can turn back the clock at this stage, in my view it was right to move towards this with caution, to recognise that there are societal attitudes and situations that have to be taken on board while at the same time ensuring we facilitate participation in the workforce to the maximum extent possible.

We did what we could in budget 2008 in regard to the home carer's tax credit having regard to other priorities which also required resources. Obviously it is something I will continue to look to in future budgets in view of the commitments I have made in that area. That is my general response.

In terms of the amendment, the terms of reference are not narrowly focused, they are quite wide and give the discretion necessary for the commission to look at all issues, including the equity of the tax system.

Is the amendment being pressed?

I am entitled to respond.

The Deputy has taken up the full session with her two amendments. Deputy Bruton has—

The Minister made one—

Excuse me. The Chair is speaking.

The Minister gave a smart ass response to what I said.

The Deputy has taken up the full session with her two amendments. Deputy Bruton has tabled seven amendments and we have not reached them yet.

The Minister is wrong.

Is the amendment being pressed?

Can I correct the Minister on what he said in regard to one item?

Is the amendment being pressed?

The explanatory memorandum shows that the basic personal tax credit for a one-parent family is €1,830, the employee tax credit is €1,830 and the home carer's tax credit is €900. I do not know how the Minister does his arithmetic but it seems to me that particular difference is €930—

We have debated this amendment for long enough.

—of actual extra tax paid by a couple where one of them chooses to stay at home to look after children. The Minister does not get it, this is not about women going out to work, it is about our children being cared for.

Excuse me. Is the amendment being pressed, Deputy?

Amendment put and declared lost.

Amendment No. 3 is out of order as it involves a charge on the people.

Amendment No. 3 not moved.
Sections 1 and 2 agreed to.
SECTION 3.

I move amendment No. 4:

In page 13, line 10, to delete "€900" and substitute "€1,540".

This amendment essentially seeks to raise the home carer's allowance to double the current figure. My own belief is that it should be set at the PAYE allowance at a minimum because a person who chooses to work at home, caring for children or for anyone else, should be treated in the same way as a PAYE person who goes out to work. This allowance would be equivalent to the PAYE allowance.

The Minister did have a little bit of fun pointing out the inconsistencies in the Opposition's position. The consistency in the Opposition's position is children. What the Opposition is looking for, and certainly what Fine Gael has consistently sought, is to try to help families to have children. That is why the home carer's credit is targeted and the reason there is a need to look at something special in regard to child care costs.

There is a narrow band of years when one has particularly high child care costs. The Government has to look afresh at how we support children and how we can make it easier for parents to be successful in rearing children. Many families decide that what is best for them is to have a couple of years at least at the start with one spouse at home, virtually always the mother with the young child, after which child care would click in. The State needs to be more generous towards this. I accept it would amount to a shift of resources towards children but it is one that would ultimately be justified. If we try to do it on the cheap and rely on the fact that the State, historically, for all manner of reasons, stayed out of child and family issues, we will not really provide adequately for children.

There is a need to rethink on the momentum introduced to the tax code by the Minister's predecessor. While the Minister is belatedly slowing the momentum of his changes, he is still being carried along in their direction. He needs to rethink his attitude to children. In the long term we will live to regret taking a very narrow view in the tax code of children and how we should support families with children. We will look back on this as a period when we took a wrong turn. It falls to the Minister to look afresh at this issue.

I support the amendment. There was clear recognition when the Minister introduced individualisation and home carer's allowance pre-credits that there had to be some form of redress. Nothing happened for a number of years until this year when the Minister increased the tax credit from €770 to €900. He referred to the increase in the tax bands for a married couple with a single income. However, when one compares a family with two income earners with a family with one income earner and a home carer, the former is receiving an extra €164 in tax credits. One can ask whether that is fair.

Deputy Bruton indicated that the Minister would have to examine this matter. The dynamics of the economy have changed. If there was a choice, one spouse would choose to stay at home but the way the tax system is structured, people do not have that choice.

I, too, support the amendment. Politics is about more than just pounds, shillings and pence. One either believes in a certain type of society or one does not. One can coldly ask whether one believes in the type of society we want or whether we are going down the road of measuring everything in terms of money. That is what is changing society. Do not tell me a child is not better off in the arms of his or her mother rather than in the arms of a stranger in the role of caretaker.

Parents have a choice and many choose to leave their children with carers outside the home, whom Deputy Barrett refers to as strangers. That is their choice and they should not be denigrated for doing so, as the Deputy appears to be doing.

Deputy Andrews should, please, not misquote me; he should make his own argument. I do not mind his view.

Deputy Barrett is—

Deputy Andrews should not misquote me. He can stick to his view.

Deputy Barrett was judgmental in his comments. If people make a choice to leave their children in a child care centre outside the home, I do not think that is up for—

Deputy Andrews should make his own argument and not misquote me.

I am not misquoting Deputy Barrett.

Deputy Andrews is misquoting me.

Deputy Barrett is being judgmental of those who avail of child care.

I am not judgmental. I said it was up to people to decide whether they wanted to—

I reject the notion that only the Opposition cares about or is interested in children.

The Deputy should put his script aside and speak for himself.

The Bill is about striking a balance. Given the resources available, it strikes the right balance and I support it.

I was sitting back listening to the debate.

The Minister should take the scripts from the Government Deputies and let them speak for themselves.

We all speak for ourselves.

There are no scripts.

The Minister cannot be defended by the soldiers all the time.

The only scripts I have seen recently are from the Fine Gael press office. They are all over the place.

I know the Minister will be the next Leader of Fianna Fáil, but this is ridiculous. He is capable of being on his own.

Deputy Barrett may be sure of that.

I know it for a fact.

The effect of the amendment would be to double the value of the home carer tax credit from its 2007 value of €770. If implemented, the cost would be approximately €54 million in a full year and €37 million in 2008. The financial resources available for the 2008 budget have to provide for a personal tax package, including PRSI and health levy changes, amounting to €582 million. The aim of the income tax measures is to use tax credits and bands to keep low income earners out of the standard rate band and average earners out of the higher rate band as promised in the programme for Government. Measures are also focused on assisting the elderly, lone parents, widowed persons and widowed parents, those with a disability and carers. Over 54% of the resources in the personal tax package are devoted to assisting these categories and the low paid. The Deputy will appreciate that the resources available in 2008 are more restricted than in previous budgets and choices have had to be made about the allocation of those resources. Not everybody may agree with them, but the choices had to be made. To provide for a doubling of the home carer tax credit would mean increases in other income tax credits or reliefs would have to be curtailed or not implemented. It is a question of finding the balance and deciding what is fair and equitable. In all the circumstances I cannot accept the amendment.

Amendment, by leave, withdrawn.
Section 3 agreed to.

As it is now 2 p.m., in accordance with the allocation of time motion agreed by the Dáil on 14 February, I am obliged to put the following question on chapters 1 and 2 covering sections 1 to 13, inclusive: "That sections 4 to 13, inclusive, stand part of the Bill."

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

We resume on section 14. Amendment No. 10 is out of order and may not be moved.

On a point of order, has this amendment been ruled out of order because it, potentially, raises a charge on previous years? If I included the word "henceforth" would it be in order to resubmit it on Report Stage?

The advice available to me is that the amendment is out of order on the basis that it places a potential charge on the Exchequer.

Several tax changes place potential charges on the Exchequer. Could you write to me, Chairman, to clarify the matter? I do not wish to delay the committee. I understand my amendment may not be in order because it could open the books of 2007 again, while tax reliefs added to the Finance Bill usually apply only henceforth. Can you clarify the exact basis on which the amendment was ruled out of order to see if something similar could be submitted on Report Stage?

I will seek to have a letter to that effect sent to you, Deputy Bruton.

Amendment No. 10 not moved.

I move amendment No. 11:

In page 17, before section 14, to insert the following new section:

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

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

This amendment seeks to introduce a provision whereby people who are on the standard rate of tax or not paying tax at all would get relief at the higher rate on money put into a pension fund. This is a minimal change which would start the process of bringing equity into the way tax relief applies to pension contributions.

I am sure the Minister saw the report produced by the ESRI showing that 80% of the present tax relief accrues to the wealthiest 20% of families. Half of the population get no relief from pension contributions because they simply do not have pension cover. We have a very inequitable spread of relief, which is now extremely expensive because the combined cost of tax relief given on pension contributions is of the same order of magnitude as the aggregate value of social welfare pensions. It amounts to between €3 and €4 billion, according to the Revenue Commissioners, if one combines the relief on pension contributions made this year, the relief on money already in pension funds and the relief on retirement annuities and other elements.

We know this is highly unfair in the way it applies. The Minister may say he is putting off consideration of reform in the pension area for another year because he is hoping to go from a Green Paper to a White Paper and ultimately to some change. I find this provision extraordinarily unfair. Since the Minister took over I have been putting forward this type of amendment which we need to start to change and to recognise that this tax relief on pension contributions is an extraordinarily valuable subsidy, the bulk of which goes to people who are very well off. There is a ceiling. The maximum amount on which one can get pension relief is €300,000, but the pension relief goes up to 60% depending on one's age. Even that is very generous and if they are well placed, people can accumulate huge funds that are out of proportion to the State's obligation to protect them in their retirement.

This has grown up over many years. The Minister's predecessor radically expanded the basis on which pension relief could be obtained. In his desire to promote saving for a pension, however, which was understandable, he did not examine the issue of equity, and the hopes that more people would get pension funds through, for example, the PRSA scheme have been disappointed because the PRSA has not attracted very many people. We are left with a situation of gross inequality, as the ESRI has pointed out, in the way very expensive relief costing €3 billion or €4 billion is distributed. Extraordinary sums of money are being distributed and while the Minister may say, as he said last year and the year before, that he wants more time to consider this, we cannot continually put this off without starting a process that begins to bring some fairness to it.

The issue of pension reform is one that needs much greater priority than it has been given to date. Some elements could be picked off as relatively easy to address without waiting for the entire package to be put together. I am sure the Minister is familiar with the phenomenon whereby, unless they have additional voluntary contributions, many ordinary workers who have built up a pension fund in good faith are caught by the obligation under existing tax law to buy an annuity when they retire. At present that gives extraordinarily poor value. Again, this is treatment that applies to PAYE workers that would not apply to self-employed people who have approved retirement funds.

I am not optimistic the Minister will accept this amendment. However, I believe the House needs to express a view on the unfairness of the system under which pension tax relief is made available to the ordinary people we are trying to encourage to do more saving for their pensions. The present relief is highly skewed towards people who are very well placed. We need to balance things. Now is the time to start that process of change and this provision is a relatively modest start. The former Minister for Social and Family Affairs, Deputy Seamus Brennan, was favourable to this and it is capped with a lower ceiling than he envisaged. Perhaps this is something the committee will find worth changing.

This issue is in the process of public consultation. It is a complex issue. The Green Paper has begun a debate on the options we should take to enhance the fiscal sustainability of pensions and the Government will seek to address the issue in the aftermath of further dialogue with the social partners in the course of this year. We are all aware of what the demographic situation will be towards the middle of the century in terms of the number of people who will be dependent on pensions and the number of people who will be active in the workforce to support them. That will change dramatically in the years to come. For that reason this is an important policy issue.

Deputy Bruton's argument is that at this stage we should take on board the option in this amendment as an indication of Government or parliamentary intent and see what develops thereafter. Given the important financial issues involved, I want to do this in an integrated way that meets all the requirements in a fiscally sustainable way and not just improving the opportunities for people to provide for their pensions in addition to their entitlements under the State insurance system. The Government has not yet reached the point where it can make that decision. The issues the Deputy raises are important and strategic and will be dealt with in the context I have outlined.

The Minister's response to Deputy Bruton's amendment is rather disappointing. Given the turmoil in the financial markets, for people who want to top up their pension entitlements and have been investing in products such as AVCs, including many people in the public service, particularly women who for the reasons debated earlier have broken periods of service, the biggest draw in terms of the State's pension provision is the 41% tax write-off that is available to higher rate taxpayers. That in turn has skewed the pensions industry here whereby the products can be very expensive. The Minister is talking about having an overall review. In other jurisdictions the percentage that financial pension product companies can charge is very limited.

The reality for many investors in AVCs here is that, given the fall in the stock market, apart from the tax break they get from the State, they are in a seriously negative position with regard to their investment. When one adds in the commission prices and other forms of pricing the industry charges people who invest in pension products, there is an argument for the Department of Finance to have a root and branch review to find out who benefits from the State's very generous tax regime and whether it could be rebalanced to ensure more of the advantage ends up with the ordinary income earner than with the high earners or the pensions industry in the form of the fairly severe charges on the sale of its products.

The Department of Finance did a review and gave a number of case study examples of firms that, until the Minister brought some reform to the system, were in a position to invest €3 million to €5 million or more a year in special pension funds for proprietary directors or directors of successful private companies. The equation in our pension system is still heavily loaded in favour of the most well-off. I am aware the Minister feels a little oppressed when people talk about equity and justice issues but the State is foregoing a vast amount of tax expenditure. Look at the people who need pension provisions. A woman who takes time out, perhaps as long as seven or ten years, to look after her children and returns to the workforce, possibly even to work for the Revenue Commissioners, loses pension contributions. In the current system such women who return to the workforce are often only standard rate taxpayers. They simply cannot benefit to the same degree as proprietary directors, even in terms of the limited reforms the Minister introduced in recent years.

It is time for a fundamental rethink on the Minister's part. The major beneficiaries of the pensions incentives ought to be the people in lower and middle income brackets who must struggle the most to make contributions and put money aside for pensions. I am disappointed the Minister is so negative on the issue.

I support the amendment. The special savings incentive accounts were introduced by the last Government and they yielded an effective turnout rate of 25%, that is, €1 for every €4 invested. What is proposed here would effectively cost the Exchequer 21%, the difference between the standard and marginal rate of tax. It is the same cost to the Exchequer as the SSIAs. One was a form of saving but the other is also a form of saving, in terms of pensions. It should be considered in that light.

We must consider an integrated pensions model in terms of private and State pensions. Deputy Burton touched on this issue. If, for example, somebody retires from the workforce at a young age and goes to the social welfare office and elects to pay voluntary contributions thereafter, they can effectively qualify for a full contributory old age pension, as long as they elect to do so in the year they retire. Many people are unaware of this. If people do not elect to do so in that year, they cannot make the contribution retrospectively. People should be made aware of that fact.

Another issue that should be examined is the fact that private pension schemes send annual statements to pension holders outlining how they will do in their pension forecasts. The State should strongly consider doing likewise so people are aware of the level of their contributions. When they reach the age of 65 or 66 they would know what they will qualify for between the State pension and a private pension. These are simple, straightforward and practical measures. Deputy Bruton's proposal is practical and would cost the Exchequer less than the SSIAs. I look forward to the Minister's comments.

I have nothing to add to my earlier remarks. There is an ongoing process to examine how we can incentivise further pension provision for people on low and middle incomes who might not be attracted to the current option. In the meantime we have been improving State pension provision considerably, as well as providing for prudent provision in the years ahead through the National Pensions Reserve Fund.

There are many issues in the Green Paper on which consultation is taking place. To encourage private pension take-up among the lower paid, we have, in the programme for Government, included a commitment to develop imaginative proposals for a SSIA-type scheme in the context of the Green Paper and in consultation with the social partners. Rather than adopt a specific option or model now, we must conclude those deliberations in the course of this year and decide what we should do. It is accepted that we must plan and think through this issue, given the significant finances involved. On that basis I do not propose to accept the amendment.

I am aware that the Minister is not disposed to accept the amendment at this stage but I am anxious to hear his views on the equity of pension distribution. According to the ESRI, the bottom fifth of families get nothing out of the €3.5 billion we give in pension relief. The next fifth gets 0.25% of that pool and the third fifth gets just 5% of it. A total of 60% of families get just 5.25% of the value of the €3.5 billion for pension relief. The top 20% gets 78% of it. That means a sum of well over €2 billion is divided among a relatively small number of families, probably numbering about 250,000. The Minister can do the sums. It is a massive amount of tax relief every year for those families, while nothing is going to the bottom fifth. Surely that is an affront to any sense of fairness. The Minister often talks about fairness in the tax code and he correctly says that when he changes the code he tries to be fair to people lower down the scale. I am sure the Minister has seen the ESRI research. The manner in which this relief is being distributed is appalling. We are again asked to bite our tongues and are told that the Minister and his advisers know best when they tell us to wait a little longer, but the system is unfair and inequitable.

What is equally unfair is the other example I mentioned, namely, people in defined contribution schemes being obliged to buy annuities. I have not put down an amendment in that regard but I will be happy to do so on Report Stage. If one has €500,000 built up over one's lifetime, one could be forced to buy an annuity for €15,000. If one dies four or five years later, the €500,000 is wiped out and the annuity dies with the person. Surely that, too, is an affront to fairness for people who have worked all their lives and contributed to a defined contribution scheme. Members of the committee have the privilege of having a public defined benefit scheme. Under the rules of the defined contribution scheme people are forced to buy an annuity. Those rules only apply to PAYE workers in defined contribution schemes; they do not apply to people who are self-employed and have built up a retirement annuity.

How do I respond to constituents who complain that this is unfair? People have told me they are approaching retirement in the next two or three years and they will be told to buy an annuity. The Minister's reforms might be great when they are introduced but some people will be forced by their retirement age to buy into this and it will be done and dusted before the Green Paper has turned into a White Paper. These people will have lost and if they happen to die young, their families will not be covered because the annuity will die with them.

The Minister's advisers say that a great deal of thinking must be done, but practical politicians must point out that small things can be done now. What is the Minister's objection to either changing the annuity rules or giving people who are on extremely low incomes, perhaps not in the tax band at all or on less than the €38,400 threshold for the 20% band, and who are willing to put in the money, the same relief as would be available to a very high earner? Would that not be fair? I cannot see how it undermines a longer term trend. It is the approach favoured by the Minister who has responsibility for this. It is capped in terms of cost because it will be confined to people on relatively low earnings. If the Minister must find savings, he should bear in mind that this is a €3 billion cost taxpayers are incurring each year. If he arrived at a figure for the cost of this, for example, €50 million or €70 million, it could be recovered by making some changes at the upper end. It could be done in a cost neutral way and would get this process started. It is an affront to fairness to allow this continue. It is not good enough for the Minister to come back here year after year and state that much thought is going into this without us seeing the product, people retiring and taking the hits, while we wait for the golden design to come forward.

The Green Paper was published in October of last year with a commitment to engage with the social partners during the course of the first half of this year to see if we can provide a consensus on how to go forward. Deputy Bruton asked what I did about it. I instigated a pensions relief review in 2005 and I made significant changes to the pensions tax code in the 2006 budget and Finance Act on foot of the findings of that review which was to close off excessive funding of pensions and to limit the amount that can be withdrawn from pension products by way of tax-free lump sums. I also restricted the capacity of individuals to use ARFs as purely long-term tax exempt vehicles. That is my record. That is what I have done.

That is riding shotgun on some of the people.

I am just making the point. The suggestion is I have done nothing. I have dealt with that issue in the first instance.

Under social partnership, of which Deputy Bruton might not be a full-blooded promoter, I have decided that we would sit down under the Green Paper process and consult with each other on how we might bring this matter forward and deal with it during the course of this year. That is the commitment and that is where the process is presently. People can have their views on that, one way or the other, but that is the process that Government has undertaken for the purpose of seeing whether we can find a way forward. This is a complex area and I would rather deal with it in the round than deal with it piecemeal.

Does that mean the Minister is content? Those retiring who must buy annuities over the next 12 months or two years, or whatever period it takes the Minister to produce this, are being locked into something for their lifetime that is manifestly unfair. They will not get a second chance. They will not be back again when the Minister's provision is introduced to state that the rules have changed because they will have bought under the rules that will apply and there will not be an opportunity to unscramble that egg.

If the Minister turned to the social partners and stated he had three or four proposals on which, because of the equity of them, he sought to move ahead of this, I do not believe any of them would bang his desk stating it was unfair and he should not change this until they had seen everything. They would see, as any practising politician would, that these provisions are unfair and that we should provide the best option now for people who are facing those options. I would ask the Minister to consider for Report Stage something that could be done for these two groups, the first of which comprises those on the low tax rate who are being given less tax relief per euro rather than in aggregate. For every euro these people put in they are getting less tax relief than someone who is far wealthier. How can we accept that? Similarly, there is the case of those buying annuities. I appeal to the Minister to talk to officials to see if they could introduce something with which the social partners would be happy.

It is unfortunate that the economic climate has changed dramatically. There is an international credit crunch and there are difficulties with many banks and financial institutions which look likely to last up to 18 months or possibly longer. However, the Minister has people locked into buying products at high prices and transaction costs from the pensions industry and the insurance industry on the back of generous tax breaks, which are keeping this structure afloat. When people look at their statements they have lost value dramatically. Due to the ups and downs of the stock market over a ten-year period, few of these funds are doing well, and yet it is what people in the PAYE sector who can afford it are locked into.

On the other hand, the PRSA innovation of this Government some years ago fell flat on its face. I do not know whether there are more than 20,000 of these accounts which contain a significant amount of money. They have proven so unattractive.

There are many categories. What will happen to young construction workers, for instance, leaving the construction industry? The Minister is not willing to look forward to how, where and when the economy is changing. It is changing in the case of families and couples who work. It is changing in the case of employment in the building industry. We want to create an economy that continues to give people some sense of opportunity as they go forward. The Minister has nothing to offer people. His response is really disappointing. He is not prepared to look at the future and he is just clinging to the past.

I cannot believe that the social partners, if given some indication of possible changes on the horizon and perhaps some leadership by the Minister, are so hidebound, as the Minister described them here, that they are unable to react to the changing circumstances in the global economy which particularly hit people in the case of pension provision causing great difficulty.

Is the amendment being pressed?

I want to hear whether the Minister would consider something on Report Stage.

I explained my position. I intend dealing with these matters holistically.

Amendment put and declared lost.

I move amendment No. 12:

In page 17, before section 14, to insert the following new section:

14.—Tax relief at source shall be available for environmental service charges.".

This to some extent continues this morning's discussion. The tax relief on environmental service charges, bin charges, etc., should be available at source. I offered the Minister a mechanism via a taxpayers' advocate within the Office of the Ombudsman to facilitate Revenue putting changes like this into place rapidly. It appears that there is significant under-claiming of these tax reliefs, both in the case of rent, which is obviously on the rise, and in the case of service charges, which is much less significant financially but still allows people reclaim an amount.

The Minister indicated this morning that the Revenue Commissioners have made some efforts in this area. Given the number of environmental service providers in the country, taking into account all of the county councils most of which provide some or part of the environmental services, or award the contracts to the private operators who provide them, particularly in areas outside of large towns and cities, it is difficult to understand how it is not possible to provide a centralised system. After all, households in most parts of the country are being billed. In areas like Fingal, one can buy a tag. It would seem to me that at point of invoice or at point of sale of tags it is possible to incorporate the tax break. I remind the Minister that the total cost of the charge for an older person on a fixed income or on a pension in areas like Fingal, Dublin city or Dún Laoghaire-Rathdown is quite high. Centralising the system and making the refund easy and automatic is a fairly primary reform of the administration of tax which would favour the taxpayer. I commend the amendment to the Minister.

Deputy Burton has proposed that tax relief at source should be generally applied for service charges paid by individuals. While the principle of relief at source is very effective in ensuring that all qualifying individuals benefit from the relief, there is a cost to the Exchequer inherent in such a proposal. I also point out that in order for such a scheme to operate successfully, it would be necessary for the ten local authorities and in excess of 400 private operators to participate fully. It cannot be envisaged that a dual system of granting relief will apply.

There are currently a wide variety of methods used by the service providers to levy the service charge, varying between direct payments, bin tags and service charges. There are considerable variations in how the level of service charges is determined. It would require amendments in some or all of these systems before the introduction of any such scheme could be considered. Therefore, I cannot accept the amendment.

Does the Minister have details of the number of families that claim relief on their household charge? At least 1 million households pay charges, but I suspect that only approximately 100,000 get tax relief. Therefore, at least 80% do not get their tax relief. If we take it that on average a person is entitled to relief of €80 on the charge, then that amounts to approximately €80 million that we are hanging on to. This money rightfully belongs to households. We need to look again at the issue and find ways to ensure there is greater take-up of this relief.

Deputy Burton's proposal to move towards relief at source is a good one, even if it is only set up for the ten local authorities the Minister has on his books. It would be good to get them to co-operate in the scheme. The Minister could then seek to ensure the 400 private operators come under a local authority sponsored scheme. We should start the process of getting this in place, although we might not achieve it in one year. Revenue should feel it is as incumbent on it to get the €80 million back to its rightful owners as it does to collect the taxes due to it from others. We do not see the same energy or determination from Revenue to try to ensure relief is given at source as it demonstrates when pursuing people it feels have short-changed it.

Rather than just issue a blanket notice, I suggest the Minister should speak to Revenue to inquire whether a scheme can be started, for example, a pilot scheme with some local authorities. Some might say such a scheme offers something special to people in certain local authorities, but Revenue acts similarly when it conducts special audits on people it thinks are not paying their due taxes. This scheme would be a way of moving forward on the agenda.

There is a change among taxpayers now and they feel the obligation to pay more than previously. However, they also believe that Revenue should make an effort to return moneys that are rightly theirs to them. I understand the Minister may not have the necessary procedures in place to agree to Deputy Burton's amendment now, but perhaps the process could be started.

Is the amendment being pressed?

May we have a reply from the Minister?

When we discussed the question of relief provided at source, the point was made that if we have a multiplicity of providers, it is difficult to do that. We can do it with mortgage interest relief and pensions relief and other areas where the technology enables us to do so, but it is not as simple as has been suggested. I said earlier that the Revenue Commissioners have been quite active in bringing to the attention of taxpayers, as a result of discussions here over a number of years, their entitlement to claim. There has been a definite programme in that regard. Revenue also announced a statement of strategy last Friday which has a number of initiatives as to how it can do this.

Revenue's efforts and initiatives to bring this relief to the attention of taxpayers are proving just as effective, if not more effective, than trying to devise the technologies that will provide relief at source, given the technical difficulties because of the multiplicity of providers. It is much simpler when there is not a multiplicity of providers. I am sure Revenue would be happy if it could do with it as it did with other reliefs. There is an effort being made through other mechanisms to bring this to the attention of taxpayers.

I provided information last October to Deputy Damien English when he asked about the number of PAYE employees who have claimed tax relief on refuse collection fees paid to private collectors, with a breakdown for each regional tax office. The total then came to 180,215. This response is on the public record on 23 October 2007 and was in respect of service charges in the income tax year 2004, which was the latest detail available at the time.

There are difficulties and as a result other efforts are being made to bring the relief to the attention of taxpayers. That effort will continue. It is not possible to accept the amendment, in view of the technical issues involved, quite apart from the efforts being made.

Is the amendment being pressed?

Will the Minister make available an estimate of how much is not collected by taxpayers in terms of the relief to which they are entitled? I believe it is a significant amount, as must be the relief on rent which also goes uncollected, and must amount to tens of millions of euro. I give the Minister notice now that I intend to introduce an amendment at a later Stage in the parallel situation involving rent. In that regard we have the ironic situation — as mentioned by Deputy Ciarán Lynch — of which I have personal experience through cases brought to me by constituents, where if a person is in receipt of HSE housing support and the rent is payable to a foreign landlord, the individual in receipt of the HSE—

That is not part of this amendment.

It is the same issue. I just want to give notice to the Minister that I intend to introduce the matter.

We have nine amendments to deal with and I ask Deputies to stick to the amendments.

The Minister is talking about how difficult it is to deal with material that is not central. In the case of rent subsidies, the material is centralised, yet we have no information from a tax point of view with regard to the people who receive the rents, namely, the landlords. However, in the case of foreign landlords, persons who receive a rent subsidy from the HSE are responsible for deducting the tax and paying it to the Revenue Commissioners. There are significant areas of tax administration which need to be changed to favour the individual who is not in a position to afford a tax adviser.

People on the Hill of Howth, in the €4 million to €10 million value houses, all get their bin charges tax rebate because they have an accountant to fill in their tax returns. However, somebody living perhaps two miles away in Raheny will not get the rebate because, for one reason or another, he or she does not fill in all the details required to obtain the relief.

I wish to press the amendment.

Amendment put and declared lost.

Amendment No. 13, tabled by Deputy Burton, is out of order because it is outside the scope of the Bill and declaratory in nature. The amendment is disallowed. The amendment seeks that the Minister shall review tax relief arrangements for private hospitals, etc., to determine their compatibility with health criteria, in particular the size and location of such facilities. The amendment has been declared out of order.

Amendment No. 13 not moved.

Amendment No. 14, in the name of Deputy Joan Burton, is also out of order. A charge on Revenue would be incurred.

Amendment No. 14 not moved.

I move amendment No. 15:

In page 17, before section 14, to insert the following new section:

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

This amendment relates to the situation where employers provide a child care facility directly to an employee or pay the child care costs of an employee directly to a third party. I understand the Minister is concerned that this is being used as a form of tax avoidance but in practice where, in the ordinary course, a genuine employer is providing facilities for employees, why should the Minister take an aggressive approach? Does he have particular concerns about this and could he advise the committee further?

The position is that existing law already provides an exemption from an employee benefit-in-kind charge where employers provide free or subsidised child care for their employees. The exemption applies where the child care facilities are made available solely in-house by the employer, by the employer jointly with other participants, by other persons and the employer is wholly or partly responsible for financing and managing the child care service, or by other persons and the employer is wholly or partially responsible for capital expenditure on the construction or refurbishment of the premises. Essentially, for the exemption to apply, the employer must be involved in the provision of the facilities, their management or their funding.

Concerns were expressed previously that the relief was not available to small and medium sized enterprises, SMEs, by virtue of their size. Where the individual SME might not be able to facilitate the provision of child care facilities on its own, the legislation allows the enterprise to join with other small employers to provide co-located facilities, contributing proportionately to costs and jointly providing the child care service. In this way, the SMEs can address collectively the differences of scale in the provision of facilities.

The Deputy's proposal, in so far as it relates to the direct provision of child care, is addressed already in existing legislation. The amendment is, therefore, unnecessary.

Regarding the second proposal in the Deputy's amendment, namely, that employees be given a benefit-in-kind exemption where their employer purchases child care for them from third parties, a co-requirement of the current exemption is that employers must be involved in the provision, management or funding of the facilities. Apart from this, the main difficulty with the Deputy's suggestion is the potential cost to the Exchequer. Allowing employers to buy child care for employees from third parties is unlikely to have any significant impact on the supply of child care places. Indeed, it could lead to some displacement, with employers buying up the most convenient child care places for their employees and those not getting such a benefit being forced out to less convenient child care facilities. There could also be a knock-on effect on the costs of child care as people being subsidised might be prepared to pay even more for the service.

Ultimately, such a provision, if introduced, would likely lead to pressure for full tax relief from all those paying their own child care costs with the associated costs being borne by the Exchequer. As the Deputy is no doubt aware, current policy is designed to increase the number of child care places and not to use existing resources to grant tax relief for child care costs per se. In these circumstances, it is not possible to accept the Deputy’s amendment.

Is the amendment being pressed?

With regard to the Minister's approach to tax relief on child care, he is reiterating the point that he wants to subsidise the bricks and mortar of the child care operator and the private providers. He wants to continue to provide tax breaks for the building of child care facilities. The current situation is that large organisations, be they the public service or large private corporations, because they can meet the requirements set out in legislation, are in a position to assist their employees with subsidised child care. However, for people working in smaller organisations, it is unlikely their employer would be in a position to provide child care facilities or to build them and avail of the tax breaks available. What the Minister has just outlined is rather inconsistent in terms of how the system works.

I appreciate that the situation in the Minister's constituency may be different from that prevailing in Dublin or other urban areas. In Dublin, one either uses the private child care market or qualifies for community-based child care facilities which are somewhat cheaper and are subsidised to some degree. However, that subsidy is under review by the Government. In the larger cities, even if a community-based child care place is available, employees cannot avail of it if their income is above a certain level. Most of the places in community facilities are taken by people undergoing training, education or starting back in work.

The situation is anomalous, as experienced by different classes of parents. Where parents only have one child, they are particularly anxious that both spouses continue to work, even if one only works part-time and especially when they have hefty mortgage repayments to make. The Minister's scenario is very tough on those families who are essentially the coping families, those who are above the lowest level of income and therefore do not qualify for community-based child care. The mothers in such families are often anxious to remain engaged in the workforce, even if only on a part-time basis, but the cost of child care is prohibitive. It costs at least €200 per week in Dublin for child care. In most Dublin crèches, including the ones supported by the county child care committees and the Government, it is almost impossible to get part-time places. The system simply does not work that way.

The Minister earlier accused me of patronising him because I talked about the difficulties faced by families, women in particular, trying to access reasonably priced child care. I apologise if I patronised him. I realise he knows everything but this is an incredible difficulty for parents. I would like the Minister to talk to committee members about his approach to this incredibly difficult area for families struggling to bring up children and keep a roof over their heads.

We touched on this issue earlier in terms of the very small increase in the home carer's credit. There is a group of people who are—

The Deputy should speak to the amendment before us.

I am coming to the amendment. I am getting there slowly. There is a group of people that are caught in a trap. They are being forced out to work because they are not certain it is worth their while to work. Staying at home is not an option because the home carer's credit is so low but at the same time they are paying very high child care costs. The argument the Minister has made in terms of not providing benefit-in-kind exemption in respect of smaller businesses is difficult to accept. If one takes the example of two businesses, one of which is very large with an in-house crèche and the other a small enterprise which provides just as much value to the economy but uses an off-site crèche, the employees of the latter business will be caught for benefit-in-kind. There is a basic inequity in that. I would like to hear the Minister's comments, as I do not accept his argument.

In my initial response on the employer-employee relationship, I explained that the employer is being encouraged to provide extra child care places for employees' children. Employers must be involved in the management or funding of those facilities to meet the policy objective of ensuring that we do not do something that would be anomalous in respect of those not working for the employers in question. I have explained that it is possible for small employers to group together and co-locate facilities to deal with the difference in scales and resources compared to large employers. If we can get employers, large or small to do so in a way that would provide additional places, we will not tax them as benefit-in-kind. The problem with what is being suggested—

My point was that they may not be able to afford it.

What is being suggested is that, of the existing complement of child care places, those employees who locate places successfully will be given a non-taxable benefit-in-kind in a way that would not meet our policy objective of increasing child care places. If the problem is trying to find places, why would one subsidise some employers who locate places and who do not need to be involved in providing, funding or managing them and then claim that it is a way of solving the problem of demand?

The Minister has—

The Deputy cannot have it every way. This is the point. While the amendment is well intentioned and has led to this discussion, I am sorry if I happen to disagree with the Deputy. The fact that I disagree does not make me any less right than the Deputy.

The Minister is coming from a supply model.

I will listen and respond. The committee can sit until 5 p.m. if it wants. The issue is the effort being made to provide a tax incentive to provide additional places, a legitimate policy objective. It is not a legitimate policy objective to provide a tax relief to some people who have not been lucky enough to be employed by some employer or set of employers who have been able to locate child care places from an existing complement. This is a problem because there are many people without taxable incomes, for which reason €575 million was invested in the national child care investment programme. We have the early child care supplement and we have invested in 11,000 training places. We have a Towards 2016 commitment to providing an additional 100,000 child care places, but the amendment would not enable me to do so. It would create an anomalous situation.

As a policy measure, employers who wish to invest in and provide child care places for their employees' children can do so under certain circumstances, but they cannot farm out that responsibility to someone else because no additionality would be gained. Small and medium-sized enterprises can group together, co-locate and share the costs proportionally to address the fact that some are small or large employers. This is the consideration behind the policy and I am ensuring practice is reflected in legislation. If people want to short circuit the process and do it a different way with the outcome of increasing the cost of child care places — as expensive as they are, supply will tighten further — it would not fulfil the policy objective, namely, more child care places at more affordable prices. If more employers take up our suggestion and if we provide the incentives to do so, it is a way of addressing the matter. The suggestion in the amendment has an attraction at one level, but it also has a consequence, namely, it will compromise the policy objective in respect of which we are trying to think up ideas to help to provide more places.

I have taken a number of approaches in this area, including attempting to improve the informal sector — it was 10,000 places per year and has increased to 15,000. We will do and try everything we can to assist within reasonable constraints but, for the reasons I have given, this amendment is not such a way.

Amendment put and declared lost.

I move amendment No. 16:

In page 17, before section 14, to insert the following new section:

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

The Minister is probably aware that, unfortunately, the level of unemployment is rising and significant numbers of redundancies are being announced weekly around the country, many in industries and firms of long standing. The Minister will have heard of what occurred in respect of Allergan in Arklow, the announcement made by Arnotts in recent days of 600-700 traditional jobs to be lost in Dublin city centre and a spate of company closures on a continuing basis.

I do not know whether the Minister is aware of this, but when employers buy training, it is normally regarded as tax deductible and the employee who receives the training from the business is not charged to tax. In terms of managed redundancy, as I am sure the Minister knows, many multinationals started the practice of offering managed and phased redundancy packages, which is helpful to workers. As part of the package, they can access training of various kinds to be specified, in some cases in conjunction with FÁS and, in other cases, by purchasing training. The range of training can be wide. Where this offer is part of a redundancy package, the employee is charged on a taxable benefit. I understand the technical reasons in terms of classical taxation, but it does not make sense. What is the Minister's opinion on this matter and will he outline it to the committee?

The Deputy has tabled an amendment that seeks to ensure that training costs paid by an employer will not result in a benefit-in-kind charge applying to the employee. I am informed by the Revenue Commissioners that, in the circumstances where an employer either refunds course or examination fees on behalf of an employee or pays the fees directly on behalf of the employee and the course undertaken is relevant to the business of the employer, a taxable benefit will not arise. Details of this and other exemptions from benefit-in-kind are set out in the employer's guide on the operation of PAYE and PRSI on benefits from employment, leaflet IT20A, which is available from the Revenue website. In those circumstances, it is not clear whether the amendment would be necessary.

What about the situation of an employer providing training after a redundancy as part of a redundancy package?

I am informed that would not be eligible.

Why not? Given that the Minister is presiding over a growing rate of unemployment — the fastest increase in unemployment since the early 1990s — this has not been a problem—

The Deputy should deal with the amendment. We will not have a Second Stage debate on the economy.

—in the economy until now. I am sure that the people who have become unemployed in the Chairman's constituency will soon be at his door asking for his assistance.

I will look after my constituency.

The Chairman is lucky that there is no unemployment in his constituency.

I did not state that. I stated that I would look after my constituency.

They will be at other Deputies' doors as well because this issue arises around the country due to the current spate of redundancies. I tried to set out this issue as briefly as possible but training that continues as part of redundancy is taxable benefit. I do not expect the Minister to change this immediately but is he willing to consider the experiences of people who are going through redundancy and trying to conserve redundancy benefits as much as possible? This is not unreasonable.

As the Minister correctly says, when people are in employment, training is recognised for tax purposes without any difficulties. Can this be carried into the post-redundancy situation? Perhaps Revenue is becoming more aggressive in its approach to this matter or perhaps, due to increased redundancies, it is a growing issue.

I see the Deputy's point and will examine it for Report Stage.

I thank the Minister.

Can the Minister briefly explain the reason for this change?

Is the amendment being pressed?

I would welcome the Minister examining this issue for Report Stage as it is a growing problem.

Amendment, by leave, withdrawn.
SECTION 14.
Question proposed: "That section 14 stand part of the Bill."

I have no great objection to section 14 but I ask the Minister to explain why loans for employee share option trusts must be for at least ten years.

Section 14 amends subsection (2)(a) of section 515 of the Taxes Consolidation Act 1997, which relates to limits on the value of shares that can be appropriated tax free by trustees on an approved profit sharing scheme to employees. Under existing legislation on approved profit-sharing schemes, shares up to a maximum value of €12,700 can be appropriated to an employee free of tax in a tax year. However, on a once-off basis and where certain conditions are met shares up to a maximum value of €38,100 can be appropriated in a tax year.

Those conditions are as follows. Shares appropriated by an employee must have been transferred to the trustees of the profit sharing scheme by the trustees of an employee share ownership trust, ESOT. At all times in the five years since the ESOT was established, 50% of the securities held by trustees must have been pledged as security for borrowings. At the time of the transfer of shares from the ESOT to the profit sharing scheme a period of at least ten years, commencing from the date the ESOT was established and ending at the time when all pledged shares became unpledged, must have elapsed. This condition is commonly referred to as the ten year rule. None of the shares pledged at any time since the ESOT was established can be transferred from the trustees of the ESOT to the trustees of the approved scheme because they are pledged for the period of ten or more years referred to earlier.

It has been pointed out in representations made to me that the ten year rule can cause difficulties where there are sufficient funds available to the trustees of an ESOT, for example, in the form of a dividend income from the shares held in the ESOT to pay off the borrowings in a shorter period. The current legislation can cause trustees of an ESOT to unnecessarily prolong a loan, to avail of the increased limit, and thus delay the distribution of the shares to employees through the profit sharing scheme. The section gives the Revenue Commissioners the discretion to allow a shorter loan period of less than ten years but not less than the period for which 50% of the shares must remain pledged as security for borrowings, that is, five years. In other words, we can reduce the ten year rule to five years, at the discretion of the Revenue Commissioners, if it has the effect of delaying employees getting the benefit of a profit sharing scheme.

Question put and agreed to.
Section 15 agreed to.
SECTION 16.

Amendments Nos. 17 and 18 are related and may be discussed together.

I move amendment No. 17:

In page 19, line 32, to delete "under section 112" and substitute the following:

"under Schedule E and computed in accordance with section 112".

This is a minor technical amendment to section 16(5) that puts beyond doubt that the charge under the subsection is under Schedule E. The amendment to section 16(8) is a technical amendment to avoid a double charge tax.

Amendment agreed to.

I move amendment No. 18:

In page 22, between lines 25 and 26, to insert the following:

"(c) If, because of paragraph (b) of subsection (5), paragraph (a) of that subsection did not apply in relation to employment-related securities, the chargeable amount is to be reduced by the amount determined by the formula—

H — I

where-

H is the amount by which the market value of the employment-related securities for the purposes specified in paragraph (a) of subsection (5), exceeded what it would have been had that paragraph applied, and

I is the aggregate of any amount by which the chargeable amount on any previous chargeable event relating to the employment-related securities has been reduced under this subsection.".

Amendment agreed to.
Section 16, as amended, agreed to.
SECTION 17.
Question proposed: "That section 17 stand part of the Bill."

I ask the Minister to elaborate on the purpose of section 17.

Section 17 amends section 986 of the Taxes Consolidation Act 1997, which contains the enabling provisions for PAYE regulations. The changes ensure that the current administrative practices of the Revenue Commissioners are reflected in the legislation that underpins the operation of the PAYE system of taxation.

Question put and agreed to.
Sections 18 to 20, inclusive, agreed to.
SECTION 21.
Question proposed: "That section 21 stand part of the Bill."

I ask the Minister to supply us with his reading notes on this section as I do not understand it.

This section deals with the issue of salary sacrifice and copperfastens on a legislative basis a Revenue administrative practice that has been in place for a number of years. It does this by inserting a new section, 118B, into the existing tax code.

What is the basis for this?

The section provides clear legislative treatment for the existing Revenue practice relating to salary sacrifice arrangements for travel passes, which are exempt from benefit in kind and are provided by employers to employees, where there is a corresponding reduction in the employee's remuneration. Similarly it confirms the treatment that applies with regard to employee contributions to approved profit sharing schemes set up by employers under section 510 of the Taxes Consolidation Act 1997. The section also includes a number of anti-avoidance provisions to ensure there is no abuse of salary sacrifice arrangements by providing that only current or future arrangements, which are specifically provided for in subsection (2)(a), will be effective for tax purposes. It also seeks to prevent any attempts that might be made to circumvent the intent of the section, either by employers providing benefits to connected persons or by reimbursing employees for salaries forgone.

I am advised that the Revenue Commissioners have become aware of a number of schemes that have utilised the medium of salary sacrifice to provide tax-enhanced benefits or remuneration for employees. In particular there have been attempts to circumvent the limits imposed on personal contributions to pension schemes by transferring the contribution event from the hands of the employee to the employer and this is at the expense of the Exchequer.

The legislation, as drafted, ensures that such schemes will now give rise to a tax charge that was previously being avoided.

Can the Minister provide a copy of his notes?

We have dealt with that amendment and I have allowed the Minister to provide his note on it.

Question put and agreed to.
Sections 22 to 24, inclusive, agreed to.
NEW SECTION.

I move amendment No. 19:

In page 33, before section 25, to insert the following new section:

25.—Section 372AZ(1) of the Principal Act is amended by substituting the following for paragraph (c):

"(c) unless the potential capital allowances in relation to the building or structure concerned and the project in which it is comprised comply with—

(i) the requirements of the Guidelines on National Regional Aid for 2007-2013 prepared by the Commission of the European Communities and issued on 4 March 2006, and

(ii) the National Regional Aid Map for Ireland for the period 1 January 2007 to 31 December 2013 which was approved by the said Commission on 24 October 2006,

or

(d) where the person who is entitled to the relevant interest, within the meaning of section 269, in relation to that expenditure is subject to an outstanding recovery order following a previous decision of the Commission of the European Communities declaring aid in favour of that person to be illegal and incompatible with the common market.”.”.

This amendment inserts a new section 25 in the Bill that amends section 372AZ of the Taxes Consolidation Act 1997 with regard to the scheme of capital allowances for certain registered holiday camps and other tourism infrastructure facilities as may be improved for the purposes of the mid-Shannon corridor tourism infrastructure investment scheme. The amendment updates legislative references in section 372AZ to reflect the EU state aid requirements which must be met in relation to projects and the exclusions which apply in relation to persons who may claim capital allowances under the scheme.

The section provides that relief under the scheme will not apply unless the potential capital allowances in relation to a building or structure and the project of which it is comprised comply with the requirements of the guidelines of national and regional aid for 2007 to 2013 and the national regional aid map for Ireland for the same period. The section also denies relief under the scheme to a person who is subject to an outstanding recovery order following a previous decision of the Commission of the European Communities declaring aid in favour of that person to be illegal and incompatible with the Common Market.

Having previously tabled amendments in the area of tourism and camping and caravan parks, I am pleased the Minister has addressed some of these issues in the Bill. I do not understand the specific reason the Minister introduced generous tax incentives for the mid-Shannon region. What will be the additional effect of these measures and at whom are they targeted?

As the Deputy is aware, the Department has been awaiting European Union approval for the scheme. The EU suggested the insertion of two provisions to confirm that state aid rules apply and so forth. To give a short answer, the amendment inserts the conditionality sought by the Commission. I have a three-page note if the Deputy would prefer a longer explanation.

The scheme was duly notified in full to the Commission, which wrote to us on 11 January seeking a number of clarifications and requesting that the scheme exclude undertakings that are subject to a Commission recovery order in respect of the award of illegal state aid. We replied on 17 January clarifying all the issues raised and committed in the Finance Bill 2008 to exclude from the scope of the scheme beneficiaries who are subject to an outstanding recovery order from the Commission. I am awaiting a response from the Commission and I am optimistic that final approval will be received shortly.

On the Commission's position, is there a problem regarding persons who are the subject of recovery orders?

I am not aware of any such problem. This is an extra condition the Commission wanted inserted. If, subsequently, a person were to apply for an allowance and a recovery order was outstanding against him in respect of a previous award, the person in question would not be eligible.

Is the Minister referring to persons who had previously misused an EU scheme?

The Commission wants to ensure the legislation covers persons who are subject to a recovery order issued by the Commission.

What are examples of recovery orders?

It could be a person who had fewer corncrakes on the callows of the River Shannon than he was supposed to have had when he received a grant.

Why does it take so long to secure Commission approval for a scheme, given that the proposed scheme for the mid-Shannon region featured in last year's Finance Act? People in the region are asking this question.

I do not run the Commission.

It takes well over a year.

EU approval is required for these schemes. As is the case with all business tax incentive schemes, Commission clearance is required before a scheme can commence, as was made clear at the time. In setting out the allowable investment amounts provided under the scheme under section 29 of the Finance Act 2007, we took account of the new EU regional and state aid guidelines applicable from 1 January 2007 and the new block exemption regulation for regional aid. Better regulation allows member states to introduce aid without making a full formal notification of the aid to the Commission provided it is informed of the existence of the aid scheme and the scheme complies with the terms of the block exemption regulation.

It was our understanding that the scheme was in compliance with the block exemption regulation and the reliefs could be introduced without making a full and formal notification to the Commission. The Commission was accordingly informed of the scheme in April 2007. However, shortly after the necessary information was sent to the Commission it came to our attention that there was a possibility that one aspect of the scheme did not fully fall under the scope of the block exemption regulation. Our concerns were duly raised informally with the Commission in May 2007 and on its advice it was decided to notify the scheme for full and formal state aid approval.

On the primary legislation providing for the scheme, as set out in the Taxes Consolidation Act 1997, the award of aid under the scheme is also contingent on qualifying expenditure being in compliance with certain criteria set out in certification guidelines. In cases where aid in the form of tax incentives is not awarded automatically but on the basis of discretionary powers by the national authorities, such as in cases where there is a certification procedure in place, the secondary legislation or certification guidelines must also be included with the state aid notification documentation. For this reason, the scheme could not be notified to the Commission until the certification guidelines were finalised. The drafting of these guidelines involved detailed consultations between my Department and the Department of Arts, Sport and Tourism and Revenue Commissioners. The agreed draft of the certification guidelines was completed in November 2007 and the scheme was duly notified in full to the Commission on 14 December 2007.

As I explained, the Commission wrote to the Department on 11 January and we replied on 17 January. In our reply, we committed to exclude from the scope of the scheme beneficiaries who are subject to an outstanding recovery order from the Commission. This is one of the matters the Commission asked the Department to clarify. I am optimistic that upon enactment of the Bill, we will secure final approval of the scheme thereafter.

The main reason for asking the question is that a number of sections require clearance from the European Union. As a result, provisions made in a Finance Act have not entered into force one year later. The Minister must react to circumstances and there has been a delay of more than one year. Is it possible to find out if procedures at EU level can be expedited?

In fairness, an issue arose which we addressed. This required the introduction of secondary legislation and regulations on the scheme before approval could be considered. It was a technical matter.

It took 12 months.

Yes, but the scheme has a period of operation of three years from the point at which it is given EU approval. No time is lost.

While I accept that, I am making a general point.

I have explained.

Amendment agreed to.
Section 25 agreed to.

Owing to the co-operation of members, we are well ahead of schedule. If members wish, we can continue for an hour or adjourn and return to proceedings later.

I propose that we proceed.

NEW SECTIONS.

Amendments No. 20 and 21 are related and may be discussed together.

I move amendment No. 20:

In page 34, before section 26, to insert the following new section:

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

I have introduced this amendment previously. Although we have heard the Minister take a defensive position on the reason it is difficult to make changes, the amendment raises a specific difficulty. People who are employed, particularly those fortunate enough to work in the public service, can avail of the benefit-in-kind scheme for travel without difficulty by having their employers co-operate in the purchase of annual rail and bus passes for public transport. Given that, as the Minister informed the committee, we have something of a green Government and green issues are all the rage in government, it is difficult to understand the reason the scheme should remain so confined.

As I have noted previously, those in smaller employments where an employer is not willing to do the paperwork required to take part in the scheme are excluded from availing of it, as are women who work two or three days per week or seven or eight months per annum because they take time off for parental leave in the summer. There appear to be two ways to expand and reform the scheme to make it more attractive for people to use public transport. One method would be to make it easier for an employee to claim directly what is now put through employers. The other would be to break up the periods which can be claimed into quarterly or even monthly periods. I do not want to hear from the Minister again that the administration is the difficulty. We ought to be here to solve problems and not to tut-tut that problems are insoluble because administration does not change fast enough.

In my constituency and in other areas of the country, younger people in particular are anxious, willing and eager to use public transport. If we want to get people out of their cars and into public transport it makes sense to incentivise it and make existing incentives accessible to a much wider range of commuters. Many people in Leinster House and Departments use the current system and it is well worthwhile. Is the Minister willing to rethink his veto on expanding this system to make it more attractive to more commuters? Will he accept the Labour Party's amendment?

I am an enthusiast for this scheme. One of its drawbacks is that if one pays for an annual ticket one must be sure one's circumstances will not change during the year.

A snap election.

As a special adviser based in Dublin, I bought a commuter ticket in January 2002 not anticipating, as it had not been raised, that I would be selected by convention to contest an election. I subsequently became an Oireachtas Member although not yet a Deputy. I got poor value out of the ticket because it was related to Dublin and not to Tipperary. Making the scheme more flexible, such as making it quarterly, would have advantages. I recognise and understand this depends on the co-operation of employers and it is simpler for them to do it once a year. However, perhaps it should be examined.

Amendments Nos. 20 and 21 address related issues and I propose to deal with them together. With regard to amendment No. 20, tax law provides an exemption from an employee benefit in kind tax charge where employers provide their employees with monthly or annual travel passes. For the exemption to apply, the employer must bear the cost of the travel pass.

Subsequent to the introduction of the scheme, representations were made to investigate the possibility of employers providing the passes within existing employment costs. Following consideration of the matter, the Revenue Commissioners approved administrative arrangements known as "salary sacrifice" whereby employees could accept a pre-tax reduction in salary to obtain a travel pass of equal value in return. This can result in a saving of up to 47% on tax and PRSI on the cost of a travel ticket. Section 21 of this year's Bill places this arrangement on a statutory basis.

To ensure the renegotiated arrangements are genuine they must last for at least 12 months. Under a salary sacrifice arrangement, the employer is regarded as incurring the cost of the travel pass and accordingly the exemption applies. A full salary sacrifice arrangement was set out in tax briefing 41 in September 2000, copies of which remain available for any members of the committee who wish to see them. It is also well-publicised by transport companies.

It is the 12 month period of salary sacrifice which appears to have given rise to the assumption that annual tickets only may be used in this scheme. As I already indicated, the legislation provides for both monthly and annual passes to be used. In general, where salary sacrifice is in place, it is more effective from a cost point of view for employees and from an administrative point of view in the case of employers to use annual rather than monthly passes. If quarterly tickets become available generally, the Revenue Commissioners will be open to facilitate the granting of relief in such cases. In this respect, the amendment is not necessary.

With regard to amendment No. 21, travel expenses incurred by an employee in the performance of the duties of his or her employment are already deductible for tax purposes under existing law. To this extent, the amendment is unnecessary. If, however, the intention is to extend the present provision to cover the cost of travelling to work it would have serious cost implications for the Exchequer and I would not be in favour of it.

Deputy Mansergh gave a very good example of where the difficulties lie. In many ways, this is a continuation of our earlier discussion. We have an activity which the Oireachtas wants to incentivise, namely, using public transport versus the private motor car. We all state the scheme as it stands is excellent. Civil and public servants with predictable and regular hours of work living near travel facilities are among those in the best position to use it. However, it could be used by many more people.

Chambers Ireland and people in small and medium enterprises would like to develop schemes to encourage employees to move away from cars. Many employers will not facilitate this scheme because it involves too much paperwork. I do not state the amendment is perfect. However, it might open minds on how to develop this further.

Many people, such as Oireachtas Members, have benefits through work relating to the use of cars, such as free car parking. If I park in town on Sunday I pay anything from €2 upwards, depending on where I park. We want to incentivise people away from this and into public transport. Expanding the use of this scheme requires a bit of imagination.

As I stated, the Revenue Commissioners are being as flexible as they possibly can, as they have been and as they will be if quarterly passes are introduced. Private operators accommodate people who have atypical work patterns and work three or four days per week as opposed to five days per week. The providers must provide the method of payment and if they come up with a quarterly payment rather than a yearly payment we will accommodate it.

The Revenue Commissioners can only accommodate the flexibility of the operators. It is not a question of the Revenue Commissioners being so flexible that they provide relief for tickets which do not exist. Private operators will negotiate an annual ticket covering a three-day or four-day week and this is acceptable under the scheme. An effort is made to accommodate rather than to restrict. The responsibility of choice with regard to method and period of payment primarily lies with the operators.

Amendment, by leave, withdrawn.
Amendment No. 21 not moved.
SECTON 26.
Question proposed: "That section 26 stand part of the Bill."

I wish to ask the Minister about the restriction on property developers using capital allowances for child care and other elements. Will the Minister explain the thinking behind this? I presume the relief is aimed at the activity of providing child care and not at the property development end.

Another element of this type of relief is that those putting money into a scheme are capped regarding their income, such as a doctor. However, if they have rental income their contributions are not capped. A property developer with a rake of properties and rental income from them can put as much as he or she likes into the scheme.

I must check the second point raised by the Deputy.

This section amends the scheme of capital allowances for qualifying child care facilities in order to update the references in the legislation to reflect the coming into operation of new child care regulations in 2007. It also extends the exclusion of property developers from the entitlement to claim capital allowances for such facilities to persons who are connected with property developers.

Currently a property developer may not claim capital allowances in circumstances where the property developer or a connected person incurred a construction expenditure on the building involved. In future, the restriction on claiming allowances will also apply to persons connected with the property developer. This section also excludes persons connected with property developers from claiming capital allowances under the schemes for qualifying hospitals, mental health centres and the mid-Shannon corridor scheme relating to tourism facilities and similar circumstances.

Will the Minister explain the thinking behind it? I presume if one is building a private hospital and brings in a property developer on the project, the capital allowances are confined only to the hospital and cannot be passed on to the property developer.

This seems to be in all these allowances. Capital allowances are subject to a certain limit for a passive investor against none for a rental income investor. The corollary seems to be there is no cap if it is rental income. Will the Minister's officials send me a note on this?

They will. The purpose behind the exclusion is to make the definition under the various schemes more robust to meet EU state-aid concerns about property developers availing of capital allowances and also to restrict persons connected with property developers from benefiting from these allowances. Property developers are also excluded for similar reasons from certain other property-based tax incentive schemes including private hospitals. The amendment will provide persons connected with property developers from claiming capital allowances. It is proposed to make the amendment effective as regards capital expenditure incurred on or after 1 January 2008.

I will check the other point on rental income.

The tax life for child care centres was extended from ten years to 15 years in the 2007 Finance Act. Will the Minister explain the logic behind that decision? Queries are being raised on this provision. Those investing in child care crèches had a tax write-off over seven years. Many of them entered into these arrangements when in their 50s. With the change in terms, they will be still tied into the scheme for another five years and into their retirement.

If memory serves me right, it is about avoiding change of use of the facility after a certain period. If people are going to get a tax allowance for providing such a service, it will only be for that.

Yes, but it was extended from ten years to 15 years.

Exactly, so that we will not be giving tax relief for child care facilities that could end up as another service.

I accept that but it is coming to the fore as people of a certain age group are reluctant to get involved.

It was an Indecon report recommendation to avoid the change of use to ensure sustainability.

Regarding the provision for the construction of mental health centres——

Is this relevant to the section?

Yes, it is. Many mental health centres were very small with only 20 beds, contrary to the Hanly report's recommendations. Was there much take-up of this incentive by investors?

I do not know.

Is the Minister able to get that information?

I will see what we can do.

Question put and agreed to.
Section 27 agreed to.
SECTION 28.

Amendments Nos. 22 to 25, inclusive, are related and may be discussed together.

I move amendment No. 22:

In page 37, lines 25 and 26, to delete "whose carbon dioxide emissions" and substitute the following:

"whose CO2 emissions, confirmed by reference to the relevant EC type approval certificate or EC certificate of conformity,".

Section 28 is concerned with the new schemes of capital allowances and leasing expenses for business cars. These are technical amendments. It is necessary to refine the definition of CO2 emissions, so there is no ambiguity in the general understanding of the scheme.

In addition all new cars sold in the EU are obliged to be accompanied by a certificate indicating the car's level of CO2 emissions. Provision is being made in these amendments for circumstances in which the documentation accompanying a car establishing its CO2 emissions is unsatisfactory or if there is no documentation at all. If so, the cars affected will be deemed to be in an emissions category to which no capital allowances or leasing expenses apply. In practice, this limitation will only apply to cars over ten years old. In the context of business cars, it is not likely to be a major issue.

The car rental industry is concerned about this issue and another matter which will arise in a further section. The Minister has set a date for the introduction of a new motor tax regime for lower carbon cars. However, those who were virtuous and bought lower carbon emission cars are still locked into their old motor tax bill and do not get the benefit of the restructured bill. It is annoying many people.

Virtue does have its rewards.

It seems these people are being hit on the double for being virtuous. If a person will opt for a low emission car, it is hard to understand why they should not get the lower tax regime which will continue for the lifetime of the car. Will the Minister refer this to the Minister for the Environment, Heritage and Local Government?

There is, of course, an easy solution for those who became virtuous and purchased their cars before the budget date. It would be to buy a 2008 Toyota Prius or similar vehicle after the introduction of the new regime. People who are conscientiously green do not change their car every year, however.

Does the Minister believe people who, before his changes bought hybrid cars are so well off they can afford to change the car after the date and gain the tax advantage? It is unfair but like the stamp duty changes the Minister made many people who are not particularly well-off missed the boat. I am driving a 2002 car myself, so I am not one to speak. It seems unfair that even people who are environmentally conscious will lose all the advantages offered unless they are well-off enough to afford a new hybrid car after the relevant date.

That is the nature of change. There is always someone who claims that if I had waited until later it would have been better. We do not normally have retrospective legislation in respect of these matters. There is a change being made in terms of engine size and carbon emissions. People who previously viewed the Toyota Prius, for example, as their car of choice made that choice in the context of the regulations as they stood. If they are happy with the Prius and they go out and buy another one in the future, the new arrangements will be in place. There is nothing I can do about that. It is the way things are. I must point out, however, that there were some differentiated inducements for hybrids in the past which are now being enhanced as a result of the introduction of carbon emission criteria for all cars.

The amendments relate to VRT, which is my side of things. I will raise the issue mentioned by Deputy Bruton with my colleagues to find out whether there is any prospect of change beyond what was originally envisaged. Obviously, representations were made about this in the aftermath of the announcement, and these will have to be considered. The issue of the car rental industry was also mentioned. A presentation has been made to me in recent days about this and I am having it checked out. I do not yet know whether there is any validity to it.

In the 2007 budget, the Minister indicated that various measures to do with CO2 emissions in cars were to be introduced. Some people would have bought cars in advance of the expected changes. Furthermore, what is being introduced here is a change in capital allowances. We are now in the 2007 tax year and people will not fill returns until the end of October 2008. A measure giving people some sort of benefit for investing in cars that are less damaging to the environment could have been considered.

There is currently a gross inequity due to the fact that motor taxes are not based on CO2 emissions. However, from 1 July motor taxes for all cars will be based on CO2 emissions. The way in which the system is currently structured means that a currently owned car that is more environmentally friendly than one bought after 1 July could attract a higher rate of motor tax. This is an anomaly that needs to be considered. I would like to hear the Minister's viewpoint on these matters.

The Deputy is correct. I did say two budgets ago that I would undertake a detailed study on the issue of CO2 emissions and that I would report on this and make announcements in the last budget. I have done that. If people have decided in anticipation of this——

I am sure the cost to the Exchequer would not be significant.

It is not a question of a cost to the Exchequer; it is a question of the principle of taxation that applies. I gave notice of these changes so that people would see it as a transparent process. I cannot—

This is not a retrospective measure. It would be in place—

If the Deputy is asking me to provide reliefs which pertain to dates prior to that of the budget, I cannot do that.

I am asking the Minister to provide relief in the future for people who invested in cars prior to the budget based on expected activity after the budget.

The Deputy is in the course of what I hope will be a prolonged Dáil career, but the ability to face five different ways at the same time and keep everybody happy does not exist. It is impossible. When one goes into government, this problem increases by a factor of ten.

It is a valid point.

I understand the Deputy's point, but the short answer is that it cannot be accommodated.

The other question was whether there was any possibility of transitional arrangements regarding the motor tax provisions.

This is a practical measure.

This is a matter to be dealt with by my colleague, the Minister for the Environment, Heritage and Local Government. I will ask him to investigate whether there is any possibility of accommodation. I do not want to raise expectations as it would not be fair. I have no responsibility in this matter. All I can do is to bring these matters to his attention.

It is a very practical measure.

Does the Minister wish to comment on all the amendments at this stage?

I have commented on all of them.

Amendment No. 27 was among those, but I did not get a chance to address it.

We will get to No. 27 shortly. Are amendments Nos. 22 to 25, inclusive, agreed?

Is the Chairman taking those together?

I am taking them together. I announced that.

Does that stop me from moving my amendment?

We will get to the Deputy's amendment shortly.

Amendment agreed to.

I move amendment No. 23:

In page 37, between lines 43 and 44, to insert the following:

"(3) Where the Revenue Commissioners are not satisfied of the level of CO2 emissions relating to a vehicle by reference to any document other than either of the certificates referred to in subsection (2), or where no document has been provided, the vehicle shall, for the purposes of this Part, be treated as if it were a vehicle in Category G.".

Amendment agreed to.

I move amendment No. 24:

In page 37, to delete lines 44 to 47 and substitute the following:

"(4) In this Part--

‘CO2 emissions' means the level of carbon dioxide (CO2) emissions for a vehicle measured in accordance with the provisions of Council Directive 80/1268/EEC of 16 December 1980 (as amended) and listed in Annex VIII of Council Directive 70/156/EEC of 6 February 1970 (as amended) and contained in the relevant EC type approval certificate or EC certificate of conformity or any other appropriate documentation which confirms compliance with any measures taken to give effect in the State to any act of the European Communities relating to the approximation of the laws of Member States in respect of type approval for the type of vehicle concerned;

‘specified amount', in relation to expenditure incurred on the provision or hiring of a vehicle to which this Part applies, means €24,000, where the expenditure was incurred--".

Amendment agreed to.

I move amendment No. 25:

In page 38, line 4, to delete "(4) This Part shall be construed as sone with" and substitute the following:

"(5) This Part shall be construed as one with".

Amendment agreed to.

Amendments Nos. 26 and 27 are related and may be discussed together.

I move amendment No. 26:

In page 43, between lines 32 and 33, to insert the following subsection:

"(3) Any additional revenue raised as a result of this Section will be separately reported by the Revenue Commissioners in their annual statement.".

This amendment relates to the general issue of environmental taxes, which has been raised on several occasions. The Minister and his commission are envisaging the extension of environmental taxes. It is of concern that the money obtained in this way be ring-fenced and that the presence of environmental taxes not be used as a back door to raising tax levels generally. One of the ways in which the public may be encouraged to accept environmental taxes as being fair is if the money raised is seen, transparently, to be recycled into reductions in other taxes. Thus, for example, if the use of emission-creating resources such as oil or peat attracts greater taxes there would perhaps be a reduction in the employer's tax on wages or some other cost so that people can see that it is a balanced package.

This is the first toe in the water for the introduction of green taxes. The Minister will say it is being done on what is expected to be a cost-neutral basis, but expectations and reality can be different. People will want to see an assurance that environmental taxes are genuinely used for something, whether it be improvements in emission reduction expenditure or reductions in wage taxes. In this way there would be a sense of the public's being rewarded for contributing this extra tax by seeing something else happen that is part of the package deal. Whenever I have heard the Minister's colleagues advocate the introduction of green taxes, it is always on the understanding that there will be a quid pro quo — people will pay more on this but they will pay less tax on other things. How does the Minister intend to give that reassurance, which the public genuinely expects and has been led to expect by those who have rightly advocated the use of green taxes? I have advocated green taxes but whenever I have spoken on this issue, I have always said the public will need this reassurance that the money will be recycled.

As I do not see anything in the Bill that indicates how the Minister is planning to carry out this recycling, I put down these amendments. Amendment No. 26 provides for separate reporting of these taxes by the Revenue Commissioners so that we can see their impact. In this way we can tell whether they were cost-neutral, whether they raised more money and whether there was a dividend to the Exchequer. Amendment No. 27 provides that if there is a dividend to the Exchequer it be used solely for certain purposes, which I have specified. The Minister may have other purposes in mind, but the purpose I suggested was to reduce taxes on wages or other input costs or to use the extra revenue for improved emission reduction expenditure by the Exchequer — for example, putting insulation into the homes of older people — so that we can see a bonus, in terms of emissions, from the tax.

Without prejudice to the Minister's reply, this amendment, like many others to finance legislation, is intended to tie the Minister for Finance down. I accept that there would be a broad political intent but once one includes something such as this in legislation, one ties down the Minister and his successors who, for all I know, might include Deputy Bruton at some stage. There are enough constraints. As the Minister for Finance needs to retain some degree of flexibility, I am not that keen on such a revision.

I propose to take the amendments together. The Deputy is proposing that revenue raised as a result of the new scheme of capital allowances and leasing expenses for business cars be reported annually by the Revenue Commissioners and that it be earmarked for particular purposes. As I indicated in the budget last December, the new scheme is intended to be broadly tax-neutral, by which I mean it should cost no more than the existing scheme. It is not the purpose of the revised scheme of capital allowances and leasing expenses to generate additional tax revenue for the Exchequer.

The purpose of section 28 is to incentivise the acquisition of low-emission cars by companies and businesses generally. Whatever may be gained from excluding higher emitting vehicles from the benefits of capital allowances and leasing expenses, I would be happy to have claimed in the form of higher allowances or leasing expenses on lower cost and lower emitting vehicles. I remind the committee that this is a scheme of tax relief and, as such, involves costs and not gains to the Exchequer.

Figures on the cost of the relief are difficult to come by since car capital allowances are aggregated in tax returns by taxpayers with other allowances. In the circumstances it is not possible to provide a precise cost of the scheme. Far from looking to devise a way in which I can see how much more money I am getting, I am getting less money than I would have got otherwise.

In respect of the carbon budget—

The Minister is missing the point. Deputy Mansergh addressed the issue, namely, that of hypothecation, which is acquiring a good reputation again. If one spoke about hypothecation of taxes, in other words, earmarking taxes for a certain purpose, it used to be a term of abuse. Hypothecation is being revived because it is being said it makes taxes more acceptable. Environmental taxes are a very good example. It makes taxes more acceptable in the sense that people say they will make the effort and pay more on a resource with emissions and which causes pollution on the understanding there is a contract between them and the Minister that he will use the extra money they will pay to do something else that is part of the deal. Deputy Mansergh has said he does not like such contracts but, regardless of whether one likes them, those with whom one has entered into partnership in government have sold the taxes mentioned on the basis of that contract. Everyone who has talked about green taxes has done so on the basis that the purpose is not to raise taxes but to achieve a shift in order that we will use fewer fossil-burning fuels, employ more people or use renewable resources.

I am sure the Department of Finance has prepared a note for the Minister indicating that it would be very difficult to do this. I accept that it would but there is a sense in which this is an expectation. I would like to hear the Minister outline his own thinking on the matter. We will have more and more green taxes if we are to believe what is being said on the challenge posed by climate change, which everyone now recognises. We will have to change our way of living. The Taoiseach recently spoke about congestion charges which are, no doubt, on the way. The Minister may be able to rightly say it would be difficult to unravel capital allowances within some companies' returns and find the relevant figure. However, I am more interested in hearing his view on the principle I am raising. How would we cope with it? Something like it is necessary and desirable. Contrary to what Deputy Mansergh said, the notion of a contract is creeping into the issue of tax, as well as other areas of public activity.

There is a difference between a political commitment and a legally enforceable contract. With respect to Deputy Bruton, his party tended to confuse the two during the general election. I am not so sure that the idea of the contract caught on as much as he thinks it did.

It is an entirely different issue. Even the Minister for Social and Family Affairs is increasingly talking about how there is an expectation that those on social welfare will participate in training or other measure. The State is trying to get the public to meet it halfway when it comes to doing certain things. Green taxes are a case in point. I am not saying there is a strict legal obligation because the Green Party or anyone else who spoke about such taxes talked about reducing using the proceeds to reduce other taxes. We are legislating for the way we want to handle the matter. I am not trying to refight the general election. I simply think this is a serious issue and that it could be win-win for the State if it engaged on it because there is a sense of commitment on the part of the public. If we are to tackle climate change successfully, we must get people to buy in at community level. We must see something being given back to community. If a community in County Longford or County Westmeath decides to do certain things, there will be an expectation that there will be a quid pro quo and that some of the green fund money will go to those two counties. That creates a commitment to tackle an issue such as climate change. I am not raising this issue facetiously but as a serious one about which we must think.

The argument made by Deputy Bruton relates to there being a quid pro quo on the other side is if there is an environmental tax. We are not talking about a charge but about a modification of tax relief.

Based on CO2 emissions.

It is a tax relief.

The direction in which we are moving is clear.

The Minister to continue without interruption.

It amounts to tax expenditure, rather than a tax charge. Therefore, I am losing money. I know what Deputy Bruton is talking about. I do not see, in the context of modification of tax relief, how the concept of hypothecation would work in this case.

Apparently, the Minister was talking about it before.

There is a general point to be made, which I accept must increasingly enter the narrative of politics. This is the question of the balance between taxation in terms of capital, income and environmental taxes and the financing of local government. The Commission on taxation has been asked to look at the issue. The planning development levy is a hypothecated tax because one gets people to pay into a fund to improve local amenity infrastructure. It is not restricted to green issues. Earmarked taxes have been used in a limited set of circumstances. However, such taxes are avoided as they are not the fashion of the day. For obvious reasons, they are never fashionable with the Department of Finance, regardless of whether they are fashionable anywhere else. By the time one hypothecates, one probably ends up €2 billion short of the sum one would otherwise have. Therefore, it does not become the norm for very good reasons.

With regard to the local government experience, an enhanced levy is being paid to get local authority members to assume the responsibility of trying to raise some of their own finance in the provision of services by telling them that they must be prepared to tell the people that an extra €100 per year will be charged towards the cost of providing the local swimming pool. They are doing so and people are responding because they see the benefits locally. To return to the point being made, hypothecation is not relevant in a rebalancing of a scheme of tax relief.

I just included it in the wrong section.

I understand that; I am merely talking through the matter with the Deputy. In cases where there was an extra tax charge, namely, in the local government example, there was transparency and one could see the connection in the public accounts. On trying to change attitudes and community approaches to such issues, increasingly it will be part of our narrative generally to explain the benefits to the people. The Commission on Taxation must try to square the circle in how we marry environmental sustainability with economic prosperity, which is not simple, and the transitional arrangements in changing the tax structure to reach that point. By definition, if we do not have a behavioural change across the full population to guarantee this, the predicted revenues under the new heading will not emerge and in the interests of budgetary stability, the matter would have to be thought through. I do not propose to accept the amendments but the general political point the Deputy raises is one that will have to be incorporated into the political narrative in some way but not specifically in a section in the Bill.

The merit of having a fund is that we would not end up having to make a commitment on, say, employers' PRSI that could not be honoured in year five because people had changed their behaviour and revenue was no longer available; it would be done on a funded basis. I do not want to prolong the discussion. It is an interesting subject and when the commission reports back, we can develop it further. I am encouraged that the Minister is interested in the debate because we must find a way of solving the problem.

There is a financial aspect also under the Kyoto Protocol. We are talking about putting any moneys we collect by way of so-called green taxes towards reducing what we will have to pay in the future under the protocol. There is a financial aspect to what Deputy Bruton is proposing. We must rethink green taxes because under the protocol we are facing a bill of millions of euro in respect of CO2 emissions. If we could use the money coming in to reduce emissions, the State would save on taxes.

Amendment, by leave, withdrawn.
Amendment No. 27 not moved.
Section 28, as amended, agreed to.
SECTION 29.

Amendment No. 28 in the name of Deputy Bruton is not in order as it is declaratory in nature.

I cannot win this game. If I asked for a review, the Chairman would say it was a burden on Revenue.

The Deputy will appreciate that I am a good reader. I am advised that is the position.

Amendment No. 28 not moved.
Question proposed: "That section 29 stand part of the Bill."

The Minister has done some work on the section but, unfortunately, I did not get a chance to read his review of the subject of film relief, which I had intended to do. This measure has had a chequered career. There is a view that the relief is no longer landing any significant films. In that regard, there is a sense that the Minister's raising of the ceiling will not change the position very much. I am aware there is a counter argument which I recall officials in the Minister's Department making trenchantly some years ago, that the cost of this measure is very high because unlike setting up other industries, every film production must be subsidised. When we attract one film production, others do not follow automatically, as is the case in other businesses.

I seek a report from the Minister before next year's finance Bill is introduced on the way the new ceiling is working in order that we will at least have some sense, as we examine this area in the years ahead, of whether the concession being made has been successful and how we compare with competitor countries in this field. I understand the argument that the provision of film relief is not just about creating jobs — the Department of Finance will run its sliding scale as to the benefits gained — that there is an unseen benefit to the country being used for film making. I am interested in knowing how this concession is working. Will the Minister report back in subsequent years on whether it has been successful?

I welcome the introduction of the relief. The Irish film industry, because of the globalised nature of the film industry, is in a difficult competitive position. Costs in Ireland are relatively high because this is an expensive economy and the inflation rate is high. However, there are a number of reasonably good signs in the sense that a number of Irish people involved in the film industry are in the running for Oscars. I hope they will be successful.

One of the issues that arose when we last discussed the subject in some detail was the degree to which pre-production and post-production activities were genuinely located in Ireland because the purpose of this measure is to support artistic endeavour and employment in an Irish located industry. There is a view that the percentage of activities located in Ireland and involving the use of Irish actors, production staff and so on is relatively limited. It would be interesting to have a review of the type Deputy Bruton is suggesting to determine what is produced.

The film industry is important for other reasons. Productions made for television are vitally important in terms of the country's image in a globalised economy. Who would have thought, in the case of the recent production, that Henry VIII spent most of his formative years here, married most of his wives here, lived here for a long period and that, while living here, looked much thinner than he does in his portraits in the National Gallery in the United Kingdom? Retrospectively, being in Ireland proved very beneficial for him.

On the people employed in the industry, the key aspect is that they work in Ireland, that work of merit is produced and that it is successful. There are genuine concerns that for various reasons we are not as successful as we might be. There are locations in places such as eastern Europe which are more attractive because the cost of living is cheaper. It would be interesting to receive a report in that regard.

The problem referred to by officials from the Revenue Commissioners and the Minister's Department in the previous discussions was that individuals were investing in the scheme by simply putting money in a bank and availing of the tax break and that the investment never had anything to do with films being made. Is the Minister satisfied that such abuses of the scheme are at an end? How much activity is generated in Ireland? The sector is important in terms of the international perception of Ireland. Film success breeds film success. I hope we take home a few Oscars this year. I do not think the Minister will win an Oscar for the Finance Bill but I hope Daniel Day-Lewis and Saoirse Ronan from Carlow carry home some gold.

I am sure all members are in the league.

I warmly welcome this provision. I agree it is expensive and that, in the past, the scheme was open to abuse. However, it is important that we can compete. Someone gave me a copy of "The Tudors" for Christmas and I see that, since this measure was announced, a third series is to be filmed. Like Deputy Burton, I look forward to seeing how Jonathan Rhys Meyers fills out to become the fat old king, Henry VIII. We refer to image and nowhere is Ireland so European as in the film industry. I refer to the fields of Agincourt, the beaches of Normandy on D-Day, the Palace of Windsor, the plains of Bohemia in "Barry Lyndon", all of which were filmed in this country. There are also films with specific Irish themes and images which strongly reinforce our image.

With no disrespect to the Tánaiste's love and appreciation of cinema, perhaps it is for the Minister for Arts, Sport and Tourism to lay a report each year on the success of the measures proposed.

In reply to the last point, if that were the case, they would put Sam Goldwyn in the shade. Successive Ministers for Arts, Sport and Tourism have been beguiled by the prospect——

The last one spoke with a dog. Was it part two of "Lassie Come Home", a remake in Ireland?

The required objectivity would reside in the Department of Finance rather than line Departments on most issues, including film relief. Some 80% of the work must take place in Ireland to avail of the relief. The Revenue Commissioners question anyone who seeks to avail of the relief without meeting the criteria. In terms of being substantively produced here there are requirements in order to avail of the very generous relief available. Because of the size of our studios and the nature of their business, there will always be some post-production and pre-production activities elsewhere. Up to 20% of the work may be done in this fashion but with regard to the definition of Irish film, for the purposes of benefitting from the tax relief, the 80% threshold up to a maximum of €50 million is closely examined to prevent abuse beyond the contemplation of the provision.

Television relief is even more generous than that provided by our competitors elsewhere in Europe. I did not get the opportunity to see "The Tudors" but it would not interest a republican.

Deputy Mansergh may be offended by that remark.

Probably not, but I hear it was a good production. Well done to TV3.

There is a serious point about how we will provide relief in the future. I have responded to entreaties to deal with developments in other jurisdictions in order that the Irish film industry can remain competitive. This is another example. It would be instructive for members to read the Indecon report, available on the departmental website, which sets out the issue of film relief, the history and where it might lead in the future. I get the impression that this measure gets an easier ride in Parliament than other tax reliefs. I am sure this is for cultural reasons but there is also a refusal to face into the artistic community where some of the reliefs available are on the generous side and not as robust as would be the case if other professions sought similar reliefs.

Could it be that being a politician and being an artist are not far removed from one another, particularly when it comes to acting?

No, it has more to do with the tendency of politicians to view the artistic community uncritically rather than having it face the same criteria as everyone else. When I made minimal changes to the artist's exemption, the flurry of activity beforehand and the depiction of me as a philistine about to pull down a well constructed and much admired relief were exaggerated. We must sometimes bring equity into the discussion.

The serious point is that we must examine this issue for the future. The Indecon report is a good baseline for thinking about it this year. We must find a way to assist the film industry. I am not opposed to this but we must find the most efficient and effective way to do so. Fiscal policy may not provide all the answers we hoped for in terms of efficiency and effectiveness.

In 2004 we spent €23 million and the net benefit derived was 12% of that investment. In 2006 we doubled spending and the rate of return dropped to 1%. This is not a good indicator of the direction in which we are moving if we are proposing to extend it. With Deputy Burton, I share the Minister's view on creating an industry with upstream and downstream activity. Perhaps we need to consider more targeted investments by the State rather than measures such as this, where it is on an upward trend but the net returns are falling. There is a question mark over its future.

As someone who lobbied the Minister for the maintenance of the full artist's and writer's relief, I concede that his judgment was correct. Regarding why politicians were softer in this area than others, enlightened despots, like enlightened Ministers, knew it was important to keep artists and writers onside. They could do one more damage than most.

There might be an Oscar too.

Question put and agreed to.
Sections 30 to 32, inclusive, agreed to.
SECTION 33.
Question proposed: "That section 33 stand part of the Bill."

On the Minister's decision to securitise carbon emissions, I would like a detailed reply and do not want to hear the Minister reading out his note. What is his thinking behind this decision? It is disappointing that the EU carbon emissions scheme, which is recognised as something of a disaster, should end up being securitised, at least as far as Ireland is concerned. Carbon emissions can now be bought and sold on the stock market. The EU emissions schemes gave trading permits to the worst polluters and they will now be able to make money by trading their pollution. It may be fashionable in the financial services sector to securitise everything and to create markets but many investors around the world, including some in Ireland, are currently learning many harsh lessons from making bad markets. The consequences of diverse financial instruments are not always good.

I have questions for the Minister's partners in Government but they are not present to take part in the debate. They agreed to securitise the bad carbon emission system. The stock exchange and various other groups lobbied for securitisation but to what extent is the common good or the cause of emissions reduction served by this? Nobody has any incentive or will receive any reward for reducing emissions and it will result in the biggest polluters buying and selling their carbon emissions, presumably to general investors playing the markets. It will not affect behaviour as the purpose behind the regimes for carbon reduction, such as carbon taxation, is to reduce carbon emissions and change people's behaviour. Whose behaviour will change as a consequence of this policy? A very select set of people, excluding anybody in these Houses, is likely to make money out of the scheme and it will do nothing to reduce carbon emissions, which ought to be the primary objective of Governments at this time. That requires changing behaviour and structures so that we all reduce our carbon footprint.

Was the Minister lobbied to bring this measure in? His admirers in certain associations and organisations, some of whom ended up on the commission on taxation, strongly complimented the introduction of this section after the budget was announced. Has it been thought through in regard to its impact on behaviour and the potential reduction in carbon emissions? The EU trading system, as the EU acknowledges, is a really poor system so why now securitise emissions?

The Commission carbon trading scheme is a reality and is part of the process in response to a global issue. The question is where that trading should take place and whether Ireland should be a part of it. Should we be interested in it and should our financial services industry provide the means whereby some of the business involved can be dealt with in this country? To what extent is it in keeping with developing our financial services and providing more opportunities for our financial services for providing good gainful employment? That is the background. If people have a principled objection to the carbon emissions trading system worldwide and want to make the argument they can do so in Rio de Janeiro, Kyoto or Bali but I am dealing with the business reality. A business opportunity arises because carbon emissions trading is a reality.

The Deputy asked me not to read out my note but, given the fact that she was so critical of the provision, I feel I must do so. I must give my side of the story for the record. The section amends section 110 of the Taxes Consolidation Act 1997, which deals with the tax treatment of securitisation transactions of qualifying companies in two respects. First, the range of assets that may be securitised is extended to include contracts for insurance and reinsurance and greenhouse gas emissions allowances. Securitisation transactions involving insurance and reinsurance policies are already regarded by the Revenue Commissioners as suitable assets for securitisation in accordance with the legislation but some doubt about this remains and this amendment is intended to provide certainty in the area. The use of securitisation for carbon credits trading is becoming increasingly popular and, accordingly, greenhouse gas emissions allowances are being brought within the securitisation legislation to provide for this.

Greenhouse gas emissions allowances are broadly defined in the section as an allowance, permit, licence or right to emit certain carbon dioxide or other greenhouse gases as defined in the relevant EU directive where the allowance is issued by a state or an intergovernmental or supranational institution under a scheme which imposes limitations on the emission of such greenhouse gases and allows the transfer for value of such allowances, permits, licences or rights.

Second, this section provides for the holding by a securitisation company of an interest in the financial asset through a partnership structure to be an acceptable method for such companies to have an interest in assets. This provides a measure of flexibility to companies in that a company may, for good commercial reasons, have to use a variety of structures through which to hold its assets.

For the information of the committee a stamp duty amendment is also being introduced in section 111 to provide for stamp duty exemption for the sale, transfer or other disposition of greenhouse gas emissions allowances. Both these measures, taken together, should be of assistance to the Irish securitisation industry in attracting such business to Ireland.

I have no problem with trading in emissions, though I take Deputy Burton's point about grandfathering, in the sense that, if dirty industry is given free vouchers to trade, it seems to provide something for nothing. On the other hand, to trade them they must stop producing smoke and reduce the scale of their activity so there is probably some benefit to be gained. As the Minister said, however, once the scheme is in place it is to be encouraged because if we did not have trading we would not see the benefit of the scheme in the way it encourages a reduction in emissions at the lowest costs. It also allows flexibility so I have no problem with it in principle.

The Minister referred to the stamp duty exemption which is to apply. Other trades do not have such an exemption so is the Minister creating an advantage for this market that would not apply to a person trading in stocks and shares? If so, why is he giving a greater benefit to one trade over another?

Financial assets under section 110 attract the exemption from stamp duty. There is also an environmental rationale as trading in carbon credits is an integral part of the effort to reduce greenhouse gas emissions. It is one element of our approach to meeting our Kyoto targets, as set out in the national climate change strategy. It forms part of the EU's proposals for the post-Kyoto period up to 2020 and is recognised to help reduce emissions globally. It encourages technology transfer and helps less developed countries. It is a growing market and will continue to grow as we move towards a post-Kyoto environment. We are simply positioning ourselves to take up that business.

The Minister is profoundly wrong in what he just said. If a company created jobs in Ireland tomorrow and carried out activities at the cutting edge of carbon reduction and low carbon usage, that company would end up having to buy carbon credits from heavy polluters. Rather than subsidising the heavy polluters to reduce their pollution consciously, which is a fair objective in carbon reduction, the Minister is allowing the heavy polluters to sell on their right to remit and to make a market in it.

The Minister's attitude to stamp duty is exactly the same as his attitude to the contracts for difference. The 1% stamp duty that applies to certain types of share transactions should be exempt, but in the Minister's view, they are complex financial instruments. Complex financial instruments have the world banking system in total crisis at the moment. The Minister spoke about reinsurance, and these products would be sold on bundled as complex financial instruments. This comes from a crazy belief in the US that no matter what, the market is always is right. The market in complex financial instruments has been shown to be seriously wanting.

I am really sorry that there is nobody from the Green Party here because I would love to hear his or her justification for what is happening.

The Deputy will be aware of the composition of the committee.

Yes, but we have not heard a word from Green Party Members on this and I would like to hear their justification for it. They have done some very sensible things in creating incentives for people to change behaviour. However, if there was to be a new development in agricultural processing, something that results in large emissions, there would be no permit available because it would have already been passed on. I ask the Minister to rethink this. He is falling for the idea that the market is always right. This is the kind of super-capitalism that has led to the current crisis in financial markets. The Minister is profoundly wrong in agreeing to do this with literally no conditions attached, and not even a modest stamp duty which might make those who do this on the Irish Stock Exchange pause for thought and consider the wisdom of it.

The provision is on the basis that this is an emerging business opportunity being conducted as part of carbon emissions trading worldwide. I do not see why Ireland should excuse itself from the opportunities presented. It has environmental as well as business benefits—

Can the Minister outline the environmental benefits?

I have explained the rationale behind it. I have explained why carbon emissions trading is part of the post Kyoto commitment and how it provides for technology transfer and helps less developed countries. The whole idea is to bring about a practical reduction of greenhouse gas emissions using carbon emissions trading as part of the response. It is not the full response. Where transactions are provided to deal with that, then the Irish Financial Services Centre is quite entitled to position itself, as we have done for other types of business. It has not caused any damage to the financial services industry, because we have a good regulatory system here.

Question put and declared carried.
Sitting suspended at 5.45 p.m. and resumed at 6.30 p.m.
Sections 34 and 35 agreed to.
SECTION 36.

Amendments Nos. 29 to 33, inclusive, are related and may be discussed together.

I move amendment No. 29:

In page 50, line 41, after "elects" to insert ", in writing to the Revenue Commissioners".

The main purpose of section 36 is to minimise the administrative burden on businesses associated with the new requirements liable to the Finance Act 2006. The amendments now being proposed to section 36 are drafting amendments to ensure that the section operates as intended.

Section 36 amends Chapter 1A of Part 27 of the Taxes Consolidation Act 1997, which deals with the taxation of investment undertakings covered by the gross roll up regime introduced in the Finance Act 2000. An exit tax applies when a chargeable event occurs, such as the receipt of payments from, or the disposal of units in, the investment fund. Changes were introduced in the Finance Act 2006 to provide for a new chargeable event that would arise at the ending of each eight-year period following the acquisition of the units in the investment fund.

The section amends the legislation to take account of some practical issues associated with the deemed eight year disposal. It also extends the provision for an exemption from the exit tax in schemes of reconstruction and amalgamation involving the exchange of units between sub-funds of different umbrella funds.

I commend these amendments to the House.

Amendment agreed to.

I move amendment No. 30:

In page 51, line 11, after "applies" to insert the following:

"and has supplied the unit holder with the necessary information to enable the claim to be made to the Revenue Commissioners".

Amendment agreed to.

I move amendment No. 31:

In page 51, to delete lines 42 to 53 and in page 52, to delete lines 1 to 28 and substitute the following:

"(ii) the investment undertaking has made an election, in writing, to the Revenue Commissioners that it will make in respect of each year of assessment a statement (including where it is the case, a statement with a nil amount) to the Revenue Commissioners in electronic format approved by them, on or before 31 March in the year following the year of assessment, which specifies in respect of each person who is a unit holder-

(I) the name and address of the person,

(II) the value at the end of the year of assessment of the units to which the person is entitled at that time, and

(III) such other information as the Revenue Commissioners may require.".

Amendment agreed to.

I move amendment No. 32:

In page 52, to delete lines 29 to 41 and substitute the following:

"(b) Where paragraph (a) applies-

(i) the investment undertaking shall advise the unit holder concerned, in writing, that paragraph (a) applies,

(ii) the statement specified in paragraph (a)(ii) shall be made by the investment undertaking in accordance with that paragraph, and

(iii) the unit holder shall be deemed for that chargeable period to be a chargeable person for the purposes of sections 951 and 1084, and the return of income to be delivered by the person for that chargeable period shall include the following particulars:

(I) the name and address of the investment undertaking, and

(II) the gains arising on the chargeable event.",".

Amendment agreed to.

I move amendment No. 33:

In page 52, to delete lines 48 to 51, and substitute the following:

"section, then such gain—

(a) shall be treated for the purposes of the Tax Acts as arising to the unit holder, constituting profits or gains chargeable to tax under Case IV of Schedule D at the rate specified in section 739E(1)(b), and

(b) shall not be reckoned in computing total income for the purposes of the Tax Acts,

and section 188, and the reductions specified in Part 2 of the table to section 458, shall not apply as regards the tax so charged.",".

Amendment agreed to.
Question proposed: "That section 36, as amended, stand part of the Bill."

I seek clarification in respect of the de minimis limit. A de minimis limit seems to apply where the value of the number of chargeable units in the investment undertaking is less than 10% of the value of the total units. I am not sure what is meant by that.

It is being introduced whereby the investment undertaking will not, in respect of a deemed disposal only, have to deduct the exit tax from the unit holder and account for it to the Revenue Commissioners where the value of the number of chargeable units in the investment undertaking is less than 10% of the value of the total units and the investment undertaking has made an election to report annually to the Revenue Commissioners certain details for each unit holder. Instead, the unit holder will be required to make a return of the gain directly to the Revenue Commissioners and to account for the exit tax. Undertakings which have few Irish resident unit holders will avoid significant systems development costs by not having to calculate, deduct or account for exit tax on deemed disposals.

It is basically a de minimis limit whereby the exit tax has to be deducted from the unit holder and it has to be less than 10% of the value of the total units. That is the best way I can describe it.

It does not affect Irish holders.

Question put and agreed to.
SECTION 37.
Question proposed: "That section 37 stand part of the Bill."

I would like to hear the Minister's note on the section.

This section amends section 768 of the Taxes Consolidation Act which deals with tax relief for certain expenditure on know-how that is bought by a person for use in a trade carried on by that person. "Know-how" is defined as information and techniques likely to assist in the manufacture or processing of goods or in carrying out agricultural, forestry, fishing, mining or other extractive operations. The expenditure is allowed as a deduction against profits in the year in which it is incurred.

I propose three changes to section 768 of the Taxes Consolidation Act. Relief under that section is not available where the know-how is bought as part of a trade that is being acquired. It has come to attention that some companies are bypassing this requirement by arranging to have the know-how purchased by one company and the trade acquired by its sister company. To ensure that this provision operates in the manner intended I am adding a new paragraph to the law to ensure that this requirement cannot be bypassed by companies. The new paragraph provides that the relief will not be permitted where two connected persons work together to acquire a trade with one person buying the know-how used in the trade and the other person buying the remainder of the trade. I am providing that the tax relief will only be given where the know-how is purchased for genuine commercial reasons. I am introducing a provision, similar to the provision I introduced for the research and development tax credit claims, which will allow the Revenue Commissioners to consult with experts in evaluating know-how expenditure claims.

Has the Minister done any of these analyses to which he has referred. Has this one been subjected to any analysis in respect of costs and benefits?

No. We are undertaking a review generally of the research and development tax area this year. We have only introduced it. We know there have been some problems every time. We had the idea of providing relief for incremental research above a certain baseline and we have been extending the years to baseline years and the period of years over which the base can acquire a tax relief in an effort to accommodate long lead-in times in terms of research for certain products. This is an increasingly competitive area, particularly for pharmaceuticals and high-tech industries. We have made some changes again to meet present requirements where Irish operations are in play for serious research-type development in the coming years. We have made some changes to try to accommodate us getting that sort of work. We are doing a general review of this area because we need to—

I believe some of the outside interests are looking for the baseline to be removed altogether but I feel there is a need for some additionality or value to be generated. I will be interested to see the product of the review. It appears to be the sensible way to proceed.

Question put and agreed to.
SECTION 38.
Question proposed: "That section 38 stand part of the Bill."

I ask the Minister to elaborate on the thinking behind this section.

This section is a response to the OECD recommendation to prohibit a deduction for tax purposes of an illegal payment made to a foreign official. Such payments are not deductible for Irish tax purposes but the OECD wants to see this explicitly provided for in the law. The issue of deductibility could arise in the context of a trade where a trader makes such a payment to a foreign official. The question is whether the trader is entitled to deduct the payment in calculating taxable trading income.

In regard to a foreign official, what is the meaning of that? I presume this is an anti-corruption measure as advocated by organisations such as Transparency International (Ireland). Given that it is so vaguely defined can the Minister give an example of where it might operate? I have a difficulty in understanding it. I understand and support the idea that money should not be paid to public officials. Does that mean that elected politicians and civil servants should not get payments as inducements in respect of contracts and so on? What does it mean in practice? Will this send a message to Irish business not to become involved in making corrupt payments to foreign officials? What is the definition of a "foreign official"?

It applies not so much to the definition of officials but where the making of a payment constitutes a crime. For its own reasons, the OECD has asked us to include an explicit reference to this in our tax law and we have no problem doing so. It is simply a requirement where there are payments from anybody, the making of which would constitute a crime.

The definition of a public official includes anyone from the president of a country down, elected or unelected. The subject is not entirely academic. While I do not want to be overly specific, in the middle of the second oil crisis, nearly 30 years ago, a member of the ruling elite in a well known Middle Eastern country sought a substantial bribe from the Irish Government as the price of supplying a large consignment of oil, I understand, to Whitegate oil refinery. Obviously, this caused a great difficulty in the sense that we needed the oil as there were queues and so on, but at the same time we did not want to get into that territory. After much consideration, a decision was taken that it would not be paid, although such a payment was normal practice for the country concerned. Fortunately, a report on a scandal relating to the dealings of the gentleman concerned with Britain appeared in a newspaper a few days later and, as a result, our business went through with integrity intact. I give this as an illustration because, while we might think the subject is entirely academic from our point of view, it is not. I welcome anything the OECD and Ireland, as an OECD member, can do to discourage such behaviour.

Question put and agreed to.

Before moving to the next part of the proceedings, for the information of the committee I want to refer to two items arising from this part of the Bill which I will consider before Report Stage, namely, Deputy Burton's suggestion for a benefit-in-kind exemption for retraining in cases involving redundancy and also a scheme of capital allowances for hospice and palliative care centres. I may come back to this matter on Report Stage in respect of relief being available for the construction of such buildings.

NEW SECTIONS.

I move amendment No. 34:

In page 55, before section 39, but in Chapter 3, to insert the following new section:

39.—(1) The Principal Act is amended—

(a) in section 615(2)(a)—

(i) in subparagraph (ii) by substituting "before that time," for "before that time, and", and in subparagraph (iii) by substituting "of the business), and" for "of the business)", and

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

"(iv) the company acquiring the assets is not an authorised investment company (within the meaning of Part XIII of the Companies Act 1990) that is an investment undertaking (within the meaning of section 739B),",

and

(b) in section 617(1) by substituting the following for paragraph (c):

"(c) the other company--

(i) is resident in the State at the time of the disposal or the asset is a chargeable asset in relation to that company immediately after that time, and

(ii) is not an authorised investment company (within the meaning of Part XIII of the Companies Act 1990) that is an investment undertaking (within the meaning of section 739B),".

(2) This section applies as respects a transfer, or as the case may be a disposal, on or after 18 February 2008.".

I am introducing this amendment to counter a tax avoidance issue that has come to my attention. It concerns certain rules for companies in sections 615 and 617 of the Taxes Consolidation Act which provide for a deferral of capital gains tax on gains arising from the transfer of assets between different companies as part of a reconstruction or amalgamation. These are pro-business provisions which are intended to apply only to companies taxed under the corporation tax regime and to allow such companies to carry out reconstructions and amalgamations for genuine business reasons on a tax neutral basis. I now propose to amend the two sections to close a loophole under which tax deferral is available where assets are moved from a company subject to corporation tax into an investment company subject to tax under the gross roll-up taxation regime.

It was never intended that the provisions designed to support commercially-driven business decisions would be used as a tax avoidance measure, which works in the following way. The investment company is set up under Part XIII of the Companies Act. It is, therefore, taxable under the gross roll-up regime where funds held in such a company can roll up without any charge to tax and payments to shareholders out of the profits of the company are in general taxed at 20% or 23%. This compares with a corporation tax regime where income and gains are taxed as they arise and distributions to shareholders are taxed at the marginal rate of income tax. It is clear that the tax avoided can be significant since no capital gains tax arises on the transfer of the assets. Income and gains arising from the assets will no longer be taxed as they arise. Instead, they will be allowed to roll up on a tax-free basis until they are extracted from the company. When funds are extracted from the company by the owners, they will be taxable at 23%, not at the marginal income tax rate. The new section provides that the capital gains tax deferral rules do not apply where assets are transferred into Part XIII companies covered by the gross roll-up taxation regime.

I am happy with that proposal.

Amendment agreed to.

I move amendment No. 35:

In page 55, before section 39, but in Chapter 4, to insert the following new section:

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

This is a proposal I brought forward on a number of previous occasions, namely, where a taxpayer is claiming relief on the construction of premises — a significant number of tax breaks are related to the construction of premises — he or she should furnish to the Revenue Commissioners sufficient information to demonstrate that the contractor is complying with the relevant requirements imposed by the Health and Safety Authority or by law in regard to the construction. This is a very important issue because, unfortunately, there is a high number of deaths in the construction industry. Where people are availing of tax breaks, it is beholden on them to ensure the construction is carried out to the highest standards and the site is properly supervised. There is also growing exploitation of workers who are paid at the minimum rate and often pressurised to work longer and harder than perhaps is in the interests of their own safety or that of others working on construction sites. With regard to many activities of the Revenue Commissioners, if there was a linkage to satisfy other legal requirements, we could reduce the operations of rogue operators in the construction industry or any other form of business activity which are in nobody's interests. I recommend the amendment to the Minister. Unfortunately, in this country there is a very high rate of deaths and accidents on construction sites, including projects which are the subject of tax breaks. The Minister ought to try to ensure there is joined-up thinking in promoting health and safety in the construction industry.

Deputy Burton's amendment is similar to one she has proposed in the past few years. Following the previous amendments, we had long, wide-ranging discussions on the proposal which seeks to impose an obligation on claimants of tax relief for construction expenditure to furnish information to Revenue to demonstrate that there was compliance with Health and Safety Authority requirements or other laws on construction. As I explained when this issue was discussed previously at the committee, I am opposed to this proposal for a number of reasons. Many such claimants of tax relief will have purchased the property from the developer who had it built and will have no responsibility for or control of construction. In such cases it will have been built before the claimant acquired an interest in it and claimed the tax relief. Therefore, there is not necessarily a direct link between tax relief claimants and responsibility for construction of the building which is the subject of the relief.

Revenue staff do not have competence in these matters. The complexity and nuances of health and safety rules are such that a link with claims to the Revenue Commissioners would not be practicable. The Office of the Revenue Commissioners is not the competent authority for the receipt or evaluation of the information in question. Revenue's role is to administer the tax system and collect the appropriate tax due under the law. As I said in previous years, we must be careful in defining the statutory roles of the various authorities involved. We should not be dismissive of the work of the Health and Safety Authority which is responsible for the promotion and enforcement of workplace health and safety. The authority monitors compliance with occupational health and safety legislation and takes enforcement action, including prosecution, where necessary. The tax code is not the universal mechanism for implementing every area of the law. One applies statutory functions to those who have that responsibility, ensures they are resourced, effective and efficient in what they do and in a position to apply the law proportionately and rationally. Including in the Finance Bill a role for Revenue in health and safety matters is not the way to go. Revenue staff do not have competence in these matters. We should let both bodies get on with their jobs. For those reasons it is not appropriate to accept the amendment.

In discussions at the Joint Committee on Finance and the Public Service and the Committee of Public Accounts, I raised with the chairman of the Revenue Commissioners issues concerning tax compliance, the construction industry and relevant contracts tax. The subsequent work done by Revenue — its staff received the appropriate safety gear and visited sites — has resulted in large amounts of additional tax revenue being collected from the construction industry, which is complex. Unfortunately, there are few inspectors relative to activity levels and there are many accidents. If we can use different devices to help make sites safer, the Minister should be open to examining the matter. This is just one of a number of areas where, if there was a connection between Revenue activity, tax numbers, tax certificates and, particularly, valuable tax breaks, we would have much higher levels of compliance and safety.

Many of the tax break properties are subsequently controlled by management companies outside the law and services and let to tenants. There is another body, the Private Residential Tenancies Board, but no organised relationship, whereby landlords who buy tax break properties have to give details. In the case of properties subject to tax breaks, they have to give details such as tax numbers to the Revenue Commissioners, but these numbers are not passed on or available to regulatory bodies such as the Private Residential Tenancies Board. We have whole areas of activity where if there was co-operation and information sharing between the Revenue Commissioners and other bodies, we could cut down on abuses and dangers. It is to be recommended as a way of promoting tax compliance.

In the last couple of years, last year specifically, Revenue, on its own initiative, decided to investigate the construction industry as part of its special investigations remit. When it went on site, it complied with health and safety regulations, like anybody else. For the reasons I have given we should not accord to Revenue a widening of its remit beyond its area of expertise. Health and Safety Authority staff visit sites for the purpose for which they do their jobs. Social welfare officials visit sites to do their jobs. Everybody has a job to do. The answer in my first response indicates the reasons it is inappropriate to accept the amendment.

Amendment put and declared lost.

I move amendment No. 36:

In page 55, before section 39, but in Chapter 4, to insert the following new section:

39.—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.".

Earlier I spoke of my extreme disappointment at the Cheney-style tax commission the Minister introduced. It is dominated largely by people who are highly reputed in tax planning and have a vested interest in selling and using tax planning schemes for clients. As I said, that is all very well, but the Minister said the terms of reference related to those agreed by the partners in the Government. It seems extraordinary that there is to be no examination of those who are able to twist and bend the residency rules to ensure persons who, while for all practical purposes are resident in Ireland, live here and come in and out of the country to attend various functions, end up in the happy position of not having to make any tax contribution.

As I said before, the payment of tax must be based on a contract with citizens, whereby if tax rates are lower, people must pay their fair share, particularly the very wealthy. It has become a hallmark of some who are particularly wealthy that they insist they are above and outside the law and should make no contribution. This is a modest attempt to get people to make a statement to Revenue of their gains for the year. It is largely for statistical purposes. We do not know how many non-residents there are for tax purposes. There are more than 20 private airports. The Cinderella rule applies and people leave a minute before midnight in order that their visit does not count as a day for tax purposes.

Certain people enjoy a charmed life. Unlike some of their counterparts in countries such as the United States, they do not necessarily create large foundations for the distribution of their wealth for charitable and other purposes. Relatively small numbers make, by international standards, relatively small philanthropic contributions. Although those who promote the interests of such persons claim this is a growing phenomenon, it is limited. It cuts to the core of the Minister's beliefs in terms of whether he can stand over a situation where a person on the average industrial wage has to pay tax at 41% on overtime payments while persons with large amounts of money, in receipt of taxation advice and who are non-resident for tax purposes but continue to live in this country make no income tax contribution. This is one of the scandals of our tax system, yet the Minister avoided examination of the issue by the Commission on Taxation. I hope he will be persuaded, even for statistical purposes, to review and examine these sections. Where following previous debates he allowed his officials to undertake an examination of high net worth individuals, it resulted in an increased tax take. This creates the resources to pay for our schools and hospitals. Our hospital system was destroyed in the 1980s because large numbers managed to avoid paying tax. Many of the people concerned remain in the happy position of not having to pay any tax. Unless he addresses this issue, the Minister is condoning having a two-tier system. Wealthy individuals do not pay tax, while ordinary people are happy to contribute because they know the money raised pays for essential public services.

As I stated this morning, I do not accept the commission established by the Minister has the political or ideological bias attributed to it by Deputy Burton. I also stated that what was going on across the water in respect of a similar problem with nom-doms and the enormous difficulties the British Government was getting into on that subject and the viability of the City of London was relevant to this debate. Like Deputy Burton, I wish everybody was tax resident. However, the majority of those who earn tens of millions of euro and more choose not to reside here. They are highly mobile individuals who have business spaces in different places. We must adopt a somewhat pragmatic approach to this issue, like other countries based on the degree of strength, influence and power they have over their citizens. It is fair to say many of the people concerned sustain substantial employment. An example, which does not imply a particular admiration on my part, is a well known newspaper proprietor.

We must consider if there is a point in having non-residents for tax purposes. I do not believe there is any point in the measure proposed by Deputy Burton which could be considered a measure of harassment. Also, the people concerned might decide they were not wanted here and opt to make their living elsewhere. The rules are in place not primarily for the benefit of non-residents but for ours. This is, rightly or wrongly, our judgment of where the balance of our economic self-interest in terms of prosperity, confidence and revenue lies. We have been good at creating prosperity, confidence and revenue. An example is the International Financial Services Centre and the many schools and hospitals for which it pays. We collect a great deal more in capital and corporate taxes today than we did in the 1980s when we probably had much more socialist attitudes. There is a clash between pragmatism and principle. One has only to look across the water to see the grief that can be caused by tinkering with the issue. I do not dispute the integrity of Deputy Burton's feelings but, nonetheless, believe that if her party was in government, it would leave the matter alone.

The amendment seeks to provide that where an Irish citizen who is tax resident abroad and visits the State for at least 11 days in any tax year, he or she should 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 in considering the amendment to stand back and apply a reality check. We all know the circumstances in which Irish citizenship can be obtained. Suffice to say people are entitled to Irish citizenship in a range of circumstances into which I will not go. This extensive access to Irish citizenship for those who do not live in Ireland is recognition of our history of emigration and the connection of many emigrants and descendants of emigrants to Ireland.

The data available on the web and published by Fáilte Ireland show that in 2006 more than 1,034,000 visitors to Ireland from the United States generated revenues of approximately €815 million and that almost 4 million visitors from the United Kingdom generated revenues of €1,400 million. The number of visitors from the North was approximately 585,000, generating revenues of approximately €200 million. The data also show that almost 60% of US visitors and up to 40% of UK visitors claim to be Irish born or of Irish ancestry. I am not claiming that all or most of these visitors are Irish citizens but I am confident that those who are would abandon that citizenship if they were required to file with the Revenue Commissioners each time they took a holiday in Ireland a return of their profits or gains earned in their country of residence. This is precisely what the amendment would require them to do. Quite apart from one's views on rules of residency or non-residency, the amendment does not pass that basic reality check.

If the Minister has a difficulty with the amendment, I am open to any technical advice he or his legions of officials may offer.

I do not have a difficulty with it.

The amendment seeks to deal with persons who are non-resident for tax purposes as outlined in the Bill.

I listened in silence to the Deputy.

The hooey about visitors from around the world is just that.

Please allow the Minister to continue without interruption.

As Minister, I must outline the merits of accepting an amendment. It would not be sensible to accept this one. Deputy Burton has outlined her views on non-residency, a matter with which I have dealt in successive Finance Acts. I do not accept that the subtext of the discussion should be the suggestion that the Revenue Commissioners or someone else is turning a blind eye to the non-residency rules. The rules are applied. The large claims section takes a cross-section on a risk assessment basis to ensure they are properly applied.

We all know the origins of the current arrangements. They are based on international practice and a judgment of what is in the best interests of the country. That is the situation. Our taxation system is based on persons being resident in the country. Non-residents pay tax on income they earn in this country but not on income they do not earn here. Non-residency provisions in our tax code were determined in 1994 and I do not see any reason to change them as they are in line with international practice. I asked the chairman of the Revenue Commissioners to look at this issue again and he did so and reported his findings.

I do not like what appears to be a constant subtext to this discussion in the form of a suggestion that a blind eye is being turned, or that illegality is being condoned and some are treated differently than others. People are treated in accordance with the provisions applying to them based on their status, which is in line with what is regarded as international practice. If people have an ideological problem with these provisions and believe there should be no such thing as non-resident provisions, they are entitled to express their view. However, there are consequences to such an approach but I believe we have struck the right balance. There is no need to assert, as part of that argument, that Revenue is not applying the rules — the rules are being applied. They are continually audited and cross-checked on a risk-assessment basis.

The amendment seeks to provide that anybody who comes to this country for more than 11 days should provide Revenue with information on income earned outside the State. I have explained that such a provision would not pass a reality check.

The Minister's explanation ill becomes him. I have more respect for his intelligence than to take seriously the drivel he has just read out. In reality, he is reluctant to address what is clearly a significant tax avoidance on the part of a small golden circle which he cherishes. I presume there are rewards for cherishing that golden circle over and beyond other Irish citizens and residents for tax purposes.

Tax policy is about economic effectiveness but it is also about fundamental fairness and justice. We have a rubbish hospital system and a crisis in accident and emergency units because we have a golden circle who can avoid their obligations, while others must fulfil theirs. There are, in fact, many very wealthy people who honour their obligations to society and deserve commendation as a result. However, there is a set of rich people who regard it as a point of honour to make no contribution in the form of tax. I have a political view on this subject which the Minister refers to as an ideological view. It is a republican point of view which dates back to the foundation of countries such as the United States of America which holds that in a free republic all citizens should make a contribution. In an era of low taxation it behoves them even more to make that contribution.

The Minister obviously takes a different view and wants to nurture the golden circle, the small group which does not have to make a contribution. I disagree with him. If it is an ideological disagreement, it is one that cuts to the heart of equity and justice. He set up the Commission on Taxation but this is one of its glaring anomalies. It reminds one of Dick Cheney making sure his environment commission would facilitate the rape of areas such as Alaska, which is what characterised the environmental damage done in the name of the commission. The Minister has appointed members, Cheney-style, to the Commission on Taxation to ensure it will remain business as usual. It will not, however, address the anomalies, injustices and lack of fairness in the tax system.

On a technical point, if there was something that would assist in formulating the amendment in a more appropriate way, I would be more than happy to take the advice of the Minister or sit down and discuss the matter with his officials.

I want to respond because, on occasion, matters can descend to the point where my personal integrity is attacked and I am accused of having golden circles of friends, and there is other such nonsense. Residency and non-residency provisions are a feature of every taxation code of which I am aware. This matter was looked at in 1994 by members of Deputy Burton's party which was then in government. They signed off on the arrangements, something about which she does not want to be reminded, on the basis of best international practice. I do not mind anybody expressing a point of view diametrically opposed to mine but I do not understand why it is necessary, because of a deep-seated political prejudice against me and my party and what we stand for, to continuously portray my motivation as base or dishonest or somehow different from that of others. I accept that we may disagree with each other but I do not understand the need to use that mantra. It may continue but I will respond to put the record straight.

I have been a Member of the House for 24 years. I owe nobody anything, nor am I beholden to anybody. I am not in any golden circle or au fait with any such circle. The Deputy can undertake a trawl of the records of the Houses or the tribunals but I know what I know and my record will prove I can stand over my personal integrity. I do not impugn the integrity of any other Member and if the only way to conduct an argument in the House is to continue to impugn mine, I will put up with it but that appears to be the level of debate in which we engage nowadays.

The evidence the Minister wants is in the unfortunate display of some of the personalities before the tribunals, including some eminent members of his party, who were shown to be a party to serious tax evasion. That is the history of the Minister's party.

Amendment put and declared lost.

I move amendment No. 37:

In page 55, before section 39, but in Chapter 4, to insert the following new section:

39.—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 requests that the Minister annually publish a list of all the schemes approved relating to small self-administered pension funds and similar schemes. They were outlined in his Department's report on tax breaks which provided several case studies of people who were accumulating large pension funds, some with values in excess of €100 million. Although the Minister introduced some amendments to limit the schemes which I supported, it remains the case that there is significant tax avoidance.

Again, the schemes are only available to a certain set of persons who can afford them. The smallest GAA club in the country which receives a grant of €50,000 or €60,000, or any other community organisation which receives public support must make that information publicly available in reports by various bodies such as local newspapers, if they are of interest. Why are details of schemes for persons who gain a significant benefit from generous tax provisions for their pension not published? Where people receive financial assistance from the State, the information is published. Therefore, why should those in receipt of significant benefits from tax provisions not be similarly subject to publication of such information? If the Minister wants to introduce it on a pilot basis so that it applies to schemes above certain limits, then we could start with that, but it is essential that we know who benefits from these schemes and that the information is available to the public.

The purpose of the amendment is to try to find out who is benefitting from tax relief in respect of private pension provision at the higher end of the scale and to make this information publically available. There is a major difficulty with making confidential information about the extent of a named individual's pension savings public, having regard to Revenue's duty of confidentiality to tax payers in its dealings with them. That is an essential and fundamental feature of our tax system. All tax payers have legitimate expectations of privacy in their dealings with Revenue, and releasing a tax payer's personal information in this way would undermine those expectations.

Deputy Burton has accused me before of hiding behind commercial confidentiality on this issue. This is not the case. Issues of confidentiality must be respected. In that regard, I recall that Deputy Bruton agreed with me during the debate on last year's Bill that publication of individuals' names in this fashion was not appropriate.

Much of the discussion on this issue has centred on the view that tax relief for pensions is skewed towards highly paid executives and those who own companies on the basis that these individuals appear to have the capacity to have significant pension contributions made on their behalf by their employers into pension vehicles such as small, self-administered pension schemes. This is the very concern that motivated me to commission the review of tax relief for pensions in 2005. Significant changes were made to the pensions tax code in the Finance Act 2006 on foot of the findings of that review. The main thrust of the changes 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 ARFs as purely long-term tax-exempt vehicles.

What I am prepared to do, and what I have done in the past in replying to the Deputy's parliamentary questions, is to put broad information into the public domain about the number of high-value pension schemes. This will go a considerable distance in meeting the Deputy's request, but in a manner that does not give rise to the risk of inadvertent disclosure of personal information. If the Deputy wishes to put down a parliamentary question, I will be happy to answer it, but I am not prepared to accept the amendment.

I have a difficulty with the idea that there should be some restriction on people who work, make money and then put some of it into a pension fund. In doing so, they come into the PAYE system. The only thing we must worry about is how much of a lump sum people can take tax free. Some people will be more successful than others. We should not send out a message that there is something wrong with being successful. I do not see anything wrong with people putting money into a pension fund, because when they draw it down we collect the PAYE. This is not a tax evasion issue. The only concern of the Minister should be with how much an individual can take as a tax-free lump sum. The rest of it is money that will be paid into the Exchequer through the PAYE system. That is an ideal way of collecting money. We cannot have it both ways and we should not send out the message that successful people are not entitled to put their money into a pension fund.

The Minister mentioned ARFs and I acknowledge the letter that was sent about the point I raised at a previous meeting. That dealt with the consequences of the provisions of the Finance Act 2006, where it is necessary for people with ARFs to take out 1% this year, 2% next year and 3% the following year. That is fine and I do not want to support people who are leaving money there for the purpose of inheritance. However, the vast majority of ordinary people have ARFs. At a time when the markets are going down, it is not wise to force people to take 1% out of a fund, giving the Exchequer less revenue than it would get if the market was going the other way. One per cent of something that is negative means less money in the coffers than something that is positive.

I understand the Minister's officials and the Revenue Commissioners are prepared to look at age restrictions. However, if somebody is aged 60 and has a part-time job, then he or she should not need to draw down straight away. Why does the Minister not leave it at 66 before a person must draw down? That gives everybody a fair chance to let the fund grow. Sometimes pension schemes mature and people put the maturity of the fund into an ARF. It is given a chance to grow so that they can have a decent pension, or even a widow's pension in certain cases.

I agreed with the pension changes made by the then Minister, Charlie McCreevy. I asked him during the previous budget debate to look at changes and he did so the following year. That was progress. It is important that people put their money into something that they must pay back through the PAYE system, whether it is €10 million, €20 million or €500,000. Once they draw down, it comes through the PAYE system.

I find myself in a position somewhere between Deputy Barrett and Deputy Burton. People can put what they like into a pension fund, but how far the State should go in subsidising that is a separate question. I forget whether it was last year or the previous year, but I totally agreed with the Minister's action in putting some limit on the size of the pension fund that would be built up with State support. People can obviously go on building up with their own funds as much as they like. On the other hand, Deputy Burton's amendment would mean that individual names would effectively be published. We live in a very mobile world. Wealthy people, including tax payers, are spending an increasing amount of their time and money abroad in warmer locations. If we want to encourage people with any degree of wealth to go and live abroad, we will need published lists of their pensions. I would be against that as well and I agree totally with the Minister's position on that.

He has made progress in making the situation more equitable and he has also published some general aggregate information. That is as far as he should go, because to go any further is not in the interests of ordinary tax payers and pensioners. There are factors such as the climate which discourage people from living here, but if we discourage people who created wealth from living here, that will not benefit anybody.

We are probably straying a little bit away from the subject. My belief is that we have not capped many of these reliefs at the correct level. I have always favoured having a cumulative cap on all the reliefs people can roll up. The Minister has brought it in at a very high level, over €500,000, before any capping occurs.

I do not hold with the idea of publishing the personal details of beneficiaries. If we set up schemes, some of which have been foolish, to give tax relief for things for which we should not give tax relief and people take them up in good faith, I do not see why we should publish their names as if they had done something extraordinary. If there is folly, it is on the part of the Oireachtas for setting up such schemes.

We should be much more careful in the use of such schemes because tax relief is a subsidy. Many people seem to think tax relief is free money because the Exchequer never sees it. If it were a subsidy we were giving out, we would be much more careful. We would not ask that every beneficiary of every subsidy be lined up so that we would know who they were. We would take a much more careful approach and would not do what we are doing now, namely, putting 80% of our pension subsidies into the hands of 20% of the population.

The amount of money given out in tax relief each year is greater than some of the Estimates of several of the big Departments. If we regarded the €9,000 million we give out in the form of tax reliefs every year as an expenditure estimate, and I have advocated this previously, we would have a much more sensible debate. Instead of debating marginal changes here and there, we would seriously consider whether this is a good way to spend our money this year. We would have a more meaningful process here about what constitutes best tax policy for 2008 or 2009. The Minister needs to do more in this regard. He has started to introduce changes on the spending side. It remains to be seen what impact they have on the quality of debate about spending options. We should have a higher quality debate on tax relief options and the Minister needs to facilitate that in the House. It is not about prurient interest in who the beneficiaries are. It is about us doing our job and ensuring that the decisions we make on tax relief are fair, equitable, efficient and encompass what have been called the canons of taxation.

Perhaps the Minister could comment on the reality that we now live in a Europe where there is free movement of people and people are entitled to live in any one of the 27 states. If conditions are not favourable in Ireland people can legitimately up stakes and go to live in Portugal, Spain, France or anywhere else in the European Union. That is the reality of being a member of the European Union. If the consequences of certain impositions discourage people from staying in Ireland, the end loser will be the Irish economy.

I have given my reply to amendment No. 37. I do not have anything to add.

This is about information in regard to who the beneficiaries are. I do not care how much of a pension fund anybody builds up. Good luck to them. The State should incentivise pension funds and saving for pensions, but it is wrong that the benefits of the pension tax incentives are skewed disproportionately towards people who are exceptionally well off. I commend them for making their money in whatever way they made it. That is not at issue. What is at issue is whether Deputy Cowen, as Minister for Finance, is using the resources and tax expenditures in regard to pensions to benefit the greatest number of people who need support for a pension when they become older.

I can assure Deputy Barrett, I could write a scheme for him on the back of an envelope, that if one liquidates one's company out of which one has made a couple of hundred million euro, all one needs to do, even with the amended laws, is to go offshore to the south of Spain or elsewhere for five years and take one's profits and one will have a fantastic pension fund. None of that is under threat. Not only that, one can come back home to Dún Laoghaire or anywhere else for generous amounts of time in each of the years under consideration.

The issue is the totality of the tax expenditures on pensions and whether they could be used to assist a broader range of people in Irish society or used in other ways. If the Minister has another recommendation as to how more information can be released about this very secretive and shadowy world of who benefits from the range of tax incentives that are available in the pensions area, I would welcome it. Where we have progressed in regard to greater tax justice and fairness over the five years I have been on this committee, it has been on the basis of making information available, of debating whether certain measures are a good use of tax expenditure and supporting them, or debating whether to cut back on schemes that are not considered to be a good use of money. That is what we are trying to get at here.

Amendment put and declared lost.
SECTION 39.

Amendments Nos. 38 and 39 are related and will be discussed together.

I move amendment No. 38:

In page 56, line 16, to delete "profits, or dividends" and substitute "amounts attributable to profits, or to dividends".

These are technical drafting amendments.

Amendment agreed to.

I move amendment No. 39:

In page 56, line 18, to delete "of an excepted trade" and substitute ", of an excepted trade".

Amendment agreed to.

I move amendment No. 40:

In page 56, line 43, to delete "as trading profits of" and substitute "as exempt from tax for".

This amendment may not be accurately drafted because the section is complicated. The Minister is introducing this change to encourage holding companies operating in Ireland. I have had representations to the effect that other countries are zero rating these companies and do not regard this as harmful tax competition. Ireland, in particular, must be sensitive to changes in its tax code because other countries look at our tax code and ask whether we are bending the rules all the time to suit ourselves. However, I understand that these other countries, which are very respectable tax bases, are going considerably further than we are and that the amendment the Minister proposes would render us uncompetitive in terms of these companies locating in Ireland. I would like to hear the Minister deal with the merits of going further than he has done in this amendment and the reason he has decided to stop at a halfway house of 12.5%, the standard corporation tax rate, when others seem to be doing more.

I welcome the amendment but it does not go far enough. There are other countries, such as, the Netherlands, Holland, which has a zero rate in terms of participation exemption for foreign dividends. As it stands, Ireland has a participation exemption for CGT for sale of shares. At present any Irish company is going in at 12.5%. What I propose is nothing more than a cash flow advantage but it is a comparative advantage with making them exempt. It should be for genuine commercial reasons. In regard to concern that moneys would not be used for bona fide commercial reasons and in terms of employment, that could be dealt with by inserting a provision requiring that it be for genuine commercial reasons. The Minister mentioned this previously in regard to another amendment. I would like to hear his views. It has been in the public media to an enormous extent. What we are proposing is that the foreign dividends of the holding companies in Ireland would be exempt—

A Deputy

For subsidiaries located—

—in the EU or in other countries with which we have tax treaties.

Whatever the Netherlands is doing, it is not protecting a 12.5% tax rate as we are. The case is made by some that exempting foreign-source dividends from taxation here would help to encourage corporations to locate headquarters or holding companies in Ireland. While there may be something in this, there are also downsides to such action that we have to bear in mind. We have decided not to provide a general exemption for foreign-source dividends as a blanket exemption could contravene the EU code of conduct on business taxation. It could open the door to Ireland being used as a conduit through which untaxed foreign income could be channelled. A concession of this nature could attract operations of little substance here whose purpose would mainly involve tax planning. Developments along these lines would damage our international reputation among our fellow EU member states and others at a time when we have to defend our 12.5% corporation tax rate against developments such as the common consolidated corporate tax base.

While commentators look at a particular item and compare it with ours, our whole idea is that we have an attractive business tax system in the round and we have to be careful not to go beyond certain points where our reputation would be put at risk. This consistent approach across the board is the best way forward.

I take the view that this is an all-party issue to protect our corporate tax rate and I would accept the Minister's advice in cases such as this. He has access to much more information than I would have. Clearly, there are concerns. We would be exposed to changes in the European corporate tax regime or, as I recall during the last presidential election, there were concerns that there might be changes following on changes in Government over there. We must have a targeted approach, defend what is worth defending and make sure we fight battles on grounds where it is worth the contest. I take the Minister's advice.

Amendment, by leave withdrawn.

I move amendment No. 41:

In page 57, line 37, to delete "the aggregate of".

This is a technical drafting amendment.

Amendment agreed to.

I move amendment No. 42:

In page 58, line 5, to delete "of the period" and substitute the following:

"of the accounting period in which the dividend is received by the receiving company".

This amendment deals with the compliance burden for companies. As Deputies will be aware this section allows companies to claim that dividends received by them out of trading income of foreign companies should be taxed at the 12.5% rate of corporation tax. The section provides a safe harbour. It provides that a dividend can be treated as paid out of trading income if two tests are met — first, that not less than 75% of the income of the dividend paying is from trading and, second, that not less than 75% of the assets of the dividend receiving company and its subsidiaries taken as a whole are trading assets. This amendment deals with the second test. It allows this test to be carried out at the end of the accounting period in which the dividend is received rather than requiring it to be carried out for the period for which the dividend was paid. This will reduce the level of testing that a receiving company will have to do and so reduces the compliance burden.

I commend the amendment to the committee.

Amendment agreed to.

I move amendment No. 43:

In page 58, lines 27 and 28, to delete "in that period".

This is a technical drafting amendment.

Amendment agreed to.

I move amendment No. 44:

In page 62 to delete lines 9 and 10 and substitute the following:

"(2) This section shall be deemed to have applied as respects a dividend received on or after 1 January 2007.".

This amendment changes the commencement date for the section so that it applies to dividends received on or after 1 January 2007. The Bill, as initiated, commences the section as respects dividends received on or after 31 January 2008. This will allow companies to avail of the reduced rate of dividends received from the beginning of 2007. There was some expectation of a change in the treatment of dividends and there may have been some uncertainty as to how dividends from non-resident companies were to be treated following the decision of the European Court of Justice in December 2006.

Section 39 clarifies the treatment of such dividends and this amendment removes any uncertainty on the treatment of such dividends received in 2007.

I commend the amendment to the committee.

Amendment agreed to.
Section 39, as amended, agreed to.
SECTION 40.

Amendments Nos. 45 to 48, inclusive, are related and may be discussed together.

I move amendment No. 45:

In page 62, line 17, after "dividend" to insert ", or makes a distribution,".

These are technical drafting amendments. The section of the Bill, as initiated, is drafted in terms of dividends, it should be drafted in terms of distributions as well as dividends, as the issue being dealt with arises in both cases. The amendment ensures that the section now covers both distributions and dividends. I, therefore, commend them to the committee.

Amendment agreed to.

I move amendment No. 46:

In page 62, line 22, after "dividend" to insert ", or as the case may be the distribution,".

Amendment agreed to.

I move amendment No. 47:

In page 62, line 26, after "dividend" to insert ", or as the case may be the distribution,".

Amendment agreed to.

I move amendment No. 48:

In page 62, subsection (2), line 42, to delete "distribution made" and substitute "dividend paid, or distribution made,".

Amendment agreed to.
Section 40, as amended, agreed to.
SECTION 41.

Amendment No. 49 is a Government amendment. Amendments Nos. 50 and 51 are related. Amendments Nos. 49 to 51, inclusive, may be discussed together.

I move amendment No. 49:

In page 64, to delete lines 11 to 14 and substitute the following:

" ‘specified licence' means-

(a) an exploration licence, or a reserved area licence, that is granted on or after 1 January 2007, or

(b) a licensing option,”.

It is proposed to take amendments Nos. 49 to 51, inclusive, together. These make three technical changes to section 41 as initiated. Amendment No. 50 is a technical drafting amendment. It inserts a bracket into the formula that calculates the profit ratio of a petroleum field. This is to ensure that the sum is calculated in the correct order. Amendments Nos. 49 and 51 provide that the new tax regime applies to petroleum leases issued on foot of reserved area licences issued after 1 January 2007 and also to petroleum leases issued on foot of licensing options. These are licences other than exploration licences awarded under the Petroleum and Mineral Development Act 1960. Their inclusion accords with the intention of the Government decision in July 2007. I commend the amendments to the committee.

I have no great objection to this change which seems to be well constructed in that the more profitable the field, the higher the tax, which seems a sensible principle. Has the Minister considered how we stand in terms of the competitiveness of this regime with regard to that in place in other countries where oil or gas exploration is taking place? Is this measure confined to petroleum exploration?

We only revisit this matter on very rare occasions. The last time we dealt with it, Mr. Ray Burke was Minister, a long time ago. As it will be a long time before we revisit it, how does this measure stack up in terms of Ireland being an attractive location and ensuring we get a reasonable return for the taxpayer when we are fortunate to find resources?

The review was undertaken with expert advice. Indecon was again involved in preparing a detailed report and considering international practice and developments since this matter was last considered. The Deputy is correct that some time ago we offered what would be regarded as attractive terms in an effort to generate interest at a time when oil prices were, historically, relatively low and when exploration companies were difficult to attract. The current regime, as the Deputy states, is more towards ensuring we get a return beyond simply setting a rate for a field in order to gain the exploration, and is regarded by our advisers as being in line with international practice.

There is a compelling case for increasing the future tax take from more profitable oil and gas fields. Licensing terms internationally are being amended in favour of national governments in the light of increasing oil prices and fewer prospect areas available for exploration. The overall objective of the changes being made is to ensure the State will get a higher return from more profitable oil and gas fields, while continuing to encourage the industry to invest in exploration for oil and gas in Irish waters.

It is on this basis that we hope to maintain competitiveness in order to attract exploration companies. Geologically and in terms of the distance involved and weather conditions, Ireland is not the easiest location for exploration and additional costs are involved. Taking everything in the round, the amendment follows the expert advice available.

The much higher world oil prices are clearly the background to this decision. I note in passing that the amendment to the regime is one of the issues in the Rossport protest on the west coast of County Mayo. The terms have been changed, albeit this cannot be done retrospectively, which is one reason, among others, the dispute should draw to a close. We badly need those resources.

Amendment agreed to.

I move amendment No. 50:

In page 66, to delete lines 41 to 42 and substitute the following:

"{A — (B x 1.5)} x 100

100 — R ".

Amendment agreed to.

I move amendment No. 51:

In page 70, subsection (2), lines 20 and 21, to delete all words from and including "an" in line 20 down to and including "awarded" in line 21 and substitute the following:

"a licensing option or from an exploration licence, or a reserved area licence, awarded.".

Amendment agreed to.
Section 41, as amended, agreed to.

We were scheduled to finish at 8 p.m. Is it the wish of members to adjourn until 11 a.m. tomorrow or do they wish to continue?

I have a meeting which I agreed to attend. I would prefer to adjourn.

I have made arrangements based on the original order.

In that case, we will suspend the discussion.

Before doing so, I bring to the committee's attention that I may bring forward a technical amendment to section 44 on Report Stage.

Progress reported; Committee to sit again.
The select committee adjourned at 8.05 p.m. until 11 a.m. on Wednesday, 20 February 2008.
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