Finance Bill 2013: Committee Stage (Resumed)


I move amendment No. 65:

In page 99, to delete lines 10 to 20 and substitute the following:

739J.—(1) (a) In this section ‘investment limited partnership’ means an investment limited partnership within the meaning of the Investment Limited Partnerships Act 1994.”.

This is a technical amendment to delete unnecessary wording from the definition of an "investment limited partnership" as inserted into the Bill as published. The wording in question was inserted initially to copperfasten the meaning of an investment limited partnership but when the matter was re-examined, it was determined that the additional wording was not necessary.

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

As amendment No. 66 involves a charge, it is out of order.

Amendment No. 66 not moved.
Section 41 agreed to.
Sections 42 and 43 agreed to.

I move amendment No. 67:

In page 102, line 15, to delete “the”.

This amendment, which relates to section 44 of the Bill, deals with a drafting issue in that section. It is to delete the definite article on page 102, line 15.

Amendment agreed to.
Section 44, as amended, agreed to.
Section 45 agreed to.

I move amendment No. 68:

In page 106, lines 29 and 30, to delete "that individual or those individuals" and substitute "an individual or individuals".

The amendment deals with a drafting issue in the section.

Amendment agreed to.
Question proposed: "That section 46, as amended, stand part of the Bill."

The section deals with farm restructuring. An issue relating to lands acquired by compulsory purchase order, CPO, and roll-over relief was raised by a number of my constituents. This is not covered by the legislation, but is there an opportunity to consider the provision of roll-over relief for persons whose farmland has been the subject of CPOs in order that they can reinvest the money either in farmland or farm reconstruction?

In seeking relief under the section certification is required from Teagasc that they are qualifying farm restructuring transactions. If this certification is not received, owners of farmland sold by way of CPO or otherwise will not be eligible for the relief. If the sale is for restructuring purposes, it will be certified by Teagasc and the relief will apply, but in other circumstances it will not. I do not intend to alter the policy on CPO acquired land. I do not know whether the Deputy can recall the strong campaign run by the farming organisations to increase the compensation paid by the National Roads Authority to farmers when the national roads programme was well under way and motorways were being built in parts of the country. That held up the programme for a while and the issue was resolved by significantly increasing the compensation paid. Subsequently, the then Minister for Finance abolished roll-over relief and, in effect, pulled back some of the advantage acquired under the regulation. I do not plan to change the position. However, we can always look at the issue in future Finance Bills.

Question put and agreed to.
Amendment No. 69 not moved.
Question proposed: "That section 47 stand part of the Bill."

We are unable to table amendments that would involve a charge on Revenue, but the proposal made in the amendment came from the Irish Cancer Society. It is marginal and in the direction the Government is moving and the section provides an opportunity to accelerate the move.

There are four elements to the price of tobacco - the specific tax, the ad valorem tax, VAT and the non-tax price. The idea is that the ad valorem tax would be reduced to zero. We are aware that because of EU rules it cannot be zero. It would be great if the Minister and his officials would consider tabling an amendment on Report Stage. I proposed a nominal tax of 0.2% to comply with EU rules. The main reason for this is that if one examines prices between 2001 and 2011 - the breakdown for 2012 is not yet available - the price of a pack increased by 75%, while the non-tax element which goes to the manufacturers and transporters but not the retailers increased by 72%. The Irish Cancer Society states the Government has been doing the right thing by increasing the price, but, at the same time, the manufacturers have used the opportunity to significantly increase their profits. I do not have evidence to back this up, but the Irish Cancer Society asserts - it has data which I have not seen - they are subsidising the cheaper cigarettes. The more expensive cigarettes take a bigger hit, while the cheaper cigarettes remain cheap, thus minimising the potential impact, which could be considerable. The data we have suggest a €1 increase in the price of a pack would reduce consumption by approximately 4%, which would be useful. Anyone who smokes ten cigarettes a day spends approximately €1,500 a year, but a €1 increase would lead to a 4% reduction in consumption. This is similar to our discussion on university fees. There is an opportunity to accelerate what seems to be Government policy and bring the ad valorem tax to just above zero. The idea is that it would minimise the tobacco companies' ability to keep cheaper cigarettes cheap, thus keep people smoking.

In principle, we in Sinn Féin do not oppose the increase in the price of tobacco, particularly if it is genuinely intended to change attitudes and behaviour in society. However, the reality we face is that the market has been flooded with illegal cigarettes which are sold on the street. That is the case in most larger towns and some small ones. There is easy access to illegal cigarettes which causes a number of problems. The State loses revenue through taxes and so on and because the trade is illegal it puts a strain on Garda resources in policing the issue. In addition, if somebody can buy a pack of cigarettes for €4 or €5, increasing the price will not reduce consumption or usage of the product because the danger is it will drive people to the underground market. In principle, we do not oppose increasing tobacco prices, but instead of the section providing for a grab of additional revenue for the Exchequer, the revenue should be ring-fenced to try to change behaviour. For example, if the additional money accruing from this increase was ring-fenced to target the black market sale of tobacco, I would support the proposal. That is the reason I opposed the section. While increasing the price of cigarettes is fine and there are many reasons that should happen, particularly to lower the incidence of cancer and so on, what should be done, if we are genuine about this, is that we should ring-fence the money to make sure we tackle the issue of the sale of illegal cigarettes in most large towns and cities.

Given that at least one in four cigarettes is contraband, the fines and penalties imposed on those who are caught carrying, shipping or selling contraband tobacco appear to be low. I do not know if this matter comes within the remit of the Minister as it may overlap with the portfolio of the Minister for Justice and Equality. An express provision stipulating that any shipper who is shown to have carried contraband in their cargoes will be fined €250,000 - with no opportunity for discussion or argument - would have a significant and positive effect on efforts to combat the contraband market. The reason is that shippers would carry out much more scrutiny of bills of lading and cargoes if they knew they could be fined €250,000 or €500,000.

The amendment was tabled on behalf of the Irish Cancer Society which argues that cigarette manufacturers are able to make excessive profits in Ireland as a result of current tax structures. The changes provided for in the amendments the society asked Deputies to table will, it argues, hit the profits of cigarette manufacturers harder than they will hit tax revenues from cigarettes. They offer a better way to collect tax as, rather than increasing prices, they would increase revenue for the State and reduce profits for cigarette companies.

I concur with Deputy Twomey. The core argument of the Irish Cancer Society is that tobacco firms are piggy-backing on increases in excise to inflate their profit levels. The society has done significant work in making proposals that appear credible and, as such, they are worthy of serious examination. If the Minister is not prepared to accept them this year, I ask him to ensure work is done to examine the feasibility of the proposals, with a view to implementing them next year.

Section 47 confirms the budget increases in the rates of tobacco products tax which, when VAT is included, amount to 10 cent on a packet of 20 cigarettes, with pro rata increases on other products, together with an additional 50 cent increase on a 25g pack of rolling tobacco. This is what the section does. I compliment the Irish Cancer Society on the work it does. Its advocacy has certainly added to the general good health of the nation and I admire its work very much. However, the restructuring it is seeking, as reflected in the amendment proposed by Deputies Ó Ríordáin and Twomey, was done last year when we undertook a significant restructuring. We left a little tolerance, as it were, between the specific rate and the ad valorem tax because eliminating ad valorem tax completely would result in a loss in revenue where there is a price increase as opposed to an increase in excise.

On the penalties for tobacco smuggling offences suggested by Deputy Mathews, the penalty on summary conviction for evasion of duty is €5,000 and a term of imprisonment not exceeding 12 months. However, if the Director of Public Prosecutions decides to opt for indictment, the maximum penalty increases to €126,970 and a term of imprisonment not exceeding five years. In circumstances where the value of the product concerned is greater than €250,000, a fine of up to three times the value of the product may be imposed. This means a court could impose a fine of up to €900,000 on a person who smuggled cigarettes to the value of €300,000. These penalties come very close to those requested by the Deputy.

I have in mind fines for shippers rather than the people caught with contraband tobacco products. If such fines were in place, shipping agents would have to scrutinise their cargoes much more closely. One would then have citizens engaged in policing the problem rather than only having the Garda policing it.

It appears there is nothing to prevent the Garda pursuing such a case or the Director of Public Prosecutions taking a shipper to court if he or she is complicit in the evasion of excise. We are discussing criminal offences and for that reason-----

The issue may stray into the remit of the Department of Justice and Equality.

Securing a conviction beyond reasonable doubt in murky circumstances can be difficult sometimes.

I would like to address specifically the arguments made by Deputies Twomey, Doherty and Donnelly in favour of the proposed amendment. I have a note which may be of interest. The amendment is to request that a report be prepared and presented to the Oireachtas.

We are discussing the section.

We are discussing ring-fencing the money.

My only problem is finding an opportunity to explain the position.

Deputy Steven S. Donnelly

To what level was the ad valorem tax reduced last year?

The figure is 8.03%. It is worth noting that the structure of tobacco taxation was changed in the Finance Act 2012, which resulted in a higher specific component than had been the case and the introduction of a minimum excise rate. This was mainly to protect excise revenues in the event that the price of a pack of 20 cigarettes was reduced to below €7.75. If the approach suggested was adopted and the revised rates were applied to current retail prices, the tobacco products tax on a pack of 20 cigarettes in the most popular price category, currently priced at €9.30, would be €6.29 compared to €5.57 at present. The total tax take, inclusive of VAT, would be €8.03, compared to a total of €7.31 at present. I have explained the reason we have allowed a little tolerance, namely, that if there is an increase in price, the Exchequer also obtains a yield.

Deputy Steven S. Donnelly

It seems the figure has been reduced significantly. The figure available to me indicates that it was slightly more than 18% in 2011, which indicates it has reduced by a full ten percentage points which is great.

I must correct the figure; it is 8.83%.

Deputy Steven S. Donnelly

It has declined by approximately 10%, a significant figure, which is great. I understand the Minister's argument that it is handy to have a price dependent tax in place in case the manufacturer increases the price, as this would clearly deliver a return to the Exchequer. The concern raised by the Irish Cancer Society is that this facility also works in the opposite direction. It is concerned about the ability of cigarette manufacturers to minimise the price of cheaper cigarettes with a view to ensuring people continue to smoke. The ad valorem tax, even at 8%, may be marginal but it allows the cigarette manufacturers to leverage downwards the price of lower end cigarettes. It is worth bearing this in mind.

Deputy Donnelly explained the position very well. We did a major restructuring last year. When we did the research we also provided for a minimum rate of excise to avoid a downward leveraging of the price. This minimum rate ensures there is a threshold beyond which the cigarette companies will not lower prices further. We built this into the restructuring.

Many issues arise with regard to the tobacco and cigarette business, for example, smuggling. I am not sure about the statistic that every €1 increase in the price of a packet of cigarettes reduces smoking. It is possible that what appears to be a reduction in consumption is simply a transfer of consumption to smuggled cigarettes.

I am sure we will debate this matter again, when we can examine it further. I am not moving on it today.

It sounds as if the Minister's officials have been briefed by the Irish Cancer Society, ICS. The section has two parts - remove the ad valorem tax and cap it. My understanding is that this might be difficult in terms of complying with EU regulations, but would the Minister consider a maximum price? If the total sales price can be capped, the ad valorem price would fall and the specific price would increase, squeezing the manufacturers' price. I assume this is the ultimate aim.

We would not be able to do so under EU law.

The principle is that manufacturers are free to determine price. Increases in taxes will not necessarily impact on tobacco companies' profits.

What lobbying can be done in the medium-term on the basis that this is not a normal product, but an addictive drug with significant health consequences? What conversation can be had in Europe to the effect that, while we agree with the principle for good market reasons, this is a highly unusual product?

Lobbying is constant in Europe on different issues. I am sure there is room to lobby on this matter as well. However, it is also true that, across the 27 member states, attitudes to smoking vary widely. Parts of Europe have not made the connection between health and tobacco smoking that we have made. Obviously, their medical experts know, but people on the street do not. The prohibition on smoking in bars and restaurants is nearly universal across Europe. There has been movement, but there is always room for lobbying on these matters.

I thank the Minister.


Question put and agreed to.
Amendment No. 70 not moved.

Amendments Nos. 71 and 72 are related and may be discussed together.

I move amendment No. 71:

In page 108, subsection (1)(b), line 1, to delete "and".

This amendment deletes the provision in mineral oil tax law that makes it a criminal offence to purchase petrol or auto diesel from a retailer who does not hold the appropriate mineral oil trader's licence. No prosecutions are taken for this offence because persons who purchase petrol and auto diesel from unlicensed filling stations usually do so without any unlawful intention and are unaware that the filling station is unlicensed. The provisions for the offence under the mineral oil tax law are not otherwise affected.

One pulls in at a filling station in some part of the country with which one is not familiar to fill up the tank. Subsequently, one realises that one filled up with diesel or petrol that was brought in illegally. Under the current law, even though one did not know the fuel was illegitimate, one has committed an offence simply by purchasing it. Prosecutions have not been taken. This amendment tidies up the law by removing this offence.

Amendment agreed to.

I move amendment No. 72:

In page 108, line 29, to delete "return."." and substitute the following:



(d) in section 102(1) by deleting paragraph (c).".

Amendment agreed to.
Section 48, as amended, agreed to.

I move amendment No. 73:

In page 109, between lines 37 and 38, to insert the following:

"(e) a person who holds a Community Licence within the meaning of Regulation (EC) No. 853/2004 of the European Parliament and of the Council of 29 April 2004,

(f) a person who holds a Community Licence within the meaning of Regulation (EC) No. 1/2005 of the European Parliament and of the Council of 22 December 2004;".

As the Minister knows, this provision was arranged between the Department and the Irish Road Haulage Association, IRHA. We are concerned about several aspects. The agrifood sector is exempted from the road transport licensing provision for operators transporting food produce for primary manufacturers. Such operators do not need to hold road haulage licences. To be facilitated, the Minister's provision would require anyone availing of the rebate to have such a licence. We are attempting to facilitate those operators.

The proposed amendment to subsection (5)(b) of the new section will have the effect of permanently disqualifying a transport operator from the benefits of the repayment scheme for any breach of mineral oil tax licensing requirements or for any breach of control requirements set down in the mineral oil tax regulations. This would be disproportionate for minor failures and breaches of, for instance, documentary and record keeping requirements.

Excuse me; I seem to be on the wrong amendment. I have jumped ahead to the second amendment in the name of Deputy Michael McGrath.

We are on amendment No. 73.

A qualifying transport operator for the purpose of the repayment scheme is defined in subsection (1) by reference to the provisions of the national and EU laws under which transport operators are required to be licensed. The proposed amendment would add two EU regulations in respect of food hygiene and livestock transport to the provisions mentioned. The amendment is not required.

While these regulations set down the requirements for the transportation of animals and food products, they do not provide for transport licensing requirements. The transport licensing requirements, as they stand, are adequate and comprehensive for the purposes of the section.

On a point of clarification, is it the case that road haulage operators who are not required to have transport licences as currently constituted, given the nature of the activity in which they are involved, able to avail of the rebate?

The rebate was introduced specifically for persons with road haulage licences. The motivation related to those who transported goods abroad. If our model for recovery is export-led growth, one can justify in policy terms a rebate for the people who carry our exported goods into other countries.

Rebates were available in Belgium and France. Instead of buying diesel in Ireland, hauliers were filling up abroad for their return journeys. In revenue terms, what I have done is justified by the prospect of a transfer of purchasing activity back to Ireland from the rebated diesel abroad. I extended this provision subsequently to people involved in bus travel, the motive being to provide a further small incentive to the tourism industry. The people in the coach hire business do not buy diesel abroad. All of their stuff is domestic. No clawback is available in that respect.

The provision is focused and restricted. We do not want a rebate for everyone who carries goods, cattle or anything else. In introducing the rebate on excess duty and auto diesel, I was seeking to reduce costs in respect of export-led growth for small businesses and to assist the tourism industry in the year of The Gathering. I am conscious of the costs involved for the Exchequer and of the risk that such a scheme is open to abuse. Accordingly, one means of facilitating compliance is to restrict access to the scheme to tax compliant and licensed operators.

In providing the tax relief, I do not believe that own account operators are, for the most part, in competition with hire and reward operators, since most are by their nature providing transport services for their own products. In this regard, while I appreciate that companies have reduced overheads as much as possible, own account operators have a greater facility to incorporate transport costs within the overall cost of the product. I am also aware that some own account operators have Department of Transport, Tourism and Sport licences in respect of that part of their fleets that provides an element of hire and reward services, but my main concern in this area is to ensure the risk of fraud around the rebate scheme is minimised. The requirement to hold an operator's licence from the Department of Transport, Tourism and Sport or an equivalent licence recognised under EU law is a significant element of the compliance regime.

The haulage industry's argument was that the amendment would be cost neutral. I do not accept that - there would be a cost to the Exchequer.

With regard to the transfer of purchasing back home from abroad, I do not accept the argument that the Revenue would gain. There is a cost, which could be significant, if the application of the rebate were to widen. I want it focused. We are focusing it by saying that it has to be tax compliant hauliers who have a haulage licence. Something similar applies to private bus operators.

I am familiar with the efforts made by the Irish Road Haulage Association in advance of the budget and the rationale it presented to the Minister. I welcomed the Minister’s decision to provide the rebate to rebalance the purchase of fuel from a European perspective. The challenge existed because of the practice of Irish road hauliers to fill up overseas. It made sense to try to bring that activity back home.

However, as with any action, there is a reaction somewhere else down the line. The difficulty is that a licensed road haulier who carries out international activity will in many cases also do domestic work, which might relate to the haulage of foodstuff or livestock. The impact on the operator who is outside the licensed regime will be that an unfair competitive advantage will be given to the licensed road haulier. While understanding and supporting what the Minister did, I make the point that in order to bring equity to the domestic market the rebate scheme must incorporate the relatively small number of operators who will now be at a disadvantage because they are, in effect, paying more for their diesel.

An issue also arises in terms of the small supplier of goods to the catering sector and the concrete manufacturer, among others. The amendment does not seek to resolve their issue but I signal to the Minister that we will table an amendment on Report Stage to address it. I ask the Minister to get his officials to examine the extent to which there is potential for distortion in the domestic haulage sector as a result of licensed hauliers being able to avail of the rebate scheme. Perhaps the Minister would consider the issue in advance of Report Stage.

Valid points are being raised on the amendment. I welcome this section and also the amendment to include bus operators. It was one of the proposals Sinn Féin tabled in our alternative budget and it will be beneficial to licensed hauliers, in particular those who were buying their fuel in France and elsewhere. A genuine issue arises in terms of the cost of transporting goods within the State and the cost that must be borne by businesses and therefore that is tied into employment. There is scope for a wider impact in terms of job activation or creation measures and how we can assist others. It is progressive of the Minister to include the rebate. While it has been shown to be cost-neutral and that it could even benefit the State, there is no guarantee that is the case. As the Minister indicated yesterday, one cannot just sit back, one must take risks.

I hope the measure will bear fruit. The Minister should be equally willing to examine other areas where we can reduce the cost of transport when it is tied in with job creation or potential job creation. Even if he is not willing to examine the issue now it is something we will have to address in future finance Bills.

I very much welcome this measure. I live in a county where a significant number of international transport operators are based. From internal party discussions I am aware that Deputy Áine Collins promoted the issue as well.

To follow on from what Deputy Dooley said, the section states that national and international road hauliers will benefit. Is Deputy Dooley referring to cases where farmers take their own cattle to the mart?

I speak of those who do not have to register as hauliers.

There are very few of those.

That is the point I make, namely, that including them will not involve a major extension of the measure.

It will be extended to all farmers. What the Minister set out is progressive. It relates to international transportation first and then it was extended to national transportation. The measure is extensive as it stands.

In other words, it relates to people in the business of transport.

Am I correct in my interpretation?

Comments should be made through the Chair. Otherwise we will have a discussion and we might as well go for a cup of coffee.

Having decided on the policy, my big concern was to ensure that it was not abused, and that it would be focused on the people the policy intended to assist. That is why the reference to the haulage licence and tax compliance was included. Members are familiar with people in the haulage business who are not tax compliant nor compliant with many other requirements either. We want to rule those out and focus the measure.

If Deputy Dooley were to say to the people who have been in touch with him that some of the operators who do not need a licence to be licensed at present would qualify for a licence if they apply to the Revenue and would get a haulage licence. That would take the unfair competition argument out of the equation. However, many of those to whom Deputy Dooley refers would not qualify for a haulage licence.

Through the Chair, that is a valid point that has been made by some. There are additional and significant costs associated with having a transport licence. There is a requirement to have a transport office and to maintain certain records and controls, which are legislatively set down but it adds significantly to the cost of the operation so the benefit may not be worth it for some. I am still concerned about the potential for distortion from a competition point of view. It does not appear that I will be satisfied by the Minister. He is not in the mood for introducing such provisions.

There is potentially a significant loss of yield on the measure. The measure will be in operation for 12 months or 18 months before we know exactly what the costs are. I want to keep the measure focused on the area where the policy change is intended to assist.

How stands the amendment?

I will not press it at this stage but we will table further proposals on smaller goods carriers on Report Stage.

Amendment, by leave, withdrawn.

I move amendment No. 74:

In page 110, line 5, to delete “€75.00” and substitute “€149.00”.

As the Minister is aware from his engagement with the road haulage sector, it proposed a fairly comprehensive method to deal with the repatriation of the purchase of fuel. The international hauliers attempted to present to the Minister figures that suggest the measure would be cost-neutral. The Minister indicated he has his own views on the matter. I understand a complex algorithm has been devised in which the rebate was calculated based on the initial fuel price at the pump. The Minister has chosen a rebate of 7.5 cent per litre. My understanding is that the EU directive on rebates allows the Minister to allow up to a 15 cent rebate. It is not the case that he would pay out 15 cent but it would give him such a range. If the Bill provided for it, it would be possible to pay up to 15 cent in the event of the price of oil increasing to an astronomical level. It is the case under the current algorithm that if the price of diesel at the pump goes below €1 there will be no rebate to the haulier. I call on the Minister to extend the scale, which is between zero and 7.5 cent, to between zero and 15 cent, which falls within the provision of the appropriate EU directive on fuel rebates. I ask him to consider broadening the measure. It is not based on the current cost of fuel and where it is projected to be in the next 12 months. Accepting the amendment would not place an additional charge on the Minister or change his budget arithmetic. I would not wish to complicate matters in that way for the Minister. I urge him to consider the amendment.

The amendment seeks a doubling of the rebate.

We are allowing 7.5 cent but it seeks a doubling to 15 cent. The Deputy could say that with the rise and fall of fuel prices, there will be periods of time when the rebate will be lower than that but it is within those margins. All the risk is on the Exchequer; nobody other than the Exchequer takes any risk. I am cautious about this measure and have gone a long way with the Irish Road Haulage Association by introducing the rebate at 7.5 cent and that it where it will stay until we see how it operates.

I am disappointed the Minister is not prepared to change the provision because, as I said, there is little likelihood of the Exchequer carrying any risk unless the price at the pump varies dramatically and if it does, the VAT component increases anyway. The State has benefited from the fluctuations in oil prices generally in recent years. At the beginning of the year, one will set out a certain figure, based on whatever the projected or current oil prices are, but because of the escalatory nature of the additional taxation components, which are percentage based, one benefits from an increase. If one had to pay out the 15 cent, it would be collected in some other way. I will not push this amendment to a vote.

The 7.5 cent is based on approximately €1.54 at the pumps. If the Deputy looks at the prices when he is driving home, he will see they are drifting above that already.

It is approximately €1.53.

The risk is coming towards the Exchequer.

Amendment, by leave, withdrawn.

I move amendment No. 75:

In page 110, line 35, after "during" to insert ", prior to or after".

This is a technical amendment in regard to the restrictions that to qualify for the rebate, approved fuel cards will have to be used. This amendment would allow for payments directly to an approved oil supplier. The hauliers have been in contact with me, as my party's spokesperson on transport, and they are concerned that the requirement will be to purchase their fuel through the fuel card scheme. Not that it should matter but none is Irish-based. They have affiliates here but they are not based here. Hauliers have the capacity-----

Amendment No. 75 is a technical one. Amendment No. 76 relates to the point the Deputy is making.

Amendment No. 76 is the one to which I am referring.

I am not taking them together.

Sorry. I thought the Chairman was taking them together. Amendment No. 75 is just a technical amendment.

Amendment No. 75 is the proposed amendment to subsection (5)(b) of the new section and would have the effect of permanently disqualifying a transport operator from the benefits of the repayment scheme for any breach of mineral oil tax licensing requirements and for any breach of control requirements set down in the mineral oil tax regulations. I appreciate the intention of the amendment is to eliminate abuse by restricting the operation but the Revenue Commissioners considered that this approach would be disproportionate for minor failures and breaches - for instance, documentary and record-keeping requirements. The intention is instead to use restrictions as an incentive for ongoing compliance by operators with transport mineral oil regulations. We agree with the sentiment but we think it is disproportionate.

Amendment, by leave, withdrawn.

Amendments Nos. 76 and 77 are related and may be discussed together.

I move amendment No. 76:

In page 112, line 4, after "approved" to insert "or an approved oil supplier".

I will reiterate the point I made earlier. The provisions as set out in the Bill require the purchase of fuel through the fuel card system. Road hauliers are concerned about that because many of them purchase from approved oil suppliers who are well-known, well-established and with whom a relationship exists, whether in regard to credit terms or otherwise. There is a view that the amendment should be accepted to facilitate that trade between the hauliers and their local oil suppliers.

As the Minsiter said, I accept they should all be tax compliant and have reached the standard required for oil suppliers. There is much concern in the road haulage sector because of the presence of washed diesel in the system, the damage it is doing to the road haulage sector generally and the unfair competitive advantage it is bestowing on those who decide to use those illegal products. I understand why the Minister decided to exclude approved oil suppliers. However, it could be done in a way to ensure the relationship continues to exist.

I think there might be a misunderstanding. The scheme envisages that it will cover purchases by fuel card and bulk purchases from an oil supplier. That is provided for already. The amendment to subsection (8)(b) and (d) of the new section, which concern the additional matters relating to the relief that may be covered by regulation made by the Revenue Commissioners, includes the setting of requirements for the means by which payment is to be made for the auto diesel concerned, including payment by means of an approved fuel card.

The proposed amendments would add a reference to auto diesel supplied by an approved oil supplier but this reference is not required because supplies of this nature are already subject to detailed regulation and further regulations can be made for them under this provision, as it stands. The relief will not be confined to fuel card purchasers and direct supplies of approved oil supplies are also included.

I agree with the Deputy's intention but it is already covered by the section. The regulations can be amended to cover any difficulty that arises.

I accept the Minister's clarification and on that basis, I will withdraw the amendment.

Sections 50 to 55, inclusive, agreed to.

Amendment, by leave, withdrawn.
Amendment No. 77 not moved.
Section 49 agreed to.
Question proposed: "That section 56 stand part of the Bill."

We oppose this section, although not in an attempt to have the Minister reverse his decision because it is very clear it is a Government one. We debated this before the resolutions were passed on budget night. This section deals with the increases in alcohol prices, including the additional €1 on a bottle of wine and the other increases. Sinn Féin did not propose that in its alternative budget. We are very mindful of the lobby arguing for an increase in alcohol prices. There are also issues in terms of the minimum pricing of alcohol which are different and where action needs to be taken.

However, this measure is really a dip into people's pockets. Coming from a Border county, I would be very conscious of the additional €1 on a bottle of wine. The Minister will have been very familiar with the drive a number of years ago for cross-Border shopping. While there are different elements to that drive at any point in time, in particular the rate of sterling, one of the surveys done, which has not been disputed, showed that one of the motivation factors which drove people across the Border was the purchase of alcohol. Anyone who stopped in Asda in Strabane or who went to Newry would see people filling up their trolleys with alcohol. It has a bad effect in that if one goes into a shop for one bottle of wine but sees bottles of wine for £3.50, one will buy more than one planned. People are drinking at home and not in the pubs and there is a loss of revenue to the State and so on.

We have had this argument and I have debated the resolutions. I am opposing the section as a marker, as this is not the way we should be proceeding.

Let us consider the rationale behind the €1 increase on a bottle of wine. Representatives of the industry are telling me it is not the case that the price at which they sell wine increases but that it is multiplied. They have explained the position to me, but I cannot quite remember exactly how the measure works. I believe the way it works is that the supplier must increase the cost by €1, after which the price rises further because of VAT, etc., such that the price charged to the customer increases by significantly more than €1. This stood out for me as being a little unusual. We obviously have very high prices here relative to other European countries. I am not necessarily opposing the increase, but it feels as if the Government has gone too far in one specific area by targeting one group of people, mainly winesellers. What are the Minister's thoughts on this? Might this measure be revised and reversed a little? Perhaps the Minister might rebalance it against others. It appears that one particular product which some very good, responsible businesspeople sell as their only product has been singled out for a major increase.

I support Deputy Pearse Doherty's point on below-cost selling. The ban operated quite well in Scotland and I encourage the Minister and his team to consider it.

It is another excise increase. There had been no general excise increase on alcohol products since 1994. In the circumstances in which we find ourselves it is legitimate to increase excise duty on alcohol. First, it involves discretionary expenditure. Rather than increase tax where people had no choice but to pay it, it was decided to tax items where there was real choice, as in the case of smoking or drinking alcohol. This is a better way to impose taxation. The yield is very significant on these increases, amounting to €180 million in a full year. When in our debates we realise how difficult it is to achieve a yield of €25 million, €30 million or €40 million, we must acknowledge that a yield of €180 million is significant, especially when there has not been a general increase since 1994 and considering that the market does not seem to be particularly price sensitive. The value of wine sales increased in February. Therefore, the increase did not seem to have any effect on sales.

One aspect of the rationale which the Deputy might describe as unfair or otherwise centred on my desire to have a policy that would restrict the sale of cheap alcohol in off-licences, particularly supermarkets. It has proved beyond my ability to come up with a policy. We tried every which way last year to determine whether we could do it, but we could not find a legal way of differentiating between on-sales and off-sales. We talked about closed containers and all sorts of matters. We ran through the whole gamut but could not find a solution. Our goal can be achieved through minimum pricing orders. That is the approach taken in Scotland, but it has been challenged in the Scottish courts. We will see how it works out. If the mechanism proves to be legal in Scotland, we might be able to move in that direction here. However, in the absence of a solution, one must acknowledge that the imposition of an extra €1 in excise duty on wine represents a greater imposition than that on other alcohol products, amounting to 10 cent. Very little wine is sold in the on-trade; it is the off-licence trade that counts. Certainly, it is skewed and this is not a proportionate imposition of excise duty across the trade. There is more excise duty on wine, but this is because it is largely associated with the off-licence trade.

I was amazed at the statistics and hope I am recalling them correctly. My officials can correct me if I am wrong. When we were making the decision, approximately 24% of all alcohol sales involved wine. I remember reading in the newspaper after the 1969 election that the late Conor Cruise O'Brien, on having his first meal in the Members' restaurant, ordered a bottle of red wine and the manager had to send someone to Mitchell & Son on Kildare Street to get one. There was no wine in-house in Leinster House in 1969. One can see the change in practice that has occurred. That is the thinking behind the tax.

The €1 increase includes VAT. All of the other excise increases also include VAT. Consequently, the 10 cent increase on beer or the unit of whiskey is VAT inclusive. I do not know what the calculation was, but I do know that the result is a straight increase of €1. There is a peculiarity, however. The excise duty on wine and other alcohol products is imposed by volume; therefore, there is no differentiation between a cheap bottle and a dear bottle of wine. A cheap bottle of wine purchased in the local garage attracts an extra euro in excise duty, while a bottle of wine worth €70 purchased in a good restaurant also attracts an extra euro. It is not price related but volume related. I believed this was a little peculiar, but I am not in a position to change it. I do not believe, however, that it is particularly worth changing. That is the only peculiarity I found in the imposition of excise duty on wine.

It is good to hear about the February sales. However, the Minister should keep an eye on the fact that some of the retailers to whom I have spoken have said that the increase is due to the fact that they are still moving their old stock through. They have not yet had to pass on the increase.

I understand the Minister's intention is that the price in the shop or restaurant should increase by €1. Therefore, it is not a leveraged price increase implicating the supplier. I was told the contrary. Does the Minister mind if I examine this and revert to him? If it turns out that there is upward leveraging, will the Minister examine it?

We will examine it.

The Minister stated the rationale was that more wine was sold in the off-licence trade than in the on-licence trade. So what? Why is the Minister more comfortable taxing the off-licence trade? If I understand correctly, he is saying his preference is to tax the off-licence trade rather than the on-licence trade.

The rationale is all the work done in the Department of Health on the abuse of alcohol and the measures that should be taken to reduce that abuse, particularly by young people. One of the major focal points is slabs of beer. A can may cost 40 cent, for example. People can purchase alcohol at a very low cost in supermarkets because of the nature of the supermarket trade. Some of the products are even loss leaders and attract young people. In the absence of a coherent policy to deal with this, I imposed the excise duty on wine disproportionately. That is part of what is occurring. It is not just kids who are buying beer; there are people with alcohol problems and they put a bottle or bottles of wine into the shopping basket every time they shop. Alcohol abuse occurs at home, for one reason or another. People are under various pressures in society.

Let us consider the best hope to meet the arguments made by the Department of Health on this matter. The Minister of State at the Department of Health, Deputy Alex White, is very strong on this issue and building on the policy developed by the former Minister of State, Deputy Shortall.

If the proposed solution in Scotland is not knocked in the courts, that would be the route to go down because it could help if it were possible to bring in minimum pricing orders. The argument then would be where to pitch it.

May I reply to that?

Briefly, I note there is a vote in the Dáil and I hope to finish this section.

It is still not quite working. I accept that there are those who are buying too much wine and might have a drinking problem. According to the publicans and the alcohol sellers to whom I spoke, the anti-social drinking - the drinking that ends up in the accident and emergency department and the drinking that ends up spilling out onto the streets - is not from wine; it is from what the Minister is talking about. It is from two areas - cheap beer and vodka. There are not too many aged 15 in Greystones who have said to me, "Here, listen, you wouldn't mind going in and getting us a bottle of Chablis, would you?"

I agree with the Minister's intention on this but it does not feel as if the taxation is staked up exactly behind that. I ask him to take a look at the mix, although perhaps not this year. It is great to get €180 million out of this. I fully agree that it is discretionary spending. Perhaps the Minister would take a look at a mix involving wine, beer and white spirit drinks.

This is where I am coming from on this. There is a group of responsible independent wine sellers around the country. I am not referring to the supermarkets or petrol stations. Perhaps some other countervailing measure could be done for them.

The targeting of those, particularly young people, buying wine is an old issue. I never liked cider or wine when I was younger, but among the groups of lads with whom one would hang about there would be the bottle of Linden Village for £2.50 from the supermarket or a bottle of wine, such as Buckfast. When I was growing up, it was those monks who were getting many young boys and girls intoxicated, but I do not think they set out with that intention.

RTE has been on to me, through one of the ushers. There was a great deal of mobile phone interference, particularly around the Minister's table, in the broadcast this morning. Perhaps some officials have mobile phones turned on.

As there is a vote in the Dáil, I will be brief.

I have a couple of points. First, it does not surprise me that 24% of alcohol sales are in wine. If one goes to a restaurant or a pub, a glass of wine is €5.50. If one goes to the supermarket or off-licence, a bottle of wine - before this increase - was €7; it is now approximately €8. Even the €1 increase will not force consumers onto the on-sales. The figures are disproportionate for sales in restaurants or pubs for a glass of wine compared to buying a bottle in a supermarket or off-licence.

Another concern of mine, which the Minister himself raised, is that the majority of those who buy a bottle of wine for €8 are those who do not have much disposable income but there is not the same impact on those who are able to buy the more expensive wine. There is something the Minister needs to do on that in terms of fairness.

This is not the best approach. There is also the issue of its having been a driver to cross-Border shopping in the past. It is not an issue at present but a close eye needs to be kept on it because it could lead to significant revenue loss.

We are beginning to repeat ourselves. If we could get the Minister to briefly and succinctly respond and get this section concluded, we will suspend for the vote in the Dáil.

These all are legitimate concerns. We would be conscious of the cross-Border issue. Of course, we are operating on two axes on the cross-Border issue: the excise, which we control, but also the variations in the relative value of sterling, which is probably a bigger driver. At present, the latter is moving in the wrong direction in terms of cross-Border trade. We have to watch the two. One we can control; the other we cannot.

On the respectable wine sellers around the country, the point I made about it being a flat-rate excise increase rather than on volume is that it impacts more on the cheap wine sales out of the local garage or the supermarket, and it is not as big an imposition on those who are selling quality wines. Those I know in the trade tell me that since the recession started it is difficult to sell a bottle in normal times above €15, but they see €15 as the benchmark. The benchmark in the other trade we are talking about is approximately €7. The high-quality wine sellers will be able to absorb this without much effect on their trade because their average prices are much higher.

I must ask the Minister to indulge the Chair.

We will keep an eye on all these concerns.

Question put and agreed to.

We will suspend for the vote in the Dáil to take place. I call on colleagues to return to the committee room as soon as the vote is completed.

Sitting suspended at 11.15 a.m. and resumed at 11.35 a.m.

Sections 57 and 58 agreed to.
Question proposed: "That section 59 stand part of the Bill."

This section relates to carbon tax, an issue that has been well ventilated. We had this discussion when dealing with the financial resolutions on budget night and again during the Second Stage debate. This is not about changing behaviour but about increasing the revenue for the State. These increased carbon taxes will exert additional pressure. While it is called a carbon tax, I do not believe it will genuinely change behaviour. On that principle, I oppose the section.

I also oppose the section. I acknowledge that the extension of carbon tax to solid fuels has been in the pipeline for some time. However, the reality is that it will affect the poorest. More people are lighting a fire at home and turning off the central heating system because they cannot afford to use it. They are relying on the natural fire. We have been advised that increasing the carbon tax will add approximately €2.50 to the cost of a 40 kg bag of coal and 50 cent to the cost of a bale of briquettes. A household that goes through two bags of coal a week for half the year, which would not be exceptional, will pay an extra €130 over the course of the year. This will disproportionately hit the poorest. For that reason, we strongly object to it.

I have voted against these measures in this and the previous budget. This is clearly a revenue-raising exercise that will hit the least well-off. When considered alongside the reduction in the fuel allowance, it will hit yet again those who just cannot afford to be hit. It is spurious in the extreme to suggest it has anything to do with CO2 reductions. It is a straightforward revenue-raising exercise. If the Government was serious about reducing CO2 emissions, it could instead develop wood burning as an option, thereby expanding forestry. This would obviously mean not selling off Coillte's harvesting rights. As wood fuel we grow ourselves is carbon neutral, we could achieve the reductions in CO2 by expanding this sector but not by imposing an extra tax on those who cannot afford it, which is what this really is. It is spurious to suggest it has anything to do with carbon emissions; it is an unfair tax which I oppose.

The section provides for the application of the carbon tax to solid fuels. The purpose of introducing carbon tax was to send a price signal that there was a cost associated with the consumption of fossil fuels to the detriment of the environment. It should also be noted that solid fuels have the highest carbon content of all fossil fuels and are considered the dirtiest fuels. Given the environmental impact it is important that they are taxed.

The tax is introduced in two phases, the first of which will apply from 1 May 2013 at a rate of €10 per tonne of CO2 emissions. The second phase will apply from 1 May 2014, at which time the rate will increase by €10 per tonne of CO2 emissions, thus bringing the carbon tax on solid fuels into line with that on other fossil fuels at a total rate of €20 per tonne of CO2 emissions. The net effect of the €10 tax from 1 May this year will be an increase of €1.20 on a 40 kg bag of coal and 26 cent on a bale of briquettes. I know the Deputies are opposing it, but it stays.

We are all aware of the issue of fuel poverty, on which measures have been introduced in other jurisdictions. For example, up the road in the North the Administration is sending cheques to people who fall into the fuel poverty category. This will exacerbate the issue of fuel poverty, which is a serious concern. For a large number of people, burning coal in the fire is the only option to keep themselves warm in the evenings. Even though they may have central heating in their houses, oil is too expensive. Instead of heating their entire house, people have decided to burn a bag of coal to keep their sitting room warm until they go to bed at night. Many houses do not have modern central heating systems which allow regulation of different zones and where individual radiators can be regulated to turn off heat, as appropriate. If we were to look at the issue of carbon tax and trying to reduce the emission of CO2, we should be trying to support people in such cases and allow them to upgrade their existing systems. Only at that time should we consider an increase in carbon tax.

For many people, this is their only option. We have heard all the horror stories in the past, including of people sitting in front of their ovens trying to keep warm and so on. Fuel poverty is a real issue. This increase taken in conjunction with the reductions during the past number of years in social welfare payments, including the fuel allowance, will hurt those living in fuel poverty. This Bill does not address the issue of fuel poverty and may in fact increase it.

Significant numbers of older people die of hypothermia because they cannot afford to heat their homes during winter. The number of recorded deaths in this regard has increased in recent years. There is no getting around that what the Minister is proposing exacerbates that situation. I would like to hear the Minister's response to this issue. Organisations representing the elderly make this point year-on-year. What is proposed in this Bill will worsen a situation that is already unacceptable for elderly people. As I stated earlier, this increase taken in conjunction with the reduction in the period in respect of which the fuel allowance is paid, will hurt. Elderly people may die as a result of it. This is a serious issue.

I ask that the Minister and Government give serious consideration to the issue of alternative solid fuels that are CO2 neutral, including logs, and expansion of that sector. People must have alternatives. If the cheapest way people can heat their home is to light a fire in a fireplace then they must be offered alternatives that are not damaging to the environment. Log burning is an alternative that is carbon-neutral because trees act as a carbon sink. There is a need to look at and develop this sector in the context of providing logs cheaply to people as an alternative to coal, briquettes and so on.

I am conscious of many of the arguments being put forward by Deputies, which is the reason this is being phased in over a long period. An effective date of 1 May in practical terms means that the increase will not apply until September or October, when they commence purchasing solid fuels for the winter period. When it is further increased in 2014, there will not be a full year effect until 2015 because again the date of implementation is May 2015. Choices have to be made. There is an environmental agenda, which includes commitments to reduce carbon levels. Solid fuels, comparative to other fossil fuels, are the larger generator of carbon CO2.

On poorer people being disproportionately affected by this, no change is proposed in the fuel allowance under the national fuel scheme to assist with home heating. This is payable to people on long-term social welfare payments and will continue to be paid for 26 weeks in 2013. The carbon tax will apply on the generality of solid fuel consumption. However, the fuel allowance will be maintained to facilitate people who need assistance with heating their homes. Many of the difficulties that arise in this regard relate to poor insulation of homes rather than a lack of money for fuel. Since 2000, almost 93,000 energy poor homes have received energy performance upgrades under the warmer homes scheme. The expected spend on this scheme in 2012 is estimated to be more than €21 million. To end December 2012, just over 12,000 energy poor homes received energy performance upgrades. In 2012, the Keep Well and Warm booklet was reproduced and distributed to more than 64,000 individuals and energy affordability stakeholders. The Keep Well and Warm website was also updated. In consultation with key stakeholders work was carried out this year on the development of GIS mapping for energy poverty and new eligibility criteria.

The warmer homes strategy for affordable energy in Ireland set out 48 actions to be implemented over the life of the strategy, including activation of economies of scale and harnessing community effort through the introduction of an area-based approach to mitigating energy poverty. Many of the suggestions implicit in Deputy Boyd Barrett's contribution have been and will continue to be taken up. I expect the Minister with responsibility for energy will in the near future further reinforce schemes to ensure homes are more energy efficient.

On whether a switch to carbon-neutral products such as timber and logs is the answer, it is certainly an answer in rural areas. Many people in rural areas, in particular those in the farming community, have invested in a chain saw and have been planting small areas of their farms that are marginal with trees. That is quite common now. Also, solid fuel burners, which are being installed on a widespread basis now, produce a great deal of heat from the burning of logs and are very efficient. However, a storage issue arises in terms of log and timber burning in city areas. Many people living in cities, in particular those living in social housing, do not have storage space for a lorry load of logs. One would need a lot of logs or timber to get one through the winter. The same applies in regard to turf, which people from rural communities will understand. A person whose home is on a large site can stack the turf, etc., at the gable end but where space is at a premium storage of logs and peat, etc., is not an answer to the problem.

While we are following one agenda by increasing the carbon tax on solid fuel, we are also following another agenda in terms of preventing people on long-term social welfare payments from being affected by cold winters. In this regard, the fuel allowance will be maintained for the full 26 weeks in 2013. There is also a move towards more carbon neutral products and the insulation of homes and so on. All of these actions taken together form a pattern.

A couple of other issues arise, including the cross-Border element of this. As I understand it, the sulphur level of coal in the North is lower. There were reports last year of lorries from the North delivering coal to areas as far away as Cork. This tax could exacerbate that situation. I raise that issue because I support cross-Border trade. However, there are different regulations in both jurisdictions in terms of sulphur content.

I would like to focus on the issue of fuel poverty. The Minister is correct that Sustainable Energy Ireland has put in place schemes to assist people. He also quoted figures in regard to how many people have availed of those schemes. However, I draw the Minister's attention to the detail of those schemes. As a matter of interest, my home heating system broke recently and I had to upgrade it. If memory serves me correctly, people wishing to avail of the SEI grant must meet the first €2,500 cost of upgrading their system. It would not cost that amount to install thermostats on radiators so as to control which rooms one wants to heat and so on.

People in fuel poverty cannot afford to make this outlay. They cannot afford to spend €2,500 to avail of the grant. The Government needs to consider a more ambitious way to assist people. This taxes what the Minister calls a dirty fuel, and we do not dispute this, but it does not deal with the symptoms of the problem. People in huge houses which are not energy efficient do not have the money to spend on upgrading their system to be able to reach the threshold to get part of it back through the Sustainable Energy Ireland grants, which are very good if one has the money to spend. This pushes those who fall into this category further into fuel poverty.

Given that fuel poverty is a big issue, and various Ministers have spoken about it, has any analysis been done on the impact on it of the increase of carbon taxes on solid fuels? Given that we have seen this trend, is the Department willing to examine, or at least ask the Department of Social Protection to carry out some analysis, on the impact on fuel poverty of these measures and come up with imaginative ways to try to address or offset the impact of the increase in carbon taxes?

I appreciate the Minister's answers in the sense he is engaging with the issues we are raising, but while moves are being made towards more sustainable forms and uses of energy to reduce CO2 emissions, it always seems to be that only those least in a position to do so bear the cost of these transitions or suffering most as a result of the transition. I am a firm believer that if one wants people to move in an alternative direction one must put the alternative infrastructure in place and overcome whatever technical difficulties there may be to do this. The Minister stated there is nowhere to store logs in urban areas and this is a fair point, but there is no reason we could not have depots in estates or particular areas where people could buy small amounts of carbon-neutral environmentally friendly fuels, in particular wood, because it links into an area the Government also has a commitment to develop and expand, namely, forestry, which could generate employment. It seems a no-brainer that we would move more decisively in this direction and provide people with this alternative instead of always having to hit people and see what we can come up with afterwards.

I would say the same about insulation. As Deputy Doherty pointed out, there is a cost involved, and several times I have asked the Minister whether we could have a scheme, particularly for those who cannot afford it, whereby nothing would be paid upfront for the retrofit and insulation of a house but the cost would be added to energy bills afterwards. This would not be an extra cost because the householders will have made a saving in their energy costs. What they would be charged on an incremental basis would be the difference between what they used to pay and the saving, so there would be no extra burden. It would mean insulation could happen fast and people would not have to pay the money upfront. It would also generate a huge number of jobs for the many people trained in the insulation business. My local further education college teaches courses on BER energy ratings. People are being trained but there is nothing for them to do. We do not seem to be moving fast and decisively enough in this direction and those who cannot afford to be hit gets hit with the cost of it. This is unfair and, frankly, in the case of elderly people it is dangerous.

This is an interesting discussion and I do not disagree with much of what Deputy Boyd Barrett has said, such as his proposal on applying the costs of energy conservation measures to the electricity bill. The Minister for Communications, Energy and Natural Resources has had discussions along these lines with the ESB. I do not know the state of the discussions at present, but it is an idea which is being pursued at the highest level in terms of ministerial responsibility. It would also deal with the point Deputy Doherty made, about poor households not having the upfront money to enable them to draw down the grant subsequently.

On the general policy position, my view is that if it is necessary to take action on fuels which generate quite a lot of CO2 then the application should be universal after which we would have alternative schemes to relieve the burden on the minority of people affected. This is where the Department of Social Protection's fuel allowance comes in.

I do not know whether the guys in the pick-up trucks still go around with bags of coals in large housing estates in Dublin, but it is quite common in my city. Sometimes they also have bags of timber. The supply seems to be a bit uncertain and it is not always available. With regard to elderly people, there is also a weight issue. A bucket of coal, or a half a bucket of coal, is much handier to bring into a house if one is elderly than the supply of blocks one needs for the night. One would need a great big basket of blocks beside the fire, and lifting and carrying this as well as storage are issues. It is not an exact solution.

The imposition of the tax is at the first point of supply. The carbon tax will have been applied to the coal being supplied by the guys in the pick-up trucks, so they are not involved in some type of black market activity and evading the tax. Their trade will not be affected because it is those who supply them with the fuels who will have to bear the carbon tax.

With regard to Northern lorries delivering coal as far south as Cork, this was one of the concerns which delayed bringing forward this measure. The introduction of the solid fuel carbon tax was delayed to allow for a mechanism to be put in place to address the risk of coal products with lower environmental standards being sourced from outside the State. Regulations to enable local authorities regulate and control the type of coal supplied in the State were put in place by the Department of the Environment, Community and Local Government. It was on this basis the commencement date for the solid fuel carbon tax with effect from 1 May was announced in the budget in December. Measures have been taken to alleviate concerns about cross-Border trade with even less environmentally friendly solid fuels. I do not know whether the local authorities have moved following the Department's change or not, but individual local authorities may regulate for this in their functional area and should do so. This explains some of the considerations with regard to the timing I have introduced.

The Government must do more, and will do so, on energy-related policies to make homes more energy friendly. The same should apply to the great stock of public buildings run by the OPW. I would think the cost of heating and lighting office blocks throughout the public service could be greatly reduced if work was carried out to make them more energy friendly.

We could start here. We cannot turn off the heat in any of the offices here.

There are also days we cannot turn it on. I nearly got hypothermia in the Dáil during the debate on the property tax. It was freezing in there.

As regards what the Minister said concerning the potential, according to a conference in Wicklow about two weeks ago the figure for potential savings in public expenditure if we get all of this right is €1 billion. It is huge.

We have to move on this. Deputy Doherty pointed out the difficulty in respect of less-well-off households, but one could have a less-well-off Government as well. It is a question of getting the seed capital to start the programme and finance it up-front; the savings come subsequently. In the strapped financial position we are in, front-loading the expenditure is one of the issues were are looking at.

Is this not the kind of thing for which we could go to the European Investment Bank? Deputy Halligan said he met with EIB representatives at a committee and asked them about this. If the public sector goes to the EIB with a good project that has a definite return and for which it can set out a business case, the bank does not care whether it is public or private sector; it is interested in such projects. There is obviously a huge employment spin-off if we can put together big projects such as this. It seems to me that it should be a matter of urgency. Given the savings and jobs that Deputy Donnelly mentioned, it is a win-win situation. Are we therefore engaging with the EIB to put forward proposals of this sort?

One of the initiatives taken last year at a pan-European level was to increase capital in the EIB by €10 billion. Different countries were levied for their contributions. Of course, that €10 billion leverages up an awful lot of extra activity, because that is just the seed capital. The EIB will not fully fund a project. It works on the basis of partnerships, which can be with the government or with a private investor. Either way, seed capital is necessary up to a significant percentage of the cost required. We are in negotiation with the EIB, which has pledged to participate in the growing economy in Ireland and help drive it on further. The EIB is already co-funding three groups of schools. Bundles of seven, eight or nine schools are put out to contract. The EIB is now on the third bundle of co-financing. It has also committed to co-financing 19 community health centres and it expects to be able to release that funding in August.

There have been discussions with the Department of Communications, Energy and Natural Resources on exactly what the Deputy is talking about. One of the EIB's difficulties is that everybody is conscious of the issue of credit rating. The EIB has a triple-A credit rating and if it were to engage in partnership with a counter-party that had a low credit rating, it would put at risk its own credit rating. Getting counter-parties that have sufficiently high credit ratings to go into partnership with it is one of the issues. That was one of the things holding up the Newlands Cross separation of traffic project on the road to Wicklow and Wexford. I think we have overcome that now, however, because there are various ways one can leverage up the credit rating of the partners.

As a matter of principle, the EIB is willing to provide us with money. It is a question of working out how schemes will operate. We will see significant progress being made in that area. The EIB representatives are coming over in the course of our EU Presidency. Uniquely, they will have a full management meeting here in a couple of weeks' time. They are interested in looking at some of the projects, particularly schools, with a view to giving us a strong approval rating and committing to further expenditure. That is the way to go. I fully agree with the Deputy.

Question put and declared carried.
Section 60 agreed to.

I move amendment No. 78:

In page 122, lines 28 to 32, to delete paragraph (a) and substitute the following:

“(a) in paragraph (d)(ii) by substituting “a vehicle that, at all stages of manufacture, is classified as a category N1 vehicle with less than 4 seats and has, at any stage of manufacture,” for “a category N1 vehicle that, at the time of manufacture, has less than 4 seats and has”, and”.

The amendment as currently proposed in section 61 has an unintended consequence that certain vehicles will attract a rate of VRT of 13.3% of the open market selling price of the vehicle, rather than the intended flat rate of €200. The vehicles in question are those which have had modifications made to them post-construction which have added weight to the vehicle, such as armoured trucks, towing vehicles, and refrigerated trucks and vans. Therefore, the amendment proposes to change the wording of the relevant section - section 132(3)(d)(ii) of the Finance Act 1992 - to allow the Revenue Commissioners to decide that such vehicles meet the relevant weight criteria at any stage of manufacturing and therefore apply the lower rate of VRT. It is a concession that concerns all of those modified refrigerated vans on the road. Under the provision as originally drafted, they would be paying the higher 13.5% rate. This gives discretion to the Revenue Commissioners to apply the €200 rate to them.

Question proposed: "That section 61, as amended, stand part of the Bill."

Amendment agreed to.

This section deals with increases in VRT. The Minister is well aware that the motor industry has suffered quite a number of shocks in recent years. It is nowhere near where it was and there have been substantial job losses in the industry. The Minister has been requested to amend the VRT and motor tax laws. Despite the fact that motor tax legislation has been amended, additional increases have been imposed. This measure should not be implemented and we are opposed to it. We need to assist the industry, but this measure will not do so. VRT is a sore issue for us in Donegal and other Border communities, where high VRT must be paid for taking a car from one part of our island to another. We are opposing this section.

I want to start with a technical question. I know the bands have been moved around but, by and large, the tables seem to be pretty much the same. If my note is correct, the estimate for the tax yield is €50 million, but where is that sum coming from? I may be wrong, but a comparison of the tables does not seem to show too many differences. Perhaps the Minister could explain where the €50 million comes from. Is it from the higher end, from the lower end, or from the moving around of certain bands?

I agree with consumption tax and with the provisions whereby more environmentally friendly cars are incentivised. There is a missed opportunity here, however, so perhaps the Minister could consider it for next year's budget. The percentages could be changed more, particularly at the lower end. The provision of really attractive tax-based incentives for highly environmentally efficient new cars is something that has been done quite successfully in the United Kingdom. This is a reasonable progression, but there is potential, with regard to super-environmentally friendly cars, to ratchet down the percentages significantly at the lower end. Maybe that could be offset by increasing them a bit more at the higher end. Will the Minister examine that matter?

I support what Deputy Doherty said. As the Minister knows, the motor industry is absolutely on its knees. This will take an extra €50 million in taxes from new car purchases.

Of course the purchase of a new car is a discretionary spend, by and large, because one could upgrade to a second-hand car. The consumer price of new cars here is vastly more expensive than in the UK, where I used to live. I do not know whether the prices have been ratcheted up by these rates and by VAT, or whether it is just price-gouging by manufacturers who are creaming off higher profits here. If the Minister knows which it is, perhaps he will let me know.

As the Minister knows, the motor industry is in real difficulty. It welcomed the change in the registration system. It remains to be seen how that will work out. I hope it will result in a more even spread of sales throughout the year. The early figures for 2013 are extremely weak. It is projected that approximately 70,000 vehicles will be sold over the course of the year. I have grave concerns about the direction in which this is going. The industry is in real difficulty. I think we will see more job losses in major dealerships over the months ahead. I ask the Minister to reconsider this matter.

I would like to raise an associated issue that relates to VRT and motor vehicles. The Minister will be aware that large families - with three, four or perhaps more children - need a certain size of car if they are to comply with the road safety regulations and the proper standards for child and baby seats, etc. It is not like the old days when everyone piled into the boot. When we are framing our motor tax and VRT policy, we need to bear in mind that the cost of buying, taxing and running a family vehicle - even if one has the money to buy a new one - is prohibitive for many people. I suggest that the current policy is very much weighed against the family.

When the legislation remodelling the car tax system was first introduced in 2008, it brought about a complete change in the operation of this country's auto industry. If Deputies will excuse the pun, it could be said that we were in a different environment at that time. Approximately 20% of the national fleet of vehicles had diesel engines in 2008, but I understand that has since increased to approximately 60% among new purchases. I will pick up on the point made by Deputy Donnelly. The real difficulty that emerged from the model that was put in place by the Government of that time relates to the fact that the most efficient cars are manufactured by significant brand leaders like Lexus, BMW, Audi and Mercedes. As a result, one can tax a top-of-the-range Lexus or Mercedes for less than one might spend on taxing a Fiesta with a petrol engine. There has to be some redressing of the issue. The problem is that whereas it costs something like €106 or €108 to tax a top-of-the-range Audi, one has to pay €300 or €400 simply because one bought a little Toyota or Ford with a petrol engine. Something has to be done to address that. My recollection of the debate on the original legislation is that it was based on an assumption that we would have a petrol fleet into the future, with a minimal adjustment to diesel, but that did not happen. I do not think the Minister of the time or anybody else foresaw what actually happened. The position flipped over completely in 2008 and 2009.

Many of the concerns expressed by the Chairman are motor tax issues rather than VRT issues. Motor tax is a matter for the Department of the Environment, Community and Local Government. The changes made by the Minister to the schedule of motor tax have helped to redress some of the Chairman's concerns. Obviously, there is still a distance to go. The significant changes made to the VRT regime in 2008 were driven by the Green Party Ministers, John Gormley and Eamon Ryan, in the Government of the time. They were generally the subject of a great deal of approval at that time. The intention of the scheme was to set very low rates of VRT, and consequently tax, on environmentally friendly vehicles. The transfer took place. I always believe tax breaks are good if one knows what are one's intended consequences. A tax break which changes either economic or social behaviour in an intended direction is a justified tax break. This is what was done. Between 80% and 85% of the fleet now comprises new-model environmentally friendly motor cars. Those who are holding out by continuing to have environmentally unfriendly cars are paying the higher rates. The tax break is no longer necessary.

I will set out the position in which the Exchequer has found itself in this context in these more stringent times. The yield from VRT and motor tax was €1.4 billion before the changes took place in 2008. That dropped to €400 million in the past three years. Now that the tax break has achieved its purpose, I have to examine the reduction from €1.4 billion to €400 million in the context of the position we are in. Obviously, some rebalancing in the opposite direction is now required. I will explain where the figure of €50 million came from. After the custom and practice changed in the way I have described, the vast bulk of cars were in the lowest band. We increased the yield by putting in more bands and thereby bringing some cars into a slightly higher band. The overall figure of €50 million was achieved by means of a general readjustment across the bands and slight changes in the rates. I cannot point to a single cause. The yield was achieved on foot of a general rebalancing. I understand what Deputies are saying. Everything I did was done after consultation with the trade. We gave an indication of the new VRT rates to the trade at the end of August so that companies would know what the rates would be when they were placing their new orders for cars. They advertised those rates in their trade magazines. There was no big surprise about it. They should not have been surprised by our intention to take more revenue from motor tax.

The companies expressed major concerns about car sales in 2013 to me and to my officials. One company had conducted a survey which indicated that people were conscious of the fact that other people are superstitious about the number 13. Its research work had shown that the sale of cars in 2013 would drop by 20%. Nobody likes to admit that they get upset when they see four magpies or a black cat, or that they do not like to walk under a ladder. Those who told the researchers they would not buy a car in 2013 explained that while they would have no problem with such a car and are not superstitious, they know there are many superstitious people out there and are worried that such people will not buy second-hand cars with "13" plates when the time comes for them to change their cars. That was what came out of the research. The trade asked us to consider providing for two registration periods each year, as is done in the UK, in order to try to remediate that. We have done that. We have got away from "13" plates by providing for "131" plates in the first half of the year and "132" plates in the second half of the year.

The trade's argument was not entirely based on the projected reduction in sales in 2013. It also pointed to the cash flow and staffing problems caused by such a high proportion of their sales taking place in the first couple of months of the year. Up to now, the companies have had to gear up with additional staff and salespersons early in the year, only to have to make them redundant as the year goes by. They try to pick them up again at the start of the following year. They argued that if there were two peaks in sales, they would be able to work with a lower number of expert staff over the 12-month period as a whole and would be able to incentivise those workers by making them permanent. We followed their advice. I do not know how the year will work out, but I have noted that a 20% year-on-year reduction in new car sales was recorded in January. Having said that, the numbers in the first three weeks of last year were extraordinary because people had pre-bought to avoid the VAT increase. Many cars were ordered between the budget of early December 2011 and Christmas of that year. They were delivered in January 2012. The point of sale was recorded as having taken place before the introduction of the 23% VAT rate. The figures began to fall away after that artificial boost.

There has been a 20% reduction in January but February is down only 8%. We will see how the year goes on and whether sales peak mid summer. I suspect people are saying they want to change their cars in 2013 but if they wait until the second half of the year the number plates will show the cars are six months newer than if they bought in the first half of the year and when exchanging them again they will get the benefit. It is difficult to project these things but I hope it will flatten out and that car sales will improve. This was done in full consultation with the trade and the measures taken were not a random idea that came into my head or the head of the Minister for the Environment, Community and Local Government. We are responding to requests made by the industry and we hope they work out.

I am aware the Minister's private secretary is about six feet off the ground outside the door as I understand the Minister has to meet Christine Lagarde shortly. Perhaps we can bring the section to an end and move on.

I wish to expand on a point raised by Deputy Michael McGrath. I have raised the issue numerous times. While I have a problem with the way in which VRT is structured we will park it, but the Minister needs to do something for family cars. I do not drive a seven-seater car but my wife does. She has to as it would be illegal for her not to do so. Whenever we have the children with us we have to use the seven-seater car because our oldest child is only seven years and our youngest child is ten months, and we have four. We have to purchase a new or a second-hand seven-seater car. Old cars are affected this year if one buys across the Border. A couple who decides to have a fourth child has to pay more for their car. If they did not have a fourth child they would purchase a five-seater car. There is an additional cost of which we need to be conscious. However it is the couple's choice to have a larger family. This is where VRT kicks in. There is also an issue in terms of motor tax as it penalises those with a seven-seater car because it is structured on CO2 emissions.

It is clear the motor industry has become environmentally efficient. Therefore, more than 80% of cars bought in Ireland fall into categories A and B. However, seven-seater cars do not fall into those categories. A new Ford Galaxy has a CO2 output of 180 g/km. This is the third highest band in VRT. If one is buying a new Ford Galaxy it will fall into the 30% range for VRT which means families are being penalised in three ways as a result of having to buy a seven-seater car. First, it costs more to buy a car of equal year, for example, a 2005 car compared to a seven-seater car; second, the rate of motor tax is higher for a seven-seater; and, third, VRT will add to the cost of purchasing the car. I ask the Minister to look at the scheme. The danger of reducing a seven-seater car to a lower band is that it might encourage people with no family to drive a seven-seater car for the crack. That issue has to be protected. For families who have no option but to buy a seven-seater car something must be done in the areas of VRT and motor tax.

We have told the motor trade that we will keep this matter under constant review. I have no problem giving a commitment to review the whole scheme all over again. I am not sure how the issue of the seven-seater family car, for families of four children or more, can be addressed because the basis of the taxation is CO2 emissions. If the CO2 emissions for a seven-seater is the equivalent of the CO2 emissions for another car that is extravagant in terms of CO2 it will have to apply across the band. I cannot figure how I would address it unless some new criteria were brought in. If the tax is purely on the basis of CO2 emissions, it is very hard to isolate the area about which the Deputy is concerned, but I will look at it.

There could be a separate table for cars with more than five seats. Will the Minister also figure out how to prevent people who do not need seven-seater cars from buying them?

Will the Deputy come up with a worked-out formula?

Will the Deputy please send it to me and we will see what we can do for the next review.

Sitting suspended at 12.25 p.m. and resumed at 3 p.m.

Question put and declared carried.
Sections 62 to 65, inclusive, agreed to.

Amendments Nos. 79 to 81, inclusive, are related and will be discussed together.

I move amendment No. 79:

In page 124, lines 37 to 47, to delete paragraph (e) and substitute the following:

“(e) in section 76(2)(a) by substituting the following for subparagraph (i):

“(i) furnish to the Collector-General —

(I) a true and correct return, prepared in accordance with regulations, of the total amount of tax which became due in that taxable period, by—

(A) the accountable person in relation to the disposal of the goods or the supply of the services, and

(B) the receiver, liquidator or other person exercising a power, in relation to any adjustment required under Chapter 2 of Part 8 or section 95(4)(c),


(II) such other particulars as may be specified in regulations,”,”.

Section 66 of the Finance Bill, as initiated, amends a number of sections of the Value-Added Tax Consolidation Act 2010 in relation to obligations of receivers and liquidators. The amendments to section 66 are necessary to ensure the legislation relating to the obligations of such persons is consistent in its application to the capital goods scheme and traditional properties acquired or developed before 1 July 2008. The amendments provide that where a receiver or other person exercising a power makes an exempt letting of a traditional property on which deductibility was claimed by the owner, the receiver or other person is liable for the adjustment.

Amendment agreed to.

I move amendment No. 80:

In page 125, paragraph (g), line 8, to delete “and”.

Amendment agreed to.

I move amendment No. 81:

In page 125, paragraph (h), line 12, to delete “section 22(3)”.” and substitute the following:

“section 22(3), and

(i) in section 95(4) by inserting the following after subparagraph (b):

“(c) Where the letting referred to in paragraph (a)(iii) is a supply to which section 28(4) applies, the receiver or person exercising the power shall calculate the deductibility adjustment in accordance with the formula set out in paragraph (b) and that amount shall be payable as if it were tax due for the taxable period in which that letting takes place.”.”.

Amendment agreed to.
Section 66, as amended, agreed to.
Section 67 agreed to.

I move amendment No. 82:

In page 125, before section 68, to insert the following new section:

68.—Section 59 of the Principal Act is amended —

(a) in subsection (1), in paragraph (d) of the definition of “qualifying activities”, by substituting “paragraph 6(1), 7(1)” for “paragraph 6, 7”,


(b) in subsection (2), by substituting the following for paragraph (j):

“(j) the tax chargeable during the period, being tax for which the accountable person is liable by virtue of section 16(1), 94(6) (a) or (7) or 95(8)(c) to (e), in respect of a supply to that person of immovable goods,”.”.

Section 68 of the Bill, as initiated, amends section 59 of the Value-Added Tax Consolidation Act 2010 which relates to deductibility. Paragraph (a) of the amendment replicates the current text of section 68 of the Finance Bill and is included for technical reasons to allow for a further amendment to section 59 of the Value-Added Tax Consolidation Act 2010. Paragraph (b) further amends section 59 of the Value-Added Tax Consolidation Act 2010 in order to correct an anomaly to provide for deductibility relating to certain property transactions. Acceptance of the amendment involves the deletion of section 68.

Amendment agreed to.
Section 68 deleted.

Amendments Nos. 83 to 92, inclusive, are related and will be discussed together.

I move amendment No. 83:

In page 126, line 39, to delete “is in possession” and substitute “takes possession”.

These are technical amendments which are required to ensure the correct application of the capital goods scheme provisions of the Value-Added Tax Consolidation Act to receivers and mortgagees in possession.

Amendment agreed to.

I move amendment No. 84:

In page 126, line 40, to delete “has been appointed” and substitute “is appointed”.

Amendment agreed to.

I move amendment No. 85:

In page 127, lines 35 and 36, after “possession” to insert the following:

“(other than where paragraph (h)* applies or on a disposal of the capital good)”.

Amendment agreed to.

I move amendment No. 86:

In page 127, line 37, after “ends” to insert “(other than where paragraph (h) applies)”.

Amendment agreed to.

I move amendment No. 87:

In page 128, lines 23 and 24, to delete “subsection (2)(b)(i) or (3)(b)(i)” and substitute “subsection (2)(b)(i), (3)(b)(i) or (4)(b)(i)”.

Amendment agreed to.

I move amendment No. 88:

In page 128, lines 34 and 35, to delete “subsection (2)(b)(i) or (3)(b)(i)” and substitute “subsection (2)(b)(i), (3)(b)(i) or (4)(b)(i)”.

Amendment agreed to.

I move amendment No. 89:

In page 128, line 41, after “balance” to insert “(if any)”.

Amendment agreed to.

I move amendment No. 90:

In page 128, lines 44 and 45, to delete “subsection (2)(b)(ii) or (3)(b)(ii)” and substitute “subsection (2)(b)(ii), (3)(b)(ii) or (4)(b)(ii)”.

Amendment agreed to.

I move amendment No. 91:

In page 129, lines 5 and 6, to delete “subsection (2)(b)(ii) or (3)(b)(ii)” and substitute “subsection (2)(b)(ii), (3)(b)(ii) or (4)(b)(ii)”.

Amendment agreed to.

I move amendment No. 92:

In page 129, line 13, to delete “balance.”.” and substitute the following:

“balance (if any).

(h) Where paragraph (c) applies and if—

(i) a mortgagee ceases to have possession and another mortgagee takes possession,

(ii) a mortgagee ceases to have possession and a receiver is appointed,

(iii) a receiver’s appointment ends and a mortgagee takes possession, or

(iv) a receiver’s appointment ends and another receiver is appointed, then, in each case, the person who ceases to have possession or whose appointment ends shall furnish a copy of the capital goods record to the mortgagee who takes possession or the receiver who is appointed and, from the start date, that mortgagee or that receiver shall be treated for the purposes of this Chapter as if that mortgagee or that receiver were the capital goods owner and shall be responsible for the obligations of the preceding mortgagee or receiver in accordance with paragraphs (c) and (d).”.”.

Amendment agreed to.
Question, "That section 69, as amended, stand part of the Bill", put and declared carried.
Section 70 agreed to.

I move amendment No. 93:

In page 129, between lines 17 and 18, to insert the following subsection:

“(2) Where, in relation to a supply of agricultural produce or an agricultural service by a flat-rate farmer, an invoice is issued, that invoice must carry a VAT number and PPS number for moneys claimed against income tax by farmers and farm businesses.”.

This amendment seeks to insert a new subsection. The section itself deals with the flat-rate to farmers and the proposed subsection (2) states: "Where, in relation to a supply of agricultural produce or an agricultural service by a flat-rate farmer, an invoice is issued, that invoice must carry a VAT number and PPS number for moneys claimed against income tax by farmers and farm businesses." The amendment is straightforward and aims to ensure that all farm invoices from all farm contracting services carry a VAT number and a PPS number for moneys claimed. The proposed measure has been advocated by the contracting and farming communities who believe that enacting such a measure would do away with black market activity in agricultural sectors of the economy. It is a positive amendment which I hope the Minister of State will accept.

I thank Deputy Doherty for his amendment. Farmers are not obliged to register for VAT vis-à-vis supplies of agricultural produce. A farmer who is not registered is known as a "flat-rate" farmer and will not have a VAT number. Under VAT legislation, the invoice or settlement voucher issued for the supply of agricultural produce or services is required to include the full name and address of the flat-rate farmer who supplied the goods or services. There is no requirement under VAT legislation to include a PPS number on any invoice or similar document issued to a customer. In general, a flat-rate farmer does not issue an invoice but instead a settlement voucher is issued by the mart or the factory. Any new rule requiring the inclusion of additional information such as a PPS number on a VAT invoice or settlement voucher would impose an additional administrative burden on these businesses.

New measures to improve compliance are always being considered and it is important that those measures are proportionate. Given the potential impact of the proposed amendment on all farmers, including those not providing agricultural services, and on the food industry, careful consideration would have to be given to any such proposal to ensure that it is proportionate to the risk it seeks to address. My understanding is that this is an issue raised by many contractors in the context of tax compliance and the prevalence of black market activities, as Deputy Doherty has pointed out. However, this would be a very strong measure to take vis-à-vis very small farmers who would be regarded as flat-rate farmers. It may be a very difficult issue for them and also, on an administrative and bureaucratic basis, difficult to put in place. There is also an issue in the longer term of how exactly all of this is to be tracked. That is my initial response to the amendment.

I am no expert in this field but we all have PPS numbers. Even my youngest son has one and he is only ten months old. Everyone has a PPS number and I am not sure how bureaucratic it would be to include a PPS number on an invoice. We must include PPS numbers on many different forms. I do not think it is an overly bureaucratic requirement. This proposal aims to tackle black market activity and I would question the assertion that it would be overly bureaucratic. I am no expert but it seems sensible to me.

I am not an expert in this field either. This comes from the view of some contractors that they are in an unfair position in comparison with smaller operators and that the inclusion of a PPS number would make a difference in this regard. However, in anything we do, we must be proportionate. No one wants to be placing an unfair burden on very small farmers. Given my background, I am no expert in this but it is an issue that we will have to consider. Whether further consideration should be given to it in the context of this Finance Bill is an open question. Any person carrying on a trade must ensure that his or her records are correct and proper so as to allow for the preparation of current returns of income. Records must be kept of all sums of money received and spent in carrying on the trade, the purpose of such receipts and expenditure and of all sales and purchase of goods and services, where the carrying on of the trade involves such sales and purchases. These records must be kept for a period of six years, in either written or electronic form.

The current position is that there is already a system in place for dealing with small operators in the farming sector. The view of the Department of Finance and the Revenue Commissioners is that this amendment would place an even greater burden on that group of people who are currently trading.

I will not push the issue but the intention of this amendment is not to put an additional burden on small farmers. Farmers, whether small, medium, or large, already have too much of a burden in terms of paperwork and administration at this point in time. However, the farming community itself believes that there is black market activity taking place which is placing those who are compliant at a disadvantage and this amendment is about trying to enhance the position of the compliant farmers and contractors. The amendment only applies to flat-rate farmers who are small farmers, in the main.

I ask that we revisit this issue at some stage in the future.

There is an argument here about compliance and we are trying to ensure a level playing pitch for everyone. We want small, medium and large operators and those in the food industry to be tax compliant. It is worth having a look at this proposal but the dilemma is that this specific amendment has come rather late in the day, notwithstanding the fact that the Deputy has put forward the arguments in favour of it. It might be an issue that we can look at if it is flagged early enough. The fact that the Deputy has raised it in the context of the Committee Stage of the Finance Bill this year gives us time to think this through in the context of what we might produce next year. If the contracting industry, which is a very significant industry, believes that this issue is central to protecting its interests, then I ask the industry to make a submission to the Department earlier next year.

Anyone in receipt of Government moneys must have a tax clearance certificate. Let us say, for instance, a grant is given to a HSE-funded organisation and that organisation then does business with another organisation. Everyone in that chain must have a tax clearance certificate, as I understand it. If a business is big enough, it would be registered for VAT because it would be claiming VAT back. If a farmer supplies a small off-farm service to his neighbours, that farmer will have a PPS number because he or she needs one to claim a single farm payment, for example. I would suggest that there is no need for the additional requirement being sought by the Deputy.

My understanding is that we are looking for some administration in this area. With an invoice or settlement request a piece of paper is provided. The agricultural community is seeking for the PPS number to be on such a piece of paper. This is to avoid transactions on the black market. It is like anything else. If one buys something from an advertisement in a newspaper or from any contractor, such a person must have a tax clearance certificate, a VAT number, or PPS number, but the invoices or settlement documents need not include any of those numbers. This amendment would compel them to include the number. It would put in place an additional lock to prevent black market activity.

My interpretation is that usually the amounts on the invoices are not significant. One could extend that argument to say that everyone going to see the dentist or doctor should have his PPS number on the receipt as well.

There may be data for us to examine next year, Doctor.

A declaration of interest may be required.

We very much welcome Deputy Twomey's contribution this afternoon.

Deputy Twomey walked himself into that.

There is a paper record at present. The Deputy is right to highlight the fact that the settlement voucher is unique to the farming industry. It is unique because most farmers do not claim back VAT on goods and services because they fall within this category for a reason. It makes it easier from their perspective because, as I understand it, the mart or factory issues the settlement voucher. Let us think about this. It is probably a fair point to make on the part of those calling for it. If the submission is made to us earlier for next year we can have a look at it.

Deputy Doherty, how stands the amendment?

I will withdraw the amendment on the basis of what the Minister of State has said.

Amendment, by leave, withdrawn.
Section 71 agreed to.
Section 72 agreed to.

I move amendment No. 94:

In page 130, subsection (1), between lines 6 and 7, to insert the following:

“(e) in paragraph 6(2) by inserting the following after clause (a):

“(aa) an investment limited partnership within the meaning of section 739J of the Taxes Consolidation Act 1997;”,”.

This amendment relates to the changes made to the tax treatment of investment limited partnerships under section 40. It is necessary in order to ensure the continuation of the existing VAT exemptions for such partnerships.

Will the Minister of State elaborate a little?

Section 40 provides for several technical amendments to restore the tax transparent nature of certain collective investment funds formed under the Investment Limited Partnerships Act 1994. The changes are made by creating a new section 739J of the Taxes Consolidation Act 1997 which provides for the tax transparency of investment limited partnerships by including them in the definition of an investment undertaking in section 739B of the Taxes Consolidation Act.

Paragraph 6(2)(a) of schedule 1 to the Value-Added Tax Consolidation Act provides for an exemption of the management of collective investment undertakings as defined under the original Taxes Consolidation Act. The definition in section 172A includes investment undertakings. Therefore, it is not necessary to amend paragraphs 6(2) of schedule 1 to make specific reference to investment limited partnerships as defined in section 739J of the Taxes Consolidation Act to ensure the continuation of the existing VAT exemptions for those partnerships.

I imagine that clarifies matters for you, Deputy.

That is as clear as mud.

The next time Deputy Boyd Barrett asks he will be aware of it. I understand it is a correcting section because these bodies lost the protection that had been in place under a previous amendment and this will restore it.

Will the Minister of State explain in layman's language why they get this VAT exemption?

They have always had it and it has been part of the VAT code.

That is not a good reason.

When section 40 went through, these bodies lost the exemption and amendment No. 94 reinstates it. It is being reinstated because it has always been in place.

It has always been there.

In effect, limited partnerships can make investments without paying VAT. Is that it?

While the Minister of State is speaking to his officials I will go back to the explanatory memorandum, which will give us some indication of what we are discussing.

The idea is that these exemptions are permitted under the VAT directive. If we did not have them we would be at a disadvantage to others.

To whom? Which others?

Other member states.

I am not trying to be difficult here. I am simply looking at this change and other changes further down where there are exemptions from tax. I feel an obligation as a member of the committee to ask questions where tax is being foregone but we do not fully understand why, given that we are in a situation in which, as we are all aware, things are rather tight.

I suppose this is a competitive industry throughout the European Union in a circumstance where VAT directives, as a body of law, apply throughout member states. The question is that if we take one action in one area potential reactions could follow in terms of the viability or competitiveness of the industry. That is a position relevant to every form of taxation policy and we must consider it. The fact is that this was in place and to remove it now would put the industry at a competitive disadvantage vis-à-vis other larger or emerging players. That is our position.

I do not want to delay too long. It would be helpful to know what it is in particular about these investment limited partnerships that requires them to get an exemption. I am not-----

The question to ask is who are the people who form the investment limited partnerships? Then we would get a good idea of why.

I suggest the Deputies examine paragraph 6(1) of Schedule 1 to the Value-Added Tax Consolidation Act 2010.

I suppose Deputy Twomey knows it off by heart.

I left it in my office.

One of the great issues of the Finance Bill on Committee Stage is that to speak authoritatively on every aspect of taxation law and the full consolidated Acts, one would need two rooms, each twice the size of this one, to have all the Acts in place.

My understanding is that all financial services are exempt from VAT. Our argument is that were we to change that position it would put that industry, with its jobs and potential for further jobs, at a competitive disadvantage. The Government has already planned to create a further 40,000 jobs in this area in the coming years or decade. That is the argument we are making. We can debate the argument but that is the net point.

We could debate that and certainly I would like to debate it.

That is why we are here.

I need to know more. I have no wish to debate in the dark.

It is important that Deputy Boyd Barrett understands all of this before he votes on these matters. I agree.

Absolutely. Does Ireland's position on these matters compare with other jurisdictions in Europe? Are financial services exempt from VAT everywhere else, in most places or in some places?

The VAT directive provides for VAT exemptions for certain financial services. It is in place throughout the European Union.

Are exemptions on VAT fairly standard throughout Europe?

I take the Minister of State at his word.

Good. I take Deputy Boyd Barrett at his word.

I seek clarification on investment limited partnerships. During the period of the so-called property boom a large number of investment limited partnerships were set up to buy office blocks, let them and take capital allowances and so on. I imagine the departmental officials will be better able to say "Aye" or "Nae" to these questions. Are these the vehicles we are talking about? Do they involve partners of professional firms who decided to build office blocks and let them to the firms?

Are separate figures compiled for tax forgone as a result of these exemptions?

I presume so. If they were never in place, it would be difficult to calculate the potential liability. I presume there is a model to assist in trying to come to some calculation of the figures.

This is the general problem in Revenue. There are many schemes which are very costly to the State in terms of tax forgone. I refer to pension schemes most particularly. However, an analysis of tax forgone is not possible because the figures are not compiled in the required manner. There is a significant lack of transparency about various tax reliefs and schemes. Frankly, it is not good enough that we do not have that detail.

I understand this is not discretionary. They are exempt from VAT. As the Deputy will be aware, when the Government put in place a thorough plan for the financial services industry for the next decade or so, a rigorous assessment was made of how the sector could grow over that period, not just in terms of where it had come from but also in terms of the position in the industry in other countries. I will obtain more information for the Deputy because it is a fair question. I presume that part of that assessment would have included this very question, that if the mix were changed, what would be the impact on the industry, which we hope will create an extra 10,000 jobs. This would have to be part of a model to be produced. I can find out whether this was done.

Does the Minister of State accept the general point that there is not sufficient information held or collected by Revenue on the cost to the State in tax forgone?

In specific areas or across the board.

These are tax expenditures and should be viewed in that light, yet the detailed figures are not available because they are not compiled in that way by Revenue.

I understand financial services, including insurance, banking and so on, are outside the VAT scheme. Who forms investment limited partnerships? What equity goes into them?

They are authorised by the Central Bank and there are three in existence.

Are they big funds?

We can get that information for the Deputy.

There are two issues. I learned about REITs yesterday and now we are learning about investment limited partnerships.

They are not new.

Clearly, the Minister of State knows all about them too because he can read his notes to explain them to me. Deputy Liam Twomey probably knows more about them.

I refer to two issues. The information offered to Deputy Peter Mathews would be interesting because we need to scrutinise these issues to know who benefits from these tax breaks. The other aspect of interest is that of financial services. The Minister of State sees this as part of a policy on financial services, an area about which there is a dispute. I am not suggesting we should have a full-blown debate here, but if it is part of the policy and a planned strategy, in respect of which there is a dispute about the merits of a low tax regime for financial services as being the best way to generate jobs or investment in the State, it would be useful to have a proper debate. If there is a plan, as the Minister of State says, let us see it. As Deputy Róisín Shortall asked, what would be the implications? Have we modelled what might happen if we were to adopt alternatives such as not giving exemptions or, most obviously, the one being debated across Europe, a financial transaction tax? The Government regularly tells us we must not touch these because investment in the International Financial Services Centre would migrate to Britain. However, there is no evidence to back this up. These are important issues for all sides in the debate and we should have evidence to back up the assertions being made. I question whether, given our low corporation tax rate, a small additional amount of taxation levied on the financial services sector would do as much damage as is sometimes claimed by the Government. I, therefore, ask it for the evidence. Perhaps the Minister of State might tell us how we could have an informed debate on the issue. Can we have sight of any paper, plan or strategy available in order that we can debate them?

The issue of a financial transaction tax has a long way to run. Under our Presidency, one of the first big decisions made by ECOFIN was to move forward on the issue. It is a very controversial one with reference to the current position of the industry here which employs 33,0000 people and is worth over €1 billion in payroll and corporation tax returns. Deputies will be aware that we would not have a difficulty if all 27 member states were to move at the same time to a harmonised tax rate. This is an aspect of tax law which is very contentious in the European Union. The dilemma is that if one member state, in this case, the United Kingdom, chooses not to do so, we are in a very vulnerable position.

The Deputy asked for evidence. Some of it is intuitive, while some is based on the stated objectives of some of the biggest firms involved. We have to be very careful. It could be argued that the financial services industry here is an offshoot of the industry in London and that changes could potentially have very dangerous effects on the 33,000 jobs provided and the underlying financial base. It is an open question. Any decision must be weighed against the potential negative impact on these jobs. Even in the worst of times in the teeth of the recession, the sector created additional jobs. During 2008 and 2009 it managed to employ additional workers in the IFSC.

This is an important issue, on which the Government has strong views, as is obvious during exchanges on it. However, big questions remain to be answered. The committee and the public would be assisted in making an objective judgment on the issues involved if they could have in front of them all of the information and evidence available. It is clear that other countries have moved ahead with a financial transaction tax-----

That is a moot point. There is a big question mark as to whether that is the case.

We are not debating the issue of a financial transaction tax.

I was not proposing to do so.

The Deputy and the Minister of State are moving in that direction.

I was simply pointing out that there were different approaches.

I will not engage in a discussion on a financial transaction tax.

Therefore, it would be helpful in dealing with such matters as tax exemptions in the Finance Bill, in order to make an informed judgment, whether it be good, bad or indifferent-----

The suggestion made by Deputies Richard Boyd Barrett, Róisín Shortall and Peter Mathews that there be more robust engagement with the Department of Finance and Revenue on the assumptions underlying our view on financial services is a very sensible one. I am confident that it can be organised for the committee.

I refer to Deputy Róisín Shortall's contribution on tax reliefs and tax forgone. There is an obligation to include in tax returns a note on the availing of one of these tax reliefs. To some degree, therefore, Revenue can gauge the amount of tax forgone. I may be mistaken, but this was provided for in a previous Finance Act.

Deputy Boyd Barrett referred to financial transactions tax, FTT.

The Deputy should not go into that matter now.

I just wish to make a quick comment. Such a tax was introduced in Sweden and many financial services companies left for London. The law was then rescinded-----

There will be a rebuttal argument in respect of what Deputy Twomey is stating and I might even be the one to provide it. We are not going to discuss FTT now.

I would like to comment.

Not on FTT.

With regard to information which might prove helpful, we could take samples across companies - in the context of their size - industries, etc., in respect of the amount of tax charged and the actual profits made. This would allow us to determine effective rates and people would know what is the position.

It is a VAT exemption.

It is actually related.

Yes, but it is an entirely different model. It is a VAT exemption, not a tax exemption.

I wish to make a comment which is not related to FTT. In the context of Deputy Twomey's other point, the relevant information is available somewhere in Revenue but the difficulty is that it is not collated. A ministerial direction is required to ensure that said information will be collected and then presented to us in order that we might make meaningful value judgments. Another area where there is a dearth of information is in respect of outstanding corporation tax. In the UK, the failure of companies to meet their commitments in that regard can be openly debated by the Public Accounts Committee of the House of Commons. None of the relevant information relating to this matter is made available in this country. It is only kept in aggregate form.

May I be of assistance?

We must return to the amendment. I am not going to open up a general discussion on taxation.

Amendment agreed to.
Section 73, as amended, agreed to.
Sections 74 and 75 agreed to.
Question proposed: "That section 76 stand part of the Bill."

With the Chair's indulgence, I wish to read into the record a clarification. I received a number of representations from the telecommunications sector in respect of section 76. The sector is concerned that the new provisions under which a charge to stamp duty will arise in circumstances where the holder of an estate or of an interest in land in the State enters into an agreement with another person under which the latter is allowed to carry out development on the land in question and 25% or more of the market value of the land is paid to the landowner could also apply to situations where a telecommunications company enters into a licensing agreement with a landowner for the purpose of, among other things, erecting, installing or maintaining on that land equipment such as masts, poles, antennae, etc. The landowner would have to receive a payment or payments amounting to 25% or more of the market value of the land concerned in order for the new provisions to apply. It is not intended that these provisions will apply to such agreements involving the telecommunications sector. The provisions contained in section 76 are anti-avoidance measures which are designed to counteract certain practices that were formerly prevalent in the construction and development sectors. I am of the view that this is an important clarification in the context of how the provisions to which I refer will apply.

Section 77 agreed to.

Question put and agreed to.

I move amendment No. 95:

In page 135, before section 78, to insert the following new section:

78.—Section 85 of the Principal Act is amended—

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

"(1A) For the purposes of subsection (2)(d) 'enhanced equipment trust certificate' means loan capital issued by a company to raise finance to acquire, develop or lease aircraft.",


(b) in subsection (2) by deleting "and" at the end of paragraph (b) and substituting "business, and" for "business." in paragraph (c) and by inserting the following after paragraph (c):

"(d) the issue, transfer or redemption of an enhanced equipment trust certificate.".".

This amendment provides for an exemption from stamp duty in respect of the issue, transfer or redemption of enhanced equipment trust certificates, EETCs. These certificates are an aviation-specific form of asset-backed security, that is, security on the aircraft as opposed to the revenue stream. The established market in EETCs exists in the US and the business relating to it in 2012 amounted to $27 billion. A full adoption of Alternative A of the Cape Town treaty or equivalent domestic legislation is necessary to ensure the requisite level of security for investors. Such adoption could enable a discount for borrowers. The Departments of Transport, Tourism and Sport and Jobs, Enterprise and Innovation are currently progressing heads to adopt conditions equivalent to Alternative A.

The adoption of provisions equivalent to Alternative A of the Cape Town treaty by Ireland could create the potential to make this country an attractive location for EETC issuance, if completed by appropriate fiscal policy measures. EETCs are primarily employed in the used aircraft sector. In view of the fact that banks only have so much capacity at present, it can be difficult for airlines to raise the level of funding required through bank debt alone. In addition, airlines are increasingly seeking to diversify funding resources. EETCs enable the financing of older assets, something which is not generally possible by means of bank debt. In the US market, the aircraft that are financed through the use of EETCs would typically be five to ten years old. To facilitate the successful issuance of EETCs in Ireland, in addition to the insolvency provisions being examined by the Departments of Jobs, Enterprise and Innovation and Transport, Tourism and Sport, an amendment to the stamp duty provisions is required in order to exempt EETCs from such duty, thereby making this form of financing more attractive to investors.

Ireland is a major global centre for aviation leasing and the host of international registry associations linked with the Cape Town Convention on International Interests in Mobile Equipment. In such circumstances, there is a significant opportunity for Ireland to leverage its existing expertise in this area to create new and cheaper sources of funding for Irish airlines and to raise the country's profile as a centre for aviation finance. This was noted in the report of the aviation business development task force, which was published on 12 November last, and has been included as an action point in the Action Plan for Jobs. The benefit to the State of what is being done in this instance could be to root our aviation industry more firmly here, enhance the country's attractiveness as an aviation hub and increase revenue streams from trading in the instruments. Additional jobs should be created, although mostly in the professional services arena.

Here we go again. We already have real estate investment trusts, REITs, investment limited partnerships, ILPs, and now we have enhanced equipment trust certificates, EETCs. The same logic runs behind all of these, namely, tax breaks for foreign capital supposedly on the grounds that the latter will bring with it jobs and investment. I am aware of the Government's view on this matter. It has been quite clearly stated on many occasions. There is no transparency around these vehicles. The note in the explanatory memorandum refers to investment limited partnerships, which we have just discussed, and states "exemptions for the transfer of foreign shares and certain financial services instruments will apply in the case of securitisation transactions". This is interesting stuff. Securitisation transactions were at the heart of the global economic collapse and we are now going to give tax breaks to the entities involved in them. I would be interested to hear the Minister of State elaborate on this matter in layman's language.

I cited the example of the aviation sector, which others have also mentioned. It was reported in some of the newspapers that a subsidiary of General Electric involved in aviation leasing, based out of Shannon, was paying less than 1% in corporate tax and declared, if I remember correctly, €600 million in profits and that if it had paid the 12.5% rate, it would have paid approximately €90 million in tax. However, instead it paid approximately €600,000 in tax. This is a problem. At the very least it is something on which we need to shine a spotlight and get an explanation. How many people did that subsidiary of General Electric involved in aviation leasing employ in Ireland? Nobody. The argument that these exemptions are bringing jobs to the country does not stack up or at least we need evidence on that. We need to dispel the allegation being made or the belief that exists, which I share, that Ireland is operating as a tax haven. I ask the Minister of State to respond to some of those questions.

Clearly, the success that we have had in recent years in attracting significant financial leasing business to this country is well known. We are a big global player in this sector. One of the key points in the action plan published by the Government some time ago was to develop this sector further. It is not so much in terms of the employment opportunities although it is indirectly because if we can obtain funds into the country that has an enormous potential in terms of pension funds in particular. The clarity that is being sought through this provision is something to give what is called "first mover advantage" in circumstances where the US already has this in place and other EU countries do not. Because we have managed to develop this over a pretty significant period of years, money can go in and out very quickly. I said previously on many occasions that this is a highly privatised, highly deleveraged economy. One of the ways in which we as a country will come back to growth is by attracting investment into this country and attracting investment in on pensions in circumstances where difficulty in this respect arose in recent years. This measure provides the potential to do that in terms of giving such certainty. It is also questionable whether it would apply anyway. We are putting it in for certainty and for avoidance of doubt in regard to this aspect of funding.

The IDA is strong on this as well. We are trying to attract funds into the State across Government, as we have in recent years, but we see this as a potential area across the jobs area. The idea that this was done with some ulterior motive or some negative connotation is fanciful. There is a huge opportunity here because of the capacity of funds to attract those funds to this country. The aviation leasing sector has been significant. We have no reason to believe that by doing this there is in any way a negative to it. On the contrary, we think this is significantly positive in terms of assurance that those funds which come into this country and are invested in the aviation leasing area can remain in this country.

If there is a company such as the one Deputy Boyd Barrett mentioned that is not making any active contribution, it is not a matter we should discuss during the passage of the Finance Bill but it is one that we should follow up. We should get more information on that company.

I seek in my contribution, and this has been stated in a number of contributions in this regard, to shine a light on these areas. There is a veil of secrecy hanging over them. I would point out to Deputy Twomey that I was not the only one who raised the issue of this company. It was covered in The Irish Times. I picked up on it in questions taken in the Dáil and put the issue to the Minister as others may have done as well. It was shocking to discover that an aircraft leasing firm that was a subsidiary of General Electric, one of the biggest companies in the world, was paying less than 1% tax here. That was written about in The Irish Times in the middle of last year.

What we are dealing with here is stamp duty exemptions for firms in this sector.

This is replacing it, I point that out for the purposes of clarity.

I know, but we are dealing with a section not just the amendment.

No, it is the amendment.

It is amendment No. 95.

I want to query the amendment and the context in which it fits in because we need to shine a light on these areas. There is another way to put this and it is not about conspiracies or agenda. What the Minister of State said could be put another way, namely, that what we are engaged in is tax piracy. Did he call it "first move"?

First move advantage.

First move advantage.

Another way to put is that it is a very competitive industry.

Another way of describing that is tax piracy. Whether we take my view or the Minister of State's view, what we need is some clarity on this. How many firms are involved? How many jobs do they create? Where is the evidence that jobs are being created? I have given one example of a company where no jobs have been created. Can the Minister tell us any more about this in order that we can make objective judgments about the value of these exemptions? If in the case of one firm we have foregone €90 million worth of tax. Just think about that - we are talking about big money here. A light needs to be shone on this area.

The issue in terms of the aviation leasing sector is one that needs to be examined and reviewed. The State has had huge success in attracting in aviation leasing business. Some 50% of all aviation leasing happens in this State. Figures show that 35 such companies operate in this State employing 1,000 people. A very small number of people are employed given that those in this business have 3,000 planes available to them at a cost or an asset value of €80 billion. When we look at the CSO figures in terms of investment, some of the detail is skewed because the benefit to the State in terms of the figures is not huge. After attracting 50% of aviation leasing business into the State, how do we maximise the benefit from it? That is the genuine and legitimate question we should be asking because this is a hugely lucrative industry. Whatever has happened in the past to entice that business to this country, and it is a mobile community who can move out of this country very easily, our job must be to maximise the potential profits for the State from this business. The figure for this sector is €80 billion and 100 jobs have been created as a result of that. Aviation leasing is not a labour intensive industry, therefore, we are not going to tie jobs to it. It is not a labour intensive issue.

It is a funds issue.

It is a funds issue. When we are talking about 3,000 planes, €80 billion worth of merchandise that has been leased out and 50% of this business being in this State, we need to focus on how we maximise its potential. A review of this industry by the Department is needed to examine how we could maximise the potential without jeopardising the funds we are currently getting from it. I ask the Minister of State to arrange for such a review and for it to be presented to this committee prior to the enactment of next year's finance Bill.

Could the Deputy repeat his last point?

I will bring in Deputy Mathews.

Could Deputy Doherty repeat his last point as I did not hear it?

There is a need for a review of this business. The State has been successful in bringing 50% of all of this leasing business to this country but there is a need for a review of it to ensure that we maximise the potential of it without losing any of the investment we currently have. I ask that such a review be carried out and presented to this committee before the enactment of next year's Finance Bill.

We have added to this sector every year in the Finance Bill. It has attracted inward investment, but I am not sure that we have got a sufficient number of benefits from the sector.

I support that request.

The previous contributions were excellent, especially those from Deputies Boyd Barrett and Doherty. The Revenue Commissioners, in their up-to-date returns from tax-paying companies and even companies that legally avoid paying tax, have the information and they could supply the so-called eyes wide open type of material about which we want to know, including the number of companies, the employment levels and so on, on a six monthly and a 12 monthly basis. We have a management reporting system-----

That was supposed to be my question.

Yes, but we should request that.

That question has been put. I call the Minister of State to respond.

To take Deputy Mathews's point first, it would be able to provide some of that information. It is a matter for the committee to determine how that dialogue between Revenue and the Department of Finance proceeds.

On Deputy Doherty's point about a review, in the first instance the review is done in the Department of Transport, Tourism and Sport, but there is an issue for the Department of Finance and Revenue in that. The issue of review is important because in terms of first mover advantage, I understand there is a market in the United States of approximately $27 billion. That has got to go somewhere and the question is, where will it go? We know for a fact that at least one, if not two, European Union countries are looking at this in terms of the potential it provides their industries. Given that, as Deputy Doherty said, we have built this up over a consistent period of years to the point where we are a major global player in the area, if we do not move and if we do not make it clear that the funds that come here are safe, at some time in the future we could be jeopardising the future development of this sector, which no one wants to see happen.

In terms of why this is important, it is because, as I understand it, in excess of 24,000 aeroplanes are on order over the course of the coming years. This is an enormous growth industry, not, as Deputy Doherty said, in terms of the jobs but in terms of the funds. The funds leverage lots of things we would all like to do in terms of public private partnerships and funds that will become available to shore up the banking sector and the like. That is why it is important there is certainty around this issue. The banks do not have the money to lend because they are broken across the European Union and internationally. They are averse to that kind of risk. Therefore, routing funds into Ireland for the purposes of this sector, which has developed in recent years, is something that will be significant as a funds industry component. However, it has never been suggested by Government or anybody else that there is an enormous number of jobs within the industry. There is the potential to leverage the funds that come into the country for the purposes of the support for the sector, and to leverage the jobs that are required as a result of investment. It is a classic funds issue. I do not see a difficulty with the review if that is what the committee believes appropriate, but that review would be in the first instance a Department of Transport, Tourism and Sport related review being fed into on our side in the Department of Finance.

I am not sure it is for the Department of Transport, Tourism and Sport. My point is whether we are getting-----

Bang for our buck.

-----bang for our buck on this. The point I made earlier is that we all pay attention to the export figures because if the country is exporting, down the line it should create jobs if businesses are going well. The aviation leasing sector makes up €6 billion of our export figures annually. I believe the question is one for the Department of Finance. The jobs in the aviation sector are low paid. It is money that is coming in. It is 3,000 commercial planes. Of the €6 billion of exports, in what way is the State benefiting from that? That is the question I would like answered. Also, how can we maximise that benefit? There is an issue for the Department of Finance.

It is a fair question to pose. There must be an honest answer to that, but it is important that in any review we do not send out a signal that in some way diminishes the funds that have been brought here. As members are aware, markets need certainty more than anything else, and once we highlight that we might take a different position on an issue, it could lead to a flight of funds in this particular area because it is sensitive to developments in other states. This area will take off, literally and metaphorically, over the course of the next number of years. A review is all well and good but it is important that we would get some hard data, and we will attempt to do that, although not in the context of sending out mixed signals to the industry. That is the point I am making.

I am glad I asked about this amendment because what is coming out is revealing. This debate needs to come out into the open. I hear frequently that we must be careful because of the markets. We have been listening to that endlessly for God knows how long, and it has not got us very far. That logic seems to be operating at every level of policy, and the economic thinking is that we must be careful because the markets might get annoyed. It says a great deal about the reason there is a veil of secrecy and no transparency around much of these tax exemptions, allowances and so on because what is behind it is the fear of Government, and the fear of the political establishment generally, that we must not annoy the markets. I am not happy with that as an approach to policy.

It is not the approach to policy.

The Minister of State just said that we have to be careful.

The Deputy has the figures. He is quoting figures. They did not fall from the sky.

Excuse me, Deputy Twomey.

They came from a report in The Irish Times-----

They are freely available.

I ask Deputy Twomey and Deputy Boyd Barrett to stop-----

He is painting a picture that-----

I do not care. Deputy Twomey, if you want to engage you must engage through the Chair.

Sorry, Chairman.

If you want to speak I ask you to indicate that to the Chair. What the Minister of State said was that the markets look for certainty. It is not about fear or acknowledgement. It is that the markets look for certainty, and that is a fact.

He also said, with respect to the Chair, that in conducting a review we must be careful about the signals we send out to the markets. That means there is a hesitation about shining a spotlight on these areas in case the markets take flight. The Minister of State was clear and explicit about that.

I believe we need a review because the one example I have cited, which is the only one of which I know, is shocking in the extreme. We are discussing the aviation sector but in this section there is also reference to the extension of stamp duty exemptions to the area of securitisation transactions. As I mentioned earlier, securitisation transactions are the reason the global economy crashed. They were at the centre of the global economic collapse, and we are now extending tax exemptions to those things. We are giving them exemptions.

A Deputy

Hear, hear.

It is referenced in this section. The explanatory memorandum states that we will "ensure that the exemptions for the transfer of foreign shares and certain financial services instruments will apply in the case of securitisation transactions".

That is a different section.

We are on section 78, amendment No. 95. We are drifting away from-----

Yes, section 78. I quoted directly from the note on section 78 in the explanatory memorandum.

I am being somewhat flexible in that I accept we are speaking to the section and to the amendment.

Can I make one point, Chairman?

I had not finished. The legitimacy of what I was saying has been questioned. It is in the note on this section. We are talking about tax exemptions to areas which are murky and over which there are large question marks given their role in the global economic crisis of which we are one of the major victims. I would like explanations from the Minister of State as to why we give tax exemptions to these areas. I would like the Government not to tread carefully around the issue of reviewing these things and putting a spotlight on them so that we can all understand fully what they are, what purpose they serve and whether they are beneficial to the State. I would also like a commitment from the Minister of State that the Government will facilitate such a debate and provide such information.

I will bring in Deputy McGrath, because many members are indicating, and then bring in the Minister of State.

It is a good debate. On the one hand, there is a formal review and on the other, information. We are speaking in the dark to a large extent. Our assessment of the information might lead to a call for a review but we do not start with a review. Could the Minister of State give an undertaking that the committee would be provided with information on the key metrics that have been raised, not just in respect of aviation leasing but the investment in limited partnerships and securitisation transactions? That might be more difficult. Could the Minister of State give us the key information we require to assess whether we want to call for a review? We are speaking in the dark by and large. Deputy Doherty read out information about aviation leasing but if we could get the official facts and figures and put it on the agenda for a committee meeting, we can then assess them.

I will bring in Deputy Shortall and then Deputy Mathews.

Does the Minister of State agree with the general principle being suggested here, namely, that it is only prudent if one applies some kind of cost-benefit analysis to any kind of tax break or exemption that is available? To say that we have always had it is not good enough. Tax breaks cost the State an awful lot of money. As the Minister of State and other Ministers constantly say, there are choices about expenditures, whether one spends on health services or schools or whether one spends on tax expenditures. There is always a calculation to be done and that analysis should obviously include the number of jobs that are created, the level of investment and the leverage that provides. We cannot have that kind of analysis unless the basic information is available to us. In this scheme as in so many other tax schemes, we do not have that basic information. That is the gap the Minister of State needs to address.

Deputy McGrath used an important word, namely, metrics. In respect of the securitisation activities of certain companies in the IFSC, I had dealings with them some years ago. There would be $5 billion balance sheets at these companies that are literally just a brass nameplate. They are in Dublin, the directors are resident in Dublin and the transactions are being done on a monthly basis by names like JP Morgan, yet we have no idea of what the fund flows are. We need to know these things and the information is there. With good design of management accounting systems, we can get the headline figures and the scale of these, including how many employees there are, what funds and currencies go through and what tax is paid. It is quite easy to get this information and then we can decide that €100 billion or €1 trillion of funds is going through this industry, we think it only fair and right that this amount would attract a 0.0003% tax. Why not? It could raise €300 million.

I ask the Minister of State to make his final response on amendment No. 95.

I thank the Deputies for this useful debate. My understanding is that one half of the world's aircraft leasing comes from Dublin, which is an extraordinary and remarkable thing for a small country. It employs 1,000 people, as Deputy Doherty noted earlier, which is a lot of people. The ambition is that we will see a major spin-off from that if the section the committee has already passed - section 30 - comes to proper fruition. Section 30, which was discussed yesterday, deals with the maintenance area and how we grow that. That is jobs rich. It is about reconditioning second-hand aircraft and making them fit for purpose again. My understanding is that of the $27 billion in this area in the US, $19 billion is in what is called the maintenance repair overhaul of aircraft industry.

The argument we are making is that in order to get the maintenance side up, which is jobs rich and which we know from the figures will be a substantial growth industry, we must be clear about EETCs. In a sense, one follows the other. If there is any doubt about that, which is the purpose of the amendment, it could well have a doubt about the potential viability we are all attempting to achieve in section 30, which the Minister set out in his speech and which is part of Government policy.

The essential point raised by Deputy McGrath is the need to have the information in a way that justifies this. We can do that and it is up to the Chairman and members how we do that. In respect of the point raised by Deputy Shortall, it is a good thing in general that we have cost-benefit analysis. It is right and prudent but it must be proportionate. I know there was a debate about this yesterday and I understand the Minister made the point I am now going to make. It is right and appropriate that we would engage in cost-benefit analysis, particularly in significant tax areas. I know we have given a commitment in respect of research and development. Given that this is a very competitive area where everyone watches what one is doing, one must use the tax code and system to see if it is possible to develop a niche industry or area of financial services. In circumstances where there is no money hanging around the place and we need to take in more money, we need to do things differently. I know this point has been made by the Minister regularly. On the supply side, we must try to do things differently because we must be ahead of where others will be.

We have a significant advantage because of the success of the leasing industry, which has been largely driven by a decision taken over a decade ago. However, we must be conscious that it can go the other way very quickly. If we see the potential on the maintenance and repair side, which is jobs rich, we need the certainty in respect of EETCs. We will provide the information, as suggested by Deputy McGrath, and I take his point, which he makes better than I do, in terms of information and review. This is sensitive because there are many people who would like to get a piece of the pie we have managed to win, which is why we must be careful and do this in a prudent and proportionate way that secures the industry into the future.

Amendment agreed to.
Question, "That section 78 stand part of the Bill", put and declared carried.
Section 79 agreed to.
Question proposed: "That section 80 stand part of the Bill."

This relates to the increase in stamp duty levy applied to health insurance policies. I know this was the subject of a two-night debate during Private Members' business over the past two evenings. I did not get to follow all of it because we were dealing with this Bill. The effect of section 80 means that the levy alone will represent €940 on the renewal subscription for a health insurance policy for a family of four. Government policy in this area is to move towards universal health insurance.

At the moment, the number of people who are foregoing or dropping health cover is approximately 6,000 per month. It seems counterintuitive if the policy is to get everybody to the point at which those who can afford to pay have their own health insurance and there is another model to fund health insurance for those who cannot. The number of people with health insurance is declining. We know people are reluctant to let their health insurance go. People have made great sacrifices to keep their health insurance up and rank it as a priority in their family budgets. The Minister is looking for intergenerational support in the health insurance system but if he keeps driving younger, healthier people out of it, the result is that the levies will continue to increase and consequently premiums will increase. The system seems to be heading towards a crash. This was debated over the last two nights in the Dáil. I want to know what the policy is. The effect of the Minister's proposal is that more people will end up dropping their health insurance, which makes the achievement of the overall Government objective much more difficult. The VHI will need hundreds of millions more euro in the relatively short term. The policy is not sustainable.

I will record the content of the note and then we can have a discussion on it. In the case of new contracts entered into and renewed from 1 January 2013 to 30 March 2013, the rate will be €95 for each insured person aged less than 18 years and €285 for each insured person aged 18 years and over. In the case of new contracts entered into and contracts renewed after 30 March 2013, the rate will be based on the level of cover as well as the age of the insured person. For each insured person aged less than 18 years, the rate for non-advanced cover will be €100. For a person aged less than 18 with advanced cover the rate is €120. For a person aged 18 years and over with non-advanced cover the rate is €290. For a person aged 18 years and over with advanced cover the rate is €350. The section also amends the due dates and accounting periods by which the levy must be paid, in effect making the due date the 21st day of the second next month after the end of the accounting period. For example, the due date for the accounting period 31 March 2013 to 30 June 2013 is 21 August 2013. This levy on health insurers is part of an overall package of risk equalisation measures to ensure the availability of affordable private health insurance.

I am aware that this was the subject matter of a debate last night and on Tuesday. I am also aware of concerns about people leaving the schemes. There is a reality around that. The key issue for the Government is the question of risk equalisation. Under the principle of community rating, which all sides of the Oireachtas support, everyone is charged the same premium for health insurance plans irrespective of age, gender, current risk and the likely future state of a person's health. Community rating means the level of risk a particular consumer poses to an insurer does not directly affect the premium paid. That is the intention behind the section. I share Deputy McGrath's concerns, as does everyone, about those who are leaving schemes. If we are committed to risk equalisation and community rating, we must implement this model.

People want to know where all of this is heading. Something will have to give eventually. The rate of increase in health insurance premium costs is unsustainable and people are not going to continue to be able to afford it, notwithstanding the sacrifices they have been prepared to make to maintain their health insurance cover. The percentage covered is still relatively high despite the declines in recent years, but I have no doubt that with the introduction of property tax and water charges next year, more and more people will end up dropping out of the system. If we are trying to get to a point at which there is health insurance for everyone, be it through direct payment by customers or through the State stepping in and providing insurance for those who cannot afford it, we are moving further away from that goal. That is the difficulty as I see it. What is the policy to try to bring down health insurance premiums? If they keep going the way they are going, health insurance will become the preserve of the rich. More and more people will end up dropping out.

What is required is that we move towards a unified health care system. The Government's intention during its period in office is to put in place supports, particularly in the primary care system, that will make a significant difference. This is really an issue for the Minister for Health, who makes the recommendations to the Minister for Finance every year to make provision in the Finance Bill. The recommendation on the charge is really a policy issue for the Minister for Health. However, I understand the difficulty we face. If we want risk equalisation and a funded system that can meet our requirements, it must be funded. I fully accept that what we have seen in recent years is an increase.

I agree with Deputy Michael McGrath. This is a ticking time bomb. Vast numbers of people are leaving private health insurance or downgrading their cover and it is not sustainable. We have come very close to a tipping point and action is required. While we all subscribe to the principle of community rating and risk equalisation, the fact is that the system will collapse unless there is a dramatic change in the model of care. To suggest that the introduction of universal health insurance will address the problem is incorrect. In Holland, when universal health insurance was introduced, costs went through the roof. There must be a cost containment policy and the model of care must be switched so that the bulk of health care is provided at primary level. The programme for Government provides for that but, unfortunately, it has not happened yet. I accept the Minister of State's point that these are serious policy matters for the Minister for Health.

A side issue in the section relates to concerns that have been expressed by the health insurance industry about potential unintended consequences of the legislation. There is an amendment to section 125(a) of the Stamp Duties Consolidation Act, subsections (10) and (11) of which provide that people can be required to pay a levy only once per calendar year. There is a concern that an unintended consequence of the legislation may be that a levy will have to be paid by a person any time he or she changes his or her cover. People are being encouraged to shop around, and to switch if it is to their benefit, but the concern is that on switching they may be required to pay a new levy. Industry representatives have been in touch with the Departments of Finance and Health, both of which have been very helpful in this regard and suggested that guidelines could issue to ensure this unintended consequence does not occur. However, it would comfort the industry if the Minister were to commit on the record to issuing those guidelines.

Deputy Shortall raises an important issue. I am aware that it has been raised at official level with the Department of Health, the Department of Finance and the Revenue Commissioners. While it is not feasible or practical to draft legislation to address every possible exceptional administrative scheme arrangement, the Revenue Commissioners intend to issue guidelines to address any such issues and will be in contact with the health insurance companies, the Department of Health and the HIA in that regard. The issue of what happens if a person changes cover in the course of the calendar year must be clarified. It is the intention of the Revenue Commissioners that guidelines will be issued; I presume this will happen relatively soon after the enactment of the Bill.

I want to sum up on that.

There is no question that insurance companies will have to pay a second levy in a calendar year or that policyholders would have to do so.

The point has been made and I accept that the Minister for Health is the one responsible for this. We all subscribe to the principle of risk equalisation but the question arises of where this is heading and how it links in with the Government's objective of universal health insurance, particularly given the failing model of The Netherlands which the Government previously held up as an example. That is not much spoken about now because the system is becoming very problematic and unpopular in Holland. The most developed example of a place where private health insurance companies dominate the provision of health care is the United States. There is a big financial issue for the State in that the US spends more than any other country in the world on health but 40% of that money is spent on administration because of the predominance of private health insurers competing among themselves and having very developed structures for billing people, essentially gouging money out of people. Where is this leading? What model are we trying to adopt when it comes to providing health care? Is private health insurance the way forward? I have major questions about it.

Specifically on the risk equalisation levy that is the subject of this section, the policy holder will have to pay only once in a year, whether for a renewal or a new policy. The distribution of that levy among the players in the industry probably-----

The insurance company pays the stamp duty.

If that is passed on to the policyholder they have to argue among themselves about where the risk equalisation music stops.

Yes with increased costs, not directly as a levy for insurance so it is for the industry.

The company pays the stamp duty to Revenue. I am not going to rehearse the arguments. These are issues for the Minister for Health to deal with. The Deputy knows the Government's position on this issue. We need to see further progress. What model we follow ultimately is an issue for the Department of Health and for the Government. In respect of this section the Minister for Finance is simply implementing a recommendation of the Minister for Health. The Revenue Commissioners collect these funds through the stamp duty as it applies.


Question put and declared carried.
Section 81 agreed to.

Amendment No. 96 has been ruled out of order because it involves a potential charge on the people.

Amendment No. 96 not moved.
Question proposed: "That section 82 stand part of the Bill."

Will the Minister of State clarify this section? The memorandum states that "The amendment applies to gifts and inheritance taken on or after 6 December 2012". In the case of an inheritance that follows a bereavement. Will the Minister of State please explain the date line of this amendment? Is the reference to "on or after 6 December 2012" a reference to a death occurring on that date or is it the date on which probate is lodged or the date of the granting of the probate? There will be people today who have suffered bereavements and are probably going through probate at the moment with one expectation of its outcome which may be a different figure.

This section amends Schedule 2 of the Capital Acquisition Tax Consolidation Act 2003. The Schedule deals with the computation of CAT. The section gives effect to the proposals announced by the Minister for Finance in the budget statement to reduce the Group A tax free threshold from €250,000 to €225,000, the Group B tax free threshold from €33,500 to €30,150 and the Group C tax free threshold from €16,750 to €15,075 and to increase the rate of CAT from 30% to 33%. The group thresholds depend on the relationship of the person making the gift or inheritance to the beneficiary of that gift or inheritance, the reduction in the group tax free threshold by 10%, together with the increase in the rate of CAT and a similar increase in the rate of CGT is necessary in order to raise additional tax revenue. The estimated yield from this measure is €30 million this year and €42 million in a full year. The amendment applies to gifts and inheritance taken on or after 6 December.

In the event of a death taking place a death certificate is issued, followed by the lodging of a probate process and then there is the date of the granting of the probate process. Inheritance and gifts can be passed on but in the case of probate there is a time line. What is the impact of the 6 December cut off on that time line?

I will check that because it is very important.

If somebody died before 6 December and probate is about to commence or is under way does this measure exempt the beneficiaries or are they included by this measure?

We are checking this. I would have thought it is at the point of the death.

There is a secondary issue, if this is retrospectively dated to 6 December if someone receives probate today he or she will not comply with the legislation because he or she would have received it under one tax code and now the code has changed which retrospectively pulls them into paying.

On a related question, why is the expected yield different this year from a full year? Will we not have a full year's yield this year?

The full year is 12 months whereas last year is effectively 11 months, presumably, if the date is 6 December.

In response to the Chairman's point I am informed that generally it is the date of death but there may be unusual circumstances. What those circumstances are it is hard to know.

A Deputy

Does it depend on the date of registering the death?

A death is a death.

A Deputy

What if somebody drowned and the body was not found?

Can I come back and clarify that later?

Could I suggest that it be clarified on Report Stage?

If there is a lacuna we will correct it on Report Stage. We will consider that again. I give an absolute assurance on that point.

To answer Deputy Shortall's question about why the estimate is €30 million in 2013 and €42 million in a full year-----

It is because the aging population is dying.

I am asking an open question.

The Minister of State is not getting any answers.

This relates to gifts or inheritance taken after 6 December 2012. Why is there a difference-----

Why is there a difference in a full year?

-----in the expected yield this year compared with a full year?

We understand it is the timing of the tax payments. One may have the liability in one year but only pay it in the following year. I think that is the answer.

In that case there will not be any yield this year. Perhaps I could have a note on it.

We will circulate a note on that issue as well.

To return to the earlier point---

The liability-----

Through the Chair, Deputy Twomey, because I am interested to hear what he has to say.

One might pay the tax next year but one will have got the money this year.

It depends on when one does one's assessment.

That is just one of the issues.

We will come back before Report Stage if there is a lacuna in the issue raised.

One of the issues is that probate cannot be discharged unless its tax affairs are in order.

That is a another lacuna.

That is a fair point. We will come back specifically on that point.

May I pose a scenario to the Minister of State? We know that households are under stress with debt. There may be a situation where otherwise a gift of, say, €225,000 is made from a parent to a son or daughter to reduce liabilities owed to a bank in a negative equity situation where the debt to the bank was €425,000. Is €225,000 the exemption level?

It is the threshold.

I will leave it at that.

This section deals with the lowering of the thresholds for capital acquisitions tax, which I welcome. The Minister of State has moved in the right direction. The alternative budget we submitted to the Department called for the lowering of them and increasing the rate which he has also done in section 82(1)(b) to 33%. In my amendment, which was ruled out of order, there was further scope to lower the thresholds for capital acquisitions tax. Deputy Mathews mentioned the pressure on people on a daily basis. We see in the markets arrears figures published today that there is an increase in the number of those who are in arrears - some 185,000 people are in mortgage distress. The number has spiralled out of control. I received a message in the past half an hour that there is an individual outside the gates of Leinster House-----

I got word of that and I would rather not bring it into the committee, please.

The fact is there are people who are willing to go to extremes to make a statement. While we do not know what is going on in people's heads, there are those who go to certain extremes to make a statement about their dissatisfaction at the way the country is run. While my amendment has been ruled out of order, there are ways in which to generate more income that can relieve the pressure on individuals in certain areas. If €225,000 is the amount which a parent can give to a son or daughter, I suggest the amount be reduced to €187,000. The reason I chose €187,000 is that the average house price in the State is €187,000, therefore it would exempt a father who was transferring a house to a son or daughter in that they would be below the threshold.

We also know that capital acquisitions tax exempts the family home if the person is living in it. We are moving in the right direction but a further move in this direction would bring in a substantial amount of money. As capital acquisitions tax is a wealth tax this is one way we should be looking for additional money. It is a windfall to somebody, it is unearned income and the thresholds are quite generous. Given the current environment and the economic situation, where schemes are being cancelled left, right and centre, whether the motorised transport grant, tax on maternity benefit or the telephone allowance for the elderly, this is an area where we can save money which does not impact on people now as it is a windfall they will get in the future. That €187,000 in category A should be exempt is quite generous. Many of the thresholds, particularly category A, were always linked to property values. In the past this threshold was very high but that reflected the high price of property. I genuinely believe thresholds A, B and C should be reduced further to bring millions of euro into the coffers to provide relief to certain other sectors.

This is a wealth tax as well as the increases in DIRT, CGT and CAT in recent years. The assessment we have to make is whether by increasing the taxes or lowering the thresholds we actually get more money. The amount referred to in the Deputy's amendment was €187,000. I am not dealing with the amendment, Chairman, but I refer to the point he made.

He is right in saying that is the average house price but, of course, the average varies hugely depending on the part of the country. We are constantly reviewing the issue. He set this out in his pre-budget submission and this was an area on which the Minister agreed with him in terms of trying to get more in this area. In 2009 the effective tax rate was 20%, then 25%, later 30% and now 33% right across property taxes. The question is always how much more we can obtain from this area in a circumstance where asking prices have not moved significantly in recent years. I want to be honest with the Deputy. We are constantly reviewing the issue and will do so again in the context of next year's budget. I am a great believer in making sure that any tax change gets more money in rather than lessens the amount. The whole objective is to get the money in. While the increases from 25% to 33% in recent years have been radical, there may be potential for further increases or, equally, in terms of lowering of the thresholds. We will keep that under constant review.

While it is fine keeping the matter under review, the problem is that in the here and now we could bring in millions of euro to the Revenue that would allow the State to do other things or lessen the burden on other measures already introduced. The capital acquisitions tax is made up of two elements, the inheritance tax and the gift tax. A person does not have a choice as to when he or she dies. They die when they die and the inheritance will pass at that stage. I am not convinced that not reducing it further will put people off from bequeathing a house or assets to their kin. While I acknowledge the Minister has moved in a certain direction and it is not the first time it has increased, in recent years it went down to a level that was crazy and should be increased to close to 33% but the thresholds should definitely be reduced.

The Minister talked about the average house price, I am not sure if the average State wide house price is €187,000 - that may be the Dublin average house price. While prices have increased marginally in Dublin, they are still falling in the rest of the State. This is not somebody getting the house, the family home, in which he or she is living. This is somebody getting a house in which he or she is not going to live. If they are living in the family home and the mother passes the family home on to the daughter, they are exempt.

This is about inheriting an additional house or second home. There are legitimate questions as to why we would exempt the full value of the house. My suggestion is to benchmark the tax at that of the average house. There are other categories in which the rate could be reduced also - for example, bequests to nephews and nieces. The rate should also be reduced in the context of subparagraph (c). If these rates were applied today, they would not be likely to cause protests outside on Kildare Street.

Do not bank on it.

At the end of the day, this concerns a benefit that somebody may get in the future. It is better to reduce these benefits. They are still being left with a massive exemption.

The Deputy is making an argument for deferral of the property tax in this regard. I do not disagree with what the Deputy is saying. There is potential for more here. I see this as a kind of widening of the tax base as well. If we are serious about the employment side, we must look at every other form of taxation to keep the 1.8 million who are working at work, and more.

Yesterday the Minister spoke here about how the asset values of properties have been severely diminished over the past number of years. We hope to see a sustainable construction and property industry in the future and presumably the amount we will take in through these taxes will increase. I understand there was a significant increase in 2002, when the rate went up by 5% and there was a reduction in the group A thresholds of approximately €40 million. That is a significant amount of money. We will look at all these tax heads in trying to construct next year's budget. I believe this is a much fairer tax increase than a tax on income.

Will the Minister clarify something for me? I note Deputy Boyd Barrett's comment about concerns in Dún Laoghaire and that he might have to change to People Before Probate. There is a cumulative threshold with regard to this tax. For example, if a person who received an inheritance ten years ago receives another one next year, the threshold travels with the inheritor throughout his life. It is not the case that every inheritance is separate; it is a cumulative threshold. Is that correct?

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

The Minister of State will notice there is a theme to my questions. The note in the explanatory memorandum says that this section amends capital acquisitions tax where there is an exemption for certain policies of assurance on the life of a person where neither the disponer, the donee nor the successor is domiciled or ordinarily resident in the State. The amendment extends the exemption from tax to policies known as capital redemption policies issued by life assurance companies where the disponer, donee or successor is both non-domiciled and non-resident in the State. We have a new creature now, in the form of the capital redemption policy, receiving a tax exemption. For some reason, this is provided where a person is non-resident. Will the Minister of State explain this?

This section exempts certain policies of assurance from CAT where neither the disponer nor the beneficiary of the policy is domiciled or ordinarily resident in the State. I understand this involves foreign life policies.

The intention of the legislation is to provide that life assurance policies are not subject to Irish CAT in the situation where neither the disponer nor the beneficiary of the policy is domiciled or ordinarily resident in Ireland, since they are normally subject to applicable taxes in the jurisdiction in which they are domiciled. Basically, it ensures they are not taxed twice on a policy. This is similar to a double taxation agreement for people with these policies.

I am against double taxation, so that is okay with me.

Question put and agreed to.
Question proposed: "That section 86 stand part of the Bill."

Our old friend, the investment limited partnership, appears here. We are providing an exemption for investment limited partnerships in cases where there is a transfer of units and where the disponer or donee is domiciled ordinarily in the State and will continue to be following the removal of investment limited partnerships from the definition of "investment undertaking". Will the Minister of State explain this? Why are investment limited partnerships getting this exemption on the transfer of units? They seem to be benefiting significantly from exemptions.

My understanding is that the CAT exemptions only apply where neither disponer nor recipient is resident or domiciled in the State. In most cases, funds hold no assets in the State. Therefore, we would have no right to apply CAT in the majority of cases. The exemption was introduced to ensure clarity. I understand the exemption already exists, but it is being put in the tax code for the sake of clarity.

On why these changes are being made to VAT, CAT and stamp duty with regard to investment limited partnerships, it should be noted that changes in the Finance Bill 2013 do not confer any new exemptions. They are simply being restated. The proposed changes in section 78, to stamp duty legislation in section 86, and in amendment No. 94 to the VAT Acts arise from section 40. Section 40 moved the reference to investment limited partnerships and section 86 is a consequential amendment arising from that. The committee has already accepted section 40.

Could the Minister explain why exactly they are getting these exemptions?

For the purpose of clarity.

Why are they getting the exemptions? The amendment is for the purpose of clarity. The Minister says the exemption existed already and this clarifies that such an exemption can continue. If I understand correctly, the exemption applies to investment limited funds where those involved are not ordinarily resident in the State.

I ask the Minister of State to explain why the investment limited partnerships get an exemption from capital acquisitions tax, CAT, because they are not resident in the State.

I am not sure if the Deputy was here for the debate on section 40. I understand a very detailed discussion took place at that point which dealt with the issue of partnerships. This is consequent on the changes made to section 40. Furthermore, in the previous section, we dealt with the question of double taxation, one of Deputy Boyd Barret's old chestnuts. The principle of ensuring that people are not taxed twice for a life assurance policy is the same as the principle applying here.

This is a double taxation issue, then, is that correct?

Yes. It follows from section 40.

I also understand that we will be receiving clarification about what exactly investment limited partnerships are.

Yes. This was discussed in detail yesterday, as I understand it.

Question put and agreed to.
Section 87 agreed to.

I move amendment No. 97:

In page 142, before section 88, to insert the following new section:

“88.—The Minister shall within 3 months from the passing of this Act prepare and lay before Dáil Éireann a report on a cost-benefit analysis of tax expenditures provided for by this Act, setting out the costs of tax foregone, and the benefits in terms of job creation or otherwise.”.

A similar amendment was moved and debated by Deputy Doherty so I am withdrawing this amendment for now. However, I wish to signal my intention to move some amendments on Report Stage. These relate to section 469 (1) of the Taxes Consolidation Act 1997 which deals with the issue of self-referral to physiotherapy services and of qualifying health expenses. I also intend to table an amendment to section 30 of the Bill before us relating to certain tax incentives for aviation facilities. I would like to signal my intention to propose some amendments on the restrictions that will be imposed on the sideways setting of unused capital allowances against other income and also on determinations of the carrying forward of certain losses which apply to capital allowances remaining unused after the end of the tax life of the building, where the investor is in receipt of rental income from the facilities or is not an active partner or active trader.

Amendment, by leave, withdrawn.


Amendments Nos. 98 to 101, inclusive, have been ruled out of order.

Sorry, which of my amendments have been ruled out of order?

Amendments Nos. 98 to 101, inclusive.

It is out of character for the Acting Chairman to be ruling people out of order.

I am guided by my officials on this.

Yes, but Deputy Mathews has the Chair. Can I challenge that ruling?

I think Deputy Mathews is doing a great job.

I am following the guidelines.

I wish to challenge the ruling. Can the Acting Chairman not overrule the previous ruling?

Amendments Nos. 98 to 101, inclusive, not moved.
Question, "That section 88 stand part of the Bill", put and declared carried.
Section 89 agreed to.

I move amendment No. 102:

In page 145, subsection (1), lines 49 and 50, to delete paragraph (x) and substitute the following:


This is a technical amendment which deletes paragraph (x) of subsection (1). Paragraph (x) was making a change to section 529 in order to insert a reference to section 960H, being the section in the Taxes Consolidation Act 1997 that deals with the offset of taxes. The paragraph is unnecessary in the context of the other changes being made to Chapter 1 of Part 18 of subsection (1) of section 90. These changes ensure that an interim refund of professional services withholding tax will, where necessary, be set against any other outstanding tax liability of the claimant before a refund is made.

Amendment agreed to.
Section 90, as amended, agreed to.
Section 91 agreed to.
Question proposed: "That section 92 stand part of the Bill."

On this section, I have a question for the Minister of State. As I understand it, this is about the amount of information that needs to be submitted on a corporation tax return - I do not know if it is in certain, or all, cases - where that information relates to a company resident outside the State but with a branch or agency here. Is this section requiring more or less information from such companies? What change is taking place here in terms of the information we are seeking?

My understanding is that we are requiring more information, which I presume the Deputy will be happy about and we are providing that the information can be submitted electronically.

Very good. I just wanted to ensure it was more and not less information.

That does not mean that it will be made public.

Question put and agreed to.
Sections 93 to 96, inclusive, agreed to.

I move amendment No. 103:

In page 153, subsection (4)(c), line 12, after “date” to insert “of the”.

This amendment relates to section 97 and addresses a drafting issue in that section. It is simply correcting a drafting error.


Question proposed: "That section 100 stand part of the Bill."

Amendment agreed to.
Section 97, as amended, agreed to.
Sections 98 and 99 agreed to.
Deputy Pearse Doherty: I welcome this section, which relates to civil partnerships but I have a question for the Minister of State. During the debate on last year's Finance Bill, we dealt with the issue of bringing the taxation code into line with the Civil Partnership Act. Why is this change being made now? How come we did not catch this last year? Why is this section, which is quite substantial, being included now?

There is a straightforward reason for this. These were overlooked last year when we made the changes to last year's Finance Bill. My understanding is that Senator Zappone raised these specific issues with the Minister for Finance, Deputy Noonan, in the course of the year and he gave an undertaking to deal with these issues at the next available opportunity. The straight answer is that they were overlooked.

In that case, anyone who has entered into a civil partnership and who has been discommoded as a result of that oversight-----

Where do they stand?

Yes. Will there be a backdating of the position?

My understanding is that the protections we are including in section 100 are backdated.

Question put and agreed to.
Sections 101 to 105, inclusive, agreed to.
Question proposed: "That Schedule 1 be Schedule 1 to the Bill."

I will be bringing forward amendments on Report Stage which I have not previously tabled and withdrawn. I reserve the right to resubmit some of them. I will be tabling amendments relating to the aviation sector and VAT.

Must we signal that now, even if we have raised questions about particular sections?

You can convert your question into a signal if you wish.

Once a member states his intention to do it-----

All my questions were signals.

I am indicating that you may bring forward amendments.

I reserve the right to table amendments on sections I have asked questions about.

If it is good for the goose, it is good for the gander.

I understood that a member must signal explicitly if he does not have an amendment tabled on Committee Stage on a given issue. Is that not the case?

I am told you should mention it explicitly and you have done that now by so raising it.

Is the Minister not exempt from that rule of having to signal?

Obviously not.

You have raised the issue, Deputy Boyd Barrett. It refers to all the areas and questions that you have discussed and raised on sections.

If that is the case, I wish to do likewise and take the same opportunity.

I am reliably informed that when the Minister, Deputy Noonan, was here he gave an assurance that he would examine some issues raised by Deputies. I am informed that he will do that and that he will inform Deputies in advance of Report Stage if he has decided to move on those. We will enter into bilateral discussions with the Deputies who have asked us to examine certain things again. There may be no necessity for Report Stage amendments if he can meet the requirements of the Deputies. That is the point and we have that latitude.

Question put and agreed to.

Amendments Nos. 104 to 106, inclusive, are related and may be discussed together by agreement.

I move amendment No. 104:

In page 170, paragraph 1, lines 17 to 20, to delete subparagraphs (f) and (g) and substitute the following:

“(f) in section 487(1)(a), in the definition of “group base tax”, by substituting “subparagraphs (IV)” for “subparagraph (IV)”

(g) in section 766A(3A)(a)(i) by substituting “this section” for “section 766A”,

(h) in section 865(1)(b) by substituting the following for clauses (I) and (II) of subparagraph (i):

“(I) all the information which the Revenue Commissioners may reasonably require to enable them determine if and to what extent a repayment of tax is due to the person for that chargeable period is contained in the statement or return, and

(II) the repayment treated as claimed, if due—

(A) would arise out of the assessment to tax, made at the time the statement or return was furnished, on foot of the statement or return, or

(B) would have arisen out of the assessment to tax, that would have been made at the time the statement or return was furnished, on foot of the statement or return if an assessment to tax had been made at that time,”,

(i) in section 917B(5) by substituting “subsection (3)” for “subsection (2)” in each place,

(j) in section 960A by substituting “Chapters 1A, 1B, 1C and 1D” for “Chapters 1B, 1C and 1D”,

(k) in section 1025(4)(d) by substituting “section 465(6)” for “section 465(5)”, and”.

Amendment agreed to.

I move amendment No. 105:

In page 171, paragraph 2, line 1, to delete “and” and substitute the following:

“(c) in section 82B by deleting paragraph (b) of subsection (3),

(d) in section 127(2) by substituting “as the case may be, for the duty, including any surcharge incurred under section 14A(3), and interest” for “as the case may be” in the second place where it occurs, and”.

Amendment agreed to.

I move amendment No. 106:

In page 172, lines 45 and 46, to delete paragraph 5 and substitute the following:

“5. (a) Subject to subparagraphs (b) and (c), paragraphs 1, 2, 3 and 4 have effect on and from the passing of this Act.

(b) Subparagraph (h) of paragraph 1 has effect on and from 1 January 2013.

(c) Subparagraphs (c) and (d) of paragraph 2 are deemed to have come into force and have taken effect as regards instruments first executed on or after 7 July 2012.”.

Amendment agreed to.
Schedule 2, as amended, agreed to.
Question proposed: "That the Title be the Title to the Bill."

Is this our last opportunity to vote?

The Chairman will ask whether it should go to the next Stage. Is that right?

No. This is the last opportunity to vote.

I thank the Minister of State, Deputy Hayes, and the Minister for Finance, Deputy Noonan, for being forthright and for agreeing to take on board and examine some of the issues about which we have had concerns. I thank the officials in particular for their work during the past two days and for the two briefings provided beforehand. While we have very different views on the Finance Bill, I will not go into it because we have had two days of debate. I thank the officials for their genuine efforts to brief us and take us through some of the more technical issues.

I thank the Minister of State, the Minister and their officials for the late evening yesterday and for all the work that has gone into the Bill. It is a pity we could not have done the same with the Finance (Local Property Tax) Bill, but we have had a proper debate on this Bill.

Likewise, I thank the Minister of State, Deputy Hayes, and the Minister, Deputy Noonan, for lively engagement on the issues. I thank the officials as well. Whatever about the debate on the content, I marvel at the capacity of the officials in the Department of Finance to deal with this stuff because there is so much of it and it is so complex. I thank them. Well done to the officials.

I wish to go on the record as well. I was watching some of the debate in my office yesterday on commercial transactions. It was a good debate and I know the Minister, Deputy Noonan, appreciates the forthright way in which members of the committee, spokespeople, the Chairman and everyone else participated on Committee Stage. It is an important part of the Finance Bill. I thank all our officials in the Department of Finance and the Revenue Commissioners for the way in which they marshalled the arguments and, at times, their Minister. That was a crucial aspect of the debate. I thank the Chairman and the secretariat for facilitating the debate as well.

I thank the members of the committee for agreeing the schedule, which we have met ahead of time. Co-operation was required to do so and in respect of how votes and other matters were managed. It allowed us to concentrate our time on the debates rather than taking time out to physically vote. That was appreciated. Given that it was my first time going through and handling this process, it was something of a learning curve for me. The learning curve was made easier for me because of the role of the clerk and the other administrative officials in laying out the schedule and because of the assistance they gave the committee, the Minister of State, Deputy Hayes, and the Minister for Finance, Deputy Noonan, in recent days. The Minister's ability to operate with little prompting from officials beggars belief at times. I do not know how he keeps all that information inside his head. On my behalf and on behalf of the committee, I express my appreciation for the way the procedures were conducted and for the assistance of officials and everyone else.

Question put and declared carried.
Bill reported with amendments.