Finance Bill 2014: Committee Stage

I welcome Deputy Brian Walsh. Deputy Walsh has been appointed in place of Deputy Simon Harris. I also welcome the Minister for Finance, Deputy Michael Noonan, and the officials who will accompany him. The purpose of this meeting is to consider the Finance Bill 2014. The Bill was referred to the select sub-committee on 6 November 2014 and the committee is required by the Dáil to report the completion of its consideration of the Bill not later than 20 November 2014. The time by which the committee must have completed its consideration of the specific groups of sections and amendments addressed to those sections is determined by the allocation of time order made by the Dáil on 18 November. This order has been circulated to members.

The order of the Dáil further provides that any divisions claimed on the proceedings of the Bill must be postponed until immediately before the time set for the relevant guillotine or, if proceedings conclude before the time for the guillotine is reached, on completion of those proceedings. The putting of any question which is contingent on a postponement division must similarly be postponed. Before we commence, I remind everyone that all mobile phones must be switched off. We will proceed according to the notice I have here.

Section 1 agreed to.
NEW SECTION

I move amendment No. 1:

In page 9, between lines 16 and 17, to insert the following:

“2. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on options available for removing the USC liability for all workers earning less than €17,543 a year from the USC net.”

Obviously there are changes in the USC in this year's Finance Bill, but the Minister will be aware that it is Sinn Féin's long-standing policy that those earning less than the minimum wage, €17,543 per annum, would be taken out of the USC tax net. We recognise that the Government has moved in this direction on two occasions, but it has not done so entirely.

This amendment asks us to prepare and lay before the Dáil a report on options available for removing USC liability from all workers earning less than that figure per year. The Minister will understand why the amendment is phrased the way it is because he had the same difficulties himself when he was an Opposition spokesperson on finance. The way we deal with the Finance Bill in 2014 is wholly inadequate, when Members of the elected Dáil cannot propose amendments to a Finance Bill, but must jump through hoops to try and lay reports and so on, instead of being able to present something, debate it and vote on it if so desired. Later on there will be a string of amendments that I have proposed on very simple things that I thought did not place a charge on the State but which have been ruled out of order. I am explaining the origins and the reason the amendment is about a report.

We would like to see this enacted in this year's Finance Bill. That is not possible coming from the Opposition, but I ask the Minister to consider this. I know he moved in this direction two years ago and again this year at the mark of around €12,000. We need to go further and take out those earning the minimum wage, but I take this opportunity to press him to accept in the spirit of true political reform the legislation Sinn Féin has proposed, that there would be a constitutional amendment that would deal with the constitutional provisions that prohibit Members of the Opposition bringing forward amendments to legislation that would place a charge on the public.

I do not propose to accept this amendment. It is clear from the wording of the proposed amendment that Deputy Doherty's intention is that those earning the minimum wage or less should be exempted from USC entirely. The Deputy should be aware that the changes proposed in the Finance Bill include a provision to extend the exemption threshold for USC from the current €10,036 to €12,012 per annum. This measure alone removes an estimated 80,000 low-income earners entirely from liability to the charge.

This is in addition to the 330,000 individuals removed from the charge as a result of the extension of the exemption limit I introduced in 2012. It is now estimated that around 650,000 or 28% of all income earners will not be liable for the universal social charge, USC, from next year. In addition to this, as a result of the reduction of the two lower rates of USC and the extension of the threshold at which the 7% USC rate becomes payable from €16,016 to €17,576, all those earning the minimum wage will see a reduction in the amount of USC they pay next year. For example, as a result of the changes introduced in budget 2015 someone earning €17,542 will see his or her weekly USC charge of €10.51 per week fall to €7.19 per week. This means this person's tax bill will be reduced by just over 20%. In fact, the new higher threshold was specifically chosen to ensure that those on the minimum wage would be exempted from the higher rates of USC. It should also be noted that an individual on the minimum wage is also exempted from paying PRSI. Increasing the USC exemption threshold to €17,542 - effectively to €17,576 for administrative reasons - would increase the entry point of the charge above the current entry point to income tax of €16,500 per annum for a single employee. This would seriously undermine the rationale for the introduction of the USC which was to broaden the tax base from its narrow, unsustainable level, with a relatively small portion of income earners responsible for a disproportionate amount of the overall income tax yield. When the Government considers options for budgetary tax packages, it must take into account all the parts of the package. Therefore, single measures cannot be contemplated in isolation.

I take the point made by the Deputy that the amendment, to require the Minister for Finance to bring a report back to the Dáil, is a drafting device to ensure the amendment is acceptable and I understand his point in general. The prohibition on moving amendments which would impose a charge on the people is founded in the Constitution where the obligation is on the Executive to bring budgetary Estimates before the Parliament and it is the function of the Parliament to dispose of those Estimates.

The Minister's last point goes to the heart of fundamental political reform and how we deal with this Finance Bill and other money Bills. We know the prohibition comes from the Constitution but I want to draw to the Minister's attention the proposal of the all-party committee on the Constitution, in its seventh report to the Dáil and the Seanad. In 2002, 12 years ago, it proposed that the Committee Stage provisions in Article 17.2 of the Constitution be removed. We talk about the budget and a proper transparent budget and all the rest but we cannot propose anything in here. This side of the House cannot do anything. No matter what, we cannot make amendments unless we go through these acrobatic-like stages where we have to do a report on this, that and the other. What I am saying to the Minister is that if there is a real, genuine desire for political reform and reform of how we deal with our budget and finance matters, the prohibition, at least on Committee Stage, on Opposition Members should be lifted - as suggested in the all-party report in 2002 - so that we could have a real battle of ideas and be able to put forward suggestions that could impose a charge on the people and on the revenue. We cannot do this, but it is within the Minister's gift to allow that to happen. It is within the Government's gift to allow that referendum to take place. I do not think such a referendum would be met with opposition from the general public. It is something to which the Minister's party, and all other parties in the House in 2002, had signed up.

On the amendment, the Minister has spoken at length on what the benefits would be for individuals. I acknowledge the Government has increased the threshold from where it was, when it entered government, at €4,000, or just over €4,000, to €10,000 and then from €10,000 up to €12,000 or thereabouts. It needs to go further. The cost of removing those on the minimum wage is in the region of approximately €138 million. This would be money directly injected into the economy. I appreciate there are people who are working part-time who would have a yearly income below €17,500. However, most of them would be low-income, low-wage, individuals. The majority of them spend all their money in the domestic economy. While there would be a cost to the State, it would be a very positive move in terms of ensuring the injection of money and the injection of consumer expenditure in the real economy. There would also be the obvious benefits of taking those who are least well of in society out of the USC tax net.

We will deal with this later on in section 13 or 14 when we deal with the special assignee relief programme, SARP. It speaks volumes of the priorities of this Government when one compares the treatment of some of the highest individual earners in this State, who are having their tax written off for a certain proportion of their income, with the unwillingness of the Minister to move that further bit for these who are earning the minimum wage.

This is one of the most welcome aspects of the budget that was introduced. It is clearly directed at the lower paid, and it makes a mockery of suggestions from the Opposition that this was a budget that favoured in some way people on higher incomes, especially given the fact that the USC contribution has increased for those earning over €100,000, effectively wiping out the decrease in the marginal rate of income tax. This is a very welcome element of the budget. I will not be supporting the amendment.

I understand the points Deputy Doherty is making. However, the Government at the start of its period in office established the constitutional forum, if that is the correct name for it, and it was vested with the responsibility of bringing forward proposals on what changes to the Constitution it thought might be appropriate. The Constitution in its totality was debated and a whole series of proposals for referenda was brought forward, but there was no recommendation on this particular issue. The Government is following the recommendations of the constitutional forum and is not proposing a referendum on this issue.

However, with the excellent chairmanship of the Chairman and the willingness of myself and my officials to be quite flexible in the approach to the debate, while a Deputy in opposition cannot bring an amendment along the lines of what the Deputy suggests, to the point of including it in the Finance Bill, there is no prohibition on proposing it and having a full debate on it and its merits. It is worth pointing out that the universal social charge, when it was introduced by my predecessor, the late Brian Lenihan, replaced two levies - the health levy and the income levy. It was not a new tax. It was a replacement for impositions that had been in place for many years.

On budget day, I outlined the budget's approach not only to the 2015 budget, but also to the 2016 budget which we hope to introduce in October 2015. I went on to say that if we are back in government after an election - we are making no assumptions about that - we will continue with a particular approach to personal taxation. The approach is that with the resources available the approach we have taken in this Finance Bill will be mirrored in next year's budget. That means we will address the low paid again, through USC. If people do not pay income tax until they get above a level of €16,500, a person can make all the income tax changes he or she likes, but he or she will not reach down to lower income people. However, it is possible to adjust their income and deliver benefits to them through the USC. The majority of the resources available to us have been dedicated to people between roughly €32,000 and €70,000.

They are the people who I would argue have borne the principal portion of the burden. Also, from an economic point of view giving benefits increases the incentive to work and enables additional people to return to work. It also fulfils another objective of the Government, namely, to make it possible for our young people abroad to return to work in Ireland and not be inhibited by very high rates of personal taxation. This is the first year of a phased programme. While we are reasonably confident that we will deliver the second phase of this programme, whether or not we can go beyond that is in the hands of the electorate.

The Deputy has chosen SARP, which we will be discussing later, as an indicator that the thrust of the budget is to reward high income people. It is not. We have deliberately put a cap on the benefits of personal taxation at a gross salary of €70,000. While people on incomes above this amount get a reduction in their USC and income tax they only get it at the same level as the person earning €70,000. As such a person earning a very high salary of €200,000 will get the same break in USC and income tax, and the same relief per week, as the person earning €70,000. It is designed to be fair and equal. I know everybody does not agree with the approach but I ask that they at least acknowledge it. If they are going to attack the budget then they should attack it in terms of the approach taken rather than some other fictional approach.

This budget was not designed to give tax breaks to the wealthy and it does not do so, rather it gives tax breaks to those people who have been defined as the coping classes and the squeezed middle. This is the first time that any Minister has decided to put a salary parameter on what is the squeezed middle. We are identifying these people as those in receipt of incomes ranging from €30,000 plus up to €70,000. That is not to suggest that everybody earning above €70,000 is extremely wealthy. Given that individualisation has been bedded in as part of our tax code the couple working, one of whom probably drops the children to the crèche or school, following which both of them head off to work on public transport, or if fortunate enough, in the same car, will have individual caps of €70,000. As Members know, these are couples who form part of the 1.9 million people now at work. They work hard all day, pay a great deal of tax, look after their children on returning from work and in the last couple of years seldom got out and had to plan their social occasions carefully. These are the people to whom, under this budget, I decided to give most of the relief, using the resources I had available. I thought this time last year that I would not have resources available. We were fortunate with how the year went in terms of tax buoyancy. As well as not having to make an additional correction of €2 billion to achieve a deficit of less than 3% we had additional resources as a result of tax increases put in place which we used to deliver some relief.

Without getting into specifics, I propose to mirror this approach next year. Benefits will again be targeted at the low paid, through USC reductions, and the squeezed middle, through USC and income tax reductions, the squeezed middle being defined as people earning up to €70,000. Those earning above €70,000 will get the same relief as those earning €70,000. I do not propose in respect of those with an additional €230,000 to introduce a 1% cut in the marginal rate, thereby providing additional relief of €2,300, which is what would happen if one rolled the relief upwards. The USC level of 11% was introduced to ensure that the 1% reduction in marginal tax rates, 41% to 40%, is negatived by an increase in USC so that the benefits are flat once one passes €70,000. As a result of the personal tax measures introduced in the budget, which are being implemented in this Finance Bill, every taxpayer paying USC or income tax, or both, will get some relief. If one does a bell curve on this, one will find that the bell curve favours those on very low income and USC and the group earning between €32,000 and €70,000. That is the thinking behind the budget. I have no problem with members attacking the budget or with rigorous debate but I ask that they do not attack it under false colours or on the basis of objectives which I do not have and did not include in the budget or Finance Bill.

I thank the Minister for his lengthy response. I appreciate his direction to the Chair that amendments that have been ruled out of order can be debated fully.

This amendment is in order.

I know but there are other amendments which cannot be debated. We need to deal with this issue.

The Deputy will be able to speak to the section.

Yes, I understand but that is not good enough. I will deal later with an amendment I tabled in regard to the double Irish arrangement which has been ruled out of order. I have written legislation on this which cannot be tabled in the Dáil for constitutional reasons. It does not make sense that in 2014 the hands of the Opposition are being held behind their backs in terms of their not being able to propose amendments for discussion. It is within the Government's gift to propose the constitutional referendum on this issue, which I do not believe would meet with hostile opposition from the public.

In regard to the Minister's suggestion that budget 2015 is not a budget for the wealthy in society, I contest that it is. I will deal with that issue as we go through the different sections of the Bill. For example, in the context of SARP it is clear that the Minister thought the cap of €500,000 was too low and that is the reason he has decided to remove it altogether. However, in terms of what is proposed in this section in respect of USC and income tax, the closer an individual is to earning €70,000 the more he or she will benefit. The Minister will argue that the more a person earns the more tax he or she will pay. While that is the approach of Fine Gael and the Labour Party, I would take a different approach and try to give the squeezed middle some benefit but as much as possible at the lowest end so that everyone benefits. The reality is that comparable to an individual on the average industrial wage or below that, people earning €100,000 or €140,000 will receive multiple benefits under this budget. I do not think that is fair.

The Minister stated earlier that those earning €100,000 have obligations and so on. I am sure some of them will be hard-pressed and perhaps over-committed. However, they are not the people who in my view are presenting to the Society of St. Vincent de Paul. Therefore, what the Minister should have done is ensure as much as possible of the resources available were used to impact on those at the lowest end and on the squeezed middle. This could have been done by way of increased tax credits and widening of the tax bands. In terms of lowering the rate, which issue I will come to later, I believe that is the measure that is least fair because it allows high earners to benefit more.

I have been fair in terms of acknowledging that the Government has been moving in the direction proposed in this amendment, as a result, hopefully, of Sinn Féin keeping the issue on the agenda. We will continue to do so. I intend to press the amendment to exempt those earning below the minimum wage from the USC.

The Minister's response does not fully take into account that there is a need for a radical reconfiguring of the tax system as a whole in order to redistribute wealth because of obscene inequalities in the distribution of income and wealth.

That is what is driving people onto the streets and making them so angry about the regressive nature of water charges. Regardless of what the Minister says or how he argues the percentages, those who cannot pay their bills and those who are on the minimum wage cannot see the fairness of the decision to give multiples of what they are being given to people who earn more than €70,000. Given that 20% of children in this country are living in poverty - that is one in five - I do not see how any Government that is making decisions about where benefits might be given back, or concessions might be given out, can say that anybody who earns more than €65,000 deserves anything back, if it is a choice between giving money to such people and giving it to people on the breadline or children in poverty. That comment does not arise out of a sort of vindictiveness against people who are earning over €65,000.

I would say that when we sit down to look at scarce resources and decide where relief should be directed, we have to start with the families of the 20% of children who are living in poverty. The first priority of any Minister for Finance in any budget should be to take budgetary measures that put enough income back into the pockets of the parents of those children to lift them out of poverty. Rather than doing that, the Minister is giving €600 or €700 to somebody who is on €65,000, €70,000, €80,000, €90,000 or €100,000. Why does anyone on more than €100,000 need to get anything back? Such people are already on very high incomes. They are not struggling. They will not have difficulty. The Minister might say they are not super-wealthy, and that is okay, but they are not struggling. They are not even on the same planet as a family that does not know whether it will have enough money to feed the kids. I think that is the point being made. It was made by the tens of thousands of people who were out on the streets. There has to be a radical shift towards addressing the despair, intolerable poverty and dire circumstances faced by tens of thousands of families. They cannot understand why any extra burden, such as the water charges, is being imposed on them. They do not understand why the Minister is not using the latitude he has - the relief that is available under the universal social charge or anything else - to help people in this group and help those who are in poverty out of poverty as an absolute first priority.

I was looking at the Credit Suisse global wealth report for 2014, which is a real eye-opener. I honestly suggest that the Minister should have a look at it, if he has not already done so. The report estimates that there are 88,000 millionaires in Ireland. Like the Central Bank, Credit Suisse has shown that over the last two years, the total net assets of households in this country increased by 13% to €508 billion. Over 20% of this is owned by the top 1% and over 40% of it is owned by the top 5%.

If one examines Credit Suisse's methodology - how it works out these estimates - one will see that it uses a few different models. To a very large extent, it extrapolates its figures on the basis of how income is distributed in each society. It can correlate from that how wealth is accumulated and distributed. Even if this report is not absolutely accurate, it is shocking if it is close to the truth. I do not understand why the Minister cannot hear the voices that are raised in the Dáil or on the streets. I refer to those who are saying we need a redistributive taxation system that prioritises people who are living in poverty. That is really the point. The system should take more tax from the top 5% or 10%, whose income and wealth levels are more than adequate to bear a significantly increased tax burden.

The first point I want to make is that the logic of the points made by the Deputy suggests he believes in a model in society where everybody gets paid more or less the same. He seems to believe that if there are variations in wages and salaries in the labour market, the function of the Government should be to equalise everybody. I do not share that viewpoint, which has been put forward before. We live in a meritocracy. I think merit should be rewarded. Different levels of salary are needed to reflect that. If there are different levels of salary, there have to be different levels of take-home pay after tax.

The second point I want to make is that the Deputy has not checked the numbers for net pay, as against gross pay. The case he is presenting is that somebody on more than €65,000 is wealthy - very well-off, if not super-wealthy - and does not really need relief. Does he know what somebody on €70,000 is paying in personal taxes between PRSI, the universal social charge and income tax?

They pay a little less than €25,000. A person whose gross pay is €70,000 has €45,000 after all personal taxes have been deducted. Such people usually live in private houses that they have bought with mortgages, which means they have to make mortgage payments on top of paying their taxes. Those referred to by the Deputy as very well off quickly come down to being the coping classes and the squeezed middle. They are the people who drive the economy and they are people who work the hardest. The ESRI research has actually shown-----

Can the Minister clarify that point? I do not think he intended to suggest that low-income workers do not work as hard as middle-income workers.

I would be pleased if I could make my reply without interruption.

I ask Deputy Doherty to let the Minister finish.

I just think it is-----

Recent ESRI research has shown that inequality in Ireland has decreased since the advent of the downturn as the Government has sought to protect the most vulnerable sectors of society from the full impact of the downturn. Core social welfare payments have not been cut at all. Personal taxes have not been increased. Personal taxes have been reduced in this budget. This is to our credit, given that inequality has increased among many of our fellow EU member states and OECD countries. An analysis of the taxation measures in this budget, based on the ESRI's tax benefit model, known as Switch, indicates that all household deciles will gain from the income tax measures announced in budget 2015.

We have very limited resources. People forget very quickly that we inherited a banjaxed economy and a banjaxed fiscal situation when we came into government in March 2011. We have made some progress. I am not saying everybody is back in a position we would like them to be in. All I am saying is that we have reached a point now where rather than taking, we are able to give something back. I am outlining my personal policy position, as endorsed by the Government, on how we target the resources we have this year and those I hope we will have next year. I am saying to the Deputy that next year, we will mirror what we did this year. The ESRI has also found that the most vulnerable sectors of society were protected from the impact of the downturn, whereas the groups of people I am talking about - the squeezed middle and the coping classes - bore the bulk of the burden and carried the weight. If we were to draw up a hierarchy of who suffered the most, it would be obvious that those who lost their jobs were hit hardest. The people who were forced into emigration involuntarily are the next cohort.

As well as the policy of targeting the squeezed middle to whom I have referred and whom I have defined in monetary terms as having wages and salaries between €32,000 and €70,000, I wanted the budget and these personal taxation measures in the budget to be an instrument of economic policy. If we do this for three years the estimate is that it will add 15,000 jobs because it will remove blockages in the labour market due to personal taxation, and 15,000 extra people will be at work at the end of a three-year cycle by approaching matters in this way. I would hope also that when the young people in Sydney or in London or in Boston look at the comparative tax taken out of their gross wages, they will not be totally put off coming back to Ireland and that they will not decide they cannot afford to come home. Even though the wages look similar, the personal tax take is too high in Dublin, Limerick or Donegal or wherever. I am trying to remove those barriers as well.

I am not asking the Deputy to agree with me but I am asking him, if he is attacking the set of policies I have outlined, to attack those policies rather than some presumption of policy which I do not pursue.

The Minister made an unfortunate comment when he addressed those earning €70,000 in that he said these are the people who work hardest. It is an implied assumption that those on low incomes whom we are addressing in our amendment are not people who work hard. It is not right for a Minister, particularly a Minister for Finance, who is targeting a financial measure at a certain cohort of workers, to suggest that workers in some categories work harder than others.

This debate should concentrate on facts. I ask the Minister to define his meaning of a core payment. The under-25s who relied on social welfare - as the Minister said the hardest hit were those who lost their jobs - had their social welfare payments cut by 50%. Was that a core payment or do social welfare core payments apply only to the over-25s? I ask the Minister to provide a definition.

The Minister said that his provisions would create 15,000 jobs. Has an analysis been undertaken and, if so, can it be provided to this committee as an evidence-based approach, or is this a back-of-the-envelope calculation? Will the Minister explain the model used to suggest that the lowering of the rate of income tax from 41% to 40% will result in those 15,000 jobs and will he explain how those calculations were made? I would appreciate that information.

The ESRI Switch model was used to come up with the figure of 15,000. This information can be accessed by the Deputy. I am sure he has accessed it already. I did not suggest in any way that low-paid workers worked less hard than middle-income people. As a matter of fact I said that I wanted to use the approach to reductions-----

The Minister said middle-income workers work hardest. If he wishes to withdraw that remark, that is fine.

I know the Sinn Féin tactic. Do not try to put-----

I know the Michael Noonan tactic.

Do not try to put words in my mouth.

I am repeating the words used by the Minister.

The Deputy has made an allegation and he should let me reply.

No, the Minister made the allegation. He should not lay the charge on me. He made the comment that these are the workers who work hardest.

Please allow the Minister to reply.

If he wants to withdraw the remark, that is fine and that is why I offered him the opportunity the first time.

Deputy Doherty made an allegation about my frame of mind and about my attitude to workers.

No. You made the allegation, you made the comment before the committee. We can look at the record of the committee.

Please allow the Minister to reply first and the Deputy will have his opportunity. I am trying to be as fair as possible.

I know that when the Deputy cannot win the argument, he fights the man. It is called argumentum ad hominem.

No, it is not. I am dealing with facts.

Play the ball, not the man.

The Minister wants to resort to the old act. This is the finance committee and he has made a serious suggestion about this cohort of workers who work hardest in society-----

The Deputy will not allow me to reply to the suggestion he is making.

I will give the Minister two opportunities.

The Deputy is not giving the Minister an opportunity to answer the question in full.

He is shouting me down.

Carry on. He is making a charge.

I am not making any charge at the Deputy.

The Deputy will have his opportunity to respond.

If the Deputy will let me speak, he might calm down. I know he has had a bad month but we have all had difficult times in politics.

What does the Minister mean by my bad month? I do not understand where the Minister is coming from. If the Minister wants to get personal that is fair enough. This is about deflection. The Minister can make it very obvious. As I said at the very start, I believe it was an unfortunate use - this was my first comment - when he suggested that this cohort of workers was the hardest working in society. I actually volunteered that I believed it was an unintentional remark and an unfortunate use of words. The Minister did not take that opportunity and then he tells me that I have had a bad month, I am making allegations and trying to make a diversion. I just want the Minister to clarify that this is not the case, that it is not Government policy to believe that those earning €70,000 are the hardest working workers in society. It is as simple as that.

Deputy Doherty should allow the Minister to respond and the Deputy will be given his opportunity to reply through the Chair.

At the start of my explanation of the general policy approach of the Government to personal taxation, I spoke about relieving USC payments on low-paid workers. I said this was a defective policy instrument whereas income tax was not, because people earning below €16,500 pay no income tax so I cannot give them tax relief through reducing income tax. People marginally above or even a couple of thousand above €16,500 pay little enough income tax and as a result I cannot give them relief in that way. I said also that I was using the personal taxation system as a policy instrument. Of course I am using the cuts in the USC as a labour policy instrument. Of all the people who go out to work in the morning, whether they are highly paid or low paid, most of them work very hard. Whether one works harder than the other does not depend on the salaries they earn. If the Deputy took an interpretation out of what I said, I am sorry that my words were loose and that he was able to take that interpretation. However, the Deputy knows quite well that it is neither my attitude nor my intention because he has been listening to me for three or four years. He knows that is not my position, no more than I would ascribe it to him. He should not try to misinterpret what I say so that he can make a cheap soundbite to put me on the wrong foot. He should argue the merits of the policies I am implementing and play the ball, not the man. I have set out what I would do with personal taxes, this year, next year and, if we are back, the year after. I ask the Deputy to set out his position.

The record will reflect what we say. I mentioned that I believe the Minister used an unfortunate phrase when he suggested that the cohort of individuals earning €70,000 were the hardest working in society and I asked him to clarify that remark. That is as far as it went.

If I said that, I did not mean to. Is that all right?

That would have dealt with it.

You would not let me in.

I did let you in and you responded at length but you avoided that issue. When I raised it again, because you refused to answer it, that is when I was making accusations and so on and playing the man, not the ball and all the rest. The reason this is fundamental is because of Government priorities. The Minister has explained why he has decided to focus on those in the cohort earning up to €70,000, as opposed to providing more benefits for those who are the least well-off in society.

I am doing that as well.

With respect and through the Chair, as my amendment suggests, we take those earning the minimum wage out of the USC tax net. That is why the Minister's suggestion, which he has now clarified, that those earning €70,000 work hardest, is relevant to this debate and is relevant to the facts. The Minister has clarified it and we have wasted 15 minutes when he could have provided the clarification originally. Now we can move on to the next section.

The Deputy already stated in his very polite proposal of his amendment that he acknowledges the fact that I had taken very many people paying USC out of USC completely this year - a total of 80,000 people and more than 300,000 in 2012. The Deputy expressed the wish that we might make further progress.

Of course I did.

I have already said that we will mirror this approach next year and, if possible, the year after. I think we are nearly in the same place.

Of course I did. That is what is called playing the ball, not the man. I have continually referred to the facts. I am willing to move on.

This is the Finance Bill and we should stick to it in order that we can get past section 2 after the first hour.

Amendment, by leave, withdrawn.
SECTION 2

Amendments Nos. 2 and 3 may be discussed together, by agreement.

I move amendment No. 2:

In page 10, line 7, to delete "and".

These are technical amendments to section 2 and deal with the universal social charge. The amendments act to correct references in section 531AS of the Taxes Consolidation Act as a consequence of the changes to the rates of USC that will come into effect from 1 January 2015.

Amendment agreed to.

I move amendment No. 3:

In page 11, between lines 10 and 11, to insert the following:

"and

(d) in section 531AS(1A)--

(i) in paragraph (b) by substituting "column (2) of Part 1 or column (2) of Part 2" for "column (2) or (3)", and

(ii) in paragraph (c) by substituting "column (2) of Part 1 or column (2) of Part 2" for "column (2) or (3)".".

Amendment agreed to.
Question proposed: "That section 2, as amended, stand part of the Bill."

I wish to make a few points about section 2. We will come to the income tax side - the band and the rate reduction - in a moment, but section 2 relates to the USC. Given the way in which this budget was approached and the lack of information that we had as an Opposition party, no one could have foreseen that the Government would have had the resources to introduce a €642 million full-year cost income tax package. Right up to the eve of the budget, the narrative from the Government was that, instead of making an adjustment of €2 billion, we were looking at a broadly neutral budget to achieve a deficit of less than 3%. We prepared our proposals in that context. Instead of a broadly neutral budget, though, the Government spent an additional €1 billion. It was a negative adjustment of €1 billion. We need to address this point because countless parliamentary questions, correspondence with the Department and efforts to establish the State's true fiscal position ahead of budget 2015 were unsuccessful. We received answers that were essentially evasive and we were refused that information. This undermines efforts to achieve an objective to which I hope we all subscribe, that being, to hold a proper debate in advance of and not just after a budget.

That said, I stand by my position, which I advocated on behalf of the party, that 2015 was not the year to start a round of income tax cuts, as we will still borrow €5 billion next year to balance the books, adding to the general government deficit. As we all know, borrowed money must be repaid with interest. The attack on services in recent years due to budgetary cuts has been savage. The impact on access to critical services - the fair deal scheme among others, disability services and services for people across the country who are homeless tonight - could have been addressed to some extent.

When we reach section 3, I will discuss the overall shape of the package and the way in which it was calibrated. I acknowledge that the burden of income tax in Ireland is high. It increased dramatically in recent years and unquestionably needs to be reduced as resources allow, but I stand by my point that, at a time when we are borrowing €5 billion that must be repaid with interest, vital services have been cut to the bone and we are dealing with these issues in our constituency offices every day, this was not the right time to do so.

I make these points in the context of Members having to prepare their own approaches on the basis of a neutral budget achieving a deficit of less than 3%. Instead, the Government went €1 billion the other way, which no one saw coming because there was no evidence that the scope to do so existed. Regardless of who is sitting on the Minister's side or my side of this committee room, we will have to get this process right. If pre-budget submissions are to be meaningful and form the basis of a proper debate, we must at least be working off the same numbers.

The numbers keep changing. This year was a different type of year. Tax flows began to exceed profile by modest amounts in the first half of the year, but in August there was a big jump in tax receipts. They exceeded profile by approximately €400 million. I signalled that to the Deputy several times. When he was assuming that we were going to have a big correction, I gave him information as I had it. I told him via parliamentary questions in the House that, first, we would not be adjusting by €2 billion and that-----

-----it would be less. As we came closer and the figures became clearer, I said that the adjustment would not be much more than €500 million or €600 million. I put that on the record across the floor from the Deputy. In our very last intervention, either in committee or in the House, I went on to say that we would do better than a neutral budget, being €50 million or €100 million above the line.

I will explain to the Deputy in a minute why the figures came so late. The last cut at the budget giving new information was the White Paper on the Friday night before Tuesday's budget. The White Paper pointed out that the deficit, on a no policy change basis, would be 2.7%.

I think it was 2.4%.

The Deputy should have known that, with a deficit of 2.4% and every decimal point representing approximately €200 million, we were down €1 billion more than we expected. He is asking me why I did not announce that in advance. First, I did not have an accurate estimate of what growth might be. We were nervous to insert high growth figures. They were checked, checked and checked again. Eventually, we built a budget based on 4.7%. Had I told the Deputy in June or July that the economy would grow by 4.7% in 2014, though, he would not have believed me. That is the base for the following year.

The Minister did not know it would be 4.7% at that stage?

When we received the September Exchequer returns on the night of the last day of that month, we saw that, while there had not been a jump similar to August's figures, the levels were being sustained. More than €900 million extra had been collected in tax in 2014 by that point. That trend is continuing, thankfully.

There was significant non-tax revenue notified to me at the very end by the National Treasury Management Agency, NTMA, and the Central Bank. The latter applied a condition to some of its extra profits, namely, capital gains tax, and we were not able to use them for budgetary measures. We simply took them off the debt. There were moving parts right to the end.

If the suggestion is that the Deputy was deliberately misled or was provided with ambiguous answers, I gave him the information I had. Any Opposition spokesperson would have combed the White Paper on the Friday night before the budget.

All of the submissions had been made by that stage. It was too late. Fair enough, the White Paper was published before the budget, but that was after every submission had been made. The Minister knows that.

I did not arrange the timing of the Deputy's pre-budget submission. It is a recent arrangement that Opposition parties bring out alternative budgets. It was not done for most of the years in the Dáil simply because the Opposition parties did not have the up-to-date information, but neither did the Minister. People waited to design their budgetary approaches, which were delivered in their replies to the budget, once they had the White Paper. The White Paper gave them accurate information, they were able to draft rough cuts of their speeches and they received the accurate information on budget day.

There was no attempt to mislead. I want to assure the Deputy of that. I gave him as much information as I had and over which I could stand. I brought the information along in various steps as soon as I got it.

Through the Chair, I did not accuse the Minister or anyone of misleading me. I am just laying out the facts.

Just in case the Deputy thought I was-----

I have a letter dated 2 October, some 12 days before the budget.

The Secretary General of the Minister's Department. It was in response to specific questions that I asked.

I do not see those. When the Deputy asks for things to be costed, they never cross my desk. I do not know his questions or his answers.

It was not in response to a costing request. It was in response to a question on what the basis of the budget was and what would have been required to achieve a deficit of less than 3%. Having noted that there were many moving parts, the Minister's response is on record as "... a deficit of less than 3% of GDP can be achieved with a broadly neutral budget."

He said that on 2 October. There was never a suggestion that a negative adjustment of up to €1 billion would see us coming in at 2.7%. That is all I am saying. It is hard to believe that within 12 days the whole thing moved.

The Secretary General keeps a confidential arrangement pertaining to any contact or correspondence between him and members of the Opposition, especially finance spokespersons. I would not have seen Deputy McGrath's letter coming in or his letter going out.

I assume it was not deliberate, but the Minister is missing the point I am making. This was not in response to me asking for costings of various proposals. This was similar to the response we received to parliamentary questions we submitted, that when we were seeking to establish----

The date of 2 October was a long way before the budget.

The Deputy does not know how rapidly things move in those last days coming up to the budget.

It did not swing that much.

I will pick up on Deputy McGrath's point. The Minister has given us a timeline, and the information that was available at the end was not available in June or July. We appreciate that; it is not the issue. Seven days before the budget was announced, Deputy McGrath and I had to use our priority questions on the floor of the Dáil to try to elicit some information. The Minister said we were not to hold him to it, but that it would be a broadly neutral budget with a scope of about €50 million to €100 million. That was seven days before the budget was announced. Three days later, at midnight on Friday, the White Paper came out showing that there was scope to hit the 3% target with about €1.1 billion. I find it very difficult to believe that the Minister for Finance was not aware this type of scope existed. Was it just a pleasant surprise at midnight on Friday? I do not believe it.

When I look at what was in the newspapers in the weeks leading up this, and this is based on leaks so we will just take the information for what it is, it was very clear that the Minister for Public Expenditure and Reform, Deputy Howlin, was suggesting that there would be scope of €400 million, which ended up being roughly what was in the budget. The rest was taxation measures. The point is that it is very difficult when both Opposition finance spokespersons are looking for information, and within 72 hours, the information comes out and it is completely different from what was suggested on the floor of the Dáil, all within seven days of the budget being announced. That is really difficult. We cannot wind back the clock but we need to come up with a better, more fit-for-purpose system of trying provide information to the Opposition. There seems to be a culture of not letting anybody know and of having the big bang on budget day, as it were, like in the past when the Minister for Finance would give his speech and not even the Cabinet would know what he was going to announce. We are not in those days any more but it is very much clouded in secrecy. We simply could not get the information that was required.

I know it is going to be hard to convince Deputy Doherty, but at the end things changed very rapidly. People keep going through the figures, and I am at the receiving end of a set of figures. Every time growth rates are marked up, it changes the tax base for next year significantly. When I was talking to the Deputy whenever we had questions after the Dáil came back at the end of September, I thought we would have growth rates of 3.5% or something like that. That changes the base. Additional moneys came in from both the Central Bank and the National Treasury Management Agency. When the Minster for Public Expenditure and Reform, Deputy Howlin, was talking about €400 million, I understood him to be talking about €400 million on the wrong side of the line, which would have to be raised by taxes. We did raise taxation. We were fortunate in one thing. We were notified by the European Union that it had changed the tax application of services that originate in one country and are delivered in another country, for example, television signals. We were informed that whereas in the case of television signals from the UK to Ireland the VAT would continue to be deducted and go to the UK exchequer until 2015, it would come to the Irish Exchequer in 2015. There was more than €100 million in that. The yield will be €100 million in 2015 and €150 million in a full year from 2019. We also put 40 cent on a packet of cigarettes. There were tax increases as well as buoyancy of taxation.

Deputies Doherty and McGrath have a complaint which may or may not be legitimate. While I will see whether they can get a better flow of information next year, I can assure them that there was no conscious attempt to mislead them. In his pre-budget submission, Deputy Doherty had anticipated where the movement was more than Deputy McGrath did in his. That is not a criticism of Deputy McGrath. Deputy Doherty was basing it on-----

I was deliberately cautious.

He was cautious too, just in a different direction. He anticipated the thing moving rapidly and moved to allow for it in his submission. It will be more settled next year, I hope, unless we again have growth rates well ahead of what I expect and what is predicted.

I have one final question on the 8% rate of USC that counters the reduction from 41% to 40% on incomes over €70,000. I have the figures for the yield of introducing the 8% figure, but what is the comparison cost to the Exchequer of reducing income tax on incomes above €70,000 from 41% to 40%? I am looking for that figure because the 8% rate will bring in €71 million in a full year. Does that €71 million match euro for euro or is it above or below?

I can get the exact figures, but it actually works the other way around. USC is on a broader base than income tax so a 1% increase in USC brings in more money than a 1% reduction in income tax. That is because the tax breaks that are availed of by some high-income earners are not subject to income tax, but USC applies to them.

That is my point - what is the gap? We are talking about €71 million. I know the Minister may not have the figures there.

I do not have the figure, but I will get it to the Deputy. There is a bigger take than the relief. We cannot apply a ready reckoner to it because it is only a bigger take if individuals are availing of particular tax breaks. It would be in the individual tax break and the individual comparisons of that.

Question put and agreed to.
NEW SECTIONS

I move amendment No. 4:

In page 11, between lines 12 and 13, to insert the following:

“3. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on options on introducing a third rate of tax payable at 48 per cent on income over €100,000.”

This wording looks at the impact of a third rate of tax. We have been calling on the Minister to introduce a third rate of tax for a long time and now we have one anyway, given how we are dealing with the USC. Some people will be paying 52% and some people will be paying 51% marginal rates of tax, and then we have the self-employed as well. This proposal seeks to make the tax rate more progressive with a third rate of tax of 48% on incomes above €100,000. It is an issue that I have debated many times at this committee and I am not going to go over old ground again. I wish to put it down as a marker as I believe it is something we should be looking at. We see what is happening in society. The issue of homelessness was raised in the Dáil today and there are high levels of poverty and people in great need in society. It all has to be paid for somehow. There is only so much extra that can be put on a packet of cigarettes or a litre of diesel. For those who have the most, if they see their money spent wisely and prudently, I do not think a measure like this would be overly onerous on them.

The proposal is for a third rate of tax at 48% and that is eight percentage points above the 40% rate which is going to be the top rate from 1 January next after the Finance Bill is passed.

The economic effect is on the marginal rate of tax. Before the budget, the marginal rate was 52%, which includes universal social charge, USC, and PRSI, pay related social insurance. This would take the marginal rate of tax up to 60% for those people, a significant jump.

Such a move would also have labour market effects. If 60 cent were taken off every additional euro one earns above a certain level, literature on this question suggests it would reduce incentives. It certainly reduces the incentive to come home for those who have emigrated. The entry point in the Irish tax system is low. Before the budget, it was €32,000. Paying 60 cent on additional earnings over €100,000 would be a big imposition on a PAYE worker on such a gross salary. For someone earning the same amount in London who gets a job offer in Dublin, such a measure - essentially taking 60% once one goes above a relatively low income threshold - almost eliminates an incentive to come home.

As the debate on corporation tax develops and it becomes clear changes in the regime will take place, the level of personal taxes in a country will become an influencing factor for those who control the flow of foreign direct investment when they are deciding where to locate industry. Corporations do not make these decisions; it is people who make them. For example, last week there was an announcement by the Taoiseach of an investment of €1 billion by a multinational in a new plant in west Dublin. Would those plant managers who will be coming into Ireland ignore the fact they might have to pay 60% of their income because of such a measure?

Take the case of the self-employed. What would happen if one put an additional 8% on their tax rate of 55%? Again, this would be a disincentive to entrepreneurial people to found their own businesses. We live in a society where income and profit are drivers of activity. Why would anyone set up their own company unless there is a personal benefit of a good income from it? I accept there are other considerations in setting up one's own company but the bottom line is personal income.

One could argue this amendment has the capacity to make the income tax system more progressive. Ireland already has the most progressive income tax system of all the EU members of the OECD being at the top of the league table of the EU’s 28 member states. This proposal sticks another 8% on to the tax rate. Apart from the imposition on those with salaries who would be affected by this amendment, the economic case against it is very strong. It would be bad economic policy and would reduce rather than create jobs.

Underlying what the Minister said and what we on the left claim is a philosophical difference of opinion translated into tax policy. I would go further than Deputy Doherty’s proposal. In our budget submission, we proposed four bands on salaries over €100,000, the first on incomes between €100,000 and €120,000, the second, €120,000 to €140,000, the third, €140,000 to €160,000 and the fourth, all earnings over €160,000. In replies to parliamentary questions on this proposal, the Department of Finance claimed such a measure would raise €920 million. That would just about pay for taking people earning up to the average industrial wage out of the USC completely and reduce it for those earning between €35,000 and €70,000. It would be a serious redistributive measure.

What tax rate would apply to those four bands?

We proposed 45%, 50%, 55% and 60% respectively. The Minister claims this removes incentives and would discourage talented or educated emigrants from coming home. I do not accept this argument. Much of the time when the Minister answers questions on these rates, he talks about a marginal rate of 50% or more. It would be more honest to conduct the argument if we talked about the proportion of people’s income paid in tax. Those on €100,000 and over are paying somewhere between 29% and 33% in tax. That is according to the tables the Department has supplied me.

That would be the income tax.

It also includes USC and PRSI.

This is the point-----

Just let me finish my point.

No, this will help the Deputy. Someone on a salary of €100,000 is paying just under €40,000 in personal taxes. That consists of income tax, USC and PRSI. These are not fabulously wealthy people. Their net take-home pay is €60,000. If one piles on another 11% through the marginal tax rate, one can see where it will lead. One needs to work off net figures to see the impact.

I still do not accept those people over €100,000 are struggling.

I do not think they are struggling either. Neither do I think they are very wealthy, however.

I did not say they are very wealthy. However, when one gets up to €200,000, we are talking about very wealthy. I am not saying anyone over €100,000 is superwealthy but they are not struggling. Those earning the average industrial wage or below it, which comprises the majority of workers, are really struggling, however.

Set against that, if one shifts the tax burden from those earning over €100,000 to provide significant relief for those earning below that figure, can the Minister imagine the incentives for those on low and middle incomes? We never talk about that. The argument seems to be that the people over €100,000 must have all these incentives, otherwise they will not come back to the country or work. What incentive does someone on the minimum wage have? Where is the incentive for someone sweeping the road? Where is the incentive for the student nurse? The argument about incentives never seems to apply to the low-paid workers, those who are struggling. Instead, they must be there for high-paid earners.

The Minister said many of our graduates have emigrated and will not come back because of tax rates here. That is not true.

The biggest reason they are not coming back is because they cannot afford a house because we have made an absolute mess of housing policy, rather than it being about marginal rates of tax or income tax.

Amendment put and declared lost.

I move amendment No. 5:

In page 11, between lines 12 and 13, to insert the following:

"3. The Minister shall, within 3 months of the passing of this Act, prepare and lay before Dáil Éireann an analysis of the tax changes in this Act, and the total of tax changes and spending adjustments of Budget 2015, setting out the continuing impact on people based on their gender, income, age, marital and disability status.".

There is a theme here with regard to equality budgeting, better access to information and empowering the Opposition to do our job better by being able to table financial amendments which would incur a charge on the State and Revenue. This goes to the core of equality budgeting, which is an issue we have raised time and again. We have heard the answer, that the Minister's colleague is responsible for some of it, but this should be done. If there is a genuine spirit of political reform then equality budgeting should be introduced. Analysis should be done prior to the budget being introduced. However, given the fact that the Minister has told us it is only on midnight on the Friday before the budget that he finds out has €1 billion and he must come up with ways to spend it within 48, 52 or 62 hours, I am not sure whether he would have the scope to do equality budgeting within this timeframe. There is a need for independent analysis of how the budget impacts on various cohorts of people and how the changes in taxes and spending adjustments in the budget impact on people with regard to gender, income, age, marital status and disability status. This basket of indicators can be expanded.

We introduced legislation calling for equality budgeting, which was debated in the Dáil last year but the Government voted against it. It did so because it has consistently failed to undertake independent impact assessments of its budgets in terms of the distributional impact on people's income or the impact on groups of people in society who are already disadvantaged. Earlier, the Minister stated we should deal with the facts. Let us do so. Let us have an assessment of how the budget impacts on various people and not just rely on partial reports from the ESRI, which we all use at different times to inform the debate. Let us have proper analysis and impact assessments on various sections of society with regard to how the finance Bill and the budget in its entirety impact on various groups of people in society.

Deputy Doherty has made the case very well. In recent years, although not so much this year given the nature of the fiscal position going into the budget, very often the sting in the tail of the budget was in the detailed measures announced by line Ministers on the expenditure side on budget day or in the days after the budget. A budget must be assessed in the round and in totality so it is not just an issue for the Department of Finance. The Department of Public Expenditure and Reform must be centrally involved in this so we can have proper assessment of the impact of the budget in its entirety on various sections of society. It would allow proper debate on the type of choices we have the country. It would allow for a better debate on future budgets. I strongly endorse the amendment.

I thank the Deputies for the amendment. A substantial amount of analysis covering some of the groups the Deputies have outlined has already been published by the Department of Finance, or is due to be published in the coming months by Departments and other stakeholders. A very detailed distributional analysis was published by the Department of Finance in sections B.1 to B.26 of this year's budget. This analysis sets out the distributional impact of certain tax and welfare measures over a range of 13 income levels across six family types. The distributional analysis is complemented with a number of illustrative hypothetical case study families.

The Department of Social Protection will also publish a social impact assessment of budget 2015 using the ESRI's SWITCH model. It is expected this will be published in early 2015. It will be informed by current consideration by the Government of additional measures on the introduction of charging for water services. This social impact assessment will examine the effect of the budget across family types, income groups and economic status. It will also report on poverty indicators.

Current models available to the Government do not permit analysis of gender, marital status or disability. However, the Deputy may be aware that research by the ESRI indicates the budgets over the years from 2009 to 2013 did not have a significant differential impact on people based on gender. This reflects the fact that the tax and social welfare system does not discriminate based on gender. Further versions of the SWITCH model may include gender-based analysis. However, I am confident the reductions in income tax and increases in child benefit would not have a material impact on gender outcomes. It is not currently analytically possible in SWITCH to assist the impact of budgets on groups of people based on their marital or disability status. On the basis the analysis proposed in the amendment is already published or due to be published, and given the infeasibility of aspects of the amendment I do not intend to include it in the Finance Bill 2014.

I was thinking about the non-statutory and then statutory role of the Irish Fiscal Advisory Council. Under its mandate, it provides very comprehensive detailed analysis. This mandate is very simple, and primarily comes from the treaty and ensuring we meet the deficit and debt rules and the other rules contained in the austerity treaty at the time. We have empowered a body to do this, which is good, and I like independent voices to come forward with analysis.

Just as important to ensure we hit the European targets laid on the State is to have analysis on how the measures introduced by the Government or any future government impact on various groups of people. We do not have a comprehensive assessment. The Minister mentioned the 13 tables in the budget book. I sat in the "Prime Time" studio the night the budget was announced, when an expert from one of the accountancy firms went through it and was asked by people how it would impact on them. What is not included in the tables is, for example, the fact that one will pay water charges as a household and that one will pay more if one's child is attending third level education, or the impact on lone parents of certain measures which were announced several years ago but will kick in next year. None of this is captured, which is why we need analysis of equality budgeting to inform the debate on how we budget.

This is a mess. I do not want to go over old ground, but we receive no information prior to the budget being presented. A sum of €1 billion may appear 72 hours before the budget is announced. The Minister presents the budget and it is a done deal. The Opposition is constitutionally barred from tabling an amendment which would amend a figure or timeframe, or do anything which would place a charge on the people or bring money to the State.

We also do not have impact assessments on how measures work after introduction. The Department may carry out a study two or three years after a measure is introduced, which has been done on a thematic basis, but we have no comprehensive assessment of how a measure impacts on certain sections of society. The ESRI reports are not complete as they only look at certain parts of the budget. The one before last showed the impact was borne by the least well-off, but did not factor in the full weight of the property tax or other social welfare measures which were not completely captured within it.

There is a need for this. In the way there are austerity rules and debt rules at European level, there is a need for us to ensure we meet those targets. Just as we have a group of experts which is tasked with furnishing this committee and the Minister with reports on a regular basis there should be a group of people to look after our citizens and make sure there is an evidence-based report that informs Government and the Opposition of the impacts of these measures.

What is published in the budget booklet is helpful in so far as it goes but it is not the complete picture. Not only does it take into account all the expenditure adjustments but it takes into account some of them on the social welfare side. As the Minister indicated, child benefit is included in the eight examples given this year but it does not take into account measures that are preannounced. I made the point last year that the doubling of the property tax was not included in the booklet because it was not part of budget 2014 so technically the Minister was correct; it was not part of the measures announced on budget day. It had already been legislated for.

Similarly, the increase in the student contribution charge was laid out some years ago and everybody knew there would be a €250 increase. Those measures are not taken into account. The analysis is scattered and one would have to look at a number of different reports to try to pull it all together and draw some conclusions as to the overall impact of the budget on different sections of society. I do not want to impose a huge bureaucratic burden on officials but there must be a way of pulling together the different strands of data already available and presenting them in a coherent and cohesive way.

I thank both Deputies for their submissions but they have not alluded to the huge amount of documentation provided to them which accompanied the budget on budget day. First, if they look at the main features of the budget, there were the changes in income tax. There was a full analysis of the income impact on various families, and that was modelled over 20 pages in the budget booklet. Second, there was the major changes in farm taxation and the analysis done, which led us to the point of deciding what changes to make, was published in the budget.

Another big section of the budget was the changes in corporation tax, particularly the double Irish, but also the measures introduced to enhance the IDA package to attract additional foreign direct investment to Ireland. Huge amounts of data, studies and consultative papers were published to give Deputies all the information I had in respect of that.

On top of that, social welfare changes are always the big aspect of the budget. Traditionally, the Minister for Social Protection uses the ESRI SWITCH model to publish on the impacts of the social welfare announcements in the budget, and she will be doing that in the coming months.

While the Deputies are making some legitimate points about aspects of budgetary policy, by and large the position has improved. They have got an enormous amount of back-up documentation and analysis with this budget on the main issues, which were the policy objectives of the budget.

Amendment, by leave, withdrawn.

I move amendment No. 6:

In page 11, between lines 12 and 13, to insert the following:

3. The Minister shall, within nine months from the passing of this Act, prepare and lay before Dáil Éireann a report on options available for the introduction of a comprehensive asset tax otherwise known as a wealth tax, the report shall include options for the collation of data necessary for the assessment of such a tax, definitions of categories of wealth to be included in such a tax, proposals for the assessment and collection of the proposed tax and estimates of potential revenue raised at various rates of taxation.”.

This amendment calls for a report to examine the options of introducing a comprehensive asset tax, otherwise known as a wealth tax. I am not sure if the Minister has read the legislation, and the explanatory guidelines, I drafted the amendments based on the French model and those of some of the Scandinavian countries. It could not be introduced in the Dáil for the same reason I outlined earlier, namely, the prohibition on me or any other Opposition Member introducing a Bill that places a charge on the State but there is a need to look at this issue.

I understand the CSO is at an advanced stage with regard to collecting data on where wealth is held in this State. The big problem with introducing this, outside the ideological view that the Minister may be opposed to taxing wealth at those levels, is the issue of how much it would bring in and so on. Work has been ongoing by the CSO which I believe is coming to fruition soon. If the Minister or his officials were aware of that, that would be interesting to see.

It was mentioned earlier that we have seen wealth of Irish households increase by 10% in the past year. It is at €577 billion, but it is obviously not as basic as that. Much of that would be the recovery in house prices and so on, therefore, we need to look at where the wealth is, how it is broken down and whether it is in the hands of certain individuals or distributed evenly across society.

The report referenced earlier on wealth management in Ireland for 2014 suggests that the wealth per adult in Ireland is $209,000. I am not sure if many of my constituents would feel they have $209,000 of assets, and that is counterbalanced by about $71,000 in debt, so there would be a net effect of $140,000. If that is the case it is more likely that wealth is concentrated in certain hands and therefore we should be considering proposals to introduce a comprehensive asset tax. It would also allow for the repeal of the family home tax.

This amendment calls for a report to be laid out. I am hoping the Minister can inform us in terms of the CSO producing that type of information on where wealth is held in Irish society with the survey it has been doing for the past year and a half. I commend the amendment to the Minister.

The Government has no plans to introduce a wealth tax although all taxes and potential taxation options are constantly reviewed.

Wealth can be taxed in a variety of ways, some of which are already in place in Ireland. Capital gains tax and capital acquisitions tax are in effect taxes on wealth in that they are levied on an individual or company on the disposal of, in the case of capital gains tax, an asset or the acquisition of an asset through gift or inheritance in the case of capital acquisitions tax. Deposit interest retention tax is charged at 41%, with limited exemptions on interest earned on deposit accounts.

Local property tax, which was introduced in 2013, is a tax based on the market value of residential properties. In order to estimate the potential revenue from a wealth tax it would first be necessary to identify the wealth held by individuals. I am informed by the Revenue Commissioners that they currently have no statistical basis for compiling estimates relating to a potential wealth tax, although an individual's assets and liabilities are declared to the Revenue in a number of specific circumstances, for example, after a death. This information is not a complete measure of financial assets in the State nor is it recorded in the manner that would allow analysis of the implications of an overarching wealth based tax.

I am advised that the Central Statistics Office's institutional sector accounts do not give an indicator of the number of households or persons classified by the categories of wealth they hold. These statistics are based on aggregate information collected from financial institutions and do not contain the demographic details which would enable such a breakdown of the statistics. However, I understand that following discussions involving the Department of Public Expenditure and Reform, the CSO and the Central Bank, the CSO has commenced the household finance and consumption survey, HFCS, which will collect information on household wealth. The results of this survey are not yet available.

The main aim of the HFCS is to provide structural information on households' assets and liabilities based on a representative sample of households. This will address gaps in knowledge about the economic well-being of households and the distribution and type of wealth, the liabilities among households and individuals as well as the factors that affect financial planning by households and individuals.

That data to be collected by the CSO as part of its household finance and consumption survey are not being collected for the purposes of calculating the potential yield for a wealth tax but to collect general information on the financial situation and behaviour of households. Such information may be relevant to the formulation of tax policy and I look forward to seeing the results of the HFCS.

Another factor to consider is that asset values increase and decrease over time and in the context of recent economic circumstances, they may have declined considerably in many cases. Thus, if the value of an asset or an individual's wealth is measured at a particular time, there is no guarantee that the asset value of the individual's wealth will remain at the level or increase from that point. This would make it difficult to predict the potential yield from a wealth tax and this would have to be borne in mind, in terms of its consistency, as a source of revenue.

My Department will monitor and consider any additional information and data that come to light and will continue to examine potential taxation sources. As I stated, I do not propose to accept the amendment at this time.

It is hard to interpret the meaning of this. I am not familiar with Deputy Doherty's proposed legislation but I would like to make two observations. If one asks the average family what its greatest source of wealth is, the obvious answer will be the family home. With respect, Deputy Doherty is speaking out of both sides of his mouth here because he was vociferous in opposition to the introduction of a very modest household charge which was subsequently replaced by a property tax and yet he has no difficulty taxing the same family home through this proposal.

The second observation is that if one casts one's mind back to when the late Brian Lenihan introduced the infamous bank guarantee, it was introduced to protect deposits in banks. The introduction of an asset tax or a wealth tax would cause a huge flight of capital from the country at a time when we need to protect it. It would result in a massive loss of investment because the risk-takers would simply move their wealth or their assets to another jurisdiction where they would get a better return and where perhaps there would no property tax. For those two fundamental reasons, I cannot support this amendment.

Similarly, in all our budget submissions in recent years, we have proposed a wealth tax. I find it indicative of the priorities of this Government and of previous Governments that when they want to take money from low and middle income earners, they go to extraordinarily lengths to bill them or to find out what means they have in order not to give them something. The most obvious current example is water metering which, to my mind, is an utter waste of money. Some hundreds of millions of euro are being wasted. Immense effort has been made to ascertain how much one can charge somebody with a regressive tax. Similarly, there is very invasive means-testing for a number of social welfare benefits. The State went to extraordinary lengths to try to establish the value of family homes in order to charge for the local property tax.

All this can be done but what we cannot do is work out how much money the very wealthy have because that is just too difficult. I do not accept that for one minute. Just to inform Deputy Walsh, both our wealth tax proposal and Sinn Féin's, although it can speak for itself, exclude the family home. What we are talking about is a wealth tax on financial and other assets, excluding the family home.

I mentioned it earlier but I would like to see the same sort of drive from this Government, or from any Government, to find out the distribution of the €508 billion net, which is after liabilities are taken out, in household assets in this State, half of which, according to the CSO, are cash or financial assets. The family home takes up a significant amount of that but half of it is financial.

If the wealth distribution estimates given by Credit Suisse for Ireland are even close to true, they indicate a shocking inequality in the distribution of wealth and, overwhelmingly, that wealth cannot be family homes. If it is true, as Credit Suisse estimates, that the top 1% have 20% of that €500 billion, or the top 5% have 40% of it, that is €200 billion and 200,000 people accounting for that. Some 200,000 people have about €200 billion, so even if one takes out their family homes, the majority of that is financial assets or commercial property, which is generating revenue. That money in financial or other assets is just sitting there and is generating money all the time. They do not have to do anything with it or lift a finger. It is in investment funds and so on. What is the average return on investment funds for people who have several million euro? I would say that these days, it is 4% or 5% per year. Could we not put a 2% tax on this? They would still make money. They would not lose out on anything. If one is a millionaire, one's millions are making money all the time. We would not even be hurting them but would just be taking a little bit of that money, which is just money making money, from them and putting it back into society, into our infrastructure, into redistributing the wealth and into narrowing the gap between rich and poor.

However, whenever one talks about these things it is said it is cloud-cuckoo-land economics, it is all too difficult and that these people will all leave. These people are obviously not very patriotic in that if they are asked to pay a little bit of extra tax, they will all run away. There is a thing called capital controls. Iceland did not implode when it imposed capital controls. These things can be done if there is a will. There would certainly be fairness to it. As Deputy Doherty mentioned, it averages out at approximately €200,000 per person in the State but the majority of people having nothing even approaching that amount.

I do not see why there is no willingness, or no will, to really delve into this and to show the same energy delving into this which the Governments so often demonstrate when they try to take money from the less well off.

I look forward to seeing the data from the CSO when they are concluded. I do not think there is any reason the Government should not look at this itself. There is obviously an ideological reason. God forbid this Government would tax high income earners in society, in particular those we are targeting in this amendment who have assets above €1 million.

I would give Deputy Walsh one piece of advice. He spoke about me speaking out of both sides of my mouth but I would advise him that before speaking out of either side of his mouth, he should inform himself of the amendments before the committee. Detailed legislation has been published and there is an explanatory guide for people who are not used to reading legislation. He could see exactly what is proposed in the amendment.

This has been an issue of debate for a number of years. As I said, there are two issues here. There is an ideological one as to whether we should tax this wealth. We see the global reports and there is a question mark in terms of what access Credit Suisse has to this type of analysis when it suggests that there has been a 10% increase in wealth in this State and that a large part of it is concentrated among a number of individuals.

It has been estimated that the number of millionaires in Ireland is above 88,000.
We need accurate data. We cannot rely on a wealth management company to provide this. It is questionable whether the CSO survey would be able to pick that up, given that a small cohort of individuals hold a bulk of this asset. Some of the most conservative institutions in Europe, including the Bundesbank, have called for the introduction of a wealth tax. It has been suggested that a European wealth tax should be introduced. Suggestions have been made by the SPD in Germany regarding a wealth tax and Spain has introduced a temporary wealth tax. A number of proposals for the introduction of a wealth tax have been made. I am not suggesting we copy what other jurisdictions are doing but we should be at least be open to the idea of introducing a global asset wealth tax for those domiciled in this State and examine whether it would be fairer to do that than to cut the social welfare payments of those age 25 and under, cut services of those with disabilities who are reliant on services, provide homeless shelters for people who are lying on the streets, provide the necessary resources for children who have profound difficulties and life impairing ailments or build the children's hospital. I hear many other proposals mentioned by constituents every week in my constituency office or every day by people who contract me by telephone. The demands for services in society are immense. If we have the same provision that exists in other countries, then why not tap into that wealth? I am sure the Minister will put forward many arguments against it, including that wealth is fluid. That is why the legislation deals with global assets and so on. I will withdraw the amendment and reserve the right to table it on Report Stage.

The amendment makes no reference to any legislation Deputy Doherty may or may not have produced. I did not refer to any legislation and there is no reference to legislation in his amendment. I cannot be expected to read every item of proposed legislation that might have some impact on the Deputy's amendment.

For the record-----

I have to stop the row between the Deputies.

It is not a row.

I ask them to not stray from the business.

For the record, the amendment does not mention the family home tax which was the accusation that was levelled by the Deputy.

Nor does it mention any legislation.

I thought Deputy Doherty was about to welcome Deputy Walsh to the committee on his first day here and that he would take those factors into account.

We will move on.

Deputy Walsh should inform himself. I gave him some good advice.

Amendment, by leave, withdrawn.
SECTION 3
Question proposed: "That section 3 stand part of the Bill."

I oppose section 3. I disagree completely with reducing the top rate of income tax from 41% to 40% at this time. This is not the right time to do it. I have just given a list of priorities where this money should be spent. I do not for one moment underestimate that those who are in this cohort who would benefit from this proposal are under financial pressure but the Government must consider the priorities. I suggest that dealing with homelessness, disadvantage, the social housing crisis, the burden seven austerity budgets have put on individuals and the burden our public health and education systems are under areas far more beneficial to our consideration than reducing the 41% tax rate at this time. The closer one is to the €70,000 threshold, the more one will benefit from it. The figures provided indicate that the 41% tax rate will cost the State about €225 million, which is nearly €0.25 billion. That measure alone in a full year when combined with the standard rate band accounts for €405 million; it is 40% of the entire budgetary spend when account is taken of a full-year effect, or 30% in terms of a partial-year effect. There are far more pressing areas of need. The Minister has heard them all from Social Justice Ireland and the Society of St. Vincent de Paul, whose members are the people dealing with them at the coalface. New food parcel facilities are being opened all the time in my constituency in Donegal and across the area. This is not where the focus should be at this time. I strongly oppose this part of this measure.

The issue I have is regarding the distribution of the benefit of the Minister's tax package. He has put forward a definition in terms of people in the middle income bracket. The reality is that an individual earning €32,000 a year - who falls just below the threshold at which one enters the higher rate - would only benefit from the USC changes. That individual would benefit to the tune of €174 per annum. If one earns just inside the thresholds at which one enters the higher rate, one would benefit from the increase in the threshold and from the reduction in the rate cut. One would get three tax cuts as such. I, as a Deputy, would benefit to the tune of approximately €750, whereas an individual earning €32,000 a year would benefit only from the USC changes of €174 per annum. Similarly, in the case of a married couple where there is only one income earner on €41,000 a year, they would only benefit to the tune of €174 per annum. The Minister has not calibrated it fairly because there is a dramatic step-up for those who earn beyond the entry point to the higher rate of tax. It is not fair that somebody earning €70,000 would benefit four times more than somebody earning €30,000, but that is what the Minister has done. Somebody earning €70,000 or more would benefit by €750 per annum compared to somebody earning €32,000 a year who would only benefit by €174 per annum. If one is earning €32,000 a year, one's income will be above all of the eligibility thresholds for State support. One would not qualify for a medical card, rent supplement or family income supplement in all likelihood, and one would not qualify for any means tested payment. Many people working full-time earn that amount and less. People on the minimum wage are on €18,000 a year. It is most acute for those who are just below that entry point. If the Minister had redesigned the USC in a more fundamental way, he could have graduated the benefit far more evenly than he has done, but what he has done has resulted in a crude impact depending on whether one is earning above or below the entry point to the higher rate of tax.

The Deputy's point comes back to a point I made to Deputy Boyd Barrett. If one believes that regardless of qualifications, ability, enthusiasm, work ethic and all of the rest of it, everybody should be paid the same, I would argue that is an unrealistic model of society and an unrealistic model of the labour market. I think we would all acknowledge that because of the nature of society people get different levels of wages and different levels of salaries and they pay tax in proportion to the level of wages and salaries they have. As soon as one starts giving reliefs, the reliefs will be in proportion to the level of wages and salaries as one winds it down. I would give the following example. A single individual employed on the standard minimum wage of €17,542 per annum pays income tax of €4.01 and USC of €10.51 per week. Furthermore, someone on the standard minimum wage is also exempt from paying PRSI.

As a result of the changes introduced in budget 2015, the weekly USC of €10.51 per week will fall to €7.19 per week. This means the tax bill will be reduced by 20%, which is significant at the bottom. If one examines the percentage, one gets a better impression of the proportionality of the changes made. A single individual earning €70,000 per annum currently pays €25,531 per annum, or €490.98 per week, in income tax, USC and PRSI. After the implementation of budget 2015, this individual’s tax bill will be reduced by approximately 3%. In fact, the highest proportionate benefit as a percentage of net income from the budget tax changes occurs at an income level of just €12,000. This is as a result of my decision to extend the USC exemption threshold from €10,036 to €12,012. This affects 80,000 individuals.

It is not a flat-rate relief that is being applied. Reliefs are availed of in proportion to the incomes to which they apply. Percentages indicate the profile is far more even than one might believe. Next year, if resources are available, I will try to mirror this. Of course I agree that there are inexactitudes and anomalies but, within the policy instruments available, amounting to only three, namely, PRSI, income tax and USC, we have gone a long way. We will try to iron out the anomalies also.

I do not believe Deputy McGrath's approach is too distant from mine. I accept the points he made and we will examine in next year's budget the anomaly at the entry point to the higher rate.

Deputy Pearse Doherty and Deputy Boyd Barrett hold a different position. They are opposed to the policies on personal taxation that are enshrined in the budget and Finance Bill. Anyone considering the impact of tax must consider a range of taxes, as when the Deputies asked us to take account of water charges in addition to personal taxation. However, Deputy Doherty wants the marginal rate of income tax to go from 40% to 48% and he also wants a wealth tax. He would tax the economy out of existence if he brought in those two measures in the same year. I do not run with scare stories about people leaving the country, but I certainly do not believe one will get 15,000 extra jobs if those proposed tax measures are introduced. I could not quantify the result but I am strongly of the view that there would be a reduction in the number of jobs and the propensity of young emigrants to come home if both measures were introduced. I have no problem with Deputy Doherty proposing these measures for debate but I am pointing out that there is a fundamental difference of approach between Sinn Féin and me. I have outlined mine and Deputy Doherty has outlined his, but they are different. The two do not meet. There is no overlap or common purpose in respect of the proposals. I am not criticising as I understand the policy position from which the Deputies come and that the effect of pursuing it is to move amendments along the lines of those tabled. The Deputies' position is different from that of the Government, and ultimately the electorate will have to decide which approach it prefers.

The Minister is correct that much of this is philosophical. There are fundamental differences and there is probably not much point on dwelling on them. Suffice it to say that the notional progressivity of the Minister's budget, as presented in terms of percentages, masks the fact that both increases and decreases in percentages favour higher earners and disadvantage lower earners disproportionately. The concept of notional progressivity, as set out by the Minister with his percentages, fails to deal with the sense of injustice that people feel. They do not look at graphs and say they are progressive based on equal proportions for different earners. They note the fact that they cannot pay their bills while somebody who earns five times more than them is getting four or five times more back from the Government. In such circumstances, they cannot help but feel this is unfair and wrong, and that it is a misdirected priority of the Government.

The left has been very consistent on this. It opposed partnership pay increases during the good times because they were percentage based. A reason some of us on the left opposed social partnership was that we believed social partnership pay increases benefited higher earners disproportionately and that pay increases should have been considered more in terms of absolute figures.

While the Minister might not agree with our more broad philosophical position, he should consider the feelings that have been driving all the people onto the streets in recent weeks. They were being driven onto the streets by the fact that a huge proportion of people cannot pay their bills. What the Minister has given them back does not cover what they have lost elsewhere through water charges, property tax, increases in utility bills, public service obligation charge increases, etc. They are in as bad a position as they used to be, or perhaps worse, while those who are able to manage are getting multiples back from the Minister. He should acknowledge that this is a problem.

The Deputy has pointed out that there is a difference between our approaches ideologically, philosophically and economically. That is not to say that the Deputy's analysis of how people feel on the ground is much different from mine. Everybody in Fine Gael and the Labour Party – we are constituency politicians — knows the sacrifices people have made over the past six or seven years. We know how hard people find circumstances and how difficult it is to cope, but my problem with the Deputy's proposals is that I believe they are fundamentally flawed economically and would make matters worse. The solution to the problem he has identified and articulated so well is to grow the economy in order that low-paid people can get a bigger share through higher wages and the retention of their income because of lower personal taxes. That is the drive and objective, and that is where I am going to take it if I get another year or two at this. My objection to the Deputy's views is not personal but that I believe the model he is presenting is flawed. The high-tax model, which advocates the taking of more money from middle-income people-----

Higher income earners.

-----and redistributing it among poorer people for good social objectives, is flawed. As I stated, a single person with a gross income of €70,000 may look very well off but is paying more than €25,000 of that in personal taxes. The solution required is not that of the Deputy but to do everything possible to grow the economy, put more people back to work and ensure there are decent pay increases coming back into the system. In so far as tax buoyancy is available, it should be used to give back to all social sectors, particularly the low paid and those whom I believe comprise the squeezed middle earning salaries up to €70,000. That is not to say that people earning more than that do not need to have some relief also but my point is that they do not need disproportionate relief. With the crudeness of the economic instruments, such as a tax rate, there can be a disproportionate benefit if one runs a 1% reduction on the marginal rate of tax for incomes of up to €300,000 or €400,000. There would be a huge gain in that case, and that is why there is a cap at €70,000.

It is not that those of us in the Government parties do not understand how difficult it is for people to live because we see it in our constituencies all the time. We just have a different set of solutions. Fundamental to that set of solutions is our approach to income tax because it is another instrument that helps to grow the economy. That is the difference.

We can have ideological and philosophical debates all night but I shall call for all the first 12 sections to be dealt with by 9 p.m. We are two hours into a debate yet I still have not asked for an answer to the question as to whether section 3 stands part of the Bill. However, Members can ask questions for another few minutes.

I am well aware there is a time element here. I appreciate the Minister's robust defence of his ideological position and the tax priorities of this Government. Fine Gael is a high tax party. The only problem is that it is a high tax party when it comes to people on a very low income and disposable income. That is the only difference in terms of philosophy. The taxes have to be brought in because the deficit has to be reduced. In order to get people back to work money has to be invested in the economy. Instead, the Minister wants to levy more taxes on people to pay. I refer to the water charges, property taxes, increased carbon taxes that were introduced in previous years, increased excise charges, prescription charges and medical charges. All of those charges are indiscriminate of people's income or ability to pay. It is not that the Minister is preventing all these additional taxes. The problem is that bills are falling in the letterboxes of people who may be out of work or on very low incomes. The Minister was right with his suggestion of a 1% reduction because the higher the income the more a person will benefit. He did it the obvious way but he could have done so in a different way.

No, I capped it at €70,000.

I did not do it in the way mentioned.

Yes, he did. As has been pointed out, somebody at the entry point will benefit to the tune of €170 whereas somebody at the €70,000 level, ourselves included, will benefit by €777.

The Minister could have chosen other options. These two measures cost the State €405 million yet not one person earning under €32,000 will get a penny of it - none of them. They will benefit from the USC changes later on but they will not see a penny from the €405 million cost for these two measures. The Minister has decided to focus that money on the middle income people and he has made a robust defence for doing so. I suggest his position is flawed and that he has adopted the wrong priority at this time.

The Minister continually makes reference to immigrants in London and elsewhere who might not come home if we had a third rate of tax. For example, reducing the tax to 40% may appeal to them and encourage them to come back. Let us be clear, and he knows this better than me, England has three rates of tax. First, the highest rate of 45% is levied on incomes above £150,000. Second, the middle tax is 40% and is the equivalent to the one here as it kicks in at about £32,000. He has failed to remember that England has a high PRSI levy of 12% which increases the percentage to 52%. In reality a person in England who earns the equivalent of €70,000 will pay more tax there than here. In Australia and other jurisdictions to which he referred the kinds of difference in the systems mean that more is not paid. However, somebody earning the higher amount of £150,000 in England will pay far more tax in London, Edinburgh or anywhere else than he or she would in Ireland because the third rate of tax is 45% but there is a 12% social insurance contribution. Also, the employers' social insurance contribution is way higher because we have the lowest employers' PRSI in Europe, apart from Denmark which does not operate such a scheme. That is why our taxation system is crumbling.

I want to know the following. When will we get it right? When will people who go to hospital not have to wait on a trolley in the accident and emergency unit? What about when people go to school? I suggest the Minister talks to teachers who will readily tell him they know well just by looking at the children that they have not had breakfast. Does he know why? It is because the children cannot concentrate. Their eyes move back and forward and they cannot concentrate when their teacher talks to them. Lack of breakfast means their concentration span is very short and only lasts a couple of minutes. Breakfast clubs are being rolled out because parents do not have the disposable income to feed their children. However, the Minister has €405 million at his disposal but he has decided to focus it on individuals who earn between €32,000 and €70,000. As I said, there is no doubt that some of them are hard pressed but a lot of them are not, particularly when compared with areas in society that need the retention more.

This is a philosophical debate but it is also a factual one. The Minister has made the wrong choices. He said he is a constituency Deputy with which I have no argument. I suggest that he has not mixed enough with people who have been battered and bruised by the Government's policies over the past three years and the policies of the last Fianna Fáil-Green Administration. People are at the end of their tether and that is why 150,000 have taken to the streets. All they can see are water charges being imposed without a reprieve. The Government has decided to focus the money it has available not on the least well off in society but on what it believes is a pressed cohort of individuals. I agree that they are pressed but they should not be the priority at this point in time.

I will press on again. The Deputy has described people who are suffering from the economic collapse in the country for a number of years and still are suffering. He described that in very cogent terms and I do not think he will get much disagreement on it either from Labour Party Deputies or Fine Gael Deputies.

The Deputy was incorrect to say that Fine Gael is a high tax party. We happen to live in a high tax country for reasons which we all know about, principally because of the policy mistakes made by the previous Fianna Fáil-Green Administration. I do not want to recite the mistakes again but that is part of the base from which we are working.

Fine Gael is not a high tax party. We will reduce taxes as soon as we have the wherewithal to do so and we have started this year. I suggest the Deputy looks at what we have done since we went into Government. We were not a high tax party when we rescued the tourism industry by reducing VAT from 13.5% to 9%. We did that when we had very little money. We had to raise it elsewhere, principally by a pension levy that many people objected to. We did so because we thought it was a successful policy instrument and it was the first step to rebuild the tourism industry. We continued rebuilding it by abolishing another tax - the travel tax. Those initiatives are not the mark of a high tax party. The travel tax allowed all the airlines, but led by Ryanair, to bring an extra 1.5 million people in and out of the country in the past 12 months. Other developments which were novel but not tax-related, like The Gathering and the Wild Atlantic Way, have added to improving the sector, and now we have a re-investment in hotels. I have outlined a model of a particular sector but the first driver was a low tax position.

We are committed as well to a 12.5% corporation tax. On budget day I said that the rate was a red line, non-negotiable and not to even talk about it to us if one is from another jurisdiction trying to put pressure on us. That is a low tax position. We will also try to reduce personal taxes and we have started this year. I admit to the Deputy that the starting position is a high tax one. I reassert that our policy is to reduce taxes, particularly personal taxes.

The OECD has a hierarchy of taxes. It says that income tax increases are the second most damaging tax to the provision of jobs and that consumption taxes are the least damaging. It is worth considering that in detail. I do not pluck out taxes arbitrarily and nor do I pick my priorities arbitrarily. I try to deal with those measures that have the most economic effect and personal taxation has a big economic effect. By any standards, personal taxation in Ireland is too high. We have the most progressive tax system in the OECD but personal taxation is too high and people get to the higher rates too fast.

People have said we should do more for the low paid. If one does not pay tax one cannot do much for people through the tax system but help can be provided in other ways. The Government was very conscious of the difficulties being experienced by families on low income and significant changes were made in child benefit by the Minister for Social Protection. She is restoring a quarter of the Christmas bonus, again a feature of this budget. That shows there are other ways of directing money to people.

I will defend emphasising those that hit the higher income of €32,800 and that cohort of people up to €70,000. One can make it impersonal and turn it into a statistic.

Who are they? What couple is on €70,000? One gets a young fellow who is just back on a building site, a young fellow working in a factory, or a young schoolteacher or garda who is married to a young nurse or a girl who might work in the local shopping centre who might have €70,000 between them. The Deputy is saying they should not get tax breaks proportionate to their income and that they should contribute to Deputy Boyd Barrett's model where one takes more off them to redistribute it to people who are worse off. That makes no sense. If one looks at the people we are talking about, they are among the 1.9 million people at work who vote for Deputy Doherty as well as for me and he meets them every day of the week. The Deputy should not turn them into a wealthy statistic, because they are not. They are real people who find it hard enough to live.

It is easy to make a case for someone who seeks help from the Society of St. Vincent de Paul. I do not criticise anyone who makes such a case, but it comes back to my fundamental point that this country has come through the worst crisis since the Second World War, and probably since the Famine. It has been an absolute disaster. We are building the economy up slowly. There has to be a set of consistent policies to do that. In my view, the only cure for the ills of society, as described by Deputy Boyd Barrett, which come from low income levels, is to grow the economy and make sure that people on low and middle incomes get a proportionate share of the gains and that the gains are not hived off by a group at the top. That is what we are about. That is why we want to get more people back to work. That is why we want to bring young emigrants home. That is why the budget has been designed in the way set out.

I do not say the Deputies are not entitled to advance their policies, that they are not socially concerned or that they do not believe what they say. Neither do I say the Deputies are not men of goodwill and that their parties are not people of goodwill, but what I say is that their economic model is wrong and it will do harm rather than good. That is the difference between us.

The Minister should look in the mirror and look at the harm his economic model has caused. He should walk the streets and talk to people.

That concludes discussion on the section. I thank the Deputy.

I could make a very sharp reply about looking in the mirror but I will refrain from it.

Question put and agreed to.
Sections 4 and 5 agreed to.
NEW SECTION

I move amendment No. 7:

In page 12, after line 36, to insert the following:

“Exemption in respect of compensation for certain living donors

6. The Principal Act is amended by inserting the following section after section 204A:

“Exemption in respect of compensation for certain living donors

204B. The compensation for donation of a kidney for transplantation payable to a living donor under conditions defined by the Minister for Health pursuant to Regulation 21(2) of the European Union (Quality and Safety of Human Organs Intended for Transplantation) Regulations 2012 (S.I. No. 325 of 2012) shall be exempt from income tax and shall not be reckoned in computing income for the purposes of the Income Tax Acts.”.”.

The amendment provides for the insertion of a new section, section 204B, into the Taxes Consolidation Act 1997 to provide for an exemption from income tax in respect of compensation for living kidney donors. Such donors will generally incur expenses associated with travel and accommodation as well as suffering loss of income during the process of providing a donation. The donation of a kidney is governed by EU directive 2010/53/EU of 7 July 2010 on standards of quality and safety of human organ transplantations. The directive sets out a common framework on quality and safety standards for organs of human origin intended for transplantation into the human body. It also aims to protect donors and optimise exchanges between member states and third countries.

The directive was given effect in Irish law by way of European Union (Quality and Safety of Human Organs Intended for Transplantation) Regulations 2012, SI 325 of 2012. Article 21 of the regulation stipulates that living donors may receive compensation for a donation provided it is strictly limited to making good the expenses and loss of income related to the donation. It goes on to say that the Minister for Health shall define the conditions under which such a compensation may be granted "while avoiding there being any financial incentive or benefits for a potential donor". This new section provides for an exemption from income tax in respect of the reimbursement of expenses incurred by living donors under the conditions defined by the Minister for Health under these regulations. Such reimbursements may apply to vouched expenses of travel and accommodation up to a maximum of €6,000, and loss of income related to a donation up to a maximum of €6,000. The Minister for Health will shortly publish a document, entitled Policy on Reimbursement of Expenses of Living Kidney Donors, which will define the conditions under which the expenses of travel, accommodation and loss of income related to donations may be reimbursed.

Sections 6 and 7 agreed to.

Amendment agreed to.
SECTION 8
Question proposed: "That section 8 stand part of the Bill."

I have a brief query on the section. We dealt with the relief for the rent-a-room scheme in the Joint Committee on Finance, Public Expenditure and Reform as part of the pre-budget submissions. I was surprised to see a 20% increase in the relief. The increase is welcome but my concern is the level of the increase which gives rise to a danger that rent levels will follow. I am aware of the breakdown in terms of those who are claiming it not being at the higher level, but it is an issue on which the Minister should keep a close eye. A 20% increase is unwarranted and I do not understand the reason behind it. There was no need for it. It would have been more appropriate to increase the level of exempt income to €11,000. Is there a rationale for the change?

It has increased to €12,000.

Yes, my question is the reason it has increased to €12,000. My other question is whether in the case of two rooms being available the exempt limit on which one can claim is €10,000, or the proposed €12,000, rather than €20,000. Has the Department considered the issue?

There is no exact science in this regard, so Deputy Doherty’s €11,000 might be as effective as the €12,000 I proposed. We had and still have a situation where both in terms of family homes to purchase and rental accommodation, in Dublin in particular but also in other parts of the country, there is a supply side problem. I was looking at a series of possible measures that might alleviate supply. In the case of houses with spare rooms I thought a generous incentive might spring people into providing a room for a student. When I designed the scheme there was much publicity about third level students in Dublin not being able to find accommodation. I thought a marginal increase would have no effect but if the message went out about a 20% increase, it might provide rooms for people who need them. We have done other things as well. Following on from last year’s home improvement grant we are now applying the scheme to landlords. There are approximately 5,000 bedsits in Dublin and because of the regulation which states that bathrooms and toilets should be en suite, they have gone out of use. I hope some of those properties will come back into circulation. I have often said in the House that if there are problems, doing nothing is not a strategy.

That is fair enough.

Some of the things I have proposed might not work, but one has to try a range of solutions. To be honest, I do not know what effect the change in the room rental relief will have, but I have erred on the side of being a bit more generous than doing what the market or the consumer price index might justify.

Only a portion of houses that are available for the relief charge €10,000, so it is unlikely that they will all rush to that level anyway. One suggestion for the Minister that could be done to assist the situation relates to the Union of Students in Ireland, USI, which is targeting areas adjacent to colleges. It has dropped leaflets in areas informing people about the availability of rented room relief as many people are unaware of it. Revenue is writing to households throughout the State to inform people about their local property tax liability.

This relief is applied by Revenue. Revenue would probably be able to target the areas around UCD and DCU, and so on, in conjunction with USI or another organisation. Why does Revenue not begin an information campaign on this issue? Fair play to the USI for doing its civic duty, but it is not right that it is dropping leaflets in streets. There should be more awareness of the new thresholds and I ask the Minister to look into-----

I will ask my officials to raise that with Revenue. Certainly it should be put up on the website and if it is up, it should be made more prominent, as young people access the websites. Some €12,000 is the maximum relief available under the new regime, but it can apply to more than one loan - it can apply to two loans. For example, if there are two students and two spare rooms and the term is something over 30 weeks and they are paying €200 each, one can see how the total might run up to €12,000, but that is the maximum. I hope it makes a difference, but I cannot guarantee it.

I support section 8, because we all know there is spare capacity in cities where there are many empty rooms. It has been a reasonably successful initiative and increasing it to €12,000 is simple and understandable. It is €1,000 a month. It cannot do any harm, so I support it.

Question put and agreed to.
Sections 9 and 10 agreed to.
SECTION 11
Question proposed: "That section 11 stand part of the Bill."

I have no problem with extending to landlords. However, it is quite a large amendment, just to extend this to landlords. I have read through it in terms of the definition of a qualifying residence, but is there anything in this section other than just extending the existing home renovation incentive to landlords?

No, except that it would apply to multi-apartment blocks. If one landlord owned the block, he or she could get it for each unit. It would not make sense otherwise. The length of the amendment has to do with making the connection between having an increased supply of rental accommodation and the benefit for the landlord.

We had a lengthy debate on this last year, particularly in terms of thresholds. There was movement on Committee Stage to deal with that and the amendment the Minister brought forward dealt with some of the concerns. The application system was quite complex. I know it has been successful, but there was a complex procedure in terms of notification and getting something back and so on. Any assessment being done within Revenue or the Department as to the effectiveness of the administration of this incentive-----

Both the contractor and the applicant must go on a Revenue website. As of last week about €200 million worth of work was registered and it consisted of, and this is not quite accurate, somewhere around 4,000 individual jobs. I now have the figures - it was 3,464 contractors and €243 million worth of work, and of course they have to be tax compliant. I am not saying these contractors were not tax compliant before they got into this type of work, but there is an incentive to move into the legitimate economy and be tax compliant. It is working; there is a great deal of activity around. It can be seen not only in the cities but all over the country. The Department has received no complaints about the application process for the scheme, so it seems to be working. The tax relief is deferred, as Deputy Doherty knows, so we will only have a full picture when the tax rebates begin in 2015.

The relief runs out in December 2015, this time next year. It has been successful, so I am not sure if it will be extended. Obviously a successful scheme like this should be considered for extension, but does the Minister foresee a problem in terms of people looking to do work on their house at this point next year? Will they be able to avail of the tax relief? Must the expenditure be incurred in the tax year prior to 31 December, or must it just be registered? I am trying to figure out-----

It is a successful scheme, with the qualification I made. We have not got the absolute proof yet, but it seems to be going very well. The scheme was designed to kickstart the building industry when it was at a low point and just beginning to move again. The construction industry is much stronger now, but I do not want to announce anything this year that would persuade people to defer work that they intend to carry out, because given the way the industry goes, I want to continue to frontload the work. We will reassess the position next year and I am open-minded about it. If it is worthwhile, I will extend it next year, but that is not a commitment.

Anybody who wants to build an extension should move now. If it is discontinued, provision will be made for people who only start work next year to avail fully of their tax relief, along the lines the Deputy has suggested. The duration of the incentive depends on whether the property is a principal private residence or residential rental unit. The Deputy knows about the incentive for homeowners. There are transitional provisions, which allow for work to be carried out between 1 January 2016 and 31 March 2016, where planning permission is in place by 31 December 2015. It applies to extensions and small works, so three months grace is given for the work to be carried out if there was a delay in planning and the planning permission only came in at the end of 2015. We will review it next year and I will consult with the Deputy.

The point I am raising is that the date we have down for landlords is 31 December 2015. The Finance Bill next year will be in November again, so the Minister could be extending the scheme. If it is as successful as it has been, it should be extended but at that point people will have frozen. If I am thinking of doing an extension to my house and have not got it started early enough next year, I will freeze. I will not get the benefit because I will know it will not be all done before the end of the year, and the period between the Finance Bill and the end date is short. I am suggesting that it might be worth looking at an extension date of at least three months, which would allow one to look at it and budget-----

Not at present. The landlord window of opportunity is a bit tight, but I wanted to align it with the residential aspect and then review both next year and then we will see what we will do. Is Deputy Doherty telling me I should make an announcement prior to the budget?

We are introducing the landlord's one now that it should be, for example, 31 March 2016. If the Minister decided after the review at budget time to extend it, it would not put people off carrying out those works if they were to begin in September, because they would feel they would have completed them within the six-month period. If they are thinking of starting works in September, it is unlikely that they will, because-----

The grace period to March is in the-----

That is only if one needs planning permission. I presume one would not need planning permission for many of these projects, given the exemption from-----

I will have a look at that.

That would also carry on to residential units.

I will have a look at that between now and Report Stage.

This section is effectively giving VAT back to people who carry out work on their home or on rental properties. It is a welcome development but as the Minister knows, there is a particular problem in our part of the country at the moment with petrol stretching. Could he look at some mechanism where people could be refunded the VAT for purchasing replacement engines and carry out the work on their engines in the context of Report Stage?

This pertains to a couple of hundred people who have been badly hit financially. While it is not a solution to the problem, it would at least give some financial assistance to those affected. I ask the Minister to consider this request in the context of Report Stage. While it is a specific cohort of people, they have been badly caught. I raised this issue on Second Stage and ask the Minister to ascertain whether something could be done to assist them financially on Report Stage of the Bill.

To be clear, this provision will extend this tax break to landlords.

No, it is giving landlords a similar income tax break as that which applies under the home extension scheme.

Yes. I supported the home extension scheme, the logic being that it would generate work for builders and so on and obviously would be of some benefit to ordinary householders seeking to carry out renovations. However, when one starts to extend it to landlords - I might not have as much of a problem with small-scale landlords with one or two properties - against a background where major investors appear to be moving in and buying up huge amounts of property in this State over recent years on the back of the crash and then there are these REIT entities, with which they will get tax breaks thereon, will the biggest beneficiaries of this provision not be wealthy investors? The Minister might argue it is worth it because it will generate some employment but my concern is that this is simply another tax break for wealthy investors and we are reverting to incentivising the kind of thing that led us into the mess, which was the property boom and bust that did such damage to this economy. What does the Minister have to say in response to this concern?

The concerns I had, which were shared by most Deputies, were rising rents in the first instance. Members will have seen further evidence this week of rising rents in Dublin in particular but also throughout the country. Second, there were various stories about people in receipt of rent supplement who were unable to get suitable accommodation because as rents rose, landlords were more inclined to rent to those who had sustained and sustainable income than to those who would be the beneficiaries of rent supplement payments. It will be a while before the construction industry provides new rental accommodation to any great extent, even in Dublin. While it is to be hoped that a lot of activity will commence in the course of the year, there will be a time lapse before it is completed and rented. It was brought to my attention that there are 475,000 rental properties in the State, of which approximately 5,000 are bedsits in Dublin that cannot be rented due to new standards for rental accommodation that came into effect in February 2014. I am targeting in particular those rental properties to incentivise landlords. Effectively, the work is to refurbish but the main piece that prevents such units from being rented is the aforementioned regulation. I do not know whether the Deputy ever lived in one-----

-----but I did when living in Dublin as a student and when working there. One has a number of bedsits and the bathroom is on the landing. One must come out of the bedsit to make use of the bathroom on the landing, which is shared by three or four bedsits. The regulation introduced in 2014 states that all bathroom and toilet facilities must be en suite. This provision has taken approximately 5,000 bedsits in Dublin out of the rental market and has aggravated the supply and shortage problems. Again, I cannot guarantee it but I wish to incentivise landlords who, I am told, are not the wealthy ones but are at the lower end of the rental market and who really no longer have the funds or the interest to carry out this work. I want to incentivise them to do it. However, I note the scheme has the same caps and is not unlimited. They will be putting in far more money themselves into the refurbishment than they will get in the tax break.

On the point raised by Deputy Naughten, I have answered a lot of questions, particularly from Deputies from west of the Shannon, on the problem of petrol-stretching. However, the scheme here is not a VAT relief but is an income tax relief. It is an income tax relief to the level of the VAT paid, which is the way it works out. I will ascertain whether there is a solution to the problem but I am not making a commitment to the Deputy. However, I will revert to him on Report Stage with a view as to whether his suggestion is possible. My first inclination would not be that favourable but I will have the matter examined.

I thank the Minister.

I believe this matter is dealt with in section 11(g). However, I seek to clarify that there is no element of double relief here for a landlord. They cannot get other tax reliefs from that investment by way of capital allowances or any other tax relief. However, if my reading of section 11(g) is correct, I believe this matter has been dealt with.

I suppose they could write it off against future income. I have a note to hand, which I will outline. In general, landlords can claim a deduction in their accounts for tax purposes or expenses incurred on the maintenance of investment properties. However, I believe their inclusion in the home renovation incentive will further encourage landlords to renovate their properties in order to make them suitable for rental. I suppose the issue is that they should not get double relief.

That is my question, namely, are they getting double relief on it?

Yes, they will be getting a tax write-off for income tax as well. I suppose the issue is whether the relief piece should be included in the write-off. I see the point.

As a principle, I would suggest there should not be double relief on one item of expenditure. The Minister might have a look at this issue.

I will consider this between now and Report Stage. I understand the point made by the Deputy.

I have lived in some of those bedsits, some of which were less than pleasant and, consequently, I see the advantage of trying to do something about that. As an aside, I note the real way to deal with the supply problem is for the State to engage in a far more ambitious public housing programme. However, setting all that aside, my concern is that the unintended beneficiaries of this measure might be the very big investors, notwithstanding the Minister's intention to direct it at bedsits and to encourage smaller-scale landlords to renovate some of these unsuitable properties or those properties which no longer even fit within the criteria and to make them available. What is to prevent this measure from being of major benefit to the much larger corporate investors in property? Is there some way in which the benefit they can get could be limited in terms of their overall income, if the Minister knows what I mean? In other words, very big earners of rental income should not get a proportionate tax break as against somebody whose income is relatively modest.

That is a fair point. I understand that most of the big landlords, that is, the people with blocks of apartments and so on, have incorporated. This provision only applies to landlords who are subject to income tax. As they are subject to personal income tax, almost by definition this means they are on the small side rather then being large companies or anything like that, which are excluded. In addition, like the home improvement scheme, it will have to be put up on the website and we will know what contractors are carrying out the work and what are the applications. Consequently, they can be tracked by Revenue and if there is any obvious abuse, we will be in a position to deal with it. However, I reiterate this is one of those schemes that in theory should work but where one must wait to see whether it works in practice.

Deputy Boyd Barrett has raised a valid concern and perhaps it could be dealt with through the introduction of a cap of some sort, in terms of the amount of relief that can be availed of by any investor in a particular tax year.

It is geared towards the smaller investor as opposed to the large property investor who tends to invest in commercial property as opposed to residential property. The Deputy's concern in this regard is definitely valid. Perhaps there should be a cap on the amount of relief any one individual taxpayer can claim in a given tax year. That might be go a long way towards addressing the Deputy's valid concern.

The maximum qualifying cost for the purpose of this incentive, which is modelled on the home extension scheme and in respect of which the same caps apply, is €30,000, inclusive of VAT at 13.5%. This provides for a maximum tax credit of €4,050. This would be the relief in respect of any one apartment. As it is confined to income tax payers, the cap will be the level of income tax paid by the person, including, for example, in respect of refurbishment of a property which includes a flat at bottom level and three bedsits on each floor above that level. It is not possible to get relief unless one is paying income tax. Most of those involved would not have a huge income tax liability. Those who have would run out of headroom to avail of the tax credit. Obviously, they could defer some of it to the following year and so on. The best thing to do is to monitor it and see how it works, which Revenue will do. As I said, this does not apply to rental companies that are incorporated.

Question put and agreed to.
SECTION 12

Amendment No. 8 in the name of Deputy Pearse Doherty has been ruled out of order as it involves a potential charge on the Exchequer.

Amendment No. 8 not moved.
Question proposed: "That section 12 stand part of the Bill."

Amendment No. 8 sought to end the dual abode allowance, which, the Taoiseach, Deputy Kenny, when on the Opposition benches promised Fine Gael would abolish if elected. I am glad that the Minister has introduced an amendment to exempt officeholders, including Ministers and Ministers of State, from having their water charges deductible from their tax liability through the dual abode allowance. At the time that I highlighted this issue, having clarified with Revenue that Ministers and Ministers of State were entitled to do this, the Minister was quick to respond that this matter would be addressed in the Finance Bill. I again welcome that he has done so. However, the dual abode allowance is not only about the water tax.

I genuinely believe that the system in respect of the claiming of expenses for officeholders, including Ministers, such as the Minister for Finance, Deputy Noonan, and Ministers of State, needs to change. It should be far more transparent. I cannot understand why it does not replicate the system for other Members of the Houses. While most information in respect of this system is published on the Oireachtas website, other issues are dealt with in a very secretive manner. For example, we know so far that ten officeholders of this Government have availed of the dual abode allowance but none of us know for what purpose they have availed of it. A current officeholder who is a Minister or Minister of State can purchase a house in Dublin and can have his or her agents, architects and solicitors fees and mortgage interest in respect of that house written off against their tax bill. He or she could also have maintenance in respect of upkeep of that house, which equates to approximately €6,350, written off against their tax bill. We do not know if that has been done because there is no transparency and Revenue will not, and rightly so, disclose individual's tax arrangements. If the system in respect of Ministers and Ministers of State was the same as that used by other Members, it would at least be auditable and published in terms of the overall allowances received.

In acknowledging that Ministers, Ministers of State and other officeholders will now not be able to claim back water charges under the dual abode allowance, I do not understand the system relating to the maintenance of a second residence in a hotel. It appears that a person who maintains a second residence in a hotel, guesthouse, etc., as many Ministers and Ministers of State do, is entitled to an allowance equivalent to the cost of room rental, which is fair. However, in addition, the officeholder is entitled to an allowance in respect of vouched additional costs associated with maintaining a second residence in a hotel and, as an alternative to vouched expenses, the officeholder can claim a flat rate allowance of €3,500 per annum. Whichever method is adopted will continue throughout the period of office. When I clarified what was meant in this regard, it was suggested that the claim could be in respect of laundry expenses. This is ridiculous. There should not be in place a system which permits people to claim these benefits without any transparency and to have them written off against their tax liability. People should not be able to claim unvouched allowances in respect of which there is no transparency in terms of what is available.

I suggest that the Minister do what the Taoiseach when in opposition a short number of years ago committed to do, namely, he should abolish the dual abode allowance and bring officeholders under the statutory instrument under which the cost of staying in accommodation in Dublin is met. The availability of a €3,500 allowance in respect of the maintenance of a second residence is wrong. If I was appointed a Minister of State today and I decided to buy a property in Dublin, I could have the agent, architect and solicitors fees, mortgage interest and €6,350 per annum written off against my tax liability. That is a huge bonanza. Perhaps nobody is doing this but that this system exists is not acceptable in a situation where tens of thousands of our people are struggling to keep a roof over their heads.

I agree with the payment of expenses in respect of a person who has a second home in the capital or needs to stay in a guesthouse and so on, but the system in this regard needs to be transparent. I accept that my amendment has been ruled out of order but I suggest that the Minister go further than what was proposed therein and do what was proposed by the Taoiseach when in opposition and abolish the dual abode allowance. Perhaps the Minister will outline the rationale for retaining this allowance in its current form.

Deputy Kieran O'Donnell took the Chair.

It appears that the purpose of amendment No. 8 was the abolition of the dual abode allowance, which is a tax deduction allowed to Ministers, Ministers of State and the Attorney General in respect of the cost of maintaining a second residence. Section 836 of the Taxes Consolidation Act provides for a tax deduction under section 114 of the Taxes Consolidation Act 1997 in respect of the cost of maintaining a second residence where arising out of the performance of his or her duty a Minister or Minister of State is obliged to maintain that second residence in addition to his or her main residence. The allowance is confined to officeholders who represent constituencies outside the Dublin area.

As the Deputy is aware, overnight expenses are not paid to officeholders. Such expenses apply only to Deputies and Senators who are not officeholders. For this reason, I would not be able to accept the amendment. The position is as outlined. I cannot comment on individual cases because the Revenue does not share information on individual cases. I do not know of any person in the current Administration who has purchased a second house in Dublin. Perhaps there is a person, or more than one person, who has done so. Typically, people rent an apartment and claim tax in respect of the cost of doing so. For example, by taking an apartment on which the rent per month is €1,400 or €1,500 per month and multiplying it by 12 and taking away 41% of the end amount, the Deputy will see how short the amount which can be claimed is of the overnight expenses which all Deputies who are not officeholders receive. It has reached the point - I am sure the Deputy is well aware of this - that Ministers of State in particular were much better off before they were promoted, in financial terms, because the dual abode allowance goes nowhere near compensating them for what they lose out in terms of overnight expenses.

Under the dual abode allowance, anybody renting accommodation gets the full amount of the rental cost written off their tax bill. On top of this, they get an unvouched sum of €4,500. Anybody who stays in a guesthouse gets the full cost of the guesthouse or hotel and on top of that they get €3,500 written off their tax bill. In regard to people buying property, €6,500 plus mortgage interest and all associated fees are written off.

I think it is public knowledge that officeholders bought property, perhaps even an officeholder in this current Administration. My point is the justification for the dual abode allowance. This allowance was not created by the Minister, but is a throw back to the regime long before this Government. It needs to change.

Let us do the maths on it. Let us suppose somebody pays €15,000 a year for an apartment in Dublin and they get another €4,500 in expenses, rounding up the figure to €20,00, he or she will get tax relief of 41% on that, which is north of €8,000 of a rebate. How much does the Deputy get in overnight allowances? I should not personalise the question, but how much does a Deputy, claiming full overnight allowances, get? If the Deputy does the maths, he will see that rather than gaining, officeholders lose dramatically in this regard. It has reached the point that Ministers of State were financially better off as Members. They are taking the promotion for career reasons but are very conscious they are losing out substantially in financial terms.

I may agree with the Minister on that point. I have spoken to officeholders who would have recounted the same story to me. The issue is transparency. An Oireachtas Member who stays in a hotel can have the full cost of the hotel written off their tax bill, and also have another €3,500 written off. It is not a case that one gets 41% relief; one gets the sum written off the tax bill. In the other situation where one has one's own accommodation, one gets €6,000 written off. It is not transparent and it should not happen in that way. Even if it costs the State more money, officeholders who represent constituencies outside Dublin should have a more transparent system of expenses for their accommodation when they are staying in Dublin. We need transparency.

Imagine if one put a face to the name of an officeholder and the Taoiseach bought a nice property in Shrewsbury Road and had the fees for his architect, agent and solicitor written off his tax bill as a result of this dual abode allowance. He would get another €6,500 every year to maintain that property and he would have the mortgage interest written off his tax bill. That would not be right. I am not suggesting the Taoiseach has done this. I am sure he has not done it, but the provision in our tax code is wrong. The Taoiseach was correct when he said that he would abolish it. The Minister for Finance is correct when he says that one should not be able to claim property tax and water charges, but that ministerial amendment needs to go further. I know the Minister will not do it now but I suggest, and I am sure he would get the backing of his colleagues in Cabinet and the support of the Ministers of State for it, that he introduces a more transparent system so that all Oireachtas Members are in the same system. If officeholders are staying overnight in the capital, they should be entitled to the same level of expenses as other Oireachtas Members. There should be no secret arrangement with the Revenue that allows officeholders to have their tax liability written down.

I have been tracking these figures for many years. There are fewer officeholders claiming this concession than ever before. In the previous Administration, the majority of officeholders were claiming it. In the last tax year, I can only see ten officeholders claiming it. There may be reasons for that. I suggest the Minister needs to go further than what is proposed today.

It is only a claim that applies to Ministers who are resident outside Dublin. A high proportion of officeholders are Dublin based and are not entitled to claim it at all. The Minister for Public Expenditure and Reform deals with the rates of overnight and travel expenses for Deputies and Senators. I will draw his attention to the Deputy's remarks.

Question put and agreed to
Progress reported; Committee to sit again.
The select sub-committee adjourned at 9.05 p.m. until 10 a.m. on Wednesday, 19 November 2014.