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Select Sub-Committee on Finance debate -
Wednesday, 19 Nov 2014

Finance Bill 2014: Committee Stage (Resumed)

I welcome the Minister of State, Deputy Simon Harris, for what I hope will be a productive day; it will certainly be a long day.

SECTION 13

Amendments Nos. 9 and 10, in the name of Deputy Pearse Doherty, have been ruled out of order.

Amendments Nos. 9 and 10 not moved.

Amendments Nos. 11 to 16, inclusive, are related and may be discussed together, by agreement.

I move amendment No. 11:

In page 21, line 32, to delete " 'A' and".

Amendments Nos. 11 and 12 are connected. Section 13(c) introduces a revised definition of specified amount into section 825C of the Taxes Consolidation Act. The revision is necessary to facilitate removal of the upper income threshold. Amendments Nos. 11 and 12 relate to an apportionment of relief in cases where an assignee either commences or ends his or her employment in the State midway through the year. The method of calculating the apportionment could in certain instances result in a double restriction in relief for individuals. These amendments are proposed to address this anomaly.

The Minister of State should also speak to the amendments up to amendment No. 16.

Amendments Nos. 13 and 14 are connected and relate to section 13(d). This paragraph relaxes the requirements for tax residency for individuals coming to the State. Such individuals will no longer be prevented from claiming relief by reason of having dual residency. The wording employed in the Bill as initiated may inadvertently delay relief in certain circumstances. Amendments Nos. 15 and 16 are technical amendments.

Amendment No. 14 proposes to delete the words "and is not resident elsewhere". What is the effect of that?

In the original provision in SARP, this rule excluded assignees from countries, such as citizens of the United States who were deemed to be tax resident elsewhere. It is to ensure that individuals from countries such as the United States can avail of the SARP. It was probably inadvertent not to have had it included in the first place.

Is the Minister of State saying they can be tax resident in the United States and resident here?

They must be tax resident here, but they can also be tax resident in the United States, based on their citizenship in the United States.

The income we apply based on the definition of A as outlined on page 21 in paragraph (2B)(b)(i) is the income, profits and gains for the tax year that arise in this State.

Is the definition of gains those gains from-----

It is share-based remuneration.

What about the profits?

It is from profits gained by the employment here.

The income is obviously just direct income.

Yes, income here.

Amendment No. 13 includes the words "and is not resident elsewhere". That will apply for tax years up until 2014 but in respect of 2015 those words will be deleted. If it was never envisaged that this should be the case in the legislation, why are we inserting it for 2014 and not removing it for 2015 also?

My detailed note states that the subsection provides that as regards a relevant employee who first arrives in the State in 2014 and is not tax resident in that year, the fact that he or she may have dual tax residence in 2015 will not prevent him or her being first entitled to the relief in 2015. This reflects the relaxation of the tax residence position which was raised during the consultation process. The Deputy will be aware of this. These changes are being brought about to the SARP through the consultation. It was introduced and, admittedly, the take up has been low, although it is moving in a more positive direction. This is an effort by the Minister for Finance to ensure that the SARP is fit for purpose and is doing what it was intended to do, which is to attract people here to carry out significant employment tasks and to bring talent to the country. It is about making sure it is fit for purpose and sets out to do what originally we wanted to do. The consultation process, which is on the Department's website, raised a number of these issues and this is an attempt to respond to them.

That does not answer my question but I will move on. The Minister of State said that amendment No. 16 is technical in nature and that subsection (5) is being deleted. Can he clarify what is provided in subsection (5) and the effect of its deletion?

The provisions that were in subsection 5 are now catered for in subsection 2(b) of the Bill.

The effect of amendments Nos. 1 and 2 is to remove the upper limit.

The Deputy is referring to amendments Nos. 11 and 12.

Apologies, yes, amendments Nos. 11 and 12.

Why does the Department and the Government believe it is necessary to remove the upper limit of €0.5 million for this tax reduction to these employees?

We are removing the upper limit on income of €500,000. It is something that the Minister for Finance will keep under close consideration but it is based on the consultation process. We have engaged with stakeholders in regard to the benefit of SARP to the Irish economy. It was not something introduced simply for the sake of doing so, rather it has been introduced to attract people with specific employment skills and people who may not otherwise come to the State. The Minister is cognisant of the consultation process which suggested that a removal of the upper limit could attract more people and, therefore, it is something we are going to try out in this Finance Bill. I do not think there is any downside to trying it but, as the Minister, Deputy Noonan, has done with all taxation measures he has introduced, it will be kept under close review.

I suggest the downside to doing this is the State will suffer a loss of tax revenue. What SARP allows for at this time is for an upper limit of €0.5 million. For employees who earn up to €0.5 million, 30% of their income can be written off for taxation purposes and the lower limit is €75,000. Currently, the available amount of income is €425,000 but the Government suggests that could increase to €1 million, €1.5 million or €2 million - there is no limit in terms of what portion of one's income can be written off for tax purposes. There would be a loss of tax revenue in regard to this provision. Given the low level take up of SARP, from where is the demand coming? The take up of it has been tiny even though it has been in operation for a number of years and is a hugely generous package covering not only income tax, but flights back to one's mother country and children's private education which can be claimed against one's income tax. Are people earning €1 million saying they need us to be more generous, that allowing them to have 30% of the €425,000 exempted from tax is not enough and that they want us to allow the whole €925,000 to be included for this calculation? Is there that type of demand? I suggest there is not, given the low level of uptake of SARP. If there is that demand, I assume it is coming from one or two individuals.

We have a few pages dealing with these amendments in respect of these very highly paid individuals. The Minister, Deputy Noonan, talked about the squeezed middle Ireland yesterday but these people are not squeezed. The Minister is legislating for people who are coming to this State and earning above €0.5 million but no Irish person can avail of this measure. This is a hugely generous package which allows such individuals to write hundreds of thousands of euro off their tax bill. I understand the priorities of the Government are to reward the most wealthy in society. There is clearly a way of doing that. Why is this being done? From where is the demand coming? Why does the Minister of State believe that at a time when there is a massive crisis across the board in certain areas that people who earn above €0.5 million should get more of their tax written off than any other person who earns below that level right down to the level of the minimum wage?

The Deputy has raised a number of points. First, it is not the priority of the Government to reward the better off, but I am sure that is a debate we will continue to have during the consideration of this Finance Bill and it is one the Deputy had with my colleague, the Minister, Deputy Noonan, last night. I do not accept that there is a loss of tax revenue to the State from this measure. The Deputy is correct that these are high paid individuals, but they are also very mobile. They can decide where they wish to locate. That is an issue that is mentioned when we talk to the IDA about trying to attract some of the most senior managers into the country. We want to get senior managers and executives to come here which will create more jobs and help the people the Minister, Deputy Noonan, spoke about when he used the phrase the "squeezed middle".

I will give the Deputy an example. If somebody on a salary of €500,000 decides to locate here under the new regime, they will have an effective tax rate of 35.37%. They will end up paying €177,000 in taxes that we would not otherwise get. I would take the Deputy's point if he was presuming those people are here anyway, but considering the SARP is trying to attract people here who are mobile, who can choose to go to other countries, they would not necessarily come here otherwise. The SARP is trying to attract high paid individuals to come here. The State can benefit from the tax revenue they pay here that they would not otherwise pay. This is something IDA Ireland and such bodies note when they try to attract talent into the country. We want to help the IDA convert its strong pipeline of potential investments into a reality. I think that is something to which we can all subscribe.

The Minister of State gave effective tax rate figures. Could he provide clarity in respect of tax applying to an income of €0.5 million and €1 million? How much less tax would a person earning €1 million who avails of SARP pay compared to an Irish executive earning the same amount working in a company in Ireland? This provision represents tax forgone. The Minister is allowing for people who earn up to €1 million to have 30% of their income deducted before calculating the tax that is liable. The Minister of State might give me those figures.

I am happy to do so. I do not have the figure in respect of an income of €1 million but I am sure we can work it out. If someone was earning €0.5 million under the enhanced SARP, the one we are debating now, they would end up paying an effective rate of tax of 39.48%. If they were not availing of SARP, they would end up paying a tax rate of 49.68%. A person earning €800,000 availing of SARP would pay a tax rate of 39.67% and a person on that income not availing of SARP would pay a tax rate of 50.55%. A person earning €1.5 million availing of SARP would pay a tax rate of 39.83% and a person on that income not availing of SARP would pay a tax rate of 51.23%. I must bring the Deputy back to the point that we are comparing apples and oranges here because these people are not necessarily people who are in Ireland and the Government is saying to them that it will give them a tax break. Rather, these are people we are trying to attract in and incentivise to come to the country. I argue that the country would be net beneficiaries from the tax they would pay that otherwise would not be paid here.

In terms of the last figure he gave, the Minister of State is saying to someone that we will cut their tax bill by €150,000 if they come to this country.

The Deputy asked about the loss of income to the Irish Exchequer and I argue that there is no loss of income to the Exchequer.

There is no concrete evidence that those who avail of SARP would not have come here in any event - that their relevant employer would not have brought them here. We are talking about a handful of individuals - as opposed to thousands of people who have flooded to our shores as a result of this measure - whose companies are located here. There is no guarantee that they would not have come here regardless of these provisions. The Minister has created a sweetener for them and said he would give them €150,000 off their tax bill, that they need not worry about it, that they are one of the highest paid employees in the State but the country can afford to go without that portion of tax because we do not have a problem of homelessness, hospital waiting lists or discretionary medical cards and that we are not screwing people by asking them to pay additional water charges which they cannot pay and so on. Therefore, we can afford to allow those people to have their tax bill written off despite the fact that they are some of the highest paid income earners in the State. That is what this provision says.

I am not going to be awkward about this. The Deputy can make those comments but we are dealing with Committee Stage of the Bill and we have 100 amendments to go through. I can see that he is trying to provoke rows with other members of the committee.

The Deputy is not confining himself to speaking on the amendments.

I am sticking to the amendments.

You are not. Speaking about the water charges is obviously an attempt to provoke other members of the committee.

Water charges may be a very sensitive issue for the Chairman and his party but as regards the priorities-----

Please allow me to speak, Deputy Doherty. I am still the Chairman of this committee. I am only trying to keep this committee meeting going through the day. I gave very great leeway yesterday and last night. We have a lot of work to get through. I would like members to stick to the amendments so that we can get through the work. If the Deputy wants to provoke rows about water charges and homelessness, that is fine, but then I will become even more rigid in enforcing what people can and cannot say and this will be of no use to Deputy Doherty or anyone else. I will endeavour to allow leeway in the discussions on the amendments but I would prefer if we would discuss Committee Stage because this is not a Second Stage debate. It is Committee Stage which is to do with teasing out the amendments. The Deputy well understands how the committee works; he did not only arrive here yesterday or the day before yesterday. I ask that we deal with what we are obliged to deal with. I am not dragging my party politics into it and it is quite clear what is going on here.

I appreciate that. I also appreciate that there are sensitivities in the Government about water charges. I am trying to refrain from raising the issue of water charges but there is an issue in the Finance Bill to do specifically with SARP and how people will benefit. It is appropriate to mention the point about other priorities in Ireland that could be addressed in the Finance Bill and it is relevant to these amendments.

The Deputy knows I still allow plenty of leeway in the discussions. The Deputy wants the whole situation to break down into a party political row.

It is Deputy McGrath's turn once Deputy Doherty has finished.

I want to raise a point of procedure.

On a point of procedure.

It is entirely reasonable that the Chairman wants to focus on the amendments and the sections of the Bill and wants to progress the meeting. However, I have two points to make. Some of these amendments will be more controversial-----

Last night, there were discussions about ideology and everything else-----

As much from the Minister as from us, in fairness.

Yes, for two and a half hours and I would have stopped him or stopped you.

I ask the Chairman to consider the point-----

I am not naive about how committees work. Rather than starting the day like this, I can see how a meeting can go-----

I am being very reasonable, am I not?

Yes, thank you.

My second point is that I think it is fair enough when considering taxation measures to talk about alternative taxation, the different taxation choices that are being made in the Finance Bill, without getting into detailed discussions about the merits of other taxes. It is a reasonable point to make that making decisions on one tax policy as against others is relevant.

We are expected to confine ourselves to discussion of the amendments, even though significant leeway is permitted. However, I do not want to be listening to the same argument for the next 15 hours.

It would be helpful at this stage if the Minister of State put on the record the number of people who have availed of SARP and the amount of tax forgone. The Minister of State might dispute the use of the word "forgone", but rather the tax that has not been collected. The issue of jobs and job creation underpins all these measures and is only justifiable if there is a clear and tangible link between the executive coming to Ireland and job creation. This was the original intention of SARP. It is not a measure with which anyone is terribly comfortable but if it provides a greater economic gain for the country, then it can be justified. Our competitors for foreign direct investment have similar schemes in operation. How does Ireland's SARP scheme compare against our main competitors?

Any tax regime has to have a moral base. I do not accept that we can waive fairness for some perceived pragmatic gain. I do not know how, when people who are on lower incomes are battered with taxes and are struggling as a result, the Minister of State can justify people on extraordinarily high earnings getting further tax breaks. Many people might also ask why these executives could not be sourced from inside the country. Are there not people here who might take the jobs? Is it the case that one executive coming here will result in a whole firm coming here? There is not much evidence to back up what the Minister of State is saying and there is certainly not much fairness in these measures. I do not think one can have one tax policy for the poor or for the struggling and another tax policy for the super-rich. It is just not fair. Therefore, I am against it.

The Deputy has made his opinion clear.

By Deputy Doherty's own admission, very few people are availing of this measure. He has a point in the sense that there is a loss to the State in terms of taxation paid by that individual if he or she is already resident in the State. However, if such individuals are coming into the State from outside, then there is not a loss to the State. As the Minister pointed out last night, those people who control and influence foreign direct investment are individuals like all of us. They are sitting in a boardroom in the US or in Germany or some other part of the world. They might well be in charge of running a firm in Ireland with the potential to create a high number of jobs. They consider their own personal circumstances when they are making these decisions. Any measure that could attract these individuals to make the decision easier to move to this location has to be positive. I would like to see what it will cost the State if that figure were available.

I will endeavour to respond to the variety of issues raised by members. Deputy Boyd Barrett and I will probably disagree on this point but I do not accept the logic that this Government is not taking any action to protect lower income workers and people on the lower end of pay scales. I reference the fact that 410,000 people who were paying the USC when we came to office will now not be paying it.

I will give the same warning to the Minister of State as I gave to Deputy Doherty that he should stick to the substantive amendment.

I will do so. Every now and again I might just try to move on to a political point because I presume people are raising political points because they would like me to respond to them politically. I take the Chairman's point.

They are probably provoking the Minister of State rather than asking him to respond.

I am sure we can dip in and out of that debate during the course of the day.

The Government is very mindful of the sacrifices made by low and middle income families. Budget 2015 was the first step in an attempt to alleviate some of those burdens. This relief is an attempt to attract key decision-makers into boardrooms in Ireland. Let us be realistic. There are massive companies with headquarters in various parts of the world with key crucial and influential personnel sitting in their boardrooms. This country must make a decision as to whether we want to attract those people to come here. They are very mobile, and they are not paying any tax in Ireland because they are not living here. If we can get them to come here, they will be paying tax, albeit less tax than they would be paying without SARP, but I contend they would not be here without SARP. In addition and much more important than the tax contribution they make to the State, they are bringing influence to Dublin, to Cork, to Ireland. They are bringing decision-making capacity to this country and they have the opportunity to see what this country has to offer in terms of locating a new product or a new element of their business.

Deputy McGrath asked what other countries have such schemes and how these schemes operate. I have information on the Netherlands, France, Sweden, Luxembourg and Switzerland. I can provide the Deputy with that information if he wishes. The report is available on the Department's website. The Netherlands has a scheme commonly known as the 30% rule.

This scheme provides an exemption from tax on 30% of the salary for up to ten years for qualifying assignees. France provides a special exemption scheme for expatriates who have not been tax resident in France for the previous five years. The scheme is available for a maximum of five years and exemptions are capped at 50%. Switzerland has quite a complex tax system. Its tax is charged at federal and canton level. While each of its 26 cantons has its own tax rates, local tax rates can be negotiated individually and principally for companies as cantons compete with each other to attract multinationals and individuals. There is no national rule in Switzerland. However, most cantons give assignees some level of preferred tax treatment.

In terms of what these changes will cost, the Government does not have a specific target for the number of people who will avail of the relief. It is not possible to anticipate accurately how many will do so. The IDA and others promoting Ireland around the world and trying to attract key decision-makers here, some of whom I had an opportunity to meet when in London last week, are the people looking for such measures to be put in place.

Deputies Michael McGrath, Richard Boyd Barrett, Pearse Doherty and Brian Walsh asked about loss of tax. I dispute the way that is presented because I would contend that these individuals are not coming here for SARP. On the number of employees, we do not have the 2013 confirmed figures. However, I can give the provisional figures. The number of employees who availed of the scheme in 2013 is 36; the number of employers with employees availing of the scheme in Ireland is 31; the amount of income in respect of which tax was not deducted is €46,276; the amount of tax forgone is €18,973; and the total figure in respect of the amount of tax forgone in 2012 is €111,721.60. The provisional figure for 2013 in respect of the number of jobs created and retained is 25 and 4, respectively. While this is about jobs and individual job numbers, it is also about having the capacity in Ireland for it to be considered as a location for further expansion. The international financial services companies based here want people, when making a decision about expansion or a new product, to consider locating here.

This scheme is time limited. Also, it is important to point out that there is no exemption in relation to USC or PRSI.

In regard to the scheme as currently constructed, will IDA Ireland advise if it is not working efficiently?

There was a consultation process, the report of which is on the Department of Finance's website. It is open to anybody who wishes to do so to make points on it. Obviously, IDA Ireland is a key source of information for the Government in this regard and it is supportive of the enhanced scheme.

Have there been any deliberations with IDA Ireland in regard to this being linked to further jobs announcements outside of the individuals who avail of this scheme?

That is the nub of the point I am making. This obviously attracts individuals and, therefore, those individuals are recorded as a new job in Ireland and they obviously pay a tax element that I contend they would not pay without it. It is crucial that we have key decisions-makers here. IDA Ireland officials are trying to get into meeting rooms across the globe to encourage people to come to Ireland and to bring their families with them on the basis that Ireland is a great place to live and a great place to do business. That is what this is about.

Under the scheme as currently drafted, could a situation arise whereby an Irish resident individual working in Ireland could go abroad for six months and a day and then return to Ireland and avail of the scheme?

No. The minimum time an individual would have to be non-tax resident in Ireland is five years.

This is not only about cost, but opportunity cost.

The Minister for Finance would be forthright in saying that this is worth trying. The scheme has been in place now since 2012. We have been asked, through a consultation process which has been published and through linkage with State agencies such as IDA Ireland, to look at enhancing the scheme, taking into account what our competitors are doing. We are doing that now. Why not try it?

It would be beneficial if some empirical work was done on the knock-on effect in terms of additional jobs of the enhancement of the scheme. It should be a job creation measure as distinct from a measure benefiting only the individual.

We will come to that issue later when discussing an amendment in the name of Deputy Doherty.

I do not propose to speak to my amendment at this point although I have no objection to other Deputies speaking on the issue now. I would rather not challenge the Chair at this time.

Amendment agreed to.

I move amendment No. 12:

In page 21, line 38, to delete " 'A' and".

Amendment put and declared carried.

I move amendment No. 13:

In page 21, to delete lines 40 to 42 and substitute the following:

" "(3) (a) Subject to paragraph (b), where, for a tax year, a relevant employee—

(i) is resident in the State for tax purposes and is not resident elsewhere,".

Amendment agreed to.

I move amendment No. 14:

In page 22, between lines 11 and 12, to insert the following:

"(b) With effect from the tax year 2015, paragraph (a)(i) shall apply as if the words 'and is not resident elsewhere' were deleted.".

Amendment agreed to.

I move amendment No. 15:

In page 22, line 12, to delete "(b) A relevant" and substitute "(c) A relevant".

Amendment agreed to.

I move amendment No. 16:

In page 23, between lines 3 and 4, to insert the following:

"(f) by deleting subsection (5),".

Amendment agreed to.
Question proposed: "That section 13, as amended, stand part of the Bill."

Two of my amendments to this section were ruled out of order, the first of which relates to the reduction from 12 months to six months in respect of the period for which the relevant employee must have been an employee of the relevant employer prior to his or her coming to this State. I am interested to hear the reason for this.

Section 13(c)(c) provides that an individual must perform the duties referred to in paragraph (b) for a minimum period of 12 consecutive months from the date he or she first performs those duties in the State. It is clear then that for an individual to avail of SARP, he or she must have been an employee of the company for 12 months. Section 13(2B)(c)(i) refers to the first year of employment of the relevant employee. This means that if the first year in which the employee is entitled to the relief is not a full tax year, then relief can be apportioned. How can we put in place a provision of 12 months in respect of entitlement to relief and then allow for apportionment, and how can we ensure that in allowing for apportionment the employee will fulfil the 12 months requirement under section 13(c)(c)?

On the question regarding section 13(2B)(c)(i), that is a claw-back measure. It only applies if an employee leaves before the 12 month period. In other words, if the full 12 months is not fulfilled, then relief will be apportioned. While an individual must have committed to spend 12 months here, he or she could arrive mid-year in, say, June or July, which would be the middle of the tax year.

That is the point I am making. If an individual arrives in June, will the €75,000 be reduced by half?

As the person will be here for only half the year a €37,500 tax deduction will be made because apportionment will be used. The person will be able to claim relief under SARP at the end of the year for this portion of money, but he or she will not yet have complied with the provision whereby he or she must spend 12 consecutive months with the company. Where is the clawback measure with regard to individuals who decide to leave after six or seven months?

This is where my clawback comes into play. If the person arrives in June or July Deputy Doherty is correct that he or she is eligible for it for a portion of the year, but the person will have given a commitment under the legislation to be here for a minimum of 12 months. Should he or she leave before this 12 months he or she will not be eligible for the next portion of it in the next year, or be eligible at all.

The wording does not describe an individual who gives a commitment to perform the duties, it describes a relevant employee as an individual who performs the duties referred to for a minimum period of 12 consecutive months from the date he or she first performs these duties in the State. I suggest there is no flexibility with regard to someone stating he or she intends to do so. The individual does not become a relevant employee unless he or she has performed the duties under the section.

I stand by what I said, if the person does not spend 12 months as a relevant employee he or she will not be eligible and will be reassessed for any potential eligibility which had derived from the period he or she was here in the previous year. The person must stay the 12 months and this is how Revenue will administer the scheme.

Somebody who only spends six months in the scheme is able to avail of the relief under the provisions on page 21 of the Bill.

The Deputy is correct that one is eligible for the relief from day one, but a commitment must have been given to be here for 12 months and should the person not be here for the full 12 months he or she is no longer eligible and therefore can be reassessed by Revenue. The Deputy is correct; one is eligible for the relief from day one, but this eligibility is tied in with being here for a minimum of 12 months. Should the person leave before this, Revenue can reassess him or her.

Will the Minister of State clarify this point for me? The relief is only available to relevant employees. Relevant employees are defined on page 20 as employees who are here for 12 consecutive months, not as employees who give a commitment but as employees who perform the duties. If a relevant employee is somebody who has performed the duties for 12 months and this relief is only available to such an employee, how could somebody avail of the relief prior to performing the duties for 12 months?

I accept the argument made by the Deputy, but I have outlined how Revenue administers the scheme with regard to somebody who does not stay for the 12 months. The Deputy reads the legislation as he does, it is administered by Revenue on the basis I have outlined. I will seek further clarity.

Revenue must administer the law. If relevant employees are those who perform the duties for 12 months then they must perform the duties for 12 months.

They must, and if they do not perform the duties for 12 months the relief can be clawed back.

They cannot avail of the relief unless they are relevant employees. Revenue cannot make up its own rules. The legislation defines a relevant employee.

I do not want to get overly pedantic, but the legislation is legally interpreted in the way I have outlined. One could argue the legislation does not state "who performed the duties for 12 months" but "who performs the duties for 12 months" therefore someone is eligible from day one. I do not mean to be pedantic, I am just giving my reading of it, which tallies with how Revenue interprets it. I accept the point being made by the Deputy, but it is not how it is administered by Revenue. The employer and employee make the 12 month commitment to Revenue while availing of the scheme. There has not been an issue in this regard from a legal or administrative point of view.

There has not been an issue because the section has not applied previously with regard to apportionment.

The provision with regard to 12 months has.

The apportionment section?

This is giving clarity to something which already applies.

The 12 consecutive months with regard to the definition of a relevant employee was laid down in law prior to this.

Can we get a note from Revenue on how it interprets this, in particular addressing the concerns I have raised at this meeting which are quite specific?

We will have Revenue send a note to the committee in advance of Report Stage so members can examine this further.

Where is the demand coming from with regard to the change from six months to 12 months?

This question refers to amendments Nos. 9 and 10, which I know were ruled out of order but we can speak about the general issue. They sought to undo two of the enhancements to SARP provided for in the section. Amendment No. 10 would retain the current upper income threshold of €500,000, which we have discussed already, while amendment No. 9 would retain the current requirement for an individual to have been a full-time employee for 12 months prior to his or her arrival in Ireland. The latter change was made to align the changes made in the Employment Permits (Amendment) Act 2014 published by the Department of Jobs, Enterprise and Innovation. The Act provides for a new category of employment permit, an intra-company transfer employment permit, which allows for the temporary transfer of employees between affiliated foreign and Irish companies. Under the terms of this permit, an employee must have been employed by the employer for a minimum of six months. As we are trying to attract people here, this measure is to ensure the permit situation is aligned with the tax situation. It aligns SARP with the Employment Permits (Amendment) Act 2014.

Question put and agreed to.
NEW SECTION

I move amendment No. 17:

In page 23, between lines 34 and 35, to insert the following:

"Annual Report of the Special Assignee Relief Programme

14. The Minister shall lay before the Houses of the Oireachtas an annual report showing the number of people who have availed of the Special Assignee Relief Programme (SARP), the number of additional jobs created by SARP and tax foregone as a result of SARP.".

I do not know why this amendment would create a new section before section 14. It applies to SARP and deals with issues which have been raised by other Deputies. The amendment states the Minister should lay before the Houses of the Oireachtas an annual report showing the number of people who have availed of the special assignee relief programme, the number of additional jobs created and the tax forgone as a result. This should be standard with regard to tax reliefs as there should be transparency on how they work. The reason the number of additional jobs created here is included is because the Government announced there would be conditionality with regard to jobs created. In the original forms required one had to provide this data, but this seems to have been relaxed and now this is very much a tax break for very high income earners who take up posts in the State.

I thank the Deputy for the amendment. I do not propose to accept it because I understand the Revenue Commissioners will shortly publish statistical information for the 2012 tax year and for the first time this material will include information about SARP. The material will then be updated on an annual basis. Therefore, the Minister for Finance does not see the need to have a separate report prepared on SARP.

Will it include the number of additional jobs created under the measure?

I do not see why it cannot do so. The information I have includes the number of employees availing of the scheme, the number of employees with employees availing of the scheme, the amount of income in respect of which tax was not deducted, the amount of tax forgone, the number of employees whose education fees were paid, the amount of education fees paid, the number of jobs created and the number of jobs retained.

How many jobs were created as a result of this?

I read this earlier but I am happy to do so again. I do not have a figure for 2014, but the provisional figure for 2013 is 25 and the final figure for 2012 is five.

The figure for 2013 is 25.

The figure for 2012 is five.

Obviously these are additional to the jobs of the people availing of SARP.

When this was announced in 2012 I challenged the Government and Deputy Burton, who was not Tánaiste at the time, stated on Leaders' Questions that it was critical we attracted people to help create more jobs, that the projected cost of the relief for up to 100 individuals, which never materialised, over a period of time was between €3 million and €5 million and that it was very modestly targeted. I stated it was open-ended and contained no requirement to produce one job in the State, which it does not.

Deputy Burton went on to say that the requirement by the IDA is that each of these individuals would generate 50 jobs. That is on the record. Is it the case? If each of the individuals concerned generated 50 jobs in 2013, some 1,500 jobs should have been created. Only 25 jobs were created. The intention of this Government at the time the relief was announced was that each of these individuals would meet the requirement of the IDA to generate 50 jobs but this has not materialised. This requirement was not stated in the legislation. Either the Government misled the Dáil or this was not the requirement in the first place. Would the Minister of State acknowledge that the stated intention of the Government in 2012 has fallen flat on its face, given the fact that only 25 jobs have been created as a result of 36 employees taking up this tax relief benefit?

There is no specific job creation requirement under this legislation. The point, and I have raised it with Deputy O'Donnell and others already, is that it brings key decision-makers and those with key skill-sets to Irish boardrooms and to companies based here, so that it better positions Ireland and also multinational companies based in Ireland or with operations in Ireland to attract further growth. The commentary that the Deputy read out is not reflected in the legislation.

I accept it is not reflected in the legislation. I said that to the then Minister, who is now the Tánaiste, Deputy Joan Burton. She claimed on behalf of the Government during Leaders' Questions that each individual was required to create 50 jobs. Where did that response come from?

I hear what the Deputy is saying but I am not familiar with it. The Government is committed to job creation and one can only presume that the Tánaiste was talking about doing everything possible to continue to create jobs. I have outlined the specific references to SARP in the legislation, and this is not in it.

When I put it to the Minister that the relief is open-ended and it contains no requirement to produce one jobs in the State her response was that the requirement by the IDA is that each of these individuals would generate 50 jobs. I knew at the time that the Minister was misleading the Dáil. That is the reality. Is there documentation to show that the Government believed that each of these individuals would create jobs? The tax relief is very generous and what may have convinced the Government to introduce such a generous scheme for people overseas to come to Ireland and have their tax bill written down is that they may have been sold the idea that each one of these individuals would create 50 jobs. I assume that is the case. I assume the Tánaiste did not take to the floor of the Dáil in 2012 and deliberately mislead the Dáil. The point I am putting to the Minister of State is that the rationale for introducing such a scheme - which has been enhanced in this Finance Bill, by removing the upper limit of €500,000 - has not fulfilled its stated intention to create jobs. The original form that had to be provided has to include the number of jobs generated. There is no actual supervision in regard to that but it is pitiful what has been generated as a result of this tax relief. This relief has cost thousands of euro yet 25 jobs have been created. I suggest that if one targeted money at some small and medium enterprises, for example, some high street shops, one could create more jobs with the type of tax forgone than has been created through the tax relief for the wealthiest in Irish society.

My understanding is that this arose from concrete proposals that came from the Global Irish Economic Forum. I appreciate where Deputy Doherty is coming from but I am not sure the measure is a realistic one, that the use of this scheme to create one job would then lead to the creation of a number of jobs ranging up to 50 or 60. Is the purpose of the relief to attract and maintain certain multinationals and-or foreign investors in the State? I wonder if the Minister of State envisages other mechanisms to measure the success of the scheme other than a specific number of jobs directly flowing from one of these jobs? I am not sure that is possible. The Minister of State may also be able to enlighten me on whether there is any plan to end this scheme or does he see it as open ended for the foreseeable future?

Let me start with Deputy Creighton's points, as she perhaps has more eloquently outlined what I have been trying to outline since we started our discussion on section 13. There is a jobs benefit in terms of attracting these people and every job that is created is to be welcomed. I have given members the figures. The creation of 25 jobs is not something to be sneered at, but it is about getting the key decision makers into Ireland. These people are highly mobile and very well paid, but not by the taxpayer, and it is about getting them to locate in Ireland rather than them going to the Netherlands, France, Luxembourg, Switzerland or London, which I visited last week. We are in a very competitive environment. I have responsibility for the IFSC and our rankings in the IFSC have fallen through the floor. What has been a great success since 1987 clearly now needs a shake-up and a review. We are putting in place a new international financial services strategy.

This relief is not open-ended. It was originally for a period of three years and after the review that was carried out and published on the Department's website, it has now been extended for another three years. It is too early to say what will happen. It has only been announced that the Government is extending it for another three years, who knows what will happen into the future. Government has a very open mind on it. I personally have a very open mind on it. I know the Minister for Finance has an open mind on it. We need to see the tangible results. The Deputy is correct that we need to look at other metrics for measuring its success and that is something I will be doing in the context of the new financial services strategy.

I see the point that Deputy Doherty is making. We are coming at it from a different perspective. I do not see this as lost revenue to the State. I see it as additional revenue to the State, so does the Government, so does the Minister for Finance. I listen to the people from the IDA. When I am sick, I may have an idea of what is wrong with me but I go to a doctor. When I want to know what it takes to attract new jobs, I might have a few suggestions but I listen to the experts. The IDA, the Global Irish Economic Forum and the wider consultation process is all pointing that we should look at this as an initiative to keep our competitiveness. In response to Deputy McGrath, I have listed examples of what other countries are doing. That is not to say that the Government is not keeping an open mind. I do not see what we have to lose by trying this for another three years in an enhanced way based on the suggestions from the consultation we have undertaken. I believe it is worth a try.

Deputy Doherty alluded to the 25 jobs to which I had referred. There were 25 jobs created in 2013 on the provisional figures. The amount of tax forgone was €18,973.16. It is not an insignificant development for 25 jobs to be created with a further potential to have decision-makers based in Ireland. I will keep a watching eye on it. The Minister for Finance is definitely going to retain it. We want to see if it will continue to yield results, but our approach is to give it a try.

This is my final point on the amendment. I appreciate what the Minister of State has said. I have said to the Minister for Finance in the past that one has to take risks in finance Bills to create jobs as some things will not work. I put it to the Minister of State that when this measure was announced three years ago the expectation was that 100 people would avail of it. From the last figures available, some 36 have availed it, which is only a third of the number. It was expected that 50 jobs would be created for every individual who availed of it, so the original target was 5,000 jobs, but the number created was 25 jobs. There comes a time when one must decide whether to enhance it and allow for the super-wealthy to be able to avail of it, as €500,000 was not good enough, or does one say that the stated objective of this tax relief is not correct?

There is an issue in terms of the direction the Government is setting out, where it allows the highest earners in society to have tax written off their tax bill, while at the same time taxes are increasing for those who are struggling in the form of the word beginning with the letter "w", which the Chairman does like to use - the uisce charges - and the other charges, such as prescription charges. There is an issue in terms of the moral compass of this Government on taxation, when the stated objective of 5,000 jobs has fallen flat on its face.

I am not sure where the figure of 5,000 jobs, to which the Deputy alludes is coming from. I am not sure whether it was ever a stated intention that this relief would deliver 5,000 jobs.

The then Minister, now Tánaiste stated that for each individual 50 jobs would be created and at the same she stated that it was expected that 100 individuals would take up this relief.

Thank you Deputy.

With the permission of the Chair, I must respond because I do not want Deputy Doherty to get upset if I do not answer his question.

This is part of the roadmap for Ireland's tax competitiveness. It is important to convey that this is not just a stand-alone measure. It is one of the offerings to attract more foreign direct investment to Ireland.

The figure of 100 people alluded to by the Deputy relates to a costing that the Government set aside as opposed to an estimate. We did not know how many people would avail of it and we still do not know how many will do so. We do know from the IDA, the Global Economic Forum and the consultation that this initiative adds to Ireland's overall attractiveness as a location for FDI investment. I appreciate his point that we should sometimes take chances in a finance Bill. That is what the Government is doing but we disagree on the way to proceed.

Let me explain the logic behind what the Minister of State is arguing for. This is a two-tier tax system - one system for the rich and shareholders in big corporations and another system for the little guy. It was Donald Trump who said taxes are for the little person.

Donald Trump is not a little guy.

He is not and there is no doubt he has benefited from these types of tax breaks. However, a tax system must have a moral and ethical basis and this one does not have that.

We do. I cannot let the Deputy's comment stand. The tax system in Ireland has many complexities. I argue, and the Deputy will disagree with me, that the Government has taken measures in the budget to improve the lot of everybody paying income tax and USC. If we want our small open economy to prosper we must keep trying to attract key decision-makers. They do not pay tax here because they are not here. If we get them into the country they will make a contribution to our tax base and bring a decision-making capacity to the IFSC, to Ireland and the economy.

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

The number of jurisdictions has been extended twice and I ask the Minister of State to clarify what is intended by the section.

I am pleased to do so. The provision is another attempt to align what we are doing on the tax side in terms of support for businesses wishing to look at exporting and spending time in emerging markets. We are aligning the list of countries that are eligible, under this initiative, with the integrated plan for trade, tourism and investment by the Department of Jobs, Enterprise and Innovation. The initiative is based on the best advice on where the potential lies for further growth for Irish businesses and, therefore, it is prudent to extend the list.

SECTION 15

Question put and agreed to.
Question proposed: "That section 15 stand part of the Bill."

On the face of it this seems to be a positive amendment section but I would like to fully understand what is proposed. It seems to be a measure to impose penalties on principal contractors who make payments to subcontractors where those subcontractors, or the principal contractors themselves, are not fully tax compliant. I very much welcome the measure.

This morning I was up very early, at 5.30 a.m. I was on a picket line in Lucan because a number of bricklayers are picketing a site where a school is being constructed by a principal and large contractor. The bricklayers allege, and some of the stories are quite hair-raising, that across the construction industry the business model being pursued is one where principal contractors are knowingly engaged in situations where payments are being made to people who are purportedly subcontractors but in fact are not subcontractors at all. The allegations need to be investigated. Some of the allegations are hair-raising and there are claims people have been told to meet in pubs where they were handed brown envelopes stuffed full of cash but no proper payslips and Revenue documentation were involved. There are allegations of people who sign on in the North coming across the Border to get paid cash for work done here. If any of these allegations are true then the situation is very serious. Building workers in the industry have made the allegation that such things are happening all over the place. They argue that it is now the business model of some of the biggest contractors in the country and is the reason they are able to submit lower bids for public contracts. If the allegations are even close to the truth then the situation is very serious.

It is against that background that I welcome the amendment which stipulates there should be penalties imposed if money is handed from a principal contractor to a subcontractor where there is not full compliance. What exactly is happening? How is compliance established? What is the criteria around compliance? Something can look okay on paper but in reality can be easy to get around. I want the Minister of State to convince me that the legislation will do the job that it seems to set out to do.

For three years I have tried to convince the Deputy to agree with me on an issue so let us give it a go. Much of what the Deputy referenced relates more to the Construction Contracts Act than to the tax side and, therefore, it would be important to get that Act implemented. Responsibility for the Construction Contracts Act has been given to the Minister of State at the Department of Jobs, Enterprise and Innovation, Deputy Gerald Nash. It is hoped to have the legislation activated by next year and that is the appropriate route to take. In terms of the need to examine public contracts, we are carrying out a review of public contracts at the moment. I have responsibility for it as it comes under the remit of the Office of Government Procurement.

On the broader issue of the potential difficulties posed by public contracts, I would very much like to receive correspondence from the Deputy on the matter and I shall get back to him about it. It would be useful for me to read out the speaking note as the section is quite technical. This is essentially a technical change to address two issues. First, to remove any suggestion that it is possible for a payment to be taxed twice and second, to ensure that penalties are proportionate.

Where a principal contractor has failed to operate the relevant contracts tax, section 530F(3)(a) of the Taxes Consolidation Act 1997 provides that where the principal submits details of the relevant payment, and submits to Revenue any further information required such as a contract notification, Revenue will then establish the amount of tax which would have been due from the principal in respect of the payment using the subcontractors deduction rate and this will then become the tax due from the principal. I told the Deputy that this was a technical provision.

I am chewing the cud.

This is the joy of tax. Where a withholding tax should have applied to the payment, this is not available as a credit to the subcontractor as the subcontractor received the payment in full without the operation of the relevant contracts tax but the principal is liable for the RCT which should have been deducted from the payment. In addition, the principal contractor is liable to a penalty of 35% of the tax that should have been deducted or €5,000, whichever is lesser.

In seeking to enforce the withholding rate in appropriate cases, Revenue compliance officers are being requested to review the tax affairs of subcontractors. Where accounts and returns are belatedly filed by a subcontractor and tax paid, it is stated that there is no loss to Revenue in these circumstances. Therefore, it is argued that Revenue should not be seeking this additional tax, in other words, from the principal contractor. Section 15 amends this section so that the penalty for the non-operation of the RCT is set at a level to ensure that the Exchequer is protected and that the penalty is also proportionate and reasonable. Also, in moving to this different civil penalty regime arguments as to whether the same income is doubly taxed are avoided.

We want to be very clear that tax has to be paid but if a tax is not paid then there is also going to be a penalty. Without this amendment that matter was unclear and it looked, potentially, like the same person was being taxed twice. That is not the case. There is the tax the person owes and then there is the penalty the person must pay for having failed to comply with the RCT in the first place.

It is proposed that the new regime would reflect the level of risk associated with the incorrect operation of the RCT by a principal contractor by reference to the deduction rate applicable to a sub-contractor when the payment was made. A higher penalty will be applicable in the case of a contractor where the sub-contractor was deemed to have a higher level of risk, and vice versa. Effectively, we are bringing in a sliding scale. For instance, at one end of the scale where the sub-contractor to whom the payment was made is not known to Revenue a civil penalty of 35% of the relevant payment shall be applied to the contractor and there will be no mitigation of this penalty. At the other end, where the subcontractor is registered with Revenue and is liable for the RCT deduction rate of zero, a civil penalty of 3% of the relevant payment shall be applied, and Revenue will provide guidelines allowing for a mitigation to a zero rate.

This is about clarity, control and recognising some of what the Deputy alluded to, without me getting into the specifics, namely, that there must be clarity in terms of subcontractors' and contractors' tax liabilities. This is basically saying that if someone is a compliant subcontractor with their contractor there will be a sliding scale for offences. If they are not complying there will be a higher level of penalty, and there is no such thing as double tax. It is a penalty plus the original amount of tax. I have tried to make that as clear as possible.

I got some of that but I will have to study carefully what the Minister said and pass it on to people who are dealing with it at the coalface. I am aware the public contract side of this has to do with other Departments but major concern was expressed about the Revenue side of it. If the RCT1, if that is what it is called, holder who is the sub-contractor is not known to Revenue, the proportion of tax they should have paid will be paid by the principal contractor or a penalty will be applied. Am I correct in that?

That is correct.

That seems okay but the Minister might explain the stepping of the different percentages and why that might be higher or lower for one or the other. What is the logic of that?

I am happy to do so.

Before the Minister comes back on that, the second issue about which a complaint was made is that when deciding whether somebody should be in the RCT1 system, and it is quite technical, as I understand it there are criteria as to whether they fit into the RCT1 category. Many building workers are saying they do not fit into that category but they are being put into it by the principal contractors where certain criteria must be met in this respect such as having an office and probably a certain amount of equipment but one must actually be a subcontractor rather than simply be categorised as a subcontractor, which many of these building workers say they are not. In effect, they are being employed by the principal contractor but the principal contractor does not want to admit he or she is employing them and pushes them into being categorised as subcontractors when they are not. That is the contention. How is the Department of Finance dealing with that or has the Minister of State any thoughts on how this problem could be dealt with? The workers are saying that if anybody seriously looked into the individuals who are being categorised as a subcontractor under the RCT1 system, Revenue would very quickly discover that those people do not fit the criteria of being subcontractors. It is in that grey area that a good deal of abuse is happening. The allegation is that the principal contractors know exactly what they are doing in this regard.

I am not passing the buck but much of what the Deputy referred to is under the remit of construction employment contracts. I accept Revenue has a role to play, although it cannot be all of the solution.

I would argue that in terms of the example the Deputy has given of people being paid in brown envelopes in pubs, this sort of provision will disincentivise that. We want a situation where Revenue is rewarding less risk. It is protecting the Exchequer and putting in a sliding scale so that the less risky one is, from a Revenue point of view, the lower the level of penalty. I believe that is an appropriate thing to do.

Less risky in what regard?

Less risky in terms of the chances of one actually paying one's taxes. It is a judgment that Revenue makes. I outlined in my speaking note, which I know was quite technical, the position on people who are registered and known to Revenue versus people who Revenue do not have any knowledge of. It is a technical change. I appreciate it is an important change but this principle already exists. We are bringing in a sliding scale of penalties and making it clear that when it comes to the issue of a penalty, it cannot be argued that this is taxing somebody twice; it is a penalty.

The new regime under this section will reflect the level of risk associated with the incorrect operation of the RCT by a principal contractor by determining the level of penalty to be applied by reference to the deduction rate applicable to the subcontractor. It is incentivising the contractor to be compliant and anything we can do to incentivise compliance in a sector that has had difficulties over the years of which we all have read is to be welcomed. There is nothing hidden, suspect or controversial in this.

I am not suggesting there is. The objective seems to be good but I want to know if it is strong enough and if it deals with some of the problems it is alleged exist in this area.

It is not a panacea for everything but it is an honest effort to improve that situation.

Question put and agreed to.
SECTION 16
Question proposed: "That section 16 stand part of the Bill."

The effect of this section is that if a charity or eligible organisation is struck off the charity register, a person who made a donation to that charity in good faith and for which they received a tax break, prior to the charity being struck off, will still get the benefit of the tax break or write-off. Something, someone or several people must have prompted the Minister to consider the inclusion of such a provision. What prompted the Minister to include it?

Revenue will not be seeking recourse to the individual who made a donation in good faith. I am happy to clarify that. It is not a case that if one made a donation to a charity, presuming it was still a charity, Revenue will come knocking on one's door. That is not the case.

I will outline for the Deputy the effect of this section. The amendments being made apply only to approved bodies which are authorised as eligible charities by Revenue. In order to obtain an authorisation an applicant body must satisfy Revenue in regard to a number of matters, and we know about these, including that it is established only for charitable purposes, its income is applied only for charitable purposes and before applying for authorisation it has been granted tax exemption in respect of its income under section 207 of the Taxes Consolidation Act for a period of at least two years.

Where Revenue is satisfied that an eligible charity has ceased to comply with the conditions attached to its authorisation, for example, where it loses its tax exemption status, it can then withdraw the authorisation of charitable status by written notice to the body. However - this is the element we are trying to rectify - the withdrawal may only apply and have effect from the date specified in the notice which must be later than the date of the notice. There is a lacuna in that there is a period of time between the date on the letter and the date where the withdrawal takes place. In other words, the withdrawal of the authorisation for the purposes of the donation scheme is prospective only. As matters stand, therefore, the situation can arise where Revenue withdraws a body's tax exempt status under section 207 with retrospective effect to the date from which the body fails to meet the requirements under that section but it can only withdraw the body's authorisation for the purposes of donations from a current date.

This situation can arise notwithstanding the fact that a qualifying condition of authorisation as an eligible charity for the donation scheme, in the first place, is that the income of the body is applied for charitable purposes only. That concept is already there. In such cases a charity could have lost its tax exempt status but could still be claiming refunds of tax and contributions made to the body.

The purpose of the amendment is twofold. First, it is to remove the current restriction that requires the withdrawal of an authorisation for the purposes of donation schemes from an eligible charity to be prospective only. In other words, if this is enacted, in future Revenue will be able to withdraw an authorisation retrospectively. Second, to ensure that the retrospective withdrawal of an authorisation impacts solely on the affected charity and not on the donors who made their donations in good faith, which is the point the Deputy made, the amendment ensures that donors who have claimed or will claim tax relief by way of deduction on a donation made to the charity up to the date of the notice withdrawing the authorisation retain the relief or the entitlement to claim relief. The amendments have effect from 1 January 2015 and authorisation issued under Schedule 26A before, on or after that date.

The Deputy asked from where this arises. Much has happened in this House. There has been an additional scrutiny applied to the charities sector and a new charity regulatory structure has been set up. We want a situation whereby members of the public, when donating to charities, know that they are donating to charities in that good faith. This amendment is to ensure that is the case. It is a sensible amendment.

Question put and agreed to.
SECTION 17

I move amendment No. 18:

In page 29, line 21, to delete "on 1 February of the tax year" and substitute "at the time of the payment or transfer".

Section 17(2)(b) amends the approved minimum retirement fund, AMRF, provisions in the Taxes Consolidation Act 1997. The change allows the beneficial owner of an AMRF to draw down up to 4% of the value of the assets each year. Heretofore, the capital invested in such a fund - a maximum of €63,500 - was, in general, effectively locked-in until the owner reached the age of 75 and only the income, profits or gains arising in the fund could be drawn down. Among other things, the amendment as published in the Bill provides for more certainty on the amount that may be drawn down each year.

Section 17(2)(b) as published has a fixed annual valuation date of 1 February for the purpose of determining the amount of this 4% drawdown. Following feedback from the pensions sector, the Minister is now proposing to allow for the 4% drawdown to be based on the value of the assets in the AMRF at the point of drawdown rather than at a fixed valuation date in a year. That is the change. I commend the amendment to the committee. The Minister for Finance may bring forward further amendments to this provision on Report Stage.

Amendment agreed to.

Amendment No. 19 is in the name of the Minister and amendments Nos. 19 to 42, inclusive, are related and may be discussed together by agreement.

I move amendment No. 19:

In page 30, to delete lines 19 to 23 and substitute the following:

" " 'fund administrator' means a qualifying fund manager of an approved retirement fund or an approved minimum retirement fund or the PRSA administrator of a vested PRSA (within the meaning of section 790D(1)), as the case may be, (in this definition referred to as the 'fund') the beneficial owner of which is a non-member and the assets of which consist, in whole or in part, of—

(a) assets transferred to the fund by virtue of the exercise by the non-member of a relevant option in relation to the transfer arrangement (in this definition referred to as the ‘first-mentioned transfer'), or

(b) assets transferred to the fund which were previously held in another fund or funds the assets of which originated, in whole or in part, from the first mentioned transfer;",".

As amendments Nos. 19 to 42, inclusive, all relate to subsection (4) of section 17 of the Bill as published, I propose to deal with them together. Section 17(4) amends Chapter 2C of Part 30 of the Taxes Consolidation Act 1997, which provides for the maximum allowable pension fund at retirement for tax purposes - generally referred to as the standard fund threshold or SFT regime. The changes made by section 17(4) are for the purposes of dealing with issues arising in cases involving pension adjustment orders, PAOs, where the SFT regime and PAOs interact. At present, where a chargeable excess arises and a PAO applies, the chargeable excess tax is recovered by the pension scheme administrator solely from the scheme member’s part of the pension benefits and the spouse or partner’s designated share of the pension benefits is unaffected. The changes made by section 17(4) of the Bill provide that, in future, any chargeable excess tax arising will be apportioned having regard to the terms of the PAO, so that both the member and non-member spouse or partner share the tax charge in a more equitable fashion.

I should state that this has proved to be a difficult and complex issue and the amendments required to deal with it in the Bill as published, in the first instance, and the further range of amendments I am now proposing are an indication of that. The amendments reflect further consideration of the provision in the light of feedback and commentary received by the Department of Finance and Revenue since publication. These changes will act to ensure that the provisions operate as intended.

Amendments Nos. 23, 25, 27 to 29, inclusive, 32, 34, 35, 37 and 40 to 42, inclusive, are minor drafting or technical amendments, which we can look at if members wish, to clarify aspects of the provision. Turning to the other more substantive amendments, amendments Nos. 19 to 21 amend a number of definitions used in the provision. The amendments are primarily designed to ensure that the terms "fund administrator", "relevant member", "subsequent administrator" and "transfer arrangement" take account of the dynamic nature of pensions, particularly in the private sector, whereby pension benefits can be readily transferred from one scheme to another. The refined definitions will ensure that the correct scheme and, therefore, the correct scheme administrator is pinpointed for the purposes of administering the new provision as regards the collection and payment of any chargeable excess tax arising on a non-member spouse or partner.

Amendment No. 22 extends new subsection (5) of section 787O to make clear that, where a member of a scheme to which a PAO has been applied takes a transfer value to another scheme, the administrator of the new scheme in calculating the capital value of a benefit crystallisation event at the point of pension drawdown, and in providing information for the purposes of the application by the member for a personal fund threshold, must make those calculations as if the PAO had not been made.

Amendment No. 24 extends new subsection (5A) of section 787Q to provide that the pension scheme administrator of an ex-spouse or partner’s independent scheme, to which the ex-spouse or partner has transferred the designated benefit under the PAO, is entitled to dispose of or appropriate such assets of the scheme as are required to pay the tax due and will be protected against any potential legal action from doing so.

Amendment No. 26 is perhaps the most significant of the amendments being made. As mentioned earlier, the intent of the overall changes being made by section 17(4) is to give a more equitable sharing of any chargeable excess tax arising in the context of PAO cases, as between the scheme member and the non-member spouse or partner. Where the non-member spouse or partner leaves the designated benefit under the PAO as part of the member’s pension until maturity, the apportionment is straightforward. However, where the non-member spouse or partner has taken a transfer value to a separate independent scheme, the apportionment becomes more complicated. This amendment ensures that the non-member’s share of any chargeable excess tax in those circumstances will reflect actual events occurring at the point of transfer rather than notional events at the time the benefit crystallisation event giving rise to the chargeable excess tax arises.

Amendment No. 30 extends new section 787R(2A)(e) to place a limit on the liability of a subsequent administrator for a non-member’s share of any chargeable excess tax so that it does not exceed the value of the assets in the transfer arrangement at the point at which the non-member’s rights under that arrangement are being transferred to another arrangement, or at the point the retirement benefits under the arrangement mature and are drawn down. Amendment No. 31 amends new section 787R(3B) which requires an administrator who apportions chargeable excess tax between the member and the non-member spouse or partner, in circumstances where the non-member has taken a transfer value to a separate independent scheme, to provide a certificate to the administrator of the independent arrangement detailing the amount and basis of calculation of the non-member's share of the chargeable excess tax. The amendment places an onus on the administrator to establish, through inquiries, who is the subsequent administrator and extends the period within which a certificate must be issued from seven to 21 days.

Amendment No. 33 primarily recasts new section 787R(3C) as published in the Bill to break it up into more manageable subparagraphs for ease of the reader. It also places an onus on the administrator of the member’s scheme or the subsequent administrator of the non-member spouse or partner’s independent scheme, depending on the circumstances, to establish, through inquiries, who the fund administrator is, or the administrator of a vested PRSA belonging to the non-member spouse or partner, and extends the period within which a certificate or copy certificate must be issued to the fund administrator from seven to 21 days.

Amendment No. 36 amends new section 787R(6A) inserted by section 17 (4) of the Bill as initiated. Section 787R(6A) provides for the retention of certain records by the administrator, subsequent administrator or fund administrator for a period of six years from specified dates. The amendment clarifies the specified dates for the various parties involved.

Amendment No. 38 recasts the amendment made to section 787S(1) of the Taxes Consolidation Act 1997 in the Bill as initiated to clarify what the administrator of a scheme, who has apportioned chargeable excess tax between a scheme member and a non-member spouse or partner, has to include in the return the administrator has to make to the Collector General of Revenue for the purposes of accounting for chargeable excess tax.

Amendment No. 39 recasts new section 787 S1A inserted in the TCA 1997 by the Bill, as initiated, to ensure there is no doubt as to the responsibility for and the timing of the making of a return required to be made to the Collector General of Revenue for the purposes of accounting for a non-member spouse or partner share of a chargeable excess tax in circumstances where the non-member has taken a transfer value to provide an independent retirement benefit.

This is highly technical. Some 24 amendments have been grouped together, a total of eight pages of amendments. I wish to make a point that we should be given an updated explanatory memorandum or an explanation of those amendments in advance of Committee Stage. It is very difficult to interrogate highly technical material. I think I understand the thrust of the 24 amendments and I do not have an objection to them but I make that point that this grouping comprises 24 of the 99 amendments to the Bill. It makes our job on this side very difficult.

I take that point and I will convey it to the Minister for Finance. I know he has tried to provide consultation and engagement but I do not think it happened with regard to this section. I will relay the Deputy's comments to the Minister. It is highly technical.

Many of the changes to which the Deputy has alluded are quite technical in nature rather than substantive but I note the point.

I wish to add my view. It is complicated. The amendments relate to where, when a relationship breaks down, how the pension fund is to be divided between the two parties.

That is what we are trying to do. I might bring my speaking notes in future, Chairman.

It is difficult to know whether it is beneficial for the people concerned to stay together in the pension fund or to break up. I think detailed notes would be very useful to the committee.

My officials asked me to clarify and it is an important point. That is why speaking notes are technical in nature. It is not how the pension fund is divided but how the tax relating to the pension fund is divided.

The record of the committee will contain the information from the speaking notes but I ask the Minister of State if he will circulate the speaking notes to members so that we will have access to them before Report Stage.

The Minister of State has said that he has no problem with circulating the speaking notes. These amendments have been published since last week. It would be very helpful if we had the speaking notes a couple of days in advance as it would allow us to scrutinise them considering in this case there are so many amendments of such a technical nature. It would allow us at least 24 or 48 hours to have a closer look at them.

That is a fair point. I have also asked that a question and answer briefing be compiled which I will circulate along with the speaking notes to the committee members.

That is most helpful. I thank the Minister of State.

Amendment agreed to.

I move amendment No. 20:

In page 31, to delete lines 7 to 10 and substitute the following:

“ “ ‘relevant member’, in relation to a relevant pension arrangement,

means—

(a) a member of a relevant pension arrangement in respect of whose retirement benefit under the arrangement a pension adjustment

order has been made in favour of a non-member, or

(b) a member of a relevant pension arrangement to which a sum representing that member’s accrued rights under the relevant

pension arrangement referred to in paragraph (a) has been transferred, or subsequently transferred;”,”.

Amendment agreed to.

I move amendment No. 21:

In page 31, to delete lines 17 to 24 and substitute the following:

“ “ ‘subsequent administrator’ means the administrator of the transfer arrangement under which the non-member remains entitled to a

retirement benefit under the arrangement or in respect of which the non-member’s retirement benefit under the arrangement has crystallised;”,

“ ‘transfer arrangement’ means a relevant pension arrangement—

(a) to which a transfer amount has been applied to provide a retirement benefit for or in respect of a non-member and includes the relevant pension arrangement of the relevant member where a retirement benefit for or in respect of the non-member is provided under that arrangement of the same actuarial value as the transfer amount, or

(b) to which a sum representing the non-member’s accrued rights under an arrangement referred to in paragraph (a) has been transferred, or

subsequently transferred;”,”.

Amendment agreed to.

I move amendment No. 22:

In page 32, to delete line 2 and substitute the following:

“as if the pension adjustment order had not been made, and where the administrator is the administrator of a relevant pension arrangement to which a sum representing the relevant member’s accrued rights under the relevant pension arrangement in respect of which the pension adjustment order has been made, has been transferred, or subsequently transferred, in whole or in part, the calculations referred to in paragraphs (a) and (b) shall reflect the sum that would otherwise have been transferred, or subsequently transferred, if no pension adjustment order had been made.”,”.

Amendment agreed to.

I move amendment No. 23:

In page 32, line 5, to delete “Where” and substitute “Notwithstanding section 59B of the Pensions Act 1990, where,”.

Amendment agreed to.

I move amendment No. 24:

In page 32, to delete lines 18 to 33 and substitute the following:

“(b) Where, in accordance with section 787S(3), a subsequent administrator or a fund administrator (in this paragraph referred to

as the ‘administrator’) is liable to pay the amount of a nonmember’s appropriate share (within the meaning of section 787R(2A)(b)) of tax arising on a chargeable excess, or a part of that amount, the administrator shall, for the purposes of payment of the tax, be entitled to dispose of or appropriate such assets of—

(i) the transfer arrangement as represent the non-member’s accrued rights under that arrangement, or

(ii) the approved retirement fund, approved minimum retirement fund (or where the non-member has an approved retirement fund and an approved minimum retirement fund, of both funds)or vested PRSA (or vested PRSAs, where the non-member has more than one vested PRSA), as the case may be, (in this subsection referred to as the ‘fund’), as are required to meet the amount of the tax so payable and the non-member shall allow such disposal or appropriation.

(c) Where in pursuance of this subsection and section 787S(3) a subsequent administrator reduces a non-member’s pension benefit or disposes of or appropriates an asset of the transfer arrangement, or a fund administrator disposes of or appropriates an asset of the

fund, then no action shall lie against the subsequent administrator or the fund administrator in any court by reason of such reduction,

disposal or appropriation.”,”.

Amendment agreed to.

I move amendment No. 25:

In page 33, line 6, after “year” to insert “(within the meaning of section 787TA(1))”.

Amendment agreed to.

I move amendment No. 26:

In page 33, to delete lines 31 to 37 and substitute the following:

“(c) The assumption referred to in paragraph (b) is that, where a transfer amount has been applied to provide a retirement benefit for or in

respect of the non-member, each party’s share of the retirement benefit arising under the benefit crystallisation event giving rise to

the tax shall be determined as follows:

(i) in the case of the non-member—

(I) where the relevant pension arrangement referred to in paragraph (a) is a defined benefit arrangement and is the arrangement in respect of which the pension adjustment order has been made, it shall be the designated benefit on which the transfer amount was calculated, and

(II) in any other case, it shall be the transfer amount,

and

(ii) in the case of the relevant member, it shall be an amount equivalent to the amount determined by the formula—A — B where—

A is the retirement benefit arising under the benefit crystallisation event giving rise to the tax, and B is the non-member’s share determined in accordance with clause (I) or (II), as the case may be, of subparagraph (i).”.

Amendment agreed to.

I move amendment No. 27:

In page 34, line 10, to delete “is” and substitute “are”.

Amendment agreed to.

I move amendment No. 28:

In page 34, line 31, after “option” to insert “under the transfer arrangement”.

Amendment agreed to.

I move amendment No. 29:

In page 34, line 33, to delete “having regard to paragraph (e),”.

Amendment agreed to.

I move amendment No. 30:

In page 34, to delete lines 39 to 45 and substitute the following:

“(e) Notwithstanding paragraph (d)(ii)(II), the liability of a subsequent administrator or a fund administrator shall not exceed the lesser of the non-member’s appropriate share and—

(i) in the case of a subsequent administrator, the amount or value of the assets in the transfer arrangement (in this subparagraph

referred to as the ‘first-mentioned arrangement’) representing the non-member’s accrued rights under the arrangement at the time those rights are transferred to another relevant pension arrangement or at the time the non-member’s retirement benefit under the first–mentioned arrangement crystallise, as the case may be, or

(ii) in the case of a fund administrator, the amount or value of the assets in the approved retirement fund, approved minimum retirement fund (or the aggregate of those amounts or values where the non-member has an approved retirement fund and an approved minimum retirement fund) or vested PRSA (or the aggregate of those amounts or values where the non-member has more than one vested PRSA), as the case may be, at the date the fund administrator receives the certificate or copy certificate referred to in subsection (3C).”,”.

Amendment agreed to.

I move amendment No. 31:

In page 35, to delete line 15 and substitute the following:

“circumstance referred to in subsection (2A)(d)(ii)(II)(A) arises) shall establish the identity of the subsequent administrator and, within 21 days from the end of the month in”.

Amendment agreed to.

I move amendment No. 32:

In page 35, line 20, after “arrangement,” to insert “where known,”.

Amendment agreed to.

I move amendment No. 33:

In page 35, to delete lines 32 to 42, and in page 36, to delete lines 1 to 12 and substitute the following:

“(3C) (a) Where—

(i) the provisions of subsection (2A) apply and a transfer amount has been applied, and

(ii) at the date the subsequent administrator receives the certificate referred to in subsection (3B) the non-member’s retirement

benefit under the transfer arrangement has crystallised and the non-member has exercised a relevant option under the transfer arrangement, then, where the subsequent administrator and the fund administrator are not the same person, the subsequent administrator

shall establish the identity of the fund administrator and, within 21 days from receipt of the certificate, forward a copy of the certificate (in this section referred to as the ‘copy certificate’) to the fund administrator.

(b) Where—

(i) the provisions of subsection (2A) apply and a transfer amount has been applied,

(ii) at the date of the benefit crystallisation event giving rise to the chargeable excess tax (in this paragraph referred to as the ‘event’) the non-member’s retirement benefit under the transfer arrangement has crystallised and the non-member has exercised a relevant option under the transfer arrangement, and

(iii) the alternative circumstance referred to in subsection (2A)(d)(ii) (II)(A) arises, then, where the administrator and the fund administrator are not the same person, the administrator shall establish the identity of the fund administrator and, within 21 days from the end of the month in which the event occurs, provide to the fund administrator the certificate referred to in subsection (3B).”.

Amendment agreed to.

I move amendment No. 34:

In page 36, line 14, to delete “7 days” and substitute “21 days”.

Amendment agreed to.

I move amendment No. 35:

In page 36, line 28, after “non-member’s” to insert “appropriate”.

Amendment agreed to.

I move amendment No. 36:

In page 37, to delete lines 5 to 9 and substitute the following:

“(i) in the case of an administrator, the date of the benefit crystallisation event giving rise to the chargeable excess tax or,

where a transfer amount has been applied and the administrator and the subsequent administrator are the same person, the later of that

date and the date of crystallisation of the non-member’s retirement benefit under the transfer arrangement,

(ii) in the case of a subsequent administrator in any other circumstance, the later of the date of crystallisation of the non-member’s

retirement benefit under the transfer arrangement and the date of

receipt of the certificate, or

(iii) in the case of a fund administrator, where the administrator and the fund administrator is the same person, the date of the benefit crystallisation event giving rise to the chargeable excess tax, and in any other circumstance, the date of receipt of the certificate or copy certificate, as the case may be,”.

Amendment agreed to.

I move amendment No. 37:

In page 37, line 13, to delete “notifications,” and substitute “notifications”.

Amendment agreed to.

I move amendment No. 38:

In page 37, to delete lines 31 to 40, and in page 38, to delete lines 1 to 7 and substitute the following:

“(e) in section 787S—

(i) in subsection (1)—

(I) by substituting “within 3 months from” for “within 3 months of”, and

(II) by substituting the following for paragraph (e):

“(e) details of the tax which the administrator is required to account for in relation to the chargeable excess,

and where the administrator is the administrator of a relevant pension arrangement to which section 787R(2A) applies the return shall also contain—

(i) where no transfer amount has been applied—

(I) the name, address and PPS Number of the non-member, and

(II) instead of the details referred to in paragraph (e), details of the relevant member’s and non-member’s appropriate share of the

tax which the administrator is required to account for in relation to the chargeable excess,

and

(ii) where a transfer amount has been applied—

(I) other than where the administrator, subsequent administrator and fund administrator are the same person, the name, address

and telephone number of the subsequent administrator or fund administrator, as the case may be,

(II) the name, last known address and, where known, the PPS Number of the non-member, and

(III) instead of the details referred to in paragraph (e), the amount of, and the basis of calculation of—

(A) the relevant member’s appropriate share of the tax that the administrator is required to account for, and

(B) the non-member’s appropriate share of the tax that the subsequent administrator or fund administrator, as the case may be, is required to account for by way of a separate return under this section.”,”.

Amendment agreed to.

I move amendment No. 39:

In page 38, to delete lines 9 to 16 and substitute the following:

“ “(1A) Where the provisions of section 787R(2A) apply and a transfer amount has been applied, then—

(a) where the transfer arrangement is the relevant pension arrangement of the relevant member, the subsequent administrator, within 3

months from—

(i) the end of the month in which the benefit crystallisation event giving rise to the chargeable excess tax occurs where, at the date

of that event, the non-member is in receipt of a pension payable from the transfer arrangement,

(ii) the end of the month in which a sum representing the nonmember’s accrued rights under the transfer arrangement (in this paragraph referred to as the ‘first-mentioned arrangement’) is transferred (in whole or in part) to another relevant pension arrangement, or

(iii) the end of the month in which the non-member’s retirement benefit under the first-mentioned arrangement crystallises,

or

(b) where the transfer arrangement is not the relevant pension arrangement of the relevant member and the subsequent administrator has received a certificate referred to in section 787R(3B), the subsequent administrator, within 3 months from—

(i) the end of the month in which the subsequent administrator receives the certificate where, at the date of receipt of the

certificate, the non-member is in receipt of a pension payable from the transfer arrangement,

(ii) the end of the month in which a sum representing the nonmember’s accrued rights under the transfer arrangement (in this paragraph referred to as the ‘first-mentioned arrangement’) is transferred (in whole or in part) to another relevant pension arrangement, or

(iii) the end of the month in which the non-member’s retirement benefit under the first-mentioned arrangement crystallises,

or

(c) where—

(i) the fund administrator has received a certificate or copy certificate referred to in section 787R(3C), the fund administrator within 3 months from the end of the month in which the certificate or copy certificate is received, or

(ii) the fund administrator and the administrator of the pension arrangement in respect of which the benefit crystallisation event

giving rise to the chargeable excess tax arises, are the same person, the fund administrator within 3 months from the end of the month in which the benefit crystallisation event occurs,”.

Amendment agreed to.

I move amendment No. 40:

In page 38, line 34, after “writing” to insert “at the time the return to the Collector-General is made”.

Amendment agreed to.

I move amendment No. 41:

In page 38, line 41, after “the” where it secondly occurs to insert “fund”.

Amendment agreed to.

I move amendment No. 42:

In page 39, line 4, to delete “in section 787R(3D)” and substitute the following:

“a notification referred to in section 787R(3D) (in the circumstance referred to in section 787R(3E))”.

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

One of the changes to section 17 is the annual rate of imputed distribution applying to AMRFs and vested PRSAs. What is the motivation for that reduction from 5% to 4% for AMRFs with a value of less than €2 million? It was 3% prior to the Finance Bill 2011 and increased to 5%. We know that people can hold on to these funds and not draw down for retirement benefit. The idea of this 5% imputed distribution is to ensure that these are drawn down or at least that Revenue takes that portion of tax which would apply if they were being drawn down.

I am informed that approximately 90% of AMRFs are valued at less than €250,000. While this might seem like a lot of money, in the case of an individual retiring at the age of 60 or 65, it is clearly not because the money may have to last both the individual and spouse or partner for a period of time of 25 years or more. The Finance Bill amendment reduces the imputed AMRF distribution rate from 5% to 4%. It is targeted at individuals in the age group 60 to 70 years. It is intended to reduce the risk that individuals in that age group might outlive the funds in their AMRFs or their vested PRSAs. The introduction of stepped increases in imputed distribution rates based on age, brings Ireland more into line with the draw down position internationally for similar post-retirement funds. An AMRF represents a flexible alternative to the purchase of a pension annuity or the stream of taxable pension income. It is open to individuals who generally have defined contribution pension arrangements and do not wish to purchase in pension annuity. Anecdotal evidence suggests that most people with defined contribution pension funds are choosing the AMRF option and not purchasing the annuities. For individuals aged 70 or over, the current 5% imputed distribution remains, as does the 6% rate for large value AMRFs in excess of €2 million. We think the stepped 4%, 5% and 6% is a more appropriate measure.

Has the Minister of State figures for the number drawing down the 5% of those funds valued at less than €2 million? How many of the funds are not drawing down the 5%?

We do not have that information because we are not given that information. The Revenue inform me that there is very little tax coming in with regard to the imputed distribution so therefore, people are drawing down and paying tax on it. I do not have the data the Deputy is seeking.

People are drawing it down and paying tax on it. The answer is that this does not actually lose any tax to the State because they are drawing it down anyway. However, if they are drawing it down, that questions the validity of reducing the rate because they are drawing it down anyway at 5%. Why would we reduce the rate? There may be a portion of those who are not drawing down but they would be a very small minority, given that this does not lose us any sizeable amount of tax.

The concern is that these funds will run out because people are living longer. It is designed to slow down the process to ensure a pension pot lasts longer.

The current imputed distribution rate of 5% per annum applying to AMRFs invested in PRSAs with assets of €2 million or less is higher than the current yields or interest rates paid on most single or joint life pension annuities sold to individuals aged under 70 years. In other words, the 5% imputed distribution rate requires individuals in this age range to draw down more from their AMRF funds each year than would be paid to them under a pension annuity arrangement underpinned by the same value of assets.

The point is that people who invested funds in AMRFs would have got tax relief of 41% on them, so it is a case of tax forgone. The idea behind the imputed distribution rate is to ensure Revenue gets some tax back. The 5% rate does not require an individual to draw down his or her pension; it just means that Revenue will assume he or she has drawn down the 5% and apply tax at that level. It does not mean, however, that the pension fund will be depleted by 5%. It will only be depleted by approximately 2% because the tax will apply at the 40% rate. I disagree with the proposal but I presume we will not reach any further clarity or find agreement on the matter.

While we might not have a meeting of minds on it, I will endeavour to bring some more clarity to it from our perspective. Deputy Doherty is correct that there is not a requirement to draw down the 5%, but Revenue informs me that people almost invariably do, because otherwise they would find themselves being taxed on it twice. I do not have the hard data on the issue but, anecdotally, the evidence is that people do draw down the 5%.

Question put and agreed to.
NEW SECTION

I move amendment No. 43:

In page 40, between lines 28 and 29, to insert the following:

“18. The Minister shall, prior to Budget 2016, prepare and lay before Dáil Éireann a report on the effective rate of tax charged to domestic businesses in this State and separately to multinational corporations, and analyse the impact of this Act with regards to lowering the effective tax rate or increasing it.”.

The amendment deals with the need for the Minister to prepare and lay before the Dáil a report on the effective rate of tax charged to domestic business in the State, and separately to multinational corporations, analysing the impact of the Act with regard to lowering the effective tax rate or increasing it. Again, that is something I have called on the Minister to do in previous years. It would provide transparency in what we are doing in terms of multinational tax and domestic business tax and the effective rate paid. A sub-committee of the Joint Committee on Finance, Public Expenditure and Reform has been examining the issue at length and it is clear that there are multiple ways to determine the effective tax rate using different models. One of the issues I and others have sought relates to taking the top 20 or 30 companies and looking at the effective tax rate they pay.

The Government has brought an end to the double Irish, despite the fact that it said on the record in the Dáil that it was not possible to do so. However, I welcome the fact that the legislation I published is what is contained within the Finance Bill. What I do not welcome is the fact that the Minister has allowed the double Irish to remain in place until 2020.

Other announcements are not contained within the Finance Bill, for example, on the patent or knowledge box, which is highly dubious. We know that if we are to follow suit in terms of what the UK has done in London that it would raise big concerns with the European Commission. It is not clear what type of patent or knowledge box the Government plans to introduce. It appears that while the Government closes down one loophole it is about to open one or two others. The amendment calls for transparency on the effective tax rates being paid by corporations and multinational companies in addition to domestic companies, and the potential impact of the Finance Bill on the rates for good or ill.

The Deputy is correct that there is no reference to the knowledge box in the Finance Bill. My colleague, the Minister for Finance, flagged on budget day that it would be in the subsequent finance Bill because we want to get it right. As the Minister outlined, we want it to be the best in class. It is part of the foreign direct investment, FDI, offering and is part of the roadmap to tax competitiveness and will bring us in line with what many of our competitors are already doing. We want to engage in consultation and get things right, and therefore the measure is not contained in the Finance Bill.

There has been much confusion in recent years about the issue of effective rates of corporation tax. I accept Deputy Doherty has raised the issue previously in the context of previous Finance Bills and that it comes up regularly for discussion by the committee. There is no internationally agreed methodology for calculating effective rates. On foot of discussions on Committee Stage of last year’s Finance Bill, the Department of Finance has produced a technical paper on effective rates of corporation tax in Ireland for the committee. The paper was co-authored by Seamus Coffey, who is an adviser to a sub-committee of the finance committee. The paper contains a comprehensive 40-page analysis of the issue and was submitted to the committee and published on the 7 April this year. The paper was prepared to provide clarity about the seemingly conflicting figures that are frequently quoted and is an excellent resource for those seeking to understand what can be a complex, technical issue. Do you wish me to stop at this point, Chairman, for Members to vote in the Dáil?

I will allow the Minister of State to finish his contribution.

This is a complex issue and I am happy to stop at this point.

Sitting suspended at 11.50 a.m. and resumed at 12.05 p.m.

Before we left I had just acknowledged the fact that we had published the technical paper on the effective rates of corporation tax in Ireland. This is a very useful exercise in terms of looking at various methodologies and at various questions that have been posed at this committee and in many public and media fora over recent years on the effective rate. We are pleased that it is in the public domain. It is an excellent resource and it is good to see it being utilised. One of the objectives of the paper is to be as open and fair in the analysis as is possible, so all the figures are in there. For that reason, the Department commissioned an external academic, to whom I have already alluded, to ensure the work is seen to be as objective as possible. I know the committee would accept the objectivity of that individual due to its own work with him.

The paper examines three different methodologies used in the calculation of effective rates of corporation tax in general. It then analyses eight different figures that are quoted in respect of Ireland in greater detail. Each of these different approaches is relevant, depending on the nature of the question being addressed. In attempting to assess the effective corporate tax rate applying to the total profits earned by companies in Ireland, the paper concludes that the approach based on the national aggregate statistics from the Revenue Commissioners and the Central Statistics Office is the most suitable. The paper finds that the effective rates of corporation tax, as measured according to the statistics from these two sources, are reasonably close to the headline rate of 12.5% and that the difference is mainly accounted for by double taxation relief and a small number of other reliefs, including the research and development tax credit. Since 2003, the effective corporation tax rates on the CSO measure of profit, net operating surplus, and the Revenue measure of profit, taxable income, have averaged 10.9% and 10.7%, respectively. In more recent years there have been differences between the two figures. The CSO measure was 8.4% in 2011 and the Revenue measure was 10.4%. This is due to the existence of large losses in the system, which can be offset against profits for tax purposes, but are not counted in the CSO figures. On the basis of this extensive analysis, we are comfortable that companies in Ireland are paying the appropriate rate of corporate tax on profits generated by those companies in Ireland.

Deputy Doherty has specifically proposed that the Minister for Finance prepare a report on the effective rate of tax charged to domestic businesses in this State and, separately, to multinational corporations, and analyse the impact of this Finance Bill on lowering or raising the effective tax rate. On the effective rate paid by multinationals compared with domestic companies, I draw the Deputy's attention to research undertaken by the Revenue Commissioners and published on budget day as part of the broader economic impact assessment of Ireland's corporation tax policy. The Revenue research, entitled A Note on the Context and Concentration of Corporation Tax Payments, used a new Revenue marker to identify corporation tax payments from the foreign-owned multinational sector. This new Revenue marker is still under development, but the indications from Revenue to date are that this marker is quite comprehensive and that revisions to the data in future are unlikely to be significant. Using this marker and applying the relevant methodology outlined in the technical paper, namely, dividing the amount of tax paid by the amount of taxable profits of companies, the effective rate applied to domestic businesses was 7.7% and that applied to multinational businesses was 11.1% in 2012. Given the detailed material already produced by the Department of Finance and the Revenue Commissioners and the need to allocate scarce resources most effectively, the Minister for Finance cannot accept the Deputy's amendment.

It is disappointing that the Minister will not accept this amendment. It should be standard practice when we deal with corporation tax, and, indeed, other taxation measures, that there would be a report to outline the effect of the budget or the Finance Bill in relation to those measures. There are quite significant issues coming down the track in terms of the patent box and there are major question marks in relation to that. The Government has not unveiled any detail of it bar the fact that it wants to introduce a patent box. We do not know what type of examples it will follow, and we have the ending of the double Irish. To my understanding, there is no document that shows the impact that has on the multinational sector in terms of its effective corporation tax rate, for good or bad.

I will not press the amendment at this time. I will withdraw it and table it again on Report Stage.

The thrust of the proposed amendment gets at something very important on which, apart from anything else, the public needs clarity. We have had a range of estimates of what the actual real effective corporate tax rate is for companies in this country, and frankly the dizzying array of estimates could do nothing other than confuse people as to the reality. The Minister of State in his response just now introduced a new figure of 7.7%. We now have 2%-----

I do not want to interrupt, but the figure I gave is for domestic companies.

It is 7.7% for domestic companies. This is another figure to add to the list. We have 2%, 6.2%, 6.8%, 8%, 10.9%, and the figure of 14% was bandied about at one stage, which was truly mystifying. Revenue's CTS1 statistics table on corporate tax tells its own story, and the suggestions that corporations pay anywhere close to 12.5% are exposed when one looks at the CTS1 table. Revenue helpfully breaks down the tax cases in the corporate sector into categories of profitability, starting with bands from €1 to €25,000 and €25,000 to €50,000 all the way up to companies making profits of between €5 million and €10 million and more than €10 million.

The figure for those with a profit of more than €10 million is interesting. Some time ago I asked whether we could have a further breakdown of the corporations with profits of more than €10 million, because in reality these are the multinationals. I was told we could not have this further breakdown because the Department of Finance stated it might allow people to identify individual companies and we could not possibly do this. This is pretty outrageous. What we have available to us gives us a clue as to the answers Deputy Doherty seeks. It shows 480 companies earn profits of more than €10 million per year, and these 480 companies earn €52 billion in pre-tax profits. The slightly lower figure for total income and gains before deductions and charges is €50 billion. A total of 480 companies have €50 billion of the profits and total corporate profits are €61 billion. The vast majority of profits generated by the corporate sector are generated by 480 companies, all of which earn profits in excess of €10 million. These 480 companies pay €3.3 billion in actual tax out of the €50 billion of total income and gains before deductions and charges. This gives an effective rate for them of approximately 7.5%. This figure includes companies at the lower end, which might not necessarily be multinationals, which earn €10 million or a little over €10 million in profits. Within the smaller number of multinationals in this group, which almost certainly make much bigger profits, it is certainly indicated from this effective rate that the big multinationals are those paying approximately 6% or even less in actual tax on their total gains. Down the table, the smaller companies making smaller profits are far more likely to be paying 9%, 10% or 11%. Already the evidence available to us suggests domestic small and medium enterprises pay approximately 12.5% or, generally speaking, somewhere between 10% and 12%, but the big incredibly profitable multinationals pay 6% or 7%. This is just not acceptable.

This relates a little to the discussion we had on SARP, but here we are not dealing with a few hundred thousand euro but billions of euros in forgone taxes which could be going to the Exchequer. If these 480 companies, which make €50 billion and pay €3.3 billion in tax which works out at approximately 7%, were made pay 12.5% or even 10% or 11%, which is what most small and medium enterprises must pay, it would mean €2 billion or €3 billion extra in tax revenue for the Exchequer. This is what is being forgone because of the tax treatment of these multinationals. This must be investigated in a very serious way. I suspect this is happening because of the way in which these companies are able to write off a number of matters under certain headings, allowances and deductions which themselves need to be scrutinised. One of these is the royalties paid for patents, which brings us to the issue of the patents box and whether on its abolition the much trumpeted double Irish will, in fact, be replaced by another scheme through which the same companies will be able to avoid pretty much the same amount of taxes but in a slightly different way by speaking about patents and intellectual property rights. They will be given until 2020, which is six years, to reconfigure their tax avoidance systems and funnel all of this through royalties and intellectual property charges or however it is written down to avoid paying tax. This seems to be what is happening. I do not see why the Government shows no willingness to look into this or to look into what is a two-tier tax system with regard to small and medium domestic enterprises as against the tax treatment of multinationals. I am interested to hear what the Minister of State has to say about this.

There is quite a lot in what the Deputy said. I am somewhat disappointed I have not heard a response from Deputy Boyd Barrett with his thoughts on the document, whereby arising from debates of this committee, the Department of Finance conducted a substantial amount of analysis. All of the figures, including those mentioned by the Deputy, were included and it has come up with what it believes is the best and fairest way of assessing the tax. It was not an insider job. Outside expertise was involved in the form of an eminent economist.

There is a great deal of food for thought in it. It is important that it exists because it dispels some of the myths that have existed with regard to corporation tax. The Deputy is quite correct when he says this is extremely complex. As I alluded to in my initial remarks on this proposal, there is not necessarily one universal way of doing it. We have tried to get to the best way of arriving at a transparent point. I put those figures on the record here today.

A great deal of corporation tax is paid in this country. The Deputy's constituency is in Dún Laoghaire-Rathdown, where corporation tax of €278.3 million was paid between 2008 and 2012. We will have to do better in my own constituency of Wicklow, where just €63 million was paid in corporation tax over the same period. I have taken those figures from a 40-page document that was published on budget day, entitled Corporation Tax – A Note on the Context and Concentration of Payments. Indeed, a total of seven reports on corporation tax were published on budget day as part of the accompanying documentation. We have mentioned the double Irish system and the knowledge box. We have not mentioned the OECD base erosion and profit-shifting process, but we know about it. A great deal of effort is being put into looking at this entire area and at Ireland's competitiveness. Given that seven reports were published on budget day, along with the 40-page document to which I have referred, it is clear that a significant body of work has been done.

Deputy Boyd Barrett has raised issues about the amounts of money that have been raised and paid. If he does not mind me saying so, the 40-page report I have mentioned would suggest that he has confused the issues of gross profits and taxable income. The chapter of that report starting on page 22 explains the difference between the two. The suggestion that the right amount of corporation tax is not being applied to these companies in Ireland is dispelled in this neutral and objective report on the situation. I would welcome and appreciate the Deputy's comments on box 3.1 in the report, which sets out the main differences between gross trading profits and taxable income. I am the first to concede that it all gets terribly technical. We have done a very extensive analysis and arrived at figures. This body of work had not been done previously. The concluding section of the report, on page 40, states "the effective Corporation Tax rates on Net Operating Surplus and Taxable Income have averaged 10.9 per cent and 10.7 per cent respectively " since 2003. I do not necessarily expect that the Deputy and I are going to agree on this. I am sure this debate will continue.

The knowledge box is not an attempt to have some sort of tax-avoidance scheme. It is quite the opposite. It is an attempt to catch up with many of our competitors that already have patent boxes in place. Deputy Pearse Doherty correctly alluded earlier to the need to get this right. Obviously, it needs EU approval. The Minister could have chosen to try to rush some sort of patent or knowledge box through the Finance Bill pending EU approval, although I think it would have been unwise to do so. He has chosen not to do that. There will be a consultation period, which will be launched by the end of 2014. We will have further details fleshed out at that stage in terms of where the Government wants to go. Ultimately, we want to introduce a competitive income-based regime for intangible assets in Ireland. It has been recognised that many of our economic assets and much of our economic activity is now in intangible areas like intellectual property. Other countries are already doing this. It is not an attempt to introduce a new double Irish system. I cannot be clear enough on that. We hope to legislate for this in the Finance Bill 2015. I am sure people will have plenty of opportunities to engage through the consultation process.

It is quite right that the debate about corporation tax is continuing. It is a very important issue. I think it is the fourth largest tax take that this country has. I am sure the debate will continue. I genuinely believe the work being undertaken by the Department of Finance at the initiation of the Minister for Finance provides a great deal of food for thought and data. Perhaps it is something we can explore further. It is on that basis, and no other, that the Minister for Finance does not believe it is necessary to accept Deputy Pearse Doherty's amendment on this occasion.

We are talking about a knowledge development box, which is completely different from a patent box.

The patent box system in the UK and the Netherlands is mainly a warehousing regime.

The system we are talking about will assist with indigenous development as well.

Yes, the Chairman is correct. We have consistently said that everything we want to do in this country in relation to inversions, the double Irish system and the OECD base erosion and profit-shifting process is being done because we want to see substance taxed, we want to see activity coming to this country and we want to have a competitive regime and framework in place. I am merely pointing out that other countries have gone down the road of looking at specific boxes. Our knowledge box will be based on the development of knowledge of intangible assets of intellectual property. As I have said, it is not something we are rushing. There will be significant consultation. The details of how that will go forth will be known later this year. By giving ourselves a 12-month period in which to thrash this out and scrutinise it, we will make sure it is the best in class, as the Minister for Finance said on budget day. With that in mind, the Minister intends to legislate for it in the Finance Bill 2015 following budget 2016.

I thank the Minister of State.

The Minister of State says the Government is looking into it, taking it seriously and all the rest of it. I accept that more work has been done on it. One might argue that this has happened as a result of the big international movement in this area and the questioning, for the first time, of the consensus around low corporate tax rates by some people who have come to the Oireachtas. The combination of those developments has forced some discussion and scrutiny of these arrangements. I ask the committee to consider this proposal in the context of other measures that are being imposed on ordinary citizens at the moment. Ordinary citizens are not given a six-year timeframe in which to readjust to possible tax changes and do not seem to get the benefit of the fairly privileged access to the Department of Finance and the Minister that seems to be enjoyed by the big corporations. It has been suggested in reports that when the Minister, Deputy Bruton, was in the United States recently, the Government was busy telling these big multinationals not to worry and reassuring them that they will not have to pay much more tax. The Government is giving the multinationals six years to adjust while this is phased in. It intends to consult them all along the way. Not only are these companies being given huge reassurance, but they are essentially being given advance notice to prepare themselves for any possible adverse effects of the changes in the corporate tax regime as well. This contrasts with how ordinary citizens are treated when they are told "here is your water tax and your this, that and the other - pay it". They are not given six years to assess how it might affect them.

Having mentioned that contrast, I would like to focus on the need to thrash out seriously at some stage all the headings under which €70 billion in gross profits comes down to €40 billion in taxable profits. To me, that is a three-card trick. The ordinary citizen does not get the sort of massive tax breaks enjoyed by those who claim tax breaks on the basis that they have kids, they have to put a roof over their heads, they need lawnmowers to mow their grass, or they have a car. I know ordinary citizens get some tax breaks in these areas, but they do not manage to reduce their gross income by nearly half - I refer to their taxable income - by the time taxes begin to kick in. The level of allowances and deductions being given to corporations enables an enormous sum of gross profits to be reduced to a taxable figure of €40 billion. One cannot help feeling that this facilitates pretty significant tax avoidance. Some of this revolves around things like company cars and extravagant management expenses which, to my mind, should not attract tax deductions. Critically, it is clear from what is available to us from Revenue, and on the basis of an obvious and reasonably fair assumption that the companies making the bulk of the profits are the multinationals, that the key area in which this is happening is the area of intellectual property. That is where it is happening. We have whistleblowers and everybody. All sorts of people have analysed it. It is a fact that they are charging astronomical figures for the royalties for the right to use certain intellectual property. They seem to adjust the charges or royalties they pay for that intellectual property conveniently to cover the vast amounts of profits they make so that those profits are then not taxable.

To my mind, that is just a scam staring us in the face. When the Minister of State states that we have to be competitive with other countries making tax offerings to these companies, he cites Luxembourg, the Netherlands and the UK, which, frankly speaking, are all the tax renegades of the European Union. Do we have to compete with the tax renegades of the European Union? We have just discovered that some big Irish companies are going to Luxembourg to avoid tax. These are the people with which we are competing. Could we not compare our tax system with the tax models in the Scandinavian or central European countries rather than competing with the tax renegades of Europe?

Deputy Boyd Barrett mentioned the ordinary people a number of times in his contribution. Many of the ordinary people are employed because of the rate of corporation tax that is in place which has allowed us to attract foreign direct investment. Our corporation tax rate is a driver of growth and of foreign direct investment, which is ultimately a driver of employment. I was glad to hear the Taoiseach say in Leaders' Questions yesterday that the 12.5% corporation tax rate was not up for negotiation. I understand that tax competitiveness is being considered in the EU at present. Does the Minister of State know the current position on that?

In terms of the effective tax rate versus the headline tax rate, PwC produced a report last year which looked at the statutory corporate headline tax rate versus the effective tax rate of different countries. It showed Ireland in a very good light in that, from memory, the effective rate was 11.8% compared to France's headline rate of 33.3% but where the effective tax rate is 8.2%. Deputy Boyd Barrett mentioned Luxembourg. It has a headline tax rate of 22.5%, but the effective tax rate is less than 5%. We compare favourably in terms of the headline rate versus the effective tax rate. I hope the 12.5% corporate tax rate is protected into the future because it is a big driver of growth and employment. In my own neck of the woods, from speaking to CEOs and the members of the American Chamber of Commerce, they are very keen to ensure that this rate is protected. This Government is intent on doing that.

Thank you, Deputy. Before the Minister of State responds, let me repeat that we must do better at confining ourselves to discussing the amendments and the sections.

This is a really important debate. There is an entire sub-committee of the joint committee dealing with this matter but unfortunately we have not made as much progress as we would like to have made because of disagreements. We are failing to agree on some very basic issues, but the April 2014 paper is really helpful. The reconciliation between gross income and taxable income is in black and white. The principal deductions involve capital allowances, trade charges and losses forward, all of which are well established principles of our corporation tax system and indeed many other corporation tax systems. They are applied consistently.

I support a knowledge development box but I do not see it happening anytime soon. It is a very controversial area as it is different from the patent box in the UK. It is controversial and runs against the overall trend in the OECD, and the various international initiatives. Let us be honest - it is two years since we sent a living cities initiative proposal to the European Commission and it still has not come back. We have not had sanction for it yet. The notion that we would have approval from Europe to introduce a knowledge development box anytime soon is fanciful in my opinion.

There were a number of contributions in relation to the living cities. We will probably get to that later, Deputy McGrath. We are very confident that we are almost there and the passage of this Bill is important in that regard.

Deputy McGrath is correct that the knowledge box needs European approval. Some 11 countries have a version of it at European level. The UK and Germany have made another proposal, in terms of bringing European clarity to this, which we expect to progress quite swiftly. We are confident that we are going to act within that space. We are going to consult and we are going to do this right. That is important.

One often says that a lot of politics is grandstanding in these Houses. In fairness to Deputy Boyd Barrett, when he actually speaks on this, I know he genuinely and sincerely believes everything he says on it, but I completely disagree with it. I hope he accepts my sincerity in that regard. I disagree with it based on a number of issues. There seems to be at times an implication that he is talking about people's personal wealth or about personal taxation. We are talking about companies that are employing so many people in this country, that are bringing in tax to this country, and that are contributing to communities and to regional development as well when we see them in suburbs and counties right around Ireland. The value of multinationals to the employment number in the Irish economy is that real people with families have a pay packet coming into the home. It is not just me, but Deputies McGrath and Walsh also say that the corporation tax rate is important. Look at the ESRI report, which I think was also published on budget day. It has done a very useful body of work on the effect of increases in corporation tax rate in Ireland. It models various levels of increases and shows the impact this would have on new foreign companies coming to these shores. A figure that sticks out in my mind is that if corporation tax had increased to 22.5%, the ESRI predicts that only 50% of new foreign companies would have opened on these shores.

There is now a body of empirical data. I accept that this work may not have been done in the past. I accept that these debates are useful and are important in that regard, but it irks me when I hear his comments on the Minister for Jobs, Enterprise and Innovation, Deputy Richard Burton, and other Ministers meeting with business owners. It is really important that Deputy Boyd Barrett met with the people on the picket line and engaged with them. This is part of the job. Equally, it is really important that Government Ministers and all of us can engage with other employers as well. There is no difference between engaging with an employer who happens to be working for a multinational, engaging with the IFA, or engaging with a public sector trade union. All of these elements matter and it is important that the Government, whatever its composition, does engage with them. The reason the Government is engaging, and the Deputy referred to the double Irish, is that certainty is vital. We know from IDA Ireland and watching developments in this country that companies make investment decisions over a seven to ten year window . We have to provide them with certainty. Certainty in relation to tax is vital.

Deputy Walsh asked me about the international procedures in place. Obviously, comments have been made by the new President of the European Commission. Ireland is very willing to engage in any sort of transfer and transparency in relation to tax. That has always been the position. Tax work and tax it where it occurs. We are also playing a very proactive role in the OECD BEPS process. Do not just take my word for that. The Minister for Finance, Deputy Noonan, has shown that by moving ahead of the double Irish, having first mover advantage, rather than waiting for an international process to resolve, Ireland has got out ahead, is protecting our international reputation and is bringing certainty.

I understand that Deputy Doherty has withdrawn his amendment No. 43 to insert a new section.

Amendment, by leave, withdrawn.
Sections 18 and 19 agreed to.
SECTION 20

Amendment No. 44 is in the name of the Minister. Amendments Nos. 44 to 49, inclusive, are related, while amendment No. 49 is a physical alternative to amendment No. 48. Is it agreed that amendments Nos. 44 to 49, inclusive, may be discussed together? Agreed.

I move amendment No. 44:

In page 45, between lines 19 and 20, to insert the following:

“ ‘completion value’, in relation to a dwelling, means the price which the unencumbered fee simple of the dwelling might reasonably be expected to fetch on a sale in the open market were that dwelling to be sold on the relevant completion date in such manner and subject to such conditions as might reasonably be calculated to obtain for the vendor the best price for the dwelling and with the benefit of any easement necessary to afford the same access to the dwelling as would have existed prior to that sale;”.

This relief is confined to DIRT paid on savings up to a maximum of 20% of the purchase price of the house or apartment in the 48 months prior to the purchase date. Where the property is self-built, relief is confined to DIRT paid on savings up to a maximum of 20% of the completion value of the house in the 48 months prior to the completion date. The relief is confined to 48 months in line with other revenue reliefs. Section 17 of the Finance Act 2003 made changes to the time limits within which an assessment or an amended assessment can be made on a person. The section made a number of changes which effectively provide for reductions in time limits to four years for making of assessments and inquiries with effect from 1 January 2005. The Minister for Finance does not intend to increase the relief period and therefore he is not in a position to accept Deputy McGrath's amendment No. 49.

I will speak on amendment No. 49.

Amendment No. 48 is taken with amendment No. 49.

I responded too soon.

The list states that amendments Nos. 44 to 49, inclusive, are being discussed together.

That is correct.

Has the Minister responded to all amendments or is he coming in on several amendments?

My apologies. I spoke to Deputy McGrath's amendment.

The Government amendments relate to section 20, which provides for relief from appropriate tax, in this case DIRT, paid on interest earned on deposits by first-time buyers of residential property. The amendments in the name of the Minister extend the relief to self-build properties built by first-time purchasers and ensure that where a property is purchased or built jointly by several persons, that in order to qualify for the relief each person must be a first time purchaser.

Amendment No. 44 inserts a new definition of "completion value" to provide for a value in relation to a self built property. Amendment No. 45 changes the definition of "first-time purchaser" to include a relevant completion date and this also brings self-builds within the definition of first-time purchaser.

Amendment No. 46 substitutes "dwellinghouse or apartment" with "dwelling". Amendment No. 47 inserts a new definition of "relevant completion" to allow for the self-build category of property. This definition requires the completion of the construction of a new house to a standard where it is suitable for immediate occupation as a dwelling. The completion must be on or after 14 October 2014 and on or before 31 December 2017. The property on which the house is built must be conveyed or transferred in the name of the first time purchaser prior to 31 December 2017. There is no requirement for the registration to take place after 14 October 2014. This section will allow for the building of property on land which is already owned by the first time purchaser.

Amendment No. 48 extends the definition of "relevant purchase" to provide for both individual and joint purchasers and ensures that in the latter category each joint purchaser must be a first-time buyer. The amendment also extends the definition of "relevant savings" to include deposits amounting to not more than 20% of the value of a newly completed self-build property. In addition the amendment extends the definition of "relevant savings interest" to include interest earned in the period of 48 months prior to a relevant completion in addition to a relevant purchase. Effectively, this is to bring the self-builds into the category and to provide some clarity in that regard.

I wish to speak to amendment No. 49. This initiative is worthwhile and is modest. The amount of money allocated is €2.8 million. I recognise it will be demand led, so the amount could be much greater. The estimate from the Department is that 9,500 people might benefit in 2015 and that the average yield for each would be just under €300 so it is modest. The change I propose is that the relevant period be increased from four to five years in view of the fact that people will be saving for longer to buy a house. Interest rates are at historic low levels. People who are saving earn 1% or 2% interest on their savings if they are lucky and DIRT tax is 41% of that. This is recognising the reality. In view of the Central Bank rules which may come into play - it is likely there will be some change - which will raise the bar in terms of the amount of a deposit that people are required to save, many people especially in the high rental market will be saving for a long number of years. It is a worthwhile initiative but I am proposing that the period be increased to five years.

I gave the response earlier. I welcome Deputy McGrath's support for the initiative. He is correct in saying it is modest but it is policy intent that where people are saving for a property, be it a self-build or otherwise, that the State does not take the DIRT from them. The alignment with four years is in line with other Revenue reliefs and the Minister believes that is prudent and appropriate. Obviously this initiative is something the Minister will monitor closely, therefore I cannot accept the amendment.

It is a modest initiative. A person with savings of €40,000 and earning 1% interest will pay DIRT amounting to about €170. Therefore, over four years he or she will get less than €650 back. That will not have a huge impact in terms of the overall mortgage cost. There are a couple of issues I want clarified. I welcome the fact that self-builds are included. It is an issue I have raised on previous Finance Bills which was completely ignored by Government. Amendment No. 48 refers to "the period of 48 months ending on the relevant completion date". A person who has been involved in a self-build would normally put their own personal money up front first, instead of drawing down their mortgage. If one has €40,000 in one's account to assist with the purchase of the house and one gets a mortgage of €160,000 for a self-build costing €200,000, if it was me I would pay the €40,000 as soon as possible in the build as one receives only 1% interest, whereas if one is drawing down the mortgage one triggers automatically payment of 5%. That would be the normal trend in terms of self-build where it is directly built by oneself. Where one employs a contractor to do this work it would be a different scenario, usually the contractor would seek payment at the end of the build or may agree stage payments. The principle remains where there are stage payments that one tends to use one's cash first because it makes financial sense, therefore the completion date could be an issue. I do not know how to rectify it because there has to be a date from which to work back.

The other issue on which I seek clarification is in amendment No. 48 which defines "relevant savings" as not exceeding 20% of the amount of the consideration paid in respect of the relevant purchase for the first-time purchaser. I will use my own scenario as a first-time buyer. If my wife and I were both first-time buyers, what consideration would we be paid? There is no definition of "consideration paid". Does the "consideration paid" mean half in the case of a joint mortgage? We take out a joint mortgage where one is individually and jointly held liable but when that money is transferred is it 50% of the completion value? There is no definition as to what that actually means and how that would apply. It is left open to the possibility that one could avail of this twice.

These are all important questions. Deputy Doherty is correct. I acknowledge it is a modest measure but it reflects all the tax that has been paid on savings for this purpose over the four year period. In terms of the four year date, as the Deputy has acknowledged there has to be certainty as to what is the cut-off period. It has to be a four year period. We are trying to bring the self-build in. I take the Deputy's point. I am not certain as to how to get around that. There has to be a cut-off point to a four year date but if the Deputy has thoughts on the issue for Report Stage I will discuss it with my colleague, the Minister for Finance. It is important that the scheme operates within a four year period. As to how one legislates for that is a matter that needs to be looked at. Obviously the principle is there that we want to include self-builds as well as first-time purchases.

In regard to the consideration paid, it is not possible to claim it twice. If there was a joint purchase in the case of the example used by the Deputy, it would be divided between two and the proportionate amount would be allocated to each of your savings. It is possible to claim it only once per purchase but the consideration could be divided among two.

Amendment agreed to.

I move amendment No. 45:

In page 45, line 21, after "purchase" to insert "or on the relevant completion date, as the case may be".

Amendment agreed to.

I move amendment No. 46:

In page 45, lines 23 and 24, to delete "dwellinghouse or apartment" and substitute "dwelling".

Amendment agreed to.

I move amendment No. 47:

In page 45, between lines 24 and 25, to insert the following:

“ ‘relevant completion’ means the completion of the construction of a new dwelling, on or after 14 October 2014 and on or before 31 December 2017, to a standard where it is suitable for immediate occupation as a dwelling and the dwelling?—

(a) has been built directly or indirectly?—

(i) on his or her own behalf by a first-time purchaser only, for occupation as his or her place of residence, or

(ii) on their own behalf by more than one person, where each such person is a first-time purchaser only, for occupation as their place of residence,

and

(b) is constructed on property conveyed or transferred, on or before 31 December 2017, into the name or names of the first-time purchaser or first-time purchasers only, as the case may be;

‘relevant completion date’, in relation to a relevant completion, means the date on which the dwelling becomes suitable for immediate occupation as a dwelling;”.

Amendment agreed to.

If amendment No. 48 is agreed, amendment No. 49 cannot be moved. Amendment No. 48 has already been discussed with amendment No. 44.

I move amendment No. 48:

In page 45, to delete lines 25 to 37 and substitute the following:

“ ‘relevant purchase’ means the conveyance or transfer of a dwelling on or after 14 October 2014 and on or before 31 December 2017?—

(a) into the name of a first-time purchaser only, for occupation as his or her place of residence, or

(b) into the names of more than one person, where each such person is a first-time purchaser only, for occupation as their place of residence;

‘relevant savings’ means?—

(a) in the case of a relevant purchase, so much of the aggregate amount at any time of any relevant deposits held in the name of a first-time purchaser, individually or jointly with another first-time purchaser only, as does not exceed 20 per cent of the amount of the consideration paid in respect of the relevant purchase by the first-time purchaser, or

(b) in the case of a relevant completion, so much of the aggregate amount at any time of any relevant deposits held in the name of a first-time purchaser, individually or jointly with another first-time purchaser only, as does not exceed 20 per cent of the completion value of the dwelling;

‘relevant savings interest’ means relevant interest paid?—

(a) in the case of a relevant purchase, at any time during the period of 48 months ending on the date of the relevant purchase by a first-time purchaser, to the first-time purchaser in respect of relevant savings, or

(b) in the case of a relevant completion, at any time during the period of 48 months ending on the relevant completion date, to the first-time purchaser in respect of relevant savings.”.

Amendment agreed to.
Amendment No. 49 not moved.
Question proposed: "That section 20, as amended, stand part of the Bill."

I would appreciate the Minister of State's clarification on the meaning of "consideration paid". There are amendments before the committee that clarify that it should be apportioned. There is no clarification in the legislation stipulating consideration paid would be apportioned. It is a small matter.

The 20% appeared as a result of the Central Bank's consultation on loan-to-value ratios. There is actually no requirement in the legislation for somebody availing of the relief to take out a mortgage. The basis is that people need to save 20%, and that may change, as we heard the Central Bank suggest. However, the premise is that people have to save 20% to get a mortgage in the first place. Therefore, we should not be hitting them with DIRT as they try to reach that 20% target. There is actually no requirement on any individual to have a mortgage. The reason I say this is that until now, much of the market has involved cash buyers, people who are cash rich. People who can well afford to buy property and do not have to save for a mortgage will also be able to avail of the DIRT exemption. I am curious to learn why the measure is not targeted solely at people who, as a result of the Central Bank rules, or suggested rules, will have to save over a protracted period.

Interest rates can go up or down, as the Deputy knows. The 20% figure is a useful and appropriate one to have. Obviously, we do not know the outcome of Central Bank deliberations but legislation can change. The 20% figure is in place and I certainly do not believe it would make any sense to lower it. I acknowledge that the Deputy is not suggesting we should. As we have outlined, it is modest enough.

With regard to cash purchases, the measure is being introduced to try to help people who are trying to obtain a mortgage to get on the property ladder. It is for people obtaining mortgages, specifically first-time buyers. I am not sure whether the cash-purchase issue will arise in a very real way for the groups at which the measure is targeted.

It does not require somebody to actually apply for a mortgage and it does facilitate cash buyers.

The qualification is that one must be a first-time buyer.

It was supposed to be targeted at people who wish to avail of mortgages, but the new rules on mortgages do not suggest it will be tied to the idea of availing of a mortgage. A cash buyer who does not need a mortgage to purchase a home does not really need this DIRT exemption.

I take the point. The Deputy would probably accept that it is highly unlikely that the measure will really have an impact on the group in question. We have introduced it in an equitable fashion and it is open to all first-time buyers. The Deputy will have seen in some of the amendments we have agreed some of the protections we have put in place. One has to be a genuine first-time buyer. If there is a joint purchase, the second party must be a first-time buyer. There is no real ability for somebody to be a faux first-time buyer. The relief is modest and there are enough protections in place. It is open to all first-time buyers so as to be equitable. We will keep it under review.

This applies to first-time buyers who are to use the property being purchased or transferred to them as a place of residence. What provisions are contained in the legislation regarding the timeframe and anti-avoidance? When people are applying for planning permission for a place of residence at local authority level, section 37 agreements ensure one must live in the property for seven years. What measure is in place to prevent a person purchasing a house worth €1 million to obtain the relief, living in it for a week or two and then transferring it to somebody else?

We have not gone into the level of detail to which the Deputy is alluding. We have not done so on the basis that the initiative is a modest one for giving back tax to try to help people who have been saving. The safeguard or control measure we envisage is that one can apply under the scheme only once. Once one has availed of the measure — it is open to any first-time purchaser — one may not avail of it again. Another control measure is that the scheme is time limited.

I take the Deputy's point but I do not really envisage the circumstances he described arising in reality, for the reasons I outlined. That there is only one access point, that one must have been saving and that one must be a first-time buyer are the safeguards, and I am satisfied they are sufficiently robust.

If a person had a large portion of savings, what would be the position? I agree with the Minister of State that the circumstances are unlikely to arise but with such measures people look for loopholes. If a well-off individual has considerable savings worth €1 million and decides to buy a property with a value equivalent to those savings, the DIRT benefit he or she could accrue over four years would be quite nice. One could sell the property at a later stage. The point is that there are no anti-avoidance measures in the legislation. The scheme is targeted at first-time buyers looking for a mortgage but this is not specified. Noble intentions are one thing but there are tax accountants and others whom I am sure are beavering away to find out how to give a legal benefit to their clients. I have pointed to a possible way of doing so. There are no anti-avoidance measures contained in the legislation.

The Deputy is right to highlight this. I have described what he outlined as highly unlikely, as has the Deputy. If he wants to tease this out further, we will be able to do so on Report Stage. However, I am satisfied that people will have to have had savings in place. They will have to live in the house and will get only one opportunity to access the scheme. Considering that the scheme is modest in nature, as we have all said, I am satisfied there is no need for any further anti-avoidance measure. This is a matter that the Minister will obviously monitor. The purpose of Committee Stage is to tease out these matters but we are satisfied that the legislation is robust enough in this regard.

I support Deputy Doherty's point. What he described may not arise in many instances but, given that one must submit a claim for the DIRT to be refunded, there should be a requirement to demonstrate proof that a mortgage has been availed of. What the Deputy outlined might arise in only a small number of cases but, if Johnny has wealthy parents and they are putting money aside for him in his bank account over a couple of years so he can buy a house, he can claim back all the DIRT. The spirit of the legislation reflects the desire to help people who are saving to take out a mortgage by giving them back the DIRT. Why not, as part of the claim, require that evidence of a mortgage to purchase the property be included? That would deal with the issue.

I take the point. I am sure this is a matter that the Deputy will consider in advance of Report Stage. As he said, the measures are intended to achieve a noble aim. We are satisfied the protections and controls in place are proportionate with the benefit of the scheme. However, if the Deputies wish to tease this out further on Report Stage, I am sure the Minister for Finance will consider it.

Question put and agreed to.
Sitting suspended at 1 p.m. and resumed at 2 p.m.
NEW SECTION

I move amendment No. 50:

In page 46, between lines 5 and 6, to insert the following:

“Amendment of section 267M of Principal Act (tax rate applicable to certain deposit interest received by individuals)

21. Section 267M of the Principal Act is amended in subsection (2)—

(a) in paragraph (a) by deleting “and subject to paragraph (b)”, and

(b) by deleting paragraph (b).”.

This is an anomaly that arose as a result of the budget. As a result of the reduction of the higher income tax rate to 40% that was announced in the Finance Bill 2014 and on budget day, an anomaly will arise in regard to the tax rates applying to investments by individuals in foreign bank deposit accounts. This amendment will ensure that the legislation will continue to act as intended. The deposit interest earned on foreign bank deposits will be taxed at the same rate as the deposit interest retention tax rate that applies to deposit interest earned on domestic deposits, in other words, 41%.

Amendment agreed to.
SECTION 21

Amendments Nos. 51, 52, 98 and 99 are related and may be discussed together by agreement.

I move amendment No. 51:

In page 46, line 7, to delete “Section 481 of the Principal Act” and substitute “Section 481 of the Principal Act (as amended by section 21 of the Finance Act 2013)”.

With the Chairman's permission, I propose to take amendments Nos. 51, 52, 98 and 99 together as they all relate to the changes being made to the film relief scheme in section 21.

Amendments Nos. 51 and 52 are technical in nature and are designed to allow section 21 of the Finance Bill 2014 to amend section 481 of the Taxes Consolidation Act 1997, which is relief for investment in films, in a particular sequence. The provisions in section 21 of the Finance Act 2013 and section 24 of the Finance (No. 2) Act 2013 were each subject to EU state aid approval and subject to individual commencement orders. Amendments Nos. 51 and 52 allow for all relevant provisions to be commenced in the correct order to ensure that they will operate in the intended manner.

Amendments Nos. 98 and 99 are also technical in nature. Amendment No. 98 inserts a new paragraph 6 into Schedule 3 to the Bill. The new paragraph 6 deletes a reference to section 481(2A)(c) of the Taxes Consolidation Act 1997 in section 21(1)(m) of the Finance Act 2013. This deletion is necessary as the reference to paragraph (c) has been rendered obsolete by an amendment in section 21(1)(b)(ii) of this Bill and to retain the reference to paragraph (c) could cause some confusion. Amendment No. 99 amends the commencement provisions for Schedule 3 to provide that the new paragraph 6, as inserted by amendment No. 98, will have effect from the passing of the Act.

I commend these amendments to the committee.

Amendment agreed to.

I move amendment No. 52:

In page 46, between lines 33 and 34, to insert the following:

“(2) This section comes into operation on such day as the Minister for Finance may appoint by order.”.

Amendment agreed to.
Section 21, as amended, agreed to.
Section 22 agreed to.
SECTION 23
Question proposed: "That section 23 stand part of the Bill."

I welcome the changes to the research and development tax credit which is something that has long been called for. Improvements have been made to the research and development regime over recent years but the base year has been an issue for a number of years. The change is very welcome. It is estimated that it will cost €50 million which will make a real, positive and practical difference to companies that invest in research and development. It is an area where Ireland is enhancing its reputation and is a gateway to real employment. I welcome this positive change.

Question put and agreed to.
SECTION 24

Amendments Nos. 53 and 54 in the name of Deputy Michael McGrath have been ruled out of order.

Amendments Nos. 53 and 54 not moved.

I move amendment No. 55:

In page 48, between lines 35 and 36, to insert the following:

“(d) in section 492(3) by substituting “4 years” for “3 years”,”.

One of the changes the Minister for Finance is making to the employment and investment incentive is to increase the minimum holding period for shares from three to four years. Section 492 of the Taxes Consolidation Act 1997, which deals with the qualifying conditions for the EII as they relate to so-called connected persons, currently states that an individual will qualify for tax relief on an EII investment as long as they are not connected to the company at any time during a three-year holding period for shares. This amendment will amend that provision to align it with the change in the holding period announced in the budget. Without this amendment, it would be technically possible for an individual to have their EII scheme investment repaid a year earlier than the intended four-year holding period. This is, effectively, a drafting oversight from the changes that the Minister announced on budget day.

We can all agree that this initiative is a vital source of non-bank finance for businesses. Overall, it has not been as successful as anticipated originally as a replacement for the business expansion scheme. I make the general point that the longer an investment is allowed to retain the investment the better, and the longer period over which one can spread the tax relief the better. That makes the scheme more attractive and it has the potential to be quite a valuable source of non-bank finance. I want the Minister of State to put on the record the current data that he has on the EII scheme and how effective it has been.

I can. The Deputy's amendments were ruled out of order but I will respond to the broader points that he has raised. The Deputy wanted consideration to be given to the effect of increasing the minimum holding period for shares from four to five years. The EII scheme is targeted at job creation and retention and is available to the majority of small and medium-sized trading companies. The scheme was subjected to a significant review this year by the Department of Finance, in consultation with the Revenue Commissions. As the Deputy will know, the review included a public consultation process. Following on from the review the Minister for Finance has brought forward a number of changes to the scheme, including the increase of the holding period for shares from three years to four years.

The holding period for shares must be set at a level that, on one hand, allows the company to use the funds raised and increase revenue sufficiently while, on the other hand, not be so long as to deter investors altogether. A company's stage of development is a key factor in respect of the shareholding period. The increase in the holding period from three years to four years will allow a company more time to use the funds raised and, hopefully, be in a position, as the minimum four-year holding period ends, to repay the investors.

It should be noted that the legislation only imposes a minimum four-year holding period and no maximum holding period applies. Investors have stated that the five-year holding period was too long for them to wait for a return on their investments. In the current economic climate where more companies are competing for less available funds, increasing the holding period to five years, in the view of the Minister for Finance, could serve to discourage investors further. There is a balance to be struck in terms of incentivising the investor and enabling the company to utilise the investment. The Minister is not inclined, therefore, to increase it to a minimum of five years.

The Deputy asked how many investors availed of the EII scheme. In 2012, the scheme cost €4 million and had 352 investors. In 2013, the scheme cost €12.4 million which included 1,011 investors, including six funds. It is encouraging to see such a substantial increase.

Amendment agreed to.
Section 24, as amended, agreed to.
NEW SECTION

I move amendment No. 56:

In page 49, between lines 25 and 26, to insert the following:

“Amendment of Chapter 3 of Part 38 of Principal Act (other obligations and returns)

25. The Principal Act is amended in Chapter 3 of Part 38 by inserting the following after section 891E:

“Returns of certain information by financial institutions

891F. (1)This section provides for the collection and reporting of certain information in respect of financial accounts held by any person who is regarded by virtue of the laws of a jurisdiction other than the State as resident in that jurisdiction for the purposes of tax.

(2) In this section—

‘the standard’ means the Standard for Automatic Exchange of Financial Account Information approved on 15 July 2014 by the Council of the Organisation for Economic Cooperation and Development;

‘account holder’, ‘financial account’, ‘high value account’, ‘lower value account’, ‘reportable account’, ‘reporting financial institution’, and ‘TIN’ have the meanings respectively given to them by Section VIII of the standard.

(3) The Revenue Commissioners, with the consent of the Minister for Finance, may make regulations under this section with respect to the return by a reporting financial institution of information on reportable accounts held, managed or administered by that reporting financial institution.

(4) In addition to the specification in the regulations of a requirement that reporting financial institutions make a return to the Revenue Commissioners of information in relation to reportable accounts, regulations under this section may (without prejudice to the generality of subsection (3)) include provisions—

(a) determining the date by which a return required to be made under the regulations shall be made to the Revenue Commissioners,

(b) prescribing the manner in which returns are to be made,

(c) specifying the information to be reported in a return by the reporting financial institution, to the Revenue Commissioners, in relation to reportable accounts and, where different information is to be reported for different years, specifying the information to be reported for each of those years,

(d) specifying—

(i) the currency in which the reporting financial institution is required to report, and

(ii) the rules for conversion of amounts, denominated in another currency, into the currency, referred to in subparagraph (i), for the purposes of a return under the regulations,

(e) requiring reporting financial institutions to identify reportable accounts,

(f) specifying the records and documents that must be examined or obtained by the reporting financial institution to enable the institution to identify reportable accounts,

(g) specifying the records and documents used to identify reportable accounts that must be retained by the reporting financial institution,

(h) specifying additional requirements in relation to the examination of high value accounts and lower value accounts,

(i) setting out the circumstances in which a reporting financial institution is required to aggregate financial accounts held by the same individual or entity for the purposes of identifying reportable accounts as high value accounts or lower value accounts,

(j) specifying the actions to be taken by a reporting financial institution where there is a change in circumstances with respect to the account holder of a financial account,

(k) setting out the conditions under which a reporting financial institution may appoint a third party as its agent to carry out the duties and obligations imposed on it by the regulations,

(l) setting out the circumstances in which a reporting financial institution may make a nil return,

(m) imposing an obligation on—

(i) a reporting financial institution to obtain a TIN from any person—

(I) with whom the institution enters into a contractual relationship, or

(II) for whom the institution undertakes any transaction, on or after a date specified in the regulations, which shall not be earlier than the commencement of the regulations (and such persons are in this paragraph referred to as ‘customers’) for the purposes of including that number in a return under the regulations, and

(ii) customers to provide a reporting financial institution with their TIN on request by the reporting financial institution where, on or after a date specified in the regulations—

(I) such customers enter into a contractual relationship with the reporting financial institution, or

(II) the reporting financial institution undertakes any transaction for such customers,

being respectively—

(A) a relationship which results in the opening, operation, administration or management of a financial account, or

(B) a transaction which arises in relation to a financial account,

(n) defining ‘books’ and ‘records’ for the purposes of the regulations,

(o) in relation to any of the matters specified in the preceding paragraphs, determining the manner of keeping records and setting the period for the retention of records so kept,

(p) enabling the authorisation of Revenue officers, for the purpose of such officers—

(i) requiring—

(I) the production of books, records or other documents,

(II) the provision of information, explanations and particulars, and

(III) persons to give all such assistance as may reasonably be required and as is specified in the regulations,

in relation to financial accounts within such time as may be specified in the regulations, and

(ii) making extracts from or copies of books, records or other documents or requiring that copies of such books, records and documents be made available,

and

(q) specifying such supplemental and incidental matters as appear to the Revenue Commissioners to be necessary—

(i) to enable persons to fulfil their obligations under the regulations, or

(ii) for the general administration and implementation of the regulations, including—

(I) delegating to a Revenue officer the authority to perform any acts and discharge any functions authorised by this section or the regulations to be performed or discharged by the Revenue Commissioners, and

(II) the authorisation by the Revenue Commissioners of Revenue officers to exercise any powers, to perform any acts or to discharge any functions conferred by this section or by the regulations.

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

(6) A Revenue officer authorised for the purpose of regulations under this section may at all reasonable times enter any premises or place of business of a reporting financial institution for the purposes of—

(a) determining whether information—

(i) included in a return made under the regulations by the reporting financial institution was correct and complete, or

(ii) not included in such a return was correctly not so included,

or

(b) examining the procedures put in place by the reporting financial institution for the purposes of ensuring compliance with that institution’s obligations under the regulations.

(7)(a) Section 898O shall apply to—

(i) a failure by a reporting financial institution to deliver a return required under regulations made under this section, and

(ii) the making of an incorrect or incomplete return under those regulations,

as it applies to a failure to deliver a return or to the making of an incorrect or incomplete return referred to in section 898O.

(b) A person who does not comply with—

(i) the requirements of a Revenue officer in the exercise or performance of the officer’s powers or duties under this section or under regulations made under this section, or

(ii) any requirement of such regulations,

shall be liable to a penalty of €1,265.

(8) Section 4 of the Post Office Savings Bank Act 1861 shall not apply to the disclosure of information required to be included in a return made under the regulations made under this section and, accordingly, this section shall apply to information to which, but for this subsection, the said section 4 would apply.

(9) Where arrangements are entered into by any person and the main purpose or one of the main purposes of the arrangements, or any part of them, is the avoidance of any of the obligations imposed under this section or regulations thereunder, then this section and those regulations shall apply as if the arrangements, or that part of them, had not been entered into.

(10) Any word or expression which has a meaning given to it by Section VIII of the standard shall, where it is used in regulations made under this section and unless the contrary intention appears, have the same meaning in those regulations as it has in that Section VIII.”.”.

This section inserts a new section 891F into the Taxes Consolidation Act 1997 to provide for the making of regulations by the Revenue Commissioners requiring financial institutions to report certain information with regard to accounts held by non-resident persons. The purpose of the section is to ensure that Ireland fully plays its part in the operation of the new OECD standard for the automatic exchange of financial account information.

This standard is designed to advance the fight against cross-border tax fraud and evasion through the exchange between the tax authorities of participating jurisdictions of information relating to accounts held by residents of one participating jurisdiction in another such jurisdiction. The proposed section will authorise the Revenue Commissioners to make regulations imposing both due diligence obligations on financial institutions to identify non-resident account holders and to report such data to the Revenue Commissioners.

Amendment agreed to.
Sections 25 and 26 agreed to.
SECTION 27

Amendment No. 57 in the name of Deputy Pearse Doherty has been ruled out of order.

Amendment No. 57 not moved.
Question proposed: "That section 27 stand part of the Bill."

The windfall tax was introduced for two reasons. The first was that individuals made huge gains as a result of the rezoning of land and it was deemed appropriate that some of those gains would be recouped by the State, while the second reason was to serve as an anti-corruption measure. I mentioned at this committee previously that one would hope that local authority members, elected by the public, who engaged in the rezoning of land for the benefit of individuals who may have been connected to them or supportive of them is a thing of the past. However, it may not be a thing of the past and, indeed, we cannot actually ensure that it is so. In that context, we need to make sure that adequate preventative mechanisms are in place to make such behaviour less appealing.

There have been media reports recently relating to local authorities, planning permission and so forth which I am sure will be investigated by the relevant authorities. I believe that the ending of the windfall tax, which was 80%, and just applying the appropriate levels of taxation is not the proper way to do this. I believe that the windfall tax should have continued to exist at a reduced rate of 41%. However, I also believe that the scrapping of this tax should only apply for a couple of years. I say that because the windfall tax sends a signal to local authority members that they should not try to rezone lands for the benefit of individuals. Furthermore, a key priority for the Government at the moment is to release land for development which is probably the primary motivation for scrapping the windfall tax. Indeed, that is the same motivation behind the Sinn Féin suggestion that the tax be cut in half. We want to incentivise people to release land at this point in time but by allowing this to be open-ended, such an incentive does not exist at this point in time. Given the fact that land prices are recovering, the removal of the windfall tax actually acts as a disincentive. The incentive at the moment is to hold onto land, wait until the market improves further and then sell it on without having to pay a windfall tax. If the Minister were to introduce an amendment to this Bill to provide that the removal of the windfall tax would be for two years or some other specified period, that would incentivise people to release their land now, regardless of the rates. The rates are a separate issue. It would be open to the Government at a later stage to then decide if it wants to extend the period or not, depending on whether the measure was effective.

There are time-limited provisions throughout this Finance Bill in many different guises. The special rate of 4% USC for medical card holders is only extended by a couple of years, the VAT rebate under the home renovation scheme is time limited and the tax cut for high earners by way of SARP has only been extended for a couple of years. Yet, when it comes to the windfall tax, there is no Cinderella clause included. There is no cut-off period. The provision, therefore, will not be as effective as it could have been had the Minister placed a 24-month time limit which would incentivise people to release land now, particularly around our capital and in other cities. Such land is much needed for development purposes to deal with the current housing crisis, in both the social and private housing sectors as well as the rental market.

I believe that any tax which is designed to prevent transactions from happening is not necessarily a good tax. I know this tax was introduced by the last Government to deal with the issues referred to by Deputy Doherty. However, it has now become a barrier to the release of development land onto the market. We all accept that one of the main issues in the housing market at the moment is the lack of supply. We need land that is suitable for residential development which is appropriately zoned and serviced to be brought to the market so that supply can increase, thus dealing with some of the acute shortages in certain parts of the country. Deputy Doherty has raised a good point with regard to the hoarding of land. While the removal of the 80% windfall tax removes a barrier to suitable development land coming on the market, that does not necessarily mean that such land will be brought to market. It does not deal with the issue of land being hoarded, which can happen, over a prolonged period of time. The Government may need to consider that issue so that there is proper balance here - we want to incentivise landowners with land that is suitable for development to bring it to the market while not encouraging them to hold onto land indefinitely in the expectation that its value will just continue to increase.

I agree with much of what Deputy McGrath has said. He is right to ask how this provision will ensure that land is actually utilised and not left idle. In response, I refer him to the Minister's speech on budget day where he indicated that he plans to launch a public consultation process shortly on the issue of incentivising the use of currently unused land. This will relate to land zoned and serviced for residential development. The aim of the consultation is to assess the extent to which the taxation system can be utilised to encourage the development of such zoned and serviced land to assist with the shortage of residential properties in certain areas, of which we are all well aware. Any existing levies will be considered as part of that consultation and any taxation measures which may be introduced as a result of the consultation will take account of any levies currently in place. The issue of how to utilise unused land is one that the Minister is eager to engage with and he will launch a consultation process shortly in that regard. It is a problem that the Government is acutely aware of at present.

Regarding Deputy Doherty's point about replacing one set of tax provisions which are having a distorting effect with another set of provisions, the Minister for Finance is of the view that if one does so, one runs the risk of continuing to distort the market. He is also concerned that one would effectively shoe horn transactions into a set period. I know I am not directly addressing the section but rather the suggestion made by the Deputy in his contribution. The Minister was very clear on budget day and on a number of occasions subsequently that this provision will be kept under very close review. If it is found that transactions and the sale of land for development are leading to abuse or to increased costs of development, particularly in the area of housing, the Minister will not hesitate to introduce whatever measures are open to him and the Government in order to correct the situation.

The Minister gave consideration to replacing the windfall tax provisions with a higher single rate of capital gains tax above the current rate of 33% on any profits or gains from land disposals attributable to increases in land value above the non-developed or agricultural-use value. However, the Minister was concerned that, as with Deputy Doherty's suggestion, that could have a distorting effect on the market. We will keep this under close review. I note the words of caution expressed by Deputy Doherty and the comments of Deputy McGrath on the issue of unused land.

The Minister of State has said that the effect of what I have suggested in terms of the windfall tax being removed for a specified period would be to shoe horn transactions into a particular period of time but that is exactly what we want. That should be the stated objective of Government. We want this land to be released for development purposes. If the period in question is two years, that allows for this to happen in that period. There is a shortage of development land around our capital city.

We have a crisis in Dublin. One of the reasons for the reduction from 80% is to allow this land to come on to the market. The idea of creating a window is to encourage people to do it within a particular period. It does not mean to say no land would be sold afterwards because it could be extended if the Minister of State so wished.

Earlier, we dealt with a measure in section 20 on DIRT tax, which has been placed in a window; people must buy a house within a two year period for exactly the same reason, which is we want to facilitate people to purchase a house at this point in time. For this reason, a rebate from DIRT has been introduced with regard to savings for a four-year period. I heard what the Minister of State said on incentivising land use, which is fine. It could be the case that after the two year period it would not be realistic to return to 80% because no land whatsoever had been transferred. One does not want to put a block on it. However getting rid of it, which is very much an incentive for people to release land, and then increasing it to an appropriate level, or returning it to 80% and re-examining it at that stage, would signal to people they must use it or lose it. This has been used by the Department of Finance over and over, such as with regard to the seven year rule for buyers which runs out this year, which was a window to get people involved in the market. We should desire that land be released at this point in time for development purposes in the greater Dublin area and other areas. The reduction in the rate should only apply for a period of time.

There is a secondary issue with regard to being an anti-corruption measure, but its stated intention is to have the effect of people releasing land, which is what I would like to see. There is no point in getting rid of this windfall tax if people sit on land for two, three or four years as property prices increase. If I were sitting on a piece of land which had been rezoned from agriculture to prime development and had to pay an 80% tax I would not sell it as I would not receive much benefit from doing so. The Government is now stating it will get rid of this tax completely. However, if I read any of the analysis I would know land prices are increasing and there is a chronic housing crisis in Dublin, so why would I release the land at this point in time? There is no incentive for me to do so.

I genuinely suggest the Government examines the possibility of this on Report Stage. It would not tie its hands because the year before it was due to finish the Government could decide to extend it, reduce the rate or abolish it. The Minister for Finance has been quite clear since he took office that when we deal with financial measures it is not only with regard to raising or reducing tax and expenditure but trying to impact on the decisions people will make to affect other policies. The reason we included this measure in our alternative budget was to encourage people to release land at this point in time. The Minister of State has gone down this direction, but only half way. The time part has been left out and I genuinely encourage him to include it. The housing crisis has many components, but we need to get over this hurdle. Including a time limit would create an incentive to release this land at this point in time.

Are there deadlines for the public consultation process which the Minister started?

No, he has not outlined it yet. It was in his budget speech, but the detail of it has not yet been outlined.

Is there a timescale for it?

I will seek an update and revert to the Chairman. On budget day the Minister indicated he hopes to do this in the coming months.

I ask the Minister of State to come back to the committee on this point and take into account what Deputies Doherty and McGrath have said.

We aim to have a public consultation early next year, but I will revert to the committee as I know members will have a keen interest in it.

I understand the points made by Deputy Doherty. Quite rightly, he can list a number of examples of time limits for various initiatives and taxation measures. The Minister has taken the view there is no need to do so for this measure. It has been very obvious the windfall tax has been a barrier to transactions. It was introduced, I accept, as an emergency measure at a time of crisis. The property market is now stabilising, and perhaps normalising, and therefore we do not need barriers to property transactions. As I outlined in my opening contribution, the Minister is adamant he is keeping this under close review, and there is no assurance for anybody that he will not reconsider it and he could introduce a levy at a later date. This is a measure to remove a barrier to transactions.

With regard to Dublin, it is worth saying that in the immediate timeframe there is no shortage of development land in Dublin. The problem is the actual lack of development, which is where consultation on what we can do to stimulate development can play a role. There is no shortage of development land in Dublin, but there is in other parts of the country. According to the Department of the Environment, Community and Local Government, enough land is zoned for housing and has planning permission in the Dublin area for 30,000 housing units, or four years of supply, if construction activity were to be increased. We have enough land in Dublin. We are cognisant that if land were rezoned in other areas where there is a need for development it would be subject to the windfall tax provisions, as would the zoning of land development land generally. It is like the conversation we had earlier about trying out something in a Finance Bill. We believe the windfall tax is no longer required. We believe it is a barrier. We do not see it necessary to include a time limit because we are clearly outlining the Minister for Finance will keep it under very close review and consider it in future finance Bills.

The Minister of State mentioned 30,000 housing units and stated there is enough land with planning permission for these.

Land zoned for housing and with planning permission in the Dublin area.

Any land we are dealing with here is already zoned for housing anyway. I am not sure if I completely subscribe to the Minister of State's belief there is no need for additional land to come onto the market. While there may be land with planning permission, the problem is it is not going onto the market. We need some of this land to flow to people willing to develop it for housing purposes. The land about which we are speaking has been zoned for housing purposes. My point is the Minister of State is simply wrong on this matter. If he does not believe the land needs to come onto the market why are we getting rid of the windfall tax? These people benefited from local authorities rezoning land. The land should come onto the market, which is why the windfall tax should be reduced, but the Minister of State does not seem to want the land to come onto the market now, next month or the month after. He speaks about incentives and a consultation process which will be launched some time in the future to incentivise people to release land and develop it. This is a very simple measure. I do not understand the Government's rationale for not including a Cinderella clause. We will agree to differ. I believe the Minister of State is making a mistake.

I am sure we will return to it.

Question put and agreed to.
SECTION 28

I move amendment No. 58:

In page 52, between lines 27 and 28, to insert the following:

"(a) to qualify for tax relief under this provision—

(i) it shall not be necessary for the person claiming relief to be ordinarily resident in the relevant house,

(ii) any person who owns a pre-1915 house in a town with a population greater than 10,000 people shall be eligible to avail of tax relief,".

This relates to the living city initiative, for which the Minister of State has indicated he is confident there will be approval from the European Commission shortly. This was first announced two years ago and it was changed last year. Further amendments are proposed in the Finance Bill, which I presume are designed to get approval over the line.

It could be extended to include, for example, people who may not necessarily be ordinarily resident in the house, which would include properties owned by charitable organisations or a person who is a tenant of a property but not paying rent because he or she is a family member of the owner and, also, that the number of locations covered by the living city initiative would be extended to provide that any person owning a pre-1915 dwelling in a town with a population of greater than 10,000 people would be eligible to avail of the relief.

I thank Deputy McGrath for his two amendments which, as I understand them, break down as suggestions. The first suggestion is that the residential element of the relief be broadened out to those who are not ordinarily resident in the property and the second is that the application of the relief be broadened out beyond the six cities which the Minister for Finance currently has in mind.

On the first suggestion, I must re-emphasise that the purpose of the living cities initiative is to encourage families to return to live in the centre of these cities. The Deputy's proposed amendment would, in the view of the Minister for Finance, reverse the intention behind the initiative. The suggestion that the relief could be granted to someone who is not the owner or occupier would potentially encourage speculators back into the market. This scheme is not intended to appeal to property investors or speculators. I know that these are not the people which Deputy McGrath has in mind but that could be an unintended consequence of what he proposes. Even those who do not support the initiative would agree that we do not want to arrive at that point.

Lest there is any confusion about this I should point out that the properties in question do not have to be occupied at the time the renovation work is done. As we all know, in many instances they could not be occupied. A derelict building would have to be made habitable before it could be occupied and the relief would only commence when it is occupied as a residence. The relief is limited to owners and occupiers and does not and will not apply to landlords or speculators in the private rented sector. We have seen in the past where difficulties can arise when tax incentives are provided on a wide-ranging basis. When the Minister for Finance announced the living city initiative in the Finance Bill 2013, he stated that it was a scheme with a specific purpose to develop and reinvigorate run-down areas of our city centres. The scheme was to be targeted at houses more or less on a street-by-street basis and was aimed at attracting families back to city centre locations.

The second element of Deputy McGrath’s amendment is that the owner-occupier relief should be extended to all pre-1915 houses in towns with a population of 10,000 or more. Again, the Minister has concerns around implementation of this in practice. For example, if this was to be done, every pre-1915 house in the city of Dublin could avail of the relief and relief would be granted to some of the most affluent areas of our cities and towns. The Minister is concerned that this could result in wastage of tax expenditures in areas which do not need regeneration. This initiative is aimed primarily at urban renewal and regeneration. We have to target the parts of our cities which are in decline and need help. For this reason we are consulting the local authorities to identify the specific areas most in need of help. This is a targeted initiative. We cannot go back to large-scale property reliefs and any future schemes should always be subject to a comprehensive ex ante cost-benefit analysis. For these reasons, I cannot accept Deputy McGrath's amendments.

I support the idea of trying to bring people back to living in the cities. According to the last couple of published censuses, the population in Cork city has been declining, which is a concern. There are many properties in that city that are in need of renovation. It would be great to see more families returning to live in the city. I am concerned that two years on from the introduction of this initiative we still do not have approval for it from Europe. Perhaps the Minister of State would update the committee on the reason for the delay and the sticking points raised by Europe that have resulted in that delay.

The passage of this Bill is an important step in terms of approval for this initiative from the European Commission under state aid rules. When the pilot initiative was announced by the Minister he made it clear that it was dependent on an independent cost-benefit analysis and approval from the European Commission under state aid rules. The cost-benefit analysis has been completed recently by independent consultants Indecon, the report of which is on the Department of Finance website and concludes that the initiative is worth pursuing. This report will form the basis of the submission to the European Commission for state aid approval. Discussions will now commence with the relevant local authorities and other Government agencies to identify the deprived or neglected parts of our cities which require the type of assistance on offer. We are hopeful that this will be resolved within a matter of months.

I come from a town rather than a city but I see great benefit in the concept of this initiative in terms of regenerating run-down or neglected parts of our cities. It is a targeted initiative. The list of cities has been expanded. The priority of Government now is to obtain the required approval and get on with what needs to be done.

I wish to signal that I propose to submit an amendment on Report Stage in relation to the inclusion of towns in this initiative. I tabled an amendment to last year's Finance Bill in regard to the inclusion of the town of Bray on the basis that there are far more properties in Bray town than in Kilkenny or Galway city. In my opinion, Bray town should have been selected before those two cities. I pointed this out to the Minister for Finance last year at which time he articulated the view which the Minister of State has just repeated, namely, that it is a targeted initiative. I believe that in terms of properties in need of repair, the eastern side of the town of Bray would benefit more from this scheme than would Galway or Kilkenny cities. I am not suggesting either of those cities should be excluded but I am intimately familiar with both of them and I do not believe they comprise as many derelict properties as the town of Bray. I would welcome if consideration could be given to the inclusion of Bray in this initiative which did not get seaside resort status over recent decades.

The Government works very hard for Bray every day. We are going to be very cautious in the implementation of tax relief in the property area. The concept is regeneration of cities in respect of which, as articulated by Deputy Michael McGrath, populations therein are declining. The purpose of this initiative is to bring our cities back to life. Thankfully, this decline is not evident in our towns. The problem is one of getting people to live in our cities. We have to walk before we can run on this one. The Minister has already extended it from some cities to all cities. Let us get the EU state aid approval and see where we go from there in terms of how this scheme works practically in our cities. I will discuss the matter raised by the Deputy with the Minister for Finance.

Amendment, by leave, withdrawn.

Amendment No. 59 has been ruled out of order.

Amendment No. 59 not moved.
Question proposed: "That section 28 stand part of the Bill."

It is farcical that an amendment that seeks deletion of a line from the legislation has been ruled out of order. It is an absolute disgrace and really frustrating for me as an elected representative tasked to represent my constituency and deal with the finance portfolio. There is a need for change in this area. As I said to the Minister for Finance yesterday there is a need for reform of how we deal with financial and budgetary matters. The current system is an affront.

The amendment which has been ruled out of order sought that subsection (3) not be deleted from the original legislation. If this subsection is deleted, qualifying expenditure in respect of what was once termed a Georgian house and is now only a house would require that the work be carried out in the living quarters of that house. The Minister of State said that the primary focus of this initiative, which has been three years in the making, is to encourage families to come back to live in the city centres. The removal of the obligation on somebody who is availing of this type of tax relief, which is very generous over a ten-year period, to incur expenditure on the living quarters of a premises which facilitates them to live in it means that work does not comply with the stated intention of the living city initiative. Why is subsection (3) being deleted if we are genuinely about not only having these premises refurbished and back in commercial use and so on but having people living in the upper stories of these premises?

I recall that the Deputy raised this issue during the Second Stage debate.

He is suggesting that the living part of the initiative is at risk of being diluted in some way. His amendment appears to have been designed to reinstate this element as well as deleting the requirement that claimants, under the commercial element of the initiative, must provide certain information to Revenue before a claim can be made.

Far from diluting the residential element of this initiative, the scheme is now being extended to single storey pre-1915 dwellings and we are no longer only talking about Georgian property. Previously, this scheme had only been available to properties of two or more storeys. There will be more residential properties that will fall within the ambit of this scheme. The element of this scheme, about which Deputy Doherty has a concern, is only a minor part of the scheme itself. There is a residential element for owners and occupiers and, apart from the extension to single-storey dwelling, this has remained the same from the beginning.

Separately, there is a commercial element, which complements but stands apart from the residential part. I want to make it clear that this has always been part of the scheme from the beginning. This is not a new element. There was a small area of overlap, which applied when a commercial operation was intended to be located in what was originally a Georgian house. It could only occupy the ground or basement floors with residential owner-occupier relief being claimed on the upper storeys. The proprietor of the commercial premises did not have to live above the shop. It could be somebody else.

There are good reasons the Minister is proposing to change this: first, the introduction of single-storey buildings into the scheme will have made that restriction irrelevant in many cases; second, with the benefit of hindsight, the Minister concluded that the restriction is an unnecessary complication which will have little or no effect on the scheme as there has always been a commercial element to the scheme; and, third, the aid limit on the commercial element of the scheme, introduced in the Finance Bill, will ensure that the initiative will not result in large-scale commercial developments. This is not about allowing for a large-scale commercial benefit. It is about trying to bring life back into the cities.

The types of commercial developments which the Minister, Deputy Noonan, had envisaged operating in these special regeneration areas are small retail operations and other small-scale local services. These elements work together. In the long term, it will not be possible to have one without the other. People will not move back to live in these city centre locations if the local services are absent and retail activity will not be sustained in the absence of a vibrant resident community - both need each other.

The second element of Deputy Doherty's amendment proposes to remove the requirement for prospective claimants to provide certain details to Revenue in advance of a claim being made. This information will be used to measure how successful the initiative has been, how many residences have been refurbished, and how many commercial operations have been set up as well as ongoing Exchequer costs. Information gathering, as the Deputy will appreciate, is increasingly a feature of EU state aid rule compliance, and it cannot be ruled out that the EU will require detailed information about the operation of this initiative in the future. Obviously, we are eager to ensure we get that state aid approval. The provision of this information will also enable Revenue to better supply data in answer to parliamentary questions on the cost and take up of this initiative which is important in terms of accountability to this House.

In summary, and for the reasons I have outlined, the Minister is not in favour of those proposals.

First, to clarify, the second part of my amendment which the Minister of State read out, which was ruled out of order, is a typographical error. It was only to reinstate subsection (3), which it is proposed to delete.

The Minister is getting rid of this section, which is the condition that applies to commercial refurbishment in relevant houses which required the rest of the house to be refurbished for residential purposes. When the initiative was initially before us in legislation, the only houses that could have availed of this initiative were Georgian houses and then it was changed to a relevant house, which meant a building constructed before 1915 for use as a dwelling comprising at least two storeys with or without a basement. To apply the section to it for commercial use, would they have to have carried out work on the living part of that house?

This scheme has not been up and running, but let us pretend that it was. Where anybody wanted to avail of the commercial part of this relief, previously was there an onus on him or her to refurbish the living quarters of the premises?

That is correct. At the time, the logic was that we were talking about Georgian houses. We were trying to ensure that if works were being carried out, there would be a residential living element to each of the Georgian houses. Obviously, we have broadened that now to all pre-1915 dwellings and therefore we do not see the same necessity.

It is clear that any commercial refurbishment that was done required one also to refurbish the living quarters and to live in them. The Minister of State mentioned that such applied to Georgian houses. It also applied to relevant houses, which was classified as pre-1915 houses which were two storey also. My point is anybody who was to avail of this relief up until now had to refurbish a living quarters in his or her premises. Is it the case that there was no commercial element to this that did not allow for the refurbishment of a living area and that had to be occupied?

That is the case, but I would argue that the €200,000 tax relief limit on the commercial side that we have put in place will help with achieving EU state aid approval. It also makes it more restrictive in terms of commercial development than it was previously.

That is fine but let us stick to the facts here.

It is an important point.

The scheme in two different Finance Bills required anybody who was availing of this tax relief for commercial purposes to refurbish the upper part of the house, and one had to live in it. That is why it is called the living city initiative. What is being proposed today in the Finance Bill is that one no longer must have any part of the house refurbished for living because the Minister is including single-storey buildings, as well as two-storey ones and others, in the scheme and now one can refurbish a commercial entity without living in it. Will the Minister of State clarify that such is not the case?

I think our wires are slightly crossed here. As I stated earlier, there has always been a commercial element. There were previously under this scheme commercial elements, which, as I outlined, complement but are separate to the residential.

On a commercial element required, there was a condition-----

No. To clarify, the commercial-residential synergy was required only in the Georgian houses, not in the other buildings.

Can the Minister of State point out where in the original Act, which is what we are amending, this applies? Subsection (3), which is what we are deleting here, is the commercial end of the two-storey houses on which one need not now carry out work on the upper floor.

I am trying to get the exact reference.

While we are waiting on that, is the Minister of State stating that if the one-storey house is availing of this relief, it must only be for residential purposes?

No. I am saying that the obligation on a premises being renovated for commercial purposes to also include the living area related to the Georgian properties. The scheme is now being extended beyond Georgian properties.

A single-storey building is either commercial or residential.

It could be either.

Can it be either-or and get the relief?

It can be either-or. There is a specific provision in relation to Georgian houses.

And get the relief?

Yes. What we have done in this Bill, which we had not done previously and which comes back, I suppose, to the heart of Deputy Michael McGrath's comments earlier about the EU state aid, is limit the tax relief for commercial activity to €200,000, which is an important component in seeking approval.

If one is allowing this relief on a single-storey building without any residential effect, it is not really part of the living city initiative.

It depends on how one defines living. If one wants someone to live in a community, he or she must be able to avail of local services. There are many parts of cities that have run down and derelict buildings. We need people to live within communities where they can function and be sustained. The concept of this, as I outlined in my comments, is not to provide relief for large-scale commercial development but to help with the provision of local services.

The living city part of this is that it allows someone to refurbish a single-storey building as a commercial entity to provide services in the local community.

Yes. However, it is capped at the €200,000 relief, which has not existed previously.

Section 372AAC deals with commercial premises and capital allowances for the conversion or refurbishment of certain commercial premises. There has always been a standalone provision.

In that section, subsection 3 is being deleted and includes the following requirement: "In the case of a qualifying premises comprised in a Georgian house [which was subsequently changed to a 'relevant house'], subsection (2) shall apply only if the qualifying premises are comprised in the ground floor or basement and qualifying expenditure (within the meaning of section 372AAB) is incurred on the upper floor or floors of the building, and in respect of which a deduction has been given, or would on due claim being made be given, under that section". That was the requirement to have work done on the living quarters in the relevant houses.

As I outlined, the rationale behind it is that we have taken out the two-storey over the basement scenario where there had to be a commercial and living spaces. That reality no longer exists.

Let us stick to what is in place. There seems to be confusion because I was happy with the clarification of the Minister of State but then he seemed to say our wires were crossed. Let us forget about the amendment before us, which changes the relevant house into a possible single storey. At this point in time, can someone avail of this tax relief without having a living quarter?

How does that happen.? At this point in time, a relevant house is a two-storey house.

It is allowed in the section once it is not a Georgian house.

Did the last Finance Act not change the term "Georgian house" to "relevant house"?

Yes, but all we did in this Bill is to take out the two-storey over the basement part.

Let us stick to what exists at present. The Minister of State keeps referring to a Georgian house but that was replaced in the previous Finance Act by the term "relevant house".

The only property that could avail of it is a relevant house, which was defined as one with at least two storeys with or without a basement. Subsection 3 says that, in that case, people had to incur expenditure in the living quarters on the first floor or above.

Deputy Doherty wants to talk about what we have currently but the amendment is important.

I do not understand what is there at present.

By bringing in the single-storey, it changes the reality.

We will come to that but the impression has been given that if I was in Limerick or elsewhere and this was up and running, the only qualifying properties are two-storey houses constructed before 1915, with or without a basement. If I want to refurbish the commercial end of it, I would also be required to refurbish the living element of it, which had to be on the first floor.

No, that is not required. The space above must be available to be lived in but does not have to be refurbished by the person locating the commercial activity within the building. People cannot move in and put commercial activities upstairs.

Subsection 3 reads as follows: "shall apply only if the qualifying premises are comprised in the ground floor or basement [that is the commercial part of it] and qualifying expenditure (within the meaning of section 372AAB) is incurred on the upper floor or floors of the building". This states one must incur qualifying expenditure.

But not necessarily by the same person.

It is for the same building.

Yes, but not necessarily by the same person. Someone could operate commercially in the basement and someone must live in the upper floors. We are moving to a different scenario now.

The building could only be refurbished if there was expenditure incurred in the living part on the upper floors.

Now we have clarified the situation for the scheme that never took effect. The only way to avail of the scheme is if the building has a living quarter upstairs.

Yes, but it could have different people involved.

It could involve different people or it could be paid by a company. The stated intention of the Living City initiative was for families to come back to live in those dwellings. The amendment gets rid of the condition that existed heretofore, namely, the properties can now be renovated without the requirement of anyone living in the properties.

Yes. The Deputy is correct and I have tried to explain the rationale behind it. I will give it another go. The rationale is twofold, the first point being that we are no longer dealing with houses that have a basement. We did not want to have a commercial operation going into an entire Georgian building, where potential living quarters in a Georgian house or relevant house could end up being diminished and used for commercial operation. We have extended that to consider single-storey dwellings. There is not the same synergy as having the commercial element downstairs and the residential part upstairs. It is like comparing apples and oranges in that regard.

Second, it is important when talking about living cities that there is the provision of local services. We are moving to a situation where a single dwelling is coming into play. I have made clear, and the cap on the relief makes clear, that we are not talking large-scale commercial activity but provision of local services is an important part of a living city. People will not live in cities without service provision. It is a complex area but, with regard to the previous scenario, we were talking about a very specific type of dwelling and we are now broadening the types of dwellings.

The cap is coming from the EU, not the Government, and is a result of having to pass the state aid rules. The key point remains that there is no living requirement in the living city initiative. With regard to the single-storey case, we can argue whether it is worthy to extend this to single-storey buildings, built before 1915 or otherwise. Even if we were to agree to the merits of extending it to single-storey buildings, why would we remove the requirement on two-storey relevant houses, or the old Georgian houses, to have living quarters in the house? The legislation no longer contains that requirement.

There is a residential element to the legislation. I do not accept that there is a dilution of the residential element. Section 372AAC has always allowed people to get relief on commercial premises. Subsection 3 addressed the specific situation where the commercial property was in the basement of a pre-1915 building with two storeys over the basement. It is an evolving scheme and considerable consideration has been given to it over the past two years. Subsection 3 addressed the specific situation where a commercial property was in the basement of a pre-1915 building with two stories over the basement. It was an extra restriction and, for the reasons outlined, we did not want to see a scenario whereby people occupy a house that has living potential in the upper quarters.

Has there been a change in policy? If the legislation is passed, will the provision regarding living on the first or second floor be removed?

To clarify that point, there are two elements to the legislation, the residential and commercial. The commercial element refers to section 372AAC and always allowed people to get relief on any commercial premises. Subsection 3, which we are deleting, addressed a particular situation where the commercial property was in the basement of a pre-1915 building with two stories over the basement. We are changing to a different range of properties. Section 372AAB is the relevant residential element and one must be the owner occupier to get that relief. There are two sections and the principle of a commercial element and a residential element is maintained. We are extending it to single-storey dwellings.

I am sure the Minister of State is not deliberately doing this but he has made the point twice that subsection 3 only dealt with the specific situation where the commercial part was in the basement of a two-storey property.

The legislation only allows for two stories, with or without a basement. It states, "subsection (3) shall only apply if the qualifying premises are comprised in the ground floor or basement". So it applies not just to the basement. The Minister of State is giving a false impression, the commercial part can be in the ground floor or basement. The intention is that in the city centre of Limerick, where one has a basement which might be used to offer a service and a retail shop on the ground floor and another floor upstairs, we encourage people to go back into the city and live over the shop on the upper floors. The only way that the shoe shop on the ground floor or the basement area could be refurbished and benefit from this relief is that other expenditure would be incurred as applicable for the upper floors.

We have taken a commercial element into consideration. I certainly do not wish to mislead and I am sorry that this has been quite a technical discussion. The Deputy is correct, there are two elements. That is the only way the cost of the refurbishment of the commercial floors could be funded. There is a residential element also.

There is a residential element.

----- which is stand-alone.

The residential element is not an issue. If somebody with a house built before 1915 wants to refurbish it and live in it then they will be able to avail of the relief for residential properties. That is not an issue.

My point is that this is a major incentive to people who want to renovate their commercial premises without any requirement to refurbish the living quarters. If the Minister of State accepts the merit of houses built before 1915 being refurbished for commercial use being able to avail of the tax incentives, why does he not stipulate that subsection (3) would continue to apply to premises on the main streets in our city centres which have an upper storey? If one is to be true to the meaning of the living city initiative, he would continue to have subsection (3) which states that in the case of a two storey building, the upper storey is refurbished for living quarters. This relief is hugely generous. It has moved completely away from what was originally anticipated in terms of living in the city.

The incentive to get people to come back and live in the city centre entailed the Government offering a significant tax break that would allow people to refurbish the lower part of the building and claim the sum expended over a ten year period. Now the Minister is saying that the incentive in the designated areas is that those with houses built before 1915 no longer have to live in them but can refurbish the basement and ground floor for commercial purposes and claim the expenditure over ten years. That is completely different from what was originally anticipated.

There are other things that are completely different from what was otherwise anticipated, such as the cap. This scheme has been evolving in the past two years.

The concept of the scheme is to get people back to the city. Yes, it is intended to get people living in cities but also to get life back into parts of the city. It is not a scheme that has been drawn up by Department of Finance officials in Merrion Street. It has been done in conjunction with local authorities. We have been having conversations with local authorities in terms of what they want. Local authorities are supportive of these moves.

I take the point that Deputy Doherty makes, and it is something we may return to on Report Stage. I am happy to get him more information on this. We do not want to have a scenario where somebody is exploiting the scheme for commercial gain. That is not the principle of the scheme. That is not where we are trying to target the tax relief. We have imposed a €200,000 cap on the tax relief. It is probably a requirement of EU state aid approval for commercial development in a designated area. It will help to get life back into our cities.

The scheme is not yet in operation because we are waiting for approval from Europe. We have done the cost benefit analysis. The measures in this section, which amount to an amendment of the Principal Act, will extend the number of dwellings that will be eligible, which is ultimately good. The composition of dwellings will alter from area to area and we are working with the local authorities on this aspect and we have put a cap on the tax relief to prevent the exploitation of the scheme

Is the Deputy happy with the Minister's offer to supply more information before Report Stage?

No, I have a further comment. I want the Minister of State to address the specific point and give the reason why, in the case of the upper floor above commercial premises, we are not making it a requirement that the upper storey must be refurbished as a living area? Will the Minister think about that or come back to it on Report Stage? I tabled an amendment, which was ruled out of order, to deal with this key area.

I have issues with this scheme but I can speak to the Minister about them. What I propose would not stop a pre-1915 house being developed for commercial purposes, or for residential purposes and availing of this relief scheme. However, in cities with Georgian houses or two storey houses, there should be a requirement to refurbish the upper part.

I wish to clarify the cap of €200,000. Are all the investments over the ten year period aggregated for the purpose of tax relief on the investment?

Yes. I will consider the points the Deputy has made. I refer to the points I have made on behalf of the Minister for Finance, in which he outlined directly the requirement for a person to live above the premises. He said that with the benefit of hindsight he has concluded that the restriction is an unnecessary complication which will have little or no effect on the scheme but that the aid limit on the commercial element of the scheme will ensure that the initiative will not result in large-scale commercial development. It is fair to say that this has been an evolving scheme and one on which we have been working with the local authorities. The view originally was very narrow, we were looking at Georgian houses in a couple of cities but we have moved on quite a bit from that now. That is how the scheme has evolved.

Deputy McGrath's amendment No. 58 dealt with extending the scope to different areas.

I come from a community in County Donegal where I can see islands that were deserted in the 1960s but thankfully some islands are now inhabited and in spite of all of the challenges, people continue to raise their families on those islands. Why would a scheme such as this not be introduced for island communities? If we genuinely want to keep people on the islands, why would we not include island living in a scheme such as this?

This brings us back to Deputy McGrath's amendment and whether this scheme should apply to Bray, County Wicklow. It is certainly not ruled out but one has to remember, as Deputy McGrath rightly pointed out, that it is two years since this scheme was initiated and we still have not got EU state aid approval over the line. We are inserting a limit to the relief in the Bill and I hope this will be an important step in getting over this hurdle. Let us walk before we run and let us see how the scheme works. We can have that conversation.

The Government is being cautious. We are targeting the scheme at cities. There is a logic to that but equally one could argue the logic for islands. I can see the argument that one could make in that respect. This is a targeted initiative in terms of trying to get life back into parts of cities. That is an important point. The potential unintended consequence that we would have been concerned about from Deputy McGrath's amendment is that we do not want to do up all parts of the cities. Many parts of some cities are doing very well but there are elements of our cities that suffer from dereliction, a dwindling population and often have little or no life in them. The scheme is targeted at those areas. Should it work there is no reason that it cannot be looked at in regard to other locations.

Question put and declared carried.
SECTION 29
Question proposed: "That section 29 stand part of the Bill."

The Minister proposes bringing forward an amendment on Report Stage to include the additional requirement for companies to comply with guidelines that will be created by the Minister in consultation with the Revenue Commissioners. The amendment is necessary in order to secure the approval of the European Commission under State aid guidelines on regional aid. We will discuss this on Report Stage.

Question put and agreed to.
Question proposed: "That section 30 stand part of the Bill."

With the indulgence of the committee as there is nowhere else to flag this on Committee Stage, the Minister for Finance has asked me to inform the committee that he will be bringing forward another amendment on Report Stage which will be an amendment to provide for tax relief at the marginal rate for expenses incurred by an individual who employs a carer to take care of an incapacitated individual in his or her own home. His proposed Report Stage amendment will increase the maximum amount of expenditure that qualifies for the relief from €50,000 to €75,000 per annum. This amendment will refer to section 467 of the Taxes Consolidation Act 1997.

Is there a similar cap for nursing home support?

There is no limit on the amount of nursing home fees that can be claimed under tax relief.

I wish to clarify a comment I made earlier on the vote on section 28. I may have said that the question was lost but I wish to correct the record to say that the question was carried.

Question put and agreed to.
NEW SECTION

I move amendment No. 60:

In page 56, between lines 12 and 13, to insert the following:

“Amendment of Part 26 (life assurance companies) and Part 27 (unit trusts and offshore funds) of Principal Act

31. (1) Chapter 6 of Part 26 of the Principal Act is amended—

(a) in section 730J by substituting the following for paragraph (a):

“(a) where the person is not a company—

(i) the rate of income tax to be charged on the income represented by the payment, where the payment is not made in consideration of the disposal, in whole or in part, of the foreign life policy, shall, notwithstanding section 15, be—

(I) subject to subparagraph (ii), in the case of a foreign life policy which is a personal portfolio life policy, at the rate of 60 per cent, and

(II) in any other case, at the rate of 41 per cent,

and

(ii) in the case of a foreign life policy which is a personal portfolio life policy and the income represented by the payment is not correctly included in a return made by the person, the income shall, notwithstanding section 15, be charged to income tax at the rate of 80 per cent,”,

and

(b) in section 730K, in subsection (1), by substituting the following for all of the words from and including “and details of” to the end of that subsection:

“then, notwithstanding section 594, the amount of the gain shall be treated as an amount of income chargeable to tax under Case IV of Schedule D, and where the person is not a company the rate of income tax to be charged on that income shall, notwithstanding section 15,

be—

(a) (i) subject to paragraph (b), in the case of a foreign life policy which is a personal portfolio life policy, at the rate of 60 per cent, and

(ii) in any other case, at the rate of 41 per cent,

and

(b) in the case of a foreign life policy which is a personal portfolio life policy and the details of the disposal are not correctly included in a return made by the person, at the rate of 80 per cent.”.

(2) Chapter 4 of Part 27 of the Principal Act is amended—

(a) in section 747D by substituting the following for paragraph (a):

“(a) where the person is not a company—

(i) the rate of income tax to be charged on the income represented by the payment, where the payment is not made in consideration of the disposal of an interest in the offshore fund, shall, notwithstanding section 15, be—

(I) subject to subparagraph (ii), in the case of an offshore fund which is a personal portfolio investment undertaking, at the rate of 60 per cent, and

(II) in any other case, at the rate of 41 per cent, and

(ii) in the case of an offshore fund which is a personal portfolio investment undertaking and the income represented by the payment is not correctly included in a return made by the person, the income shall, notwithstanding section 15, be charged to income tax at the rate of 80 per cent,”,

and

(b) in section 747E(1) by substituting the following for paragraph (b):

“(b) where the person is not a company, the rate of income tax to be charged on that income shall, notwithstanding section 15, be—

(i) in the case of an offshore fund which is a personal portfolio investment undertaking—

(I) subject to clause (II), at the rate of 60 per cent, and

(II) where the details of the disposal are not correctly included in a return made by the person, at the rate of 80 per cent, and

(ii) in any other case, at the rate of 41 per cent.”.”.

This amendment deals with the potential anomaly in the income tax rates attaching to investments in foreign life policies and offshore funds. The issue has arisen as a result of the reduction, with effect from 1 January 2015, of the higher income tax rate to 40% while the income tax rate for both domestic and offshore funds and for domestic and foreign life policies remains at 41%.
This amendment will ensure that where tax liabilities in respect of investments in foreign life policies and offshore funds are paid under the self-assessment system, an individual who submits an incorrect return will not be liable to tax at a rate lower than will apply to a compliant taxpayer. In the absence of this amendment, a correct return would attract a tax rate of 41% while an incorrect return would, rather worryingly, be taxed at the marginal rate of 40%. This would incentivise people to make incorrect returns.
The amendment also ensures that there will be tax symmetry between the rates of tax applicable under the self-assessment system in respect of investments in personal portfolio life policies and personal portfolio investment undertakings, in circumstances where either a correct or an incorrect return is submitted.
Amendment agreed to.
Section 31 agreed to.
Sections 32 to 37, inclusive, agreed to.
SECTION 38

I move amendment No. 61:

In page 60, to delete lines 23 to 26 and substitute the following:

“(2) (a) Subject to paragraph (b), this section shall have effect from 1 January 2015.

(b) As respects a company incorporated before 1 January 2015, this section shall

have effect—

(i) after 31 December 2020, or

(ii) from the date, after 31 December 2014, of a change in ownership of the company where there is a major change in the nature or conduct of the business of the company within the relevant period, whichever is the earlier.

(c) In paragraph (b) “relevant period” means a period—

(i) beginning on the later of—

(I) 1 January 2015, or

(II) the date which occurs one year before the date of the change in ownership of the company referred to in that paragraph,

and

(ii) ending 5 years after the date of that change of ownership.

(d) For the purposes of the references in paragraphs (b) and (c) to a change in ownership of a company, Schedule 9 (other than paragraph 4 of that Schedule) to

the Principal Act shall apply as if references in that Schedule to section 401 or 679(4) of the Principal Act were references to the said paragraphs (b) and (c).

(e) For the purposes of paragraph (b), “a major change in the nature or conduct of the business of the company” means—

(i) a major change in the nature or conduct of a trade (within the meaning of section 401(1)(a) or (b) of the Principal Act) carried on by the company,

(ii) the commencement by the company of a new trade, or

(iii) a major change arising from the acquisition by the company of property or of an interest in, or right over, property.”.

The purpose of this amendment is to ensure that the transition arrangements that allow the application of the existing rules on residence for companies until the end of 2020 cannot be accessed by shelf companies or other companies incorporated before 2015 which are acquired in certain circumstances after the end of this year.
Section 38 amends the company residence rules in section 23A of the Taxes Consolidation Act 1997, to provide that an Irish incorporated company will be regarded as resident for tax purposes in the State. The purpose of the change in company residence rules is to bring Ireland's rules into line with the rest of the OECD jurisdictions and to address the potential reputational damage arising from the use of corporate structures commonly referred to as the double Irish. A six year transitional period is provided for in the Bill to give existing companies a reasonable time frame to plan and re-organise their business structures.
The proposed Committee Stage amendment will address concerns that the commencement provisions in the Bill as published could be circumvented so that shelf companies or other such companies incorporated before 2015 could be acquired and re-used as non-resident companies in new business operations set up after 2014 and thereby avail of the transitional period. This amendment will prevent such a scenario and will ensure that the transitional period is only available to companies with real and substantive business operations in place at the end of 2014. The amendment replaces the existing subsection (2) in the Bill with a new subsection (2) to provide for the revised commencement arrangements.
I should emphasise that the new subsection does not change the commencement date of 1 January 2015 for companies incorporated on or after that date nor does it change the commencement date after 31 December 2020, for companies incorporated before 1 January 2015, which have real business operations established before the end of the year.
My amendment essentially introduces a two-step test to provide that the non-resident status may not apply if, first, there is a change in the ownership of a company incorporated before 2015 and second, there is a major change in the business of the company. Where these two events occur during the transition period, the transition arrangements will cease to apply and the new rules on company residence will apply from the date of the change of ownership. This should deter the acquisition or transfer of companies for use as non-resident companies in new structures that are set up after this year in order to avail of the transitional period. This amendment will ensure that where there is an ongoing business in the company that was established before the end of 2014, the non-resident status will not change even if ownership of the company changes during the transition period. In particular, this should allow mergers or acquisitions of existing companies that are undertaken for bona fide commercial reasons to avail of the transition arrangements.
In summary, the revised commencement provisions will ensure that existing projects can continue to avail of the old residence rules for the transitional period up to the end of 2020, while new projects which are set up from the 1 January 2015 will be subject to the new residence rules, as was originally intended. I commend the amendment to the committee.

I welcome the fact that the double Irish has been closed down. I reiterate that the head-in-the-sand approach by the Government and the blatant misleading comments by the Government and the Minister that there is nothing in Irish legislation that can be done to close down the double Irish is insulting, to tell the truth, when we all knew that it could be done. While I welcome the amendment in that it goes some way to deal with this issue I do not understand why the transitional period remains up to the end of this year to allow for companies to avail of the double Irish and as a result they will be able to avail of it for the next five years. Has the Revenue, the Department of Finance or the Minister for Finance been informed of any companies which may be able to avail of this transitional period, companies registered or incorporated before 1 January 2015, and as a result of this amendment would be in a position to claim the benefits up to 31 December 2020?

The Minister of State knows I take a different view on this issue, not so much because of the specific aspects of the double Irish but my concern is about the issue of certainty with regard to Ireland's corporation tax offering. Last year's Finance Bill made a change in respect of stateless companies and now there is a change on the double Irish. I do not believe that our competitors, our rivals for international investment, the critics of our corporation tax rate, will stop at this; they will move on to the next issue. I believe they will keep chipping away until they have eroded and undermined our corporation tax offering. That is my concern in respect of this amendment. We are making a significant unilateral move and I do not see other countries making complementary moves. The BEPS process is in mid-stream and the final report has not yet been received. In my view, anything that lessens Ireland's attractiveness as a country for inward investment is a negative thing. We must retain a competitive advantage in respect of corporation tax. I have concerns although the Government has made up its mind on this issue. I am not suggesting that the sky will fall in. I note the commentary from the American Chamber of Commerce Ireland and others who welcome this change.

I acknowledge the Government has consulted widely and brought people on board, but I remain concerned at the unilateral move and that the issue of certainty has been undermined in respect of corporation tax.

I thank both Deputies. The diverging views on this show the importance of Government getting the balance right, which is what we have tried to do. On behalf of the Minister for Finance, I must clarify that he did not mislead the Dáil on the issue. The Minister has always been very clear that the double Irish is not part of the Irish tax offering. It is just one example of the many international tax planning arrangements which have been designed and developed by tax and legal advisers to take advantage of mismatches between the tax rules in two or more countries.

The term "double Irish" refers to a structure with two Irish incorporated companies. The Irish residence rules meant that the second company, which was not tax resident in Ireland, could, nonetheless, be presented as Irish because it was incorporated here. The change the Minister is introducing in this Bill will mean that it is no longer possible for any company to use an Irish label of incorporation without also being tax resident here, unless a double taxation treaty assigns residence to the treaty country. Removing the element of the structure which gives it the double Irish name should help restore our international reputation in the context of current EU and OECD initiatives to combat aggressive tax planning.

It is not claimed that this change will bring an end to international tax planning. For that to happen - this is a point the Minister has consistently tried to make - co-ordinated action by many countries working together will be required. That is the reason Ireland will continue to engage constructively on this issue at both OECD and EU initiative levels. What we are doing here is trying to protect reputation, but also trying to take stock of our position in terms of our overall foreign direct investment offering - the three Rs, the rates, the regime and the reputation. The rate is 12.5% and is non-negotiable. We discussed earlier how the effective rate is close to the headline rate. Other countries cannot necessarily say the same. We have also talked about the regime, in terms of foreign earning deductions, SARP and the potential for the "knowledge box". On reputation, we need to ensure that when countries locate here in the context of ongoing global initiatives, they know their corporate reputation can be protected and enhanced by doing business here.

Deputy Doherty asked why there is a transitional period of six years. The transition period, which will end in 2020, is provided in order to give existing companies a reasonable timeframe to plan and reorganise their business structures. The 1 January 2015 effective date for new companies is to accommodate companies that may already have been at an advanced stage of planned investment in Ireland when the change was announced on budget day. One of the key strengths of the Government's strategy on corporation tax has always been certainty and Deputy McGrath referred to this. This certainty now applies not only to our 12.5% rate, but also to all aspects of corporate tax regime, including our rules on company residence.

I believe Ireland has seized first mover advantage, but this is an ongoing process. What other countries will do is a question for other countries, but rather than waiting for a process to arrive at a final destination, Ireland has moved through the budget and this Finance Bill to bring certainty. Furthermore, the amendments we propose today will ensure nobody can attempt to circumvent in any way, shape or form the date of 1 January 2015.

The Minister of State mentioned that no new companies can avail of this provision now and that no off the shelf companies can change ownership and so on. It is only the companies that are well into the process of planning for this year that can avail of it.

This is the specific purpose of the amendment, that only companies that are up and running - real companies doing real business - in advance of 1 January can avail of it, rather than shelf companies. We wanted to ensure that real and potential ongoing investment that was at an advanced stage was allowed get to fruition. That certainty and timeframe is important.

I am sure the Minister of State saw the reports in The Sunday Business Post a number of weeks ago in respect of shelf companies being established in a rush to avail of the transition period. Will he give us an assurance that the proposed amendment deals comprehensively with that issue, because that is an abuse of the transition period the Government has announced?

The amendment we propose today deals specifically and comprehensively with that issue.

The Minister of State refuted the allegation that the Minister misled the Dáil and said the Minister was always clear on this issue. Let me quote what the Minister said in the Dáil in 2012 in response when both I and Deputy Boyd Barrett had challenged him on the issue of the double Irish. My final comment then had been: "While it may be the case that companies are paying tax at 12.5% on the profits registered in Ireland, the Irish tax code allows the 'double Irish' practice to exist." The Minister responded: "My understanding of what Deputy Boyd Barrett describes as the 'double Irish' is that while it exists, it cannot be remediated by changes in Irish tax law."

On budget day, the Minister said: "The so-called 'double Irish' is one of many such schemes. I am abolishing the ability of companies to use the 'double Irish' by changing our residency rules." Two years previously, he had stated that the double Irish could not be remediated by changes in Irish tax law. How is that not misleading? That was a completely and utterly misleading comment. The reason I know that is because this is the legislation that ends the double Irish.

I do not believe it is fair to say that he misled the Dáil and that is the point I am making. I am sure the Minister has probably made the same point to the Deputy in debate. This is an evolving situation in the context of international tax laws, the OECD, the BEPS process, EU initiatives -----

It has nothing to do with BEPS.

Please allow the Minister of State to clarify the position for the Deputy.

What the Minister has always made clear, as is clear to me he was trying to do in the comments quoted by the Deputy, is that Ireland on its own cannot solve international tax arrangements. What Ireland can do and is doing under the Minister's leadership is removing the double Irish label and the mismatch that occurred. However, as I said in my opening comments and as the Minister said on budget day, it is not claimed that this change will bring an end to all of the issues that Deputy Boyd Barrett was raising. That is the broad approach.

I have no doubt the Deputy will get the opportunity to clarify the Minister's remarks with him in the near future.

This is the opportunity as we are dealing with the issue of the double Irish in the context of the legislation.

True, but the Minister of State cannot really speak on behalf of the Minister for Finance at this meeting.

He has spent all morning speaking on his behalf.

Yes, but not in the context of the remarks to which Deputy Doherty has referred.

It is obviously a matter for the Department. The core point is that the double Irish is something that has been pushed in the past. I acknowledge there have been different opinions from the Opposition, but Sinn Féin and some Independents have been raising the issue in the context of the reputational damage the double Irish has caused. The Minister did not respond to international tax practice. On the double Irish he said: "while it exists, it cannot be remediated by changes in Irish tax law." This has nothing to do with BEPS. He said categorically in the Dáil that Irish tax law could not end the double Irish.

Let me give another example. In January 2013, he said: "The problem with the so-called 'double Irish' from Ireland's point of view is that it has that name." Consistently, the basic argument from the Department has been that we could do nothing to end the double Irish. Now it is being ended and I welcome that, although I am not completely happy with the phase-in dates. However, the fundamental point is that the Minister has been feeding the public and the Opposition untruths that the legislation could not end the double Irish. That is disrespectful to Parliament and to his colleagues.

In the face of legislation presented that would end the double Irish, the Minister said categorically - doing so from the seal of office of the Minister - that legislation could not end the double Irish. I believe it is important it is stated here - I know that as a member of Fine Gael and Minister of State in the Department the Minister of State will not do it - that the Minister was wrong when he stated that Irish legislation could not end the double Irish, both in October 2012 and in January 2013. He said the same outside of the House as well.

The core point is that the Minister and the Government want to create the impression that it had nothing to do with us, and that it should have been called something else rather than double Irish. The suggestion is, "why the hell did it end up being called double Irish and with us poor creatures over here getting all this flak from our European masters, from America and all of that and sure we cannot do anything about it, because it is a mismatch". There are two sides involved in any mismatch.

However, one side can move to eradicate the mismatch. That is what happened here and that is what is happening in terms of the tax code. I am sure that the type of bluff that the Minister came out with on the floor of the Dáil - or in October 2012 or January 2013 - does not wash with any of the people who are challenging the rate or some of the advantages we confer on certain multinational companies, when we know now that was not the case. It certainly does not wash with me. It is disrespectful and it should be acknowledged that the Minister was wrong. I believe he did it intentionally and deliberately. Either that or the Minister is a fool and did not know that Irish legislation could end the double Irish. I would rather believe the Minister for Finance is not a fool. I would rather believe he did it intentionally because he did not want to create the impression that we can stop this and go against those who, for their own selfish reasons, want to put pressure on Ireland's taxation regime. However, the Minister has heightened that pressure by not dealing with this properly, trying to obfuscate and trying to say it had nothing to do with us and that it is just the name. People who understand this know well that the Minister is talking nonsense and the legislation before us proves that to be the case.

Some of the Deputy's language was unfortunate and out of character. The Minister for Finance, in the Deputy's years of dealing with him, has never been known to be disrespectful. He engages, responds and puts his point across forcefully. Not even his own most ardent political opponents would believe the Minister to be a fool. The economic markets looking at Ireland and the turnaround of the Irish economy would not call the Minister a fool.

We are dealing with a complex issue. We all know international tax is a complicated issue. There are many double taxation structures in place around the world. We are unfortunate ours had a very catchy name - the "double Irish". There are countless examples of double taxation standards and double mismatches, if one likes, of international tax. The Minister has made the point - I make the point - the Government has made the point and any objective observer would make the point that Ireland on its own cannot end double tax structures. However, Ireland could and did take measures in this legislation to end the potential damage to our reputation as a result of that label. That does not mean that double taxation structures have all of a sudden gone away. Either Deputy Doherty or Deputy Boyd Barrett referred earlier to other countries which already have such structures.

The Minister has made a decision. I appreciate the Deputies do not like the timeline but they support the decision. I respect Deputy McGrath's position on the importance of certainty and I have tried to respond to that. However, the amendments and section we are dealing with today is a progressive step forward. It gives Ireland first mover advantage. While investors looking at other countries are wondering what will happen to their various tax structures, they can look to the three Rs - rate, regime and reputation - for Ireland and have certainty. We are probably not going to agree further on this point.

I do not think the Minister is a fool. However, the Government and the Minister have hidden the truth about the complicity of the Irish tax system in aggressive tax avoidance by major multinationals. There can be no doubt about that. A two-tiered approach to a taxation liability was underlying this. In general, in the tax code, if a company was incorporated here it was liable to tax here. However, that was not the case for these multinationals. We allowed the situation to persist and pretended there was nothing we could do about it. That is dishonest. It is a dishonesty which flowed from the dogmatic and obsessive commitment of this Government, the main Opposition party and much of the political establishment in this country to doing whatever the multinationals want. They were afraid to challenge them in any way for fear they might run away. This cosy arrangement with the multinationals has persisted for quite a number of years. It was finally challenged following the election of people to the Dáil who were willing to question it and we have now discovered the truth. That put pressure on the Government to change things. The problem is that the multinationals then get six years to find another way around paying tax. This is completely unacceptable and extraordinary.

Many signals have been sent and assurances made. That is how I read some of the comments made in the last couple of weeks on foot of the announcement about the abolition of the double Irish. These were reassuring sounds from the Government to the multinationals. They are not to worry as they will not have to pay any more. They will have six years to work out how to deal with it and, in any event, the Government will work on a knowledge box on which the multinationals will have an input to ensure it does not hurt their interests. It gives another meaning to the term "double Irish". It is one law for the super wealthy multinationals and it is another law for the ordinary taxpayer.

We have been through this a couple of times already here today.

This is the section that deals with it. It is important to put down a marker and let the public know that multinationals that have been engaged in aggressive tax avoidance are going to be allowed to persist in that for another six years. There are questions over whether the Government is working hand-in-glove with multinationals to ensure, after the six year-period expires, the successor regime will allow the aggressive tax avoidance to persist in a new way. The Government has said or done very little to convince me that is not the case. The commitment by this Government has been steadfast. It, like previous Governments, has been reluctant to look under the rock that is our corporate tax system and see the worms and maggots there. If the Government is serious about closing down this loophole which allows aggressive tax avoidance, I do not see why it does not do it this year or, at the latest, in January of next year. Ordinary citizens are not getting six years to adjust to austerity taxes. Why should these companies get it?

The Deputy has the right to raise these issues again but parts of them were probably debated earlier. In everyone's interest, I will not return to the issue of multinationals and the contribution they make, except to say that about 250,000 of the ordinary people of whom the Deputy speaks work in foreign direct investment firms in this country. Some of them might live in the Deputy's constituency. He might even know some of them. They are valuable to the economy.

They pay more tax than the multinationals.

There is a final point I wish to make on this. Our company residence rules come from 1906 case law. They have been in place since pre-independence. It is not fair to any Irish Government, whatever its view, to suggest people sat down to plan and plot it. It evolved through international mismatches as outlined. This is an attempt to move beyond that. We are co-operating at an international level. I welcome, as Deputy McGrath outlined, the support of the business community - it is important to get its support every now and again, if we want to get the economy functioning - and that of the OECD.

I outlined to Deputy Doherty the idea of the six-year transition period. We do not make these changes lightly. We want to give companies which have investments and significant numbers of employees certainty on tax matters. That is why we also had a consultation this year on the broader base erosion and profit shifting, BEPS, project. We asked the question about company tax residence as part of that process and the Minister has acted on it.

I have one final straightforward question. Why give them six years?

Companies need to have a period of time to provide certainty. The amendment we are speaking to limits the ability of companies to pretend to be established in advance of 1 January 2015.

One will have read media articles expressing concerns that other companies would open here but there are companies here with substantial employment bases and tax bases. People need certainty in regard to investment decisions and by giving people that certainty, it safeguards employment and investment.

Give them the certainty of paying a bit more tax.

We already had the tax debate and I would argue they pay a lot more tax than the Deputy believes they pay. I will not convince the Deputy on that one but the report might.

Amendment agreed to.

Amendments Nos. 62 and 63 in the name of Deputy Pearse Doherty have been ruled of order.

Amendments Nos. 62 and 63 not moved.
Question, "That section 38, as amended, stand part of the Bill", put and declared carried.
NEW SECTION

I move amendment No. 64:

In page 60, between lines 26 and 27, to insert the following:

"Amendment of section 626B of Principal Act (exemption from tax in the case of gains on certain disposals of shares)

39. (1) Section 626B of the Principal Act is amended by inserting the following after subsection (3):

“(3A) For the avoidance of doubt, the treatment of a gain, as not being a chargeable gain, provided by this section and section 626C shall, notwithstanding any provision of section 590, not apply for the purposes of section 590.”.

(2) This section applies as respects disposals on or after 18 November 2014.".

This is effectively an anti-avoidance measure. The amendment makes a technical change to section 626B of the Taxes Consolidation Act 1997. The purpose of the amendment is to ensure that the provisions of section 626B cannot be used by Irish resident individuals and trusts to avoid a charge to tax imposed under section 590 of the Taxes Consolidation Act 1997.

Section 590 is an anti-avoidance provision which attributes certain chargeable gains, made by a non-resident company, to Irish-resident participators in that company. The purpose of section 590 is to prevent persons from avoiding capital gains tax by transferring property to a non-resident controlled company.

It has come to Revenue's notice that some individuals are seeking to invoke section 626B, which exempts certain disposals of shares by companies from capital gains tax, in order to avoid a charge to tax under section 590. There is considerable tax at risk in respect of the cases of which Revenue is aware at present, with the potential to run to millions of euro.

Revenue's position is that the exemption provided by section 626B and a related exemption in section 626C, which provides a similar exemption in respect of gains on the disposal of asset relating to shares, do not apply in circumstances where a gain accrues to a company but is attributed to an Irish resident individual by section 590. To prevent the misuse of these relieving provisions by individuals and trusts, the purpose of this amendment is to clarify that sections 626B and 626C do not apply where a charge to tax arises under section 590.

I would like to inform Members that the Minister may be bringing a further technical amendment to this provision on Report Stage.

Sections 39 to 41, inclusive, agreed to.

Amendment agreed to.
SECTION 42

I move amendment No. 65:

In page 62, line 9, to delete "951" and substitute "959I".

This amendment relates to section 42 of the Bill. It corrects an incorrect statutory reference in section 42. It is a technical amendment.

Amendment agreed to.
Section 42, as amended, agreed to.
NEW SECTION

Acceptance of amendment No. 66, in the name of the Minister, involves the deletion of section 43 of the Bill.

I move amendment No. 66:

In page 62, between lines 10 and 11, to insert the following:

"43. Section 604B of the Principal Act is amended in subsection (1)(a) -

(a) by substituting the following for the definition of "agricultural land":

" 'agricultural land' means land used for the purposes of farming but does not include buildings on the land;",

and

(b) in the definition of "relevant period" by substituting "31 December 2016" for "31 December 2015".".

This amendment relates to section 43 of the Bill. That section amends section 604B of the Taxes Consolidation Act 1997, which grants relief from capital gains tax for farm restructuring where the first transaction in the restructuring, for example, the sale, purchase or exchange of farm land is carried out on or before 31 December 2015 and where the restructuring is completed within 24 months. The first restructuring transaction is extended to 31 December 2016 on foot of a recommendation of the agri-taxation review.

Currently, farm buildings can qualify for farm restructuring relief because they are included in the definition of "agricultural land" in section 604B, although farm houses and mansion houses are excluded unless they are derelict and unfit for human habitation. The purpose of this amendment is to ensure compliance of the relief with EU state aid requirements. The amendment provides that the relief will apply to land used for the purposes of farming but not buildings on that land. It is not anticipated that this amendment will impact significantly on the operation of the restructuring relief. I commend the amendment.

Will the Minister of State clarify this particular issue? Obviously, there is an EU issue in regard to farm buildings. This only applies to farm buildings and not to buildings which are habitable, which are excluded from it. We are talking purely about farm buildings. It may make sense, as part of that restructuring, to exchange or transfer the ownership of the home yard, where one has farm buildings. The proposed rules would not include the relief.

Sadly over the past few years, farmers invested massively in slatted sheds, encouraged by the Department of Finance and the Department of Agriculture, Food and the Marine. Many have huge financial charges placed on their farming operations currently. In some cases, they built these sheds on out-farms. These farmers may have an opportunity to purchase land closer to them and if they sell the out-farm with the shed on it, they will not get the relief in regard to the shed. That may not make it financially possible for them to do so.

This issue of out-buildings will probably not be a massive issue in the Chairman's part of the country but in my part-----

I am listening carefully just in case it is.

This is an issue in my part of the country where we have very fragmented farms and many farmers would have smaller buildings on out-farms. If the whole objective behind this is to try to encourage consolidation, which is far more necessary in my part of the country than anywhere else, although it is not happening there, the rewording introduced here may act as an impediment to facilitating that. That is why I raise it with the Minister of State.

It might be useful to put on the record the supplementary briefing material I have. It might give members an understanding of the rationale behind this. The definition of "agricultural land" is being amended to exclude buildings due to concerns for EU state aid compliance. The original definition already excluded farm houses and mansion houses unless they were derelict and unfit for human habitation. The relief up to now has been targeted at the sale of outlying land parcels with their replacement by closer lying land parcels in regard to the main landholding with a view to reducing the total number of land parcels and improving the productivity and viability of the holding. It would not have been expected that those transactions would involve many buildings, if any.

In the budget last month, the Minister announced that Teagasc certification guidelines are being amended to enable whole farm replacement to be eligible for the relief, subject to meeting the conditions laid down by Teagasc. The exclusion of buildings from relief in a whole farm replacement situation may be more relevant. However, from the commencement of the relief, farm houses and mansion houses have been excluded. An individual may be able to avail of capital gains tax principal private residence relief on the sale of the farm house. Furthermore, the non-farm house buildings may well be depreciating assets and so would not generate a chargeable gain. The exclusion of buildings is necessary to address concerns for EU state aid compliance and the Minister does not expect it to impact significantly on the operation of relief measures for those reasons.

I am confused as to what the EU issue is in regard to these particular building. Why does it have a problem with them? It could be an impediment to whole farm replacement, for which provision is being made, and to out-farms, in particular where there are buildings on those farms and where there are very fragmented holdings, as we have in my part of the country. I accept the argument that there may not be a gain in it because the building is a depreciating asset.

If that is the case, why is it an issue under EU rules?

The European Commission advised the Department of Agriculture, Food and the Marine that farm restructuring relief, which is currently given to farm buildings, contravenes EU state aid rules. Considering that this was a relief for farm consolidation, if property were to be included, it would be, in the view of the Commissioner, a move away from farming. It would also have to be extended across the economy to all businesses, rather than just farming. I can get the Deputy a note on this from the Department of Agriculture, Food and the Marine if he wants to have a look at it in advance of Report Stage, but it was a concern expressed by the Commission to the Department and this amendment is a response to that. If there is an unintended consequence the Deputy is concerned about, perhaps he could correspond with the Minister for Finance on that.

Amendment agreed to.
Section 43 deleted.
Sitting suspended at 3.52 p.m. and resumed at 3.57 p.m.

I welcome the Minister, Deputy Noonan, back to the select sub-committee

Section 44 agreed to.
SECTION 45
Question proposed: "That section 45 stand part of the Bill."

The definition of an active farmer is relevant to a number of sections but it is referenced in section 45. This covers a number of issues throughout the Bill, including long-term leases, retirement relief, capital acquisitions tax relief for young farmers, and single farm payment disposal, which is referred to in section 45. The difficulty relates to the definition of an active farmer.

In my part of the country, in counties like Roscommon, Leitrim, and Galway, the majority of farmers are part-time. The definition of an active farmer under the legislation as it stands is that they must spend at least 50% of their time actively farming. Because of the farm sizes we have and the capacity of those farms, especially those on marginal land, to generate a sustainable income, farmers are required to work off-farm to supplement that income. One can see right across the annual Teagasc income studies the importance of off-farm income. This is particularly the case in my constituency where many farmers work with Bord na Móna as seasonal workers. Many of them would fail this test even though they are full-time farmers except for the seasonal work they do with Bord na Móna.

The majority of farmers in the west - about six out of ten - are part-time farmers. The objective behind all of this is farm consolidation. It is about transferring farm holdings to younger farmers, who are more energetic and can increase production. We need that in the west more than anywhere in the country. We have fragmented holdings and an old farmer population, and it is difficult to get young farmers to take over holdings. There is huge potential for efficiencies in agricultural production, but the active farmer definition as it stands would limit this. I know the Minister has indicated that he will look into this, but there are no amendments to it before us, and he might clarify exactly the position and his intention. Is it just to cover the issue of long-term leases or is it to cover the other categories I have raised in relation to the definition of an active farmer?

Could the Minister refer to the agri-taxation recommendations as well?

Deputy Naughten raised this issue, which is also relevant to sections 69 and 74. Farm organisations have raised it and I am sure the Minister’s backbenchers have also raised the definition of the active farmer with him. There is a need for more clarity around the definition. Is it based on a 40-hour week in which case somebody who is farming for 20 hours a week or more will meet the definition and the difficulty can be overcome? If not, given the number of hours that many people in farming work, the time spent working on the farm and in another form of employment could be more than 40 hours a week and the person might fall foul of the 50% test. There is a great deal of concern about this. These reliefs are vital for the sector and for succession planning on many family farms. It would be helpful if the Minister could deal with that issue.

I have tabled amendments on the definition of the active farmer. The Government amendments do not deal with the issue of 50% of the working week. I propose that we define the working week as a 35-hour week, which would mean that the farmer would have to farm for 17.5 hours to avail of the benefits included in the different sections. That is reasonable. Any active farmer would work for approximately 2.5 hours a day. That classification would be acceptable to farming groups, but the present definition is not acceptable. I raised this on Second Stage in respect of farmers with small holdings, particularly on disadvantaged land, who would not have enough income to sustain themselves and need off-farm income. The requirement would be that in certain circumstances if they work 40 hours off-farm they would have to work 40 hours on-farm, which is unrealistic.

I thank the Deputies for raising this issue. This section does not refer specifically to active farmers. My amendment No. 83 deals with the concerns expressed by many Deputies, including those present, and by the farming organisations. The farming organisations and the Department of Agriculture, Food and the Marine have agreed that the terms of this amendment will meet their concerns.

The Chairman asked me to refer to the farm tax review. In the 2013 budget, I announced that we were doing a full review of the tax measures put in place over a variety of budgets to enhance and encourage farming and the agrifood business to see were they still fit for purpose, in other words, were they still achieving what was intended? The review was very good. The farming organisations co-operated fully and came up with a report in which there are four recommendations that require further discussion with the stakeholders and we will have that discussion. Commercial farmers and the farming organisations received the rest of the recommendations quite well. Those are the recommendations that made up the agrifood farming tax package in the budget and in this Bill. We were very pleased to do that.

The purpose of the policy falls into two areas. The first is to ensure that the transfer of farmland to the next generation of dynamic, energetic farmers could be achieved more easily and made more affordable to farming families. They were well received. There is an emphasis in the recommendations on leasing. If one could not get permanent transfers leasing was good option. The conacre system where one had land for only 11 months does not encourage investment. Leasing for up to 15 years and the tax benefits that go with that were enhanced.

Income averaging is another serious concern for farmers because in farming one can have a middling year, a very good year, another middling year and then maybe two bad years. How does one average income? We considered various schemes in other countries. We ended up changing the income averaging mandate that is in the tax code from three to five years. That is of significant help. One saw the beef crisis this year. I presume that following the trends in milk prices in New Zealand and on the international milk market, something similar will happen with milk over the winter but it will be short term. Averaging income and matching good years with bad years is essential to encourage farming as an industry, to make it worthwhile to be in it, and to encourage investment.

Everything was fine until the question of the definition of the active farmer came up. I examined it when Deputies brought it to my attention. Deputies on all sides of the House contacted me, formally and informally. The original definition of the active farmer was somebody who spent at least half of his time farming and the presumption was that we were talking about a 40 hour week. It is reasonable to assume that somebody could spend 20 hours farming by spending an hour after work in the evening and spending another ten at the weekends because farming is the kind of activity where, unfortunately for young farmers, a bit of Sunday work is always required, especially on dairy farms. The Deputies are very familiar with how that works. It was also a trust system. No one from the Revenue Commissioners or Teagasc was going to chase around with a watch to see whether somebody spent 20 hours on the farm. It looked reasonable. However, the farming organisations, individual Deputies and farmers are seeking additional assurance.

In addition to the 50 hours dedicated to farm work, there are three other measures, some of which we had already. The first test will be 50 hours on the farm. If one is a qualified farmer, that is, one who has been certified after pursuing one of those courses with which the Deputies are familiar, there is no hours test. It is sufficient to be a qualified farmer and have the ability to farm the land commercially. Then one qualifies for the benefits in the legislation, which include stamp duty, capital acquisitions tax and so on. They all run on the same definitions.

The second definition was if one worked off the land, for example, if the young farmer, qualified or not, was in Dublin and leased his land to a qualified farmer, whether he qualified under the 50% rule or the qualified farmer rule, the benefits would apply as long as the lessor qualified under the active definition. The third definition meets the concerns of Deputies McGrath and Doherty. If, for example, somebody, who was off the land for several years and had no qualification leading to certification, inherited on a sudden death - the kind of thing that usually happens in rural Ireland - and is unable to avail of it we have introduced a measure whereby somebody can qualify in the three subsequent years.

There is a three-year window where one can qualify.

The purpose of the measures is not to raise taxes or have additional revenue. It is to put incentives in place so that farmland does not lie fallow but is used to best purpose and farmed commercially. It is an honour system in that nobody will be chasing around after people. It provides an incentive to put land in the hands of people who will farm it commercially or are qualified to do so. When we get to amendment No. 83 we can go through it again. I assume the Deputy is in a bit of a hurry this evening with all the other things he has to do. That is the position, if that satisfies his question.

Yes it does satisfy the question and I thank the Minister. There is quite a bit of flexibility there and I welcome the changes. What does the Minister believe is the potential Exchequer cost of this, and what is the potential number of people who would avail of it? I am aware this is a guesstimate more than anything but, for the purposes of calculation, the Minister still has to put a figure in place.

Our original estimate was €7 million but that is a shot in the dark. With the response we are getting, we now think it will probably be somewhat less than that, maybe a good bit less. We will provide for it. In the overall scheme of things it is not a huge consideration. Our consideration is to get as much land as possible back to being farmed commercially, if possible by the next generation of farmers, young men and women alike.

Does forestry come into the equalisation of farm income over the five years?

We have also changed the definition of off-farm income in the Bill. Income derived from an activity that is totally separate from farming would not apply, but activity that runs from farming, something like grain drying, with which the Chairman would be familiar, would possibly be eligible, or the production of the kind of things we see at farmers' markets. They would all be within the criteria for qualification. Anything that hinges back into the principal farming activity and runs from it will qualify. If it is something entirely separate, for example, working as a small building contractor as well as a small farmer, that would not work.

What about forestry?

Forestry would qualify, I think, but there are other benefits for forestry. I will get back to the Chairman with a more detailed note on that. I will need clarification. There is an income tax issue.

The Minister referred to an individual's normal working time, which is the phrase contained in different sections of the legislation. That is assumed to be 40 hours, therefore 20 hours would be applicable to the on-farm activity. However, the legislation does not specifically reference 40 hours, although the interpretation and application of this law by Revenue will also refer to the Minister's comments and his stated intention on Committee Stage. Can he clarify that an individual's normal working time will, in all circumstances, be deemed to be 40 hours?

I have a note here for the Deputy. Revenue will publish a note for guidance on the practical operation of the provisions. This note will specify, among other things, that Revenue will accept the normal working time including on-farm and off-farm working time, approximating to 40 hours per week. This will enable farmers with off-farm employment to qualify for the relief, provided they spend a minimum average of 20 hours per week working on the farm. Where anyone can show that the normal working time is somewhat less than 40 hours a week, then the 50% will be applied to the actual hours worked subject to the overriding requirement that the farm is farmed on a commercial basis with a view to the realisation of profits. It is not hobby farming, it is farming for profit on a commercial basis. The reference point is, whatever their day job is, half of that will qualify them, but there is an assumption that the day job is a 40 hour week, and then they will qualify with 20 hours on the farm. If the day job were less, they could qualify with less, but there is probably no necessity to do so because it is an honour system. The Revenue Commissioners are not going to be down on the farm with a watch or a calendar to see how many hours are being spent there. This is to get land back into commercial use and to incentivise people to approach it in that manner.

I can only look at the words in front of me, I cannot look at what people might think the words mean. The Minister will agree that legislation means what it means as written. What it says here is "spends not less than 50% of that individual's normal working time farming land". Now if the person is working 40 hours a week, then he has to spend 20 hours on the farm. If he normally works 50 hours a week, he has to spend 25 hours on the farm per week. Is that not what it says?

No. Before Deputy Ó Cuív joined us, I explained that there were three other separate tests under which one would qualify, so that first test could be ignored completely. The Revenue Commissioners have also accepted that a normal working week is around 40 hours. They would not regard 50 hours as a normal working week. They would regard that as abnormal or----

If they were Deputies it would be an understatement of a normal working week. They would have to accept the facts.

The Deputy would have to get a certificate, I think. He works so hard he would never qualify for half the week on the farm.

I do not have any land.

I would have to send him back to agricultural college.

The second question that arises here is that in order to pass this test do we move to the other two tests? Under this test, one has to put in 20 hours on the farm.

Approximately 20 hours or so, yes.

Well, 20 hours is 20 hours. There are farms in the west where that time would be hard to justify if one were to farm efficiently. My experience was that part-time farmers in the west sometimes ran their farms a lot more efficiently than those who were full-time because they had the resources to do so. In other words, the ideal way of getting a family income was to have a job off the land and to run the farm well. The provision in the Bill is fine if one has access to good land that needs intensive farming. However, and I have experience in this area, if one is farming efficiently on more marginal land, it may be hard to justify the 20 hours. This means that a very large number of farmers are potentially excluded under the first test. I understand the Minister said that any one of the three tests will suffice, is that correct? The second test is getting an educational qualification. Could the Minster tell me what that qualification is?

It is any one of the normal qualifications that farmers have always used for transfer of land, stamp duty, exemptions and so on. There is a list of the colleges and I understand there are online courses as well. This second test is the qualified farmer's test, and the only test of that is a qualification. One does not have to have a specific number of hours on the farm to be eligible under that. The way Deputy Ó Cuív is presenting the first test is very exaggerated. What it says is that 50% of one's time in a normal working week would be spent on the business of farming.

The objective is-----

It refers to an "individual's normal working" week. It does not refer to "a normal working" week. People use certain wording for a reason. If this referred to "50% of a normal working week", I would see it as being specifically 20 hours. The Bill refers to an individual's "normal working time".

If an individual's normal working week is more than 40 hours, it would appear to have an effect.

The Deputy is missing the point. He has not been here for the full discussion.

I would have to be in two places. It is unfortunate that this is happening at the same time as the major announcement on water.

I know but I have not yet mastered bilocation.

The Revenue Commissioners have informed my officials at the Department of Finance that they will regard a 40-hour week as the maximum normal working week but they will recognise as normal working weeks that are shorter than 40 hours. They will not go above 40 hours. They have also notified us that as soon as these measures pass, they will put out a note, almost the equivalent of a statement of practice, on how this will operate. I am communicating that. Nobody will be disadvantaged and nobody who wants to farm will be prevented from doing so. It is an honour system and the purpose is not to raise revenue but rather to get as much land in Ireland as possible farmed for commercial purposes being defined as farming for a profit and not hobby farming.

Question put and agreed to.
Section 46 agreed to.
NEW SECTION

Amendments Nos. 67 and 68 are related and will be discussed together.

I move amendment No. 67:

In page 66, between lines 15 and 16, to insert the following:

"Report on betting duty

47. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on options available for the introduction of a rate of 3 per cent betting duty for online and in-shop bets to be paid by the customer.".

We have dealt a number of times with the issue of a 3% betting duty for online and in-shop bets to be paid by the customer. We have raised this time and again and there were clear indications from a previous Minister of State and the Minister that this would be considered when the online element was up and running, as is now the case. It is appropriate that we examine the possibility of a 3% rate and the provisions that would allow for that to be placed on the customer instead of the shop. A number of betting outlets across the State find it difficult to maintain their presence as a result of the move to online gambling, which is understandable. They incur a betting duty and a 3% duty placed on the customer, as it was years ago, would not only benefit the Revenue Commissioners through an additional tax take but it would provide a reprieve for those shops. They are saving the 1% that they must find from their own profits, so it would be a 1% boost for them in effect.

We should consider this measure and the 3% rate is appropriate. It is at a level where larger outlets would not be able to take on the costs and it would force them to pass it to the customer. Anybody going into a bookmaker's office would not see a 3% charge as unique. If a person uses BETDAQ or Betfair, that person is already paying charges for the laying of bets. If appropriate, the levy could be put on winnings. Over 93% of money taken in by betting shops are paid out in winnings so almost 100% would be recouped in the betting duty element. The Government has in the past indicated it was open to such a measure and now is the time to consider the options for increasing betting duty, with the levies put on the customer instead of the business.

Amendment No. 67 requests a report on the options on the introduction of a 3% betting duty for both online and in-shop bets. There have been a number of calls for an increase in the rate of duty applying to betting. However, I have always maintained that my preferred approach has been to first put a regulatory regime in place for the sector and to extend the base on which the 1% rate applies, ensuring the tax is applied fairly and widely on a level playing field for all. This is being put in place by the Betting (Amendment) Bill 2013. All taxes are reviewed on an ongoing basis by officials from my Department and the Revenue Commissioners and this will be no different. When we can be sure that we have in place a framework that captures all betting, all other options, including rate increases, can be considered. However, the priority is to extend the tax to the remote sector. I will not accept the amendment for those reasons.

Amendment No. 68 replaces section 21 of the Betting Act 1931 and provides for the extension of opening hours for registered bookmakers’ premises from 7 a.m. to 10 p.m. year round, subject to closure on Good Friday and Christmas Day. It also provides for penalties where these opening hours are contravened. These provisions are contained in the Betting (Amendment) Bill 2013, which is currently before the Seanad. However, issues raised by the EU Commission and Malta under the EU Technical Standards Directive means that the Bill is in standstill and will not now be enacted before the end of the year. It is necessary to provide for the extension of opening hours in the Finance Bill to provide certainty for the bookmaking industry, which estimates that the existing restricted opening hours from September to March result in some 500 jobs being lost annually in the industry. I commend this amendment.

The betting Bill was introduced to the Seanad on the basis that it would clear the European Commission by the end of September or early October. At that stage, Malta launched an objection, as is its right, so the Bill is further delayed while the Commission examines Malta's objection. The reason for the objection would be well known to most Deputies, as it has an extensive online industry and does not wish us to follow through on our proposals. Malta cannot delay us indefinitely and I understand the Commission will make a decision some time in the new year, as the standstill period runs out in the first week of January 2015. We can complete the Bill in the Seanad at that stage before returning to the Dáil. I brought forward the element of the Bill that extended opening hours for traditional bookmakers because 500 people are losing their jobs because they are regarded as temporary or seasonal staff, as they are not retained during winter months. This will allow bookmakers to retain such staff for the winter months.

Deputy Pearse Doherty's proposal takes us back to a time when there was a more serious levy on betting. Currently, a bookmaker would absorb the levy but in the olden days, when I was in a bookmaker's office more often than in recent years, the option was to pay the tax on the wager or the winnings. If the tax was paid on the wager, it became part of the bet, so it accumulated in the winnings. That was one way of doing it. The levies do not now apply to winnings but rather to turnover. Bookmakers are subject to normal corporation profits tax, so this would be an additional tax.

It is an additional tax and if one makes an assumption as to how much of a bookmaker's turnover is profit, let us say 7% or 8% at most, although they will claim that it is significantly less, and one does the sums on that basis, a 3% levy on turnover becomes a very high levy on profits. As the Deputy said himself, 93% of what they take in is given out in winnings. If one applies this turnover charge to the profit margin, it may be excessive. That said, I am prepared to discuss it. We will be back in the new year, hopefully, to have a full debate on the betting Bill once it clears the standstill period in the Commission. I am sticking to the 1% levy at the moment because I want to equalise the online market with the traditional bookmaker market. I do not want to disadvantage the traditional bookmaker by not having a levy on the online area or by having a bigger levy on the traditional bookmaker. I am open to the Deputy's input and advice on what he thinks an appropriate levy might be but the first step will be to place a 1% levy on online betting to equalise it with the levy on traditional bookmaking. We will see what level of compliance we achieve. If we have a proper base for the levy, we can then discuss whether it is in the interests of the betting and bloodstock industries to increase that levy by 0.5% or 1%. My intention, however, is not to do that at the introduction of the betting Bill when it passes all Stages in the Seanad and the Dáil early in the new year.

On the face of it, the proposal in amendment No. 67 appears reasonable in that the increase is modest. However, I would fear that the larger operators in the industry would be able to afford that 3% levy at the expense of the smaller, independent operators who employ thousands of people. We met some of those operators recently and they indicated very clearly that they would be against any increase in the levy. They support what the Minister is doing with regard to online and exchange betting but argued that any move to increase the betting tax for betting shops around the country would have a negative effect on the smaller, independent operators while the larger operators who have a big online presence would be able to absorb such an increase. The end result would be that betting shops across the country would be shut down, with the loss of thousands of jobs.

The opening hours provision in amendment No. 68 from the Minister has been welcomed by the industry. Industry representatives have given a commitment to increase the numbers they employ on the back of the extra hours their shops will be allowed to open. It is important that we listen to the bookmaking industry because it is an important supporter of horse racing in Ireland. If one attends race meetings anywhere in the country, one will see that the numbers attending have declined sharply in recent years. In that context, it is important that we support bookmakers because they are the drivers of much of the sponsorship of horse racing. There is an ongoing debate about the merits of the sponsorship of horse racing and sport in general by alcohol producers but bookmakers are ploughing lots of money into horse racing in this country. Horse racing is arguably one of Ireland's most successful international sports and employs huge numbers of people. We also have a significant horse breeding industry here. Indeed, Ireland is one of the largest breeders of thoroughbred horses in the world, surpassing both the UK and France. It is important that we listen to the bookmakers.

Again, while the increase proposed by Deputy Doherty is modest, it would have a detrimental effect on the smaller, independent operators across the country.

My amendment would not have a negative impact on independent bookmakers across the country but would actually have a positive impact because the amendment is clear that the levy would be placed on the customer rather than the bookmaker. At the moment, all independent bookmakers, large or small, are absorbing a 1% betting duty. They are taking that out of their profits which, as the Minister has suggested, are currently around 7% before operating costs. They have to absorb that 1% now but if we were to apply a 1.5%, 2% or 3% levy to the bookmakers, they would go out of business. The point is to place the levy on the customer which in effect gives 1% back to the bookmakers because they would not have to pay that charge out of their profits. They will be more profitable and it is the customer who would pay the charge.

The Minister made reference to a turnover tax and he is correct about that in respect of online betting and so forth. However, this is what operated in the past. As the Minister mentioned, one could do it on the profits or on the bets. In the past, the rates were 15%, then they were 10% for a long period, then 5%, were abolished totally at one stage and then reintroduced at 1%. If a person goes into a bookmaker's shop to put €10 on a horse, a dog or whatever, he or she will be charged 30 cent under my provision and the State gets that 30 cent. The bookmaker does not have to pay it.

This is a complex area, particularly with the development of online and exchange betting, and that is why we need a report on the area. We are suggesting that a report be prepared on the options available in terms of applying this levy. I understand the Minister's objective of capturing everybody first and then examining the rates but this was first mentioned in the Finance Bill 2011 and it still has not been applied. In that context, I am concerned about the delay, although I understand the issues relating to the European Commission and so forth.

I have engaged with many industry players on this issue. When they heard that we wanted to increase the betting duty to 3%, their initial reaction was that this would put them out of business. However, when we clarified that we wanted to increase the duty to 3% but apply it to the customer rather than the bookmaker, they argued that it would benefit them, save jobs and enable them to keep their premises open.

The Minister made reference to the level of tax and the amount of bets that are placed here. In my view, it would be impossible for the industry to absorb a 3% levy. Some of the larger operators may be able to absorb a 1.5% or 2% levy but 3% is probably beyond even their reach. That is why it should be set at a level that does not allow the larger operators to absorb it because that will only force people to go to them to place their bets and would put pressure on the other operators.

It goes without saying that the fact that we do not have a gambling control Bill is simply not good enough. That should have been developed alongside the original legislation that we passed last year. That said, the Minister's amendment is to be welcomed. It causes concern to the industry that longer operating hours for winter racing are not allowed at this point in time. The original 1931 Act has a cut-off point of 6 p.m. What system operated heretofore with regard to winter racing and winter betting?

I wish to refer to amendment No. 68 too. Obviously if one is betting online, one can do so 24 hours a day whereas bookmakers' shops can only open for a restricted number of hours. The playing field is not level in that respect. Amendment No. 68 proposes to extend the opening hours of bookmakers and I support that. However, I agree with Deputy Doherty on the issue of the gambling control Bill, which should be brought forward without delay. The latest word from Government is that the Bill will be published in the middle of 2015.

The societal consequences from the adverse effects of gambling, such as gambling addition and the need to protect vulnerable people, should be considered part of this issue. The decision not to include it is deeply regrettable. Hardly a week goes by without reading in the mainstream media about lives being destroyed, houses being repossessed, families divided and massive financial debts that have been built up through gambling addiction. The issue should be dealt with in parallel with the extension of opening hours. We have been told the Bill will not be ready for another six to eight months, which is regrettable. I know the Department of Finance is not involved, rather it is the Department of Justice and Equality, but the issue is integral to this debate.

First, I will reply to Deputy Doherty. The 1931 Act provided for closure on Sunday, Christmas Day and Good Friday. Otherwise bookies' shops could stay open from 9 a.m. until 6 p.m. The Finance Act 1998 provided that Christmas Day, Good Friday and Easter Sunday were the closed days and that opening hours were from 7 a.m. to 6.30 p.m. from September to March and 7 a.m. to 10 p.m. from April to August. It was in that Bill that the idea of a more tolerant summer season was introduced. The Finance Act 2007 provided that the opening hours from September to March would be up to 10 p.m. where race meetings took place. That was in addition to the provisions of the 1998 Act. The Betting (Amendment) Bill 2013, which I published, stipulated Christmas Day and Good Friday as closing days and opening hours from 7 a.m. to 10 p.m. otherwise, and that is what we are doing now. The 7 a.m. start time was contentious when introduced but the situation has settled down. I do not know what trade there is at 7 a.m. but obviously there is some. The amendment in my name now states the opening times as 7 a.m. to 10 p.m. all year round with the exception of Christmas Day and Good Friday.

The reason I do not want to move unilaterally to put a levy on punters is that punters will change and go online. The last time I was at a race meeting I was surprised to see so many people with accounts with online bookies and using their mobile phones to text in bets even from the racecourse rather than bet on course. The online industry is huge. If one looks at Paddy Power's annual report, and he is only one of them, one can see the amount of punting online which is not only on horse racing.

There is some illegal betting all the time. No matter how one cracks down on illegal betting, there will always be a friendly publican who will oblige and say he will run next door, when he gets a few minutes, to put a bet on with the bookies. That does not usually happen. If there is a 3% levy on winnings at the bookies then a punter will think why pay 3% on winnings when one can either go legal online or illegal with a local interested party whom one meets in the course of one's social life. We must keep things going. Whatever we do we will do it online and offline together and that is where I am positioned now. There is a 1% levy on traditional bookies and I am attempting to put 1% on online betting which is where we are being held up. One of the things that puts one off the European system is when one sees how long it takes to get a simple process - something like this - concluded and when the delays are built in to help the non-compliant rather than the compliant. That is another day's work. That is my position on the matter.

It is worth saying this is all a kind of subsection of the bloodstock industry. The bloodstock industry in Ireland is world class. It employs about 16,000 people but before the recession it employed in excess of 20,000. The people in the bloodstock industry who brief me have told me that the Irish bloodstock industry is losing its world ranking. They relate that slip to the fact that prizes for races in Ireland are comparatively low, especially for key races. Also, the people with the more expensive and, consequently, better horses are not inclined to stay here because they will not race them here for the prizes that are available here. The big competitors are the UK and, more important, France. As the best of horses are not here, there is a tendency to move stallions out of the country. There are many advantages in France which encourages people to move there, and the industry is greatly concerned. That was why, when I thought we would have a reasonable revenue coming from the betting Bill, we increased the money available to the horse and greyhound racing fund by about €6 million and promised to do so for three years in a row. The horse end of the fund has about €44 million at the moment, of which half was derived from betting because it had to be supplemented in recent years. When the Irish bloodstock industry was ranked next to Kentucky and number one in Europe, it received about €60 million from the fund. My intention is to build up the fund over three years. I have made the commitment to do so in a multi-annual budget and I would like to continue to do that.

I am concerned about bookmakers and their employees in terms of job creation, but I am not somebody who backs horses usually. I am more concerned about ensuring that we have the relationships with the revenue which arises from the bookmaking industry and bloodstock industry. Ireland is rightly famous for its bloodstock and I would not like it if we lost our world ranking. The people at the top of the industry, whom I saw before the budget, were very strongly of the view that this was now the case. That is the context and it is important that Members know the context as we debate these issues. I am no expert and I am open to advice from Members. We will talk about the matter again when the betting Bill comes in.

To clarify, the Minister mentioned that people are betting online rather than betting in bookies' shops. He will see that my amendment states: "a rate of 3 per cent betting duty for online and in-shop bets" which means the rate is across the board. That replicates what is being done in terms of the legislation that has been passed but is being held up in Europe. Detailed discussion and examination of options are required. The Department does such work and I hope it will be able to look at options. We have triggered or the Department or the Government have triggered different consultations on different measures in the past. Introducing the rate would be worthwhile. The Minister has outlined clearly the challenges faced by the horse racing industry, particularly in terms of dropping down the world ranking. There are other issues in the sector which may not have been managed as well as possible during the boom times. However, we need to preserve the industry and support it where possible.

There are other issues involved. We always focus on betting duties in terms of horse and greyhound racing. People claim more money is bet on other sports, such as a game between Ireland and Scotland, rather than on a race at Punchestown or wherever, a local GAA match, the roulette table and so on. A huge section of gambling is not taxed and we need to get to grips with the issue. People who have a flutter and place a bet on black or red at the roulette table can afford to pay a betting duty of between 1% and 3%. It is difficult to collect the duty but it is not impossible. In the same way it is a bit of a headache to collect a 1% charge on online gambling but it will be done, hopefully successfully, when approval is obtained from the European Commission in respect of matters relating to remote access betting, and so on.

All other types of gambling are not being taxed, so I suggest that we move into this area.

In the context of amendment No. 68, the Minister indicated what was amended in the 2013 legislation. The times involved appear to be the same as those outlined in this instance.

That is correct. I am bringing forward the provision contained in the Bill, as published, because of the delay which occurred. This will mean that the provision can be applied this winter and that temporary workers will be able to remain in employment. It is exactly the same.

The point is that some of the time has been missed and that the industry has been impacted upon. I accept that the matter was outside of our control.

As soon as we decided to do this, we indicated our intent to the industry. I hope the companies involved retained their workers for a couple of weeks.

Last year, I sought assurances from the Minister that this would be put in place for the autumn races. It is a pity that this did not happen. A non-contentious provision such as this should have just been triggered. We could have passed the relevant legislation in the Dáil and Seanad quite easily and without any real or substantial debate.

We did not discover that the primary legislation had been delayed until the end of October, when we received notice that Malta had objected. We thought it was coming through.

Yes, but this began to affect the industry at the end of September. My point is that when we knew the relevant measure was not going to be put in place, we could have taken action. In any event, that is in the past.

I wish to return to the matter of Christmas Day and Good Friday. I do not have very strong views on this either way. There is no restriction on gambling on Christmas Day or Good Friday. We are now regulating the online aspect but there is no restriction on anyone using his or her iPhone or computer and placing a bet with Paddy Power, William Hill or whoever. Why are we taking action in respect of the high street aspect?

It is for social and cultural reasons. There are advocates who state that pubs should be open on Good Friday and Christmas Day, but I am of the view that this would not be a good idea. As well as thinking of the industry, we must consider those who work within it. The people in question are entitled not to be pressured to work on Good Friday or Christmas Day and we want it written in law that both will be counted as days off. That is how we do it.

I understand the position with regard to Christmas Day. However, it is quite abnormal to shut down businesses on Good Friday. With the exception of pub staff, everyone works on Good Friday. In addition, there are sporting events which take place on that day. The debate on this matter is beginning to evolve. We are dealing with betting duty but the debate has moved on, particularly in terms of the Minister's home city of Limerick and other places in which key sporting events are held on Good Friday. Easter Sunday was included in the ban at one point but that is no longer the case. However, Good Friday continues to be included.

By and large, Ireland remains a Christian country. Even those who do not practise their Christianity, despite the fact that they may have been born into a particular faith, still regard Good Friday and Christmas Day as special. Some of this might come down to deeply held religious feeling, while some might only be attributable to sentiment at present. I am not proposing any change in this regard. I do not believe pubs should open on Good Friday or Christmas Day either.

I agree with the Minister in respect of the particular sentiment on the part of the majority of members of the public. I am not suggesting that I wish to do so but if I wanted to do so, I could not go to my local bookmakers shop to place a bet on a football game taking place on Good Friday. However, I could go to the casino in the town in which I live and play blackjack, roulette, slot machines, etc., until 4 a.m. or 5 a.m. I wish to highlight the contradiction between the position relating to casinos and that in respect of the regulated industry, which operates between the hours of 7 a.m. to 10 p.m. but which is not allowed to operate on Good Friday.

Some casinos have private club status. I accept that one can play the slot machines in amusement arcades in Bundoran or wherever but casinos are not open to the public.

Not from a legal point of view.

If one walks into a casino-----

Can we stick to the amendments?

-----in this city or anywhere else, one will be presented with a membership form to complete.

The Deputy has made my point for me. He will not be expected to fill out a form if we finish our proceedings early and he decides to go for a drink.

Amendment, by leave, withdrawn.
Section 47 agreed to.
NEW SECTION

I move amendment No. 68:

In page 66, between lines 22 and 23, to insert the following:

“Amendment of section 21 of Betting Act 1931 (hours of business of registered premises)

48. The Betting Act 1931 is amended by substituting the following section for section 21:

"21. (1) Registered premises shall not be opened or kept open for the transaction of business—

(a) at any time on Christmas Day or Good Friday, or

(b) before 7 o’clock in the morning or after 10 o’clock in the evening on any other day.

(2) If, in relation to a registered premises, subsection (1) is contravened, the registered proprietor of those premises shall be guilty of an offence and shall be liable on summary conviction to a class A fine or imprisonment for a term not exceeding 6 months or both.".".

Amendment agreed to.
SECTION 48
Question proposed: "That section 48 stand part of the Bill."

When does the Minister expect this section to be signed into law?

As soon as the Bill is passed by the Seanad and signed by the President.

The section relates to late night opening for betting shops. When will it be commenced?

It will be commenced when the Bill is passed by the Houses and signed by the President.

Will it be mid-December?

It is expected that the Bill will be passed by the Seanad in the first week in December, so the section should come into force by the middle of the month.

Question put and agreed to.
Section 49 agreed to.
SECTION 50
Question proposed: "That section 50 stand part of the Bill."

Is it possible to speak to sections 50 and 51 together?

That seems a bit silly.

That is how the system works.

I wish to refer to the issue of petrol stretching. As the Minister is aware, this is a major issue in my constituency and across the west in general. It is imperative that everything possible should be done to try to bring people to account in respect of this matter. On Second Stage I stated that at present the average fine, on conviction, in respect of fuel laundering is €2,900. The amount of damage done to vehicles by those involved in petrol stretching is far in excess of this amount. I am of the opinion that we need to review the penalties which apply. A cap of €5,000 applies in respect of District Court fines relating to summary convictions. This should be made the minimum level of fine in respect of those who supply illegal fuel. Such individuals should also be obliged to serve up to 12 months in prison. I understand that the current specification which applies in the case of unleaded petrol - reference is made to this in section 51 - could allow for up to 10% kerosene to be blended into it and no one would be guilty of breaking the law. As a result, there is a possibility that people involved in petrol stretching could escape conviction. Is there a need to tighten up the definition in respect of petrol to ensure there is no loophole in this regard?

Second, if it is the case that we cannot secure a criminal conviction, can the Minister of State ensure evidence collated by the Revenue Commissioners will actually be made available for a civil class action, if it is to take place?

The other aspect is that we need to ensure what has been occurring cannot happen again. Petrol stretching has been occurring in continental Europe, including Poland, for years. It seems the Revenue Commissioners have had their eye off the ball in regard to what is happening in other jurisdictions. We should have tried to put some checks and balances in place. Let me refer specifically to section 50. The information required for diesel deliveries is far more detailed than that required for petrol deliveries. There is actually a variation in the amounts of detail required to comply with the licensing regime currently in place under the Revenue Commissioners. The returns made by filling stations are far more detailed for diesel deliveries they receive than for petrol deliveries.

I understand a distributor that operates here and in the United Kingdom actually took petrol from its fuel stations off the market in the United Kingdom earlier this year. There is genuine concern that some of that fuel ended up on the market here in our network of filling stations. I urge the Revenue Commissioners to investigate whether the company took petrol off the market in the United Kingdom, the reason for doing so and, if it was taken off the market, what happened to it subsequently. We should have assurances that it was not distributed in our fuel network.

The final aspect that needs to be addressed, which I raised last night, is the need to put a fund in place to assist those who have had their vehicles damaged. Many of them have third party insurance so the damage to their engines is not covered. Those with comprehensive insurance who do not have no-claims bonus protection face higher premiums. Some financial relief will have to be provided for them. There have been cases where insurance companies did not pay people who were comprehensively insured.

In this context, something needs to be done for licensed retailers selling legitimate fuel. Owing to the current rumour and innuendo, their businesses are being undermined. I know of a legitimate fuel retailer that wants to reduce the price of petrol by 2 cent per litre but which is afraid to do so for fear it will be branded as a fly-by-night operator selling dodgy fuel. This is a serious issue and it needs to be tackled very quickly.

Sitting suspended at 5.05 p.m. and resumed at 6 p.m.

Would the Minister like to respond to Deputy Naughten?

Yes. I thank Deputy Naughten for his contribution. I am aware, having received a series of parliamentary questions from Deputies west of the Shannon of the high incidence of petrol stretching there, to which I have given lengthy replies.

On the supply chain data as reported by traders, forecourt retailers must report their petrol-diesel purchases on a monthly basis. They report on a transaction by transaction and delivery basis. This reflects the much greater incentive for diesel fraud as against petrol stretching. In regard to the terms "diesel laundering" and "petrol stretching" there is a lot more profit to be made in laundering than there is in petrol stretching. This is the reason for the different treatment of diesel and petrol.

On the kerosene issue, it is illegal to add kerosene to petrol. There is no tolerance of that. Diesel can be detected in petrol because of the marker in kerosene. From 31 March next a much more effective marker will be in use for all marked fuels, including kerosene. This will make detection more effective. As a result of a joint operation between our Customs and Excise driven by Revenue and the authorities in the UK a new marker that will be effective on both sides of the Border will be introduced. Previously, as markers were developed, antidotes to them were developed. The marker now developed is more effective and will come into play on 31 March next.

The Deputy also asked about penalties. The penalty in this regard is, on summary conviction, a fine of up to €5,000 and 12 months maximum imprisonment or both. If the case goes to indictment the fine is €126,790, which is very large, or five years maximum imprisonment or both. These fines were last updated in the Finance Act 2010. Fines are a matter for the courts. Fines have been increasing as the courts treat these matters more seriously. In regard to the odd numbers issue, this arises out of indexing of the fines as introduced. The figure of €126,790 is a result of that.

An extensive range of new measures have been introduced over recent years to tackle fuel fraud, including enhanced supply chain controls and the acquisition of a more effective fuel marker. The key measures include: the strengthening of the licensing regime for auto fuel traders with effect from September 2011 to limit the ability of fuel criminals to get laundered fuel onto the market; the introduction of a new licensing regime for marked fuel traders in October 2012, which is designed to limit the ability of criminals to source marked fuel for laundering; the introduction of new requirements in relation to fuel traders' records which have stopped movements and fuel deliveries and ensures data are available to assess supply chain analysis; and the introduction in January 2013 of new supply chain controls following significant investment in new IT systems. These controls require all licensed fuel traders, whether dealing in road fuel or marked fuel, to make monthly electronic returns to Revenue of their fuel transactions. Revenue is using these data to identify suspicious or anomalous transactions and patterns of distribution that will support follow up enforcement action, where necessary. Intensified targeting, in co-operation with other law enforcement agencies on both sides of the Border of enforcement action against suspected fuel laundering operations, has also been introduced and increased.

The Revenue Commissioners reviews its strategies in relation to fuel fraud on a continuous basis. Where it identifies a need for legislative provisions to strengthen the legal framework for tackling illegal activity and protecting legitimate business these proposals will be considered carefully. Action against the illicit oil trade in the period since 2011 has led to the detection and closure of more than 30 oil laundries and to the seizure of 3 million litres of illicit fuel. In addition, more than 120 filling stations were closed for trading without a licence or for breach of licensing conditions. All the indications, based on feedback from the industry and tax revenue from diesel consumption, are that these measures have been successful in tackling the laundering problem. I have had discussions with the trade which is very complimentary about the actions taken by Revenue. We get empirical evidence on the basis of excise from diesel and petrol. This naturally would be increasing as the economy grows. Eighteen months ago when the economy was either static or growing slowly there was a significant increase in petrol and diesel consumption. The trade attributed this to the effectiveness of Revenue in putting the illegal traders out of business. As a consequence, legal traders' sales have increased. The next step is the introduction of the new marker. If it is successful enforcement will be easier.

If one has a marker that is easily identifiable, one can pinpoint illegal fuel or additives, such as kerosene, to stretch petrol. The will is there with Revenue and the personnel is there with Customs and Excise. It is the techniques that have been lacking for a while, because the laundering techniques were almost equal to the marker techniques, but I understand that has changed and the tests they have done on this particular marker hold out significant hopes that it will be a very significant weapon in the fight against fuel laundering. I will ensure Revenue knows of the Deputy's concern, and that of our colleagues, about petrol stretching which, in the overall scheme of things, is kind of minor league activity compared with fuel laundering. However, there have been widespread incidents in the west of Ireland and it wrecks engines, so I can see why there is such concern.

I thank the Minister for his response. He is right that much work has been done on diesel laundering and there is absolutely no doubt but that Revenue, customs and his Department are to be commended on that. The new marker, which will be introduced in the new year along with the licensing which has been introduced, will make a significant difference.

The Minister is also right that diesel laundering has more potential to undermine the finances of the State than petrol stretching but the difficulty is that from the consumer's point of view, petrol stretching has a far more dramatic impact and it happens far more quickly. I know of one local garage which sees two cars per day with their engines seized up because they have been filled with petrol which has been stretched. We are talking about in excess of 200 to 300 cars whose engines have completely seized up as a result of this. Many of these people do not have the financial resources available to them to replace their cars.

The Minister admitted in his response to me that there is different treatment in regard to the accounts which need to be submitted by petrol retailers to Revenue when dealing with diesel and when dealing with petrol. The reason Revenue has been so focused on the issue of diesel is that there is a huge financial loss to the State. The financial loss to the State is less from petrol stretching but the financial cost to consumers is significant and quite a number of people have been badly hit. I know of a couple, both of whom are on the minimum wage, with an eight year old car and a ten year old car, which they used to get to work. They had third party insurance and they do not know how they will get to work. Christmas has been cancelled for that particular family.

I need an assurance from the Minister that the Revenue Commissioners will now apply the same criteria in regard to accounting for petrol which currently apply to diesel to ensure that petrol supplies are being monitored in exactly the same way. This, in itself, will reduce the possibility of rogue traders using this as a mechanism to put stretch petrol into the system.

In the context of the contribution made by my colleague, I should state a personal interest in the matter because Deputy Naughten suggested a payment, or a fund be established, for affected people. I was a victim of laundered diesel during the summer and it put my car off the road permanently. It is a huge revenue loss to the State. The Revenue Commissioners are active on the ground but it appears to me - I am open to correction and the Minister might comment on this - that their efforts are, by and large, in dipping motorists' cars to see what fuel they are burning, lest they be burning agricultural diesel when they should be burning the other type. Is there sufficient impetus in Revenue to dip at forecourts?

I listened to a Revenue official recently, on foot of a very welcome investigation on the Border where a very significant diesel laundering plant was uncovered, say there was a network of approximately 150 filling stations around the country where this diesel was regularly laundered. This is not rocket science in that if one chases cheap diesel at the forecourt, one is very likely to run into this problem of laundered diesel, although, as Deputy Naughten said, there are operators who are striving to be as competitive as possible and who are doing so legitimately.

Revenue has scarce resources and as much as there is something to be gained from dipping motorists' cars at marts or wherever - the agricultural community seems to come under the spotlight - far more significant progress would be made at source if Revenue concentrated on dipping at the forecourt. There should also be an obligation on forecourt operators to retain a sample from each filling they receive - maybe this is already the case - and details of who supplies them. Revenue knows there are approximately 150 filling stations around the country which deal with this and are selling it at very competitive prices relative to their competitors, which is unfair, so it is not rocket science to target the scarce resources in that direction.

There is nothing we can do other than significantly ramp up the penalties in this legislation, if possible, on forecourt operators because they are putting their legitimate colleagues out of business, are costing the State a significant amount and are impacting very significantly on individual motorists. The issue of Revenue and resources is probably an endless debate. We have had the debate about cigarette smuggling. I do not know whether it should involve a combination of Revenue and the Garda. The old weights and measures section, which used to ensure one was getting a gallon of petrol when one bought one, could be involved in sampling.

We have a lot of State resources, including personnel, knowledge and equipment. Could we be assured we are getting the maximum return from the effort being made and that it is adequately targeted? I do not know if the Minister can answer that in detail but this is a significant cost to the Exchequer. By the nature of the game, these people will always be a step ahead of the State. One can have a car which is motoring fine but the next thing it will not go and one is faced with replacing it, something for which one has not budgeted, and that is a huge cost on any household. It is happening quite a lot. It is only since it happened to me in August that I have become aware of dozens of people to whom it has happened. It is something on which we could make more progress.

I do not disagree with Deputy Creed. Revenue has been quite successful and the success rate can be measured in the new measures it has taken but also in the fact that since 2011, 30 oil laundries have been closed down. It has seized in excess of 3 million litres of illicit fuel and closed 120 filling stations for various breaches. Revenue dips at filling stations but its principal success is due to a Finance Act in which we made it compulsory for people with oil firms for marked oil to make returns and for forecourts to make returns. Fuel is now traced from the refinery, or the port of import, all the way through to the filling station. If there are any discrepancies or anomalies in the supply line, that alerts Revenue and it investigates it, and that includes dipping in the forecourts. Revenue has been quite good.

As I said, the level of profit on laundering is much greater than on kerosene. In the family of fossil fuels, such as diesel, petrol, kerosene, aviation fuel, heavy fuel oil and so on, kerosene and petrol are one step apart.

It is possible for a motor engine to work properly with small additions of kerosene but it is illegal to do so. People can stretch their fuel by adding kerosene but it is illegal to do so. If one were to add 10% kerosene to a litre of petrol, with a ratio of 90% to 10% kerosene, the profit would be about 5 cent a litre. However, the profit on diesel laundering is about 50 cent a litre. In terms of the effort of work by Revenue, diesel laundering is a bigger threat to the revenue of the State and, therefore, Revenue is chasing it. We have to measure the application of resources as well. I will look at what the Deputy has advised and I will draw it to the attention of the Revenue Commissioners but there is this imbalance between the profitability of the two illegal activities.

I read out the list of penalties, which are quite extensive. Sometimes it might be difficult to get proofs because a tank can be dipped at a filling station but it might be difficult to prove who put it into the tank and at what point in the supply chain the kerosene was added. There seems to be a mismatch between the success of Revenue and the number of convictions achieved, and there is also a time lag. Revenue is very conscious of this situation and it is pursuing it very vigorously. We have been talking about getting an indelible marker, meaning that it could not be easily removed by some other chemical process. As a result of shared research with the UK authorities, Revenue believes it now has an indelible marker and it hopes this will be effective on cross-Border activities.

We must acknowledge another element in that much of this activity is driven by former subversives who are now criminals. They have the strong arm and the heavy hand and intimidation is part of the process as well as chemistry degrees.

The Minister is correct that from the point of view of the Exchequer there is a marked difference between the financial impact of diesel laundering and petrol stretching. However, if even a small amount of this stretched fuel is put into a vehicle, after a couple of thousand kilometres the engine will be completely destroyed. Hundreds of people have had their engines destroyed. I have given the example of one garage which is taking in two vehicles a day. Second-hand replacement petrol engines cannot be found. New engines are being sought from the country of origin. There is a deficit of replacement engines because of the large number of vehicles which have been destroyed in our part of the country. Revenue needs to redouble its efforts to trace petrol stretching to the same extent that it is doing with diesel laundering. This can only be done by having the proper paperwork in place, as is the case with diesel. I appreciate that the Minister has agreed to consider it.

My advisers with me today include senior Revenue people and they are listening to the Deputy's account. I now ask them to raise this matter within their organisation and to talk to the chairman of the Revenue Commissioners to see if action can be taken along the lines suggested by the Deputy if Revenue considers this to be worthwhile and possibly fruitful and bearing in mind it is not just the loss of revenue in question but also the disabling of the motor engines of cars belonging to citizens. Is that acceptable to the Deputy?

I appreciate that and I thank the Minister.

I have a question about section 48 which we have disposed of. I refer to the possible monthly deferment of the payment by Revenue. What is the rationale? Tax will be delayed for a year, not lost, but the measure will affect the deficit or budget figures.

I ask about the robustness of the legislation to ensure that the type of activity such as diesel laundering is dealt with and clamped down on as much as possible. I listened to officials from Revenue. I reiterate that Revenue is one of the institutions of State, if it can be described as such, which has been unscathed by the financial crisis in that people have a great respect for Revenue even though some of them might end up on the wrong side of it. It is a very efficient organisation which has done a good job. I hope the incoming chairperson is as efficient as the outgoing chairperson. Is the legislation sufficiently robust to deal with this issue? Revenue officials spoke on the radio about the recent discovery in south Monaghan. It appeared from what was said - this is subject to a court case - that the discovery seemed to have been made by chance, that a lorry was spotted parked where it should not have been and a surveillance operation was mounted. The operation, which had been running for more than a year, has been stopped and put out of business, and that is welcome.

I refer to recent information about another case in Monaghan which has collapsed. I can speak freely about the case now. A €4 million fuel laundering plant was detected by Revenue in 2001 but the warrant issued was for fuel smuggling rather than fuel laundering. Therefore, the two charges against the individuals were dropped. They would have had an opportunity to defend themselves in court but the case collapsed as a result of the issuing of the wrong warrants. Is the legislation sufficiently robust to ensure that similar cases are not dropped for such reasons in order that at least they would make it to a court hearing? This is a matter of concern. I do not know who is to blame for the fact that the warrant was issued incorrectly. It is not just an issue for Revenue as it has happened in other cases over the years.

I was somewhat surprised that in the same radio interview it was suggested that criminal gangs have in their possession and actually own 150 outlets for laundered diesel in the State. I could be wrong because it could be that number in the island as a whole. These outlets are fronts. I note that one of the amendments states that an operation must be working for profit and therefore is not a front for these activities. If these are fronts to distribute washed diesel, how soon after the enacting of this legislation would the 150 operations be taken out of circulation? Revenue has a list of suspected outlets but it does not seem to have the powers or the intelligence information to close them down. From talking to individuals I am now very careful about where I stop for fuel. Many smaller fuel operators are completely legitimate and people may be avoiding going to them and filling up in Topaz or Applegreen instead. There is a suspicion and a fear among customers. Can the Minister offer any reassurance that these illegal petrol outlets will be closed in a timely manner?

The current laws are adequate. It is just that the practice has been very widespread.

The Revenue Commissioners are of the view that it is decreasing. If they have prima facie evidence or even a suspicion that a particular station is selling laundered diesel or illegal fuel of some sort, they follow it up. They are not standing back and saying, "We know the names and addresses of 120 petrol stations that we think are trading in illegal fuel and we are not acting". They closed 120 and they continue that work. The first source of their information would be following the supply chain. If 4,000 litres or 5,000 litres of diesel are being delivered to some country cottage with a shed at the back every week, one does not need to be Sherlock Holmes to be suspicious that they are not using it for the lawnmower. Getting the information on the supply chain has been very effective.

They also work in another way. If somebody like Deputy Creed had his engine destroyed, he would think about where he might have got the fuel. Some people report to the Revenue Commissioners that their engine was destroyed as a result of getting fuel in a particular filling station. They will follow that up as well. They have no reluctance to follow up.

Petrol stretching relates more to gifted amateurs and local criminals, but diesel laundering is part of the national conspiracy we inherited from the Troubles in the North to a very large degree. It is more prevalent in Border counties than elsewhere, but it has also spread right into the south of the country. They own diesel trucks that ply the roads of the Republic and deliver to stations. They may own a petrol station or may lease it. There may be a former sympathiser who is now owning or leasing it. The Revenue Commissioners are trying to break into that network. It is not always easy to do so but they will continue to do so. The proofs are difficult, but the marker should be easy.

My amateur understanding of this is as follows. The marker was a coloured dye in green diesel or red diesel and the laundering simply washed out the dye using a chemical process. The diesel then looked legitimate. It did not look like home heating oil or agricultural diesel. We went through a phase where as they kept changing markers, the process of laundering kept changing as well.

In the past two years, they did some serious scientific research. I remember telling members two or three years ago that they had a very good marker and they found that if the diesel was stored in plastic containers for some reason or other, the contact between the plastic and the marker acted as a kind of antidote and nullified the marker so that did not work. However, they have tested this rigorously in the way one tests scientific products. They are quite optimistic that when they introduce this new marker on 31 March 2015 it will be successful, but the campaign goes on.

I commend the Revenue Commissioners on the work they are doing in this area. I was delighted to hear about the new marker recently and how hopeful Revenue and departmental officials are that it will go a long way to resolving the issue. It would be transformative if it is as successful as the Minister thinks it might be. What is going on is an absolute disgrace. The State is being denied an unknown quantum of money every year. I urge the Revenue Commissioners to use every weapon in their armoury to get to grips with the issue. Clearly, they need to use their very extensive powers. If some businesses are fronting illegal activity, then the Revenue Commissioners have very sweeping powers to examine all facets of the underlying business, and that should be done. I urge the Revenue Commissioners to continue with their work. I am sure they have all of our support.

I want to return to this point because I am not reassured by what the Minister said. I do not suspect that the Revenue Commissioners are sitting on their hands with information. The Customs official who is the manager for the Border region, Mr. Kelleher, put some very specific information into the public domain. In that interview he referred to 115 rogue fuel stations operating across the country. I want reassurance that there is an operation in place regarding each of those. I assume there is because I am sure the Revenue Commissioners would not have this list and be doing nothing about it. The numbers of petrol stations closed in the past have not been anywhere near that figure. I believe the report published in April mentioned 30 stations that were closed down last year. Some of them may not be controlled by the criminal gangs this individual was discussing because they can also be closed down for other reasons.

I want reassurance that there is an operation and that the Revenue Commissioners are focused on the issue and have the required powers. Does this legislation contain powers that the Revenue Commissioners are seeking to deal with this issue? Will it enhance their powers?

The Revenue Commissioners inform me that they are examining the supply chain data and if they match up with one of the stations about which they are suspicious, then they act because they have good grounds for acting at that stage. They also inform me that the 120 filling stations that were closed down since 2011 were closed down on foot of examining supply chain data and this has been very effective.

In addition, the Deputy may recall that a reckless trading provision was introduced last year. That has made the big suppliers very conscious of their legal risk if the way they supply diesel is regarded to be reckless trading. They are very cautious about who they now supply. The Revenue Commissioners are of the view that they are winning the battle at this stage and they hope that the new marker will be another weapon to help them advance the cause further. At present, they are not seeking any additional powers from us, but if they come looking for additional powers, of course, we will give them additional powers.

The reckless trading provision the Minister mentioned brings to mind a case. Obviously, following the supply chain will reveal what is happening. Where somebody would be involved in supplying and informs the Revenue Commissioners of the suspicions that the person who is purchasing is obviously purchasing in quantities greater than required to fill a lawnmower to mow a lawn, what action do the Revenue Commissioners take against that individual who has alerted them to the belief that there may be illegal activity in the level of the supply chain? My understanding is that they pursue the individual who actually informed the Revenue Commissioners of what he or she believes is illegal activity.

I will get a view on that for the Deputy. I cannot really give him a legal opinion on it, but I will give him an indication of Revenue practice as soon as I get a note.

The supplier who supplies rebated fuel recklessly is liable for the duty. That is what the note states.

I understand the point about acting recklessly. If I am a supplier and I phone the Revenue Commissioners and say, "Look, I'm supplying to this individual here and I believe that they are involved in laundering fuel", I understand the Revenue Commissioners will pursue me because it was my responsibility first and foremost to ensure my customer was not involved in that even though I tipped off the Revenue Commissioners with my suspicions and they would have-----

That person would be pursued for the recovery of the duty lost. However, I do not believe he or she would be pursued for a criminal offence.

They may be pursued because they have supplied in a manner which ended up as reckless trading and as they had suspicions they should not have supplied and there is a loss of excise duty. The supplier is deemed to be responsible for the loss of duty but would not be pursued by Revenue for a criminal offence of reckless trading.

The point I am making is that there is a disincentive for a supplier who notices a pattern and believes an individual is up to no good to inform Revenue because the duty will fall back on him or her. I do not wish to labour the point.

That is like saying there is a disincentive in being honest. That is effectively where the argument leads. Of course, there is a disincentive in being honest if there many people who can make money out of acting fraudulently. That is the point.

It is not the point.

We are moving well away from the amendment.

The point here is that a person who is not acting dishonestly and in good faith supplies a person, who then has suspicions in relation to his or her activity because of the quantum received and, perhaps, understands the background of the individual or whatever.

The suspicion arose when the person fulfilled the order. It did not arise after the person made the delivery. The legislation enacted two years ago was to trace the supply chain. Obviously that puts certain obligations on suppliers, not on receivers.

There can be a number of orders. If a person places an order with me there is no suspicion. After perhaps the third order, one might say the person is going through a great deal of fuel and has serious suspicions and will contact the Revenue. When Revenue sees all the fuel supplied to the individual, the supplier is levied with the duty.

Good faith is always a defence. If the Revenue believes people act in good faith it will not pursue them. The Deputy asked a question previously which I did not answer as to why the measure was-----

We cannot go back on sections that have been discussed. The Minister may provide a briefing note to the committee and I can pass it on to the Deputy.

I cannot do it here.

That is the rule.

Question put and agreed to.

Some members were expecting that we might finish consideration of the Bill tonight, but given that we have spent an hour on section 50 it appears as if we will here tomorrow.

Sections 51 and 52 agreed to.
SECTION 53
Question proposed: "That section 53 stand part of the Bill."

The point was made on budget night by a small number of Deputies and me that increasing the cost of tobacco is just another regressive hit at lower and middle income families who are already in difficulty. We do not buy the argument that it is a health measure but that it is primarily about a Revenue raising grab which disproportionately hits the less well off. I wish to record that opposition as I have done in previous years. Deputy Joe Higgins and one or two other Deputies have made similar points.

At this point I should indicate, as a medical doctor, that after every budget when excise duty is increased, a number of people seek smoking cessation programmes due to the fact that the cost of cigarettes has a significant effect on their pockets. It is of major benefit to them when they give up smoking and I would encourage the Deputy to do the same.

I thank the Chair for his concern for my health.

Deputy A

Is he looking for €50?

I give free advice now and again. The important issue is that the Deputy takes it up.

I am well aware that smoking is a very bad habit. I know I should give it up but I am not entirely sure that is the purpose of this budgetary measure.

I will not get involved in this intervention because I do not want to interfere in the doctor-patient relationship.

We are a wee bit away from the amendment.

Question put and declared carried.
SECTION 54
Question proposed: "That section 54 stand part of the Bill."

This section deals with tax concessions for disabled drivers. A review of the level of disability required to avail of the tax concessions is long due. One has to be virtually paraplegic or an amputee and it takes no account of a wide range of medical circumstances. With his medical hat on, the Chairman may wish to intervene in this debate. A constituent who was in contact with me recently was going to Dún Laoghaire on appeal on this issue as this is the routine if one cannot get a primary certificate from the HSE locally. In the context of the legislation, will the Minister give a commitment that Revenue or the Department might consider redrafting the regulations to take into account people who are substantially disabled and immobile and who, without access to modified vehicular transport, would be virtually housebound? I ask the Minister to take that on board.

It is not just a scheme for disabled persons who drive cars. It is a scheme for persons whose disability prevents them or seriously inhibits them from being mobile so the criteria are quite strict. It is a generous scheme and we have succeeded in maintaining it right through the crisis when many other schemes were either abolished or trimmed back. We are reviewing it now but we are not reviewing it with any intention of diminishing it. We want it focused properly in its original intent. It is a mobility scheme to ensure mobility to persons, not persons who are disabled but persons whose disability inhibits their mobility or prevents their mobility. The medical test is quite strict. We have had difficulties with it from the European Union as well in terms of reducing excise but we got over those by turning it into a grant scheme.

I support Deputy Creed on this point. The criteria for a primary medical certificate are so strict and the bar is set very high. I had a case in my area, a person the Minister knows well, who lost his entire arm in a boating accident who does not qualify. It is very difficult to explain to a person in that situation that he or she does not have a sufficient disability to qualify for a primary medical certificate. From a reading of the rules that person would not qualify. The Minister needs to look at the issue.

From memory, I believe there are 11,000 people in the scheme. It is an issue that is being reviewed.

I would support both members. If somebody has an artificial leg and is quite mobile, he or she is fully covered under the existing scheme. However, if a person has suffered the loss of an arm or does not have the use of an arm, he or she is not covered under the scheme, even though the degree of immobility may be worse for the person who does not have use of his or her arm.

Question put and agreed to.
Sections 55 to 62, inclusive, agreed to.
NEW SECTION

I move amendment No. 69:

In page 81, between lines 9 and 10, to insert the following:

"Amendment of section 111 of Principal Act (assessment of tax due)

63. Section 111 of the Principal Act is amended in subsection (2)(a) by substituting "if he or she is aggrieved by the assessment” for “if he or she claims that the amount due is Excessive".".

Section 111 of the VAT Consolidation Act 2010 deals with assessment of tax due. A person on whom a notice of assessment is served is entitled to appeal that assessment. Current VAT legislation provides for an appeal only against the amount of the assessment. This amendment to section 111 aligns the VAT legislation with similar provisions in the Taxes Consolidation Act 1997 to provide that a person can appeal any issue about an assessment with which he or she is aggrieved.

Amendment agreed to.
SECTION 63

I move amendment No. 70:

In page 81, between lines 27 and 28, to insert the following:

"(c) the Principal Act is amended in Schedule 1, Part 1, by inserting the following subparagraph after paragraph 4(3):

"(3A) the supply of services related to the teaching of Irish Dancing.".".

This amendment seeks to include the supply of services related to the teaching of Irish dancing. We have been teasing out this with Revenue and the Minister through parliamentary questions. Schools of Irish dancing are not exempt for VAT purposes but other schools of dancing, such as ballet, are exempt. I do not understand why Irish dancing is not included given it is one of our traditions. It is something we should cherish and promote. Not casting any aspersions on other schools of dancing, but the idea ballet would be rated at 0% while Irish dancing is not exempt does not create a fair playing field in this regard. I have seen documentation from the Revenue Commissioners on providing educational facilities. Irish dancing lessons are not provided by a recognised cultural body. If there is genuine willingness on the part of the Government to exempt Irish dancing schools from VAT it would be possible to do so. I note no list of educational establishments for VAT exemption exists . It is dealt with on the basis of teaching methods as standards for equivalent content, and teaching methods and standards in educational establishments recognised in the State. This is an important measure at any time, but in particular as we approach the centenary of 1916. It would be a positive signal with regard to Irish culture and tradition if schools of Irish dancing were exempt from VAT for their services.

I thank the Deputy for his amendment. This has been raised in the House a number of times and was the subject of an Adjournment debate in the Seanad. Under the EU VAT directive, with which Irish VAT legislation must comply, it is not possible to apply an exemption from VAT for dance lessons in general, including Irish dancing. Accordingly it is not possible to accept this amendment.

EU VAT law provides a public interest exemption for education, as set out in paragraph 4(3) of Schedule 1 of the Value-Added Tax Consolidation Act 2010. An exemption may be provided in respect of children’s or young people’s education, and school or university education, provided by educational establishments recognised by the State, and education of a similar kind provided by other persons. For example, ballet schools are regarded as providing VAT-exempt education of a similar kind because, in general, recognised ballet schools are run by qualified ballet teachers, who teach to an externally examinable curriculum.

Where Irish dancing schools meet the same criteria for education as ballet schools, in terms of having a regulated examination and certification procedure, they can avail of the same VAT exemption. If the Irish dancing organisations believe that Irish dancing should qualify for such an exemption, they should contact the Revenue Commissioners in this regard.

I take it from this response that there is openness on the part of Revenue to engage with Irish dancing associations to develop a type of regulated exam process or progression within schools which would allow them to avail of a VAT exemption. This is the first time I have heard this.

I am working on the advice notes I have received, including when I replied to the Adjournment debate in the Seanad. It seems the exclusion or inclusion of ballet is not for ballet per se or preferential treatment for one type of dancing over another, it seems to rest on three criteria, which are that the teacher is qualified; that there is a recognised curriculum which applies throughout this sector and is not the curriculum of one particular school; and that there are certifiable standards and certificates are awarded through an examination process. If the Irish dancing organisations wish to be exempt from VAT and approach Revenue with a programme which meets these three criteria, they will be in a position to talk seriously about having a similar VAT exemption as other educational establishments.

That is fair enough and is to be welcomed. With regard to sporting activities including golf and physical education, the Minister has brought forward a provision on green fees for not-for-profit golf clubs. I suggest we include the teaching of Irish dancing. Would its inclusion be ruled out by Europe?

Yes, the provision on green fees for membership golf clubs was not something to which I subscribed voluntarily. It was a change in European law. We followed and legislated for a change in the directive instructed from elsewhere. VAT is very much driven by European VAT directives. I cannot predict whether Revenue would grant VAT exemptions, but it seems, from what it has said, that the route is worth exploring. It would not have to apply to every dance school in the country. There are categories of dance schools. If a group teaching to a very high standard had a set curriculum and an examination it would have a case to make.

I find it a little bizarre that the Minister seems to be saying this is largely coming from Europe. If it is coming from there it is also bizarre policy on its part. To exempt green fees from membership clubs, whatever about not-for-profit-----

That is not in the amendment.

It is in section 63.

The Deputy is speaking about the section.

I am making the contrast.

I thought he was speaking about the amendment.

I am speaking about the amendment because I am contrasting the two. To go beyond Irish dancing, my kids did breakdancing in a place in north Dublin which went out of business. It was a brilliant school with hundreds of kids, but struggled because of the recession. It did its best to stay above water. I did not even consider the VAT issue. Following from what the Minister stated, it would have been subject to VAT. If it had obtained an exemption from VAT it probably would have made quite a difference to its prospects for survival. At the time when it was on the brink of going out of business I brought representatives from the school to meet the former Minister, Deputy Deenihan, to see whether anything could be done to save it.

It was evident, whatever about formal curricula, that this was healthy exercise. In terms of dance, it was innovative. It was as positive an activity as one could get children to do. It seems strange that Europe would say it will give a VAT exemption to member-owned golf club green fees but it will not give it to something like this or Irish dancing. It does not add up. I do not understand the logic of the policy. Member-owned golf clubs hardly qualify as a group that needs a particular exemption if, in other areas, like dance, the EU only allows exemptions if it categorises the activity as educational and it has a curriculum. How do these two activities compare?

The decision on green fees was not a policy decision. It came from a decision of the European Court of Justice. It does not suit all member-only golf clubs either because to claim back VAT on inputs one needs to be registered for and paying VAT. If one is exempt from VAT, one cannot claim back on one's inputs. There are swings and roundabouts. It is not correct to present it as some kind of advantage being given to member-only golf clubs.

On the dancing issue, the exemption from the VAT directive which applies generally to all services provided is not an exemption for dancing. It is a public interest exemption for education. The reason ballet qualifies is that those involved have organised themselves so that they qualify as an educational activity. If those in Irish dancing do the same they will be in a position to talk to Revenue for an exemption on that basis. The exemption is not for teaching dancing. The exemption is for education and it is the public interest exemption.

With the type of school the Deputy mentions for break-dancing, I do not know how big it was.

One is exempt from VAT if one is below a certain turnover threshold. The threshold is €37,500. If they were below €37,500 in fees, they would not have a VAT liability anyway.

I would say they would have been above that annual total amount.

This hits larger operations that are organised. If these are larger organised operations, they should move more towards an educational format and avail of the exemption in the VAT directive if Revenue so decides.

As a matter of interest, if they did so, particularly in an area such as dance where there is innovation, change and development and which is not static, would they-----

If they satisfy the Revenue criteria, Revenue has the discretion to exempt the activity.

Is amendment No. 70 being pressed?

I will withdraw the amendment. I hope there will be some engagement in the next period over this.

Amendment, by leave, withdrawn.

I move amendment No. 71:

In page 81, between lines 27 and 28, to insert the following:

"(c) the Principal Act is amended by inserting a new paragraph 6 to Schedule 1, Part 1:

"6. The supply of services related to the provision of voluntary rescue activities including but not limited to mountain rescue services.".".

This exemption is something that we have been dealing with. It is a demand coming from mountain rescue across the State. It is to exclude from VAT the supply of services related to the provision of voluntary rescue activities, including, but not limited to, mountain rescue services.

I commend these individuals, as volunteers. In my area of Gaoth Dobhair, mountain rescue was called out to assist two persons in the mountains last week. These are volunteers who give of their time freely. They must purchase a lot of equipment to ensure that they have the necessary equipment to rescue people and save lives. They do tremendous work.

This is something that the Government should press. We should take this case to the European Commission in relation to the EU VAT directive. I believe that there is a justification to have the provision of voluntary rescue activities excluded from VAT in this Finance Bill.

VAT is a tax on consumption and is applied to supplies being made by a person and not to supplies received by them. In this context, it is not possible under EU VAT law, with which Irish VAT law must comply, to introduce VAT exemptions based on services received, nor to introduce an exemption based on the recipient of a service.

Non-profit groups engaged in non-commercial activity, including those involved in mountain rescue, are exempt from VAT under the EU VAT directive. This means they do not charge VAT on the services they provide and cannot recover VAT incurred on goods and services that they purchase. Non-entitlement to VAT deductibility is a general feature of VAT exemption.

There is no provision in either European law or Irish VAT law to allow a zero-rating or exemption for supplies of this nature.

Is the amendment being pressed?

We are not yet at that stage. I will tease out the Minister's response.

The sea-rescue service is able to avail of wide-ranging VAT exemptions. Can the Minister explain, when comparing the sea-rescue services to the mountain rescue teams, why one can and the other cannot?

The EU VAT directive makes specific provision for VAT not to be charged on the supply of sea-rescue vessels. The directive does not contain a similar provision exempting mountain rescue equipment from VAT. The exemption is in the directive. It is parented for our point of view and we can have it here as an exemption.

This is the point I have made which is why I have raised this. Clearly we do not have access to the European Commission.

Under Article 13 of EU VAT Directive 2006/112/EC which provides the exemptions, there needs to be included other voluntary rescue services, which would include the mountain rescue. The reason I put this forward is that it is something we need to take on with the European Commission. This directive needs to be changed. It is only fair and proper that mountain rescue services would not have a 23% VAT rate applied to them. It is why I have raised this issue at this Stage of the Bill. I want to know whether Deputy Noonan, as Minister for Finance, intends to raise this with his European colleagues in regard to voluntary mountain rescue services or if he believes it is adequate at present. The Minister is correct in stating that sea-rescue services are named in the directive and that is the issue. There is a need for harmonisation of other rescue services in the directive.

There are anomalies in the VAT directive which one would like to raise but they are only raised in the context of a review of the directive. They are not raised on an item-by-item basis. I would have no opportunity to do it on an item-by-item basis. While there is some discussion about the future of VAT as an appropriate taxation method, there is no signal to us yet that there is any review pending of the VAT directive. It is something that might be more appropriate for the European Parliament in its relationship with the Commission. I suggest Deputy Doherty contact his party members who are Members of the European Parliament to raise this issue with the Commission. He might be able to advance it a little.

We have raised it. Mr. Matt Carthy, MEP, raised it with the Commission. Those avenues are being dealt with. I accept the Minister's statement there is no opportunity if there is not a formal review but I presume that he can, for example, highlight the issue with the Commission if it is his belief that this should be done.

I am not able to elicit that from the Minister now. For example, he could write to the Commission to indicate the State would favour a harmonisation on this directive to include mountain rescue voluntary services.

I do not have any problem with mountain rescue equipment being exempt from VAT and it is a marginal issue in terms of the Exchequer. If we were to do it, I would be strongly in favour of voluntary groups, particularly sea and mountain rescue groups, which take great risks in assisting people who get into great difficulty. My problem is that in the absence of a review of a VAT directive, there is no way of raising this with the Commissioner. One could mention it in conversation but that is pointless as the issue does not go anywhere unless there is a review. If there was an opening in the European Parliament, I would not be reluctant to follow it up.

I appreciate what the Minister is saying. I suggest that even if there is not a review, at least the Minister could put the State's position on record with the Commissioner.

There is interference with the broadcasting system and people may not be able to hear the Deputy at all. Does he have a laptop causing interference?

The most important person to hear me is the Minister.

That is fine if the Deputy is happy that he may not be heard clearly.

Perhaps the Deputy can repeat the question.

There is no point in just hearing answers if the questions cannot be heard. Perhaps the finance committee could write to Commissioner Moscovici, who is now in charge of tax matters, and see what he says. The finance committee could raise it directly.

We can do that.

Amendment, by leave, withdrawn.

I move amendment No. 72:

In page 81, between lines 27 and 28, to insert the following:

"(c) the Principal Act is amended by inserting a new paragraph 6 to Schedule 1, Part 1:

"6. The supply of services and goods to non-profit making organisations for the production of events or monuments designed to commemorate the centenary of the 1916 Easter Rising.".".

This relates to a VAT exemption for the supply of services and goods to non-profit making organisations for the production of events or monuments designed to commemorate the centenary of the 1916 Easter Rising. The commemoration will be a big occasion and it is hoped that community groups the length and breadth of the State can be involved with commemorating and celebrating the activities of those who were involved with the events of 1916 and remembering them in a fitting manner. I assume this will be done in different ways, with some people constructing monuments or gardens while there will also be events based in the tradition of Irish language and dancing, arts, poetry and any other type of imaginable activity.

Many of these groups will raise funds and they might get small local grants but they will have to pay VAT on costs. Approximately a quarter of the cost will end up in the Government's pocket when people commemorate the events of 1916. As the Government has not been able to provide much money to commemorate these events across the country, it would be appropriate that any event organised at a local level by a not-for-profit organisation would not be subject to VAT. This is a unique opportunity, as it is a centenary event. A strong case should be made in this respect.

The amendment is open to change as I could not determine how to regulate the process. For example, a group might argue that any event was a centenary event for 1916 and seek a refund of the 23% VAT rate. We had to produce our amendments before the Government's plan became apparent but there should be some type of regulatory process to cover the issue. Perhaps the projects would have to be agreed beforehand. Mechanisms have been used in the past where proposals were pitched and if approved, a group could avail of a VAT exemption. There will not be much forgone tax if we follow through on this but I am unsure if there are European Union rules that may affect the measure. There should be ways around the problem. We know that cultural bodies, for example, are exempt from VAT, so perhaps part of this idea could come under that umbrella. Where there is a will, there is a way, so I am interested to hear the Government's view on this proposal.

VAT is a tax on consumption and is applied to supplies being made by a person and not to supplies received by them. In this context, it is not possible under EU VAT law, with which Irish VAT law must comply, to introduce VAT exemption based on goods and services received, or to introduce an exemption based on the recipient of a good or service. Charities and non-profit groups engaged in non-commercial activity, including those involved in 1916 commemorations, are exempt from VAT under the EU VAT directive and this is reflected in the VAT Consolidation Act 2010. This means they do not charge VAT on the services they provide and cannot recover VAT incurred on goods and services that they purchase. Essentially, only VAT-registered businesses which charge VAT are able to recover VAT.

The point is that if a local group in Gaoth Dobhair, down in Limerick or anywhere else wants to come together and do something for the centenary of 1916, it will pay VAT on products it must acquire, although it would be a not-for-profit group. I suggest that there must be a way to get around this, given the significance of the event. In the Minister's absence, we dealt with the living city initiative, which is wide enough with respect to the cities across the State. This is a specific issue dealing with the commemoration of the 1916 Rising and the Proclamation of independence for this State. I assume these events would be deemed as being cultural and cultural bodies are exempt from VAT. I assume that if this was something in which the Government was interested, it could be approached under a cultural heading.

We should try to use the goodwill of the public, which wants to organise activities and events or construct monuments, and not have the Government profit from it. The Government will take almost €1 from every €4 that will be spent by local voluntary groups marking the centenary of the 1916 Rising. With regard to respecting those who gave their lives in that event, it would not be a nice way to mark the centenary. Where there is a will, there is a way, so will the Government consider options to ensure events within a controlled environment can be excluded from VAT? Perhaps some of the suggestions I spoke about could be used, as cultural bodies could be included in having approved events coming from local community groups. I am sure there are other suggestions and the staff can think outside the box in formulating a solution for this.

There can be no outside-the-box approach in this as the directive is quite clear. VAT is applied to supplies made by a person and not what is received. That is the way the directive operates. The men of 1916 fought to establish a sovereign republic on this island and one of the principal badges of sovereignty is the power to levy taxes and the obligation to pay them. I am not sure this is the best way to honour the men of 1916.

It is an interesting debate to open and I am sure the Chairman will not allow us pursue it.

The Deputy is certainly right.

The Minister used an unfortunate argument.

The only reason we cannot do this is that Europe will not allow us to do so. Many men and women fought in 1916 to have a republic on the island of Ireland. I agree with the Minister that tax sovereignty is a cornerstone of that. However, Europe will not allow us in commemorating those people to have those commemorations exempt from VAT.

The Deputy will recall that one of the foundation stones of the great republic to the west of us, namely, the United States, on which the men of 1916 were establishing their principles and on which the first Government built the Constitution, is based on the Boston Tea Party's no taxation without representation; no representation without taxation. It is a fundamental principle of sovereignty.

The Minister is digging for the Boston Tea Party.

Deputy Doherty has highlighted a number of examples of worthwhile items and services that are worthy of exemption from VAT. The reality is that there is an unlimited number of items that are bought for good motives and services that are worthwhile with good causes in mind that are subject to VAT. We had a lengthy debate on the issue of defibrillators being subject to VAT at 23% even though they are provided by voluntary clubs and save lives. At issue is the best way of addressing this matter in a structured way. Currently, it is driven by EU law. Does the Minister have any suggestions as to how this committee can engage with decision-makers on this? Deputy Doherty has put forward a few suggestions in this regard but one could list a few hundred items or services etc. which one could argue should not be subject to VAT.

One obvious way would be for voluntary groups who are commemorating 1916 and honouring the patriot dead to be compensated in other ways, including through the committee set up to commemorate or otherwise. It is common for us to give grants for sports facilities to all of the sporting organisations without giving them advantages through taxation. If funding is the issue there must be other ways of delivering funds.

Amendment, by leave, withdrawn.
Section 63 agreed to.
Sections 64 and 65 agreed to.
SECTION 66

Amendments Nos. 73 to 78, inclusive, are related and will be discussed together by agreement.

I move amendment No. 73:

In page 83, line 28, to delete "5 years" and substitute "6 years".

This section relates to one of the recommendations of the agri-taxation review intended to encourage more productive use of farmland. The section in the Bill as initiated provides, subject to certain conditions, for relief from stamp duty to encourage the long-term leasing of land to active farmers. The amendments in my name increase the lease period from five to six years and provide that the lessee must be either a farmer who has a farming qualification or a farmer who spends not less than 50% of his or her normal working time farming. My amendments allow a farmer a period of up to four years to acquire a farming qualification. They also provide for the claw-back of the relief if the conditions on which the relief is granted are not satisfied.

The recommendations of the agri-taxation review are to focus tax reliefs on encouraging the transfer of farmland to active farmers. In this context, the recommendation is that an active farmer is one who either has a farming qualification or who farms the land for not less than 50% of his or her normal working time. In either case, the farmer must farm the land on a commercial basis and with a view to the realisation of profit from the land. Deputy McGrath’s amendment does not necessarily meet these conditions because a farmer, as described in his amendment, could be engaged in farming in a minimal way and yet be within the charge to income tax under section 655 of the Taxes Consolidation Act 1997. For these reasons, I am unable to accept the Deputy’s amendment.

Deputy Doherty’s amendment proposes the substitution of a specific period of a 35-hour working week in the section. Many farmers, in addition to carrying on farming on a commercial basis and with a view to the realisation of profit, also have off-farm employment to supplement their farming income. Introducing a specific hourly requirement in the legislation as proposed in the Deputy’s amendment, allows no element of flexibility for genuine situations where that 35 hour period might not be satisfied.

My amendment No. 74, together with a guidance note that I understand the Revenue Commissioners will issue, which will specify that Revenue will accept that normal working time, including on-farm and off-farm working time, approximates to 40 hours per week, is a more flexible approach that adequately addresses the issue raised by Deputy Doherty’s amendment. This will enable farmers with off-farm employment to qualify for the relief provided they spend a minimum average of 20 hours per week working on the farm. Where anyone can show that his or her normal working time is somewhat less than 40 hours a week, then the 50% requirement will be applied to the actual hours worked, subject to the overriding requirement that the farm is farmed on a commercial basis and with a view to the realisation of profits. For these reasons, I am unable to accept Deputy Doherty's amendment.

I am informed that issues have been raised about this provision from a State aid viewpoint as the proposed relief is confined to farmland. Accordingly, amendment No. 78 provides that the section will be subject to a commencement order pending resolution of any State aid issues. We discussed this issue fully when Deputy Naughten raised it under a previous section. Deputy Ó Cuív participated in that debate. I am willing to go through it again but I am simply pointing out that we did discuss it fully earlier. I stand corrected in that four years rather than three years is provided for in respect of the time a farmer is allowed to obtain a qualification.

I welcome the agri-taxation review. It has come at a good time. I apologise in advance if I repeat anything that has been already discussed but I was unable to be here for the earlier debate.

Participation in part-time courses by farmers is difficult owing to a clash between the work they must do and time availability. There is a need for recognition in this regard. I am not happy with the proposal that 50% of an individual's working time must be spent farming. I am a farmer. One can farm successfully and productively on a commercial basis with the use of agricultural contractors. Essentially, the person who manages the land and has the correct records and invoices is the farmer. As a result of the expansion of our dairy industry, and given the huge land fragmentation problem we have in this country, there will be many arrangements in place that will result in a different definition of active farming. I would not be completely wedded to the current the definition. I understand why it is included but I believe there is need for recognition that it does not really define farming as it is currently evolving. However, there is huge potential to do what the Minister proposes to do, namely, make land more available, but it would require more detailed discussion. The agri-taxation review has opened a window that did not exist in the past. I hope we can develop the issue further later. I am not totally comfortable with the provision as drafted.

I appreciate Deputy Barry's competence in this area. The agri-taxation review also contained other recommendations on which we were not fully in agreement with the farming organisations.

We decided to park them, subject to further discussions with the stakeholders. A submission from the Deputy would be welcome because of his wide experience in farming. The same applies to any other Deputy, or the committee.

This is a technical area and it is important we get it right because it is about land mobility. I have a somewhat jaundiced view about the ability to prise land from landowners because there is such a historical attachment to ownership of land, for good reasons. Ireland is different to any other country in this regard. If we think about previous incentives, like the early retirement scheme and installation aid schemes, none of them increased land mobility as policy instruments. We must hope this will happen. It is important that we do not devalue the contribution made by part-time farmers, which is part of the debate. Many farmers looking in from the outside, who are talking about 20, 35 or 40 hours a week, would have a rather jaundiced view of the debate. They do not farm by the clock but on the basis of whatever work must be done. Even part-time farmers exceed the 35-hour or 40-hour week. That is the nature of the business.

I will query these points individually as we go through them. Amendment No. 73, which proposes to amend section 66, refers to going from five-year leases to six-year leases. This concerns exempting the lease from stamp duty. My question applies equally to conveyancing later in the debate. Transfers may occur on the death of someone and are not always predictable If someone inherits a property, there may be a five-year lease that is halfway complete. If there is a lease in place and two years are left, how does this apply? This may apply to someone who stands to inherit but is effectively locked out because of the lease. The person does not want it to run six years from the date of inheritance. This section deals with the lease but it also applies to conveyancing.

It applies to new leases. On an existing lease that was put in place two or three years ago, the stamp duty has already been paid. It is not intended to be a retrospective measure.

We must be careful that we do not accidentally lock out someone who wishes to participate as an active farmer at the earliest possible date. My observation is more critical to the stamp duty on inheritance rather than an existing lease.

The policy position is that this is not in the interests of raising revenue for the Exchequer but of bringing land back into commercial use where it is underused or which, through a change of ownership, may become underused. The definition of commercial farming is that it is being farmed for profit. Everyone agrees there are other factors in addition to the reluctance of farmers to loosen their grip on land and make other arrangements. One of the other factors is the 11-month system. If we can move to leasing, it makes land more commercial because it gives the lessor the opportunity to invest. There is full agreement on this point. If the point came up in the review of farm taxation and we accepted it after being in constant interaction with the farming organisations. The farming organisations agree with what we are doing and this is what they want and what they think will work. When questions were raised about the definition of "active farmer", the advice was that it was a workable proposition. It is an honour system because no one from the Revenue Commissioners is checking on the hours people spend on the farm. It is a system of self-assessment to a large degree. The farming organisations agree that clarification was necessary. The Revenue Commissioners and my officials designed this amendment and ran it by the farming organisation and officials from the Department of Agriculture, Food and the Marine. Both signed off on it with approval. It has gone through the checks and balances available to me but if the Deputy thinks other issues should be examined, I will do so.

Perhaps it is more applicable to conveyancing and stamp duty liability rather than to renewed or new leases. I am happy with amendment No. 73.

The policy purpose is to make long-term leasing the norm. Why do we just go from five years to six years rather than from five years to seven or ten years? In the amendment to section 69 on conveyancing, there is a provision that the person who is a beneficiary of the conveyance is an active farmer or else leases it for a period of up to six years. Where he or she is an active farmer, he or she is obliged to be the holder of a prescribed qualification or meet the definition of a part-time farmer. Where someone inherits a farm and is an active farmer but dies and the spouse becomes the automatic inheritor, is there retrospective liability for stamp duty where people do not meet the educational qualification? Does it apply to the beneficiary at the time of the transfer, regardless of whether the person continues to meet the part-time farming requirement?

There is no additional obligation in the grace period if there is a death and the farm transfers to the spouse.

The Deputy is familiar with the exemption from stamp duty for young farmers, which has been in place for quite a while. The time period is six years and we wanted to align this with the six-year period. We did not want too many numbers bouncing around. Can the Minister provide information on the amendment proposing that, where the instrument is executed on or after 1 January 2015 and before 1 January 2016? Does that give a window of opportunity to people above a certain age? What is its purpose?

I remember going through the amendment and signing off on it. It applies to people who are over 65 years getting an additional year. Transfers involving people aged 66 years or under are covered by the exemption.

Is there any penalty for people who are now over 70 years, for example, and who make the transfer now?

If they have not availed of it up to now, they will have a window of opportunity to do so because it is not limited by age. After the year passes-----

So there is a 12-month window in 2015.

Yes, someone of any age can do the transfer. After the year is up, the 65 years limit moves to 66 years and the lessor may be 66 years of age or younger. It is putting in a deadline to incentivise transfers.

In the typical family, the father is thinking of doing it. However, if he does not do it in the next 12 months-----

It is a blunt instrument but I can understand the reason it is there, which is to encourage transfers. However, there are so many different individual circumstances where someone is 65 or 66 years of age. It would be foolish of us to suggest that anyone who is 65 or 66 cannot actively contribute to or work a holding. He or she may have a young family and is not in a position to avail of an inheritance relief usefully at that stage.

That would relate more to the consanguinity relief where the closeness of the relationship decides the additional benefit.

Are we not penalising the landowner for doing the transaction another time if the family member who stands to inherit or who would be identified as the successor is still a juvenile or still in school and not in a position to take over the whole thing? I understand the purpose of this. It gives a window of opportunity for people to get their house in order when they might have dilly-dallied about it until now. However, there are people aged 65, 66 or 67 years or older whose children might be only 14 or 15 years of age. A person is not going to transfer a farm to a son who is still in school. Is that window not being closed off?

Not really. There are circumstances in which these reliefs could not be availed of by persons due to family circumstances. We are not disadvantaging them. Their current position continues. It is simply that they are not in a position to avail of the reliefs.

This is all about the reliefs. A person will want to transfer it in the most tax efficient manner possible.

It does not apply to all families like the Deputy has described. If a person married late or everyone is gone away and the couple had a child later in life, where the 15 year old is in secondary school and the father is 70, he is not going to transfer it in the next 12 months. However, he is not being penalised in any way. It is simply the case that this particular relief does not suit his circumstances so he will not benefit from it. We all know the problem here. Some 26% of farmers are over 66 years of age. The relief has been available for decades. It was due to expire at the end of this year. I am extending it for three years with a one year extension for transfers from people over the age of 65.

I welcome the Minister's clarification.

The Deputy can come back on Report Stage if he wishes but I can assure him that all these things have been discussed, run by and agreed with the farming organisations.

If it was agreeable to the committee, it would be great to come back to it on Report Stage.

The Deputy can put down an amendment for discussion on Report Stage. We will swing through the sections on Report Stage unless we have an amendment to stop us. If an amendment is put down, we can discuss it.

Amendment agreed to.

Amendment No. 74, in the name of the Minister, was already discussed with amendment No. 73. If amendment No. 74 is agreed to, amendments Nos. 75 and 76 cannot be moved.

I move amendment No. 74.

In page 83, to delete lines 31 to 33 and substitute the following:

“(4) For the purposes of this section the lessee shall, from the date on which the lease is executed, be a farmer who—

(a) is the holder of or, within a period of 4 years from the date of the lease, will be the holder of, a qualification set out in Schedule 2, 2A or 2B to the Act, or

(b) spends not less than 50 per cent of that individual’s normal working time farming land (including the leased land).”.

Amendment agreed to.
Amendments Nos. 75 and 76 not moved.

Amendment No. 77, in the name of Minister, was already discussed with amendment No. 73.

I move amendment No. 77:

In page 83, line 34, to delete “5 years” and substitute “6 years”.

Amendment agreed to.

I move amendment No. 78:

In page 84, between lines 10 and 11, to insert the following:

“(2) This section comes into operation on such day as the Minister for Finance may appoint by order.”.

Amendment agreed to.
Question proposed: "That section 66, as amended, stand part of the Bill".

We should look at the definition again and examine if we are crossing over on the definition of a single farm payment. People sign a single farm payment application form, an application for European money, stating that they are a farmer. We do not want a situation where people are stating they are a farmer to receive European moneys and at the same time are not qualifying for this. I know the Minister will be tired of people bringing up agriculture matters. However, if the push here is to encourage transfer of land, I cannot understand why, in previous times in sections dealing with land lease income exemptions, the exemptions did not apply to sons or daughters. We all wish for elderly farmers to transfer the farm to the next generation. I benefited from the retirement scheme many years ago. We are not allowing the land lease income exemptions to apply even though we should. It is a de facto retirement scheme that will bring in a cascade of young farmers. On this section, we should be cognisant that a person signs a declaration stating he or she is an active farmer on a single farm payment application form.

Question put and agreed to.
Sections 67 and 68 agreed to.
NEW SECTION

Amendments Nos. 79 and 80 may be discussed together. Amendment No. 80 is a physical alternative to amendment No. 79 and acceptance of this amendment involves the deletion of section 69. If the question on amendment No. 79 is agreed, amendment No. 80 cannot be moved.

I move amendment No. 79:

In page 84, between lines 26 and 27, to insert the following:

“Amendment of Schedule 1 to Principal Act (stamp duties on instruments)

69. (1) Schedule 1 to the Principal Act is amended—

(a) in paragraph (5) under the Heading “CONVEYANCE or TRANSFER on sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance”—

(i) by inserting “of property that is land” after “inter vivos”,

(ii) by substituting the following for subparagraph (a):

“(a) the instrument is executed—

(i) on or after 1 January 2015 and before 1 January 2016, or

(ii) on or after 1 January 2016 and before 1 January 2018 and the individual by whom the property is being conveyed or transferred has not, at the date of the conveyance or transfer, attained the age of 67 years,

(aa) the individual to whom the property is being conveyed or transferred is an individual—

(i) who, from the date of conveyance or transfer and for a period of not less than 6 years thereafter—

(I) farms the land, or

(II) leases it for a period of not less than 6 years to an individual who farms the land,

and

(ii) who, in a case where subclause (I) applies—

(I) is the holder of or, within a period of 4 years from the date of transfer or conveyance, will be the holder of, a qualification set out in Schedule 2, 2A or 2B to the Act,

or

(II) spends not less than 50 per cent of that individual’s normal working time farming land (including the land conveyed or transferred),

(ab) in a case where subparagraph (aa)(i)(II) applies, the individual to whom the land is leased—

(i) is the holder of or, within a period of 4 years from the date of transfer or conveyance, will be the holder of, a qualification set out in Schedule 2, 2A or 2B to the Act, or

(ii) spends not less than 50 per cent of that individual’s normal working time farming land (including the land conveyed or transferred),

(ac) the land is farmed on a commercial basis and with a view to the realisation of profits from that land, and”,

and

(iii) in subparagraph (b) by deleting “the instrument contains a certificate by the party to whom the property is being conveyed or transferred to the effect that”,

and

(b) by inserting the following paragraph after paragraph (5):

“(5A) Where any of the conditions in paragraph (5) are not complied with, at the time of the conveyance or transfer or subsequently, paragraph (5) shall not apply, any additional duty shall be chargeable by reference to the rate of duty in paragraph (4) and the provisions of this Act, in relation to the delivering of returns, the charging of interest and (where appropriate) the incurring of a penalty shall apply from the date on which compliance with any such condition ceases.”.

(2) This section comes into operation on 1 January 2015.”.

Conveyances and transfers of certain properties between close relatives are currently subject to stamp duty at one half the normal rate of stamp duty. The reduced stamp duty is payable by the individual to whom the land is conveyed or transferred. This relief is commonly known as consanguinity relief and is due to expire in relation to instruments executed after 31 December 2014.

The amendments proposed to the Bill as initiated arise from recommendations of the agri-taxation review. They provide for the continuation of this relief for another three years in relation to the conveyance of land executed on or after 1 January 2015 and before 1 January 2018. However, the relief as contained in the Bill is confined to the conveyance or transfer of land by an individual who is 65 years of age or under where the person to whom the land is being conveyed or transferred is a farmer who, from the date the land is conveyed or transferred, spends more than 50% of his or her time farming land – including the land conveyed or transferred – for a period of not less than five years. In addition, the land must be farmed on a commercial basis and with a view to the realisation of profits.

The amendment takes account of further representations to ensure that the recommendations of the agri-taxation review are fully reflected in the Bill. My amendment gives farmers of any age who may wish to transfer their land to a close relative a final opportunity to do so before 1 January 2016. Thereafter, the relief will only be available where the farmer transferring the land is aged 66 years or under.

In addition, farmers to whom the land is transferred and who have a farming qualification can qualify for the relief provided they farm the land on a commercial basis and with a view to the realisation of profits, without the requirement of spending at least 50% of their normal working time farming. Farmers who do not already have a farming qualification are given a period of up to four years from the time they acquire the land to obtain such a farming qualification. Finally, the relief will also be available to farmers who, instead of farming the land themselves, lease the land for a period of not less than six years either to a farmer with a farming qualification or to a farmer who farms the land for at least 50% of his or her normal working time. In either case, the farmer must farm the land on a commercial basis and with a view to the realisation of profits.

This is the issue on which I had the conversation with Deputy Creed.

This amendment brings the position up to date legally with what I was saying in our exchange of views.

I thank the Minister for his introduction to this amendment, which I believe is substantially correct. However, I have a concern I would like the Minister to reflect on when he gets the opportunity. He is obliging the landowner to contract a lease only with somebody who has an agricultural qualification as prescribed under the Act, such as somebody with a green cert or a degree in agriculture.

It states that in the case where subparagraph (aa)(i)(II) applies, "the individual to whom the land is leased - (i) is the holder of or, within a period of 4 years from the date of transfer or conveyance, will be the holder of, a qualification ... or (ii) spends not less than 50 per cent of ... time...". The Minister appears to be interfering in a way that is not required in the commercial potential of a landowner to contract with whomever he or she wishes, in terms of the best price available for the land. For example, partnerships are becoming the norm now in farming. Therefore, a partnership or limited company might be leasing the land. Is that compatible with what the Minister is obliging in regard to the person leasing the land from the owner. Partnerships and limited companies appear to be at a significant level now, particularly, but not exclusively, in the dairy sector. Is this provision compatible with the requirement that the person leasing the land must have a qualification? How does a company or partnership that might be leasing the land fulfil that requirement? Does it apply to the principals of companies in the case of a company? The named directors might be totally different from the persons actively involved in the farming of the land.

This deals with inter-family transfers. The title on this is generally "consanguinity relief" - the closeness in blood. Therefore, it is not about companies or strangers. It is about inter-family transfers and about the State being willing, in certain circumstances and under certain conditions, to give certain tax breaks arising from the closeness of the relationship and the intention to farm commercially.

As I understand it, the Minister is exempting from stamp duty the conveyance of a family farm to a family member and he is entitled to that if he is an active farmer himself, if he meets that definition or has an agricultural qualification. He is also entitled to that stamp duty exemption if he decides to facilitate the availability of that land, through a lease, to a third party, but that third party is obliged here to have a certain level of qualification. What is the situation if the person leasing that land is not an individual, but a company or a partnership?

I shall read the briefing note for the Deputy. Consanguinity relief under paragraph (5) Schedule 1 of the Stamp Duties Consolidation Act 1999 is available to an individual to whom land is conveyed or transferred by a close relative who personally farms the land or leases it to an individual who farms the land. The section does not specifically provide for the farming of land by companies. The Revenue Commissioners have indicated that they will look favourably on allowing the relief on an administrative basis, subject to any controls considered necessary to avoid abuse, where a farmer retains ownership of the land but farms it through a company that is controlled by him or her and in which he or she is a working director who satisfies the active farmer requirement, in other words that he or she is a farmer with an agricultural qualification or is a farmer who spends not less than 50% of his or her normal working time farming the land on behalf of the company, and in both cases that the land is farmed on a commercial basis or with a view to the realisation of profits.

Similarly, if the owner of the land leases it to a farmer, as provided for in the section, who farms it through a company and satisfies the active farmer requirements, the relief will also apply. Whether the farming is carried out by an individual in a personal capacity or through a company which the individual controls is not a significant issue. The important aspect of this relief is that the land is put to productive use for farming purposes.

Therefore, if it is a company, one would need to check the situation with Revenue, but it has expressed a willingness to allow the company to be "the farmer".

That is a useful clarification.

Amendment agreed to.
Amendment No. 80 not moved.
Section 69 deleted.
SECTION 70
Question proposed: "That section 70 stand part of the Bill."

If I am reading this correctly, this section states that people with a higher level science degree in applied agriculture or bachelor of science honours degree will be deemed qualified. Is that correct?

Yes, this section adds to the schedule of qualifications a qualifying farmer under this section will require.

Question put and agreed to.
Sections 71 and 72 agreed to.
SECTION 73

Amendments Nos. 81 and 82 are related and will be discussed together.

I move amendment No. 81:

In page 86, line 18, after “establishment,” to insert the following:

“or who, regardless of age, is permanently incapacitated by reason of physical or mental infirmity from maintaining himself or herself,”.

These amendments relate to section 73 of the Bill. That section amends section 82 of the Capital Acquisitions Tax Consolidation Act 2003, which exempts certain receipts from capital acquisitions tax.

Section 73 of the Bill amends sections 82(2) and 82(4) Capital Acquisitions Tax Consolidation Act 2003, CATCA, to provide that payments made for the support, maintenance or education of the children of living parents and orphaned children are exempt from capital acquisitions tax, CAT, up to the age of 25 if the children are in full-time education. CAT exemption for payments made by parents for the support or maintenance of dependent relatives, including children who are incapacitated by physical or mental infirmity, are dealt with separately under section 82 of CATCA 2003 and this exemption applies provided the income of the dependent relative does not exceed about €13,800 per annum.

These amendments expressly ensure that the exemption applies to a child who, regardless of age, is permanently incapacitated by reason of physical or mental infirmity.

For children in general, the exemption applies to 25 years of age, but for children who are physically or mentally incapacitated, there is no age limit. This measure aims to block a tax avoidance measure where wealthy parents were using the cover of this section to provide extraordinarily valuable gifts of money and property to children, purporting that these gifts were for educational use.

Chairman: Thank you Minister. We will stop now for a ten-minute break.

Sitting suspended at 8 p.m. and resumed at 8.10 p.m.

I welcome amendments Nos. 81 and 82. It was essential for the Minister to make it explicit that the change he is proposing does not apply in the cases he has outlined. I indicated that I opposed the section to ensure we would have a debate on this issue. There was some controversy over the proposal. The Revenue Commissioners clarified matters, as I understand it. Some suggestions were made by taxation advisers that the change would allow the Revenue Commissioners to tax normal board and lodgings that parents provide for family members. The Revenue Commissioners have clarified that is absolutely not the case.

The original legislation was certainly open to abuse. It is good that the loophole is being closed off. There seems to be some confusion but it should be clarified that the small gift exemption of €3,000 per annum is completely separate. It is a different issue entirely. I take it in good faith that there have been examples of abuses. The original wording was open to abuse.

Amendment agreed to.

I move amendment No. 82:

In page 86, line 29, after “establishment,” to insert the following:

“or who, regardless of age, is permanently incapacitated by reason of physical or mental infirmity from maintaining himself or herself,”.

Amendment agreed to.
Section 73, as amended, agreed to.
SECTION 74

Amendments Nos. 83 to 85, inclusive, are related. Amendment No. 84 is an alternative to amendment No. 83. The amendments may be discussed together by agreement. If amendment No. 83 is agreed, amendment No. 84 cannot be moved.

I move amendment No. 83:

In page 87, to delete lines 37 to 41, and in page 88, to delete lines 1 to 9 and substitute the following:

“(i) is the holder of any of the qualifications set out in Schedule 2, 2A or 2B to the Stamp Duties Consolidation Act 1999, or who achieves such a qualification within a period of 4 years commencing on the date of the gift or inheritance, and who for a period of not less than 6 years commencing on the valuation date of the gift or inheritance farms agricultural property (including the agricultural property comprised in the gift or inheritance) on a commercial basis and with a view to the realisation of profits from that agricultural property,

(ii) for a period of not less than 6 years commencing on the valuation date of the gift or inheritance spends not less than 50 per cent of that individual’s normal working time farming agricultural property (including the agricultural property comprised in the gift or inheritance) on a commercial basis and with a view to the realisation of profits from that agricultural property, or

(iii) leases the whole or substantially the whole of the agricultural property, comprised in the gift or inheritance for a period of not less than 6 years commencing on the valuation date of the gift or inheritance, to an individual who satisfies the conditions in paragraph (i) or (ii).”,”.

These Committee Stage amendments all relate to section 89 of the Capital Acquisitions Tax Consolidation Act 2003, which deals with agricultural relief. Capital acquisitions tax relief is available in respect of gifts and inheritances of agricultural property, including land, subject to certain conditions. At present, individuals who are farmers as defined in the section are entitled to agricultural relief. The definition requires that a farmer’s agricultural property must comprise 80% by value of the farmer’s total property.

The amendments to the agricultural relief provisions contained in the Bill, as published, provide for a further requirement under the definition to ensure that agricultural relief is more effectively targeted at individuals who inherit or who are gifted agricultural property and who actively farm it themselves or who lease it on a long-term basis to active farmers. To qualify for agricultural relief, the beneficiary or lessee must spend not less than 50% of his or her normal working time farming agricultural property, including the agricultural property comprised in the gift or inheritance, on a commercial basis and with a view to the realisation of profits from that agricultural property. The purpose of these amendments is to ensure productive use of agricultural property.

Amendment No. 83 further extends agricultural relief to any beneficiary of a gift or inheritance of agricultural property if that beneficiary is the holder of any of the qualifications for applying for relief from stamp duty in respect of transfers to young trained farmers - set out in Schedule 2, 2A or 2B to the Stamp Duties Consolidation Act 1999 - or who achieves such a qualification within four years from the date of the gift or inheritance, and who, for a period of not less than six years, farms the agricultural property on a commercial basis and with a view to the realisation of profits from that agricultural property.

This amendment is designed to ensure that beneficiaries of agricultural property who hold qualifications in agriculture and who are productive farmers but who are not in a position to spend at least 50% of their normal working time farming the agricultural property can also avail of the relief. Following the passing of the Bill, the Revenue Commissioners will publish a note for guidance on the practical operation of the provisions. This note will specify, among other things, that Revenue will accept that normal working time, including on-farm and off-farm working time, approximates to 40 hours per week. This will enable farmers with off-farm employment to qualify for the relief provided they spend a minimum average of 20 hours working per week on the farm. Where anyone can show that their normal working time is somewhat less than 40 hours a week, then the 50% requirement will be applied to the actual hours worked, subject to the overriding requirement that the farm be farmed on a commercial basis and with a view to the realisation of profits.

My second amendment provides for the claw-back of the relief if the additional conditions for the attainment of the agricultural qualifications by the beneficiary or use of the agricultural property by the beneficiary or lessee are not satisfied. Deputy Doherty’s proposed amendment to the relief involves the substitution of a specific period of a 35-hour working week in the section. Many farmers, in addition to carrying on farming on a commercial basis and with a view to the realisation of profit, have off-farm employment to supplement their farming income. Introducing a specific hourly requirement in the legislation, as the Deputy’s amendment proposes, allows no element of flexibility for genuine situations where that 35-hour period might not be satisfied. I consider that the Government's first amendment, together with the guidance note that the Revenue Commissioners will issue on how what is termed "normal working time" will be applied in practice, is a more flexible approach and for this reason I cannot accept the Deputy’s amendment. It goes over the same ground again but is simply adding a further definition regarding "active farmer" in case there is any doubt that the reliefs will apply to any person who qualifies under any of the four categories.

Amendment agreed to.
Amendment No. 84 not moved.

I move amendment No. 85:

In page 88, to delete lines 12 to 22 and substitute the following:

“ “(4B) Where a donee, successor or lessee ceases to qualify as a farmer under subsection (1) within the period of 6 years commencing on the valuation date of the gift or inheritance, all or, as the case may be, part of the agricultural property shall for the purposes of subsection (2), otherwise than on the death of the donee, successor or lessee, be treated as property comprised in the gift or inheritance that is not agricultural property, and the taxable value of the gift or inheritance shall be determined accordingly and tax shall be payable accordingly.”.”.

Amendment agreed to.
Section 74, as amended, agreed to.
Sections 75 and 76 agreed to.
SECTION 77
Question proposed: "That section 77 stand part of the Bill."

Can the Minister put on record the number of people who are paying the domicile levy at this point?

It is small. I will check.

Given that the amendment allows for the Office of the Revenue Commissioners to write to those whom they believe are subject to the levy, how many letters does the Minister expect the office to issue after this section is enacted?

In 2010, 28 returns were filed. Three of them were for nil amounts. In 2011, 26 were filed and two were for nil amounts. In 2012, 20 were filed and four were for nil amounts. In 2013, 12 were filed and one was for a nil amount. There was an active compliance campaign. The number filed without compliance activity in 2010 was 11.

After compliance activity, 17 more were filed; therefore, the number went up to 28. In 2011, without activity, there were 14, an increase of 12 to 26. In 2012, without activity, there were 14, an increase of 6 to 20. In 2013, without activity, there were 12. As there was no new filing after compliance activity, the figure remained at 12. The total paid in 2010 was €3,067,027. The following year it was €3,054,795. In 2012 it was €2,097,405 and in 2013, €1,565,345.

There were 12 in the last year for which we have figures. The section allows the Revenue Commissioners, in circumstances where they believe somebody is liable for the domicile levy, to write to that individual and give him or her 30 days in which to make a full and true return, with the payment of the levy. Presumably, it is included because Revenue believes there may be a list of people affected. Are there two, ten or 20 individuals to whom Revenue expects to write about this matter?

For the 2010 domicile levy year, 85 cases were examined for a potential liability. Of these, 30 remain open. For the 2011 domicile levy year, 86 cases were examined for a possible liability, of which 36 remain open. For the 2012 domicile levy year, 86 cases were examined for a potential liability, of which 27 are still open. Cases that are open in respect of any year are subject to ongoing compliance activity. Many of these cases involve a potential liability for more than one year. That is the best I can do.

Question put and agreed to.
Section 78 agreed to.
SECTION 79

Amendment No. 86 has been ruled out of order. Amendments Nos. 87 to 91, inclusive, are related and will be discussed together.

Amendment No. 86 not moved.

I move amendment No. 87:

In page 93, line 34, to delete “that” and substitute “a”.

Section 79 of the Bill introduces a new section, 811C, to the Taxes Consolidation Act, 1997. The purpose of subsection (5) of the new section is to make it clear that the Revenue Commissioners can challenge a transaction, both under the general anti-avoidance legislation contained in section 811C and by way of an alternative assessment under any other appropriate provision of tax legislation. The wording of subsection (5) in the Bill, as published, could be read as implying that the same Revenue officer must make an assessment under section 811C and by way of alternative assessment. This could give rise to difficulties, for example, where a Revenue officer who made an assessment by reference to section 811C has retired or passed away and another Revenue officer now wishes to make or amend an alternative assessment on that taxpayer in relation to the same transaction. The amendment makes it clear that the assessments can be made by two different officers. Needless to say, this does not mean that a taxpayer will be charged twice. The subsection makes it clear that only one of the assessments can become final and conclusive.

Amendment No. 88 also relates to the new section 811D introduced to the Taxes Consolidation Act, 1997 by section 79 of the Bill. Subsection (2) of section 811D defines a disclosable transaction for the purposes of the section. The effect of the transaction being disclosable is twofold. First, it cannot enjoy the benefit of the protective notification regime for which the section provides. Second, if a taxpayer makes a qualifying avoidance disclosure of the kind provided for in the section, the level of mitigation of the surcharge provided for is less than for other transactions. Broadly, a disclosable transaction is one which was disclosable under the mandatory disclosure regime. However, for the purposes of section 811D, an exception is made where a promoter of an avoidance scheme ought to have disclosed but did not disclose a transaction and, therefore, did not provide the taxpayer with the transaction number provided for in the mandatory disclosure legislation but the taxpayer discloses the transactions and co-operates with Revenue in giving details of the scheme and the promoter. In these circumstances, the transaction is not treated as disclosable for the purposes of section 811D and the taxpayer is allowed to make a protective notification and obtain the higher level of mitigation where a qualifying avoidance disclosure is made. The purpose of the amendment is to clarify the interaction between the timings involved in making a protective notification and those involved in taxpayers receiving a transaction number under the mandatory disclosure regime. The amendment ensures a taxpayer cannot avail of a protective notification simply by claiming that, at the time when the notice was made, he or she did not have a transaction number. If a transaction number is given to the taxpayer at any time before the date for filing the relevant return, no valid protective notification can be made.

Amendment No. 89 relates to the definition of protective notification and the new section 811D. This is a technical drafting amendment intended to make it clear that a protective notification must contain each of the four items of information set out in the definition.

Amendment No. 90 relates to subsection (4)(a) of the new section 811D, where it references section 811C(6). Paragraph (a) of section 811D sets out the consequences where a taxpayer has made a valid protective notification. These are that Revenue can carry out inquiries, make or amend assessments, etc., within the standard period for making inquiries. For income tax, it is four years from the end of the year in which the return was submitted. In addition, if Revenue considers that the transaction was a tax avoidance transaction and is successful in challenging it, no surcharge will be made and the interest on unpaid tax will only start to accrue from one month after the date on which Revenue makes or amends the assessment withdrawing or denying the tax advantage. There are no provisions in the tax Acts that impose a time limit on the collection or recovery of tax found to be due and payable. However, as originally drafted, there could have been some doubt as to whether this paragraph had placed a limit on when Revenue could collect or recover tax in situations where a taxpayer had made a protective notification. This amendment seeks to remove any such doubt.

Amendment No. 91 relates to subsection (4)(b) of the new section 811D. This paragraph deals with the situation where Revenue believes a notification is not valid, for example, because it was received late or did not contain all of the required information. Revenue may only make inquiries or make or amend an assessment on a taxpayer who makes a protective notification within the prescribed period for so doing. For example, for income tax or corporation tax, the period is four years after the year in which the return to which the assessment relates is filed. In the Bill, as published, paragraph (b) provides a taxpayer with an explicit right of appeal against Revenue making inquiries outside this time limit. The amendment provides the taxpayer with an explicit right of appeal against Revenue making or amending an assessment outside the time limit. Without this amendment, the taxpayer could only challenge an out-of-time assessment by way of judicial review.

Amendment agreed to.

I move amendment No. 88:

In page 94, line 37, to delete "the transaction was not" and substitute the following: “by the specified return date, within the meaning of Part 41A, for a return referred to in section 817HA(3), the transaction was not”.

Amendment agreed to.

I move amendment No. 89:

In page 95, line 32, after “transaction,” to insert “and”.

Amendment agreed to.

I move amendment No. 90:

In page 97, line 17, to delete “section 811C(6)” and substitute “paragraphs (a), (b) and (c) of section 811C(6)”.

Amendment agreed to.

I move amendment No. 91:

In page 97, lines 32 to 37, to delete all words from and including “and” in line 32 down to and including line 37 and substitute the following:

“and—

(i) commences carrying out enquiries as if section 811C(6)(a) applied, a taxpayer who is aggrieved by such enquiries, on the grounds that the person considers that the officer was precludedfrom making that enquiry by reason of paragraph (a)(i), may appeal to the Appeal Commissioners and subsections (5) to (8) of section 959Z shall, with any necessary modifications, apply to that appeal, or

(ii) makes or amends an assessment as if section 811C(6)(c) applied, a taxpayer who is aggrieved by the making of such an assessment, or, as the case may be, such amendment, on the grounds that the person considers that the officer was precluded from making the assessment or, as the case may be, the amendment, by reason of paragraph (a)(i), may appeal to the Appeal Commissioners and subsections (2) and (3) of section 959AF shall, with any necessary modifications, apply to that appeal.”.

Amendment agreed to.
Question proposed: "That section 79, as amended, stand part of the Bill."

I am opposed to this section, and I raised the following point on Second Stage. In section 79 the new subsection (2A)(a) to be inserted refers to someone who comes forward and says he or she has been involved in a tax avoidance transaction, and as a result of doing that before 30 June 2015, the surcharge under existing legislation would not apply and the interest that person would have to pay would be reduced by 20%. That is wrong. These people have been involved in tax avoidance transactions. Today, the Government announced that people who cannot afford to pay water charges will be hit for an extra €60. These people were deliberately involved in tax avoidance transactions and the surcharge that is in the law is not applied and their interest rate is reduced by 20%. That smacks of hypocrisy.

I know we will not see eye to eye on this. I have said before that there are two ways of introducing a scheme like this. One is to say "Come quietly into the fold with your hands up and we will treat you kindly with kid gloves."; the other is to say "If you do not come before us by 30 June we will ramp up the interest fees and surcharges." At a time when the Government will chase people to their graves and beyond for water charges by charging on their properties, is it appropriate that people who were deliberately involved in tax avoidance should be treated in this way? This is kid gloves stuff.

There is a middle ground. It is not as the Deputy states. The Revenue Commissioners advise us to take the middle ground. Moving the proposal to delete the settlement incentive for older tax avoidance cases is the issue. The Minister of State at the Department of Finance, Deputy Harris, made clear during the Second Stage debate that the Revenue Commissioners are challenging a significant number of cases involving tax avoidance transactions. Pursuing these cases through the courts is slow and the outcome can never be certain. If one loses it is very expensive. This is why a settlement opportunity is being put in place. At an absolute minimum any taxpayer who wishes to avail of this settlement incentive has to pay the tax due. Where interest is relevant, 80% of this has to be paid and the measure is strictly time bound.

Is that 80% of the interest?

A total of 80% of the penalty interest due on the tax outstanding must be paid, as well as the tax. The tax must be paid in full and 80% of the interest. Only 20% does not have to be paid. It is strictly time measured. The purpose of it is to enable the Revenue Commissioners to take a proceeding successfully against people for tax evasion through tax avoidance measures.

The point is that the Revenue Commissioners do not have to take proceedings against them at all. The person comes to them and owns up. What is due now is 100% interest and 100% surcharge, but the Minister is saying today that the 100% surcharge is gone and 20% of the interest due is also gone for people involved in deliberate tax avoidance measures. That is not the way to deal with this. It may be costly and these people may be very wealthy and may challenge the Revenue Commissioners in the courts, but the Revenue Commissioners have issued 500 court notices against people who did not pay their household charge or their property tax. Constituents from outside the State come to me weekly who were not aware of the non-principal private residence charge and face a charge of more than €7,000. They ask what leeway or negotiation there is for them. I have to say there is none but I can tell them that under the Finance Bill 2014, if they were involved in a tax avoidance transaction and put their hands up before 30 June 2015, their surcharge and 20% of the interest would be wiped off. That is the way the Government is prioritising matters.

The Deputy is missing the point that tax avoidance is not illegal. These people are involved in tax avoidance schemes. They are not involved in tax evasion schemes. In several cases the Revenue Commissioners have challenged the legality of tax avoidance schemes. The people involved in the tax avoidance schemes are prepared to take the Revenue Commissioners to court to prove that the tax avoidance schemes were legitimate and will pursue it all the way to the Supreme Court. The Revenue Commissioners can do that and risk losing, taking the expense and opening a gap in the code or they can ask these people if they really want to go all the way to the Supreme Court and try to incentivise them to come out with their hands up and admit that their tax avoidance scheme was not kosher, pay all the tax they avoided and 80% of the interest and settle on that basis. There is a queue of them challenging in court. It is the advice of the Revenue Commissioners that this is a better way for them to do business and is more likely to end with revenue for the Exchequer than to pursue the matter in court with the possibility of losing key cases and opening gaps in the tax code which others could use to avoid taxes until we close those gaps, which cannot always happen overnight.

It is not tax evasion or incentivising people guilty of a criminal offence. It is moving to close tax avoidance schemes where the Revenue Commissioners have a very strong opinion that a scheme is not in accordance with the law. A major part of the problem we are trying to deal with is that cases can take years to process through the courts. There is massive expense. When cases have been processed, the Revenue Commissioners often find there are no assets left to pay the tax by the time they get a court adjudication. If they go after everything, they can end up with nothing, even if they win the case. It is not a wish to be soft on those who avoid tax. This is purely to get the best result in the country’s interest.

I did not say they were involved in illegal activity or evading tax. I said they were involved in deliberate tax avoidance transactions. Tax avoidance transactions may be legal but they can also be illegal. This will apply only where the Revenue Commissioners believe under section 811 that a surcharge applies. Therefore, it was putting money beyond the reach of the Revenue Commissioners through a tax avoidance transaction which is against the law. These people were deliberately involved in that action. This is a softly, softly approach. While the Minister’s commentary about going through the courts and there being no assets left may be fair, there are two ways to deal with this. The Minister could have told the individuals in the long queue that if they did not come forward and settle by such a date, the Government intended to double the surcharge on 30 June 2015.

The interest and surcharges on the non-principal private residence charge of €200 per year, which ran for approximately five years bringing it to €1,000, built up to €3,000 and Revenue doubled that. The big stick came out and the Revenue Commissioners said if the charge was not paid by a certain date at the end of September, it would be doubled to more than €7,000. I know people who were in Scotland, America or parts of the North who were not aware that such a charge existed. In this case the surcharge and 20% of the interest on tax avoidance transactions, which could be large multiples of the non-principal private residence charge, will be wiped out because the Revenue Commissioners may not win the case in court. There is no reluctance to take on other people in court.

The surcharge issue as an incentive has not worked. That is why the people who, in the opinion of the Revenue Commissioners, are involved in tax avoidance schemes are prepared to go the whole way to the Supreme Court. It is a doubtful proposition that doubling the surcharge would be an added incentive. Much of the time these people are playing for time. They get a lot of time if they go through the court process. Sometimes at the end of the process they have cleverly disposed of assets and there is nothing for the Revenue Commissioners to get. The Revenue Commissioners only form a view that a tax avoidance scheme is illegal at a point in the process and at that point when they go to collect they are taken to court by the person or persons involved.

Revenue is independent under statute. When Revenue advises me that it thinks there is a better way of doing business then I feel under an obligation to agree with what Revenue wants to do. This is not the Government coming up with policy positions, as the Deputy suggested. This is Revenue saying we are not doing very well in pursuing some people for tax avoidance who have decided to challenge us in court and to use the delays and expense of the court system to defer a result, and sometimes to avoid liability, while they dispose of their assets.

The Revenue says this is a better way to pursue the matter in the first instance. If those people do not come out with their hands up and be frank about their tax avoidance scheme, then they will be pursued to the end through the courts system. If they do come out they will still be liable for all the tax they avoided but they will also be liable for 80% of the interest rate. The opportunity is time limited. We are not changing the tax code to make this provision a permanent fixture. I am disposed to take Revenue's advice on this matter and I do not have better advice.

The Minister seems to be giving a get out of jail card to people involved in deliberate tax avoidance. If the boycott campaign against the water charges does not succeed in bringing about their abolition, in the next budget or the one after that will he adopt a similar attitude towards the penalties the Government plans to impose on water charges? That would be consistent with the logic he is applying now.

First, it is not a get out of jail card because jail is not one of the punishments. The punishments are specified under tax law, as described by Deputy Doherty, and that is what would apply. People do not go to jail at the end of the process. It is tax avoidance; it is not tax evasion. There is an international industry active in this city where tax advisers explore the possibility of coming up with new and novel tax avoidance schemes which they market to clients. Revenue, frustrated by the slow process of bringing people to book, has decided to have a short period where some of the penalties are mitigated but no tax is written off. Those people are liable for all the tax they avoided but some of the penalties are mitigated. The principal mitigation is that instead of charging 100% of the interest rate the recommendation is to reduce it to 80%.

Idealists might regard such pragmatism as unprincipled but Revenue considers it to be a way to get in the tax that was avoided rather than going through an expensive court system. They are not saying this will go on forever. They are saying if persons in this category do not avail of this offer from Revenue then they will be pursued in court and let the chips fall where they will.

Will the same latitude be shown if people decide, as a protest against water charges, to boycott them for a year or so to see if they can secure the abolition of water charges? If they do not succeed when two years have elapsed will the Minister say "Fair enough, we will not bother penalising you. You had a crack at it but it did not work out so we are going to go soft on you to get you back in"?

Revenue is not involved in the collection of water charges.

The Minister is. If he can direct Revenue then he can direct Irish Water.

Revenue is not involved in the collection of water charges and neither is the Department of Finance, as a matter of fact. Is the Deputy saying it is a tax, a levy or it is too much?

It is a regressive tax.

It definitely is a regressive tax.

I thought the Deputy said last week that it was not a tax.

No, it definitely is a regressive tax.

I understand where the Minister is coming from as well as this debate. Generally speaking, we are referring to high-net-worth individuals, not the average PAYE worker. In the context of the Minister's negotiations with Revenue and accepting the logic of his proposal and from where it emanates, has-----

I never negotiate with Revenue. That would be improper.

In the Minister's contacts with Revenue and the briefing he has received on this matter, has he ever contemplated – in the presence of the Revenue Commissioners – the value to compliance of a day out in court against some of these people? It would send a signal to the effect that the State, via the Revenue Commissioners, would not be a pushover for these people either.

There have been several days out in court. Sometimes, Revenue wins. Sometimes, it loses. There is no reluctance to proceed in court. The cases do not often get highlighted in the media.

What are the interest rates?

Some 8% per annum.

What of the surcharge?

It was 20%, but is being increased to 30%.

The surcharge is the large one.

Some 8% is enough.

I have a question for the Minister, although the Revenue officials might be able to answer as well. Aside from this section, has Revenue any discretion in its application of interest and penalties in the case of an under-declaration of income by a self-employed person or an under-declaration of a VAT liability?

My understanding is that it has discretion up to a certain point in the process.

Could someone clarify that?

Under the scheme set out in the Act, there is a graduated range of penalties that depends on the seriousness of the transgression. There are also differences between people who disclose voluntarily and those who are discovered by Revenue's audits.

My question is on whether there is any discretion in the application of the legislation or whether the situation is absolutely black or white? People often approach us with Revenue issues. Usually I say that there is nothing I can do because everything is laid out in black and white in the Act, Revenue has no discretion and it applies the law.

Revenue has a code of practice for dealing with penalties and interest rates and allows for discretion within that code. We can get the Deputy a copy of it.

It is on the website.

My opposition to this section has been noted over Second and Committee Stages. It is terrible what the Government is doing, particularly given Revenue's involvement in the non-principal private residence, NPPR, charge and the lack of flexibility shown to people who genuinely did not know. That said and to move this discussion along, how many individuals is it estimated could avail of this scheme?

Neither Revenue nor the Department of Finance is involved in the second home tax. That is a matter for the Department of the Environment, Community and Local Government. It took the proceedings, not the Department of Finance or Revenue.

Revenue is collecting it. The second home tax was-----

Revenue is collecting the household charge, not the NPPR.

My apologies. Regarding the quantum of individuals whom the Department believes may apply under this section, are we discussing single digits, double digits or treble digits? What is the estimate? We are doing a bit of crystal ball gazing.

I will check now. My advice is that while it is difficult to arrive at a precise number, we are discussing a figure in the hundreds rather than the thousands. The table I have before me is not particularly clear and may be deceptive, but it probably gives the Deputy a flavour. The overall number of protective notifications received is 518. The overall number of protective notices under investigation or litigation is 443. The overall number of protective notifications closed is 75. These are the statistics for the end of June 2014.

I refer to numbers being investigated under the different schemes. The figure for the income tax loss scheme - the leverage financial trading scheme - is 427. The amount of tax at issue is €30.1 million. In terms of the year received, the figures are 19 in 2010, 40 in 2011, 129 in 2012, 136 in 2013 and 104 in 2014. One can see that was a fairly active scheme being marketed under that heading. The next scheme is a GCT loss scheme - option on spread betting on the euro and on the dollar. It is a foreign exchange scheme. The number is 12 and the amount of tax is €12.5 million.

The figure for the next scheme, the corporate deduction regarding employee benefit trust scheme, is three. The amount of tax involved was €400,000 and 2014 was the year of notification. In regard to the capital allowances scheme - claim under section 291A of the sale of service mark to connected companies - the amount not quantified was one and that goes back to 2012.

The principal one is the income tax loss scheme - the leverage financial trading scheme - where there are 427 of them, ranging over a number of years. They go back to 2010 but they are still not resolved. The court process will, in theory, deal with them but a queue has formed. That is the principal target, if I am not misreading the statistics.

Question put.

In accordance with the Order of the Dáil of 18 November 2014, the taking of a division is postponed until 5 p.m. tomorrow, per the relevant deadline indicated on the allocation of time motion or until the completion of proceedings in the matters to be dealt with in this session.

SECTION 80

I move amendment No. 92:

In page 106, to delete lines 24 to 35 and substitute the following:

" "(4) (a) Where a person is a marketer of a transaction that it would be reasonable to consider is a disclosable transaction and the promoter of that transaction has not provided the marketer with a transaction number for that transaction in accordance with section 817E, then within 30 working days from making the first marketing contact in relation to that transaction, the marketer shall provide the Revenue Commissioners with -

(i) the name and address of the promoter of the transaction,

(ii) details of the transaction, and

(iii) all materials, whether provided by the promoter or otherwise, used to make a marketing contact in relation to the transaction.

(b) Where a marketer provides information to Revenue in accordance with this subsection, then this shall be wholly without prejudice as to whether or not the transaction is a disclosable transaction.",".

This amendment relates to section 80, which amends the mandatory disclosure regime by introducing a new subsection (4) into section 817L of the Taxes Consolidation Act 1997. Under the revised mandatory disclosure regime proposed in the Bill, the Revenue Commissioners will assign a transaction number to each scheme disclosed to them under the legislation and will notify this number to the promoter of the scheme. The promoter, in turn, is obliged to give the number to any taxpayer to whom the scheme has been sold and to any person who markets the scheme. The taxpayer is obliged to include the transaction number in his or her return of income, thus allowing the Revenue Commissioners to track the use of the scheme more easily.

The purpose of subsection (4) is to impose certain obligations on a marketer of a scheme that is subject to the mandatory disclosure regime, where that marketer has not been provided with a transaction number by the promoter, as required by the legislation. These obligations are being introduced so that any person marketing a scheme, which should have been but was not disclosed to Revenue, will be obliged to provide Revenue with as much information as he or she has in regard to that scheme.

As drafted, subsection (4) was open to the objection that a marketer could not always know whether a scheme he or she was selling was an avoidance scheme that was subject to the mandatory disclosure regime. This amendment recognises that there may be occasions when a person is marketing a scheme but does not actually know all of the details of that scheme - he or she is simply putting taxpayers in contact with a promoter and that promoter is the only person who really knows all of the details of the scheme.

This amendment makes it clear that a marketer cannot avoid an obligation under subsection (4) by arguing that he or she did not know all the details of the scheme and, therefore, could not know whether it was disclosable or not. The obligation on a marketer applies if it would be reasonable for him or her to consider that the transaction would be a disclosable transaction.

This amendment also makes it clear that the fact that a marketer has provided information to Revenue in regard to a scheme - now that the legislation explicitly acknowledges that the marketer may be providing that information without having perfect knowledge of the scheme - does not, in any way, prejudice whether or not that scheme actually is a tax avoidance transaction that is subject to the mandatory disclosure regime. If the marketer provides information about a scheme which is one that ought to have been disclosed by a promoter but was not, then Revenue will seek penalties for non-disclosure against the promoter of that scheme.

Amendment agreed to.
Section 80, as amended, agreed to.
Sections 81 to 91, inclusive, agreed to.
NEW SECTIONS

Amendments Nos. 93, 95 and 96 are related and may be discussed together.

I move amendment No. 93:

93. In page 119, between lines 24 and 25, to insert the following:

Amendment of section 10(A) of Finance (Local Property Tax) Act 2012

92. The Finance (Local Property Tax) Act 2012 is amended in section 10(A) by substituting the following subsection for subsection (3)—

"(3) Notwithstanding subsection (1) and (2) and subject to subsection (4), the Minister for the Environment Community and Local Government shall ensure in the making of regulations, that a residential property shall not, for the purposes of this Act, be regarded as a relevant residential property if a certificate has been issued in relation to it having a building condition assessment damage rating of 2, or a building condition assessment damage rating of 1 with progression; and has either been accepted by the Pyrite Remediation Board for remediation, or is in any area where the presence of pyrite has been established, regardless of whether a hardcore infill test has been carried out.".

I am moving this amendment on behalf of Deputy Clare Daly. Thankfully, pyrite is not something that affects my constituency but I am aware of the trauma many families have been put through because their houses are affected by it. This amendment seeks an exemption from the local property tax on the basis that one's house is affected by pyrite. Deputy Daly told me that the requirement on the homeowner to get a hardcore infill test is more costly than the exemption from the local property tax and she proposes, on behalf of families whose houses are affected by pyrite, that there should be a much lighter requirement on householders to prove their houses are affected by pyrite and that they should be exempted from the local property tax. She told me the Department is aware of this and is supposed to be working on it. I hope the Minister is positive in his response.

Amendment No. 95 has been put down as a marker. Our party is committed to abolishing the local property tax and reintroducing the non-principal private resident charge at a rate of €400 per annum.

It is a statement of our intent. This is something that we believe should be done. I do not expect the Government to agree to it but it has been tabled. I will also speak to Deputy Boyd Barrett's amendment, the substance of which I agree with. I would also suggest that the issue which has not been dealt with is that of properties that have been damaged by what is called mica, where there has been block damage to houses. It is prevalent in Donegal and other areas where buildings cannot be insured and they may need to be knocked down. That also needs to be considered in the exemption from the local property tax. I would be interested to hear the Minister's suggestion on this. I signal an intention to bring forward an amendment on this matter on Report Stage.

Amendment No. 96 relates to the valuation date for local property tax in the 2012 Act. As the Minister will be aware, owners have certainty for the next two calendar years as to the amount of LPT that they will pay. For 2015 and 2016, the amount they will pay will be based on the valuation on the valuation date of 1 May 2013, but there is to be a new valuation date of 1 November 2016.

It must be borne in mind that since the May 2013 valuation date, property prices, especially in Dublin, have increased by in the region of 40%. At this stage, many are looking at a spike of two bands in the valuation of their property. For instance, the property of somebody currently in band 3, where the property has a valuation of between €150,000 and €200,000 and the person is paying €315, could jump quite easily to band 5, where properties are valued at €250,000 to €300,000, which would result in an LPT liability of €495, a jump of €180, which is more than anyone will pay in respect of water charges. I refer merely to the additional LPT.

Many of the Minister's backbenchers, especially those based in Dublin, have expressed concern on this issue. I acknowledge it is two years away. There is certainty for 2015 and 2016 as to what those liable will pay, but this is coming down the track quite quickly. Based on the pattern of property price increases, many face a hefty hike in their property tax bill for 2017.

I will refer to the amendments in the order in which they arise. I am aware of the issues that Deputy Boyd Barrett is attempting to address with his proposed amendment No. 93. Officials of the Department of Finance, with officials of the Department of Environment, Community and Local Government, have been examining the alternatives other than testing that may be available to confirm entitlement to a local property tax exemption with a view to coming up with a viable solution for all.

The Deputy's amendment removes the requirement for sub-floor hardcore testing and replaces it with either acceptance by the pyrite remediation board for remediation or location in any area where the presence of pyrite has been established. As I am sure the Deputy will be aware, the pyrite remediation board's pyrite resolution scheme is limited to properties with a damage condition rating of two and this requirement would be of no use to a property with a damage condition rating of one with progression. As the pyrite remediation board's pyrite resolution scheme is a scheme of last resort, it would also be of no use to properties being remediated through other avenues, for example, insurance or directly from builders.

It is important that any changes that may be made to the LPT legislation do not go beyond the objectives of providing only a temporary exemption for homes with significant pyritic damage. As I have advised on many occasions, a liability to local property tax should apply to all owners of residential property with a limited number of exemptions. Limiting the exemptions available allows the rate to be kept low for those liable persons who do not qualify for an exemption. The other option proposed by the Deputy, that is, location in any area where the presence of pyrite has been established, does not in itself establish the presence of pyrite in any particular property. In this regard, I believe the Deputy's proposal is too broad and could result in the relief being available to those beyond the intended target group.

The local property tax operates on a self-assessment basis and it is a matter for the property owner, in the first instance, to calculate the tax due based on his or her assessment of the market value of the property. Where a property owner does not qualify for an exemption, when making an assessment, the presence of pyrite in a particular area would be one of the factors that could be taken into account in valuing their property. The advice is clear. If there is pyrite in the area or if there are signs of pyrite in the house, that should be taken into account when a home owner is assessing the value of his or her property. For the reasons outlined above, I oppose the Deputy’s amendment.

With regard to Deputy Doherty's amendment No. 95, the non-principal private residence charge has been superseded as a source of local government funding by the introduction of the local property tax. The level of income expected to be generated by LPT in 2015 is in the region of €500 million. The reintroduction of the NPPR charge, even at double the rate of the original charge, which was €200, would not generate one third of this level of income. I expect the local property tax to provide a more sustainable system of funding for local government and a sounder financial footing for the provision of local services. It will lead to greater transparency and accountability at a local level and it is certain that the stronger democratic relationship and clearer lines of accountability created can only have a beneficial impact on service provision from the perspective of the service user.

As regards abolition of the local property tax, it is well established that the taxation of property through an annual recurring tax is less economically distortionary than the imposition of tax on either income or capital. This is supported by economic literature and OECD analysis which underscores how an annual tax on land and buildings has a relatively small adverse impact on economic performance. ESRI research shows that a property tax is six times more job-friendly than taxes on work and income. The Government is determined to do everything in its power to protect and support the creation of jobs. The introduction of a property tax is part of a broader approach to the taxation of property. The aim is to replace some of the revenue from transaction-based taxes, which have proven to be an unstable source of Government revenue, with an annual recurring property tax, which international experience has shown to be a stable source of funding. The local property tax has been successfully introduced and we can look forward to a stable source of funding which is fair and progressive with the owners of the most valuable properties paying most. The tax is equitable, has reference to ability to pay, conforms to international norms and significantly broadens the domestic tax base. In the circumstances, I do not propose to accept this amendment.

Deputy Pearse Doherty also referred to recent events in Donegal. I understand that the Department of the Environment, Community and Local Government has been concerned about this matter and has been in touch with interests in Donegal about the problem with concrete blocks in that county. I understand that as yet no firm evidence has been provided to the Department of the Environment, Community and Local Government to substantiate the figures quoted. I understand the Department of the Environment, Community and Local Government is prepared to review any information that can be made available on these matters, such as test laboratory reports on the concrete blocks and structural reports on the affected dwellings, and having regard to such information, the Department may be in a position to offer advice that may be of assistance to affected home owners.

As a general rule, building defects are matters for resolution between the relevant contracting parties - the home owner, the builder, the supplier or their respective insurers - and in the event a settlement cannot be reached by negotiation, the option of seeking redress in court can be considered. Where appropriate, affected home owners should pursue their structural guarantee or insurance providers where structural guarantee insurance is in place.

It is understood that legal proceedings may have been instigated in some of the cases relating to the problem in County Donegal, which is the appropriate course of action to take in the event that the responsible parties, that is, the builder, the supplier, their insurers or both, do not face up to their responsibilities and provide a solution to the affected home owners. However, as I stated, the Department of the Environment, Community and Local Government is available to receive relevant information and to be of assistance to home owners if they are in a position to be of assistance.

As for amendment No. 96 tabled by Deputy Michael McGrath, the Deputy proposes to give broad discretion to the Minister as to when properties should be revalued for local property tax, LPT, purposes. As the local property tax is a new tax, the Government wishes to provide certainty to home owners and for this reason, valuation periods of three years were introduced with the exception of the first valuation period, which covers three and a half years. In addition to providing certainty, it also eases the administration burden on the home owners by not being obliged to revalue their houses each year. The Deputy may be aware that under the LPT legislation, where a property is not a “relevant residential property” on a valuation date, that is, not liable to LPT, with certain exceptions that property will not be a relevant residential property until the next valuation date. In the interest of equity for compliant LPT payers, it is important to have regular valuation dates in order that newly built properties are brought into the LPT net. It also provides certainty to those home owners as to when they will become liable to LPT. In the absence of further valuation dates, new properties built after 1 May 2013 would not be liable for LPT and would not have a valuation for LPT purposes. Should those properties be brought into the scope of LPT using a different valuation date, it would be inequitable to those home owners as their LPT liabilities would be assessed using a later valuation date where property prices are increasing compared with those currently on the register.

While I am very conscious of the concerns of home owners regarding increasing property prices and the effects this will have on their LPT liabilities, particularly in urban areas, I do not believe the Deputy’s amendment is the most appropriate way to address these concerns. The next valuation date is not until 1 November 2016. In advance of that date, in conjunction with my officials, I will examine the LPT and any impact on LPT liabilities due to increasing property prices. However any consideration at this stage would be premature. For the reasons outlined above, I am not minded to accept the Deputy’s amendment.

I revert to the position in County Donegal regarding the problem of mica within the defective blocks. The Minister has outlined the options that have been pursued and so on, some of which have been exhausted. The Minister stated the Department is open to looking at the data and all that, which I am sure will happen without delay. However, my question is in respect of local property tax. While I acknowledge the Minister will not give a commitment this evening, without doing so can he state he is open to the idea of exempting properties from local property tax, just as would be buildings affected by pyrite, where it can be proven that defective blocks were used in the construction of those properties?

First, we anticipated the Deputy would raise this issue on Committee Stage and, consequently, the information I put on the record is from a speaking note provided in consultation with the Department of the Environment, Community and Local Government. Beyond that, I do not have relevant information. However, that Department is prepared to accept information and to advise when it receives the information. It is premature to decide whether exemptions along the lines of the pyrite exemption should be provided in law but the advice in the previous note to Deputy Boyd Barrett would apply. If the defective block structures in certain houses have decreased the value of the houses, on a self-assessment basis home owners are free to take this into account when they are submitting a valuation for their local property tax.

On the valuation, the problem is there is no band that includes zero. The band goes from zero to €100,000.

Yes, but most properties would have some value.

Some of these properties would be unsellable because they would not have a sale value. If they contain defective blocks, they literally are unsafe and will not last. Who in their right minds would buy them?

I cannot really have a constructive conversation with the Deputy in this regard-----

I understand and appreciate that.

-----because I am relying on the speaking note provided.

Yes, and I am impressed that the Minister anticipated this was an issue I would raise, given I only thought about it myself a few minutes ago.

The Deputy will observe the excellence of my prophetic advisers.

I just said that to see whether I could get the Minister to give a bit more commitment on this matter. The point I am making is that while I am sure the Department is open to meeting the group and so on, would the same principle apply? Without dealing with the specifics, in the case of defective properties for which people do not have recourse - I do not mean somebody who was sold dodgy windows or something like that but a structure that is completely defective - is the Minister open to considering the same principle that applies in respect of pyrite to other cases, not individual cases but systemic cases, in certain regions? Systemic may be the wrong word.

My note states there are particular circumstances attaching to the pyrite problems in hardcore, which made legal recourse particularly difficult for affected home owners to pursue, namely, traceability of the defective material. Most of the houses affected by pyrite heave were located in housing estates in which a number of different builders were involved and the hardcore material may have come from multiple sources. In such circumstances, it was almost impossible for the affected home owners to prove the source of the material, which would be required to pursue a legal action. I am informed that from the information available at this stage, the case in respect of the dwellings affected by structural problems in north County Donegal differs noticeably, in that traceability does not appear to be an issue. However, as I stated, I am simply reading speaking notes I received. I will not give the Deputy a commitment because I do not know enough about the case.

That is fair enough.

A provision was not put into the local property tax legislation to deal with houses that had building defects. There simply was a provision made for houses affected by pyrite because of the difficulties in that regard. However, if the Deputy pursues this with-----

Yes, with Revenue, and I may revert to this issue again.

The Deputy should pursue it with the Department of the Environment, Community and Local Government.

Yes, and with the Department of the Environment, Community and Local Government.

I am not closing the Deputy out and he may come back and discuss it again, either formally or informally.

I thank the Minister for his response to amendment No. 96 on the revaluation of properties for the LPT. I welcome the Minister's intention to examine the operation of the LPT, including the impact of rising property prices on the liability that households face because as matters stand, many people in the greater Dublin area are facing a jump of approximately two bands, which equates to an increase of €180. However, there are two years to go and the Minister intends to conduct a review. I take his point about the need to bring new properties into the net and this will not happen unless there is a new valuation date. While that is one issue that must be taken into account, members will have this debate again.

Amendment, by leave, withdrawn.

Amendment No. 94, in the name of Deputy Pearse Doherty, has been ruled out of order.

Amendment No. 94 not moved.
Amendment No. 95 not moved.

I move amendment No. 96:

In page 119, between lines 24 and 25, to insert the following:

“Amendment of section 13 of the Finance (Local Property Tax) Act 2012

92. The Finance (Local Property Tax) Act 2012 is amended by substituting the following section for section 13—

“13. (1) In this Act the date by reference to which the chargeable value of a relevant residential property is to be established is referred to as the valuation date.

(2) The valuation date in relation to a relevant residential property shall be 1 May 2013.

(3) The Minister may, by order, alter the valuation date referred to in subsection (2).”.”.

Amendment put and declared lost.

I move amendment No. 97:

In page 119, between lines 24 and 25, to insert the following:

“Amendment of Taxes Consolidation Act 1997

92. The Taxes Consolidation Act 1997 is amended by the insertion of a new section after 195A—

“Non residents: certain expense payments

195B. (1)In this section—

‘associated company’ has the same meaning as in section 432; ‘company’ has the same meaning as in section 4 disregarding (a) to (e);‘director’ and ‘employee’ have the meanings respectively assigned to them by section 770(1); ‘relevant meeting’ means a meeting in the State of the board, or a subcommittee thereof, of a company of an associated company.

(2) This section applies to payments made by a company to or on behalf of a director or employee in respect of expenses of travel and subsistence incurred where—

(i) the director or employee is not resident in the State,

(ii) the director or employee travels to the State to attend relevant meetings, and

(iii) the expenses are incurred in connection with the attendance of the individual at relevant meetings.

(3) Payments of expenses to which this section applies shall be disregarded for all the purposes of—

(i) the Income Tax Acts, and

(ii) the Social Welfare Acts.”.”.

This issue was brought to my attention by tax practitioners and I would be interested to hear the Minister's response to it. The point being made to me is that, for example, if a company in Ireland appoints an overseas director, who flies into Ireland several times a year for board meetings, the Revenue's current position is that the director's flight and hotel costs are a benefit in kind and he or she ought to be subject to income tax on that. In contrast, if European civil servants come to Ireland for a meeting with the Department of Finance, they would not pay BIK, so there is inequality of treatment with businesses seeking to avail of overseas expertise to improve their firm. Although Revenue claims this has always been its view, many industries have had specific rulings from Revenue to the contrary. It is an interesting question. Should a director of a company here, who is living abroad and travelling to and fro, be subject to BIK on costs which were incurred necessarily in order to attend meetings here?

Section 114 of the Taxes Consolidation Act 1997 provides for a tax deduction solely in respect of expenses of travel necessarily incurred in the performance of the duties of an office or employment. In general terms, this means that travel expenses incurred by an employee or office holder travelling to or from work do not qualify for a tax deduction and, where an employer pays or reimburses such expenses, they are taxable.

In the case of an executive director or employee, this means that travel expenses incurred travelling from his or her normal place of work to attend board meetings will generally qualify for a tax deduction and an employer may pay or reimburse such expenses free of tax. The reason for this is that the director or employee is travelling from his or her normal place of work to another work location and is travelling “in the performance of” his or her duties.

However, in the case of a director living outside the State who has no executive or other duties within a company, travel expenses incurred travelling to attend board meetings in the State do not qualify for a tax deduction and where an employer pays or reimburses such expenses, they are taxable. The reason for this is that the director is merely travelling to work. It is important to distinguish between individuals who have executive functions in a company and those who do not. In the case of the former, there is no issue in relation to the taxation of travel expenses. In the case of non-executive directors, I am conscious of the need for companies to maximise the range of skills, experience and independence on their boards. This is important for a number of reasons, not least in the interests of good corporate governance.

While I do not propose to accept the Deputy’s amendment, and this is an issue that has already been raised with my Department recently, I understand the Revenue Commissioners will commence a broad review of the tax treatment of travel expenses in early 2015. As part of this review, they will look at the tax treatment of travel expenses incurred by non-executive directors in travelling to attend board meetings, including expenses incurred by those who travel from outside the State. The review will take account of the longstanding principles governing the taxation of travel expenses, existing guidance issued by the Revenue Commissioners and the need to re-examine such principles and guidance to ensure consistency of treatment as between taxpayers. The review will also have regard to implications for the Exchequer. Consultation with stakeholders will also form part of the review.

I welcome that because my understanding is that Ireland is an outlier in its treatment of this issue. That is something the Revenue can check. It strikes me as odd that a non-executive director who, of necessity, travels in and out of Ireland to attend meetings and who is reimbursed for the cost of that travel, is then taxed by the Irish Revenue on the amounts that have been reimbursed. The net effect of it is that the non-executive director incurs a cost by virtue of performing his or her duties. It is an issue for some companies which are seeking to attract high-calibre people who are based abroad to act as non-executive directors and provide their expertise to businesses here. It is an issue that should be examined and I welcome the fact that Revenue will look at it as part of the broader review.

There are anomalies as well. There could be a difference of tax treatment for a person travelling from Belfast compared to a person travelling from Cork to Dublin, one being outside the jurisdiction.

That is a bigger debate, which we could start, but I think I got my point across.

Amendment, by leave, withdrawn.
Sections 92 and 93 agreed to.
Schedules 1 and 2 agreed to.
SCHEDULE 3

I move amendment No. 98:

In page 124, between lines 17 and 18, to insert the following:

“6. Section 21 of the Finance Act 2013 is amended in subsection (1)(m) by deleting “(c),”.”.

Amendment agreed to.

I move amendment No. 99:

In page 124, line 20, to delete “paragraphs 1, 4 and 5” and substitute “paragraphs 1, 4, 5 and 6”.

Amendment agreed to.
Schedule 3, as amended, agreed to.
Schedule 4 agreed to.
TITLE
Question proposed: "That the Title be the Title to the Bill."

When is a consolidated Bill expected?

A taxes consolidation Bill.

There are no specific plans at the moment.

Was 1997 the last?

It is an issue to be looked at. When things calm down-----

I thought things were very-----

We have just entered the calm period. We want to check the depth of the water-----

The Minister will know all about calm on 10 December. The calm before the storm.

Question put and agreed to.

As the proceedings on amendments Nos. 73 to 79 have concluded, the postponed division on section 79 will now be taken. As there are fewer than nine members present, under Standing Orders we are obliged to wait eight minutes or until a full membership is present before proceeding to take the division.

Question put: "That section 79, as amended, stand part of the Bill."
The Committee divided: Tá, 7; Níl, 3.

  • Conway, Ciara.
  • Farrell, Alan.
  • Lynch, Ciarán.
  • Noonan, Michael.
  • O'Donnell, Kieran.
  • Twomey, Liam.
  • Walsh, Brian.

Níl

  • Boyd Barrett, Richard.
  • Doherty, Pearse.
  • McGrath, Michael.
Question declared carried.

I thank all the Deputies who participated in this debate and, in particular, the spokespersons for the groups and the parties. It is great to be finished and have it done thoroughly. I thank also the Chairman and his officials.

I thank the Minister, and his officials and also the Minister of State, Deputy Simon Harris, for giving a detailed briefing. I thank the members for their co-operation with the committee and the officials.

I thank the Minister, the Minister of State and, in particular, the officials for the briefings. To reiterate at this late stage on the passing of Committee Stage - I can only speak for my party and myself - we hope next year will be different in terms of earlier briefings and explanatory notes being provided prior to amendments being submitted. A number of issues were raised on Committee Stage which, hopefully, we can address by this time next year.

Go mbeirfimid beo ag an am seo arís.

I thank the new Chairman of the committee for his excellent chairing.

Not too much praise of the Chairman.

I thank also all the officials for their work. Notwithstanding the fact that we disagree on quite a number of issues, I thank the Minister for his succinct and sometimes witty defence of the Finance Bill.

I echo all the points that have been made. I thank the Minister, the Minister of State and the officials. The one point that stands out for me is in respect of the amendments from the Government side. It would be helpful if we could have an explanation of those in advance. There was one example today, which I highlighted, where 24 amendments, many of which were technical, were grouped. They involved eight pages of amendments without any advance explanation on them. I did not attend the briefing given by the officials because it took place on the morning of the deadline for submission of amendments and we were still working on them so it was not as valuable as it could have been.

Bill reported with amendments.
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