Finance Bill 2015: Committee Stage (Resumed)

Before we resume, the Minister of State wishes to make a brief statement.

As long as it is not ideological.

Not yet.

The Minister for Finance intends to bring forward an amendment on Report Stage to provide for an increased deduction for certain landlords when calculating rental profits. The deduction will increase from 75% to 100% in respect of interest paid on qualifying loans for landlords who commit to providing rental properties to social housing tenants for a minimum period of three years.

Sections 28 and 29 agreed to.

Amendments Nos. 43 to 60, inclusive, are related and will be discussed together by agreement.

I move amendment No. 43:

In page 43, between lines 3 and 4, to insert the following:

“ ‘Member State’ has the same meaning as ‘relevant Member State’ has in section 766;”.

Most of these amendments are technical in nature with the purpose of correcting minor drafting errors and ensuring the legislation that implements the knowledge development box, KDB, operates as intended.

The main substantive amendment is amendment No. 49, which extends the amount of time that a company has to make a claim for the KDB relief. As initiated, the legislation provides that a company has to make a claim for relief within 12 months of the end of the accounting period. However, I am now extending the period to 24 months to recognise that the KDB is a new tax incentive, there are significant documentation requirements that must be met before any claim is made, and that it will take time for taxpayers to become familiar with its operation. This will provide some additional flexibility and allow taxpayers to respond to the requirements of the KDB, in particular those that relate to the documentation that is required support a claim.

Amendment No. 43 clarifies the definition of member state used for the purpose of the KDB refers to the EU and EEA regions, not just the EU as per the original legislation. Amendment No. 44 is a technical amendment correcting the reference to the appropriate section of the Patents Act 1992. Amendment No. 45 clarifies the criteria that should be applied by an agent for the purposes of certifying patents that are not subject to an examination for novelty and inventive step. This is aligned to the standard criteria for examined patents.

Amendment No. 46 makes it clear that all qualifying research and development expenditure that leads to the development of a qualifying asset may be included in the KDB computation. This will ensure that even unsuccessful research and development may be included, so long as it sought to resolve the uncertainty that the ultimately developed qualifying asset resolves. Amendment No. 47 clarifies that an amount of research and development expenditure does not have to be excluded for the purposes of the KDB computation simply because such expenditure is capitalised only for accounting purposes. At present, the legislation already provides for this to be included in respect of intangible assets, for example a business process or know-how. This change will ensure it may also be included for tangible assets, for example aspects of a piece of equipment protected by a patent.

Amendments Nos. 48 and 51 are technical amendments which are necessary to remove a circular calculation, thereby ensuring the KDB computation works. Amendment No. 49 provides a claim must be made within 24 months, rather than within 12 months. Amendments Nos. 50 and 52 are technical and are necessary to clarify that the obligations to keep records and documentation as set out in section 769I and 769L apply only to a company that claims the KDB relief. Amendments Nos. 53 to 58, inclusive, are technical amendments to delete a superfluous subsection in section 769O and amend all consequential references within that section.

Amendments Nos. 59 and 60 are necessary to clarify that the criteria which apply to the additional category of assets for small companies are within both the OECD rules, but also the EU state aid rules. This follows the definition of a micro, small or medium-sized enterprise as set out in the Commission's Recommendation 2003/361/EC of 6 May 2003. Specifically, this change will clarify that to qualify for the additional category of assets, the Irish taxpayer must have less than €7.5 million of income from all intellectual property per annum; employ less than 250 people; have a balance sheet of less than €43 million; and have a global annual turnover of less than €50 million. If the Irish entity is a member of a group of companies, then this turnover requirement applies to not just the stand-alone Irish company but to the whole global group.

I commend these amendments.

Amendment agreed to.

I move amendment No. 44:

In page 44, line 5, to delete “section 105” and substitute “section 106”.

Amendment agreed to.

I move amendment No. 45:

In page 44, line 6, after “criteria,” to insert “in that the invention is susceptible of industrial application, new and involves an inventive step,”.

Amendment agreed to.

I move amendment No. 46:

In page 44, lines 21 and 22, to delete “on the qualifying asset, in relation to a company,” and substitute “in relation to the qualifying asset, in respect of a company,”.

Amendment agreed to.

I move amendment No. 47:

In page 44, line 31, to delete “intangible”.

Amendment agreed to.

I move amendment No. 48:

In page 46, line 33, after “asset” to insert “before taking account of any allowance available under subsection (5)”.

Amendment agreed to.

I move amendment No. 49:

In page 46, line 40, to delete “12 months” and substitute “24 months”.

Amendment agreed to.

I move amendment No. 50:

In page 47, line 8, to delete “relevant company” and substitute “relevant company, which has made a claim under this section,”.

Amendment agreed to.

I move amendment No. 51:

In page 47, lines 36 and 37, to delete “profits, calculated as if this Chapter did not apply,” and substitute “profits”.

Amendment agreed to.

I move amendment No. 52:

In page 49, lines 25 and 26, to delete “to which this Chapter applies” and substitute “in respect of which a claim was made under section 769I(2)”.

Amendment agreed to.

I move amendment No. 53:

In page 51, to delete lines 38 to 41, and in page 52, to delete lines 1 to 3.

Amendment agreed to.

I move amendment No. 54:

In page 52, line 4, to delete “(2) Subject to subsection (5)” and substitute “769O. (1) Subject to subsection (4)”.

Amendment agreed to.

I move amendment No. 55:

In page 52, line 24, to delete “(3) Subject to subsection (5)” and substitute “(2) Subject to subsection (4)”.

Amendment agreed to.

I move amendment No. 56:

In page 52, line 36, to delete “(4) A relevant company” and substitute “(3) A relevant company”.

Amendment agreed to.

I move amendment No. 57:

In page 52, line 41, to delete “(5) Where” and substitute “(4) Where”.

Amendment agreed to.

I move amendment No. 58:

In page 53, line 5, to delete “subsections (2) and (3)” and substitute “subsections (1) and (2)”.

Amendment agreed to.

I move amendment No. 59

In page 54, line 38, to delete “and”.

Amendment agreed to.

I move amendment No. 60:

In page 54, to delete lines 39 and 40, and in page 55, to delete line 1 and substitute the following:

“(ii) where that company is a member of a group, the group has turnover not in excess of the turnover threshold amount, and

(iii) the company is a micro, small or medium-sized enterprise within the meaning of the Annex to Commission Recommendation 2003/361/EC of 6 May 20031 concerning the definition of micro, small and medium-sized enterprises.”.

Amendment agreed to.
Question proposed: "That section 30, as amended, stand part of the Bill."

This is a very important section, dealing as it does with the issue of foreign direct investment, corporation tax and the Government's efforts to reduce the potential exposure to tax for companies in the future. One of the problems with the economy we have created in this State is its over-reliance on foreign direct investment. There is an inherent imbalance within the Irish economy at the moment, with 90% of exports coming from FDI companies, for example, rather than indigenous business. Any imbalance will cause exposure and will make us susceptible to shocks in the future, whether they be shocks in the context of base erosion and profit shifting, BEPS, taxation, exchange rates or the competitive realities of emerging markets. Foreign direct investment is very mobile in comparison to indigenous business and therefore it is far easier for it to go elsewhere. Indigenous business does not have the same level of mobility. Typically the attraction of FDI companies is used by emerging economies as a strategy to grow their own indigenous sectors in the longer run. The attraction of such companies is very seldom an objective in its own right but Ireland has not been able, so far, to strike a balance between the two. Of course, FDI must be welcomed and every job that can be created in times of difficulty must be supported but the current imbalance must be addressed.

This Government has been dragged, kicking and screaming, into changing the taxation environment for FDI companies. Sinn Féin has long been calling on the Government to resolve the so-called double-Irish problem and the various loopholes that were in existence which allowed companies to pay very low effective rates of tax. This year I attended a committee meeting addressed by the chief economist of the Department of Finance and have tabled parliamentary questions to the Minister on this issue but there seems to be confusion around the fact that corporation tax receipts are so far ahead of profile this year in comparison to other years. The trading environment and exchange rates have been suggested as reasons for this but there is a large body of opinion that holds that corporation tax is so far ahead of profile this year because some companies are locating their profit generation base for tax and accounting purposes in Ireland which has resulted in a ballooning of the corporation tax take here. If that is the case, it means we have lost the opportunity which existed for the last four or five years and the State has lost out on those funds because of this Government's reticence to become up to date with international best practice on taxation.

My worry is that the knowledge development box is simply another method by which the Government is seeking to ensure that we maintain a competitive advantage through our corporation taxes. Foreign direct investors will tell one that they want to make a profit. The infrastructure of profit for any business is based on having access to customers, low input costs and a skilled workforce. The availability of most of those components is falling in this country because we are reducing our investment in education and infrastructure and therefore, our competitive advantage is our bargain basement corporation tax rate. We are putting all of our competitive eggs into one basket and making it difficult for ourselves to broaden out and re-balance the economy in the future. I am concerned that the knowledge development box is simply another way of going down this route.

I understand that the knowledge development box is designed to replicate the patent box which has been introduced in other countries. Will the income generated from products developed from patents or intellectual property be identified as income under the knowledge development box structure? Will it cover not just the sale of intellectual property or a patent but also the sale of a product developed from same? The cost analysis from the Government indicates that it will cost about €50 million but I ask the Minister of State to outline how this was calculated. My understanding is that this can only be calculated by determining the income to the State if the effective corporation tax was 12.5%, then determining the percentage of profits made by FDI companies which would be booked under the knowledge box and working out the difference. If that is the case, we have to be talking about billions of euro in costs to the State.

Much of the work being done by FDI companies at the moment is contract work which leaves employees in a precarious position. Does the Minister of State know what percentage of the employment created by FDI companies is contract based as opposed to direct labour?

We are probably both proud of the fact that we have a very different perspective on this section of the Finance Bill, in terms of our views on the knowledge development box. It is not fair to say that the Minister was dragged, kicking and screaming anywhere in the context of his approach to ensuring that this country promotes best practice when it comes to taxation and plays a prominent, leadership role within the OECD's BEPS discussions. The Deputy does not have to take my word for that because there is evidence in last year's Finance Bill to back it up. The Minister abolished the so-called double-Irish in that legislation which gave this country a first-mover advantage and sent out a very powerful message to investors about certainty and to the OECD that this country wants to play a constructive role and encourages others to do likewise. Now we have arrived at the point where we have the OECD BEPS process in place. I also do not accept the Deputy's suggestion that there is an over-reliance on FDI. If one looks at the job creation figures, which I do not have to hand unfortunately, one will see that the majority of new jobs in the Irish economy have been created by indigenous Irish companies.

We must be very clear that the knowledge development box is not just an incentive for FDI companies. It is also an incentive for indigenous Irish companies, startups and young companies in this country to develop, innovate and research here. If we do not put such measures in place here we will make Ireland a less attractive location compared to competitor jurisdictions in terms of encouraging companies to innovate, research, develop and register patents. The Minister for Finance mentioned during the Second Stage debate on the Finance Bill that it is quite likely because of the operation of the OECD modified nexus that the knowledge development box will be of most benefit to single companies which carry out their research and development activities in Ireland. We would be very happy to see smaller Irish indigenous business availing of this relief and we expect, certainly in the initial years, that to be the case.

On the issue of corporation tax, the Deputy said there is much speculation as to why we have seen a spike in corporation tax receipts.

Rather than speculating I am following the advice of the Revenue Commissioners on this. Revenue has advised the Minister and the Department of Finance that the increase is attributable to, among other things, improved trading conditions and the positive currency fluctuations. The Deputy's point that we do need to continue to monitor it is a fair one.

On the cost, my understanding is that the cost for 2016 is estimated to be €31 million. The Deputy is correct that it will be €50 million in a full year. That is based on a reasonable assumption of a 50% uptake. The legislation provides that the knowledge development box, KDB, will arise in respect of accounting periods commencing on or after 1 January 2016. This cost for 2016 can be further refined to €31 million on the basis of the payment dates for preliminary tax which fall due in 2016.

The payment dates for preliminary tax, such that it will be €31 million next year but it would be €50 million in a full year. How we are arriving at the figure in terms of the expected cost is an important question. The annual cost of the knowledge development box in terms of tax foregone from 2016 forward has been estimated. This focused on companies who up until this year had corporate profits that were taxable in Ireland at the standard 12.5% corporation tax rate and who from 2016 may have profits that are taxable at the KDB rate of 6.25%. On the basis of the analysis carried out in the 2013 review of the research and development, R&D, tax credit the majority of Irish firms who undertake R&D in Ireland are claiming the R&D tax credit so it is assumed that companies who would be able to qualify for the knowledge development box rate are captured by this data, which are reported by the Revenue Commissioners in the corporation tax, CT, returns.

On the basis of the most recent data available, the Revenue Commissioners has advised that in 2013, the total CT liability of all such firms was €1.4 billion. This is the outer limit of tax that could be reduced by the KDB rate. In reality, the number of companies who will be able to immediately avail of the KDB will be much lower as only the proportion of income that is attributable to qualifying assets such as patents or copyright qualify. Unfortunately, no data in that regard are collected by the Revenue Commissioners. The amount of income that could qualify for the KDB rate is the proportion of expenditure on qualifying R&D in Ireland over the total amount of worldwide R&D that was carried out to generate the intellectual property, IP, assets. That is how we have arrived at the cost.

I was struck by the point made by Deputy Tóibín's colleague, Deputy Pearse Doherty, during the debate on last year's Finance Bill and in other discussions, which I think is a fair point, that sometimes in a finance Bill it is worth taking a chance on trying an idea that could result in more R&D, more innovation and substance-based R&D. With this knowledge development box we now have the first OECD-compliant box in the world. While other countries and other competitor jurisdictions will have to adapt, amend and improve their offering to ensure they comply, Ireland will not because - this refers back to the kicking and screaming comments made earlier - rather than rushing to do things the Minister used the period between the last budget, in which he made the announcement about the knowledge development box, and this budget to ensure we have in place a box that is reputationally sound and in accordance with the new OECD figures.

With regard to the kicking and screaming comments, Ireland's reputation was on the floor with regard to its corporation tax issues. It was at the heart of discussions of Congress investigations in the United States. I recall that when the Taoiseach was in California the Governor of California made a joke about Ireland's tax regulations in front of him. Internationally we have a poor reputation with regard to tax. That has a material cost as well.

There has been some talk about the knowledge development box being considered by the EU to be state aid. Perhaps the Minister of State would indicate whether there have been discussions in that regard with the EU, such that there is no confusion in that regard. Am I correct that the Minister of State said that there is a potential €1.4 billion cost in relation to this?

No. In 2013, the total corporation tax liability of all six firms was €1.4 billion. That figure relates to the outer limit of tax that could be reduced by the KDB rate.

The Minister of State also mentioned in the context of our discussion about the imbalance in the economy that many of the jobs being created are in the indigenous economy. There is no doubt but that job creation in foreign directive investment, FDI, is totally out of kilter with regard to exports from foreign direct investment. In other words, foreign direct investment has an enormous capacity to book profits in Ireland at extremely low employment growth rates, which indicates that first, these are very weak areas with regard to jobs per euro exported and second that a lot of the booking of profits here is for taxation purposes rather than manufacturing. I have yet to meet anyone in Irish business - I have spoken to a few such people - who believes the business will benefit from this measure. Is it the sale of the patent or the intellectual property or the sale of the manufactured goods that relates to that patent or intellectual property here that is captured? If it is the latter, then the ability of this technique to reduce taxation exposure will be far higher.

On the latter point, the qualifying income is the trading income that is derived from the qualifying assets. This includes royalties that are attributable to the assets and sales income. Any income that results from a disposal of the qualifying assets, such as the patent, will remain subject to the capital gains tax, CGT, rate. Chargeable gains are not subject to the KDB rate. It is the trading income derived from the qualifying assets that is captured.

So drugs produced under a new patent would be included?

The scope is far larger then than I expected.

When a company sells a product that derives some of its value from intellectual property, IP, but is not in itself IP then it will be able to avail of the KDB in relation to those products. The legislation provides that where any amount of the sales price of a product or service is attributable to one of the qualifying assets, namely, a patent, a copyright, a software or a third category of assets, then the portion of the income can qualify for KDB treatment.

That means that the measuring of the processes within these facilities will be key. A cynic would say that if a drug is produced by way of a particular method and that process is altered somewhat then that is innovative because it has changed the process of manufacture of that drug. It may simply be the case that one ingredient has been introduced after another ingredient and so on. How can we be sure that what we are looking at is innovation or R&D that is of value to the State? The Minister of State said that this process is such that we will be able to identify the components within a product that fall under the KDB and so on. Given there are potentially billions of euro involved in this there will be a huge incentive for foreign direct investment to play the game to a certain extent.

On the issue of state aid and the EU, which is an issue previously raised by Deputy Michael McGrath, the KDB complies with the modified nexus standard which was agreed with the OECD as part of the base erosion and profit shifting, BEPS, process. The EU code of conduct has approved and adopted the modified nexus standard. Clearly, the tax sovereignty of a member state is a member state competency within the European Union. As we have adhered to the modified nexus rules and the KDB as a general measure that is available to all Irish corporate taxpayers the KDB does not require any specific approval by the EU, such that approval by the European Commission under state aid rules is not required. However, as I said, the EU code of conduct has approved and adopted the new modified nexus approach, which the OECD base erosion and profit shifting, BEPS, process has also identified.

The point made by Deputy Tóibín in terms of what qualifies and how we can ensure we are getting real value for money is a valid one. The whole idea of the KDB is to encourage R&D in Ireland.

Business processes do not qualify. It would have to qualify to be registered as a patent or for copyright. The business process the Deputy outlined at the start in his useful example would not qualify. It has to be something that is patentable or copyrightable. Therefore, business processes would not qualify.

I am utterly opposed to the knowledge development box. I do not accept the Minister of State's assurances that this is not just replacing the double Irish tax scam with a new tax scam. I think that is exactly what the Government is doing. Having been exposed very badly with the double Irish, the Government in collusion with the multinationals has engineered a new tax scam, which is the knowledge box. This is borne out by the fact that on a number of occasions the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, has had meetings with the US multinationals, and he has openly acknowledged that he has discussed this in detail with them. From his most recent meeting in October he reported very positive feedback from the multinationals. I am quite sure there is very positive feedback from them because, as we know from an abundance of evidence, they are keen to pay as little tax as they possibly can on their absolutely extraordinary profits. In recent years we have allowed them to evade an extraordinary amount of tax under the double Irish mechanism.

I do not believe the Government or the Revenue Commissioners did not know of the abuse that was going on. That applies to the previous Government and the current one. I made a point on Second Stage and I will expand on it here, as I have a little more time now. The Department of Finance's technical paper on the effective corporate tax rate contains a table produced by Revenue, table 3.25, on corporation tax distribution statistics. There are the gross trading profits figures and then the allowances are taken out. There is net trading income, other income and then total income. It is amazing that in 2007, total income was €63 billion after the allowances were taken out. The deductions in that year were €6 billion, so the taxable income was €56 billion. To be clear, those deductions include trade charges, which was the main mechanism through which the big multinationals wrote down their tax liability. One subsidiary of a company would charge another subsidiary of the same company for the cost of using its intellectual property or patents. They effectively wrote off most of their profits by charging it to intellectual property. In 2007, €6 billion was written off, mostly under the heading of trade charges by the big multinationals. Two years later that figure jumped from €6 billion to €19 billion, which is a factor of three. If I were in Revenue or in the Government of the day, I would be asking, "What the hell is going on here? Has the cost of intellectual property jumped by that much?". The total trading profits were not that different; in fact they were less.

We are discussing the knowledge development box.

This is about the knowledge development box.

The Deputy should tighten it up a bit now. We are on corporation tax.

Are we still on table 3.25?

Yes. We need to go into this detail to establish whether the knowledge development box will prevent the sort of tax evasion or the aggressive tax avoidance of the past. If this committee serves any purpose, it needs to go into this detail.

The gross trading profits in 2007 were actually €10 billion more than they were in 2009, but the amount written off jumped by 200%. Therefore, the taxable income went from €56 billion in 2007 to only €37 billion in 2009. This is blatant tax avoidance using intellectual property. As I pointed out to the sub-committee dealing with this, I did not fully understand how this worked until I got an e-mail from an anonymous whistleblower who worked in one of these companies, who explained very simply how they did it. He said they would just adjust the amount they charged to royalties or intellectual property according to what profit margin they wanted. They could literally decide what profits they wanted to make. That is how they were operating. There have been these absolutely unbelievable increases in the amount they are writing off, and are allowed to write off, under the old scheme.

The first thing to say is that the Government has not got rid of the double Irish, the mechanism through which they have done this; it is being phased out. The Government has given them the time. The companies that have been doing this will continue to be able to do it for the next few years until they acquaint themselves with the knowledge box.

In response to Deputy Tóibín, the Minister of State said he did not anticipate that much uptake in the first year. They do not need to do it in the first year because they will continue with the double Irish, but they will slowly acclimatise themselves to the knowledge box. Given that this is how they engaged in blatant tax avoidance in recent years, what assurances can the Minister of State give us that the knowledge box is not just the same thing? It all turns on the question of the value a company can assign to patents and intellectual property.

The Minister of State has just made the really big admission that the sales that derive from the qualifying intellectual property will be able to benefit from the knowledge development box tax break. There it is. All they have to do is make the very slightest adjustment to the intellectual property. Deputy Tóibín spoke about medicines and stuff. Making small changes in medicines can actually result in big changes. It is not medicines that we need to worry about here. These are the tiniest cosmetic changes, or they could appear to be significant changes but actually be cosmetic changes. We know the companies involved: the big IT companies, including Google and Facebook. They can make cosmetic changes. They might even appear to be significant changes, but they are not significant because they are always upgrading the stuff, with new versions of this, that and the other happening every few weeks. It is really just variations on basic themes.

However, those variations will then be constituted as new intellectual property, with new patents associated with them, and all sales deriving from those products will be written off for tax purposes. The Government has given them six years to refine this measure, just in case there are any difficulties, because we know the Government is under pressure from certain voices in Parliament, but, more importantly, it is under pressure internationally on this matter. The Minister is clearly having lots of consultations with the multinationals and they are being given a six-year phase-in period to refine how they can fully exploit this new tax loophole.

It is important to understand just how much we are losing. We are in an extraordinary position in which the Government does not want a possible €19 billion from one company alone. That is the upper estimate of what Apple would have to pay us back if it were to pay back the tax that it appears it should have paid to us.

That is way out. The Deputy is speculating. No decision has been made on anything. I enjoy wide-ranging discussions, but it is going a bit far to speculate on the outcome of a European Commission ruling.

It is not speculation.

It is speculation, as no decision has been made.

I ask Deputy Boyd Barrett to stick to the Finance Bill.

I am dealing with the Bill. We need to understand what is at stake.

The Deputy should stick to the Bill and not talk about Apple.

Estimates have been put on the amount of tax Apple would have to pay back in the event of an adverse ruling. The signals are that the European Commission believes we engaged in state aid in making special deals with companies such as Apple in order for them to avoid paying tax. I believe that to be the case, as do many others. That is why there is an investigation. The upper estimates of how much tax was forgone in respect of one company suggest it could be as much as €19 billion. We are in an extraordinary situation in which the Government does not want that money. If I were the Minister of State I would be chasing that money, but he is sitting back and saying "We will see what happens," and "There is nothing to see here," when we could be talking about as much as €19 billion.

Let us look at the serious estimates of the effective tax rates. The Government refers to a figure of an effective rate of 10.9%, which is laughable, because it is after the deductions to which I referred, namely, trade and charges, which is how companies write down their taxable income. Any serious analysis of the profits being made by those companies would start with their gross trading profits at least, if not their total income. Then one gets a very different picture. One gets an effective tax rate of approximately 6.2%, which roughly coincides with EUROSTAT’s estimate. EUROSTAT's estimate of our effective tax rate is 5.9% for 2012. As we know, the United States Congress estimated that the companies that are in the eye of this storm, the big players, are paying a rate of 2.2%. Every time figures about their profits or revenues come out, that is borne out. We had the extraordinary revelation recently that Google made €18 billion in revenue last year and paid €28.6 million in tax. I calculate that rate to be less than 1%. That is what is going on. Everybody knows it. I believe the Government knows it and that Revenue is aware of it, but it is being actively facilitated. The knowledge development box is the new mechanism to facilitate the process. I am sure the Minister of State will try to tell me that is not true.

But I do not believe him.

First, the Deputy approaches this debate from an interesting perspective, whereby he does not seem to think the tax rates and toolkits we have, and the various incentives and initiatives that successive Governments in this country have put in place over a lengthy period, which has been part of the success of our industrial policy, matter in terms of creating jobs and substance and therefore that we should just wind down the Department of Finance and it should effectively be some sort of Robin Hood system whereby one takes in a bit of tax and one gives it out.

Robin Hood would be very good.

That is not the way the world works. That is the Deputy’s ideology and I respect that, but it is not how the world works. In Deputy Boyd Barrett’s constituency there are thousands of people, in Cherrywood and other areas, employed by multinational companies. They are in well paid jobs. They pay tax to this country and make a living for their families and therefore they contribute to the economy and to society. The idea that the initiatives put in place by the Government, previous Governments, and presumably successive Governments to try to keep this jurisdiction competitive do not have any bearing on those job creation figures and that it is all just incidental does not stand up to any degree of scrutiny.

It was very interesting when Deputy Boyd Barrett said that - shock, horror - the Minister for Jobs, Enterprise and Innovation had met with the multinationals. Shock, horror - the Minister for Jobs, Enterprise and Innovation interacts with businesses to try to create more jobs. I will let Deputy Boyd Barrett into a little secret: yesterday I met a multinational company in Cork and I talked to those involved and asked what we are doing well in this country in terms of attracting investment, what made the company decide to locate in Cork, how many jobs it had created and whether it was likely to create more. That is the sort of engagement we have. Expressing shock and horror at Ministers with economic portfolios engaging with the business community is the equivalent of condemning the Minister for Agriculture, Food and the Marine for meeting with the IFA. That is what we are meant to do. That is what we are duty-bound to do, and should we choose not to have those engagements we should not be in government. Nobody who has that attitude should be.

I have too much respect for Deputy Boyd Barrett’s intellect to believe he genuinely believes that the knowledge development box is the double Irish by another name, because it simply is not. Deputy Boyd Barrett knows it is not. First, when he says this country got caught in relation to the double Irish, let us be very clear in terms of setting the record straight. No Government of any hue ever sat down in any office in Dublin or any other part of this country and designed the double Irish. The double Irish was an anomaly devised, I presume, by international tax lawyers to enable companies to pay less tax, and we have ended it. Deputy Boyd Barrett is right that we are phasing it out. That is factually correct. The double Irish was never part of the Irish tax offer. It was never something designed by the Government or by any previous Government. It is just one of a number of examples of international tax planning arrangements which were designed and developed by tax and legal experts to take advantage of what could best be described as mismatches between tax rules in two or more countries. That is why the OECD's BEPS process and countries working together on a global level is the only way to address such issues.

In contrast to the double Irish, which was to do with tax residency rules, the knowledge development box is about substance. It is about recognising that there are companies today in this country and right around the world – and even more in the future – that will spend a significant amount of their time, energy and resources in research and development and trying to come up with novel ways of doing things. It is a policy choice. As a country we must decide whether we want that to happen in Ireland - if we want Irish companies to be innovative and to invest time, energy and resources in developing new products that could make significant positive differences in society and the economy. Ultimately, we must consider whether we want foreign companies that are making decisions on where to carry out that research and development to decide to invest and create jobs in Ireland, or whether we should just sit on our hands and allow those jobs and investments to go elsewhere. We have made our policy decision. It is one that is internationally recognised as having merit in terms of investment in growth, and that is the reason OECD economies are increasingly driven by knowledge-based development. It is also the reason the new rules and the new modified nexus recognises the opportunities such boxes provide.

Deputy Boyd Barrett also made the point that if there was a tiny change to a product, it would still qualify the company to use the arrangement. The point I was trying to make earlier is that if there was a tiny change there would be a tiny benefit. The benefit is proportionate to the qualifying asset - the amount that was invested in the change. I wish to make that clear as well.

The Deputy also asked whether companies that used the double Irish could not just use the knowledge development box instead. The non-resident company that formed part of the double Irish structure typically owned highly valuable intellectual property which was tax-resident in a zero-tax jurisdiction.

The substantial research and development activity that led to the development of such intellectual property has typically already been developed, often in the United States. Following the rules agreed to by the OECD, to which we are referring as the modified nexus, the box has been designed in such a way that the 6.25% rate should only apply to profits that are the result of substantive research and development carried out in Ireland. In essence, this means that if a country earns 50% from its research and development that led to the development of an asset in Ireland, 50% of the income arising from that asset will qualify for the KDB rate. It is good that we are aspiring to have that research and development carried out in this country as it will benefit our constituents and the economy, but I take the point that the Deputy and I will not agree on it.

The Deputy also raised the issue of transfer pricing and royalties. Differences can, obviously, arise in the legal and tax systems between countries, an issue we have discussed. International tax planning takes account of these differences in national systems and rules. From an Irish perspective, the profits arising here are taxed at the appropriate rate. The Taxes Consolidation Act 1997 requires that a company's trading profits be computed in accordance with generally accepted accounting practice, subject to any adjustment required by tax law. In computing such profits expenses incurred wholly and exclusively for the purpose of trade, including royalties and licence fees paid for the use of intellectual property, are deductible. The tax code contains transfer pricing rules that apply the OECD's arm's length pricing principles to trading transactions between associated companies. This ensures the profits chargeable to corporation tax in Ireland fully reflect the functions, assets and risks located here by a multinational group.

What companies do outside Ireland is beyond the scope of the Irish tax system. That is the reason we have been having discussions at OECD level for the past few years. We cannot conclusively determine the effective rate of tax paid under international tax structures by reference to the taxation paid in Ireland alone. However, we are continuing to work with international bodies to ensure there is fair play on the international stage. That is what the OECD process is about. Regardless of how long I speak, I doubt that the Deputy and I will agree on this issue, but that is the explanation of my position and that of the Government.

What is the expectation for the additional research and development activity this will generate over time? The Minister of State has put a cost on the introduction of the knowledge development box of €50 million in a full year, which presumably means that some of the profits currently taxed at 12.5% will be taxed at 6.25% when the knowledge development box is implemented. For me, the real value of having a knowledge development box is that is generates additional investment, additional research and development related activity and, ultimately, additional employment and corporation tax revenue. That must be the objective and the ultimate measure of whether this will work. There should not be a cost to the State by way of tax forgone in net terms in the introduction of a knowledge development box. The purpose is not just to change the basis on which certain profits are taxed from one rate to another, as that would not achieve the overall purpose.

What the Minister of State said about the European Union was interesting. It does not require separate approval from the European Union because it meets the OECD standard. However, that does not mean that the European Union will not at some stage initiate a probe, as it is entitled to do and as it did in the case of the United Kingdom's patent box some time ago. Will the Minister of State clarify where this places Ireland in terms of its attractiveness as a location for research and development related activity? Our rate of 6.25% is lower than the 10% rate in the United Kingdom. Are there other countries in Europe that offer similar rates? Where do we rank in the European Union, in particular?

On what Deputy Richard Boyd Barrett said, the key issue in terms of profit shifting, undoubtedly, relates to transfer pricing, royalty payments and moving profits from one jurisdiction to another. As long as there are so-called Crown dependencies and overseas territories of the United Kingdom such as Bermuda, the Cayman Islands and the Virgin Islands which charge no corporation tax, companies will do what they can to channel profits to these destinations. The way to deal with that issue is through international co-operation. What we can control here directly are the allowable deductions against trading profits, capital allowances, research and development allowable expenditure, losses forward and so forth. However, we must nail the issue of transfer pricing because profits are being moved from one jurisdiction to another through the transfer pricing mechanism. Ultimately, however, I always make the point that this is about real jobs. Last week Apple announced an additional 1,000 jobs in Cork. When they come on-stream, there will be 6,000 people in Cork city working for Apple, which is truly extraordinary. Ireland cannot be compared with the brass plate operations in Bermuda and the Cayman Islands which are book companies facilitating the transfer of billions of euro to destinations where there is no corporation tax charged. That is what it is about. Until that matter is dealt with collaboratively with other countries on an international basis, we can only get our house in order.

I welcome the introduction of the knowledge development box, but it is right to probe and ask serious questions about it because it should enhance value and revenue. Ultimately, that will be the measure of it.

I agree with Deputy Michael McGrath on this issue. I also agree that the value and benefit of the knowledge development box, KDB, to the economy should be measured in new research and development, additional jobs and investment.

To clarify my earlier comments on the OECD process and the European Union, while the Irish box complies with the OECD BEPS process owing to the modified nexus, that modified nexus has now been adopted in the EU code of conduct. The European Union has given the OECD model the seal of approval, for want of a better phrase, in that regard.

The Deputy asked where this positioned Ireland. That is a key question. As the Deputy knows from engaging with multinational companies in his constituency and nationally, tax is only one element. Companies locate here for a variety of reasons, including our talented workforce, the low turnover and high retention rates of staff, the ease of doing business, infrastructure, connectivity, access to the European Union and being the only English speaking nation in the eurozone. This is another tool in the toolkit. It is just one tool but when one combines it with all of the other parts of Ireland's offering and the roadmap for tax competitiveness, it places us in a strong position.

The Deputy asked if other countries had patent boxes. The United Kingdom, France, the Netherlands, Luxembourg, Belgium, Hungary, Portugal, Spain, Switzerland, Turkey and China have them, but ours is the only such box that is compliant with the OECD modified nexus. As a result, it is highly likely that the boxes in competitor jurisdictions will have to be updated, modified or changed. Luxembourg has announced that it is ending its box. The United Kingdom is now obliged to consult on updating its box and Spain has recently announced details of its updated box. Ireland is well positioned and IDA Ireland and the Government can now state proudly that people can come to this country, carry out research and development and avail of the knowledge development box knowing that it is fully OECD compliant and compliant with the new modified nexus.

The Deputy also asked about new research and development. That is a pertinent question. Anecdotally, we all know that more effort and time are being put into research, development and innovation. One of the hard facts is the increase in the amount being availed of through the research and development tax credit, which dramatically increased from approximately €290 million in 2012 to €430 million in 2013. This shows that an increasing number of companies, including Irish companies, are availing of the tax credit to carry out research and development in this country. We must continue to monitor this closely and ensure we are putting supports in place in order that Ireland can be competitive and proudly invite people to come here as a good location in which to conduct their research and development. We can also tell Irish indigenous companies that they can carry out their research and development here and that the Government and the State will support them.

I do not have a problem with a Minister or the Government consulting anybody. I was referring to the fact that, according to the reports, the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, was discussing the knowledge development box with multinationals and essentially seeking their approval.

He received very positive feedback. There have been many such meetings with key multinationals which are not happy that there is a move internationally to close down tax avoidance schemes, but it is not the job of the Minister for Jobs, Enterprise and Innovation, or any other Minister, to reassure them that we will not go after more of their profits in tax and that is what it sounded like in the reports. It sounded like we were reassuring them. I wish the Government had engaged with the water charges protesters and asked them what they would like in the tax code and how they would like taxes to be levied. If it had, we would have a very different tax system.

The policy of the Government and the previous Fianna Fáil Government is and was to dance to the tune of the multinationals in how we design the tax code. That is not right. The amount of tax they pay on their profits is shockingly low and obscene compared to the amount ordinary workers must pay and we should seek more from them. Our proposal is to charge them 12.5% as a minimum effective tax rate and specify that allowances or deductions would kick in only after they had paid the 12.5%. God almighty, 12.5% is a pretty low level of tax for them to pay on their astronomical profits. However, even 12.5% is not low enough for these companies and we are giving them a mechanism by which they can pay half of it, which is what they have been paying through other mechanisms. It is no coincidence that the figure set for the KDB is 6.25%. According to EUROSTAT, 6.25% is approximately what these companies are paying. We are establishing a system which will ensure they will not have to pay any extra tax. We should be asking them to pay a little extra.

This will come back and bite us all. If the Minister of State walks down to the Liberties area where Guinness is based, he will notice that Guinness built houses for its workers, parks, swimming pools and other infrastructure. It was not a sublimely progressive or benevolent entity. It made a lot of money for itself, but it understood that, in order for it to make profits and sustain its business, it had to contribute something to the infrastructure and give the employees who made its profits for it houses, basic sanitation levels, etc. These multinationals do not think they have such responsibilities. However, they rely on our infrastructure and need our educated workforce. We are running into a problem, whereby the lack of affordable accommodation in the city may become a disincentive for the multinationals to locate here.

It is a fair point.

It could become more of a factor. Why do we not have the money to provide affordable accommodation? The answer is we will not make these companies pay taxes to contribute to our universities and infrastructure, including water infrastructure, on which they rely heavily. They do not want to pay anything towards the cost of our infrastructure and we are facilitating them. It is a pity we do not demand that they pay a minimum of 12.5% which they could well afford and which would give us €4 billion extra in tax.

The US Bureau of Economic Analysis stated American corporations based here made a profit of $970,000 and paid $25,000 in tax per employee per year, which is a phenomenally low effective corporation tax rate of approximately 2.5%. We can contrast this with the figure for citizens in County Wicklow, whom the Minister of State represents, who pay a tax rate of 40%. They will not have a knowledge development box or any other tax loophole. Ireland has been a leader in competition on corporation tax rates. It is a central element of our international economic attractiveness. Competition in corporation tax rates robs the citizen and locates the profits in the hands of the corporations. Over time, it erodes the tax base and transfers money to corporations. Around the world countries are losing corporation tax, given that they are forced to reduce their corporation tax rates as a result of a very negative competition that Ireland is leading.

Some 50% of the planet's wealth is owned by 1% of the population. This extremely unequal distribution of wealth is being driven by a number of very large corporations which are making massive profits, on which they are not being taxed, while citizens are being taxed. The Government, instead of having a big flashing neon light over the State stating “bargain basement corporation taxes, please come in”, must invest more in education and show it has a smarter, better educated citizenry than any other country. We must say we have a broadband system that will beat anybody’s such that events such as the Web Summit will not have to leave. We must say we have a transport infrastructure in which, if an accident takes place on the Lucan bypass or the M50, the whole of the Dublin region’s transport network will not be snarled up.

Paul Krugman has carried out analysis which shows that the sunshine states of America are experiencing more growth owing to the fact that their house prices are far lower than in New York and other centres. Deputy Richard Boyd Barrett is correct. When a company such as PayPal asks its staff if they have spare rooms to provide accommodation for potential workers in the company, it is clear that our infrastructure is snarled up. We have reached capacity in areas that should be competitive advantages for the country. The level of the Government's investment will decrease between now and 2020, according to the figures included in the spring statement. We are at the bottom of the list when it comes to Government investment in these areas, which means that our competitive advantage will weaken and become more located in bargain basement corporation tax rates. There is no doubt in my mind that the knowledge development box is part of it. We have been forced down this route owing to the lack of Government investment.

From today, Northern Ireland will have a corporation tax rate of 12.5%. How will it affect our competitiveness?

Tax rates are matters for individual states. Therefore, the tax rate in Northern Ireland is primarily a matter for the Northern Ireland authorities and the British Government.

The Irish Government is fully supportive of any measures that will help promote the all-island economy and make the island of Ireland more wholly competitive. However, as I was saying in my exchange with Deputy McGrath, a low stable corporate tax rate is only one piece of that broader, more complex competitiveness jigsaw. A reform of the Northern Ireland corporation tax system does, in my view and in the view of the Department of Finance and the Government, have the potential to generate benefits on both parts of the island. That can only be good for the island of Ireland and the economy, North and South. It is obviously a very current issue in terms of yesterday's announcement. In an effort to respond to Deputies Tóibín and Boyd Barrett, let us just take a step back. I think they were both supportive of the OECD BEPS process.

Absolutely. There must be an international process in which these loopholes are-----

Sinn Féin was supportive, which I welcome, and Deputy Boyd Barrett was supportive-ish, in his own words, which was fine. Let us remember where the modified nexus for knowledge development boxes came from. It did not come from this Government, from the Department of Finance or from the Minister, Deputy Noonan. The modified nexus came from the OECD BEPS process, which recognised that while there is benefit in having boxes that enable and incentivise research and development, investment and growth, it is important that those boxes do not allow or facilitate aggressive tax planning. The modified nexus is exactly what we have applied to our knowledge development box, which means that as we sit here today in this committee room, Ireland is the only country that has a knowledge development box that is compliant with the OECD modified nexus, which was put in place to reduce aggressive tax planning. We just need to see this debate in that context. This was an important measure put in place to combat aggressive tax planning.

Whether we like it or not, research and development is happening. Every day, companies in Ireland and around the globe are using the brains of our brightest to develop new products, new ways of doing things and novel inventions to make the lives of our citizens better. We have a choice: do we want that research and development to happen, in terms of jobs and investment in this country, or do we want Irish companies which wish to engage in research and development feeling they need to leave and move to another jurisdiction that is more supportive of incentivising that research and development, and foreign direct investment and multinational company members sitting in boardrooms around the globe today deciding they are not going to Ireland but to another jurisdiction? I know my position on this and I know the Government's position. We want to make sure we have a competitive but transparent regime in place to attract jobs and investment in terms of innovation, research, patents and copyright. As has always been the industrial policy of this country through successive Governments, we want that to be based on substance and real jobs. That is why we are doing this.

I am still confused about the difficulty with the Minister for Jobs, Enterprise and Employment engaging with multinationals. Obviously we are going to talk to businesses to see what we are doing well in this country that is making them likely to invest more in the country. We had a public consultation process and there has been active engagement with stakeholders. Those stakeholders included a range of NGOs over the course of 2015. There was also a public consultation in 2015. There were nearly 40 written submissions and officials met nearly 100 companies. The process also included engagement with a range of Government agencies and Departments, including Enterprise Ireland, which works with indigenous Irish companies. As is always the case with public consultations, the submissions received will be published on the Department of Finance's website. I do not think I can say anything more to influence or change anyone's mind.

We have said enough.

I have just one specific question. The general issues have been bashed around and will be again on Report Stage. Will there be an upper limit on the amount of relief a company can get? The Minister of State spoke about small and medium enterprises, and I am all for incentivising small and medium enterprises, but I do not believe they will be the main beneficiaries. If it was targeted at small and medium enterprises, as the Minister of State suggested, should there not be an upper limit on how much any company can benefit?

Why would one limit substantive research and development?

To stop research and development.

It goes back to the point that, first, one can only apply the knowledge development box to a fraction of the patent and it only applies to the profits that originate from that fraction. That is the control. I do not see why there is a need for an upper limit on the amount one invests in terms of developing patents and copyrights in this country and the proportion of that one makes a profit on. The factual answer is no, there is no upper limit.

That has been an in-depth discussion.

Question put and declared carried.

I move amendment No. 61:

In page 56, line 6, after “year.” to insert “Revenue shall then make this country-by-country report available to the public on their website.”.

We welcome the move towards country-by-country reporting and it leads to an increased level of transparency. However, it is missing public transparency. It is very interesting that the public still is not allowed know what is happening. In England, for example, when it was found out that large multinationals operating there - Google, Starbucks and a number of others - were paying extremely low corporation tax rates, the people of the country became quite annoyed and political pressure on these organisations started to grow. These organisations began to say they had to maintain good public relations with customers, and that they would, therefore, step up to the plate regarding a better corporation tax regime. Society is a powerful leverage with regard to tax justice. If the information is not made public, consumers are not making full decisions on the justice behind the behaviour of these companies. It is not good for the public not to have this power and knowledge. Although we live in an information society, this information is withheld. It neutralises the citizens’ ability to effect change on these companies.

I alluded earlier to the fact that many developing countries feel they are being robbed of tax by the fact that we have bargain basement tax rates here. These countries are not necessarily in the same global tax treaties as we are. Therefore, even though country by country reporting is going to happen, they may not have full access to the information. These are the poorest countries, and they are likely to lose out regarding global taxation rules.

One of my worries is that I do not know how much profit companies such as Tesco make in the State. This is a long-term bugbear of mine. The Revenue understands, and there is a report into Revenue of the profits that are made, and they paid tax on this basis. However, the citizen and the consumer of these large companies are deemed unworthy of full knowledge of their expenditure. The companies operate within this State and tax is an enormous part of the justice of any state. We, as citizens, cannot ascertain whether these companies are fulfilling tax justice.

I thank the Deputy for the amendment. Under the internationally agreed approach for country-by-country reporting, the reports filed and shared with the tax authorities must remain confidential. The OECD and other countries involved in agreeing the BEPS report have been clear about it.

The nub of the reason I cannot accept the amendment arises from the fact that if Revenue was to make these reports publicly available, other countries would be entitled to stop exchanging country-by-country reports with Ireland. This would result in a lot less information being made available to our tax authorities, in this case the Revenue Commissioners, and dilute the significant benefit of this important BEPS measure, which I know the Deputy welcomes.

The purpose of country-by-country reporting is to provide Revenue with the information necessary to make informed risk assessments. It will give a clear overview of the global activities of large corporate groups. This will enable Revenue to target audits and interventions by highlighting where there may be particular transfer pricing, something we discussed. Making the reports public would not improve Revenue's ability to carry out this work. Instead, it would actually make it much more difficult as Revenue would not receive, as I said, the country-by-country reports filed with the other tax authorities.

Separate from the OECD proposal for country-by-country reporting to tax authorities which is being introduced in the Finance Bill, which means that this country is implementing this proposal very quickly, the European Commission is examining the issue of public country-by-country reporting. This would require companies to make information about operations, activities and profits in each country in which they operate publicly available, which is something the Deputy would welcome. The Commission recently held, as the Deputy will know, a public consultation on the issue and has commissioned an impact assessment. I and the Minister for Finance await the outcome of the impact assessment, but in any event departmental officials and the Minister will continue to engage actively in the debate on the issue at an EU level while introducing country-by-country reporting to tax authorities as agreed at the OECD as part of the BEPS process.

In general, I and the Minister, Deputy Noonan, believe it is important that a consistent approach is adopted globally to country-by-country reporting. If we do not have a globally consistent approach, we are nearly back to square one. For the reasons I have outlined, I am not in a position to accept the Deputy's amendment.

I thank the Minister of State. He has given a dispassionate analysis of the situation as it stands. He very cleverly did not give me any opinion whatsoever with regard to whether he thinks it is right that there should be transparent public knowledge and country-by-country reporting. Does he think it is right that people are kept in the dark with regard to their expenditure and the tax justice behind that? Does the Minister of State think it is right that if I buy an Apple laptop, iPad or phone, I do not know exactly the tax justice behind it? Should citizens not know that information?

I have an open mind, as does the Minister, on the issue of public country-by-country reporting.

The Minister of State is on the fence.

No, we will not go there. The Deputy might use the term "dispassionate", but I am concerned about facts. I will outline what would happen if we accepted his amendment today. We have worked hard to arrive at this point where we are about to legislate for country-by-country reporting, which I think the Deputy would recognise is a step forward, and our tax authorities are about to receive information that he and Deputy Boyd Barrett has, for a lengthy period of time, correctly------

As well as every other Deputy in the House.

Yes, and every other Deputy in the House. My exchange today has been with Deputies Tóibín and Boyd Barrett. They have rightly highlighted the need for certain information to be available to Revenue and have expressed concerns about the lack of information available. Extra information will be available to the Revenue Commissioners and other tax authorities that we did not have before.

I am a firm believer in a co-ordinated and consistent multilateral approach. As I said, the EU is carrying out an impact assessment of the issue. We will do what any prudent Government would do, namely, when the impact assessment is completed, we will assess it and make our position very clear at that stage.

There is another fundamental issue. Taxpayer information is confidential. I do not know Deputy Tóibín's tax information details nor do I want to. I want to know that the Revenue Commissioners know all the relevant details they need to ensure this country receives every cent of tax it should in order that we can invest in the social services he and I want.

The Minister of State has given me an apolitical answer.

I thought that was quite a political answer.

No, because I do not know where he stands on the issue. He told me he will wait for an impact assessment. He told me he is not sure of his views on whether there should be public transparency with regard to country-by-country reporting. Did the Government play any role in negotiating for publicly transparent country-by-country reporting?

It is quite prudent.

The Minister of State told me he will wait for an impact assessment. He told me he is not sure of his views on whether there should be public transparency with regard to country-by-country reporting. Did the Government play any role in negotiating for publicly transparent country-by-country reporting?

Let me be very clear on my position because I do not want the Deputy to misrepresent it. I will be clear on the Government's position in rejecting his amendment, which is what we are debating. If we passed his amendment he would make sure the Revenue Commissioners would have less information available to them to make important decisions on behalf of the Irish taxpayer. That is why I am rejecting his amendment.

I still do not know where the Minister of State stands on the issue.

That is exactly where I stand on the Deputy's amendment. He is asking me-----

The Minister of State is-----

Deputy Tóibín has asked me a follow-up question which I am very happy to answer, although it is not directly linked to his amendment which we cannot support. We will wait and see the outcome of the impact assessment, but I remain to be convinced about the benefit of taxpayer information being publicised. I want to have an independent and robust tax authority that has all the information available to it.

Like I said, the tax information relating to the Deputy, me, his and my party is not public. Are we going to decide that certain people's or organisations' tax information will be public? That is why the European Union is examining the issue and why there is an impact assessment. It is important to recognise the progress that has been made. If Ireland does one thing on its own, that can have knock-on consequences. The world is not as simple as we would like it to be at times.

That is why we are here.

If we decide we are going to make public confidential tax information, we are giving every other tax authority absolute and justifiable reasons not to give us the information the Revenue Commissioners need. That is where we stand.

All the information on HSBC which came from Swiss leaks showed all the tax avoidance that was going on. This was leaked to several European Governments before it was leaked to the media and absolutely nothing happened. As a result of the inaction of governments across Europe, it was leaked to a host of international media organisations which then published the information. That is one example of why we need public country-by-country reporting.

To put it bluntly, governments cannot be trusted to make known to the public important information that is in the public interest. I am reading quite a good paper on this very issue, which points out - the Minister of State can confirm whether this is true - that the Irish tax authority has 201 members of staff in its office for large taxpayers, but this covers more than 12,000 companies of domestic and foreign origin, among which are 1,000 foreign transnational enterprises. The paper goes on to point out that even with the best systems and procedures, it seems unlikely that 201 staff members would be able to scrutinise effectively and ensure the accuracy of these companies' tax returns. That seems like a pretty good point.

By having them publish the information, we would save ourselves a lot of work and effort. It would allow the public and all sorts of people to scrutinise these accounts and establish whether multinationals are playing by the rules. It would establish whether Government policy is working. It might be useful to know what subsidies of various types are going to companies. The public is entitled to know all this information, particularly given the sheer size and significance of multinational companies, many of whom have bigger economies than large countries.

These companies are like Colossi, dominating the world economic system, and we know very little about what they are really up to. They have extraordinary influence on what happens in the world, to the point that, effectively, they can blackmail governments. They have pretty much succeeded in doing that here because the Government is afraid of them.

In what regard have they blackmailed us?

The Government is afraid of them.

Of whom are we afraid?

The Government is afraid of saying "Boo" to the multinationals. When we were discussing the effect of corporate tax rates, we were not allowed to have Apple or any other multinational appear before the committee.

They have no jurisdiction over our tax rates. That is our-----

We can ask the banks to appear but we cannot ask these companies. We are afraid of them.

I am sorry, Deputy, but as I chair that committee,-----

Yes. The Chairman was afraid of them.

-----we made it quite clear that the issue was one of global taxation and tax avoidance,-----

-----which is to do with the base erosion and profit shifting, BEPS, project. Apple-----

The Government did not even want a discussion on whether multinationals should have appeared before us in public.


I am sorry, but Deputy Boyd Barrett is losing the run of himself.

The Deputy is referring to multinationals, but no multinational sets our taxation rates. There was no point in having them attend.

The American Congress had them attend, but we could not. The British Parliament had them attend, but we could not.

If the Deputy will remember, we discussed the reports from Westminster and Congress. The recommendations of the Washington report made no reference to Ireland. In fact, it recommended changes to America's own taxation system. The Senate and Congress introduced legislation that made no reference to any of the points that the Deputy has been throwing out at this meeting like confetti. I did not mention his comments because he did not bring our committee into disrepute. He agreed with the terms and conditions of the sub-committee.

I did not. I opposed them and called a vote.

The Deputy disagreed with the committee's recommendations, which was no surprise. We did not have any multinational attend because multinationals do not set our tax rates.

Yes, and I strenuously disagreed. It is-----

The Deputy should read the report again. He-----

I have read it in detail.

-----might then understand the recommendations from Westminster and elsewhere.

I still believe that the multinationals should have appeared before us.

Those recommendations had nothing to do with what we were discussing. I apologise to the Minister of State, as I should not have interrupted.

It is shameful that we were afraid to have the multinationals attend. Regardless of that sub-committee, they should attend to answer questions just as they had to appear before the British Parliament and the American Congress.

In 2014, PricewaterhouseCoopers conducted a poll of business leaders, of whom 59% stated that there should be public country-by-country reporting. Even the business leaders do not see a problem with it, yet a minority of business leaders - those associated with the large multinationals - and governments with close relationships with those multinationals do not want it. I do not see how anyone can sustain the claim that we do not need this information, given the aggressive tax avoidance of such companies, their importance to all of our lives and the way in which they influence the global economy. It is not on that this reporting would not be done publicly.

I presume, and maybe I should not, that all Deputies welcome the agreement at OECD level on country-by-country reporting that this State will, hopefully in the coming weeks, put into law through this Finance Bill. It will empower the independent taxation authority - the Revenue Commissioners - to have information available to it. The Deputy was at pains to point out examples of where such information, which Revenue did not have previously, would be useful. I presume that, regardless of his view on whether information should be public, he accepts the logic of the current situation, whereby if we unilaterally decided to conduct country-by-country reporting, we would deprive Revenue of the vital information it needed. The Deputy is looking confused.

Let me clarify. The OECD BEPS process agreed country-by-country reporting on the condition that the information remained confidential, as all taxpayers' information remains. If the Oireachtas decides to make such information public, it will untangle the BEPS agreement and allow other taxation authorities not to give that information to the Revenue Commissioners because we are not in compliance with the agreement. That would be an extraordinarily foolish step to take.

In which case, there is a big problem with the agreement.

In fairness to the Deputy, his support was "ish".

It was "ish". I said that.

There is an ongoing EU process as well as an impact assessment. Let us see where they go.

I will make a point about HSBC because the Deputy was not factually correct. The Committee of Public Accounts probably received information regarding HSBC, but it is important to point out that there were three prosecutions in this country in respect of issues arising from that situation. My understanding is that it all occurred before any information was made public. Can we please give credit to the Revenue Commissioners for the job that they do? If the Deputy wants a comparator, the UK received information on more than 1,000 cases, which resulted in one prosecution. In this country, Revenue received information on fewer than 100 cases, which resulted in three prosecutions. The Deputy must recognise the benefit in the role of independent Revenue Commissioners. We decide tax policy and it is their job implement it. They do that well.

Amendment put and declared lost.
Section 31 agreed to.
Question proposed: "That section 32 stand part of the Bill."

This section concerns anti-abuse clauses, in that the system cannot be abused if the arrangements are not genuine. This is welcome, but will the Minister of State detail the number of cases involving, as well as the revenue lost to date as a result of, tax arrangements that were not genuine? We are tightening regulations, which is welcome, but it is obviously in response to Revenue's experience of non-genuine cases.

It is an important question. My understanding from consulting officials is that this is not a response to a Revenue-specific problem or an issue highlighted by the Revenue Commissioners to the Government. Rather, it transposes the EU parent-subsidiary directive into law. I have no knowledge of individual cases or problems.

Is the Minister of State confident that there has been no experience of individual non-genuine cases?

I am advised by the Revenue Commissioners that they are not aware of any case and that this is a common anti-abuse measure. That is the best advice available to me. This transposes an EU directive.

Question put and agreed to.

I move amendment No. 62:

In page 59, between lines 28 and 29, to insert the following:

"33. The Minister shall, within nine months from the passing of this Act, prepare and lay before Dáil Éireann a report the effective rates of corporation tax paid by companies in the State.".

This relates to our discussion on public country-by-country reporting. The basis of many of these changes is the fact that Ireland has been an outlier as regards corporate tax, which has cost us dearly in terms of the amount of tax that we should have been receiving over a long number of years. Changes have been made and are welcome, as is country-by-country reporting, but when the likes of Trinity College academic Professor Jim Stewart uses information from the US Bureau of Economic Analysis and estimates that the effective corporate tax paid by foreign firms is 2.2%, the damage caused by this policy shocks to the bone. It all affects everyday human experiences. Yesterday, we discussed with the Minister, Deputy Noonan, the 7,700 people on trolleys since the start of this year in my local hospital in County Meath, the 400,000 people on health service waiting lists, the 130,000 people on housing waiting lists and the thousands of children in emergency accommodation. Two weeks ago, a woman rang me from a tent with her daughter because of the lack of housing in County Meath.

We see on the one hand a country whose delivery of public services has been vandalised significantly over the past five to ten years, and on the other an effective corporation tax rate - not by my estimation but that of the US Bureau of Economic Analysis and Trinity College academics - of 2.5%. That is jarring information. Citizens in all the constituencies are paying income tax at a marginal rate of 40%. The purpose of this amendment and the previous amendment is to empower citizens with information and to ensure that they are no longer left in the dark as regards their spending power and their understanding of the contribution that companies make to the tax base of the State, and that information is to be made clear.

I understand the Minister stated that a change within the agreed negotiated position would reduce the ability for that to function properly. However, there is a logic to what I am saying. Potentially, the Minister would become a champion of information to citizens. He should seek to push this, either through the mechanism within the amendment or in negotiations on an OECD and a European basis.

I do not propose to go fully into the report unless the Deputy wishes me to in a later exchange. Obviously there are lots of different figures quoted for effective corporation tax rates, but the report, which was co-authored by Mr. Seamus Coffey and the Department of Finance, found that the effective corporate tax rate in this country was 10.7% or 10.9%, and that is documented in the report that we published.

I am merely pointing out that the statistics the Deputy quotes are not statistics that I accept. I am not accepting them on the basis of the report that the Department published and co-authored with Mr. Seamus Coffey. Let me respond directly to the amendment from Deputies Tóibín and Doherty.

At 12.5%, as we have already discussed at length, Ireland has one of the most competitive headline corporate tax rates in the OECD. Our competitive rate of corporation tax has been an important part of industrial policy in this country since the 1950s, and has attracted real and substantive operations to Ireland since then. I refer the Deputy to an ESRI report published on budget day last year which showed what would have happened in terms of job losses and investments not made had we altered the rate of corporation tax to a higher level.

All companies in Ireland pay the standard 12.5% rate on their profits generated in Ireland. A standard 25% rate applies in respect of investment, rental and other non-trading profits and profits from certain petroleum, mining or land-dealing activities. A rate of 33% is applied to the chargeable gains of companies.

Some other countries may have a high headline rate of corporation tax which is then supplemented by a high number of tax reliefs. The approach in Ireland, however, is more transparent. We have a relatively low headline rate of corporation tax, which is applied to a broad base. We therefore have only a small number of incentives in Ireland, but we ensure that these are targeted. They are focused, first, on the creation of additional employment, as is consistent with current Government policy, and second, on areas of innovation, as we have already discussed, with a view to generating high-value-added economic activity.

As the Deputy will be aware, in 2014 the Department of Finance produced a technical paper, Effective Rates of Corporation Tax in Ireland, for this committee. The paper was produced - I acknowledge the work of this committee - as a result of discussions held during the Committee Stage of the previous year's Finance Bill. It contained a comprehensive analysis of effective rates of corporation tax paid. It was submitted to the committee and published in April 2014. The paper was prepared in order to provide clarity about the seemingly conflicting figures that are frequently quoted, and is an excellent resource for those seeking to understand and obtain more information about what is clearly a complex technical issue.

There is no internationally agreed standard for calculating effective rates of tax. Therefore, the paper examined three different methodologies used in the calculation of effective rates of corporation tax generally. The paper also analysed 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. However, in attempting to assess the effective corporate tax rate applying to the total profits earned by companies in Ireland, the paper concluded that the approach based on national aggregate statistics from the Revenue Commissioners and the Central Statistics Office is the most suitable.

The paper found that the effective rates of corporation tax, as measured according to 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. The report was based upon the analysis of effective rates across a ten-year period and, therefore, does not need to be re-examined on an annual basis. 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.

In relation to the publication of details on the effective rates of corporation tax paid by individual companies in the State, both the Department and the Revenue Commissioners would encounter, as we have already outlined in previous discussions, a number of issues regarding the confidentiality of individual taxpayers. There are strict taxpayer confidentiality rules which would prohibit the Revenue Commissioners from providing taxpayer-specific information. It would not, therefore, be feasible to publish any individual details while maintaining a taxpayer's right to confidentiality.

In the budget, the Minister, Deputy Noonan, announced that from 2016 onwards that certain multinational companies would be required to submit to the Revenue Commissioners an annual report of their groups' activities on a country-by-country basis - we have dealt with that already. This will ensure that the Revenue Commissioners have improved information about the global activities of multinational companies and will help them with assessing high-level transfer pricing risks.

Between this new country-by-country reporting and the fact that a detailed report was provided to this committee following on from previous engagement with this committee, the Minister does not see the need to publish another report on an annual basis, considering the report looked at a ten-year period. Given that a detailed report has previously been prepared by my Department and the need to allocate scarce resources most effectively, I cannot accept the Deputy's amendment.

The conclusion of the paper that the Minister of State referred to that the effective rate was 10.7% was heavily contested, and I do not accept for one second that such is the effective rate.

The introduction to that paper sets out the incredible spectrum of different effective rates depending on how one chooses to calculate it. They go from the 2.2% rate from the US Bureau of Economic Analysis to the EUROSTAT or so-called implicit rate, which is estimated at 5.9% for Ireland. I do not accept 10.7% as a credible estimate of the effective rate precisely because, as I explained earlier, it is after the deductions that have been the mechanism through which these companies have aggressively avoided tax using intellectual property and patents. That method of calculating the effective rate comes in after all that has been taken out of their taxable income, and one ends up with something that looks like 12.5%, but it is following the deduction of billions of euro in profits under the heading of trade charges.

I also believe, as I stated earlier, that it was a huge gap in the remit of that investigation into the effective rates that we did not bring some of the companies at the centre of this controversy in here to be questioned in detail about their tax affairs. We did not get to the bottom of what was going on with effective tax rates. The public still has the right to know the truth about this matter.

Amendment put and declared lost.

I move amendment No. 63:

In page 60, to delete lines 7 to 38, and in page 61, to delete line 1 and substitute the following:

"597AA. (1) (a) In this section—

'51 per cent subsidiary' has the same meaning as it has in section 9(1)(a);

'development land' has the same meaning as it has in section 648;

'group' means a holding company and one or more companies which are 51 per cent subsidiaries of the holding company;

'holding company' means a company whose business consists wholly or mainly of the holding of shares of one or more companies which are its 51 per cent subsidiaries;

'qualifying business' means a business other than—

(a) the holding of securities or other assets as investments,

(b) the holding of development land, or

(c) the development or letting of land;

'qualifying group' means a group, the business of each 51 per cent subsidiary (other than a holding company) in which consists wholly or mainly of the carrying on of a qualifying business;

'qualifying person' means an individual who is or has been a director or employee of a company (or companies in a qualifying group) who—

(a) is or was required to spend not less than 50 per cent of that individual’s working time in the service of that company (or those companies) in a managerial or technical capacity, and

(b) has served in that capacity for a continuous period of 3 years in the period of 5 years immediately prior to the disposal of the chargeable business assets of which the disposal of shares in the company (or one of those companies) forms the whole or part;

'relevant individual' means an individual who has been the beneficial owner of the chargeable business assets for a minimum period of 3 years immediately prior to the disposal of those assets;

'target company' means a company (including a company in a qualifying group) the disposal of shares in which forms the whole or part of the disposal of chargeable business assets;

'working time' means any time that an employee or director is—

(a) at his or her place of work or, in the case of an employee, at his or her employer’s disposal, and

(b) carrying on or performing the activities or duties of his or her work.

(b)(i) For the purposes of the definition of ‘qualifying person’ in paragraph (a), any period during which the individual was a director or employee of—

(I) a company that was treated as being the same company, for the purposes of section 586, as a target company, or

(II) a company involved in a scheme of reconstruction or amalgamation under section 587 with a target company,

shall be taken into account in calculating the periods during which the individual was a director or employee.

(ii) For the purposes of the definition of ‘relevant individual’ in paragraph (a), any period during which the individual owned shares in—

(I) a company that was treated as being the same company, for the purposes of section 586, as a target company, or

(II) a company involved in a scheme of reconstruction or amalgamation under section 587 with a target company,

shall be taken into account in calculating the periods during which the individual was a beneficial owner.

(2) (a) Subject to paragraph (b), ‘chargeable business asset’ means an asset, including goodwill which—

(i) is, or is an interest in, an asset used for the purposes of a qualifying business carried on by an individual, or

(ii) is a holding of ordinary shares in—

(I) a company whose business consists wholly or mainly of carrying on a qualifying business, or

(II) a holding company of a qualifying group,

in respect of which an individual—

(A) owns not less than 5 per cent of the ordinary share capital, and

(B) is a qualifying person in respect of the company or, if the company is a member of a qualifying group, of one or more companies which are members of the qualifying group.".

This amendment relates to section 33 of the Bill.

The amendment makes the following changes to that section in order to align the capital gains tax relief provisions more fully with business structures on the ground: the minimum shareholding requirement to be satisfied by an individual is reduced from 15% to 5%; the definition of “holding company” is modified to reflect the commercial reality of a company group carrying on a qualifying business or businesses where a holding company may have less than a 100% shareholding in its subsidiaries; the definition of “full-time working director” is deleted and a new definition is included, that is a definition of “qualifying person”, to reflect the commercial reality of the involvement of an individual entrepreneur with the company or companies he or she has founded, either as a director or as an employee, and with the time given to these roles which may be satisfied over the minimum holding period of three years within a longer five year period ending with the disposal of the shareholding in the company or companies; the exclusion from the relief of disposals by entrepreneurs of shareholdings in a company or companies which they started and which may become a quoted or public company is removed; and the amendment ensures that the relief should not be denied in cases of a reconstruction or reorganisation of a business where an original company or shareholding is replaced with a new company or new shares.

I commend the amendment to the Committee.

In Sinn Féin's alternative budget we allowed for the differentiation between active and passive investment. That is important, because lumping both together does not make sense. Active investment, where investment is being made to improve the functionality and health of a business, will have outcomes for the State in that it will make the business more competitive and, hopefully, lead to more employment. There is no doubt that this type of investment needed to be differentiated from passive investment.

My concern here is that the Government took a huge jump in reducing rates here and that this is a significant cut. There has been significant analysis in regard to the Government having hollowed out the tax base, to a certain extent, in the budget. USC contributors to the tax base who are on salaries over €75,000 have shared in the €169,000 in cuts to the USC on income below €75,000. This cut, along with the collapse in CGT here, is a difficult blow for Revenue. Fine Gael has mentioned it expects to reduce USC further in the future and I understand there is an €8 billion fiscal space in the next five years to get rid of USC, which would amount to €4 billion. This makes for a further significant cut in the tax base. Given that we face so much pressure in regard to public service delivery, for example, the Minister for Health, Deputy Varadkar, stated yesterday that universal health insurance is too costly and ambitious, the reduced revenue from USC and CGT at the same time, is a concern for us.

We welcome the differentiation between active and passive investment. We were en route to a 33% rate for active investment and a 35% rate for passive investment but we were taken aback that the Government collapsed that to 20%.

Fianna Fáil holds a different view to Sinn Féin on this issue. Ireland is competing with other countries, the UK in particular, for high potential start-ups and this is an issue in that regard. It has been raised by technology entrepreneurs in particular. These people are highly mobile and can decide to start or grow their business in any jurisdiction. The regime being introduced is a step in the right direction. The rate in the UK is 10% for entrepreneurs. The level here is quite low, a threshold of €1 million, but it is a step in the right direction. We should monitor the implementation of the measure to see if it can be enhanced in the future.

Amendment agreed to.
Question proposed: "That section 33, as amended, stand part of the Bill."

I wish to notify the committee of the intention by the Minister for Finance to bring forward amendments relating to the CGT entrepreneur relief on Report Stage. One of the amendments will relate to a further modification of the minimum shareholding requirement in the entrepreneur relief provisions and a second amendment will relate to section 542 of the Taxes Consolidation Act, to deal with the impact of the revised entrepreneur relief provisions on certain disposals of land acquired under compulsory purchase orders.

Question put and agreed to.
Question proposed: "That section 34 stand part of the Bill."

I have a brief question. Any tightening of regulations in regard to anti-avoidance is good. Have any cases arisen to date of tax avoidance within this loophole and has the incidence of this being measured?

I am informed by Revenue there have been no specific cases but that it is a prudent anti-avoidance measure to include in the budget each year. As the Deputy is aware, we try, in consultation with Revenue, to identify areas where we should beef up anti-avoidance and this is one of those areas. However, the Revenue Commissioners advise me they are not aware of any specific cases.

Question put and agreed to.
Sections 35 to 38, inclusive, agreed to.
Question proposed: "That section 39 stand part of the Bill."

Is there a potential cost to the Exchequer as a result of this anti-avoidance measure being weakened and has any revenue been raised from this measure in the past few years?

There is no cost to the Exchequer associated with this.

Question put and agreed to.
Sitting suspended at 1 p.m. and resumed at 2 p.m.
Sections 40 to 47, inclusive, agreed to.

Amendment No. 64 has been ruled out of order.

Amendment No. 64 not moved.

I move amendment No. 65:

In page 72, between lines 5 and 6, to insert the following:

"48. The Minister shall, within nine months from the passing of this Act, prepare and lay before Dáil Éireann a report on the difficulties facing the independent Off Licence sector, including the issue of the importation of alcohol for direct sales to consumers online and measures within the tax code to address these difficulties.".

Amendment, by leave, withdrawn.
Section 48 agreed to.

I move amendment No. 66:

In page 72, between lines 9 and 10, to insert the following:

"Value-Added Tax in respect of Charities

49. The Minister shall, within 6 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the potential introduction of a capped Value-Added Tax compensation scheme for charities.".

The Minister is quite familiar with the impact of VAT on the charities sector. I know that earlier this year the Minister established a special working group comprising the Irish Charities Taxation Reform group, the Minister's Department and the Revenue Commissioners to examine how the impact of VAT on charities could be addressed. The report published at budget time confirmed that the issue can be dealt with at national level by way of a compensation scheme rather than a direct rebate. There are a number of such schemes already operating in different EU member states, including Denmark, which provides compensation with an in-built cap to limit exposure in the Danish exchequer. The practical effect of the Danish scheme is to provide a partial refund of VAT to charities based on independent income collected by way of fund-raising. I fully understand the concern that would exist in the Department to limit the scope of any change because it could ultimately continue to rise and lead, in effect, to a demand-led process, which would be of concern.

The essence of the issue is that various charities are working exceptionally hard, raising money through their volunteer networks in many cases and buying goods and services for end-users. However, they also pay VAT. As this is not in the course of business, as such, the charities are not able to register for VAT and reclaim any they pay. There is an equity issue that must be very carefully examined. I welcome the steps taken so far with the special working group but I would like us to go further with this Bill and have a report on the introduction of a capped VAT compensation scheme for charities prepared.

As the Deputy said, earlier this year I agreed to the establishment of a working group comprising representatives from my Department, the Revenue Commissioners and the Irish Charities Tax Reform Group to examine options available to reduce the VAT burden of charities. A report from the group was provided to me in my deliberations ahead of the 2016 budget. It was published and is available on the budget 2016 website.

We have not taken any action on foot of the report because tax expenditures can be quite a blunt instrument and I am not convinced they constitute the best way to address the issue. Following consultation with other member states, the report of the working group found relatively limited favourable VAT treatment for charities across Europe. Furthermore, the existing ministerial refund orders already in place in Ireland provide some VAT relief to charitable causes. Introducing a VAT refund scheme for charities would also, most likely, lead to similar claims from other VAT-exempt organisations, most notably sporting organisations. Requests for new ministerial refund orders have been consistently refused since the 1980s, primarily to maintain the integrity of the VAT system.

I thank the Minister for the reply and I welcome the fact that the report was prepared. The Minister seems to have concluded his own deliberations on the matter but he might clarify if the report is still under consideration. Has the Minister reached the conclusion that this does not warrant any change to the VAT system? It is important to establish the view of the Department and the Minister.

I understand the concern that this could lead to further calls in other sectors, especially from sporting bodies, which could make a legitimate case. They are selling lottery tickets and fund-raising every week to buy equipment and pay for services on which they pay VAT.

There is a legitimate concern that there would be further related demands. The Minister might clarify his comment that there is already provision for some VAT relief for charitable causes. If he has a note on that provision or any information on what it involves, it would be helpful to this debate also.

We received the report from the working group in advance of budget 2016. I decided on foot of it not to make changes. As Deputies have not yet had an opportunity to peruse the report, I am not closing out the option. Whoever is around can return to it in future budgets. The base analysis is now available. I understand the report sets out many of the tax concessions available, including the one on which the Deputy has sought information. I can send him a copy of the report, or he can look it up on the website.

I will look it up. I thank the Minister.

Amendment put and declared lost.
Section 49 agreed to.
Sections 50 to 56, inclusive, agreed to.

I move amendment No. 67:

In page 78, between lines 34 and 35, to insert the following:

"57. 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.".

I welcome the decision to bring online betting into the betting tax space. In my party's alternative budget we proposed that a 3% tax be paid by the punter. My party has engaged massively with many of the smaller firms operating within the industry. We have heard the view that a 1% turnover tax on a small firm could equate to a tax of 20% or 30% on the profits made by that firm. Therefore, we have decided that a 3% tax should be paid by the punter. That would lift the weight from the smaller operator or bookie and create a level playing field. The proceeds of such a tax could be used to fund the horse racing industry or resource services for people with gambling addictions, etc. It would establish greater revenues. There is a concern, especially among smaller operators in this sector, that one or two very large players in the gambling industry have a great deal of influence and control. It has been suggested they potentially have the ear of the Government. Does the Minister agree that it would be economically beneficial to small businesses that are trying to create jobs and that it would improve the market structure if the burden was not placed on small operators in the manner in which it is currently placed on them?

The Betting (Amendment) Act 2015 was enacted on 15 March last. It provides a regulatory system for remote bookmakers and betting intermediaries, otherwise known as betting exchanges, that offer betting services in Ireland, regardless of their location. The Act provides for fair and equal treatment of all bookmakers by extending betting duty to remote operators, thereby widening the tax base and protecting the Exchequer from the leakage of potential tax revenue. Prior to the enactment of the legislation, excise duty was payable at a rate of 1% on bets entered into with a traditional bookmaker. Since the application of duty to the remote sector from 1 August 2015, licensed remote bookmakers are now liable for 1% duty on the amount of a bet from customers in the State and licensed remote betting intermediaries are now liable for 15% duty on the commission charged to customers in the State.

There have been a number of calls for an increase in the rate of duty applying to betting. However, my preferred approach has been to put a regulatory regime in place for the sector and then to extend the base on which the 1% rate applies, thereby ensuring the tax is applied fairly and widely on a level playing field for all. This system is now in place. The first two months of duty from the remote sector have yielded €3.3 million, which would imply a yield of approximately €20 million in a full year. It is better to wait until the new remote taxation regime has bedded in before considering changes to the rate and type of taxation. As I said, the priority is to allow time for the new regulatory regime to bed in. In addition, the application of a charge directly on the punter as requested would be problematic. Punters who bet via remote means are highly sensitive and such a change would incentivise tax avoidance. All betting firms, including betting exchanges, share this view. They would prefer the tax liability to remain with the firms. That these companies would prefer to bear the tax is a clear indication of how challenging it would be to enforce this proposal.

All taxes are reviewed on an ongoing basis by officials from my Department and Revenue. I assure the Deputy that the betting tax will be kept under review to monitor the operation of the new regime. Accordingly, I cannot accept the amendment.

Amendment put and declared lost.
Sections 57 to 60, inclusive, agreed to.

As amendments Nos. 68 to 71, inclusive, are related, they may be discussed together.

I move amendment No. 68:

In page 79, to delete lines 30 and 31 and substitute the following:

"obtains cash from an automated teller machine situated in the State by means of a cash card or a combined card;".

These amendments which propose to further amend sections 123B and 124 of the Stamp Duties Consolidation Act 1999 relate to the annual stamp duty charge that applies to the different types of card issued by financial institutions, including ATM cards, debit cards and credit cards. In regard to section 6 which amends section 123B of the 1999 Act, I announced in the Budget Statement that I was replacing the current flat rate charges for cash cards and debit cards of €2.50 and €5, respectively, with a charge of 12 cent for each cash withdrawal from an ATM. I am seeking to incentivise consumers to use more modern forms of payment such as debit cards instead of withdrawing cash from ATMs. I am also seeking to reduce the amount of cash in circulation. After the publication of the Finance Bill, my officials engaged in further consultation with representatives of the financial services sector. A number of amendments are proposed on foot of this consultation. The amendments are intended to address concerns that have been raised about the practical effects of changing from a flat rate charge to a charge based on usage. They will also generally update section 123B of the 1999 Act in order that it reflects current banking practice.

Amendment No. 69, the main amendment in the group, specifies 31 December in each year as the date that determines whether a charge arises. A charge will arise where the particular card is valid on that date and where the cardholder has an address in the State on that date. The charge is also being confined to cash withdrawals from ATMs situated in the State. Provision is being made for circumstances in which a card that is cancelled or expires during a year is replaced by another card before 31 December of that year. The original card and the replacement card are treated as a single card for the purposes of liability to the stamp duty charge and imposing the monetary cap on the charge.

There are a series of minor technical amendments in relation to the removal of references to debit cards as such cards, within the meaning of section 123B, have become redundant. In practice, cards that have a debit function only have been replaced by cards that contain the dual functions of a cash card and a debit card. Section 123B refers to such cards as combined cards. The higher monetary cap of €5 compared to the lower cap of €2.50 is only applied where both functions of a "combined card" are used. Where only the cash card function is used the lower monetary cap applies.

An amendment that is not connected with the charge on the basis of charge was made to sections 123B and section 124 of the Finance Bill, as published, so as to update the definitions used in these sections for different types of financial institution. These definitions are based on those used in EU regulations. However, an unintended consequence of adopting the current EU regulation was to bring An Post and credit unions within the charge to stamp duty. These latest amendments to sections 123B and 124 exclude these bodies and maintain the status quo in relation to chargeable persons.

I recommend the amendments to the House.

On these amendments, there are two issues I want to flag, one of which I raised on Second Stage and the other I will raise here today. What the Minister is trying to do here to incentivise electronic payments is a positive development. In these amendments he is trying to deal with some of the anomalies that have been flagged on foot of the introduction of this measure. As the Minister is aware this is on foot of the movement to the interchange fee cap which kicks in from 9 December. Is it possible for the Minister to introduce it at an earlier date than 9 December? I asked on Second Stage that it be introduced from 1 December, purely because there are only 24 days in the run up to Christmas, to give retailers the maximum opportunity to comply, rather than on 9 December as proposed under the EU directive.

We are moving from a fixed rate charge per transaction to a percentage of the overall value of the transaction. While that incentivises people to use cards for small payments the difficulty is it prohibits them from using cards for large payments because the charge is now a percentage of the overall bill. Traditionally, the cohort that has been slowest to move from the cheque book has been the farming community. If a farmer is buying cattle at a mart and given that the charge is a percentage of the transaction we are talking about a significant fee being generated which either the farmer or the co-operative in the mart has to carry. Is it possible to have a look at the directive before it is implemented fully so that we are not introducing a further disincentive to electronic payments where large amounts are involved and forcing people to go back to the old paper-based systems and cheques? I understand that some businesses that deal with large transactions including the co-operative livestock marts are looking to withdraw this particular service because of the banking fees involved.

In the package of measures announced in the budget the most beneficial one from the retail trade point of view is the cutting of the fee that banks charge on credit card transactions. My estimate is that is worth about €37 million to the retail sector not in a transfer from the taxpayer but in a transfer from the banks and the finance houses. That is beneficial. I am advised that 9 December is a date that the industry has selected following EU regulation. I have no role in setting the date so we cannot change it here.

Caps are being introduced on debit cards by Visa which will limit the total charge on debit cards to €1. That is additional information.

Has that kicked in already or is it about to kick in? Is it only for the one company or is it across the board?

Visa has mass market on debit cards so that it is the only card supplier that really matters at present in the Irish market. It is making the change effective from 1 May 2016.

Is there any mechanism whereby it can be brought forward from 1 May 2016 or is the industry itself acting rather than us pushing it?

There is a general push but it is the industry itself that is acting in this case.

It is causing a barrier in the short term in terms of the transition from cheques. The message will go out that it is from 9 December and the Commission as a whole is encouraging people to use electronic payment systems yet between now and 1 May 2016 there is an anomaly in respect of large transactions.

In my view it is a generational thing and it takes a while to develop and deliver a cashless society. I know quite a number of people, some related to me, who work with cash and cheque book and would be horrified at the idea of buying a bullock with a piece of plastic. It does not work out that way. I am sure the Deputy knows such people also. Younger people are more adaptable and will move on. I do not think the effective date, as long as it is pretty quick, matters that much. What matters is that we are putting the new facilities in place to encourage people to avail of these systems of payment which are electronically transacted.

What is the issue in regard to credit cards?

Credit cards, seemingly, are fixed at 0.3% regardless of the size of the transaction. That piece was reformed previously, if that is a reform, but it is the debit cards now where cash is drawn immediately and the settlement is done immediately. One's bank account is deducted as soon as the card is transacted.

Amendment agreed to.

I move amendment No. 69:

In page 80, to delete lines 1 to 32 and substitute the following:

“ ‘credit union’ has the same meaning as it has in the Credit Union Acts 1997 to 2012;

‘financial institution’ has the same meaning as it has in the European Union (Capital Requirements) Regulations 2014;”,

(iii) by substituting the following for the definition of “card account”:

“ ‘card account’ means an account maintained by a promoter to which—

(a) amounts of cash obtained by a person by means of a cash card are charged, or

(b) amounts in respect of goods, services or cash obtained by a person by means of a combined card or debit card are charged;”,

(iv) in the definition of “basic payment account”, by substituting “one of the following” for “one of the following banks”,

(v) in the definition of “promoter”, by substituting “means a credit institution or a financial institution other than a credit union or An Post and any of its subsidiaries” for “means a bank or building society”, and

(vi) in the definition of “quarter”, by substituting “into a card account.” for “into a card account;”,

(b) by substituting the following for subsection (2):

“(2) A promoter shall, within one month of the end of each year, commencing with the year 2016, deliver to the Commissioners a statement in writing showing—

(a) the number of cash cards and combined cards issued at any time by the promoter that are valid on 31 December in the year,

(b) the number of cash transactions completed in the year using a card valid on 31 December in the year in respect of each type of card,

(c) the number of cash cards to which the monetary cap referred to in subsection (4) has been applied,

(d) the number of combined cards, both functions of which were used in the year, to which the monetary cap referred to in subsection (4) has been applied, and

(e) the number of combined cards, only the cash card function of which was used in the year, to which the monetary cap referred to in subsection (4) has been applied.”,

(c) by inserting the following subsection after subsection (2):

“(2A) For the purposes of subsection (2), a cash card or a combined card shall be valid on 31 December of a particular year where—

(a) the card has not expired or been cancelled before that date, and

(b) on that date, the address of the person to whom the card was issued is in the State.

(2B) A promoter shall, within one month of the end of each year, commencing with the year 2016, deliver to the Commissioners a statement in writing showing the number of each type of card to which the monetary cap referred to in subsection (4) has not been applied, together with the number of cash transactions in the year in respect of those cards.

(2C) Where a cash card or combined card issued by a promoter in respect of a card account and valid on 31 December in a particular year (in this subsection referred to as the ‘final card’) has been issued following the cancellation or expiry in that year of another card of the same type issued by the promoter in respect of the card account (in this subsection referred to as a ‘previous card’), each such previous card shall be taken to be the final card for the purposes of this section.”,

(d) by substituting the following for subsection (3):

“(3) Notwithstanding subsection (2)—

(a) if the cash card or combined card is not used at any time during a year,

(b) if the cash card or combined card is issued in respect of a card account—

(i) which is a deposit account, and

(ii) the average of the daily positive balances in the account does not exceed €12.70 during that year,


(c) if the cash card or combined card is issued in respect of a basic payment account, then it shall not be included in the statement relating to that year.”,

(e) by substituting the following for subsection (4):

“(4) Stamp duty shall be charged on every statement delivered in pursuance of subsection (2) at the rate of €0.12 for each cash transaction included in the statement, but the amount charged in respect of—

(a) any individual combined card, both functions of which were used in the year, shall not exceed €5,

(b) any individual combined card, only the cash card function of which was used in the year, shall not exceed €2.50, and

(c) any individual cash card, shall not exceed €2.50.”,


(f) in subsection (9) by substituting “of a cash card or combined card” for “of a cash card, combined card or debit card”.”.

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

There is a logic to what the Minister is doing. I agree that people have some flexibility and an opportunity to reduce the level of stamp duty they are paying but this has to be viewed alongside the actual bank charges because these are Government charges. Bank charges are a different animal. The present bank charges can be very significant. I have checked AIB as a case in point - it charges 35 cent for an ATM withdrawal, 20 cent for each debit card purchase, something the Minister is encouraging in the drive for an cashless society, combined debit card purchase with cash back, 20 cent and any staff assisted transaction, 39 cent. These are the sample charges of one individual bank. The Minister's policy is fine but it needs to be consistent with what the banks are doing in practice because the amount the customer is paying is the Government stamp duty plus the actual bank charges.

I submit the bank charges are not going in the same direction as the initiatives the Minister is proposing. Has the Central Bank examined this issue? Is it talking to the individual banks? It is true that the staff-assisted transactions incur higher charges than automated transactions but if they did not impose such high charges for each withdrawal or debit card purchase, for example, people might be prepared to hold less cash.

The banks vary in that regard. I understand AIB charges 35 cent for a withdrawal at an ATM machine and Bank of Ireland charge 20 cent. Some cards are free at point of use but they charge a quarterly fee. One will find it has been done when one gets the statement, but Deputy McGrath is right. There must be pressure on people and one of the most significant actions we took in this package of measures in the budget was to reduce the bank fee on the credit card and debit card transactions for purchasers in a shop, for example, from 20 cent to ten cent. As I said to Deputy Naughten, that is a delivery of approximately €37 million to the retail sector from the banks by reducing the fee. It is something with which we will likely continue.

The point I am making is that the Minister is trying to encourage people to use, say, Visa debit cards instead of cash when they are making a small purchase. If a bank charges 20 cent to use that debit card to buy a newspaper for €2, it is 10% of the cost of what they are buying so if they have cash in their pocket they will use that instead of using the debit card because of the cost incurred. If it is a small transaction people will be much more likely to use cash because of the bank charges that apply to automated transactions.

That might be true but I am told that contactless transactions are usually free so we are moving in the right direction. I take the Deputy's point. We will encourage the banks to co-operate.

Question put and agreed to.

Amendment No. 70 in the name of the Minister has already been discussed with amendment No. 68.

I move amendment No. 70:

In page 80, to delete line 38 and substitute the following:

“ “ ‘bank’ means a credit institution or a financial institution other than a credit union or An Post and any of its subsidiaries;”,”.

Amendment agreed to.

Amendment No. 71 in the name of the Minister has already been discussed with amendment No. 68.

I move amendment No. 71:

In page 81, between lines 5 and 6, to insert the following:

“ “ ‘credit union’ has the same meaning as it has in the Credit Union Acts 1997 to 2012;”.”.

Amendment agreed to.
Section 62, as amended, agreed to.
Section 63 agreed to.

Amendment No. 72 is in the name of Deputy McGrath.

I move amendment No. 72:

In page 81, between lines 11 and 12, to insert the following:

“Capital Acquisitions Tax

64. Section 30(2) of the Principal Act is amended by the substitution of “the date on which probate is granted in respect of the deceased person” for “the date of death of the deceased person”.”.

This issue was brought to my attention through one individual case and I want to clarify the law in one sense. As I understand it, with regard to inheritance tax, the threshold which applies is determined by the date of death whereas the valuation of the property concerned in the inheritance is determined by either the date of probate or the date of death. Can I clarify if that is the case? Is there consistency in terms of the law which applies to the date of the relevant threshold and the law that applies to the date of the valuation of the relevant property? Is that the case?

That is correct.

There is consistency.

What the Deputy said is correct about the rate applying and the date of valuation.

Is there a difference in the treatment-----

It gives more flexibility to persons to order their affairs. I will read the full note.

There are two important dates that are relevant for the taxation of an inheritance. These dates are used for different purposes. First, the date of death of a disponer is the date by reference to which the group tax-free thresholds and tax rates are determined. Therefore, whatever thresholds and rates are in force on this date apply for the purpose of taxing the value of an inheritance. These rules are based on statute and are strictly applied.

Second, the date on which probate or administration is granted is generally used as the "valuation" date. The valuation date is the date on which the market value of the assets or property comprising the inheritance is established. This market value is then compared to the relevant group threshold and the tax rate applied as appropriate on any excess of the market value over the threshold. This date also determines when any inheritance tax must be paid and a tax return must be submitted to Revenue. However, as stated, the thresholds and rates in force at the date of death of the disponer apply for the purpose of taxing the value of the inheritance.

Also, for capital gains tax, CGT, purposes, where a person acquires assets as a legatee of a deceased person, that person is treated as acquiring those assets at the date of death of the deceased person.

It is a general legislative principle that tax legislation should follow general law. According to the law of inheritance an inheritor comes to own an inherited asset on the date of inheritance, rather than on any other date. This is therefore the soundest and most appropriate date for the rules relating to the rates and thresholds relating to capital acquisitions tax, CAT, which are necessarily specific and precise to apply.

The amount of time elapsing between inheritance and grant of probate can vary greatly, and can also be determined to a large extent by inheritors themselves. As such, were the rate of tax due and the tax-free threshold available to be defined by date of probate there would be considerable scope for individuals to delay probate with the hope that the CAT regime would become more favourable for them.

While I understand that there are inheritors for whom it would currently be advantageous for the tax-free threshold and rate of tax to apply according to the date of probate, as the threshold for inheritances from parents has been increased, there have been and could again be situations where the opposite is the case, for instance, when the thresholds have been reduced or the rate increased.

To apply CAT rules with respect to the date of probate would also be in conflict with the CGT provisions that treat the date of death of a deceased person as the acquisition date by a legatee for the purposes of that tax.

How stands the amendment?

I will withdraw the amendment.

Amendment, by leave, withdrawn.

I move amendment No. 73:

In page 81, line 14, to delete “€280,000” and substitute “€300,000”.

I welcome the change the Minister has made to the Group A tax free threshold; he is increasing it from €225,000 to €280,000. This proposal is to go further to increase it to €300,000. This is not an issue on which there is agreement. Different parties and representatives have different perspectives on it but it is a legitimate aspiration for elderly people in particular who wish to pass on a home or another asset to a son, daughter or other family members and it should be encouraged because, ultimately, that asset has been built up after tax income, a point often forgotten. People pay for the home and pay their mortgage from their net income, which has already been taxed.

The move the Minister has made is a significant one. It is going in the right direction but I would like to see it go further. Did the Minister examine at any stage the possibility of having a separate treatment for a home? There are provisions in law whereby somebody can inherit their parent's house tax free if they have been living in it and caring for the parent for a period of time and so forth but has the Minister examined the issue of dealing with a home separately from other assets? Also, why did he decide not to amend the thresholds that apply to the other two categories, B and C, for inheritances from wider family members?

I thank the Deputy for his support for this provision. The examination I did on the family home was to satisfy myself that persons who lived in the family home and who previously were acting as carers could inherit the family home without any inheritance tax liability.

Having established that this was the case and that the conditions attached were not very onerous, I did not move to make changes in this regard. I changed the threshold from €225,000 to €280,000 because property prices have been increasing and the cuts the Government made in the thresholds on capital taxes were made when the State and the Exchequer were in penury and the Government needed every euro it could gather. However, the provisions now are fairer, and this will be reviewed in future years if I am in a position to so do. This year, while I initially looked beyond the parent-to-child transaction, I did not have enough resources to do anything more significant. My point is that it was not because I disagreed in principle but because I thought it better to dedicate the resources I had to parent-child transactions, rather than letting it go out to those in class B and class C.

Amendment put and declared lost.
Section 64 agreed to.
Section 65 agreed to.

I move amendment No. 74:

In page 81, between lines 19 and 20, to insert the following:

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

A couple of months ago, David McWilliams presented an interesting show, broadcast on RTE, called "Ireland's Great Wealth Divide," and some of the statistics he presented were very interesting. According to the figures he presented, the most affluent 20% in the State own 73% of the State's wealth, while the poorest 20% in the State had 0.2% of the wealth of the State. By any judgment, this divide is severe and shocking. He also stated that the combined wealth of the top 5% was almost double that of the entirety of middle earners - that is, the squeezed middle. According to Revenue data, the top 1% of income earners in Ireland had an average income of €373,300 on an annual basis, whereas the bottom 90% earned approximately €27,000 per year. Members are not discussing normal times by any means. They are not talking about the 1970s or the 1980s or the normal left-right or rich-versus-poor debate. This is about a modern phenomenon of incredibly concentrated wealth in the hands of extremely few people. This has happened under the Minister's watch in recent years and many would state that it has accelerated under his watch.

The idea of a wealth tax is not new. Interestingly, the Aire made an important and true statement yesterday, when he noted that there was a difference between wealth and income. There is a significant difference between the two, and therefore there must be a method whereby both income and wealth are taxed. There is a strong body of opinion worldwide to the effect that for those who have a high level of wealth, perhaps in excess of €1 million, that is not concentrated in farms or businesses, the wealth itself can offer an opportunity to source income for the State and can be used to address the inequalities within the State. The Nevin Institute calculated, on the basis of 2013 data from the Central Statistics Office, that a wealth tax which excluded people's homes, farmland, vehicles and pensions and which was levied at a rate of 0.5% could raise approximately €400 million per annum. In a response to a question from Deputy Pearse Doherty in the Dáil Chamber a year or two ago, the Minister admitted that this was the ballpark figure. Given the catastrophic division between rich and poor and given the life-and-death challenging experiences of many people at the bottom, would it not be a good idea to accept this amendment? This amendment does not proceed as boldly as to suggest that a wealth tax should be implemented. All it seeks is for a report to be written on the options available in this regard. In other words, the Minister is merely being asked to research the options available in order that he might have the possibility of another tool in his toolbox regarding the raising of revenue.

I thank the Deputy. I do not propose to accept this amendment. The Government has no plans to introduce a wealth tax, although all taxes and potential taxation options are of course constantly reviewed. Wealth can be taxed in a variety of ways, some of which are already in place in Ireland. Capital gains tax, CGT, and capital acquisitions tax, CAT, are, in effect, taxes on wealth, as they are levied on an individual or company on the disposal of an asset, in the case of CGT, or the acquisition of an asset through gift or inheritance in the case of CAT. Deposit interest retention tax, DIRT, is charged at 41%, with limited exemptions, on interest earned on deposit accounts. The local property tax, which was introduced in 2013, is a tax based on the market value of residential properties. The domicile levy introduced in budget 2010 also constitutes a form of wealth tax. It is aimed at high-wealth individuals with a substantial connection to Ireland, regardless of whether they are tax-resident, to ensure they make a tax contribution to this country in a year of at least €200,000.

In order to estimate the potential revenue from a wealth tax, it would first be necessary to identify the wealth held by individuals. I am informed by the Revenue Commissioners that they currently have no statistical basis for compiling estimates on a potential wealth tax. Although an individual's assets and liabilities are declared to the Revenue in a number of specific circumstances - for example, after a death - this information is not a complete measure of financial assets in the State, nor is it recorded in a manner that would allow analysis of the implications of an overarching wealth-based tax. Comprehensive data on household wealth in Ireland, including assets and liabilities, were published for the first time earlier this year by the CSO. These data have been collected across the entire eurozone according to a standardised methodology. The data indicate that wealth inequality in Ireland for 2013, as measured by the Gini coefficient, is lower than the eurozone average. The results also show that wealth is less concentrated at the top of the distribution here than the eurozone average. Central Bank analysis of the data also indicates that while wealth inequality has increased since 2011, it is actually lower than in 2006, the earliest period for which data are available.

As part of the research programme agreed between my Department and the Economic and Social Research Institute, ESRI, covering macroeconomic and taxation issues, a research project involving detailed analysis of wealth distribution and taxation has been included. It is intended that this research project, based on the household finance and consumption survey, HFCS, published this year by the CSO, will commence shortly. A number of the issues highlighted by the amendments proposed by Deputies Pearse Doherty and Richard Boyd Barrett, including the estimation of the potential tax base and the yield of a wealth tax in Ireland, already feature as part of the work planned for the project. It should be noted that the data gathered by the CSO as part of the HFCS were not collected for the purpose of calculating the potential yield from a wealth tax but to collect general information on the financial situation and behaviour of households.

My Department will monitor and consider any additional information and data that come to light and will continue to examine potential taxation sources, as I stated at the beginning of this reply.

I do not intend to accept the amendment.

The Deputy referred at length to Mr. McWilliams's television programme. Mr. McWilliams relied heavily for his data on a Credit Suisse report but that report indicated that much work remained to be done to refine estimates of wealth in a country. I do not know whether the television piece was completed before the CSO report was published in January but Mr. David McWilliams did not reference it. I refer to the report on the household finance and consumption survey which was published by the Central Statistics Office in January 2015. It presented the results of the household finance and consumption survey I referred to already. The survey was carried out between March 2013 and September 2013 on behalf of the Central Bank. Such surveys were carried out across Europe. The main highlights of the report were that a household's main residence accounts for the majority of most households' gross wealth at 48% on average. Financial assets account for a much smaller proportion of gross wealth at an average of 13%. More than half of households hold some form of debt, with mortgage indebtedness proving to be a particularly heavy burden for young cohorts. However, the mortgage repayment burden is more evenly spread across the age distribution, with younger borrowers benefiting from lower interest rates and long mortgage terms. The median value of net wealth is €105,000. This is in line with other European countries where the average is €109,000. The top 20% of households hold 70% of net assets, which is similar to the position in other European countries. In Ireland, the concentration of wealth at the top end of the distribution is driven by two factors, namely, larger holdings or real assets and relatively smaller holdings of debt. As such, a great deal of the Deputy's argument was based on incorrect facts. It is not his fault they are incorrect, they come from other sources.

As the Minister has referenced the report, I ask that his officials send it to the committee's secretariat and I will circulate copies to the members.

We can access that for the committee. I presume it is on the CSO's website. I am not criticising Mr. McWilliams. It was January 2015 and the lead-in time to the broadcasting of television programmes can sometimes be quite lengthy. As such, the data may not have been available when the programme was filmed. However, it casts a totally different light on the distribution of wealth in Ireland. Anybody who is pursuing the option of a wealth tax should remember that, on average, 48% of a household's gross wealth is the family home. We have already taxed the family home with the local property tax, a move on our part with which some of the Deputies do not agree.

We can try to "out-data" each other here all day.

That is not what we are doing.

If one goes to the CSO's household finance and consumption survey report-----

The Deputy is missing the point. It is a very clever debating point but it is not accurate. I am not trying to "out-data" anybody. I am saying that there is domestically-generated CSO data from January of this year which was not used in the Deputy's main reference, namely, Mr. McWilliams's television programme. Once the current data from the CSO are taking into account, Mr. McWilliams's programme, which was based on the incomplete Credit Suisse data, looks rather exaggerated. That is the point I am making.

Even if one was to go on the CSO data from the household and finance consumption survey, it indicates that the top 20% of income earners hold 40% of the wealth. That is equivalent to the bottom 20% of the income distribution. Even on those figures, wealth distribution is grossly lopsided.

The Deputy said he accepted what I said yesterday to the effect that income and wealth are different. Now he is using income data to prove a wealth divergence. That is not logical.

Perhaps I have not made myself clear. The CSO references those in the top 20% of the income distribution having 40% of the wealth. The CSO crosses the two items there. It says that those in the bottom 60% of the income distribution are at the same level of wealth. That is approximately two thirds. The top 20% in the income distribution has three times the wealth of the bottom two thirds. Even on the basis of the figures to which the Minister refers, there is no doubt that we have a lopsided wealth distribution. By the Minister's own admission, it has got worse since 2011 when he took office. That was one of the first things he said.

I have been a Deputy for four and a half years. Approximately two years ago the Minister admitted the need for a budget costings office which Opposition parties could use to develop and cost alternative proposals. Such a service would improve the quality of the budgetary debate and avoid the same old arguments about how Opposition proposals are not properly costed. We could then discuss real figures and real policy differences. That has not happened. One of the outcomes of acceptance of the amendment before us would be to allow us to begin examining the options available with regard to a wealth tax. The Minister mentioned that we were in penury a while ago and said that every single available cent was chased. He also said that capital gains tax is a wealth tax. That tax was reduced in the budget. There were changes regarding a capital acquisitions tax, which led to it also being reduced. The Minister also referred to the property tax. The latter is a blind and blunt asset tax. People who own houses worth €200,000 on which they owe €400,000 come to my office on a weekly basis. They are being taxed at the same rate as those who own similar houses debt free. There is a blindness there. It is not a smart tax. It does not identify the differences in the wealth of individuals.

A woman in my constituency had her home heating oil stolen from her tank during the summer. For the next few months she got up late in the morning in order to skip breakfast, ate lunch in her own home and went to her daughter's house for dinner. She would not have had enough money to pay for the oil without making those savings. Some people are on the edge of existence yet they are subject to a blind and blunt property tax which they pay the same rate as the millionaire next door who owns a yacht. All we are saying is that we should be developing smart taxes which take into account the real worth of an individual and which take account of the fact that if a person is extremely wealthy and has deep pockets, he or she should contribute a little more. That is why I tabled the amendment.

I have no objection to the Deputy and his party bringing forward proposals for taxes. In so far as the Department of Finance can cost them for the Deputy, it will do so. However, I pointed out in my initial reply that there is no database of the wealth of the nation within any State agency, including the Revenue Commissioners. It is very difficult to construct a tax if one does not know the base to which it applies. The positions the Deputy has taken up are exaggerated because the distribution of wealth in Ireland is fairer than in most countries across Europe. The CSO's research proves that. It also shows that the position now is more fair than it was in 2006 when the first data became available.

It is not deteriorating. The Deputy makes the comparison with 2011. The reason the situation is different from 2011 is that the policies pursued by the Government have caused a recovery in the economy and the recovery is happening rapidly. Part of that recovery is a growth in asset prices. As the Deputy says, people on the top incomes tend to have more assets than people on low incomes. As a consequence, their wealth increases because the value of their assets increases. That is not a deliberate action of the Government; it is a consequence of the success of the Government in getting the economy out of hock and getting it to grow at rates of 6.2% in net terms in 2015. The Deputy is right to say that 20% of the top earners have 40% of the wealth, but the same 20% pay 80% of all the taxes. Any analysis of Irish society shows that it has one of the fairest tax systems in the OECD. Many of the rhetorical points the Deputy makes are exaggerated. That is not to say that his party is not fully within its rights to propose a wealth tax to the electorate, but it needs to make sure that it knows the asset base on which it is applying the wealth tax, especially if it is omitting family homes, as 48% of all wealth is in the value of family homes.

We will not agree on the idea of a wealth tax, but every manager in the State knows that one cannot manage if one cannot measure. If the Government does not collect the information, it cannot manage this issue properly either. It is quite shocking that the Government does not know the wealth of the nation. It does not know the wealth in the hands of the people of the State. That means it is blind to one of the biggest economic aspects of running the country, and if it does not know that information it cannot manage that process properly. It is not an argument for non-collection; it is an argument for the collection of that information. If the Nevin institute can work that out from the 2013 CSO data, surely the Government can put in place some level of information to collect. We might disagree on the wealth tax but, at the very least, can we not agree on the necessity to manage the affairs of the nation with the information at our hands?

The Deputy is opening up a very wide debate on the theory of governance and how much the State should know and acquire information about its citizens. If someone has a Picasso hanging in their bathroom, should the State know about it if the person who purchased the Picasso-----

Their insurance company will know about it.

-----did so with after-tax income? This is huge debate in the United States about whether there should be big or small government and to what degree the state should have files of data on everything about its citizens. It is a different theory of governance.

The Minister has jumped from economic management and knowing the facts to holding files on everything about people. That is not what we are discussing.

That is what the Deputy said. He said-----

The Deputy made a criticism of the governance of the State on the basis that we did not know the exact wealth of each citizen. I do not see that as a criticism.

I believe that 95% of the population would.

I doubt it. Perhaps they would want it to know about their neighbours, but not about themselves.

Absolutely. There are a number of points I want to make. For some time we have been arguing for a wealth tax. In our pre-budget submissions I quoted extensively from both the most recent Credit Suisse report and the one before that to press the argument for a wealth tax. The Minister comes back with the same arguments each year. To some extent we are on ideological terrain, because the Minister just does not believe in doing this, but it is worth responding to some of the points he has made. There is a distinction between wealth and income. That is absolutely true. Sometimes when we talk about the need to tax wealth and higher incomes, other Government spokespeople - not so much the Minister - blur that distinction for political and rhetorical purposes. We are very clear about the distinction and believe we need to capture extra revenue for the State from higher incomes and wealth from capital and financial transactions. We are very clear on the distinction, as I am sure the Minister is, so he should not misrepresent our view on this. I said to the Minister yesterday that there is a connection between income and wealth. It is spelt out in the Credit Suisse report - if the Minister has read it - and it is obvious if one thinks about it. They are not the same thing but there is a connection. Credit Suisse makes the point explicitly in its report that those who receive higher incomes over time generate wealth because-----

That is very simple - because surplus income is converted to wealth in normal situations.

Absolutely. I thank the Minister for making my point for me. Only a tiny group of people has surplus wealth. That is critical. Only a very small group of people has surplus wealth. Most people have debt. That is what they have. The owe money. When income, wealth and assets are set against liabilities, for most of their lives most people are operating in negative territory. For a small minority of people, that is not the case. We are trying to get at the very small group that has extraordinary wealth. That is also linked to the fact that they have very high incomes, so they have surplus wealth every year that they can translate into wealth, as the Minister put it. That wealth becomes self-perpetuating. If someone has a lot of money, a million quid, it makes money for them. They just sit there and watch it accumulate. As the Minister pointed out, it is not just property. We understand the distinction, but the point is to get at that accumulated wealth.

The Minister says that for the majority of people the wealth they have is primarily made up of the family home. This is obviously by way of justification of the property tax. That is true for the majority of people but when one reaches the top 5%, or the top 1%, that is no longer true. Their family homes are a much smaller proportion of their overall wealth, which is made up of commercial property interests, big investments and cash. The purpose of a wealth tax is to capture that. Even on the most conservative assessment of wealth distribution, as the Minister has set out with the CSO report, if we accept that the top 20% - approximately 300,000 people - have 40%, a conservative estimate is that they have €151 billion, most of which is assets other than family homes. That is the point. One will find that the concentration is even greater when one gets to the top 10%, but with that top 20%, the €151 billion that they have consists mostly of commercial property or financial assets. If a 2.5% tax was put on that €151 billion owned by the top 20%, it would raise €1 billion a year.

They would still end up wealthier at the end of each year if a wealth tax at a rate of 2.5% were levied on them annually; it is just that the growth of their wealth would be slowed down. The average increase in the value of that wealth, accounting for investments, etc., is probably running at 4% to 5%. Those affected would still end up better off, but the accumulation and concentration of their wealth would be slowed down. It would be a very significant boon to the Exchequer. Why would the Minister not even consider opting for this, or even a measure that was a little more conservative? We suggest a rate of 2.5%, but even a slightly more conservative rate would result in a few hundred million euro. Why would the Minister not even consider this as a source of revenue rather than unloading a regressive property tax on those who cannot afford it?

As I said to Deputy Peadar Toibín, Deputy Richard Boyd Barrett is at liberty to argue the case and put forward proposals to the electorate. I just disagree with him, but I am also pointing to the difficulties in his construction. We have wealth taxes - capital taxes - and they are imposed at high rates. If one transfers property or anything else to somebody else, there is gift tax at a rate of 33%, with very low thresholds. On inheritance, one pays at a rate of 33%, with very low thresholds, particularly if one is not in the direct line of descent. There is also the property tax, to which I referred on a number of occasions.

I do not understand socialism in Ireland. If one was to search the world, one would not find a group describing itself as socialist that refused to tax property. I do not get it. The Deputy requested that we not tax property. The property tax is on all property, but the Deputy will not tax the big mansions in which those against whom he targets most of his rhetoric live. They comprise the wealthy, multimillionaires or those with all of the wealth he describes so graphically, but he opposes me when I tax big mansions. I hope to convert him as time passes. At least Deputy Paul Murphy has now paid his property tax, which is an advancement on what has happened. He probably has a date in 2017 with a circle around it on the calendar on which he will pay his water charges.

I do not understand Deputy Richard Boyd Barrett's position and I am forced into wondering whether, for populist reasons, he is afraid to tax property. I wonder why he would not do the simple thing and tax property. He opposes doing so. The party the members of which are beside him proposes to remove property tax when it gets into power, yet property tax is a tax on fixed assets. All wealth taxes are on assets. The most effective wealth taxes, if there are effective wealth taxes, are on fixed assets. The proposal from the Deputy is that family homes, including mansions, be exempt. According to Sinn Féin, land would be exempt. What fixed assets are left? One could tax liquid assets such as cash in the bank, but DIRT is paid on them already. For how long does the Deputy believe the money would stay in the Irish banks if one was to levy a tax on it at a rate of 2.5% or 3%? For how long does he believe there would be share transactions in the Irish Stock Exchange if share capital value were to be levied on the basis of his belief that it constituted wealth? What is his position on pension funds? I placed a levy on pension funds to provide me with the resources to reduce the rate of VAT in the hospitality sector from 13.5% to 9%. I introduced it as a temporary measure, but there was outrage among the Opposition. It was opposed to left, right and centre and I was told I could not do it. It was an effective wealth tax, but, again, it was opposed.

The Deputy is against every wealth tax, except some mythical one that applies to very little or assets that will move. He should go back to the drawing board and come up with realistic propositions. Sinn Féin is seeking to exempt so much from the wealth tax it proposes that I do not know exactly to what wealth it would apply. I notice that it did not exempt farmyards, although it exempted land. Dairy farmers would need to look out for this because bulk tanks, equipment and machinery constitute quite a lot of wealth on a farm. Now that I have mentioned it, I suppose another exemption will be proposed when the wealth tax is refined.

I disagree with what the Deputy is doing. He does not propose the obvious steps such as building on the wealth taxes we have and supporting a property tax such as the one in place. He should agree with a levy on pension funds such as the one we had, although I removed it completely. That gave me the resources I needed to do a good job for the tourism industry, yet the Deputy keeps talking about a wealth tax that would bring in hundreds of millions of euro. He will not do the obvious.

All sides are diverging from what we are discussing. This is not about the specific merits of a wealth tax but about the amendments. May we all focus on them or we will be here long after the allotted time? May we, please, stick to what the amendments are about?

Yes. The amendment is about compiling a database on wealth. Obviously, this is proposed with a view to having a possible wealth tax.

We have heard the arguments since 2 p.m. yesterday and long before then.

We have not. Is that not what the Finance Bill is for?

I can help the Deputy on that point. The Department of Finance has agreed a multi-year joint research programme with the ESRI on taxation policy and the macro-economy. Under this research partnership, economists in my Department will work alongside ESRI researchers on various new tax-related research topics aimed at gaining a better understanding of the links between various taxes, including a possible wealth tax on economic performance.

Yippee. The Minister is doing that, although he said it would be very difficult to do.

What I said was there was no base for a wealth tax available anywhere in the country, but we constantly upgrade our research.

Is the Deputy happy with that response?

I just want to make a point to the Minister on collecting the data. In responding to the suggestion we collect data on wealth I must re-emphasise that we are focusing, in particular, on those at the very top, not the ordinary person who has a house. I refer to those with multiple properties and vast financial and other assets. They are the people at whom we are trying to get. The Minister says he or people might balk at collecting data for each individual, but that happens all the time in the case of the ordinary citizen. If the poor apply for a social welfare payment, they are means-tested forensically on their income and assets before receiving it. The Minister has the information on property through the property tax system. He has gathered it.

The second home tax was progressive. It was levied on properties one had, in addition to the family home. We could reinstate and increase that tax and consider the property assets in question and their concentration. It would be interesting to see who owned multiple properties and ascertain what tiny group of investors and property owners owned multiple properties. We would find there was a heavy concentration in this area. We should direct taxes at those who are generating considerable revenue and have an appreciating asset because of concentrated ownership of large amounts of property. There is nothing to stop the Government from gathering information that would allow us to have a wealth tax targeted not at family homes but at the very wealthy, or those who have many financial and property assets above and beyond the family home.

First, the local property tax is a tax on all property and so it includes multi-property owners, as described by the Deputy.

It does not differentiate.

To differentiate and isolate multi-property owners would not be, I suggest, to target the very wealthy. Many second homes are holiday homes that are owned by retired people and are located around the coast in places like Wicklow, Wexford, Connemara, Kerry and Donegal.

I know that. It would be easy to establish who owns three, four, five, ten, 15, 20 or 50 homes. There is a big difference in that regard.

Many of these houses are holiday homes bought by retired public servants through their pensions. That is the Deputy's definition of the wealthy. As well as that, since the famous Supreme Court case taken by a former President when practising at the law, a caravan is a residence rather than a vehicle such that mobile homes and caravans would be included as well. The Deputy needs to examine his data.

That is not what we are talking about.

The Deputy referred to a tax on second residences.

I said the information is available to the Minister.

We need to move on.

There are a suite of assets that could be included.

For example, all income from savings in excess of €1 million per annum; stocks and shares and all other financial products in public companies; shares in private non-trading companies; and land, buildings and second and subsequent homes. The Minister referenced second and subsequent homes. If the Minister were to abolish the property tax and impose a €400 tax on second homes, a person who owns two homes would be a net saver under the Sinn Féin policy because instead of paying €300 property tax on the first home and €300 in property tax on the second home he or she would pay only €400 on the second home. What is being proposed would only apply in respect of multiple homes. The key issue is that the wealth of a family in terms of the price of a house suffered a massive rupture because of the housing crisis, which rupture has not been experienced anywhere else in the world. As a result, property prices are not a good analysis of the wealth of a family. The Minister has frozen the property tax this year because he knows that the value of property over the next couple of years could increase so much it would be out of all proportion to the wealth of the family. That freezing of the property tax is an admission that the tax is a blind, blunt instrument to identify the wealth of a family, which does not take into consideration the debt of a family.

There is an ideological reticence within the Fine Gael Party to take money from those who are extremely wealthy in this country and to invest that money in services for those who are extremely poor. That is the bottom line. That cannot continue. The Minister can dress this up any way he likes but it cannot be hidden from people. I propose to press the amendment.

How long does the Deputy think deposits in excess of €1 million would remain in banks in Ireland if people were hit with a property tax of 3% or 4%? How long does the Deputy think those deposits would remain here in these days of electronic transfer of money?

Put in place capital controls.

This happens in France and Norway.

Deputy Boyd Barrett is visiting Greece too often.

I no longer have the money to do it.

I must refresh myself on Sinn Féin's wealth tax proposal because the last time I read it, it contained a proposal in relation to the exemption of land. During his contribution just now Deputy Tóibín included land in the list of assets in respect of which the wealth tax would apply.

I was referring to working land.

Working farmland, livestock and bloodstock would be exempted from it.

What does the Deputy mean by "working farmland"?

Working farmland, as understood in the context of approximately 200,000 farms in this country, is land on which a number of agricultural products are produced and from which income is derived for a family.

If the advised stocking level of a farm is 60 cows and associated calves, is the land of an elderly couple living on a farm which has 15 cows rambling around it working land?

The Minister can get Jesuitical on the differences but his Department is sufficiently resourced and staffed-----

My Department is not making this proposal.

No, but the departmental staff are sufficiently skilled to be able to differentiate between working farmland of a family and an asset held by a wealthy person in order for it to appreciate. Currently, banks of land throughout this country are being held by developers in the hope that they will increase in value such that when they build on it they will be able to maximise their profit levels. There are many examples of land-----

I thought the position of Sinn Féin was that the price of zoned land is too high and is making too big a contribution to the cost base of ordinary starter homes such that we need to reduce the price of land for starter homes rather than increase it by imposing a 4% tax on it.

Amendment put and declared lost.

Amendments Nos. 75, 76 and 78 are related and will be taken together by agreement. Amendment No. 77 has been ruled out of order.

I move amendment No. 75:

In page 81, between lines 19 and 20, to insert the following:

"66. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on options for the abolition of the Local Property Tax.".

There is no point rehashing the debate we have had thus far. Amendment No. 76 provides that the Minister report on the cost of the proposed freezing of the local property tax and the likely property prices in 2019. We are dealing with a method of taxation of families which is unstable. To stabilise it in the election cycle the Government had to freeze it. I would like to know the likely cost of the property tax freeze and likely property prices in 2019.

Amendment No. 78 deals with an issue of significant importance to a large section of our population. The amendment provides:

The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on options on extending the exemptions from the Local Property Tax to residents in buildings unsafe because of fire safety regulations or other structural issues.

The Minister will have a lot of experience of people with regard to pyrite. These are people whose homes, because they are crumbling, have almost zero value. My understanding is that if following the carrying out of a particular test a house is identified as having significant pyrite damage, the owner can seek an exemption from the local property tax on that basis, and that the exemption applies for only six years. As such, in terms of the cost of the test, the exemption is useless. There are other people similarly affected, for example, the people of Longboat Quay and Riverwalk Court, which is in Meath. These people are living in houses that are practically valueless because they do not meet necessary standards. Would it not be useful to extend the exemption to these individuals? Deputy Doherty has constituents in Donegal whose houses contain muscovite mica, and similar to those affected by the pyrite disaster, they have lost confidence in living in their houses or else the value of their properties has dissolved.

The intention is to retain control of the property tax such that it does not become a type of automatic imposition on households because the price of houses throughout the country or in one part of it rises unexpectedly. That is the purpose of the decision. The revaluation date was due in November 2016. We will now defer it. It is difficult to estimate the potential loss because determination of that requires insight into the expectations of the percentage rise in value up to 2019. It is difficult to give the Deputy a figure in this regard but it is probably in excess of €100,000 or €125,000 on average. That is a very loose estimate because, as I said, it may be the case in 2017 or 2018 that house prices have stabilised. If appeared last year that there would be a continuing rise. I cannot give a realistic estimate. That can only be done retrospectively from 2019.

On the pyrite issue, I answered a question this morning in the Dáil which set out the position in this regard. The Government has accepted the proposals of Dr. Don Thornhill in respect of pyrite-affected houses as set out in his report.

I published the report in the documents accompanying the Budget Statement. Effectively, it is no longer necessary for a householder to have an expensive assessment, which might cost €2,000, carried out, especially when the benefit is much smaller than the cost of acquiring it. It will be done on a self-assessment basis. The Revenue Commissioners will accept the Thornhill recommendations on an administrative basis in the first instance, pending legislation being passed to give it the statutory basis that is required. In the next two weeks the Revenue Commissioners will publish a protocol setting out the position, to make it easier for persons whose family home is affected by pyrite to claim the exemption from property tax.

Regarding the other categories of houses mentioned by the Deputy, such as those in Donegal and Longboat Quay, the local property tax is self-assessed. If somebody decides that his or her house is of very low value - and I presume no house has nil value - that is what he or she should return to the Revenue Commissioners. The tax is based on the value as self-assessed. The legislation governing the administration of the local property tax provides for a limited number of exemptions from the tax. There is no specific exemption for properties affected by mica and there are no plans to introduce such an exemption. 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. When making an assessment, issues such as the presence of the mica will be one of the factors that a property owner should take into account in valuing the property.

If somebody is claiming their house is worth very little because it has a mica problem, it would be prudent for the householder to indicate this when returning the property return to the Revenue Commissioners and to provide some evidence that this is the case. Otherwise, the Revenue Commissioners might revert to them if comparable houses in the area were paying significantly more in property tax and the discrepancy could not be explained from the Revenue Commissioners' perspective.

I welcome the changes with regard to pyrite. The latter was a brake on families proceeding in that direction.

I worry about the self-assessment element. Many of the people in Riverwalk Court, Longboat Quay and in Donegal suffering as a result of the impact of muscovite mica are under fierce stress already. One's home is one of the foundations of one's well-being and if it is unsafe or is crumbling, that can have a massive impact in the context of stress. In addition, self-assessment is very stressful. Most business people or self-employed people who use the Revenue online service to carry out the self-assessment can be very stressed about being correct that their liability is X or Y. Even if they are entitled to money back, they second, third and fourth-guess themselves to ensure they have done it right. They wonder if they will get stuffed three or four years hence if somebody carries out an audit. They also wonder whether they should leave money aside in case they have not paid enough thereby ensuring that if they are audited, they will not fall into arrears with the Revenue Commissioners.

The good news is that the Minister sees that a person who lives in a nearly valueless house should not have to pay property tax on it. Would it not be easier for everybody if a black-and-white understanding could be given by the State to people living in these houses that this is the case, and that it is one of the stresses and strains they do not have to deal with this year as a result?

I am advised by the Revenue Commissioners that it is not possible to provide a prescriptive set of criteria that a property must meet to be treated as not suitable for occupation as a dwelling house. They cannot provide the black-and-white criteria the Deputy seeks. However, the test for liability for property tax is whether the house is occupied. If the damage is so severe that people have moved out, there is no liability on the property. Once it is occupied, there is a liability for property tax and the question that arises is how much should be paid. That depends on the valuation and the valuation is a self-assessment exercise. However, the Revenue Commissioners have oversight of that and they might get back to somebody who has included a much lower valuation compared with the value of other houses on the road. There are auctioneers and valuers all over the country and they do not charge much. The auctioneer in a local village will write a statement of what they think the house is worth on the market and can outline that the reason they believe its value is lower than all the other houses on the street is because of severe damage due to X or Y. That is the process. It should work and I believe it will.

With regard to the postponement of the revaluation date until 2019, which I welcome, what is the status of properties that were bought and came on stream since the last valuation date in 2013? How will a first-time buyer who purchases a new house in 2015 be treated in the context of LPT?

They will not have a liability until the next valuation date. One might argue that this is unfiar. If, however, one considers factors such as time of purchase, negative equity and the bad times we have come through, then one can put it down to good fortune.

Will the legislation be introduced next year?

If possible, I will legislate on the revaluation date and the pyrite issue before Christmas but the agenda is becoming very crowded. The Dáil is scheduled to return after Christmas and the amending legislation is only a couple of sections. With the Deputy's and the Opposition's help, it should not take much time to process. However, it is important to do it because we should give it a legislative basis.

Amendment put and declared lost.

I move amendment No. 76:

In page 81, between lines 19 and 20, to insert the following:

“66. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the cost of the proposed freezing of the Local Property Tax and the likely property prices in 2019.”.

Amendment put and declared lost.
Amendment No. 77 not moved.

I move amendment No. 78:

In page 81, between lines 19 and 20, to insert the following:

“66. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on options on extending the exemptions from the Local Property Tax to residents in buildings unsafe because of fire safety regulations or other structural issues.”.

Amendment put and declared lost.

I move amendment No. 79:

In page 81, between lines 19 and 20, to insert the following:

"Impact of Budget

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

I acknowledge the fact that on budget day the Department publishes with the budget booklet tables which show how different families are affected by the budget measures and which focus, in particular, on the taxation side. Account is also taken of some welfare changes. This year the tables give examples of families with children and the increase in child benefit is taken into account. However, my argument, especially in view of the expenditure cuts in recent years, is that there is no holistic measure of the impact of the budget on different family types and people in different circumstances, be that as regards gender, income, age, marital or disability status. The ESRI publishes a report on the distributional impact in terms of tax, welfare and public service pay policy, and the Minister has taken issue with some aspects of that. To put that issue to bed, I strongly recommend that the Departments of Finance and Public Expenditure and Reform jointly publish a comprehensive analysis of the impact of the budget. The tables that are published on budget day are a help.

They go some way towards it, but they do not take account of the full distributional impact. If the Minister is not going to accept in full the ESRI analysis, which he has not done in recent years, then the Government should take responsibility for publishing its own.

The ESRI did state that the first four budgets of the Government were regressive and it also stated that in budget 2016 the bottom 20% received the least. Someone on €28,000 received little. We had the USC debate yesterday about the difference between those at the top and at the bottom. Social Justice Ireland said that somebody on social welfare was not getting the same level of help or support as someone earning €50,000.

By any measure, equality budgeting is an internationally accepted method of dealing with inequality and poverty. I do not believe anyone on the Government benches who would claim there is not inequality or poverty in this country. Approximately 60 countries either use equality budgeting or are in the process of doing so. Such countries include England, South Africa, Canada and African countries such as Tanzania and Uganda. This is not some kind of new dawn that we are asking the Minister to introduce. We are not asking him to develop anything other than something that is tried and tested. One benefit is that the Minister would not have to listen to me or other Members belly-aching after a budget because he could point to the fact that the equality budgeting objectives had been met. I would be interested to hear why exactly the Government opposes the amendment.

I thank the Deputies. A substantial amount of analysis covering some of the groups the Deputies have listed has already been published. The Department of Social Protection has, on 4 November last, published a social impact assessment of the welfare and income tax measures in budget 2016. The social impact assessment was completed in consultation with the Department of Finance in respect of the income tax elements of the budget and is consistent with my Department’s analysis of the impact of the budget package.

Using the ESRI’s tax-welfare simulation model, SWITCH, the social impact assessment includes a breakdown between the impact of tax and welfare measures respectively, as well as presenting the overall distributional impact of budget 2016 by income group and family type. It also examines the impact of the budget on the at-risk-of-poverty rate and on work incentives, as well as the impact of the change in the minimum wage.

Expansion of the SWITCH model has also enabled the incorporation this year of investment in the early childhood care and education scheme into the social impact assessment. The distributional impact by family type in the SWITCH model facilitates comparisons between the distributional impact of the budget on families with and without children, by employment or retirement status, and for lone parents. All of those are presented in the social impact assessment.

At this time, it is not possible to use the SWITCH model to assess the impact of the budget on groups of people based on their disability status. As I have pointed out previously, there are already significant efforts under way to expand the capacity of the model. This is evidenced by the work which has allowed modelling of medical cards and the early childhood care and education scheme.

For further information, the budget book includes a range of material addressing distributional issues and explaining the impact of budget 2016. A series of tables shows the impact of budgetary measures at a range of income levels for different income earners. A variety of illustrative cases provide examples of the change in net income for sample household types. The extent to which income is redistributed through the tax and welfare system and the progressivity of the income tax system are also addressed in the budget documentation. On the basis that the analysis proposed in the amendment is already published, I do not propose to accept the amendment.

Amendment put and declared lost.

Amendments Nos. 80 to 82, inclusive, are related and may be discussed together.

I move amendment No. 80:

In page 81, to delete lines 29 and 30.

These amendments relate to section 66. The amendments, which are technical in nature, are required to deal with a number of issues which have been brought to the attention of the Revenue Commissioners. I commend the amendments to the committee.

Amendment agreed to.

I move amendment No. 81:

In page 82, to delete lines 2 to 7 and substitute the following:

“ ‘return of value’ means the dividend paid in respect of fully paid bonus C shares issued to shareholders in the company in accordance with the terms of a return of value and related share consolidation which was completed by the company on or about 20 March 2015.”.

Amendment agreed to.

I move amendment No. 82:

In page 82, line 9, after “value” to insert “in respect of shares where an election to take B shares was made”.

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

Before we proceed, would the Minister and members like to take a ten-minute break?

How long do we have left? Is it about an hour?

We are due to finish this session at 5 p.m., but if we take a break now we could extend the finish time if we need an extra ten or 15 minutes.

Okay, that is fine.

Is it agreed that we take a ten-minute break? Agreed.

Sitting suspended at 3.45 p.m and resumed at 4.05 p.m.

I move amendment No. 83:

In page 82, between lines 30 and 31, to insert the following:

“(b) in section 5 by inserting the following after subsection (1):

“(1A) In the Capital Gains Tax Acts, any reference, howsoever expressed, to an individual—

(a) being a man, a married man or a husband, shall be construed as including, as necessary, a reference to a woman, a married woman or a wife, and

(b) being a woman, a married woman or a wife, shall be construed as including, as necessary, a reference to a man, a married man or a husband.”,”.

Section 67 inserts a new interpretation section into the Taxes Consolidation Act to ensure the references to marriage throughout the taxes Acts are interpreted in a gender-neutral manner, thereby facilitating the tax assessment of same-sex married couples in the same manner as other married couples. This amendment addresses a drafting oversight by clarifying that this section also applies to capital gains tax.

Amendment agreed to.
Section 67, as amended, agreed to.
Section 68 agreed to.

I move amendment No. 84:

Amendment of section 851A of Principal Act (confidentiality of taxpayer information)

69. Section 851A of the Principal Act is amended in subsection (1) by substituting the following for the definition of “professional body”:

“ ‘professional body’ means—

(a) an accountancy body that comes within the supervisory remit of the Irish Auditing and Accounting Supervisory Authority,

(b) the Irish Auditing and Accounting Supervisory Authority,

(c) the Irish Taxation Institute, or

(d) the Law Society of Ireland;”.”.

Amendment No. 84 inserts a new section 69 into the Finance Bill to amend section 851A of the Taxes Consolidation Act 1997, which contains provisions relating to Revenue’s treatment of confidential taxpayer information. The purpose of this amendment is to allow Revenue to report unprofessional conduct by solicitors, in acting on behalf of taxpayers, to the Law Society so that the Law Society can carry out an investigation into the alleged misconduct.

Section 851A provides reassurance to taxpayers that personal and commercial information received by Revenue for tax purposes is protected against unauthorised disclosure. The authority to disclose taxpayer information requires a specific statutory basis and the use to which the disclosed information can be put by the recipient of the information is prescribed by statute.

One of the circumstances in which it is permitted to disclose confidential taxpayer information is where a Revenue officer is satisfied that the work of a tax adviser acting on behalf of a taxpayer does not meet the professional standards of the professional body of which the person is a member. Thus, for example, a Revenue officer may disclose taxpayer information to the Irish Taxation Institute so that the institute can investigate whether the alleged misbehaviour of one of its members has breached its professional standards.

Section 851A defines “professional body” as those accountancy bodies that come within the remit of the Irish Auditing and Accounting Supervisory Authority and the Irish Taxation Institute. This amendment includes the Law Society in the definition.

The current situation whereby Revenue can report unprofessional conduct by certain tax professionals but not solicitors is a source of grievance for those tax professionals who are not solicitors because of the perceived competitive advantage it gives to solicitors in the provision of taxation advice and related work. In so far as possible, I would like to see a level playing field between all tax advisors and I consider that this amendment will contribute to this. I recommend this amendment to the committee.

If the Legal Services Regulation Bill 2015 is enacted and a new legal services regulatory authority is set up, will that need to be named in this section or does it step into the shoes of the Law Society in respect of certain investigations it might do?

This is not a new issue but one that Revenue has been considering for some time, and it has been discussed with the relevant professional bodies. Originally, it was considered that the provision should be included in the Legal Services Regulation Bill 2015, under which the new legal services regulatory authority must be established and to which Revenue would report unprofessional conduct by solicitors. However, the timeframe for enactment of that Bill became increasingly uncertain and it was considered preferable to instead include a provision in the Finance Bill 2015, which has a more certain enactment date.

Amendment agreed to.
Section 69 agreed to.

Amendments Nos. 85 to 87, inclusive, are related and may be discussed together by agreement.

I move amendment No. 85:

In page 87, line 26, to delete “(1) This Chapter” and substitute “This Chapter”.

I propose to discuss amendments Nos. 85 to 87 together. These amendments relate to section 70 of the Bill, which inserts a new section 898S into the Taxes Consolidation Act to provide for the repeal of the EU savings directive, subject to ministerial order.

As the repeal of the EU savings directive was formally adopted by ECOFIN on 10 November 2015, a ministerial order is no longer required to commence the repeal. Amendment No. 87 therefore deletes the commencement provision in section 898S(2). Amendments Nos. 85 and 86 are consequential to this deletion.

Amendment agreed to.

I move amendment No. 86:

In page 87, line 32, to delete "section 891F." and substitute "section 891F.".".

Amendment agreed to.

I move amendment No. 87:

In page 87, to delete lines 33 and 34.

Amendment agreed to.
Section 70, as amended, agreed to.

I move amendment No. 88:

In page 89, to delete line 34.

This amendment relates to section 71 which is concerned with Revenue powers. This section in its current form is stated to take effect on 22 October 2015, the date of publication of the Bill. This is a drafting error. As the provision relates to Revenue powers, it will in fact take effect when the Bill passes into law and no earlier. This amendment removes the reference to 22 October.

Amendment agreed to.
Section 71, as amended, agreed to.

I move amendment No. 89:

In page 90, between lines 33 and 34, to insert the following:

"(2) This section shall come into operation on such day as the Minister for Finance may by order appoint.".

The purpose of this amendment is to provide that section 72 will be subject to a commencement order. Concerns have been raised about the ability of persons who file returns to obtain and report the additional information that is required in time for the next return filing date. As such, I propose to defer immediate implementation of the change and will bring the new reporting requirements into effect at a later date.

Amendment agreed to.
Section 72, as amended, agreed to.
Sections 73 to 76, inclusive, agreed to.

I move amendment No. 90:

In page 93, line 16, after "Health" to insert "and the Data Protection Commissioner".

This amendment provides that the Data Protection Commissioner shall be consulted when regulations providing for the disabled drivers and disabled passengers fuel grant are made. This will assure the Data Protection Commissioner and the public that the data protection protocols contained in the regulations are of the highest standard. My officials are drafting regulations to introduce the necessary legislative underpinning for the fuel grant. They have been working with officials from the Office of the Data Protection Commissioner and will continue that work. I intend to sign the regulations shortly after the Bill is enacted.

Amendment agreed to.
Section 77, as amended, agreed to.
Sections 78 and 79 agreed to.

Amendment No. 91 in the name of Deputy Richard Boyd Barrett has been ruled out of order.

Amendment No. 91 not moved.
Sections 80 and 81 agreed to.

Amendment No. 92 in the name of Deputy Pearse Doherty has been ruled out of order.

Amendment No. 92 not moved.
Sections 82 and 83 agreed to.

Amendments Nos. 93 and 94 are related and may be discussed together.

I move amendment No. 93:

In page 95, between lines 21 and 22, to insert the following:

"Amendment to Section 10(A) of the Finance (Local Property Tax) Act 2012

84 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.".".

Amendment, by leave withdrawn.

I move amendment No. 94:

In page 95, between lines 21 and 22, to insert the following:

"Amendment to Section 10(A) of the Finance (Local Property Tax) Act 2012

84 The Finance (Local Property Tax) Act 2012 is amended in section 10(A) by substituting the following subsection for subsection (4):

"(4) Notwithstanding subsection (3) and subject to subsection (5), a residential property shall not, for the purposes of this Act, be regarded as a relevant residential property in relation to five consecutive liability dates commencing with the first liability date on or before which a certificate under and in accordance with regulations under subsection (1) has been issued in relation to property, and in cases where the property has not been remediated for all subsequent liability dates until it has been remediated.".".

Amendment, by leave, withdrawn.
Section 84 agreed to.

Amendment No. 95 in the name of Deputy Michael McGrath cannot be moved.

Amendment No. 95 not moved.

I move amendment No. 96:

In page 95, between lines 35 and 36, to insert the following:

"Deposit Interest Retention Tax

85. 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 charging of Deposit Interest Retention Tax at rate equivalent to the individual's marginal income tax rate.".

Although what I am proposing in this amendment in respect of deposit interest retention tax might be administratively difficult to achieve, there is an issue of equity to address, namely, that DIRT is currently levied at 41% irrespective of the income tax status of the recipient of the interest, with the exception of certain older persons who may apply for a DIRT-exempt account. Everybody else must pay DIRT at 41%, whether they have no income liable to income tax, pay tax at the standard rate of 20% or pay tax at the marginal rate of 40%. There is an issue of equity here, especially for the many people who are dependent on interest income. At a time when interest rates are so low, such income is lower now than it may have been in the past. At the same time, DIRT has increased substantially, from 27% to 41%. Moreover, for some people with unearned income, there is an additional 4% PRSI charge on the interest income. I am asking the Minister to review this issue with a view to ensuring greater equity.

In this amendment, the Deputy is seeking to reduce the rate of deposit interest retention tax to a rate equivalent to the taxpayer's marginal rate of tax, that is, 40% or 20%, or zero if the person does not have a taxable income. The standard DIRT rate has increased significantly since 2008, from 20% to 41%, and is now one percentage point above the higher rate of tax. Up to budget 2009, the rate of DIRT was equal to the standard rate of income tax at 20%. The increases in recent years were introduced to generate additional yield and encourage spending in the economy to stimulate growth and employment.

I am informed by Revenue that the estimated cost of charging DIRT at rate equivalent to individuals' marginal income tax rate, that is, either 40%, 20% or 0%, depending on the highest rate of tax applicable to their income, would be of the order of €77 million for 2016, based on a forecasted DIRT yield of €298 million. This is a necessarily tentative estimate as it cannot, for instance, account for any individuals moving bands. That said, it represents a substantial loss to the Exchequer, particularly given that under the terms of the Stability and Growth Pact, Ireland may not introduce discretionary revenue reductions unless they are matched by other revenue increases or expenditure reductions. This means the Government must consider carefully any tax changes, as any reductions will have to be offset elsewhere. I am further advised there would also be significant administrative issues and costs associated with such measures, both for Revenue and for financial institutions. In the circumstances, I am not disposed to accept the amendment.

I thank the Minister for his reply and for giving the costings. I accept that what I am proposing would be administratively difficult to implement. An estimated cost of €77 million in 2016 is a very significant sum. Over time, however, as commissions on taxation examine the overall structure, the taxation of interest income should be aligned to the overall taxation of a person's income from other sources. It would be the fairest way to do it. It is not something that can be done overnight because it has a significant associated cost, as the Minister outlined. Nevertheless, in the longer term, it is an objective that is worth working towards. It is not fair that persons on very low incomes who have an asset that is earning interest must pay tax at 41% on that interest. I accept the changes required will take time, on which basis I do not propose to press the amendment.

Amendment, by leave, withdrawn.

I move amendment No. 97:

In page 95, between lines 35 and 36, to insert the following:

“Personal Retirement Savings Account

85. Section 787J of Chapter 2A of the Principal Act (as inserted by the Pensions (Amendment) Act 2002) is amended by the repeal of subsection (3).”.

This amendment relates to the taxation treatment of PRSAs, personal retirement savings accounts, which were introduced in 2002. There are two points at which PRSAs are severely disadvantaged when compared to normal occupational pension schemes. The employee is liable for a universal social charge, USC, on employer contributions to a PRSA. In the case of PRSAs, both employer and employee contributions are subject to Revenue limits allowable for tax relief, while in the case of occupational pension schemes, only the employee contributions are subject to Revenue limits.

The Finance Bill provides for an exemption for employees from USC on employer contributions to a PRSA, which is welcome. It brings the USC treatment of such contributions in line with employer contributions to occupational pension schemes. However, there is no proposal to address the second anomaly, whereby both the employer and the employee contributions to the PRSA are reckonable or taken into account in terms of the overall amount which can be contributed within the allowable limits. That is an issue which needs to be examined.

The current situation means that more contributions can be made to defined contribution plans than to the PRSAs. This has a major impact for a small number of PRSA holders and is deeply unfair. It particularly impacts those whose pensions are underfunded and who are striving to close the gap. PRSAs are principally designed for those with no occupational pension scheme. National and government policy for some time has been to encourage people to provide for their future well-being and their retirement. To discriminate against PRSAs vis-à-vis occupational pensions by counting employer contributions towards the allowable limits for tax relief strikes me as unfair. I am not sure what the original justification of it was.

I assume the proposed amendment follows on from comments made by the Deputy in his response to the Finance Bill debate on Second Stage. During that debate, he highlighted the differential treatment afforded to employer contributions to trust-based occupational pension schemes as compared to PRSAs, in so far as the operation of the annual limits on employee tax-relieved pension contributions are concerned.

Basically, the amount of tax-relieved contributions which an individual or an employee can make towards pension savings in any one year is subject to a limit based on an age-related percentage of his or her annual earnings and to an overall earnings cap of €115,000 per annum. In the case of PRSAs, any employer contributions are aggregated with the employee’s contributions for the purpose of determining if these limits are adhered to. In addition, employer PRSA contributions, unlike employer contributions to trust-based occupational pension schemes, are treated as a benefit-in-kind of the employee. As against that, however, they are also deemed for tax relief purposes to be a contribution made by the employee. This means, in effect, that, where the aggregate amount of employer and employee contributions to the employee’s PRSA does not exceed the employee’s annual age-related limit, no effective benefit-in-kind charge arises. This is because any potential benefit-in-kind charge arising for the employee, as a result of the employer contribution, is exactly offset by the employee’s tax relief on those contributions. It is only where the combined contributions exceed the age-related limits that an effective benefit-in-kind tax charge arises.

I am assuming that the intent of the Deputy’s amendment is to, first, remove employer contributions to PRSAs from the compass of the employee annual age-related limits; second, although not specifically provided for in the amendment, to remove the benefit-in-kind charge on the employee in respect of the employer contributions. This, I think, the Deputy would view as levelling the playing pitch vis-à-vis trust-based occupational pensions schemes.

In that regard, however, I have explained several times over the years in response to parliamentary questions on this issue, that there are good reasons for this differential treatment, which are of long standing. In the case of trust-based occupational pension schemes, employer contributions are effectively controlled, first, by the statutory limit on the maximum benefits that can be provided for an employee under a scheme, that is, a pension not exceeding two thirds of final salary; second, by the standard fund threshold regime which places an overarching limit on all pension benefits of €2 million.

In the case of PRSAs which were introduced in 2002, these are contract-based products which are beneficially owned by the PRSA holders. As with other contract-based pension products, for example retirement annuity contracts, no benefit limit as such applies to the contract. Control of benefits in such instances is exercised through restrictions on the annual amount of tax-relieved contributions that can be made by, or in respect of, the PRSA holder. In the absence of contribution-based controls, it would simply not be possible, under the current legislative structure, to restrict the amount of benefits arising under such contracts, other than by way of the standard fund threshold limit of €2 million mentioned earlier.

I do not propose, therefore, to accept the Deputy’s proposal to amend the legislation in a fashion which would remove the impacts of the current restrictions on employer-related contributions to PRSAs. Apart from increasing the annual cost of tax relief on pension contributions to the Exchequer generally, it would also mean that employers would be in a position, of which I have no doubt they would avail, to pick and choose favoured employees in respect of whom they would make significant additional contributions above current levels and above the levels made by them to employee PRSAs generally.

All of that said, I accept the differing approaches to the treatment of contributions to PRSAs and to occupational pension schemes, while having a sound basis, is just one manifestation of the overall complexity of the rules surrounding private pension provision. These are being looked at in the context of the broader reform of the pensions area being considered by the Tánaiste and Minister for Social Protection. This change agenda includes work to reform and simplify the pensions landscape, to ensure schemes operate effectively and there is a regulatory structure which gives pension savers confidence in the system. This encompasses consideration of potential impediments to the uptake of PRSAs. It is in that context that the issue of concern to the Deputy can best be considered.

I thank the Minister for his comprehensive reply. There is much to digest there. It is a complicated area and his reply has improved my understanding of the distinction between the taxation treatment of an occupational pension scheme and a PRSA. I will take some time to study the Minister’s reply to consider whether to introduce a Report Stage amendment.

Amendment, by leave, withdrawn.

I move amendment No. 98:

In page 95, between lines 35 and 36, to insert the following:

“Vouched Travel Expenses

85. The Principal Act is amended by insertion the following section after section 195A:

“195B. (1) In this section—

‘expenses’ means vouched expenses;

‘normal place of work’ means the location where an employee or director undertakes the majority of the activities of their employment/office;

‘relevant employee or director’ means an employee or director who undertakes activities at a temporary place of work and whom incurs additional travel and subsistence expenses arising from that fact, other than that which they would have otherwise incurred;

‘temporary place of work’ means a location where an employee or director is required to travel to undertake activities for a temporary period not exceeding 24 months.

(2) This section applies to payments made by a company to or on behalf of a relevant director or employee of that company in respect of expenses of travel and subsistence incurred by the employee or director solely for the purpose of undertaking activities at a temporary workplace.

(3) So much of a payment to which this section applies shall be exempt from income tax and shall not be reckoned in computing income for the purposes of the Income Tax Acts.”.

This is a hot topic. The Revenue Commissioners undertook the national contractors project which yielded significant revenues for the State. It was a significant initiative by Revenue to examine the issue of the tax treatment of travel and subsistence payments for self-employed contractors.

I welcome that the Minister held a public consultation on this area a number of months ago and I know a number of submissions were made to that public consultation exercise. We are talking about contractors working across the information and communications technology and health care sectors in particular, and the tax treatment of costs associated with contractors working away from their normal place of work.

The point made to me is that the current system and interpretation from the Revenue Commissioners has caused some uncertainty. I assume the Minister may accept that to a point as he has initiated the public consultation. The point has also been made that our capacity to deliver on major capital projects, with very large companies seeking to bring in the required expertise on a contracting basis, is meeting difficulties. The issue must be examined.

It is some time since I studied the tax law surrounding deductible expenses for employees but the general rule of thumb about an expense being wholly, necessarily and exclusively incurred in the performance of the duties is, I presume, still the test used by the Revenue Commissioners. Many of these contractors, by the nature of their job, move between locations. I would have thought the expenses incurred in doing that job are inextricably linked to the performance of their duties in the course of that job and would be deductible, but there seems to be a different interpretation put on it. There is also the acceptance of whether a person's home can be the normal place of work, which it is for some contractors. For example, that would be the case for some people providing information technology support. Many of these people have received very hefty tax bills, perhaps legitimately, and I am not holding a candle for anybody trying to avoid their taxation responsibilities.

I suggest there is a need for certainty in the taxation treatment of self-employed contractors and we must be cognisant of the ability of major employers in this country to deliver on capital investment projects and have access to the required expertise in this country. The nature of the working environment has changed and more people are now self-employed. They have incorporated and are offering their services as an independent contractor. We are dealing with old taxation legislation and although I welcome that the consultation has been done, will the Minister's Department and the Revenue Commissioners, if they have not done so already, consider very carefully the submissions and bring certainty to the issue in order that it can be clearly explained to all the stakeholders, the Tax Institute, employer bodies, large companies and the contractors? We should have clear rules on how travel and subsistence payments in particular should be taxed and this should be consistent.

As the Chairman indicated, we discussed this with amendments 7 to 9, inclusive. As I stated yesterday, my officials are still considering submissions received in the course of the recent consultation exercise. I will examine the results and consider if it is appropriate to make any changes. I am not in a position to make any changes in the course of this Finance Bill.

Is there any timeframe on the deliberations of the consultation?

I do not know if there will be an extraordinary finance Bill in the course of 2016 but I have no plans to do one. In the normal course of events, the issue would arise in deliberating next year's finance Bill.

Amendment put and declared lost.

I move amendment No. 99:

In page 95, between lines 35 and 36, to insert the following:

"85. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on options for abolishing the penalty for payments of taxes, such as the Motor Tax, in instalments.".

This amendment does not really involve any ideological differences but it is a logical amendment with a view to fair play and practicality. Many people who pay in instalments are affected by penalties as a result and typically a person paying by instalments in the first place is likely to have viewed the total cost as unaffordable at a particular time. It is not logical from a justice and human basis that such people incur an extra cost because of that position. We live in a high-tech age with much connectivity and it is very easy to share information. There is a logic to ensuring there is no penalty for payment by instalments.

I am not in a position to make any comment on motor tax as this is not a charge which falls within my area of responsibility. However, my response on the general point raised by the Deputy regarding the payment of tax by instalments is that the abolition of these arrangements would impose an unacceptable cost on the Exchequer.

A core provision in the Revenue Commissioners' powers to collect the taxes and duties within their care and management is the provision for specific monetary sanctions on taxpayers in the event that payments are made late or not made at all. These monetary sanctions can comprise interest, surcharges and penalties of various kinds and exist principally to ensure the Revenue Commissioners are not placed in the invidious position of becoming an involuntary interest-free creditor to individuals or businesses as regards the late payment of tax. Equally, where repayments of tax to taxpayers by the Revenue Commissioners are unreasonably delayed, provision is also made to include interest to compensate the taxpayer for the temporary lack of those funds.

From the overall perspective of servicing the national debt as well as funding the provision of public services generally, the Exchequer cannot be placed at the mercy of taxpayers as to when they may or may not choose to pay their taxes. While the payment of certain taxes, such as local property tax, may provide for instalment payments without interest, this is not generally true in circumstances in which a statutory payment deadline has been missed.

The argument that tax payment deadlines are unfair is unsustainable for the very good reason that, in general, the events which have given rise to the liabilities will have already occurred by the time the tax has to be paid. I am thinking of VAT or the remittance of PAYE deducted by employers. There could be no justification for fiduciary taxes such as these to be paid by instalment. In summary, there is no unfairness in the current system and the existence of these sanctions is fully justified. For this reason I am not prepared to accept the Deputy’s amendment.

I know there is a vote in the Dáil. This amendment does not refer to late taxes in any fashion but rather it speaks to taxes paid on time but which could be paid in instalments. What would the cost be to the system if it was reformed to allow for taxes to be paid in instalments? I know the Minister must be specific about it.

Sitting suspended at 4.40 p.m and resumed at 4.55 p.m.

We will continue our consideration of the Finance Bill 2015 with section 85. We are on amendment No. 99. Deputy Peadar Tóibín is in possession.

I appreciate that the example given is motor tax, which does not come under the Minister's remit. I think responsibility for it lies with the Department of the Environment, Community and Local Government. As we do not have an example of a specific tax, I ask the Minister to consider a reform to allow businesses and individuals who are dealing with cash flow problems and who pay their taxes on time to pay in instalments, without any penalties being imposed. With motor tax, if one pays in instalments, one pays a greater gross figure than if one were to pay in one go. I ask the Minister to consider that in the future.

Amendment put and declared lost.

I move amendment No. 100:

In page 95, between lines 35 and 36, to insert the following:

85. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on options available to ensure that international and institutional investors in REITs pay a comparative amount of taxation on income and gains upon receipt of dividends as an Irish resident company or individual investor would have to pay. ”.

This is a difficult matter to understand. A real estate investment trust, REIT, can be set up in this State and can invest in retail properties and collect income from rental properties - and possibly the sale of the rental properties - without paying corporation tax. If the beneficiary is resident in this State, that beneficiary will then pay tax on the dividends.

If the beneficiary were living in the United States, for example, that beneficiary, because of international taxation treaties, could manage not to pay tax on the dividends, or at least could have a significantly reduced tax on the dividends. First, this is obviously a cost with regard to potential taxation that could be received into the State. Second, it has the effect of distorting the property market in real terms, because the REITs can become an efficient way to dodge tax responsibility. A selling point for a REIT built in that fashion would be that it was very tax-effective. It could create distortion in the market. In the long term we would see more internationally owned REITs than Irish people owing properties and dealing with them in that fashion.

This amendment proposes the preparation of a report on the taxation options of international and institutional investors in Irish REITs.

The function of the REIT framework is not to provide any tax exemptions for investors, but rather to facilitate collective investment in rental property by removing the double layer of taxation which would otherwise apply to property investment via a corporate vehicle. The REIT framework is designed to produce an after-tax result for shareholders similar to that from direct investment in property, while also providing the benefits of risk diversification and attracting of new sources of capital and professional management associated with collective investment.

A REIT must distribute at least 85% of its property income profits annually to the REIT shareholders. Instead of being taxed directly on the rental income, investors are subject to taxation on dividends paid from REIT profits arising from that rental income. Distributions to Irish-resident individuals are subject to dividend withholding tax, DWT, and are also subject to income tax, PRSI and USC at the individual’s marginal rate. Such investors will also be liable to capital gains tax of 33% on disposal of their shares in the REIT. Irish corporate investors are liable to corporation tax on the dividends received at the same rate that would apply had the income been earned directly - that is, the non-trading rate of 25% applies. They will also be liable to corporation tax of 33% on their chargeable gains on disposal of REIT shares.

Distributions to non-resident investors by Irish companies are generally exempt from DWT if the appropriate declaration of non-residence has been completed. However, this exemption does not apply to distributions from a REIT. In the absence of any other provisions, foreign REIT shareholders would not have any liability to Irish tax on REIT dividends, despite the fact that the REIT itself benefits from a tax exemption on qualifying profits of the rental business.

In order to ensure that tax from foreign investors is retained, a dividend withholding tax at the standard rate of tax was legislated for, specifically applying to REIT dividends. All REIT distributions to non-resident investors are subject to DWT at a rate of 20% at source. The non-resident investor may also, depending on the national tax rules in her or his country of residence, be subject to tax in that jurisdiction. However, non-resident investors who are resident in countries with which Ireland has a double taxation agreement, DTA, may be entitled to claim a refund of some of the DWT, if the relevant DTA permits. The taxation of dividends varies from treaty to treaty, but commonly a source state would retain the right to approximately 15% tax on dividends paid from that state.

Non-resident investors will not be liable to capital gains tax in Ireland because the REIT is a publicly listed company. However, non-resident investors will be liable to such taxes in their home jurisdictions.

A REIT may pay gross dividends to certain Irish-resident "excluded persons," such as pension schemes, charities, investment funds and other exempt bodies, provided the appropriate declaration has been provided.

When considered in conjunction with the many benefits that REITs bring, such as risk diversification and attraction of capital, the potential loss of tax relating to foreign shareholders is mitigated to a level that is acceptable within current budgetary constraints. Therefore, I cannot accept the proposed amendment.

This arose back around 2011 or 2012 when the property market was in total collapse and effectively there was no property market in Dublin. People with buy-to-let properties trying to get out could not do so because the price was frequently less than the mortgage they had on the property. On doing research, we found that REITs were commonplace across the OECD countries, particularly in Canada and the United States, but also in some European jurisdictions. The big benefit from the investor's point of view is that he or she does not need to raise €300,000 by way of a mortgage and savings to buy a property to let but can invest €5,000, €10,000 or €15,000 in REIT shares. So it suits small investors who are building up a pension. They can have things like bank shares and a bit invested in property as well, without having their total life savings in property. In 2009, 2010 and 2011 people were absolutely burnt, with all their life savings consumed because they had invested in property.

The motivation for introducing this was to encourage people to continue investing in property. As we know from the debate over the past three or four months, we need good-quality rental property, especially in our cities, and the REITs have fulfilled that need.

It is not being driven by tax exemption. If a publicly quoted company were constructed, it would need to pay corporation tax before paying a dividend and then the dividend would be subject to income tax, USC and so on in the normal way. In this case it is analogous to ordinary citizens having a three-bedroom house up for rent. They have a liability for income tax, USC, PRSI and so on. If they sell it, they incur a capital gains tax liability. Absolutely the same applies to a person who invests in a REIT, but because it is not incorporated, the company is not subject to corporation tax, provided it complies with certain conditions. The principal one is that, rather than retaining profits, they distribute 85% of the profits each year by way of dividend to their investors in proportion to the amount invested. It has worked very well since it was introduced in Dublin.

There are other advantages. Because they tend not to buy individual properties and tend to have an apartment block, or two or three apartment blocks in the same complex, REITs can afford to put in professional managers. So the quality of the accommodation and the management of the accommodation will usually be higher than in the case of the one-off rentals, which were the only option when I was in rental accommodation. It has many advantages.

I stress that there is no loss of revenue to the Exchequer. If the investor is abroad, the rules apply as they would to another investment. Investors in Ireland are subject to income tax, USC, PRSI and whatever else on their investment. If they were to sell the shares, it would be the equivalent of selling the property; they would be liable for capital gains tax on any capital gains made on the shares. It is a good scheme and it is working well.

There might have been logic for it in 2011 or 2012 to inflate what was a punctured property market. However, we are not dealing with a punctured property market at the moment. Many people would feel that in much of the country it is too inflated again. I grant that REITs might provide a more consistent level of quality.

Let us say John and Patricia are investors in a REIT. Patricia lives in Ireland and pays tax on her dividend. John lives in the US and, under an international taxation treaty, can reclaim the tax he pays. There is an advantage to being non-domiciled under these programmes. Has there been any review of the effective rate of tax paid on the dividends of REITs in Ireland as opposed to abroad? We cannot manage if we cannot measure. Is the Department confident that there is no disparity, or has any research been done to deliver confidence that there is no disparity? If there is a difference and the net tax of a foreign investor is lower, and there is a potential distortion that could lead to a loss of tax, would the Minister agree to legislative changes to ensure it no longer exists?

The rules apply at home as if the investor were a typical small landlord who was renting a three-bedroom house. The income is treated is the same, except that it comes by way of dividend rather than rent. Capital gains tax is the same. It is far more flexible. One does not need to sell the house in order to get one’s money out; one need only sell the shares. A person who has an investment of €20,000 and who needs the money can sell the shares. It is a much more flexible way of having a property play which is unlikely to lead to the madness we had during the Celtic tiger days. The same rules apply to an investor who lives abroad. The taxation of persons abroad who have investments in other jurisdictions is governed by tax treaties with the sovereign states concerned. A withholding tax applies, and a portion of the withholding tax is recoverable. As I said in the note, one would expect that 15% to 20% of the withholding tax would be retained in the jurisdiction of the investment.

The purpose of tax is to pay for the goods and services, and cover the liabilities, of the State. People living in New York are not enjoying the goods and services of this State. They are not driving on the State's roads or having their roads lit up by public lighting from this State, their children are not going to school here and they are not availing of the hospitals. While they should have a liability as investors, they should have a different liability from the generality of taxpayers. In the Deputy's example, Patricia is taxed under Irish law, and while there are various measures regarding residence and domicile, if John’s tax jurisdiction is the US, he is taxed in accordance with that law. If there is a crossover, it is governed by the tax treaties.

While the Minister is correct that the purpose of tax is to pay for the public services delivered in the country, it is also to construct healthy markets and redistribute some level of wealth. My question remains. Has the Department of Finance undertaken any study on the effective rates applied to dividends from REITs for those domiciled in Ireland and abroad? If there is a difference, will the Minister seek a change in the legislation?

It is too early. The legislation allowing REITs to set up investment funds was introduced in the 2013 Finance Bill. Many of the REITs did not actively invest for a year after they had accumulated the fund. It is very new. I agree with the Deputy’s point. In due course, an assessment must be done of how it is working, given that it was a novel scheme for Ireland, although it works very well in other jurisdictions. I am glad we have REITs. In the Dublin market, they are providing good rental accommodation in the absence of domestic investors.

When would be a logical time to identify the different effective rates?

The period would have to be sufficiently lengthy in order for the information to be useful. Off the top of my head, I would say we would need five years of operation. I have just been told that in the general review cycle, the first review will take place next year. While I would not expect it to be very revealing, it might identify any particular problem that arises.

Will the review take into consideration the different effective tax rates paid by people with different domiciles?

Yes. We will take into account what the Deputy has argued. His concerns are legitimate. However, the scheme is very good.

Amendment put and declared lost.
Sections 85 and 86 agreed to.
Question proposed: "That the Schedule be the Schedule to the Bill."

Before we move on to the Schedule, the Minister wishes to make a remark.

Deputy Richard Boyd Barrett tabled amendments Nos. 93 and 94, but, given that he was absent, they were dealt with very quickly. I have speaking notes on the amendments, which I wish to put on the record. I wish to clarify the position on local property tax in respect of houses affected by pyrite damage. I dealt with it in the response to a parliamentary question this morning.

On foot of the report of the review of the local property tax, which I commissioned, and which was recently submitted to me by Dr. Don Thornhill, I have decided to ease the qualifying criteria for relief from local property tax for homeowners whose properties have been severely affected by pyrite. The current pyrite exemption will continue in place and will remain confined to properties with a damage rating of grade 2 or grade 1 with progression. However, where a property has been accepted for remediation by the Pyrite Resolution Board, PRB, without testing, or a property has been remediated by a guarantee company or a builder or developer, or where a party is compensated in lieu of remediation without testing, the Revenue will accept confirmation of remediation or compensation from either the PRB or the relevant party for the purpose of exemption without testing. In such cases, it will obviate the need for expensive testing.

Deputies are aware that the necessity of this change was due to the fact that people were deemed to be exempt if they proved their houses had suffered grade 2 damage or grade 1 with progression, but had to pay €1,500 to €2,000 to get engineering certificates to prove it, and the cost of proving it was greater than the value of the exemption. This deals with the issue, which has existed for some time. Given that Deputy Boyd Barrett is interested in this, I wanted to put it on the record for the benefit of him and other members.

I have a question for the Minister about the short selling of shares on the Irish stock market. Some financial institutions and hedge funds bought shares in Bank of Ireland when they were at a low price of 14 cent and sold them close to the peak price of 37 cent. It has recently been reported that one of these institutions recently short sold when the share price seemed to be increasing at approximately 35 cent. Now, the shares are valued at approximately 31 cent, a fall of over 10%.

Will this not have a destabilising effect on our banking system? Our banks are still not out of the woods. Has the low share price an effect on lending rates? Small businesses are being crucified with high interest rates. Our banks are mainly State owned, with a percentage of Bank of Ireland State owned. Could this type of activity scupper plans to sell off the banks? This is a worrying trend for our banking system. Should the Central Bank look at and monitor this more closely? Are the reports from the Central Bank -----

That is not related to the Schedule.

I appreciate the Minister may not be able to answer all of my questions, but I submitted a parliamentary question on the issue and I understand the Central Bank has authority under the short-selling regulations to restrict or temporarily ban the selling.

The Minister cannot respond to that because it is not part of the Schedule.

I may talk to him afterwards.

In general terms, the Bank of Ireland is a publicly quoted company. The State has 14% of its shares and private investors have the rest. The shares trade every day on the Dublin Stock Exchange and, more significantly, on the London Stock Exchange. Like any publicly quoted share, the shares rise and fall. I saw a reference to the transaction the Deputy referred to in the newspapers and the matter was also a subject of a parliamentary question. I do not have the text of the reply and will not try to summarise it as it was quite technical. I believe the information I got from the Central Bank adequately covered the situation. I refer the Deputy to the relevant parliamentary reply and if she wishes to submit a supplementary question to adduce more information, I will do my best to provide her with the information she requires.

Question put and agreed to.
Title agreed to.

Before we finish, I wish to signal that I will bring forward amendments on Report Stage and will give Members adequate notice of them.

I thank all members who have contributed over the past two days and thank the Minister and his officials for giving their time.

I would like to thank the Chairman, his staff and his colleagues who have contributed fulsomely to this debate.

Bill reported with amendments.