Other Questions.
8 Ms Lynch asked the Minister for Finance if his attention has been drawn to comments made by a person (details supplied) in which it was suggested that the law should be changed to make it an offence for anyone to take steps to facilitate the fraudulent evasion of tax; if he intends to act on this suggestion; and if he will make a statement on the matter. [2474/05]
View answerI am aware of the difficulties the Revenue Commissioners experience when attempting to prosecute persons who collude in or facilitate tax evasion. This has been raised at the Committee of Public Accounts and in the media. I have considered this matter in the context of the Finance Bill, which will be published later this week. It would not be appropriate for me to comment further in advance of the publication of the Bill.
Does the Minister agree that tax evasion is a crime? It can be a significant one against society when money that would otherwise be available for important areas such as health and education does not become available. Is the Minister bearing in mind the Revenue Commissioners' finding that legislation on tax evasion makes any prosecutions in the area difficult? Is the Minister aware that bank officials or senior management who organised, perpetrated and facilitated multi-billion euro of offshore tax evasion have not been prosecuted? Compare this with people on social welfare who are frequently, and correctly prosecuted for defrauding the social welfare system.
The question of revenue law assisting the Revenue Commissioners is under consideration in my Department on foot of representations by the Chairman of the Revenue Commissioners. I have sought the advice of the Attorney General's office and I will make an announcement on this matter when the Finance Bill is published on Thursday.
Is the question of evidence the real problem? In the NIB case, substantial tax evasion schemes were identified. While the taxpayers paid, the bank suffered no financial penalty for the tax evaded. Is there a problem with evidence requirements or penalties? Will the Minister inform us where the problem lies with this issue? People feel this is a serious source of scandal.
The current legislative provision covers the offence of assisting someone in making an incorrect return. This narrowly defined offence is specific. To address this difficulty a new offence of facilitating tax evasion, along similar lines to the recently enacted criminal justice legislation and the UK model would have to be considered. These are matters on which I have taken advice and I will comment on them when I publish the Finance Bill on Thursday.
Will a distinction be made in the legislation between the people who deal face to face with bank officials who may have given direct advice and senior management in financial institutions who would have been responsible for what was often an unspoken policy that would have encouraged tax evasion? Is the Minister aware of that distinction and will he make provision for it?
The legislative base is rather narrow and restrictive. The creation of an offence regarding aiding and abetting of tax evasion is a matter on which I have taken advice. I cannot comment further on the matter until Thursday.
Will the legislation include an offence of aiding and abetting putting money offshore for the purposes of tax evasion? I understand that is the difficult point. Did the Minister receive representations from commercial or banking interests or the tax advisory industry regarding this matter?
The Chairman of the Revenue Commissioners made representations.
Did he receive any from banking or other commercial interests?
I have not seen any.
9 Mr. Timmins asked the Minister for Finance if he has satisfied himself with the manner in which unclaimed bank drafts are handled by the banking sector. [2544/05]
View answerWhile I do not have a statutory function in this matter, I am aware there are bank drafts which have remained uncashed for various periods. The overall regulation of the banking system is a matter for the Irish Financial Services Regulatory Authority. I have not been made aware by that body or any other organisation that there is any particular dissatisfaction with the way banks issue drafts to their customers.
There is an issue, however, with uncashed bank drafts. The Irish Financial Services Regulatory Authority recently provided some preliminary estimates of the extent of funds in uncashed bank drafts for periods of up to two years. It is firming up these figures and looking at the extent to which such drafts remain uncashed for longer periods. When these figures are available, I will be in a position to consider whether these uncashed amounts should be dealt with as if they were dormant accounts, within the terms of dormant accounts legislation. My Department is examining this issue and is considering the legal issues arising in conjunction with the Attorney General's office. Whatever legislation is appropriate could be accommodated in financial services legislation under development in my Department.
Any legislative amendments would need to recognise the fundamental differences between prepaid instruments, where the customer does not hold an account, and dormant bank accounts. Unlike conventional dormant bank accounts, establishing the beneficial ownership of dormant bank drafts is not straightforward.
I appreciate the points raised by the Minister in his reply. I have followed this issue for some years. However, the Department and the Irish Financial Services Regulatory Authority have been reticent with regard to getting involved as they did not see that there is a problem. There is an issue and I am aware that the preliminary figures given may not be as accurate as they should be and they are looking to establish exactly what is there. In many cases, people got bank drafts, which were later forgotten about, and when they passed away, the drafts were uncashed, similar to the situation of dormant accounts. In many cases, the banks know the original holders of these drafts, yet they are not obliged to inform the person and there is no timeframe on the validity of a bank draft. When the Irish Financial Services Regulatory Authority finalises its figures, a substantial amount of money will be involved. The initial figure for two years or older was €98 million, but following the publicity of this issue it will be somewhat less than that. Following the publicity of this issue people who had worked in banks have informed me that they were aware of outstanding bank drafts. Will the Minister examine the concept of putting a time limit on a bank draft? This would put an onus on the financial institutions to contact the holder of the bank draft informing them that its shelf life is coming to an end.
The bank has no way of knowing where the bank draft is if no one presents it. The person to receives it does not have to have a bank account, which creates difficulties. The point is made in terms of investigating the matter to determine the extent of uncashed bank drafts, what are the ownership issues, what advice can be obtained from the Attorney General and what should be the period of dormancy. A number of issues need to be examined. IFSRA is following up the matter and, as soon as it reports back, we can set in train a process to see how the matter can be resolved. If dormancy can be established, what we have done in regard to dormant bank accounts provides us with a model, perhaps not the exact model, which will ensure these moneys are put to good effect.
10 Mr. Bruton asked the Minister for Finance the way in which he would like to see the budgetary cycle change to provide a more meaningful process for debating options and for delivering results. [2540/05]
View answerI am currently examining a number of options for change which could be implemented in the short and medium term. Any changes to current practices would need to meet best practice, improve both the quality of debate and the data available to the House on the budget, meet our obligations to the EU and be capable of being delivered within the existing budget timetable. I will discuss shortly the possibilities for change with my colleagues in Government and, at that stage, I will bring forward proposals which the House will have an opportunity to discuss.
The Minister did not say what he has in mind. Would he consider, for example, that the spending Estimates and the broad based tax proposals should be introduced much earlier in the cycle, perhaps in October, and that they identify new programmes, the multi-annual implication of new programmes and their capacity to staff projects like hospitals they are committing to build, and sometimes are not staffed? Would he consider obtaining outcome and performance indicators from each Department to accompany the Estimates so that there would be realistic benchmarks against which to judge their spending programmes? Has he in mind some of the issues that have been developed overseas, such as efficiency agreements between his Department and some of the line spending Departments, changes in project appraisal methods, which have fallen into some disrepute, and ministerial compliance statements, where they would sign off on the robustness of the basis on which Estimates, particularly new programmes, are being put together? Are these the elements the Minister has in mind because it would be a useful direction in which to go?
Given the documents which I have read, these issues are certainly on the Deputy's mind. As I said, I am prepared to consider how we might be able to improve the budgetary process. I have not reached a decision on how this might be done. I am consulting with my officials and preparing some ideas for consideration by Government. The reason I am not being very specific at the moment is because I would need collective cover for anything I may do, otherwise I might be accused of acting in bad faith. We are aware that the budgetary process should be examined to see can we improve the quality of the debate and the participation of the House in the budgetary process. Unfortunately, it is too early for me to be more specific in terms of the policy documents the Deputy has produced.
What has happened to the commitment the previous Minister obtained from the Departments of Agriculture and Food and Transport that they would change the way they presented their Estimates and adopt performance indicators to make a more meaningful presentation? As far as I know, that pilot project has not seen the light of day. Has it been derailed?
The pilot project is still ongoing and an appraisal of it should be forthcoming. I will get the details for the Deputy. I read a fair amount of the supplementary information provided and it appeared the pilot project was underway. Given the multi-annual funding and the envelope system which has been applied to capital projects, and which in some respects was applied in last year's budget to current disability issues, there are opportunities to do more in this regard. I take the point the Deputy made regarding the whole question of capital and ensuring it flows on from the capital project completion date in the interests of good service delivery. Guidelines have been outlined to Departments to ensure the revenue implications are examined and factored in before embarking on major capital projects. This makes for a good system of accountability and efficiency. I am aware of the number of ideas the Deputy put forward, which I will examine to see if we can incorporate some measures that might subsequently form the basis of discussion in this House.
The Deputy said a project under the chairmanship of the Department of Finance and involving the Departments of the Taoiseach, Transport, Agriculture and Food and Social and Family Affairs is developing a pilot project to link departmental business planning, resource allocation and output reporting. The report on that project and the pilot models are being finalised in light of the views last September of the financial management sub-group of secretaries general, and will be submitted to me shortly.
11 Mr. P. McGrath asked the Minister for Finance his views on whether additional caps should be introduced in respect of certain tax reliefs in order that they not be used to eliminate the tax liability of high earning persons. [2585/05]
View answerAs the Deputy will be aware, in budget 2005 I announced that my Department, in conjunction with the Revenue Commissioners, would undertake this year a detailed review of certain tax incentive schemes and tax exemptions.
There are a number of elements to the review which is already underway. It will evaluate the impact and operation of certain incentive schemes and exemptions including their economic and social benefits for the different locations and sectors involved and to the wider community, including external consultancy work on the evaluation of property based tax incentive schemes. It will examine the degree to which these schemes allow high-income individuals to reduce their tax liabilities.
As well as examining relevant international approaches, the review will also include a consultation process seeking submissions on measures that could be introduced to balance the benefit of such reliefs and the extent to which such incentives and exemptions are used by high earners to reduce their tax bill. One such measure to be examined will be whether additional caps should be introduced in respect of certain tax reliefs in order that they cannot be used to eliminate the tax liability of high earning persons.
If the core issue is to examine how high earning individuals can reduce their tax liability to zero, which is a scandal, can the Minister in a much more rapid and targeted way cap what any individual can claim on the aggregate of relief across the board? It is a targeted intervention which would not destroy the relief if the Minister feels the relief continues to have relevance. Why has he decided to review the whole lot when there is capacity to take some short-term measures that would not have any damaging effects and that would ensure everyone pays a realistic tax contribution? He could do so this year. He does not need to wait for reviews.
I set out in my Budget Statement the reason I decided to take a comprehensive approach, and I stand by that judgment. It is important to examine how we can systemically deal with the idea of high income earners being able to eliminate completely their tax burden. A number of approaches could be considered, not just putting a cap on the relief one could claim. Whatever methodology is decided on, based on the broadest possible comparative work, submissions and so on, we must examine the balances between the benefit to the taxpayer and wider community benefits in respect of the schemes themselves. We must examine every aspect. One then gets a much clearer picture of the way forward. As the Deputy knows, some of these schemes, those for which I have not changed the dates, are coming to an end. In looking at this we need to recognise the broader tax relief schemes I have outlined, which are clearly for the benefit of ordinary taxpayers. We are not talking merely of schemes for the rich. The ones we are concentrating on here involve property reliefs, specific area reliefs and so on. We are considering these to see what role they could or should play in the future, given the current level of economic and social development we have attained.
We will also consider what structures should be put in place for people who can access those schemes based on our review of the balance between the benefits for individuals who would invest in them and the wider community benefit which would derive from whatever modification of structure might emerge as a result of the comprehensive review we are undertaking — or the complete elimination of the schemes. Coming into this job at this time, I felt that this was the best direction for me to take.
Caps already exist on some schemes such as that for film relief, so that a new concept is not being introduced. Is the Minister indicating that next year's budget will contain a comprehensive response to this review? I am sure he will forgive me for being sceptical of reviews. We have seen about ten reviews of competition with no concrete action taken on many of them. I know the Minister does not have a reputation for conducting reviews and then doing nothing about an issue, so will he indicate his intention for next year's budget? Will he have ready for that budget a comprehensive response, a set of measures as a result of this review?
That is my honest intention. Rather than considering this matter piecemeal and reacting to whatever issue is more fashionable in any given week or day I intend to consider the entire issue. It would be helpful for the ordinary taxpayer to see what role these schemes play and to see their wider benefits.
Successive governments devised these schemes. They were changed and modified and they evolved through circumstances including judgments justified in their own way and time. A wider community benefit derives from these schemes. Too often, critics like to portray them in terms of being some sort of sop or concession to high earners. Their purpose is rather to gain a wider community benefit, which has taken place. Some schemes have worked very well and others not so well in instances where the level of architecture or integrated planning or whatever was not uniform. One could point to a great success in location A and one not so great in location B. We must learn what wider merits are involved in these schemes, their applicability and application in the years ahead, given that the economy is not progressing at full speed in every part of the country. We must learn lessons from the operation of these schemes so far, and considering the infrastructure deficits we have identified, see what can be done to assist parts of the country that might gain an overall benefit by the implementation of such incentivised schemes. That is the purpose of the review. It is not done simply to defer decisions. It is a question of getting matters right and it is far better to take what might be a valid criticism of not proceeding with the schemes now, or making any changes now. I am prepared to take that flak in the interests of coming forward next year, as Deputy Bruton suggested, with something that perhaps makes greater sense.
Does the Minister agree that it is not appropriate for an individual with an income of perhaps €200,000 per year not to pay at least the standard 20% income tax rate after the ordinary personal tax credits and so on have been applied? It is very difficult for someone on the average industrial wage, on a gross income of about €30,0000, having the top tax rate of 42% applied for some of that income and certainly for any additional overtime earnings in excess of that gross income, to find that someone with a very substantial income of €200,000 paid no tax. Will the Minister undertake to eliminate that loophole for earners at the top level?
Will the Minister accept that the focus of the current review of tax reliefs is somewhat misplaced, that not only should we look at whether the existing reliefs are effective — many of us believe they cannot be justified — but that we should put in place mechanisms regarding how any future relief might be introduced, what sort of democratic accountability is attached to them and whether they can be cost-effective during the term in which they are meant to operate? Such mechanisms do not exist for any of the current reliefs and we need them if we are to have any faith in any such reliefs to be introduced in the future.
The democratic accountability is very clear. Matters are voted on in this House, the Finance Bill is enacted in this House and changes brought forward are decided in this House.
Sometimes they are decided on the night before.
That does not bring into question the validity of democratic accountability within the law. One can bureaucratise this democracy out of existence if one wants, and get someone else to do our job. We must take the decisions and make the judgments. We do not have to wait for unanimity or total agreement. One must make a decision and one does so. Democratic debate is about putting forward different views. Matters are voted on and they proceed. People can decide afterwards if a good or bad decision was made. Too much of our modern politics is about finding out if someone else can make decisions for us. We can make the decisions here, stand over them and that is the end of the matter.
Regarding Deputy Burton's point, of course we want equity in the tax system. That is in the interests of high earners, low earners, all earners, including those outside the tax net. Everyone should pay his or her share. That protects everybody. Regarding the payment of at least 20% tax on income, there are many people with the income mentioned by Deputy Burton who earn more than 20%, as the Deputy knows from the answers to questions she tabled in recent months.
If one goes for the minimum income tax rate for the type of income earners the Deputy mentioned, one has to watch out for that rate becoming the target rate. Tax planning then begins to develop on a much wider basis so that more people go down to that rate rather than rise to effective rates of 32% or 40% or whatever, as the Deputy will know from answers to parliamentary questions. An entire range of issues is involved there, such as tax credits and trading losses. Taking it that everyone accepts that all those are legitimate credits against tax liabilities, the broad point is that we want to arrive at an acceptable situation. It is not acceptable for a person at the income level noted by Deputy Burton to end up after assessment without a tax liability. It is not acceptable now, nor was it acceptable in 1993 or before that. No reputable tax planner indicates to anyone that he or she should aspire to that situation, apart from bringing attention to themselves.
It is not as simple as it seems but one simple, fair and understandable concept, which is comprehensible to all and to which I subscribe is that everyone should pay his or her fair share of tax. For these tax relief schemes to be successful one needs people with discretionary earnings above normal living expenses and so on to invest in the schemes and make them work. We must be clear on that. We cannot on the one hand talk of high earnings and on the other hand say that all should be on low earnings, because then one will not get people into the schemes. The wider issue involves the employment content, the economic activity generated and the wider community benefit which, for example has seen an extra 100,000 people working in the construction industry. That is not entirely due to these schemes but they have made their contribution. We must take that into account when deciding and making judgments about the balance between the benefits to the investor and the wider community benefit.
Those are the sorts of things that we must analyse objectively, taking our time to deal with all aspects comprehensively in a calm and collected way. That will add to a greater understanding of what, if any, role such schemes will play in future, given the level of economic development that we have achieved hitherto. That is why the way that I propose is better. It is not simply a question of focusing on dealing with the equity issue for high taxpayers, which is valid and something that I intend doing, but it is also about achieving greater comprehension in the community of what such schemes can do, why they exist and what benefits derive from them beyond their being a concessionary benefit for high-income earners. We must come to understand that their wider acceptability as part of the tax code will ensure that they are valid and play the role that we envisage.
12 Mr. P. McGrath asked the Minister for Finance the deadlines to which the different phases of decentralisation are now operating; and the status of elements which have not been included in any of the phases. [2547/05]
View answerIn November 2004 the decentralisation implementation group submitted to me a report identifying those locations and organisations which, in the group's opinion, should be the first to relocate. All the recommendations in that report were accepted by the Government and subsequently published. The full contents are available at www.finance.gov.ie.
In the November 2004 report, the implementation group stated that it would report again in spring 2005 on progress regarding implementation of the programme. In that report, the group will also deal with locations and organisations not covered in its recent report.
What is the Minister's understanding of the status of the locations? I believe that 29 of the 53 locations are included in one of the first three phases. I also understand that the chairman of the group has said that some of those proposals are simply not feasible, do not hold water and cannot proceed. Has the Government completely washed its hands of responsibility for the promises it made and whether they should be delivered? Now the Minister says that they are to be administered through some bureaucratic group at arm's length from the politicians. He tells us that we should value our own role but appears to wish to push decentralisation as far away as possible from himself.
I wish to inquire further about the first few phases. The difficulty appears to be that 60% of those moving in the first phase are doing so within the Dublin commuter belt. That does not seem to gel with the Minister's target for decentralisation. The second feature is that in 11 of the 14 locations in the first phase, the majority of those moving are not coming from Dublin. That does not gel with the Minister's aim either, which was to reduce the pressure on Dublin and promote regional development. Is the new bureaucratic system that the Minister has set up in accordance with what the Government is trying to achieve? It appears superficially very different. When will the Government account to the House for what it is doing instead of hiding behind Mr. Flynn's group?
I do not accept the Deputy's contention. We have taken the decision to introduce a very ambitious programme of decentralisation to change how the Government works. As part of that process, the Government and its agencies will be moved to diverse locations. That decision has been taken and we stand by it since we believe that it was right. We are not washing our hands of the implementation phase. We have appointed someone who, as the Deputy knows, having taken the central applications idea and ascertained the level of demand, is now matching that to those Departments ready to proceed. That is a very intricate industrial relations issue that must be dealt with in the normal fashion. The chairman of the implementation group and his colleagues are well qualified to move those issues forward, and that is proceeding currently.
The Deputy asked me whether the programme is progressing as we envisaged. When the locations were announced, the Departments were matched to them. It was never going to be the case that one would have a "big bang" approach, with everything moved and sorted out in a single day. It was a question of taking those cases where one could clearly see immediate movement possible and acting on those so that the message could go out very clearly that the programme was in implementation mode and that we were proceeding.
One cannot have it both ways. The Deputy cannot say that he is opposed to decentralisation and then ask me why everyone is not already in the new locations.
That is not what I said.
The Deputy takes both sides of the argument, depending on how he sees it progressing. There are some locations where one can see immediate movement possible, with the construction or identification of premises and people ready to relocate. There is also the question of skill sets and getting people with the necessary qualifications. That is a large and very complicated task. Some of the main criticisms coming from members of the Deputy's party regarding those towns that they represent have been based on the idea that we are not getting people to them quickly enough. The Deputy's view is the more strategic one that perhaps we should not be using this model at all. People speak with forked tongues when in opposition, depending on what constituency group they are addressing.
It is a question of recognising how ambitious the programme is. It was announced, and we stand by that decision. The implementation group is proceeding with matters and there are issues to deal with. No one is suggesting that it is facile or simple. The political decision and the will behind it are no less now than when it was taken. That in no way reduces the complexity of what must be achieved. However, I believe that progress and a way forward are being shown by the implementation group, suggesting that the policy can succeed. We have every intention of ensuring that it does so.
The Minister is very good at answering my points, but it is he who wishes to have it both ways. His predecessor as Minister for Finance, former Deputy McCreevy, introduced what he has called an ambitious political programme without any strategic analysis or thought given to whether it would fit. It was done in the wrong manner. By any standards, that is not the way to make important decisions about the future of the public service.
I accept that it has been done, but now the Minister is saying that the implementation is so intricate that he cannot be held politically accountable to the House or say what is happening regarding the different elements. That is what has happened. If a question were tabled tomorrow on what will happen regarding Ballinasloe, we would get the standard reply that the implementation group was examining all those extremely intricate issues and that we should wait and see. That is not the sort of political accountability that the Minister advocates regarding tax reliefs and many other matters. He cannot have it both ways.
Some of the proposals are nonsensical and seen as such, but the Minister wishes to avoid the political fall-out from his saying that we must abandon schemes that the Government accepts will not work. The Minister and his Cabinet colleagues are trying to have it both ways on this, and that is not the sort of political responsibility or courage for which he has stood in other areas. He must mend his hand and take proper political charge of this matter, abandoning schemes that cannot be implemented and establishing a proper strategic structure for what should be done.
We will have to agree to disagree. I am not abdicating my political responsibility to see this through; the Government intends doing that. The Deputy made an argument regarding my earlier point. If I made a political decision on tax exemptions for stallions, for example, the administrative decision on implementation would be a matter for the Revenue. That does not mean that I am not accepting responsibility for that decision. One delegates functions in the interest of getting the job done effectively. If that were being dealt with simply by the Cabinet of 15 at a weekly meeting, of course we would not make progress on the matter. It must be dealt with — despite its complexity, it is being dealt with — so that the job gets done. It was never going to be the case that the job could be done overnight.
It has been suggested that my predecessor said it would all be done by 2007. He made a very clear statement on that budget night to show our seriousness and that we intend being a fair distance down the road by 2007, and he was entitled to make that statement. The Deputy knows in his heart and soul that the scheme would never have got off the starting blocks if the former Minister for Finance had gone about trying to do the job in any other way. By the same token, even on the day of the announcement, it is a voluntary scheme. We are not tearing up the industrial relations rule book but we are making it clear that a strategic decision has been taken with which I believe everybody in this House agrees, even if they do not like particular aspects of it or the way it was done. Everyone accepts that decentralisation is good for the country and the system. It has worked. It is working as we speak where we have decentralised offices. There is not a sense of dysfunction or people not being able to do their work in a collective and coherent way. That is not the case. The Revenue Commissioners have decentralised and one can now see the level of improved effectiveness and not simply because of decentralisation. The idea that this is an act of national subterfuge is an exaggerated argument. It is not correct. Decentralisation does and will work but we must be prepared to go through the process not just of consultation or determining the level of interest but the change of skills that will be required, the relocation of personnel and so on. It is a big job but it will be implemented and we stand over it.
There is an indication, based on the first series of reports, that despite what people are saying, a considerable chunk of the programme can be implemented in the foreseeable future. The chairman will report on other aspects in the spring with which one can see greater problems arising but that is not to say we should forget about it. We must work our way through this and in the reports the chairman has given me and the few discussions I have had with him on it, he is quite confident that we can work through this process. I take what he has to say with a great deal of seriousness. He is not a gentleman who would go on a wild goose chase. He has many functions but he is perhaps uniquely equipped to make the sort of progress on this issue, despite its complexity, that might otherwise not be possible. Far from it being an abdication of political responsibility by my not handling it every day of the week, that is the reason we give it to people who have those interface skills, with the legitimate staff interests involved, to try to make this happen. That is all I am saying. There was never going to be a "big bang". This was never going to be done overnight. We all knew that, although perhaps some made it look a little simpler than others but it is the right thing to do strategically. Progress is being made and we can make further progress. We intend standing over the decision in the interests of making sure that strategic decision stands.
13 Mr. Bruton asked the Minister for Finance if the termination dates set out in the Finance Act 2004 for various property-based schemes are subject to review under the public consultation which he has announced. [2557/05]
View answerAs I announced in my Budget Statement, my Department and the Office of the Revenue Commissioners will undertake a detailed review of certain tax incentive schemes and tax exemptions in 2005. This review will evaluate their impact and operation, including their economic and social benefits, for the different locations and sectors involved and the wider community. In addition, the review will examine the degree to which these schemes allow high-income individuals to reduce their tax liabilities.
I subsequently announced in a press release on 6 January 2005 that my Department has advertised for external consultants to review certain tax incentive schemes. Two consultancy studies are envisaged. One will examine the area-based incentives, that is, the urban renewal, town renewal, rural renewal and living over the shop schemes. The other will examine the other incentive schemes, namely, those covering multi-storey car parks, park and ride facilities, student accommodation, buildings in use for third level education purposes, hotels, holiday cottages, nursing homes, private hospitals, sports injuries clinics, child care facilities and the countrywide refurbishment scheme. The last five schemes have no termination date while all of the other schemes have a final date for incurring qualifying expenditure of 31 July 2006. This termination date was laid down in Finance Act 2004 and I indicated in the budget that the date remains unchanged.
Separate from the consultancy studies being undertaken in regard to these schemes, a special public consultation process was advertised on 8 January 2005 seeking submissions on measures that could be introduced that balance the benefit of such reliefs with the extent to which these are used by high earners to reduce their tax bill. The deadline for submissions for this process is 31 March 2005.
In signalling this review in respect of schemes that have a fixed termination date of 31 July 2006, is the Minister inviting a whole lobby group to start converging on him and Members of the House to try to extend the closing dates of relief schemes or has he made a definite decision that the closing dates mean the end of those schemes and that the review will not reopen them? There is some confusion about the Minister's intentions. He got plaudits, as did his predecessor, for announcing termination dates on schemes in an industry that has been working at fever pitch and is not in need of tax relief, as we heard today from a prominent developer in the southern region. Is the Minister opening the door again to a further extension of those dates or are they final, regardless of the review?
In respect of the existing schemes as they are currently constituted, they will terminate in 2006. That pipped the squeak, so to speak, and we saw what happened in the final months of last year when people finally got the message that there would not be a chance of another 12-month or two-year extension. In respect of existing schemes, the termination dates are fixed. I said we were not changing them in respect of the schemes as constituted.
The review we are undertaking is to determine what we can learn from all that, what is good or bad, what we would do if we were starting again and whether we should start from this position, given the current level of economic development. Those are matters for us to decide upon based on what emerges from the review. If I were to prejudge the review, there would be not much point in having it. The questions include the role for tax relief schemes in the future, if any, what areas we would consider are merited or that can give us the community benefit where we have a deficit that cannot otherwise be filled by the marketplace, public provision or whatever? As I said in the Budget Statement, the termination dates stand for existing reliefs as they are constituted. What we do in the future must be determined by the outcome of the review.
Will the Minister undertake, in regard to the consultation, to publish all the documentation because a critical issue in respect of many of these schemes, as initiated by his predecessor, is that a cost benefit analysis was not done? In the Finance Act of two years ago, the generous tax breaks available for private hospitals were initiated by a letter from a general practitioner in the former Minister for Finance's constituency, and last year there was a significant expansion of the tax breaks for existing hotel refurbishment on the basis of a short, one-page letter from the Irish Hotels Federation. If we are to make intelligent decisions on what is a difficult area, the principle of incentivising behaviour through tax breaks is not of itself wrong but this is a hidden world which is only available to the few. Will the Minister undertake to publish all the documentation, information and representations made? Does he propose that the consultative process may include public hearings?
Regarding some of the recent tax breaks initiated by his predecessor in the Finance Bill of two years ago in regard to private hospital development and nursing homes, must the development of private hospitals tie in with the Government's health sector policy? The Hanly report stated that a 300 or 400 bed local hospital is not viable yet in the tax breaks for private hospitals, and no dimensions of viability are indicated in respect of bed numbers à la the Hanly report, which is Government policy.
Those interested in making submissions may find it useful to examine the discussion documents of the tax strategy group which are available on the Department's website. Future tax strategy group documents will be available on the site also. It will be a matter for us in the first instance to examine the submissions we receive and what the review outlines. Consultants have yet to be appointed. We have advertised for them. They will report to me. The tax strategy group will consider matters. Those documents are available. It is incorrect, therefore, to state, in terms of the availability of these documents, that it is a hidden world.
My predecessor made many good decisions. If one makes a large number of decisions, one might not get everything right but one has more chance of getting matters right by doing so than by remaining paralysed by analysis, making no decisions, waiting for someone else to make them on one's behalf or waiting to see if one is in the clear politically before making such decisions. One must go with one's judgment and instincts on occasion. Analysis has a part to play but it cannot be substituted for the fact that one must sometimes make political decisions which do not meet with unanimous acclaim. We have reached the point in this country where everyone must agree with one before one makes a decision. It is as though one is doing something wrong. Ministers are obliged to make decisions. How they make them and the methodology they use is a matter for themselves. It is the responsibility of others to decide subsequently on one's judgment. That is the nature of democratic accountability. We all have our different styles and our own ways of working.
Reference was made to committees and their role. It is open to committees to organise their business in any way they wish. If they want to make a contribution to this debate during the year, they are more than welcome to do so.
I have set out my stall in terms of how I am going about my job. People can criticise me but I have decided, for the reasons outlined, to continue to operate as I have been doing and I will defend my judgment and my decision to do so. It is my intention to deal with these matters in the next budget. I intend this to be a comprehensive review in order that we will become wiser and more informed, based on the role these incentive reliefs and other reliefs have played thus far, in terms of how we should proceed. While people might not like the way decisions are taken many, if not all, of the decisions in question have a great deal of merit and have proven extremely successful. My predecessor's tenure was proof of that. Like all my predecessors, I will go about doing this job in my own inimitable way.
Does the Minister accept that before the review examines any individual reliefs, the central question must be asked as to why property based tax reliefs exist in respect of a sector of the economy that is already responsible — before one breaks down the effects of the individual reliefs — for 12% of gross national product? I put it to him that his lack of clarity regarding whether some schemes will continue is causing a corresponding lack of development in certain areas. I cite here the example of Cork city where there has been no development in the docklands areas because of an expectation among developers that either tax reliefs will be continued or that a special tax designation will be made. As a result, there is an onus on the Minister to put this issue beyond doubt once and for all.
The Deputy stated that the industry is already responsible for 12% of GNP. That is a high percentage and I am delighted the domestic construction industry is responsible for it.
It is also a result of property speculation.
No, it is because there are over 200,000 people working in the industry. These people are all working here whereas when there were downturns in the industry in the past, they were obliged to go elsewhere. I am delighted we have a buoyant construction sector and that we have twice the capital budget, in terms of a percentage of GNP, of any of our European counterparts. The latter would love to be in the same position as Ireland.
Let us not decry the fact that we have a buoyant construction sector. One of the important things we must do in the coming years is to ensure that if demand is not maintained at its current level — housing output now is 80,000 units compared with 30,000 six or seven years ago — a way to make a soft landing is found. We must ensure the construction sector continues to make a positive contribution, without there being any adverse economic impact in terms of reduced demand. That is one of the issues the economy and the Government and its successors must face. Assertions to the effect that we have had some tax incentive schemes and that the latter is a reason we should not have had them because we would still have had the same level of activity do not stand up to scrutiny.
We have reached a level of economic activity where it is timely to review these matters in order to discover whether there is a deadweight argument, whether schemes could be modified, whether there are incentives which would remain appropriate and whether there are areas of activity which would benefit from such schemes. These are issues we should not prejudge. It is timely that we should consider these various matters rather than simply adding or subtracting from the current system of schemes. If we take a comprehensive approach, it is likely that there will be a greater degree of agreement regarding the way forward. There is no point engaging in an argument which adds more heat than light to the situation.
Written Answers follow Adjournment Debate.
