Dáil Éireann díospóireacht -
Tuesday, 19 May 1992

Vol. 419 No. 9

Finance Bill, 1992: Report Stage (Resumed) and Final Stage.

Debate resumed on amendment No. 24.

In page 23, to delete lines 7 to 31.

—(Deputy Garland.)

Mr. Garland

May I remind the Minister, and Members, that when we adjourned on Friday we were discussing amendments Nos. 24 and 25 and the proposed arrangements for dealing with withholding tax in sections 10 and 11.

As I said on Friday, I am very disappointed at the Minister's response and, indeed, with the response of everyone in this House, who seems to be of the same opinion — with the exception of myself — that professional people are there to be discriminated against. The Minister is selecting professionals and saying, perhaps because he thinks their earnings are too high and that some are exploiting the poor — maybe some are — he has a special tax regime to deal with certain professional people.

As I pointed out on Friday, doctors in a rural practice or in a working class urban practice, are probably earning modest sums of money. These doctors are being discriminated against as opposed to doctors or specialists working in the Fitzwilliam Square area who are not being so discriminated against. There is an underlying tenor going through this debate that they are all on the "fiddle" anyway and this is a way of getting our own back on them. This is very rough justice and it is creating a bad precedent. Enshrined in Finance Bills for some years was a discrimination against business people and professional people on the one hand and PAYE workers on the other. PAYE workers had an unfair advantage with regard to PAYE and PRSI allowances. There was never any logic in it. I suppose I will have to withdraw this amendment because I am not getting any support from any side of the House. I am disappointed with the Minister's response but perhaps he will do better next year.

An Leas-Cheann Comhairle

On that note is the amendment withdrawn?

Mr. Garland

Yes.

Amendment, by leave, withdrawn.

Amendment No. 25 not moved.

An Leas-Cheann Comhairle

We come now to amendment No. 26. Amendments Nos. 27, 28 and 29 are alternatives. Accordingly, it is suggested, for discussion purposes, that we discuss amendments Nos. 26, 27 and 29 le céile. Is that agreed? Agreed.

Mr. Rabbitte

I move amendment No. 26:

In page 25, to delete lines 30 to 48 and in page 26, to delete lines 1 to 45.

Effectively, this amendment seeks to oppose the stated intention in the Bill by the Minister to treat certain benefits, specifically disability benefit, unemployment benefit, pay-related benefit and injury benefit as being liable for tax in the same way as income derived from any other source. The purpose of my amendment is to oppose the taxing of social welfare benefits. There is a very strong argument in equity to oppose it. We have just listened to a plea from Deputy Garland on behalf of the professional classes. I am quite sure he had a point when he sought to distinguish between, for example, a doctor serving in part of a constituency like my own and the more wealthy elite of the medical profession. When one thinks of the arguments we have advanced during this Finance Bill for people who would be considered wealthy or well off in our society, it is regrettable that we end up considering a proposal from the Minister that social welfare benefits should be liable to taxation.

I would remind the Minister that the benefits we are talking about have been paid for under the social insurance scheme. The people concerned have paid 7.75 per cent of their income down through the years up to a ceiling of about £19,000. They have been funding their entitlements under the social insurance system out of their own pockets and in conjunction with their employers down through the years. It is grossly inequitable that should someone become ill and be eligible for disability benefit that having funded that social insurance scheme they should be liable to taxation. For somebody who is unemployed, through no fault of his own, it is unfair when he re-enters the workforce that his unemployment benefit will now be taken into account, along with whatever he may earn for the given tax year. There is a serious inequity here. The Minister's stated objective, with which I would generally agree, about income, whatever its source, being liable to taxation is a good one. When we have such gross inequity in our society, when some of the richest, most powerful and wealthy in this community can pay for the best advice and expertise to teach them how to avoid, minimise or even evade their tax liability, it is disgraceful that we should be considering it in the context of the poor social welfare recipients in this case.

I am aware an argument was made by the Commission on Taxation in the mid-eighties concerning this issue. No doubt the Minister will draw to my attention the particular paragraph of that report. The Commission on Taxation said they believed that the exemption of short term social welfare benefits from income tax was contrary to equity principles which dictate that the amount of income rather than its source should determine the amount of tax that is payable. Because these benefits are funded separately from the social insurance scheme I do not agree with that statement of policy that it is contrary to equity principles. In any event, one should read the rest of the chapter on the question of the taxing of short term social welfare benefits in the commission report. It is clear, if one does that, that that statement or policy is qualified by a number of other considerations, one of which is the recommendation that there should be a basic income for all people in society, below which nobody can fall. At that time they recommended that as being in the region of £55 to £60 a week. Translated into today's figures that minimum threshold would be between £62 and £72 per week. We know that some assistance payments fall below that figure.

Finally, my real objection to seeking out social welfare recipients to make a contribution in income tax is that it is entirely unconscionable that people who have worked all their lives, people who have paid social insurance, people who have become ill, people who have become unemployed, people who have become been injured, people who have become redundant and are entitled to pay-related benefit should have to pay tax while the exemption levels are so low. If the exemption levels were fixed at some reasonable level, I would be prepared to consider the Minister's proposal on its merits. That is not the case. People are now liable to income tax at a level of about £70 per week. It is unjustifiable. It is a disincentive to work. It is unfair and takes no account of the inequities in society and it takes no account of those who use every loophole in the system to salt their profits offshore.

I propose this amendment which effectively deletes the section, because while some progress has been made in tackling the gross inequities that were brought to our attention by the Commission on Taxation and by several reports and comments since then, it is nowhere near sufficient to warrant us chasing people who are unemployed, who are in receipt of social welfare, to pay income tax. They have paid their social welfare stamps and this type of proposal is entirely premature while we have such low tax exemption levels and while we have a separate system for social insurance and taxation. I hope the House will support me and that the Minister will take on board some of the arguments I have made.

Mr. Carey

As far as I understand it, the Minister has accepted the proposals put by Deputies Quinn, Garland and Noonan on Committee Stage and his amendment No. 27 is almost similar to amendment No. 28. I thank the Minister for accepting it.

Mr. Garland

I would like to speak first to amendment No. 26 in the name of Deputy Rabbitte. I have a good deal of sympathy in the points Deputy Rabbitte made. Needless to say, I have a good deal of sympathy for many people who find themselves recipients of social welfare benefits. However, on balance, I do not think the Deputy has made his case and I am inclined to stand over what the Commission on Taxation had to say on this matter.

I agree, of course, that the exemption limits are far too low and, like Deputy Rabbitte, I sought to have these increased. There are far too many low earners paying tax and this should be put right. At the same time, it is generally perceived that there is a certain amount of racketeering whereby, towards the end of the tax year, certain employees suddenly go sick and draw sickness benefit free of tax with the ridiculous effect of allowing them to earn more net, after taking their sickness benefit, than they would have earned had they stayed in work until the end of the tax year and paid tax. I feel the balance of advantage lies with the proposals in the Finance Bill.

With regard to amendments Nos. 27, 28 and 29, the Minister's amendment No. 27, as Deputy Carey says, seems to cater for my amendments Nos. 28 and 29.

Mr. Byrne

I want to support Deputy Rabbitte. Section 15 is about penalising the sick who are on disability benefit, those unfortunate enough to be unemployed, those who have suffered industrial injuries and those who are on pay-related benefit, by taxing them. Coming from this Coalition Government this is nothing short of outrageous and totally unacceptable to those in benefit who have paid 7.75 per cent under the social insurance code.

The reason this amendment must win out here today is because these people have already been horrendously victimised in the Social Welfare Bill. If the Government were implementing the recommendations of the report on social welfare and payments were at the level recommended in 1985 it would be another matter. In 1985 it was argued that the minimum basic payment should be between £50 and £60 a week. By today's standards that would be between £62 and £72 a week. Even though there is an increase of 6 per cent this year, unemployment benefit, disability benefit, unemployment assistance and supplementary welfare allowances are still only at £53 a week, at least £10 behind the figure recommended in the report of the Commission on Social Welfare.

What is the logic behind penalising yet again those who are unfortunate enough to be ill, injured or unemployed? Why should unemployment benefit drawn by a person who is unlucky enough to be unemployed be treated as income when all it does is to put bread and butter on the table of the family man or woman who has been unfortunate enough to lose his or her job? Is the Minister to penalise such people if ever they should get employment after that second six-month period so that they will be deemed to have earned during the period of their unemployment?

It is important to note that as a proportion of the overall budget the social welfare budget has been declining, expenditure on social welfare as a percentage of the gross domestic product has also been declining and the Exchequer contribution, as distinct from the social insurance contribution to social welfare, has been declining.

Every politician who has his finger on the pulse of the electorate knows, for example, that old age pensioners, both men and women, who have worked all their lives and who are in receipt of a small contributory old age pension from CIE, Dublin Corporation or the ESB are outraged that they are to be caught in the tax net. How can the Minister expect us to stand over this section of the Bill given the scandals that are hitting the headlines every day of the week involving people with vast incomes who are not paying their fair share?

As regards the famous annual report of the Comptroller and Auditor General, I wish to remind the House that if there is to be equity and if the meagre social insurance payments of those in receipt of disability benefit and the unemployed are to be deemed as income, then the full force of the law must be used against those employers who according to the report owe the State £137 million in pay-related social insurance contributions. When are we going to hear that employers will be sent to jail and the tax code will be implemented fairly?

In his report the Comptroller and Auditor General deals specifically with the self-assessment system, which was considered to be a progressive change in taxation policy and was introduced after hundreds of thousands of men and women took part in a major demonstration to call for tax reform. The Comptroller and Auditor General commented on the inability of the Revenue Commissioners to collect the vast sums of money outstanding and stated that they had informed him that their audit visits, under all programmes, only impacted on 9 per cent of the taxpayer base in 1990. He went on to say that less than 1 per cent of cases had been subjected to a full self-assessment audit.

There are people in this society who are making huge sums of money. The Minister's colleagues in Fianna Fáil sometimes argue that there is approximately £1 billion, on which tax should have been paid, in offshore accounts in the Isle of Man, Jersey, etc., and that the Minister is thinking of ways to entice that money back to this country. When the Minister proves to this House, to the average PAYE worker and to the unfortunate recipients of disability benefit and unemployment assistance that he intends to go after those elements in our society who have milked the system, we might be in a position to consider his suggestion that social insurance payments should be deemed as income for tax purposes. It is only when we see company directors, landlords and the long list of tax evaders whose names are published annually being sent to jail and not given a slight slap on the hand, that we will be convinced that the Minister is determined to achieve equity in the taxation code. I wholeheartedly support Deputy Rabbitte's amendment.

Mr. Pattison

I support the amendment. Section 15, taken in conjunction with the provisions of this year's Social Welfare Act, represents a severe attack on social welfare recipients and is an insult in particular to the unemployed, the sick, and those who have been injured at work. I am puzzled about why this group are being targeted at this time. While it is true that long term social welfare payments, such as pensions, have been taken into account for tax purposes, unfairly so in many cases, we should loosen the tax net for those pensioners caught in it at present rather than extend it to cover the small number of recipients outside it.

This will be considered to be a draconian provision by those who lose their jobs. While it is always difficult to come to terms with redundancy, it is no longer considered to be temporary while one waits to take up another job but rather permanent. One therefore needs all the assistance that one can get, in particular, financial assistance. These provisions, along with the provisions contained in the Social Welfare Act, will penalise workers who have been made redundant on both the tax and social welfare fronts. Heretofore one could look forward to easing some of the problems resulting from the loss of a job by applying for a tax rebate after a month or two. It appears however that it will not be possible to do this under this provision. As the burden on the unemployed will be increased by the Government under this Bill, as well as under the Social Welfare Act, I cannot support this section as it stands but feel obliged to support the amendment.

In relation to disability benefit, as anyone who knows how the Department of Social Welfare have operated in recent years will know, the day is long gone when people could lightly claim disability benefit. The qualifying conditions, in particular the medical conditions, have been applied severely and rigorously. Consequently only those who are genuinely ill and incapable of work qualify for this benefit. Even though we are talking therefore about people who are genuinely ill and who have suffered a severe reduction in their income as a result of their illness, the Government's answer is that they are an easy target, they will tax them further and will ensure they will not gain any tax advantage. That essentially is what the Government are saying. However, I believe if we can provide an advantage for people who are ill, in most cases seriously, we should do so.

In regard to those who have been injured at work, unfortunately, the number of injuries continues at a high level. However, this is not the fault of the worker. It would not be in order for me to go into this matter at this stage except to say that no worker goes out deliberately to sustain an injury at work. Indeed, there is nothing to be gained financially by being injured at work, even though some people might think so, particularly when a common law award is made. Anyone who has been injured would much prefer to make a full recovery than to receive even a large amount of money. Consequently, I object to these people being targeted in the Bill. Previously, people injured at work used to receive a higher rate than those on disability benefit but the Minister for Social Welfare abolished that and they now receive a reduced rate. The Minister for Finance will now take more from people who have been injured at work, and I oppose those provisions for the reasons I stated. The Minister is targeting unfortunate victims in society, those who are sick, unemployed or who have been injured at work. The Minister has also targeted what is left of pay-related benefit. I hope the Minister will reconsider this proposal and accept the amendment. When he introduces the second Finance Bill in the autumn he should examine the harshness of the PAYE system in relation to old age pensioners, including widows' and invalidity pensions.

Mr. Noonan

(Limerick East): My party will not support this amendment. The Minister must take action in this area because it is invidious that people out of work who receive sick benefit, tax arrears and social welfare payments can end up with take home pay which is more than that of their colleagues who remain at work doing the same job. Deputies who have spoken in favour of the amendment know what happens, particularly after Christmas each year, when there are very high levels of absenteeism. During the last few months of the financial year when there can be tax rebates and PRSI payments do not have to be made, it can pay to stay out of work. In country constituencies they call it “diving”, I do not know what they call it in the city; there are many “divers” who are ripping off the rest of the taxpayers in the same manner as people owning offshore companies. The sums of money involved are not as big but the principle is the same.

I support the general thrust of the Minister's measures in the anti-evasion sections and I will not oppose him in regard to this measure. However, there is a case to be made for people in bad circumstances and they should not be seriously disadvantaged. Perhaps the Minister will consider an amendment which would simply deal with the problem of people having more take home pay when they are sick than when they are working. The amendment could say that taxation of social welfare would be to a point which would bring the total income below what they would receive if they were working. The figure could be £5 or £10 below their income, which would be a better formula, because there is a danger that certain categories of workers who have been injured will have a genuine problem as a result of the Minister's present approach being too hard on some individuals. Perhaps it could be couched in a way which would be a kind of reverse of pay-related benefit — I am sure it is not beyond the Minister's officials to come up with something of this kind — which might solve the problem.

I presume that the Minister is more interested in putting an end to excessive absenteeism than in the yield from this measure. I know it is an attempt to improve work practices but the Minister could achieve this in a different way. I notice at the end of the section that the Minister says this measure will not be effective when the Bill is passed, the Minister will have to bring orders before the House to implement it. Effectively, this section will remain moribund until these orders are introduced. Perhaps the Minister will again examine the matter and decide not to bring in an order until the autumn in the second Finance Bill.

Mr. Quinn

I do not think anybody can argue against the principle that if somebody has an income which brings him, or her, into the tax net, from whatever source, that it should be considered for taxation. The way in which the Minister is proposing to implement the recommendations of the Commission on Taxation — which made many other proposals not being implemented by the Government — is not the correct procedure. Deputy Noonan's comments support the point I wish to make, which is that this measure is premature. Deputy Noonan said that this is not a revenue gathering measure and I do not know if the Minister has calculated the yield in this regard. However, the draughtsman in the Department of Finance who scurries across to the Department of Social Welfare to scrutinise the administration of their operation is being hopelessly misled because our understanding is that the Department of Social Welfare have now assured Deputies, including my colleague, Deputy Pattison, that the kind of abuse which lives in the folk memory of many people — and certainly is part and parcel of the demonology of the Progressive Democrats — is something of the past. Computerisation has now been introduced in the Department of Social Welfare and this system enables them, if they wish, to identify people who are abusing the system in the way it was abused in the past. We all recognise that that is not the point; what is at issue here is whether you transform the whole system to eliminate a particular abuse. We presume, as Deputy Noonan said, that this is not about revenue, otherwise the Minister would be making nonsense of the whole system of redistribution. The Minister is squeezing social welfare payments and tightening up regulations in relation to their allocation, including the referee system for disability payments and so on. As I said, there can be monitoring of payments by computer to very quickly root out collusion between employers and employees so why introduce this measure in the first place?

I am glad that the Minister, contrary to the normal administrative practice of the draughtsman and the Department of Finance — and indeed every other Department — at least has decided to bring in the regulations and have them debated in this House prior to their coming into effect, which is not the normal convention in regard to legislation. Perhaps it is a recognition within Fianna Fáil that they still have a constituency which might depend on this. To that extent, the Minister's amendment and the other two amendments representing the other parties in this House recognise that and the Minister has accepted it. However, I have a better suggestion for the Minister: he should accept the proposal contained in amendment No. 26 and come back in the autumn with the regulations as an integral part of his second Finance Bill. There is no rush in relation to introducing this matter. A great deal of fear has been generated because many people will now have to comply with form filling which they would not otherwise have had to do.

I am conscious of the very short amount of time available for the remaining 200 sections but I should like the Minister to indicate what level of revenue this measure is expected to yield. Will that yield be automatically transferred as a bonus payment into the coffers of the Department of Social Welfare for distribution within the system or will it be simply retained as a Government saving? What system of administration does the Minister have in mind for the operation of that measure?

If the Minister goes along with the argument of the Progressive Democrats and some Fine Gael Members that a great deal of abuse is taking place then surely he has the wherewithal to eliminate the abuse rather than change the system.

The principle of persons earning income or getting income from any source and then paying tax on it is not one with which the Labour Party disagree. With the present low threshold of income tax allowances, and bearing in mind the tax rebate as a result of redundancy or illness in one year, and in one year only, the Minister is being unnecessary harsh and uncharacteristically cruel if that is all he is going after. There are other ways of collecting revenue, as the Minister has shown. I should like to hear the Minister's comments on that.

The best course of action the Minister could adopt in this instance would be to accept the amendment to delete this section and, if necessary, bring back the measure with the implicit regulations attached to it so that people can understand what he has in mind. Members would not then feel they were voting for some kind of pig in a poke.

Minister for Finance (Mr. B. Ahern)

Amendment No. 26, tabled by Deputy Rabbitte, would remove from the Bill the enabling section provided for the treatment as income for tax purposes of the benefits specified in the section. As I said in the Special Committee, and during the Second Stage debate, that section is in line with the Government's general policy that income when received should be treated as income for tax purposes. In the case of the social welfare benefits in question, there is no reason that these benefits, which are, after all, a substitute for taxable employment income, should not be treated as income for tax purposes. The fact that up until now they have not been so treated is an anomaly.

Suggestions have also been made on numerous occasions that the anomaly gives rise to absenteeism and acts as a disincentive to work. In fact, every report published in the past 20 years has made that point. I know it is not the only point and there are other disincentives but it has always been included. That would not arise if the benefits were taken into account for tax purposes as the section proposes.

I do not accept the amendment. I emphasise that the extent to which taxation will arise in any particular instance will essentially depend on the amount of other income an individual has. I have said over and again that in this regard we are not talking about taxing a disability benefit. The measure will not apply to those who receive only a disability benefit; it is the other income received that brings people into the tax net as other income will bring people in receipt of other benefits over the threshold also. That is the relevant point.

It is wrong for us to try to say that the principle of the section is to tax benefits. I shall certainly examine the details of the proposal when considering the commencement date, and the precise way the section will operate. We should not distort what we are talking about. The benefits will not be taxed but if people have income from other sources the joint income will be taxed if people are over the threshold.

That is precisely what happens in the case of the person who receives an old age pension and a work pension or some other form of income. If those incomes joined together put someone over the tax threshold, then the income is taxable. I suppose one could make a case for a pensioner or a person in another category because they do not have the benefits.

Deputy Noonan asked about the application of a tax benefit and I should like to pose two questions in that regard. First, I shall answer Deputy Rabbitte's point. In a paper published in November last the ESRI presented the results of a study on the taxation of short term social welfare benefits. The study was based on the ESRI survey of income distribution and related matters conducted in 1987. It was found that taxation of short term social welfare benefits would most affect the higher paid. Fewer than 10 per cent of those affected were in the bottom 30 per cent of income distribution. That survey was based on 1987 tax rates. The income tax changes since 1987 in relation to exemption limits, child additions and the reduction of the standard tax rate would mean that the lower paid would be even less affected by bringing these benefits into the taxation system than was indicated by the ESRI survey. I ask Members to take the findings of the survey into account. It is apparent that people at the bottom end of the income scale will not be overly affected.

Deputies Quinn, Garland, Rabbitte, Byrne and Pattison said there will be a considerable amount of work involved in bringing in these regulations and determining the way in which they should operate. An amount of work will have to be put in by the Department of Social Welfare and the Revenue Commissioners and certain matters will have to be teased out but it is time we tried to bring that work to finality. As I said in the Special Committee, I am not sure how quickly that can be done in that a certain amount of matching has to take place.

I wish Deputy Quinn was right in these matters. I often think he is right and that with the development of easy software packages we should be able to identify such issues and then address them quickly. However, they are very complicated when one tries to cross them or, at least, they are put forward as being complicated.

Mr. Quinn

That is more like it.

Mr. B. Ahern

We will have to take action, develop the principle in an Act and try to focus minds on it. The taking into account of disability benefit in the assessment of taxable income will yield a substantial amount of money, I believe, but that is something that can wait until all the conclusions and studies have been issued.

Mr. Quinn

About how much does the Minister estimate the yield will be?

Mr. B. Ahern

I could only give an estimate because there is still much work to be done in this regard and the amount is £20 million. There are definitely arguments in favour of this measure. In the Special Committee I was told that this is a major change and I accepted that argument in my amendment. We will come back to discuss the commencement date and whatever else there is to discuss at a later date.

Mr. Noonan

(Limerick-East): Will it come back before the summer recess?

Mr. B. Ahern

No, it will not. Much of my reason for establishing the principle of this measure is to try to focus minds on it. I am not trying to blow all Deputy Rabbitte's arguments out of the water but I ask him to take account of the ESRI survey. Some of the data contained in it certainly convinced me of the merits of this proposal. Quite honestly, the Government are not going after the low paid in any substantial way. If results prove that to be the case, we will examine it when we are working on the regulations.

What struck me was that the figure of less than 10 per cent of those affected featured in the bottom 30 per cent of income distribution. If one re-examines budgets of the past four or five years one will see that their position has improved substantially based on data supplied. In any case it would not have worsened their position. We will have additional time to consider other data. Certainly I shall be doing so as time progresses. I am doing this on the basis that I believe the contents of the ERSI report on taxation will have very little impact on the low-paid. If, in course of discussions, anything to the contrary is proved, I will bear it in mind, but recent examinations would indicate that no such contradiction will be proved.

Mr. Rabbitte

While being sorry that the Green Party find it unable to support this amendment, I welcome the support of the Labour Party. Clearly the encounter with the old war horses, the annual encounter at the Fine Gael Ard-Fheis, has caused iron to enter Deputy Noonan's soul, which is regrettable because I have listened in the course of these discussions to much special pleading on behalf of people of some considerable means in our society. I do not make any apology for pleading the cause of people in receipt of certain benefits under the social Welfare Acts.

Deputy Noonan advanced the argument that this amendment is about the phenomenon of absenteeism, that the Minister's purpose, rather than a revenue earner, is to tackle that phenomenon of absenteeism. I am easily won over to that argument. I am aware that it does take place, though not nearly as widely as is in the demonology of some politicians and commentators.

That is not the purpose of the relevant section of the Bill. If that is an accidental consequence, or even an intended consequence, so be it in that limited area of abuse. This proposal affects disability benefit, unemployment benefit, pay-related benefit and occupational injury benefit. As a former trade union official I know a number of people who became unemployed after, say, six months of the year earning a reasonable income and whose prospects now of ever re-entering the labour force are virtually nil. As a result of this amendment at the end of the year such a person will have a significant tax liability. For the first six months of the year he will have been in receipt of a reasonably good income and in the second six months of the year received pay-related benefit. He, or she, will have a substantial tax liability now as a result of this amendment. These are people who, through no fault of their own become unemployed and have little or no prospect of ever re-entering the workforce.

Deputies Noonan and Garland are concerned about the phenomenon of shysters. There are shysters in all walks of life, not in the current Dáil, of course, but, in the past a few may have been elected to this House. There are shysters everywhere. Is the argument being advanced that those who are genuinely ill should be penalised as a result of those who take a dive at a certain time of the year? I cannot support that argument.

Although I missed a particular part of Saturday's Fine Gael Ard-Fheis, at one stage I was accompanied by a constituent of mine, somebody who has transferred from one area of my constituency — under the so-called £5,000 grant — in order to purchase his house on a private estate. He is now out of work because of a heart condition, at 38 years of age, with five young children, with a new mortgage, and he will continue to be out of work. He estimates that this proposal will seriously affect his earnings. His wife works for a couple of hours per week with a contract cleaning company in the area. There will be casualties from this proposal. The reason I am opposing it is that I cannot see how it is a priority while there remains so much work to be done in terms of broadening the tax base and introducing equity into the system. This is not in line with the recommendations of the Commission on Taxation; they hedged it around with qualifications to which I have referred. The ESRI report did indeed conclude what the Minister said. But they did not conclude that no social welfare recipients would be caught in this kind of all-embracing proposal to tackle the problem.

While the tax exemption levels are so low, while we have yet so far to go in combating the phenomenon about which Deputy Byrne spoke in terms of abuses that take place elsewhere in the system, I cannot see that this is a priority. I do not think I should forget the people who elected me here and because there is a certain intellectual argument about the equity of all income being subject to taxation there may indeed be an argument in principle in this case. But I do not believe that this is a priority. For that reason I wish to press this amendment.

Question put: "That the words down to and including `benefits' in line 11 on page 26 stand."

The Dáil divided: Tá 66; Níl, 22.

Tá

• Ahern, Bertie.
• Ahern, Dermot.
• Ahern, Michael.
• Andrews, David.
• Aylward, Liam.
• Barrett, Michael.
• Brady Gerard.
• Brennan, Séamus.
• Briscoe, Ben.
• Burke, Raphael P.
• Calleary, Seán.
• Callely, Ivor.
• Clohessy, Peadar.
• Collins, Gerard.
• Connolly, Ger.
• Cowen, Brian.
• Cullimore, Séamus.
• Davern, Noel.
• Dempsey, Noel.
• Dennehy, John.
• de Valera, Síle.
• Ellis, John.
• Fahey, Frank.
• Fahey, Jackie.
• Fitzgerald, Liam Joseph.
• Fitzpatrick, Dermot.
• Fitzpatrick, Dermot.
• Flood, Chris.
• Harney, Mary.
• Hillery, Brian.
• Hilliard, Colm.
• Hyland, Liam.
• Jacob, Joe.
• Kelly, Laurence.
• Kenneally, Brendan.
• Kirk, Séamus.
• Kitt, Michael P.
• Kitt, Tom.
• Lawlor, Liam.
• Lenihan, Brian.
• Leonard, Jimmy.
• Leyden, Terry.
• Lyons, Denis.
• Martin, Micheál.
• McEllistrim, Tom.
• Molloy, Robert.
• Morley, P.J.
• Nolan, M.J.
• Noonan, Michael J. (Limerick West).
• O'Connell, John.
• O'Dea, Willie.
• O'Hanlon, Rory.
• O'Keeffe, Ned.
• O'Kennedy, Michael.
• O'Leary, John.
• O'Rourke, Mary.
• O'Toole, Martin Joe.
• Power, Séan.
• Quill, Máirín.
• Reynolds, Albert.
• Smith, Michael.
• Stafford, John.
• Tunney, Jim.
• Wallace, Dan.
• Wallace, Mary.
• Woods, Michael.
• Wyse, Pearse.

Níl

• Bell, Michael.
• Byrne, Eric.
• De Rossa, Proinsias.
• Ferris, Michael.
• Foxe, Tom.
• Gregory, Tony.
• Higgins, Michael D.
• Howlin, Brendan.
• Kavanagh, Liam.
• McCartan, Pat.
• Mac Giolla, Tomás.
• Moynihan, Michael.
• O'Shea, Brian.
• O'Sullivan, Gerry.
• O'Sullivan, Toddy.
• Pattison, Séamus.
• Quinn, Ruairí.
• Rabbitte, Pat.
• Ryan, Seán.
• Spring, Dick.
• Stagg, Emmet.
• Taylor, Mervyn.

Tellers: Tá, Deputies Dempsey and Clohessy: Níl, Deputies Byrne and McCartan.

Question declared carried.

Amendment declared lost.

Mr. B. Ahern

I move amendment No. 27:

In page 26, to delete lines 12 to 18 and substitute the following:

"(b) Where an order is proposed to be made under this subsection, a draft thereof shall be laid before Dáil Éireann, and the order shall not be made until a resolution approving of the draft has been passed by Dáil Éireann.".

Amendment agreed to.

Amendments Nos. 28 and 29 not moved.

An Leas-Cheann Comhairle

Amendment No. 30 in the name of Deputy Garland. Amendments Nos. 31 to 39, inclusive, form an alternative composite proposal. It is proposed, therefore, to discuss amendments Nos. 30 to 39, inclusive, together.

Mr. Garland

I move amendment No. 30:

In page 27 to delete lines 6 to 51 and in page 28, to delete lines 1 to 9.

This amendment proposes to remove section 17 from the Bill. The section deals with profit-sharing schemes and the shares granted to employees. I am quite happy with the present legislation in this area which was introduced in 1982. It made a small contribution towards better labour relations and was an attempt at getting away from the "them" and "us" concept which results from the way society and industry are structured. We in the Green Party would prefer to move from the concept of employer and employee to that of people working with others through workers co-operatives or working in family businesses. However, we are light years away from that at present. We must accept the concept of employers and employees and the inevitable conflicts that arise between the interests of these two groups who comprise the bulk of our industry. I think we are all agreed that we are going through difficult times on the industrial relations front, having had a prolonged bank strike followed by a prolonged strike in An Post at present.

In the budget the Minister proposed the total abolition of these schemes. We all received representations from trade unions on the one hand and from various employer organisations on the other, requesting us to oppose this proposal, and I am pleased the Minister has responded to some degree to these representations. At present there is a £5,000 limit on these transactions. I do not propose that that limit be increased because we must keep a reasonable balance in this matter. This scheme is designed to assist workers and people up to middle management to have a stake in the business in which they work. It is not designed to benefit the very highly paid managers and directors, nor should it do so.

Deputy Noonan (Limerick East) has put down a series of amendments which propose to increase the figure from £2,000 to £4,000. In other words, he is proposing an effective reduction of £1,000, from the present level of £5,000 to £4,000. I do not disagree with that proposal because it may make for a reasonable compromise. By inserting this section the Minister is accepting the principle behind this measure, but the limit of £2,000 is too low; it should be between £3,000 and £5,000. We are looking for consensus in the House. I hope that the principle of this proposal is accepted by the Labour Party and the Democratic Left. They have no amendments down on the matter but I will be disappointed if they do not feel reasonably favourably disposed towards it because it would indicate — I hope I am wrong — a certain narrow trade union attitude to employee remuneration which sees the basic wage plus overtime as the main aim of the trade union movement in securing increases in this area.

I would like to think that the trade union movement as represented by these two parties would seek to broaden the horizons of the Left and of the trade union movement so as to achieve more worker participation in industry. We need more worker directors. It is important that workers feel part of the enterprise, not in battling with management for a greater share of the cake but in making a contribution, which will be recognised by management, to profit sharing schemes and co-ownership schemes. The Liberal Party in Britain have been pioneering in this area for many years in an effort to close the divide between management and labour. I would be interested to hear the other contributions on this matter.

Mr. Noonan

(Limerick East): A series of amendments in my name are being discussed with the amendment in Deputy Roger Garland's name and as Deputy Garland has made a very strong case I do not need to add to it. The Minister announced on budget day that he intended to abolish profit sharing, an idea first put forward by the leader of Fine Gael, Deputy John Bruton, and introduced in 1982 by the then Coalition Government. The Minister has since changed his mind on the principle and has restored profit sharing, but with a maximum market value of shares of £2,000. Effectively the principle has been conceded but the amount has been reduced from £5,000 per employee to £2,000 which, I believe, is too low. In the interests of achieving a compromise I have put down an amendment to increase the figure to £4,000 and a series of consequential amendments to make it consistent right across the table. Considering that we are discussing all these amendments together and as Deputy Garland's amendment is down first and, I hope, will be put, I will be voting for it.

Mr. Quinn

We are back to where we were on Committee Stage. I had an amendment down at that stage to delete the section with the effect of leaving the status quo intact. The arguments have been cleared articulated. The Minister has compromised to save face in his Department. His arguments, as usual, have a certain degree of plausibility, but they do not convince. If the section was all right it should have been left alone and if it was not it should have been abolished. The Minister's response in putting in £2,000 instead of £5,000 is half hearted even though sums of £5,000 were very seldom taken up. The fact is that this was left in there as an incentive. This is not a revenue gathering mechanism, it is part and parcel of the price tag of scraping the barrel in order to appease the Progressive Democrats. It is contrary to everything the Minister believes and is contrary to the document he published in his capacity as Minister for Labour. This has clearly brought down on the Minister's shoulders the wrath of the social partners in the form of the FIE and the Congress of Irish Trade Unions.

I do not have any difficulty in supporting this amendment if it has the effect of restoring the status quo. It will not cost the Government a substantial amount of money. The sum involved is less than £2 million. Since we were so concerned in the previous vote to deal with the problem of absenteeism, it is extraordinary that this provision is being halved especially as the money in these instances did not disappear. If it was not on deposit in somebody's account it was being recycled for other productive purposes either by direct consumption or through further investment.

Deputy Noonan's amendment tinkers with the problem. I can see that the Deputy is trying to save the Minister's face by allowing the original provision to stand to the tune of 80 per cent. On balance, this is a classic instance where the Minister was driven by either the political concerns of the Progressive Democrats or the bureaucratic concerns of the officials in the Department. They were certainly not the concerns the Minister previously stated. For that reason we will be supporting the amendment.

Mr. Carey

I support this amendment. I am astounded that the Minister took this decision but I understand why. I can see where his advice came from. It came from employees of Aer Lingus who consider themselves to be experts in industrial relations. They believe that the legislation allowing this tax relief was useless and counter productive. I do not know what motivated the departmental advisers, but as Deputy Quinn said there has been harmony, great productivity, few accidents, great savings on waste and so on in companies that have availed of the legislation. One of the big bonuses has been that American companies who have been notoriously secretive about transferring shares in their companies had finally agreed to participate in this share system.

I am puzzled about the Minister's attitude. There have been publications, particularly The Evening Press showing that the Minister said he was right to abolish this incentive. We know about pressure groups, but I am talking about the principle of this which was to improve industrial relations. The Order of Business was held up for an hour today, and some of the problems discussed during that time related to bad industrial relations in a semi-State company. When the Minister was in the Department of Labour he encouraged one company in my constituency, Semtex, to take part in profit sharing. The Minister, when he was Minister for Labour exhorted members of SIPTU, the only union who were reluctant about profit sharing and the share system, to participate fully in profit sharing. When the Minister joined the dream ticket with the Taoiseach — another man who champions himself as a businessman who wants to further industrial relations — they abolished one of our most progressive pieces of legislation. This has not occured for the simple reason Deputy Quinn put forward, to reduce incentives by £1 million here and a £1 million there in order to keep Deputies O'Malley and Molloy or their compatriots happy. There was something more sinister about it.

Merrion Street has no understanding of industrial relations. They have pushed this proposal on people. This section reveals that although Merrion Street has a finger in every Department and dictates to them when estimates and budgets are being calculated, when it comes to real knowledge of manufacturing industry, they do not know what they are about. They are far from reality.

If one is sweating, working on the floor of a company that is making great profits and one is tied by something called Programme for Economic and Social Progress or a national wage agreement, and one wants to get a bit extra and provide for the future, profit sharing is a great system to keep everyone steady.

There were no industrial relations problems in the Syntex Plant which is near to where I live. If the Minister takes out his files on that company he will see that since its foundation in 1974, the Irish have taken it over. The Americans set it up and there has been a share participation. The American corporation gave these shares out to employees. The first people to take advantage of them were the skilled trade unions. The leader of the union there is a man from the North of Ireland. He persuaded the craftsmen to join with him in profit sharing. They made huge savings in that company. That is the only success I can name immediately, but I know there are others in the mid-West. SIPTU were very slow to participate in this scheme.

It was the policy of the ICTU not to really encourage the scheme, but in recent years they have come to see the benefit of it. Employees in the craft unions now have substantial savings in this area. There have not been any labour relations difficulties there. The company pays out under the Programme for Economic and Social Progress. The big benefit has been that the Americans had confidence in Syntex because of all the productivity and the good industrial relations so they put huge research and development into it. It has taken 18 years to do this and now the dream ticket has come along and blown a hole in it. They have abolished this benefit. These men are to lead us out of our huge unemployment problem and they could not even deal with this basic simple thing.

The Minister's predecessor at the Department of Finance is now Taoiseach, so he knew what was being prepared. It was not today or yesterday that these options were put to Cabinet. What was the Minister for Labour doing when this came up? How did he approve it? How did the Department of Finance put that across?

Mr. Quinn

All the Ministers are busy doing something else.

Mr. Carey

What goes on in the Department of Finance is unbelievable. How they get away with it is mindboggling. I fully support Deputy Garland with regard to maintaining the status quo. I had the privilege of working with fellows on a factory floor, sweating it out every day. We saw the fellows in Mount Street and Merrion Street doing very well. This scheme ensured a proper return to people in manufacturing industry, although I know there are service industries which have taken advantage of it. Maybe the Minister was trying to get after GPA who are already in the scheme. Maybe he was trying to get after Tony Ryan because he is a successful businessman. Maybe there were some difficulties there. Could there be a hidden agenda? Are they after the banks?

Mr. Quinn

Or some of Tony Ryan's directors.

Mr. Carey

Perhaps. We have Deputy Garret FitzGerald and Peter Sutherland.

Mr. E. O'Keeffe

And Nigel Lawson.

Mr. Carey

And Mr. Lawson, a fine fellow too.

Mr. B. Ahern

And P. J. Mara.

Mr. Carey

Yes, he suffered in the massacre. He was another man who fell on St. Valentine's Day. There were 15 of them, I think.

Mr. Farrelly

The only living surviver is in the Chair. He was on the list but he survived.

Mr. Quinn

We should congratulate the Deputy on his recovery.

Mr. Carey

Part of the dream ticket.

An Leas-Cheann Comhairle

Deputy Carey, this is a very interesting and delightful contribution. Lest you detract from it by repeating it, maybe you would call it a day.

Mr. Carey

I will not repeat my remarks. I should like the Minister to accept Deputy Garland's amendment and to shake out that section in the Department of Finance who suggested this to him. The USSR used to send people to Siberia. The Minister should see the moguls in Merrion Street who put this to him and send them to the equivalent of Siberia within the public service.

Mr. Quinn

I think it is called Inishvickillaun.

Mr. Carey

No, they would be looked after in Inishvickillaun.

An Leas-Cheann Comhairle

Deputy Carey should stay with the dream because if we started going into elements of fantasy or nightmare it would not be relevant. Deputy Carey has addressed himself well to the amendment before us.

Mr. Carey

It is a serious subject. Deputy Bruton has given his commitment that if Fine Gael get back to power they will see to it that this provision is fully restored and we will encourage further profit sharing and share participation. That is the only way forward.

Mr. Martin

This issue has been of considerable concern to me in my constituency. Deputy Carey should be careful in berating the people in Merrion Street. We in Cork sometimes look rather enviously at the very favourable tax regime which the moguls in Merrion Street have bestowed upon his area from time to time.

Mr. Carey

The Deputy has Ringaskiddy.

Mr. Martin

We do not. That is the problem.

Mr. Carey

It is up to the Deputy's Minister.

Mr. Farrelly

If the Deputy does not agree, let him vote against it.

Mr. Martin

There was general consensus on Committee Stage that the principle of this scheme was good and that the Minister was correct in restoring it. We debated the matter thoroughly on Committee Stage. Restoring the scheme in such a way that an employee can take out £2,000 every year is welcome. It is good for industrial relations and for generating participation in the workplace. The feedback I have been receiving is that the bulk of correspondents who got in touch with me following the budget announcement are reasonably satisfied at the compromise which has been arrived at. The figure the Minister has set meets the vast majority of cases. That is what we should be concerned about, not encouraging hyperbole or over indulging in major issues. The scheme has been restored and can be reviewed annually. The best way to proceed is to monitor participation in this scheme and if there is a major demand at the end of next year we might make further amendments. We should accept the goodwill of the Minister. We have witnessed the democratic process in operation. He has responded to reasonable arguments and we should be satisfied.

Mr. Cotter

On budget day I described the budget as an itsy bitsy kind of thing. This is an example. This initiative showed a complete philosophical chasm. There was no overall plan in the budget. They were turning every stone looking for a few pennies, irrespective of what effect a measure might have on any group within the economy. This measure had a devastating effect, particularly on bigger companies and middle management. The Minister knows this and that is the reason he has back tracked. He showed he had not a clue about the dynamics of company management. I would not blame the moguls of Merrion Street. I blame the lack of Government philosophy in putting the budget together. They were collecting pennies and hoping they would end up as pounds and they succeeded in needlessly aggravating important sections of the community. The Minister should have understood that this measure, which was introduced in 1982 as a great innovation, was a great aid to company management and a way of motivating people in the workplace. Today when the Country at large is continually berating the Government about the tax take and the fact that there is no reward for people, to implement the Minister's original proposal would be to compound matters. That makes people ask why they should be bothered. There is enough of that attitude.

Last week I spoke about the new mathematics this Government have created, whereby three is greater than 11. A person earning £3,000 has more disposable income than a person earning £11,000 and a family on £7,500 from social welfare is better off than a corresponding family on £16,000. They have created "new mathematics" and this is another example of how they have compounded the errors they made. The Minister has back-tracked a little, but that is not enough. He should realise that this was a massive blunder which upset the management structure in a great many companies. From talking to people in middle management, I know they were completely frustrated by this action and saw it as a vindictive move to take a few well earned pounds from them. The Minister has restored this incentive in part but he should do the decent thing and restore it entirely because of the input it makes to good management and increased output. It motivates people and gives them a sense of belonging. Therefore, I will support this amendment.

Mr. Rabbitte

First, I want to defend the position of my union, SIPTU. I know Deputy Carey sweeps with a very broad brush on occasion but the reason SIPTU have taken up this position is that the overwhelming number of people who are members of the largest union in the country simply cannot afford to subscribe £5,000 for shares annually, even at market value or even do so occasionally. That is the difficulty with the comments on it. Members have not commented on what is included in the amended Bill but on what the Minister said on budget day. What the Minister did on budget day was wrong, we are all agreed on that and I do not think there is any need to go back on the arguments on why this was wrong. I am surprised that a former Minister for Labour would have made that decision having regard to the industrial relations implications and the other points made by Members, but in fairness to the Minister for Finance he had other matters to pro-occupy him round the time the budget was being framed and I for one would be prepared to forgive him on this occasion.

The Minister has got it about right now and whereas Deputy Garland has gently chided me by expressing the hope that I would not take up any narrow trade union position which is an opprobrium I will have to live with, difficult though that may be, I would rather not be put in the position of having to vote for the status quo because it has little regard for the factual position on the shop floor. I think the Minister has got it about right when he sets the figure at £2,000 per annum. That is about as much as the people for whom this scheme was designed are capable of taking up. If we are talking about improving industrial relations and involving the kinds of people envisaged in this scheme, the average run of the mill industrial worker, the shares option facility exists until section 12 of this Bill revokes it for the people who can afford to invest £5,000 or more per annum. On Second Stage the Minister remarked that £200 million is tied up in the share option scheme that exists. I have not an exact account of what was said on Committee Stage in the Seanad but I believe the Minister said the average take up was of the order of £1,400 or £1,450 per annum. That would be my experience of the situation as well. I find it difficult to be moved by the argument in favour of restoring the status quo. I am glad, and I agree with Deputy Carey on this point, that the Minister has replaced the scheme but I think the ceiling is not far out from what is needed.

We might quite properly have spent a great deal of time today discussing the trade dispute in An Post but with all due regard to the relevance of the industrial relations argument, regardless of what you read about the level of earnings in Sheriff Street, the average staff member working for An Post would not be troubled by the ceiling we are opposing in the Bill as it now stands. The average staff member has enough difficulty finding money to pay his mortgage instead of having £5,000 to subscribe for shares on an annual basis.

One point which nobody has referred to — perhaps I have misunderstood it — is the top-up arrangement. I thought there was a top-up arrangement in place for the years 1991-92 which means that anyone who wants to take up the option in the current tax year can benefit from a ceiling of £4,000. Therefore this measure causes me even less pain. I plead with my colleague. Deputy Garland, not to force an emergency parliamentary party meeting of the Democratic Left as to what we will have to do on this amendment if he presses the amendment for the status quo. I am in agreement with the principle but I think the ceiling of £2,000 or thereabouts more or less meets the demand. If we decided earlier to tax recipients of certain social welfare benefits, then it seems to me that we give someone the opportunity to subscribe at market value for shares to the value of £2,000 annually. That is fair and I find it very difficult to justify a benefit greater than this.

Mr. S. Barrett

I find it strange that everybody thinks the figure is about right. I get the impression we are developing a society where there seems to be something wrong when one is successful. Why is it better that we set this ceiling at £2,000 rather than at £5,000? When the ceiling was set at £5,000 it did not cause any great problem — I did not read about people taking to the streets to protest about this or the trade unions complaining bitterly about it.

The scheme was a good one and it was highly successful. People seem to forget that the few big businesses we have in this country started out as a small business. We need to encourage people to start businesses which, we hope, will get bigger. The bigger the business becomes, the better it is for this economy, for the people we represent, and the 300,000 who are now lingering in the dole queues.

What was wrong with setting the ceiling at £5,000? If the Minister had come in and said that in order to pay social welfare benefits he would have to cancel the scheme because the country is broke, that would be acceptable, but the reality is that there is no immediate saving to the State — perhaps there are possible savings in the future but the Minister cannot say he is saving £2 million or £3 million as a result of this measure.

We are a country with a very small population that is dying because of the lack of employment opportunities. We need to encourage people to change their attitudes towards work, to change their attitudes towards their employers and trying to make businesses grow bigger. If I were Minister, the first thing I would do is introduce this scheme in State commercial companies.

Mr. Carey

In An Post.

Mr. S. Barrett

If this scheme was in place in An Post at present would we now be experiencing the terrible difficulties that exist for those who are trying to keep their businesses in operation? The State should be the first to introduce the scheme in State commercial companies. They have to show that there is a place for everybody's contribution in State companies. People should share the profits when profits are made. The State should lead by example. However, what we do in our anxiety to convince people of the equity of the taxation system is to start abolishing things that appear to create inequity. That is a load of nonsense. I do not blame civil servants for this decision because the politicians make the decision around the cabinet table. As both Deputy Quinn and Deputy Noonan (Limerick East) would know from their days in Government, the “sell the Asgard” list would be sent up prior to the budget discussions by every Department because they had to submit areas where they could make savings.

Politicians and Ministers had to make decisions and they considered various ideas and suggestions. Another "sell the Asgard” list would arrive and eventually decisions had to be taken. For a party like Fianna Fáil, who parade themselves as the pro-business party, who charge £1,000 a team to play golf and the best of luck to them if they can get it — I hope there are more successful business people around who can pay Fine Gael, Labour and the Democratic Left the same amount to play golf — this Finance Bill is the most anti-business Finance measure ever brought into this Dáil. All the Government are doing is sending up the greatest smoke-screen ever invented. I thought P. J. Mara was good but the two new arrivals seem to outstrip him to a far greater degree than I had ever anticipated. They are still managing to convince the electorate that they are pro-business.

Mr. Rabbitte

They are not as funny.

Mr. S. Barrett

They are sending up massive smoke-screens. I would say to the Minister that instead of restricting the scheme he should extend it to State companies and introduce new thinking into commercial State companies, into ordinary business and encourage people to participate. We are the people who should be giving the example and not be coming in here trying to defend reducing it from £5,000 to £2,000. That is petty. It was not causing a problem at £5,000. It was a success in that it prevented strikes, it resulted in greater participation in companies and it created wealth. The more wealth we create the more taxes will be generated. If everybody sat on his laurels we would all be screaming. Whether it is £2,000 or £5,000 it highlights a line of thinking that actually frightens me, especially when we have in real terms 300,000 on the dole queues.

Where does the Minister think we will get jobs? Who will invest? Who will get up, take on the risk and create jobs for those who are seeking them? Young entrepreneurs cannot get money. If they walk into a bank nobody will give them money unless they have security, and so they leave us. If those is business wish to expand they have to sell their house to the bank before they can obtain a bigger overdraft. What sort of atmosphere are we creating for business in this country? We should be leading by example and extending this scheme to State companies, showing employees in those companies that they are as important as anybody else if they are prepared to row in and make a profit. Then we would all be better off.

The last point I wish to make — and I should not say this because I will be accused of having a vested interest — relates to the insurance business. We are told that people want to abolish mortgage interest relief. Has anyone ever heard such nonsense? People buying their own homes——

An Leas-Cheann Comhairle

Can Deputy Barrett report progress? The Deputy has been in possession for a fairly long time.

Mr. Hilliard

The Deputy is doing very well.

Mr. S. Barrett

It is the thinking and the attitude that worries me.

An Leas-Cheann Comhairle

The question is being put at 7 p.m.

Mr. S. Barrett

Fianna Fáil back benchers who have shown their grit on other occasions may show that they really are in favour of creating the sort of society I want by whispering to the Minister to accept these amendments.

Mr. Farrelly

The Minister should accept the amendments before us. Having had a three-day debate on Committee Stage, the Minister must accept that the original decision was a wrong one. The Government decided to look at every option regarding the availability of allowances and instead of ensuring that people had pride in their work, decided to ensure that anybody who had a say in the company in which they worked would not have the benefit in future and instead would revert to the old days of the fifties and sixties. I would like to ask the Minister whether there was any vision in the Cabinet when this decision was made? I would ask the Minister to take on board the points made by my colleagues, especially the suggestion made by Deputy Barrett to extend rather than restrict this provision to other areas. Is it any wonder that the 281,000 people registered as unemployed on May Day have no confidence in any jobs being created when vision on the Government benches is so narrow? I would urge the Minister to accept the amendments before the House.

Mr. Deenihan

I referred to this provision at length on Second Stage so I do not intend to dwell on it at length now. I should like to point out to the Minister that before he introduced the provision he should have consulted with Kerry Group plc and Tilletson in my constituency. Kerry Group plc introduced this scheme for their workers in 1986 and it proved very successful. I have discussed it with a number of the staff all of whom agreed it created a buzz in the workplace. Kerry Group plc employ in excess of 3,000 people, the majority of whom have shares in the company. That is one of the reasons Kerry Group plc. is one of the best in the country and one of the reasons it has such a growth rate is because the workforce is so highly motivated.

At a time when we are talking about incentives for employers and employees this afforded one of the few real incentives for employees. I notice at various conferences throughout the country it is usual to invite people such as Jack Charlton, Ciaran Fitzgerald or Mick O'Dwyer to speak about motivation. This was one of the greatest motivation factors in the workplace ever introduced in Ireland. I appeal to the Minister to go some way towards meeting this proposed amendment. If he cannot go the full way I appeal to him to accept Deputy Noonan's proposal of £4,000. I agree with Deputy Barrett that rather than restrict this provision we should expand it and we should consider other options along similar lines which would give an incentive to employees. Several American firms coming to this country were impressed with the scheme of incentives for employees. In some cases it was one of the reasons they invested here.

The Minister has listened to many contributions but he should give very careful consideration to this. If he cannot facilitate us this year perhaps he will reconsider the position for next year.

Mr. Finucane

In a previous contribution I stated that, in framing the budget, the Minister probably overreacted to the succession of scandals. The sentiment coming through this Finance Bill is that the Minister has developed an anti-business mentality.

I heard Deputy Carey's very eloquent contribution in relation to Syntex in Clarecastle. There are "Syntexes" all over the place. There are successful businesses in Limerick and Kerry and other places. In such circumstances, successive governments encouraged people to take out shares, and have a stake in their companies. This was one area where there was positive encouragement. I listened with interest to what Deputy Barrett said about the semi-State companies, and possibly this whole concept should have been broadened. I think there is an element of begrudgery in this. The Minister realised afterwards that his proposal to abolish this scheme was not a very wise decision but could not, naturally, admit that it was a mistake and reinstate the limit of £5,000, so he restored it to a limit of £2,000. I agree with Deputy Noonan that this limit should be increased to £4,000.

Having shares in a company may be called a fringe benefit, but in the context of the valid improvements in the social welfare system, prevailing wage rates and the poverty trap, one often has to give this type of incentive to encourage people to remain in the workplace. In recent times it has been said that the average industrial wage is £231 a week. In my area around Newcastle West, where SIPTU prevail, the average industrial wage is £150 and one does not have to be a wizard to work out what people earning that much take home at the end of the week. Is it any wonder, in a situation like that, that a person with two or three children decides that it is not worth his while working? It is desirable to have incentives like the share option scheme. It is not wise to lash out and remove such benefits on the grounds that they are an unfair concession to workers. Quite often they are topping up a wage which could be classed as inadequate in comparison with social welfare benefits.

The Minister recognised the folly of what he did originally and partially rectified it. He may not be able to go the full way to the £5,000 but at least we have given him the option to go to £4,000 and I would ask the Minister to support what we have put forward.

Mr. B. Ahern

We had a long debate on Committee Stage but I want to make a few more points on this. I understand the benefits of this scheme well and Deputy Quinn clearly put them on the record.

Mr. Carey

You did not recognise them on budget day.

Mr. B. Ahern

I have been involved in discussing aspects of this over a great number of years and it is true that there has been great reluctance on the part of the trade union movement to become involved. It was one of the schemes that was thought to be of some benefit during the joint labour committees and Basil Chubb's committee on partnerships and co-operation at all levels. The concern was that on its own it had not been successful and there was no great interest in it. A small number of companies, mainly multinationals, used it to try to encourage participation by their employees. A large number of other companies used it as an incentive to their senior executives. Yet other companies used it to displace traditional bonus packages. Whatever way it was used, there was some merit in it.

As part of the Programme for Government last autumn the Government decided that reliefs, exemptions and shelters would all be examined. Profit sharing and the various share option schemes were all matters to be considered and they were not dealt with individually but together. That was the decision the Government made.

As Deputy Carey would know, Syntex used the scheme well. They spent about three hours one morning last February with me and my officials explaining the benefits and how it operates. They were one of the companies that played a role in convincing us that we should keep it on. The reason I changed my mind about this scheme, as opposed to other schemes, was that it could lead to directors with incomes inclusive of export sales relief dividends of £4 million paying only £44,000 in tax and relief dividends of £3.5 million into their bank accounts: to directors with incomes of £2.5 million paying only £32,000 in tax and receiving sales relief dividends of over £2.5 million; or to directors with £7.5 million paying tax at £20,000.

Mr. Carey

The Minister had other means to correct that.

Mr. B. Ahern

If Deputy Carey is asking me, as Minister for Finance, not to examine the various schemes whereby people can earn £7.5 million and pay £20,000 in tax, I am afraid he is dealing with the wrong Minister.

Mr. Noonan

(Limerick-East): Who brought in that scheme?

Mr. Carey

What amendment was that?

An Ceann Comhairle

Please allow the Minister to proceed without interruption. You have had your say.

Mr. B. Ahern

I have listened to eight speeches from the Fine Gael benches. Just because I have tickled a little bit at the abuses whereby people can make millions and pay less than 1 per cent tax, I am interrupted. I have readily accepted that there is some benefit in this scheme, but other people have to accept that there are in this country some people who pay tax at 48 per cent and there are people who pay at 27 per cent and if they work an hour's overtime they pay almost 50 per cent while other people use shelters, reliefs and exemptions in a way that is legitimate under the system, and cross things like share options, share reliefs and purchasing shares to evade tax so that they pay less while the ordinary, complaint taxpayer pays more. Let me say to Deputy Barrett that I have great admiration for businessmen who show enterprise and work legitimately and invest the money in this country.

As I pointed out in detail on Second Stage, in a number of cases, not just one, the approved share options schemes were designed and structured in such a way that only a single person benefited. They used limited partnerships under the share option scheme as a vehicle to avoid tax. Notwithstanding the amendments made in relation to such parnterships by the Government in 1986, with which I would have agreed, they involved operations both inside and outside the State, one of the features of which was the generation of substantial losses in the earlier years which could be offset against the taxable income of the limited partner up to the amount of his contribution.

While I agree with what Deputy Barrett had to say, that we should look at some of these operations to see if jobs have been created and provide reliefs for them, they can avail of considerable capital allowances. In addition, we have an excellent structure in relation to expenses while business can avail of the new wear and tear allowances. As I mentioned the last day, under one of these schemes which involved a limited partnership, the people concerned bought shares in a gas exploration company in Texas to gain reliefs with the result that they only paid a pittance here. They should have paid at the rate of 40 per cent.

Mr. Rabbitte

It is a bloody disgrace.

Mr. B. Ahern

I should say——

Mr. Carey

The Minister should publish all the information.

Mr. B. Ahern

That is what I am doing.

Mr. Carey

The Minister is not publishing it; this is innuendo.

An Ceann Comhairle

Deputy Carey must desist.

Mr. S. Barrett

When one person abuses something, one does not scrap it.

An Ceann Comhairle

Please, Deputy Barrett, let us hear the Minister out.

Mr. B. Ahern

I have been listening for a long time and I am sorry if it hurts to listen to some of the facts——

Mr. Carey

It is not hurting me, or indeed any of us.

Mr. B. Ahern

I am not attacking your company, Deputy Carey. They are well covered. All they wanted was a figure of £1,400.

Mr. S. Barrett

That is innuendo.

Mr. Carey

Of course I could not but you could. Is that not correct?

Mr. B. Ahern

One Deputy mentioned that we are talking about a mere pittance but £280 million will be required to pay for the cuts in tax rates, the extension in the tax bands and the exemptions as announced in the budget. That was a major achievement in that we managed to pass on money which was held by way of various reliefs in the hands of a few individual taxpayers. I will not say that they were non-compliant taxpayers because they used the system legally so I have no complaint to make but this money is to be used to help 750,000 taxpayers. I make no apology for removing tax shelters which were availed of in some cases by half a dozen people, in others by either a few hundred or a few thousand and providing the money instead to 750,000 people. In fact I think this is the most sensible thing that I have ever done in my life and I make no apology for doing so.

I should say that this particular share scheme was not abused; rather the point at issue is the way it was used along with others. I have met the Irish Profit-Sharing Association on a number of occasions, the ICTU, the FIE and several companies all of which have said, and the Revenue figures show this too — that the figure is less than £1,000 in the case of over 50 per cent of companies. I do not want to make up a figure, as I said on Committee Stage, but it would seem that in the case of over 90 per cent of companies the figure is less than £1,400 or £1,500.

The Irish Profit-Sharing Association could only point to Guinness where the figure is over £2,000 but they also avail of other schemes. I also believe that some companies can afford to carry the cost themselves rather than pass it on to the taxpayer. This does not apply to Guinness as they had no objection and were quite happy with the figure of £2,000. When the Irish Profit-Sharing Association put forward the figure of £2,000 they said it should be kept under review in the years ahead.

I would ask Deputy Garland, who made some valid points at the outset, to consider the following. Even though the vast majority of those who avail of the scheme are satisfied with a figure of £1,400 and if I leave the figure at £5,000, the people who have been affected by my decision to close off other share options schemes and who do not need the scheme as much in respect of operations both inside and outside the State — most of which I would argue, are not valid — would automatically go for the maximum of £5,000. It would therefore have the wrong effect. Every person who has been affected by the decision to remove shelters, reliefs or exemptions will say that this scheme provides a way around that. They will not be slow in doing so.

In one recent prospectus, but not for this scheme, the headlines, "Investment Opportunity" and Tax Efficient Partnerships" are littered all over the document. The result is that an investor would have more cash available in the first year of the investment than in the case of any other investment. Even though that was not a profit sharing scheme, people will invest their money in this scheme. Though it would not cost the State much to increase the figure from, say, £2,000 to £5,000 now, as employees never availed of the full amount or saw a need to go over the figure of £2,000, everyone would use it from now on for that purpose. I am not saying that I have made a mistake and that the figure should be raised once again to £5,000; I looked carefully at the scheme to see what was good in it and to ensure that it would not be abused.

Mr. Rabbitte

Am I right in saying that it will be possible to top it up to £4,000 this year?

Mr. B. Ahern

Yes. I announced this change in the budget on 29 January and it was brought to my notice that because of that at least two companies — I am sure there are many more — had not issued shares in the tax year 1991-92. As a result of the changes I have made in the Finance Bill an extra £2,000 worth of additional shares may be issued in the tax year 1992-93. Therefore in the tax year, 1992-93, £4,000 worth of shares may be issued. I should also make the point — this fact was not emphasised in the debate — that it is £2,000 per year for five years and the shares are to be held for that period. However, one will not have to cash them in at market value at the end of the fifth year——

Mr. Carey

We are all aware of that.

Mr. B. Ahern

The Deputy did not say so.

Mr. S. Barrett

I would prefer if the Minister replied to this debate without mentioning the other schemes he is abolishing. It is ridiculous using this argument in connection with the scheme in question.

Mr. B. Ahern

It is not. Various schemes were used together. As I said on both Second Stage and Committee Stage, and again today, this scheme has many benefits——

Mr. S. Barrett

Why, then, did the Minister abolish it in the first place?

Mr. B. Ahern

If the Deputy had been listening, he would know.

Mr. S. Barrett

I did listen but I did not understand. The reason is that pressure was put on the Minister from this side of the House.

Mr. B. Ahern

No. While Deputy Noonan tabled a Priority Question other Deputies raised the matter during Question Time——

Mr. S. Barrett

It would be sensible to bring back the scheme.

Mr. B. Ahern

It is equally sensible to close off the others.

Mr. S. Barrett

The figure of £5,000 will not make much difference.

Mr. B. Ahern

In this way it will not be open to abuse. I ask Deputy Garland, therefore, to accept the arguments I have put forward in the way they have been accepted by the Irish Profit-Sharing Association, the ICTU, the FIE and a number of companies, including Syntex. The scheme is a fair response. It will continue to grow and prosper as a result of the number of companies which have taken it up. Only a small number of companies have used it over the last ten years and I hope many more——

Mr. Carey

How many more companies will now take it up?

Mr. B. Ahern

I hope many companies will take it up because they will see it is there for a particular purpose.

Mr. Carey

They will run from it.

Mr. B. Ahern

Maybe employees will know more about it than they did in the past, because only a certain number of companies went out of their way to emphasise it. If Fine Gael Members are concerned about the scheme perhaps they will try to influence people to join it.

An Ceann Comhairle

As it is now 7 o'clock I am required to put the following question in accordance with an order of the Dáil made this day: "That the amendments set down by the Minister for Finance and not disposed of, including those in respect of which recommittal would, in the normmal course, be required, are hereby made to the Bill; that Fourth Stage is hereby completed and that the Bill is hereby passed."

Question put.

The Dáil divided: Tá, 68; Níl, 61.

Tá

• Ahern, Bertie.
• Ahern, Dermot.
• Ahern, Michael.
• Andrews, David.
• Aylward, Liam.
• Barrett, Michael.
• Brady Gerard.
• Brennan, Séamus.
• Briscoe, Ben.
• Burke, Raphael P.
• Calleary, Seán.
• Callely, Ivor.
• Clohessy, Peadar.
• Collins, Gerard.
• Connolly, Ger.
• Coughlan, Mary Theresa.
• Cowen, Brian.
• Cullimore, Séamus.
• Davern, Noel.
• Dempsey, Noel.
• Dennehy, John.
• de Valera, Síle.
• Ellis, John.
• Fahey, Frank.
• Morley, P.J.
• Nolan, M.J.
• Noonan, Michael J. (Limerick West).
• O'Connell, John.
• O'Dea, Willie.
• O'Hanlon, Rory.
• O'Keeffe, Ned.
• O'Kennedy, Michael.
• O'Leary, John.
• Fahey, Jackie.
• Fitzgerald, Liam Joseph.
• Fitzpatrick, Dermot.
• Flood, Chris.
• Gallagher, Pat the Cope.
• Harney, Mary.
• Hillery, Brian.
• Hilliard, Colm.
• Hyland, Liam.
• Jacob, Joe.
• Kelly, Laurence.
• Kenneally, Brendan.
• Kirk, Séamus.
• Kitt, Michael P.
• Kitt, Tom.
• Lawlor, Liam.
• Lenihan, Brian
• Leonard, Jimmy.
• Leyden, Terry.
• Lyons, Denis.
• Martin, Micheál.
• McDaid, Jim.
• McEllistrim, Tom.
• Molloy, Robert.
• O'Rourke, Mary.
• O'Toole, Martin Joe.
• Power, Seán.
• Quill, Máirín.
• Smith, Michael.
• Stafford, John.
• Tunney, Jim.
• Wallace, Dan.
• Wallace, Mary.
• Woods, Michael.
• Wyse, Pearse.

Níl

• Barrett, Seán.
• Barry, Peter.
• Bell, Michael.
• Belton, Louis J.
• Bradford, Paul.
• Bruton, Richard.
• Byrne, Eric.
• Carey, Donal.
• Cosgrave, Michael Joe.
• Cotter, Bill.
• Creed, Michael.
• Currie, Austin.
• D'Arcy, Michael.
• Deasy, Austin.
• Deenihan, Jimmy.
• De Rossa, Proinsias.
• Doyle, Joe.
• Durkan, Bernard.
• Enright, Thomas W.
• Farrelly, John V.
• Fennell, Nuala.
• Ferris, Michael.
• Finucane, Michael.
• FitzGerald, Garret.
• Flaherty, Mary.
• Flanagan, Charles.
• Foxe, Tom.
• Garland, Roger.
• Gilmore, Eamon.
• Gregory, Tony.
• Higgins, Jim.
• Higgins, Michael D.
• Hogan, Philip.
• Howlin, Brendan.
• Kavanagh, Liam.
• Kenny, Enda.
• Lee, Pat.
• Lowry, Michael.
• McCartan, Pat.
• McCormack, Pádraic.
• McGahon, Brendan.
• McGinley, Dinny.
• Mac Giolla, Tomás.
• McGrath, Paul.
• Mitchell, Gay.
• Moynihan, Michael.
• Noonan, Michael. (Limerick East).
• O'Shea, Brian.
• O'Sullivan, Gerry.
• O'Sullivan, Toddy.
• Owen, Nora.
• Pattison, Séamus.
• Quinn, Ruairí.
• Rabbitte, Pat.
• Ryan, Seán.
• Shatter, Alan.
• Sheehan, Patrick J.
• Spring, Dick.
• Stagg, Emmet.
• Taylor, Mervyn.
• Timmins, Godfrey.

Tellers: Tá, Deputies Dempsey and Clohessy; Níl, Deputies Flanagan and Howlin.

Question declared carried.

An Ceann Comhairle

This Bill is certified a Money Bill in accordance with Article 22.2 of the Constitution.