During the past few years I have queried whether the traditional Finance Bill is the most effective way to address the problems of the economy. I have asked how appropriate is this inherited ritual in tackling the problems of a modern society. I repeat these questions in the context of the 1994 Finance Bill.
Although the paternity of recent Finance Bills may have been the same, they have lacked any definite or comprehensive approach to fiscal policy and have often been internally inconsistent. For example, in 1992 the Minister for Finance claimed to have shut down or altered 39 concessionary taxes. The Minister was exaggerating, but I applauded him then and I do so now for tackling some of the more disgraceful tax shelters and loopholes and limiting some of the more unproductive and wasteful schemes. Unfortunately, the Minister has now revived many of these tax breaks in this Bill, albeit in many cases in a different fashion.
There are several other contradictions. Last year the Minister introduced a modest probate tax which he vigorously defended on Committee Stage. This year he has undermined the tax in response to a well-headed campaign. This chopping and changing and ad hoc planning is serving little purpose in economic terms. I suspect there is a diminishing political dividend in terms of political expedience. For example, the Minister set out to make certain changes in the residential property tax in the budget. I predicted on budget day that this would incite middle income earners to fury. That is what happened. As a result this Bill reflects the changes which were forced on the Government and introduced by the Minister.
The ink was scarcely dry on the Finance Bill when the Taoiseach announced that it was the intention of the Government to replace the residential property tax. One cannot be certain from one year to the next what changes will be effected in any aspect of tax, or that a direction settled on for one year will not be reversed the following year. The impression is that if the lobby is powerful and persistent enough, it can hope to win any change and almost any concession. There must be great uncertainty as to the significance of the Taoiseach's recent statements, notwithstanding extraordinary briefings yesterday by some of his spokespersons to the effect that we ought not to take too seriously what the Taoiseach said in Killarney.
On the same weekend in Killarney, at the IMI Conference, the Taoiseach said: "We want a return to the type of low tax economy that was in operation in the 1960s". He went on "The burden of personal taxation will continue to be reduced as the Government works it way back to 1960 levels". I know, a Cheann Comhairle, that in fine weather Killarney has strange effects on people. Only a week earlier it led Minister Burton to promise the women at the meeting she attended that the Government was about to backtrack not only on the residential property tax but on the taxation of unemployment benefit. There was no basis for Minister Burton's statement. She absented herself from the House for more than a week afterwards and has never stated publicly why she made that statement in Killarney or why, if she was reported incorrectly, she did not seek a correction. The Government has not withdrawn its decision to extend taxation to unemployment benefit.
The Taoiseach, in Killarney also, whatever it is about the Kerry air, went on musing nostalgically about a return to 1960s levels of taxation. I do not know what our over-stressed captains of industry at this £1,500 per person weekend business meeting really thought of the Taoiseach's ramble down memory lane. I am amazed that none of our economic commentators has done an assessment of the implications for tax revenue of a reversion to 1960s levels. I find it hard to believe that people have already forgotten the Taoiseach's recent bravura performance in the United States where he recalled in sparkling fashion his own casual acquantance with the tax man in the 1960s when he was in business in the midlands. I cannot imagine that the Minister for Finance would be too pleased about his reverting to 1960s levels of taxation if we were to follow the Taoiseach down that road. It is remarkable that he should have made the speech the same week Deputy Trevor Sargent called for the abolition of income tax. It would appear that Deputy Sargent and the Taoiseach are closer on this issue than Deputy Sargent realises. Only fools and PAYE earners paid tax in the 1960s, and we have the Taoiseach's own word for it. However, the Minister for Finance, Deputy Ahern, has advanced in this House on a number of occasions a distinctly post-1960s concept of tax policy and tax reform. I will quote what he said because, as it happens, I agree with it:
It was never expected and never intended by the advocates of tax reform that widening the tax base and reducing tax rates would produce a lower tax bill for everyone. On the contrary, it was always inherent in this strategy that there would be trade-offs between, on the one hand, improvements in the mainstream income tax regime and, on the other hand, curtailment of reliefs which benefit limited groups or sectors. This was common ground among the proponents of tax reform and was explicitly stated by, for example, the Commission on Taxation. As the Commission said in its first report, tax reform is a collection of measures each of which affects some individuals adversely and others favourably. Those who will not benefit are those who are over-favourably treated under the existing system.
I happen to agree that that is a fair enough statement of the intentions and aspirations of those of us who have been campaigning for genuine tax reform for a long time, but for the life of me I cannot reconcile the two positions held by the two most senior members of Government on this critical question. I cannot see how we can have a reversion to 1960s levels of taxation, as the Taoiseach wants, and at the same time some minor improvements for income tax payers and a curtailment of reliefs and shelters to business, as the Minister for Finance says he wants.
I do not know if the Taoiseach wants us all, in this reversion to 1960s levels of taxation, to head off for San Francisco with flowers in our hair and tell the taxman, as he did, that we are only joking. There is an apparent conflict between the Minister for Finance and the Taoiseach on tax policy, and it is not the only apparent contradiction in Government policy in this area. At the same IMI Conference the Taoiseach advocated the reintroduction of rates. He said: "I think people will feel happier paying for services that they are getting." The point is that people are already paying for services, which, in some cases, they are not getting. It would appear that for the Taoiseach, language means whatever the Taoiseach wants it to mean at the time. The Taoiseach seems to have decided to replace the controversial residential property tax by an as yet unspecified nationwide tax. You are witness, a Cheann Comhairle, to the extent that you have been troubled in the last few days by attempts by Members on the Opposition side to establish what exactly the Taoiseach meant by what he said in Killarney. As of now, we have failed in that objective of finding out what is this nationwide tax that he proposes as a replacement for the residential property tax.
It would appear that the Taoiseach is calculatedly sending out two distinct and different messages. He is telling people in Dublin in particular, and perhaps in other urban areas, not to worry about the residential property tax, which is the Labour Party's idea, that he has now persuaded them to abolish the residential property tax and that the rest of the country will be got to pay a substitute tax. He has not told us yet what that substitute tax is going to be. Then he sends out a different message to the rest of Ireland along the lines that there is some turbulence in Dublin, that Niall Andrews, John Stafford and Olive Braden — I should not forget her name just because Fianna Fáil do — are having some difficulty on the doorsteps because of this residential property tax; that because it is election time the Government wants to be able to tell them that the tax has been abolished but that the rest of the country should not take too seriously the suggestion that it is intended to reintroduce rates.
Then, right on cue, the rural "Buddha", Deputy Michael Smith, reassures the rest of Ireland that, like Horatio, he will man the bridge and ensure that whatever else happens rates will not be reintroduced for the rest of the country. As a result we do not know where we are, and Minister Smith has got tremendous headlines. The headline yesterday morning was "I'll fight the reintroduction of rates, says Smith". Classically, Fianna Fáil now have it both ways: residential property tax will be scrapped, there will not be a reintroduction of rates and, so far as Fianna Fáil are concerned, the Labour Party can put on their sandals and take their own Aqua Libra bottles to the bottle bank; they can provide their own service. We are getting rid of residential property tax and we will not reintroduce rates.