Ivan Yates
Ceist:4 Mr. Yates asked the Minister for Finance if he will set out the revisions, if any, to the budget arithmetic for 1994 arising out of the publication of the Exchequer returns for the first quarter of 1994.
Ceisteanna—Questions. Oral Answers. - Exchequer Returns.
Thomas P. Broughan
Ceist:58 Mr. Broughan asked the Minister for Finance his views on whether the first quarter Exchequer returns indicate that the current budget deficit will be eliminated in 1994.
I propose to take Questions Nos. 4 and 58 together.
As I indicated in my press statement which accompanied the release of the Exchequer returns, the development of the public finances over the first quarter of this year has been quite satisfactory. However, I do not propose to revise the underlying budget arithmetic in the light of the first quarter's returns, nor do I see any prospect that the current budget deficit of £262 million, .9 per cent of GNP, which was projected in the 1994 budget will be eliminated.
The principal factor underpinning the strong first-quarter returns was the performance of tax revenue. Here the yield was boosted by once-off amnesty proceeds and also benefited by comparison with the slack yields over the first quarter of last year, when tax inflows were depressed by the effects of the currency crisis on interest rates and consumer confidence. In addition, the negative impact of such factors as the elimination of the income levy and the year-on-year decline in DIRT yields will not be fully reflected until the final quarter's returns. It follows that the tax margin recorded over the first quarter will move back towards the budget target as the year progresses.
It must also be borne in mind that the budget-day projection of expenditure did not reflect certain outgoings which were subsequently established in the Revised Estimates Volume published at the end of March. The major adjustments are associated with the Programme for Competitiveness and Work, comprising the £85 million gross cost of the public service pay agreement, and the £10 million additional spending on headage payments to be made this year. I am looking to the extra tax buoyancy that will accrue directly from these extra expenditures together with the prudent tax forecast recorded in the budget to broadly counterbalance the additional outgoings.
Is the Minister aware that some expert economists forecast tax returns this year could be as much as £150 million more than anticipated on budget day? On the property tax, does he not feel as sick as a parrot that he is bringing such political fallout on top of him in the context of the European election when he will not need one-fiftieth of the money it is expected to raise?
The Deputy is raising a matter worthy of a separate question.
I have never felt better but I can understand the Deputy feeling sick. I did not hear any renowned economist make that point. The only note I saw was in an article in the Irish Independent on 8 April which stated the Finance spokesman for Fine Gael Deputy Yates, predicted that.
Some stockbrokers sympathise with me.
Tony Gregory
Ceist:5 Mr. Gregory asked the Minister for Finance arising from his reply to Parliamentary Question No. 78 of 13 April, 1994 if he has satisfied himself that the income tax returns from the farming community given in his reply represents a fair and equitable contribution from that sector.
The information given in response to Deputy Gregory's question on 13 April referred to the amount of income tax paid by the PAYE sector in 1993 and the amount paid by the farming community in the same year. It was pointed out in the reply that the amounts paid by each sector must be seen in the context of the relative numbers of taxpayers in the PAYE and farming sectors. It was also noted that the amount attributed to the PAYE sector included the tax paid under PAYE on the income from employment of farmers.
Farmers are assessable to tax on farming profits on actual income on the same basis as other self-employed taxpayers. The normal self-employed allowances may be offset against farming profits as well as special provisions in relation to stock relief and income averaging. As with all self-employed taxpayers, farmers are obliged to make annual returns of income and pay the appropriate tax by the due dates. Returns by farmers are subject to audit in the same manner as other self-assessed taxpayers and I am satisfied that the audit procedures in place are adequate to the task of auditing tax returns from the relevant sectors. I am informed by the Revenue Commissioners that the evidence currently available from self-employed audits indicates that farmers' compliance levels are comparable to those of other self-employed taxpayers.
The Minister did not repeat the figures he gave in his reply on 13 April. Over £3 billion was paid by the PAYE sector and £52 million was paid by the farming community. Would the Minister agree these figures indicate that not only are the PAYE sector paying their own fair share but the share of every other sector, in particular big farmers? Is this fair or equitable? What will the Minister do about it? When will he introduce equity into the system so that this outrageous disparity between the PAYE and farming sectors no longer exists?
Farmers paid £52 million in 1993 and the PAYE sector paid £3 billion. It is a question of revenue collection and compliance. There is a slight difference in the make up of the figures. Approximately one million people are involved in paying the £3 billion and there were 28,000 farmers liable for tax in the last year.
On average, the PAYE sector pays five or six times as much as the farming sector. That is based on the figures given by the Minister in the House some time ago. He represents thousands of PAYE workers in Dublin and surely he understands their anger when they hear of huge increases in farming profits in the last year when the amount of tax farmers pay is a mere fraction of what the PAYE sectors pays.
The Deputy must not make a speech.
I am asking the Minister if he understands the anger of his constituents when they hear, almost on a daily basis, that farmers never had it so good.
We must avoid repetition.
The Deputy will understand that farmers also pay PAYE as 15,000 of them are part-time farmers. The latest figures show — they are almost three years old — that they paid £30 million in that category. It would distort the facts not to give that figure. I am delighted to see that the Deputy is coming around to the point of view that tax dodgers whether in our constituencies, among the farming community or elsewhere should pay tax.
These are the Molly Malones.
It is not only in one section of life that people dodge paying tax.
Is that what the Minister told them in Moore Street?
Why is the Deputy picking out Moore Street? Is he insinuating that the people in Moore Street do not pay tax?
I hope the Minister is not talking about the unfortunate people——
I never mentioned Moore Street.
I am glad that is clear. Perhaps the Minister will tell the House what he is insinuating.
The Deputy would know far better than me.
If the Minister does not tell us how can we know?
The Deputy would know the position much better than I. Deputy Gregory correctly stated that the amount paid by farmers—this is based on income—is much less than the amount paid by other self-employed and PAYE workers. The same laws, rules, regulations and audit procedures apply to farmers.
I want to do a one-two with Deputy Gregory on this matter in the hope that he will do a one-two with me in June.
He did not declare yet.
Will the Minister agree that, regardless of how one seeks to dress it up, the disparity between the amount paid by farmers, £52 million, and the amount paid by the PAYE sector, £3,030 million, is outrageous? Am I correct in saying that 14 per cent of the population is working in the agricultural sector? How can the proportion of income tax paid by farmers be fair? Is it not time that the procedures were revised? How do the Minister's constituents—— asked.
The Deputy should not personalise the matter.
How does the urban constituent continue to tolerate to such a manifestly unfair system? Does the Minister think that the self-assessment system is working in the farm sector? Will he indicate the extent to which the farming sector is subjected to audits of returns? Will he explain — I am sure Deputy Yates understands this very well — the position in terms of taxation on the various transfers from the European Union to the farming population for set aside. headage, etc.? Are these transfers subject to full tax in all cases? Are we being told that the total take from the land owners of Ireland is £52 million per annum when the take from unemployment benefit will be £30 million——
That is a separate matter, and the Deputy knows it.
May be it is, Sir, but it is worth making the point——
Let us hear the Minister's reply.
——that the Minister will raise the same amount from the land owners of Ireland as he proposes to raise from the sick and unemployed.
The Deputy has made his point adequately.
The Deputy has raised some fair questions. Farmers are assessed for tax on farm profits, actual income, in exactly the same way as other self-employed persons. The normal self-employed allowances and reliefs apply to farmers and there is a set-off against farming profits. The stock relief given to farmers has been reduced in recent years. The self-assessment system which applies to all self-employed taxpayers applies to the income from farming profits. Farmers are obliged to make their annual returns in the same way as other self-employed persons. Returns of income made by farmers are subject to audit in the same way as other returns. Since the introduction of the special audit system, which has been extended for 1994, random audits have not been carried out to the same extent as previously. Approximately 28,000 audits and less than 3,000 detailed audits have been carried out.
It would be unfair not to make it clear that the total number of farmers on the Revenue Commissioner records for 1992-93, the last year for which figures are available, was approximately 87,000. This was made up of 54,000 full-time farmers, 15,000 trader-farmers and 18,000 low income farmers. The 18,000 low income farmers are assessed approximately every three years; by and large they are left alone as they have no taxable income. The projected number of farmers liable to tax in the period 1993-94 is 28,000. As Deputy Gregory correctly stated, the difference between the average amounts paid by the PAYE sector and other self-employed people was approximately £200, with a big gap between them and farmers.
On the question of payments from the EU, all farmers receiving payment have to use their RSI number. This applies to most, but not all payments—some further adjustments have to be made. Most of those payments will be taken into account in assessing tax this year. Questions still arise about what happens when all the money has been received from the EU, and this matter still has to be dealt with. By and large most of the payments will be taken into account for tax purposes.
I have been trying to increase the number of audits carried out, to extend the self-assessment system and employ more staff to deal with evasion in whatever quarter. Apart from the PAYE sector, which has a clean sheet in terms of tax, there is some element of evasion in all sectors. People who try to evade the system will be pursued under the laws which apply to the self-employed sector generally.
Does the Minister accept that the burden of taxation must be spread more evenly over all sectors, particularly the farming sector? Is he aware that the Governor of the Central Bank singled out farmers for not paying their fair share of tax? Does the Minister accept that the average PAYE worker is paying five or six times as much as the average member of the farming community and that his efforts to rectify this disparity are continuing to fail? What steps will he take to ensure that this inequity is eliminated?
The average payments during the last year for which figures are available are: PAYE workers, £3,903; farmers, £754 and other self-employed persons, £3,664. I am not going to single out any one sector; it would not be fair to do this. When the Revenue Commissioners were given additional powers a few years ago very few people supported this move. However, I have to exclude Deputy Rabbitte from that statement. I am trying to ensure that the system operates more effectively.
Last year I reformed the corporation tax system and employed more people to ensure that the system worked properly. The only way to ensure compliance in the self-assessment system is to impose a stringent audit procedure. It is unfair to generalise and say that if the system is not catching people then everyone is a dodger. The system is designed to catch people. If people do not earn the income then they do not pay the tax. Unless I receive evidence to the contrary, I can only assume that the system is working. The level of compliance among the self-employed is increasing all the time—the legislation in this area is tough—and we have to ensure that it is increased further in the coming years. I am not prepared to single out any one group and accuse them of anything.
I accept that, as the Minister has said, one cannot generalise. Nonetheless, I pose a general question to him while accepting that he has improved the anti-evasion and enforcement mechanisms in recent years. Does the Minister not agree that there would appear to be something wrong with the self-assessment system if the owners of the land still contribute no more than an infinitesimal £52 million out of the total income tax yield? Would he not acknowledge that, from the point of view of the PAYE worker, whether in rural or urban Ireland, there is something wrong there? There are, of course, farmers who do not have an income that would warrant making any significant contribution, but there are farmers on very substantial incomes and to think that, at the end of the day, we will get no more in tax from them than from the unemployed and sick means there is something wrong as far as the urban PAYE worker is concerned.
I think one would have to add in the figure of £33 million, or whatever that would reflect in modern terms, so probably the yield would be approximately £100 million on current figures from the farming community. As Minister for Finance, I have an obligation to ensure that we get additional revenue to pay for services and allow reduced borrowing. I believe the self-assessment system and audit procedures are working. Wherever there is non-compliance, it is through the people working in the field on individual cases we can increase the yield. I cannot say there is not more money to be had from every sector under existing laws. I am sure there is. The Revenue Commissioners must be allowed to do their job, with Members of this House supporting them in their task. It would appear that every time they attempt this task, there are more negative howls from this House, which is a disappointment to people trying to do their job and ensure that we are compliant. While 84,000 farmers were assessed, 28,000 only had to pay under the current law. What they pay in taxes amounts to approximately £100 million.