I move: "That the Bill be now read a Second Time."
This Finance Bill is my first and the first for a Labour Minister for Finance. It gives legislative shape to the measures announced in the budget on 8 February. I hope the House can have a constructive exchange of views on the measures in the Bill and on how best we should shape the tax system to meet the needs of this country.
The Bill will facilitate the confirmation of income tax and corporation tax reliefs announced in the budget; the extension of various capital gains tax and capital acquisitions tax reliefs to assist business; the introduction of a number of new and specially focused reliefs to assist those in rented accommodation, to provide tax relief on local authority service charges, to encourage donations to Third World charities and to afford the opportunity for our cultural institutions to build up the national collection of cultural items; the provision of additional powers to Revenue to counter tax evasion and, in the light of a recent court ruling, to secure the position of the Revenue in the application of its traditional powers in the excise area. The Bill also places a duty on auditors and tax advisers generally to report tax evasion. This provision honours the commitment made unanimously by the Oireachtas to implement the recommendations of the beef tribunal report.
It will also facilitate the refocusing, on the other hand, of certain anti-evasion measures such as the VAT monthly control statement and the easing of penalties for late filing under self-assessment; the introduction of a range of reliefs in the business sphere to promote enterprise and the renewal and upgrading of particular urban areas and tourist resorts; and the introduction of new VAT rules for dealings in second-hand goods agreed by the European Union and the removal of competitive distortions in the application of VAT to certain sporting facilities.
I will deal with the main features of the Bill in my speech. In the Bill we are taking further major steps to reduce the tax burden on employment, on low incomes and on the cost of employing labour. Tax reform is an ongoing process. We are seeking to widen the tax base, to confine reliefs to the standard rate and to lessen the burden on business in general. We have seen tax rates reduced substantially over the past ten years. However, we need to do more as resources allow.
Turning to particular sections of the Bill, sections 1 to 4 provide for the major improvements in income tax announced in the budget. The personal allowance is being increased by £300 for a married couple and £150 for a single person, with comparable increases in the widowed, single parent and widowed parent allowances. The standard rate tax band is being extended substantially from £16,400 to £17,800 for a married couple and from £8,200 to £8,900 for a single person. The existing PRSI income tax allowance available to higher rate contributors is being renewed at £140 rather than £286, in order to part finance a new PRSI allowance of £50 per week introduced this year for such workers. Together with the improvement in personal allowances, this means that the thresholds for the higher tax rate in the case of most employees will be increased from £22,186 to £23,740 for a married couple, and from £11,636 to £12,340 for single persons.
The general under 65 income exemption limits are being increased by £200 to £7,400 for married couples and by £100 to £3,700 for single persons. To provide greater assistance to the elderly, exemption limits for those aged 65 or over are being raised by £400 for married couples and £200 for single persons.
Section 5 provides, further to the budget announcement, for the introduction of a tax allowance for all tenants in private rented accommodation to be effective from 6 April 1995. This new relief is essentially a broadening of the relief currently available to the over 55s in such accommodation. The main differences are that the new relief will be at 27 per cent and the annual allowances will be £500 for a single person, £750 for a widowed person and £1,000 for a married couple. The over 55s will continue to enjoy their existing level of relief and allowances, which are £1,000 for a single person, £1,500 for a widowed person and £2,000 for a married couple.
While the relief for the over 55s operates on a previous calendar year basis the Bill provides that this new relief and the over 55s relief will, from the 1995-96 tax year, operate on a current tax year basis.
I announced in the budget that as part of the refocusing of State support for third level education, I would provide a tax relief for fees in certain private colleges. This is done in section 6 of the Bill. Tax relief will be available for tuition fees paid to private colleges in respect of approved courses. The Minister for Education will approve the colleges, courses and the level of fees eligible for tax relief. Only full-time undergraduate courses of at least two years duration will be eligible for approval. The tax relief will be available for fees paid from the academic year 1996-97 and will be at the standard rate of tax.
In the budget I announced a tax allowance in respect of local authority service charges which are paid in full and on time. The allowance will be given at the standard rate of tax up to a maximum of £150. Section 7 provides for this allowance and extends it to certain payments in respect of privately operated refuse collections, at a flat rate of £50 per annum, and to payments for domestic water supplies by members of voluntary group water schemes.
Section 8 relates to tax relief for donations to designated Irish Third World charities. These charities will qualify for tax relief in respect of certain donations by individuals in the range of £200 to £750. This will be topped up by Revenue remitting to the charity the tax associated with the contributions at the standard rate. Thus, a donation of £750 will be worth an extra £277 to the charity. The figure of £750 represents the maximum qualifying contributions that an individual can make to all designated charities in a year. Relief will also be available where the qualifying contribution is made by instalments.
Section 10 provides for a number of special measures aimed at improving the position of those most adversely affected by the taxation of short term social welfare benefits. First, to assist families, the child dependant allowances payable with unemployment benefit and disability benefit are being exempted from tax. Second, the special relief for systematic short-time workers introduced in the Finance Act, 1994 is being extended for a further year and broadened to include all such workers. Finally, the first £10 per week of unemployment benefit is also being exempted from tax from 6 April 1995.
Section 11 provides for an increase in the deposit interest retention tax rate on special savings accounts from 10 per cent to 15 per cent, as announced in this year's budget. This measure is designed to strike a more appropriate balance in the tax treatment of deposit income and income from other sources — especially riskier equity investment in Irish business — and has, therefore, been welcomed by business representatives. However, I should emphasise that these accounts still provide attractive tax benefits for small and medium-sized depositors. A final-liability tax of 15 per cent on such interest income compares very favourably with the standard 27 per cent rate for deposit interest generally.
Section 12 and 13 provide for the changes which I already announced in the tax treatment of covenants made by individuals. These changes are being made as part of the overall changes in the financing of third level education and to reduce an area of tax expenditure which has been growing significantly over the past few years. The changes being brought in this year will apply to new covenants from Budget Day and existing covenants from 6 April. This year's changes are as follows. First, tax relief is abolished on covenants in favour of minor children, except in the case of a covenant in favour of an incapacitated minor child who is not the child of the covenantor. Second, tax relief on all covenants made by individuals, other than those in favour of the incapacitated, will be subject to an overall limit of 5 per cent of the covenantor's income.
From 6 April 1996 tax relief will no longer be available generally for covenants made by individuals. Tax relief will continue to be available in the following four cases. First, tax relief will continue to be available, on an unrestricted basis, to covenants in favour of incapacitated adults and those in favour of incapacitated children, provided the covenantor is not the child's parent. The other three categories of covenants will be allowed tax relief subject to an overall limit of 5 per cent of the covenantor's income. These are covenants in favour of those aged 65 or over, covenants for the purposes of research or the teaching of the natural sciences, and covenants to certain bodies established for the promotion of human rights. Covenants made by companies are not affected by these changes.
Section 16 increases the existing limit of £2,000 on the value of shares which can be allocated each year to employees under approved profit sharing schemes to £10,000.
Section 17 gives effect to a number of changes in the seed capital scheme announced in the budget. These proposals, which will make the scheme more effective as an incentive to new business start-ups, will: increase the level of investment that qualifies for relief from £75,000 to £125,000 by extending the "look back" period to five years; allow two qualifying ivestments in the one company to be made over a three year period; increase to £15,000 from £10,000 per annum the level of the maximum amount of non-PAYE income which an individual may receive and permit greater time flexibility in taking up employment in the new company by allowing employment to commence up to six months after the end of the tax year in which the first investment is made.
Section 17 also extends the scheme to trading activities on the Dublin exchange facility. Currently, FINEX is the only operation located there. This change was also announced in the budget.
In addition, this section makes a number of technical and drafting amendments to simplify the scheme making it more easily understood and thereby helping to stimulate interest in it. There has been a significant increase in interest in this scheme in the past few months and the changes in the Bill will give it a further boost.
The Black Economy Monitoring Group, which was set up by the Central Review Committee of the Programme for Economic and Social Progress, carried out a thorough review of the operation of the C45 system in 1994. The group made recommendations which were endorsed by the Central Review Committee on action to curb any abuses. Most of the recommendations are being implemented on an administrative basis and several of these involve closer contact between Revenue and Social Welfare in monitoring abuses. Arising out of these recommendations a provision is being introduced in section 18 permitting the Revenue Commissioners to make regulations in relation to making declarations to be signed by both parties at the commencement of a contract confirming they are satisfied that the C45 system is applicable. The purpose of this provision is to seek to ensure that the C45 system is used in genuine self-employed cases and not in employee PAYE. Section 18 also provides for making regulations on information to be provided by subcontractors to principal contractors. This will ensure that information is available to Revenue on payments made under the “gang system”.
Section 20 amends the public access requirements set out in section 19 of the Finance Act, 1982, which provides for relief from income or corporation tax, as appropriate, for owners of approved buildings of significant scientific, historical, architectural or aesthetic interest. Buildings approved by the Commissioners of Public Works will now be able to qualify either by being open to the public on a bed and breakfast basis for at least six months of the year, of which four months must be in the period 1 May to 30 September, or by complying with the existing public access requirements, which require them to be open to the general public for 60 days, of which at least 40 must be in the period referred to above.
Section 21 provides for the continuation of stock relief for farmers at 25 per cent for a further two years to 5 April 1997. The section also provides for stock relief at a rate of 100 per cent for four years for young farmers who first become chargeable to income tax in respect of profits or gains from farming for the year 1993-94 or any subsequent year of assessment up to 1997-98. To qualify for this 100 per cent relief, the individual must be under 35 at the start of such a year, and have met specific training requirements. This is in part a relaxation of the qualifying criteria announced in the budget where it was stated that the 100 per cent stock relief would be available only to young trained farmers who qualified for the scheme of installation aid operated by the Department of Agriculture, Food and Forestry.
Section 22 provides for particular tax treatment for farmers in respect of profits arising where cattle herds must be disposed of because of statutory disease eradication measures. The treatment operates by allowing deferral of the profits for tax purposes over two years and the application of 100 per cent stock relief to the profits so deferred.
Section 29 provides for the introduction of a significant new scheme aimed at attracting to Ireland certain major multinational corporations. Where the qualifying conditions are met, such companies will be exempt from Irish tax on the profits of their foreign branches.
Changes are being made to the self-assessment system in recognition of the improvement in voluntary compliance. The changes in the Bill follow a recent review of the system involving the Tax Administration Liaison Committee and are as follows: A direct debit facility for the payment of preliminary tax; a fixed date of 30 April each year for the payment of the balance of tax due. This measure is designed to encourage earlier filing of returns and will be subject to review; the surcharge for late filing of returns is reduced to 5 per cent for a delay in filing up to two months, with a maximum cap of a £10,000 surcharge and remains at 10 per cent for a delay of two months or more, but with a maximum cap of a £50,000 surcharge; the restriction of certain reliefs for companies failing to file returns on time will be reduced to 25 per cent of the relief where the delay in filing is less than two months and will remain at 50 per cent of the relief where the delay in filing is two months or more. Maximum caps have been introduced in each case; for new businessess the surcharge provisions for late filing of returns will apply only to delays with effect from the second filing date; for short-lived businesses the profits subject to tax will not be in excess of actual profits earned and, finally, a loophole is closed which had allowed married couples, who alternated as assessable persons, to avoid paying preliminary tax.
These provisions are contained in sections 19, 30, 31 and 63.
The Bill contains a number of measures dealing with the urban renewal scheme which is aimed at revitalising certain urban areas and assisting employment in the construction industry. Section 32 provides for a two years' extension up to 24 January 1999 to the deadlines for the urban renewal tax incentives for the Custom House Docks area.
Section 34 extends by two years to 5 April 1998, the period for the availability of the tax incentives in the Temple Bar area. Section 35 provides for a scheme of tax reliefs for six enterprise areas located in Dublin, Cork and Galway. The incentives available are capital allowances of 100 per cent for the construction or refurbishment of premises in these enterprise areas which are used by qualifying companies carrying on trading operations, that is, manufacturing or internationally traded services. The allowances consist of free depreciation of up to 50 per cent in the first year in the case of owner occupiers only, or an initial allowance of 25 per cent available to both owner-occupiers and lessors, with an allowance of 4 per cent per annum on the balance up to 100 per cent. Double rent allowances for qualifying traders will be available for ten years as will rates relief.
The capital allowances will apply in respect of either industrial buildings or commercial buildings, including offices. Projects wishing to set up in the enterprise areas must first receive certification from the Minister for Enterprise and Employment, following consultation with the Minister for Finance.
In addition section 35 provides for offices to be allowed as qualifying buildings for the purposes of the 1994 urban renewal scheme in the designated areas outside the five county boroughs of Dublin, Cork, Limerick, Galway and Waterford. This measure is retrospective to 1 August 1994, when the new scheme commenced. The section also provides that the 13 year clawback period for capital allowances will apply to industrial buildings in designated areas on the same basis as is currently applied to commercial buildings in these areas.
Finally, I should mention that sections 32, 34 and 35 increase from 90 to 125 square metres the maximum permissable floor size for newly-built apartments in the various urban renewal areas. This is to encourage the provision of larger family oriented accommodation in these areas.
Section 36 amends section 35 of the Finance Act, 1987, which provides relief from income tax and corporation tax in respect of investment in Irish film-making companies. The amendments concern the power of the Minister for Arts, Culture and the Gaeltacht to impose conditions in his certification of a qualifying film and clarification of the necessity for such certification before relief can be granted in respect of film investment. The section also closes off an unacceptable arrangement in the raising of loan finance for a section 35 investment. Such an arrangement could involve a film-making company forgoing interest which would otherwise be receivable by it from a bank so that, in return, the bank concerned would reduce the interest it charged on loans to investors in the film company.
Section 43 provides for a corporation tax exemption in respect of employment grants paid by the industrial development agencies to medium and large industrial undertakings. A similar exemption already exists for employment grants to small and service businesses. The concession will increase the real value of the grant in the hands of recipient companies and thus provide an additional incentive to such enterprises.
Section 44 provides for an exemption from corporation tax and capital gains tax for the Irish Horse Racing Authority and its subsidiary, Irish Thoroughbred Marketing Limited, from their inauguration dates of 1 December 1994. In line with precedent, there is no proposal for an exemption for these bodies from tax on deposit interest.
Section 45 and the Second Schedule provide that following the reduction in the standard rate of corporation tax from 40 per cent to 38 per cent from 1 April last, the associated tax credits applicable to distributors to shareholders will be reduced, in line with precedent, from 25/75ths to 23/77ths of distributions made on or after 6 April 1995. As indicated in the Budget Statement, the reduction in the standard rate of corporation tax provided for by section 54 of the Bill should be viewed as a first step on the road to securing a rate comparable with our overseas competitors. To that end, the aim will be to reduce the standard rate further in future years, as resources permit.
Chapter III of Part I of the Bill provides for a new scheme of tax reliefs from 1 July aimed at renewing and updating the tourist amenities and facilities in certain seaside resorts, namely Achill, Ballybunion, Bundoran, Courtown, Kilkee, Lahinch, Tramore, Westport and Youghal. The precise qualifying areas are described in the Third Schedule.
Sections 47 and 48 provide for accelerated capital allowances in respect of capital expenditure incurred on the construction of hotels, holiday camps, holiday cottages and other tourist accommodation registered or approved by Bord Fáilte. The accelerated capital allowances will also be available in respect of capital expenditure incurred on the construction or refurbishment of types of non-accommodation tourist facilities as set out in a list to be published by the Minister for Tourism and Trade with the consent of the Minister for Finance.
Section 49 provides for a double rent allowances as a deduction in computing trading income of the lessor for the first ten years rent paid under a qualifying lease on a qualifying business premises in a resort area.
Sections 50 to 52, inclusive, provide for reliefs for 100 per cent of expenditure incurred on the construction, conversion and refurbishment of certain rented residential accommodation. Under these reliefs the qualifying expenditure can be offset against all the rental income of the claimant in computing liability to tax but will apply only where the accommodation is available primarily for letting to tourists.
Sections 56 and 125 of the Bill deal with the bank levy. Section 125 provides for the phasing out of the bank levy from £36 million in 1994 to £24 million in 1995, to £12 million in 1996 and to nil in 1997. There is no net cost to the Exchequer since the levy is already fully offset against the banks' corporation tax liability. There would, however, be a cash flow loss in the current year due to the later payment date for corporation tax. As the House is aware, to overcome this the banks have agreed to a compensatory cash-flow arrangement whereby in 1995 they will make an earlier payment of corporation tax of £12 million in order to cover the £12 million reduction in the levy. Thus the Exchequer will not be at a loss. This compensatory cashflow arrangement will be continued in subsequent years.
Section 64 provides for a two-year extension of the corporation tax relief on certain gifts to First Step Limited, a charitable organisation which assists job creation by supporting enterprise development in areas of high unemployment.
As the House is aware, my colleague, the Minister of State with responsibility for commerce, science and technology recently published the report of the Science, Technology and Innovation Advisory Council. The report and recommendations of this council will now be examined in detail by a high level official group under the guidance of a Cabinet steering committee, which will be chaired by the Minister of State, Deputy Rabbitte. I welcome the publication of this in-depth study and I wish to echo the report's finding that Irish firms must realise the need to increase their investment in R&D if they are to survive in the increasingly competitive global market. In this context, I will be introducing by way of Committee Stage amendment to the Bill a measure aimed at stimulating incremental R&D investment. Full details of the amendment will be given in due course.
I propose certain measures in this Bill which will assist the future development of the International Financial Services Centre.
To facilitate the development of treasury activities in the IFSC and in the Shannon zone, section 59 provides that certain withholding taxes imposed abroad may be grouped together and allowed as a credit against Irish tax chargeable on intra-group activities, subject to certain restrictions. As already indicated I am extending under section 17 the seed capital scheme to trading activities on the Dublin exchange facility with a view to facilitating local involvement in trading on the exchange. Section 62 amends existing legislation to allow dealings in commodity futures and commodity options on the Dublin exchange facility where such dealing is the principal trading activity of the company.
To enable the development of the collective funds sector, section 38 will allow transparency where all the unit holders in a collective fund are themselves collective investors. Also in the collective funds sector, section 37 removes, in specific circumstances only, the advance corporation tax liability of certain investment companies. IFSC companies will also benefit from other provisions in the Bill which are of more general application.
As regards capital gains tax section 65 increases from £5,000 to £15,000 the reporting limit, for capital gains tax purposes, on sales of art, antiques and other valuables by auctioneers. The existing requirements are putting Irish auction houses at a competitive disadvantage vis-à-vis their UK counterparts. Sections 66 and 67 provide significant improvements in the retirement relief for disposals of business assets by entrepreneurs over 55 years. These include an amendment in the rules for computing relief for company shares which should result in a substantial increase in relief for many family companies. Also, the exemption limit on disposals of business assets outside the family is being increased from £200,000 to £250,000.
Section 69 provides for significant changes in the rollover relief for equity investment, the aim of which is to make the relief available to a wider range of enterpreneurs. Also, by virtue of section 68, rollover relief is being extended to disposals of development land used for trading purposes, where the business has to relocate for environmental reasons. The relief will be subject to the local authority certifying that the land has been subject to a use which is damaging to the local environment.
Section 70 contains provisions to rectify certain weaknesses in the capital gains tax legislation which came to light as a result of the Glackin Inquiry into transactions involving the former Johnston Mooney & O'Brien site in Ballsbridge, Dublin. I am closing off a loophole whereby the 15 per cent withholding tax on disposals of certain assets, mainly land or land-related, could be circumvented where the disposal is made for a non-cash consideration. This problem will be rectified by extending the withholding tax provisions to such transactions.
I now turn to excise duties. The Bill confirms the budget increase of 12p on a packet of 20 cigarettes and pro rata increases on other tobacco products. It also provides in sections 71 to 78 for the extension of tobacco stamps to non-cigarette products such as roll your own tobacco. Tax stamps are due to come into effect on packet cigarettes this autumn and on roll your own tobacco next year.
In the area of excise duty compliance and enforcement, the Bill includes provisions to update and clarify Revenue powers to stop, search, detain and seize goods liable for forfeiture under excise. The necessity for this action arises from a High Court decision which held that, because of the inconsistency in phrasing legislation, the issue of a search warrant in respect of excisable goods liable for forfeiture was invalid; this ruling resulted in the curtailment of seizure powers of the Revenue Commissioners in the excise duty area it is now proposed to remedy. The availability to Revenue of the powers in question are vital to secure the very significant revenues at stake. The powers in sections 79 and 90 are largely a restoration of the search and seizure powers together with re-enactment of provisions in the Finance Act, 1992 and related basic excise management provisions from early statutes, as well as a right for a claimant to appeal against the seizure and forfeiture of goods.
The Bill provides for a vehicle registration tax relief scheme which I announced in the budget. Schemes of this type have been successful in other countries. Tax relief of £1,000 will be granted by way of repayment where a car at least 10 years old is scrapped and the owner purchases a new car. This transparent approach ensures that the concession will accure to the qualifying new car purchaser.
The Bill also includes other proposed amendments to VRT law which increases the minimum amount of tax payable on category A vehicles — mainly cars — from £100 to £250 and which make technical changes in the way VRT ic calculated when a vehicle is converted to a category subject to a higher rate of tax. The VRT provisions are contained in section 91 and 92 of the Bill.
In the road tax area, it is proposed to introduce in section 104 two concessions relating to the first licensing of a vehicle which will bring some flexibility into the system in circumstances where delays arise between the registration of a vehicle and its subsequent going on the road. First, where a vehicle is registered within the last seven working days of a month and a road tax application is made in the following month, because the vehicle owner has not had the use of vehicle until then the road tax disc will be effective from the beginning of the month of licensing rather than, as at present, from the month of registration. Second, where there is a prolonged delay between the first registration of a vehicle and subsequent licensing, road tax will be effective from the beginning of the month of licensing provided certain conditions are complied with and on payment of a fee of £20 to the licensing authority.
Section 102 provides for the continuation in force of certain excise licences or the granting of a temporary licence where an application has been made by a specified deadline for a tax clearance certificate and where a decision on a tax clearance certificate has not been given in sufficient time to allow the licence to be renewed or taken out.
Section 103 establishes an excise duty framework for the production and importation of substitute motor fuels including biofuels. The section gives effect to EU rules in this area. Substitute fuels used in motors will be liable to the road diesel rate of duty which is the lowest rate of duty applicable in the road fuel area. Existing reliefs for diesel fule will automatically apply to the duty on substitute fuels. It is also proposed to avail of an EU provision which allows for the exemption from the new excise duty of pilot scheme production and use of biofuels. The Minister for Finance, in consultation with the Minister for Transport, Energy and Communications, will be empowered to exempt projects where applications are submitted before end-1998.
Sections 105 to 124 of the Bill relate to VAT and are predominantly concerned with the transposition into Irish VAT law of the EU Seventh VAT Directive. The directive contains new rules for the VAT treatment of sales of second-hand moveable goods, works of art, collectors' items and antiques. The objective of the directive is to avoid double taxation of such goods. Under the new system — the margin scheme — the dealer has the option to charge VAT on his profit margin only, rather than, as has applied up to now, on the full sale price of the goods which would include an element of trapped VAT.
The Bill also establishes a special scheme for auctioneers, which is similar to the margin scheme and provides for the retention, in slightly modified form, of our existing VAT input credit arrangements for dealers in second-hand motor vehicles.
The Bill contains two initiatives in the area of sporting and health and fitness which have the purpose of ensuring equity and consistency of treatment in relation to VAT. These changes are covered by sections 110, 120, 122 and 123 of the Bill.
In the case of golfing facilities, it is proposed that where a member-owned club's turnover from non-members exceeds, or is likely to exceed, £20,000 per annum — the normal registration threshold for services — it will be liable to VAT at 12.5 per cent on that turnover. Such clubs will remain exempt in relation to turnover derived from normal membership fees and where turnover from non-members does not exceed the £20,000 threshold. For the purposes of these provisions, a person will be regarded as a member if his or her current membership entitles that person to use the golfing facilities, without further charge, for at least 200 days in a continuous period of 12 months.
Similar provisions will apply to the "pay as you play" golfing facilities provided by the State and local authorities. Pitch and putt facilities provided by non-profit making bodies or local authorities will not be affected by the initiative and will remain exempt.
The Bill also includes an enabling provision which will allow the Revenue Commissioners to determine, on a case by case basis, if the VAT exemption afforded to non-profit making bodies operating in the general area of sports and health and fitness should be withdrawn where the £20,000 turnover limit is exceeded. It is not intended to apply a heavy-handed approach in this area. A determination made under these provisions may be appealed to the Appeal Commissioners.
The measures represent a considered effort to respond to the many representations received on behalf of the commercial sectors concerned and are designed to conform to existing EU requirements that VAT exemptions should not give rise to distortions of competition. They will take effect from 1 January 1996.
The Bill provides in section 119 that, if requested to do so, any VAT registered traders operating cash rebates or other incentives not recorded in normal trade documentation will be required to notify the Revenue Commissioners of all such payments or benefits given in connection with supplies to other traders. This measure, which replaces the monthly control statement requirement, will be reinforced by the continued development of the Revenue Commissioners' existing sector by sector audit programme. I know that business interests in general will welcome these new arrangements.
Turning to stamp duty, the Bill contains a number of measures which will be of particular assistance to the business sector. A new stamp duty exemption is being introduced under section 133 to facilitate stock borrowing by member firms of the Irish Stock Exchange. Sections 126 and 127 give stamp duty relief for company restructurings.
Section 129 exempts health insurance from the 2 per cent levy on non-life insurance premiums which would otherwise have applied to the VHI when it becomes an authorised non-life insurer later this year.
Sections 134 to 138 contain the new provisions in relation to residential property tax. The Bill increases the thresholds for property value and income as announced in the budget. The new thresholds are £94,000 for property and £29,500 for income. The tax will be at a flat rate of 1.5 per cent.
This year's Finance Bill contains a number of important measures which will help family businesses. In relation to capital acquisitions tax, section 142 of the Bill provides for an increase in business relief to a flat rate of 50 per cent on all qualifying assets. Previously, only the first £250,000 per beneficiary qualified for 50 per cent relief, with 25 per cent relief on the balance. In addition, more favourable instalment payment terms are being introduced in section 145 for capital acquisitions tax. This will give business owners the option of discharging their liabilities over five years at a competitive interest rate of 9 per cent.
The combination of the EU farmer retirement scheme and the stamp duty relief for young trained farmers introduced last year has given rise to substantial intergenerational transfers of farm property. In 1994, an estimated £100 million worth of farm land was transferred to young trained farmers. This year's Bill contains a number of measures which will give further encouragement to the transfer of farm property to younger more enterprising farmers.
A number of family-owned companies holding heritage houses, gardens and other items of historic or aesthetic interest are currently unable to avail of the capital acquisitions tax relief for heritage property which does not extend to company shares. In order to assist the preservation of such properties for public viewing, section 147 provides for the granting of relief to shares in existing heritage companies to the extent that the underlying value of the shares is attributable to heritage property.
Sections 148 to 151 make a number of amendments to the legislative provisions dealing with the Irish residence of individuals for tax purposes. Section 148 provides that the exemption from liability to DIRT will now be based on the non-residence status instead of the non-ordinary residence status of the tax-payer. Section 149 makes a similar change in regard to the exclusion from the obligation on financial institutions to report details of deposit interest to Revenue. Section 150 introduces an annual £3,000 threshold in regard to the Irish tax liability on the foreign investment income of an individual who leaves Ireland to work abroad for a number of years. At present, all the foreign investment income of such a person is liable to Irish tax for the first three years of his stay abroad. Section 151 deals with the tax relief for Irish individuals who go abroad to work on foreign assignments and removes the existing disallowance of the first 15 days spent abroad in computing the amount of the relief.
Section 153 provides for reporting certain tax offences to the Revenue Commissioners by auditors and other persons who assist companies in relation to tax. The offences which are reportable include making incorrect returns and failure to make returns, false claims to relief, falsifying documents, failure to keep records and non-payment of certain tax, otherwise than where the tax is declared tax or the non-payment is under discussion with the Collector-General. This provision implements a recommendation of the beef tribunal report but extends the reporting requirement in the interests of equity and consistency, to all persons who assist companies in relation to tax, not just auditors.
Where such a person has reasonable grounds to believe that a company has committed an offence, the person is obliged to notify the company. I would emphasise that if the company itself then notifies the Revenue Commissioners or the evaded tax is made good the person will not be required to notify the Commissioners. However, if the company does not rectify the matter, the person will be obliged to inform the Revenue Commissioners within 30 days of notifying the company. This requirement will not apply where the information is obtained in the context of assisting the company in preparing for litigation.
We have sought to strike a balance here between the requirement to report evasion and the extra duties this places on business and professionals. We have included a materiality clause to lessen the burden and to focus on reporting of substantial evasion — the materiality criterion is 5 per cent of tax liability or £5,000, whichever is the lesser. I am anxious to accommodate genuine concerns in the operation of the section but the essential structure and requirements of the section will remain. At the request of the auditing profession I have allowed an arrangement whereby the adviser or auditor reports to the company first to give the client a full opportunity to bring its affairs into order and, if this is done the adviser or auditor will not be obliged to make any report to Revenue.
Section 154 amends section 429 of the Income Tax Act, 1967, to confirm the right of accountants and tax practitioners to represent clients at the rehearing of tax appeals before a Circuit Court judge.
Section 155 amends section 115 of the Finance Act, 1986, to limit a bank's liability to pay VAT and PAYE to the Revenue Commissioners, in respect of a company on whose book debts it has a fixed charge, to arrears of VAT and PAYE arising only after the issue to the bank of a notice of liability under section 115. At present, a bank is liable to pay arrears of tax arising before issue of a notice and even before the taking out of the fixed charge. To benefit from this reduced exposure a bank must notify Revenue of the existence of the fixed charge. The amendment reduces a bank's exposure arising from lending to firms on foot of a fixed charge and is intended to alleviate problems for firms, in particular small firms, in securing loan finance. I hope the banking sector will respond positively to this initiative.
The black economy monitoring group and ICTU have identified access by the Revenue Commissioners to information held by public authorities as a valuable tool in monitoring the black economy and combating abuse. Section 156 empowers the Revenue Commissioners, for the purposes of the assessment, charge, collection and recovery of tax to obtain from a Minister of the Government details regarding payments made by the Minister to specified persons.
On a separate but related issue section 14 introduces an amendment to the Income Tax Act, 1967, to require a return to the Revenue Commissioners of payments to landlords in relation to rent or rent subsidy by public bodies such as health boards.
Further to the announcement in the budget, section 157 provides for a scheme of tax relief on donations of items of national heritage. It provides that the annual aggregate value of all items to be accepted under the scheme by an expert selection committee for donation to one of the national cultural institutions or approved bodies will be £0.5 million. No individual item worth less than £75,000 will be eligible for acceptance under the scheme. The tax relief available to donors will apply to income tax, corporation tax, capital gains tax, and gift and inheritance tax and will be available also in respect of arrears of such taxes.
I hope the House has benefited from this long exposition and I am ready to hear and examine the points put by other Members in the debate.
I recommend the Bill to the House.
