Dáil Éireann díospóireacht -
Wednesday, 10 Mar 1999

Vol. 502 No. 1

Finance Bill, 1999: Report Stage (Resumed).

Mr. McDowell

I move amendment No. 66:

In page 267, between lines 18 and 19, to insert the following:

108. – (1) As respects duty to be charged, levied and paid on and from a day which the Minister for Finance appoints by order, Section 90 of the Finance Act, 1992, is hereby amended by the insertion after subsection (2) of the following:

‘Provided that the rate of excise payable on beer produced and sold is based on the level of production of beer in an Approved Warehouse in the previous year that was liable for excise in that previous year according to the following table:

Size of Brewer (Product – Liable for Excise in previous year)

Output	Excise Rate
02,000 hl	excise free
2,001 – 3,000 hl	1% of the base rate
3,001 – 4,000 hl	2% of the base rate

and for each additional 1,000 hl of production after 4,000 hl, the excise rate shall increase in increments of 1% of the base rate, subject to an upper limit of 100% of the base rate.'.

(2) Subject to the provisions of this chapter, a rebate of 3% of the total excise paid in respect of beer produced in a microbrewery shall be allowed subject to compliance with such conditions as the Revenue Commissioners may think fit to impose.".

This amendment deals with the excise treatment of beer brewed in microbreweries. We had a lengthy discussion of this on Committee Stage, as a result of which I formed the view that the Minister might do something about this if he was in better humour. He was in particularly poor humour on the day in question and he did nothing. I thought we would have another go at this subject. The case is a compelling one, and the cost to the Exchequer would be minimal.

The argument is simple. There are relatively few of these microbreweries, which are basically pubs where beer is brewed. Only 40 or 50 people are employed in this area, but it is reasonable to say the potential for employment is considerable, and they are a great tourist attraction. We had a lengthy debate on this matter on Committee Stage which I do not wish to repeat. The Minister said he was in a stingy humour then. I hope he has mellowed over the weekend and might be willing to be more constructive on the amendment.

Mr. Noonan

Fine Gael tabled a similar amendment on Committee Stage, and I support Deputy McDowell's amendment. On mature reflection, the Minister will see the merit in this amendment. It might be slightly more complicated to buy a round after a cumann meeting if he had to buy a Newbridge Black or a light brown beer from Naas, but there is no economic or fiscal reason for not doing this, and it would stimulate an interesting little industry in its infancy.

Mr. McCreevy

The effect of the amendment would be to introduce lower rates of excise duty on beer brewed in small scale breweries. Deputies will recall that this issue was raised in the Dáil on a number of previous occasions and that I announced in reply that I have no plans to introduce a zero, a low or a staggered system of excise duty on beer brewed in such small scale breweries.

Irish excise duties do not discriminate between large and small breweries, and the tax system is not a source of competitive distortion. Excise duty from beer is an important source of revenue and amounted to £365 million in 1998. Furthermore, excise on beer was last increased in the January 1994 budget. The share of price represented by total tax, including VAT, has declined from 37.6 per cent in 1994 to 35.1 per cent in 1998. All breweries have, accordingly, been advantaged by a relative decline in the share of price attributable to tax. In addition, relatively high-priced premium craft beers bear no extra duty compared with same-strength mass produced beers. The proportion of price represented by tax is accordingly less for such premium beers.

There is no guarantee that any reduction in the rate of excise duty would be passed on to the consumer.

Mr. McDowell

The Minister does not appear to have had a very enlightened weekend. If I understand his response correctly, he is saying he does not see any difference between small scale breweries and large multinationals. There is a distinct difference between multinationals which make enormous profits and produce huge amounts of beer and these small scale indigenous industries which are an attraction to tourists and in their infancy in this country.

I invite the Minister to tell me whether he thinks this is an industry, an activity or practice he would encourage. If so, why is he not willing to do so with the fiscal instruments available to him?

Mr. McCreevy

I will give Deputies the European Union background to this matter. Under Article 4.1 of Council Directive 92/83/EEC, member states may apply reduced rates of duty, which may be differentiated in accordance with the annual production of the breweries concerned, to beer brewed by independent small breweries within the following limits: the reduced rates shall not be applied to undertakings producing more than 200,000 hectolitres of beer per year, and the reduced rates, which may fall below the minimum rate, shall not be set at more than 50 per cent below the standard national rate of excise duty.

Accordingly, the reductions proposed in Deputy McDowell's amendment would not be permitted by the directive. At present, Austria, Belgium, Germany, Denmark, Finland, Luxembourg and the Netherlands avail of the provisions of Article 4.1 of the directive. Any proposed low or staggered regime would also have to apply to imports of beer produced in small breweries in other member states in accordance with the provisions of Article 4.3 of the directive.

The duty is a specific tax which does not increase in relation to the value of the product. A higher priced premium craft beer bears the same amount of duty as a mass produced product of the same strength and, accordingly, a lower tax share of price than that of a mass produced product. At present, there are 13 microbreweries approved by the Revenue Commissioners, and the total amount of beer brewed was 15,000 hl in 1998. The estimated cost of granting the lower excise rate based on a 0.25 per cent share of the market is £500,000 in a full year. If market share increases to 0.5 per cent, it would cost the Exchequer £1 million in a full year.

Amendment put and declared lost.

Mr. Deenihan

I move amendment No. 67:

In page 270, line 42, to delete "1,400" and substitute "1,600".

This amendment is designed to accommodate the 1.6 litre engine, the typical family car. The proposed increase in VRT is another attack on the rural dweller. A long discussion took place here today about rural Ireland, how it has been penalised and the number of people leaving it. This is another blow to the typical rural dweller given that the family car of most rural dwellers has the 1.6 litre engine. Many of those people travel long distances to work and need a strong car. The average horse power of cars in rural areas is 1.6 litres.

This amendment which provides for a modest increase in cubic centimetres is designed to help the family worker and the rural dweller. There is no reason the Minister should not accept it. In recent years PAYE workers have accepted minimum pay increases under the various partnership programmes with the promise of tax reductions and lower interest rates. They got the PAYE and PRSI reductions and now have lower interest rates because of forces outside our control and the fiscal policy we have pursued. Why is the Minister proposing to increase VRT, a critical tax for most PAYE workers? For those who hope to benefit from the taxation measures in the Finance Bill, all the benefits will be diluted because of the 3.3 per cent increase in VRT. Before Christmas I went to a garage with the intention of buying a car. By the time I purchased it after Christmas it cost me £700 extra. Any benefit I got from the PAYE reductions was totally wiped out because of this increase.

Commercial companies renew their fleet annually because of hard driving and wear and tear. The VRT will increase their operating costs. A phrase I heard recently was that the 1.6 litre car is the workhorse of the nation. It is the typical car of most commercial companies. That sector which is driving our economy is being penalised with this increase. Commercial travellers will have to face increases in benefit-in-kind taxes as a result of this hike.

The Minister has referred much to environmental tax. Deputy Noonan referred to him as an eco warrier during the debate on Committee Stage. This is not an environmental measure although the Minister is trying to sell it as such. At a time when EU policy is to encourage citizens to replace old cars with new cars and to be environmentally conscious, the Minister is moving in the opposite direction. The increase in VRT is the first step in environmental taxation. I pay tribute to the motor industry which has taken measures to reduce emissions, fuel consumption and so on by examining technology, developing better engines, fuel use and so on. It now takes 30 new cars to produce the same level of emissions as one new car five years ago. Therefore, the more new cars on the roads the better for the environment. This provision will however discourage people from buying new cars, instead they will take the imported option.

The real impact of this environmental tax is that more people will buy second-hand imported cars, many of which are eco rejects from their country of origin. Ireland has now become the dustbin of Europe for second-hand cars. We import approximately 40,000 cars each year but export none. The forecourts of garages are crowded with second-hand cars that will never be moved because they are not competitive due to the VRT element. The Minister's stated policy on green taxation is a contradiction.

The Minister said the economic benefits would be in the region of £43 million. I am not worried about those with cars over 2 litres, the Mercedes and so on. Sales in that sector which can look after itself will yield £15 million. The Minister will note from the amendment that I have reduced my demand from a 2 litre engine to a 1.6 litre engine. I estimate that sales of cars with 1.6 litre engines and 2 litre engines will yield another £15 million. Already the Minister has £30 million and has only £13 million to make up to reach his target. Given the buoyancy in the motor trade, he will achieve that target. I predict he will achieve about £60 million from this provision. By making a small concession he would satisfy the typical family motorist, those who are fed up with gridlock in the cities and bad roads in the country. This mat ter will become a major issue just as PAYE became a major issue. Motor taxation, the level of VRT, VAT and insurance will become a big issue. The Minister would lose nothing by accepting this amendment.

Car sales have increased substantially as a direct result of an increase in the car ownership age group, less emigration and more people at work. As I pointed out during the debate on the Bacon report, one of the reasons for the increased house prices is the number of people in good jobs and their ability to obtain mortgages on the strength of their incomes. The same applies to the sale of cars, more people at work means more people are buying cars. New car sales are unique in that they depend on the ability to sell a trade-in which is already burdened with a high level of residual VRT. This situation has been further exacerbated due to the proposed VRT increases which make Irish used cars less competitive, relative to used imports. As used car stocks in garages build up there is cause for concern regarding the long-term problems. Where will those cars be dumped? What will happen to them? There will be a cost factor in the end.

The Minister quoted from several EU documents during the course of the debate on the Finance Bill, 1999, and will do so now to support my case. In the EU working document on the automotive industry published in November 1998, the EU Commission stated that the promotion of a more coherent and environmentally orientated vehicle taxation system through the establishment of an overall Community framework should be considered. Countries such as France, Germany and the UK have no additional registration tax so the Irish adjustment should be in a downwards direction. The recent VRT increases fly in the face of this policy. This document goes on to state that among the legal provisions adopted at EU level is a framework for fiscal incentives targeting the sales promotion of new clean cars respecting new European emission standards. I understand the Department of the Environment and Local Government report on sustainable development takes this point on board. The crude measure of VRT increases adopted by the Government do not do this and will, in the long run, favour the importation of older less environmentally friendly cars from abroad. That is happening. Every day one sees Japanese cars on the road.

I refer to the Minister's point on our amendment on Committee Stage about the difference between the two VRT rates of 22.5 per cent and 30 per cent being too steep. I took this point on board to try to strengthen my argument for a reduction of between 1.4 per cent and 1.6 per cent. That is why I modified the amendment to make it more reasonable and to give the Minister every opportunity to accept it. This cut off point of 1.6 per cent should be viewed as a more natural cut off point, as it is the cut off point for capital allowances used by the Minister. It would also allow him to retain his current three band structure for which he argued so convincingly on Com mittee Stage. Even in a discussion afterwards he said there would be too great a leap between the bottom and top rate and that there would be no medium rate.

On the environmental issue to which the Minister will refer, he might consider the approach adopted in other EU states such as the UK where consumers are encouraged to use smaller vehicles through positive incentives rather than penalties. The Minister is trying to encourage people to buy smaller cars by penalising them and by using a disincentive whereas in England people are given a positive incentive. The scrappage scheme introduced by the last Government was a far more positive environmentally friendly incentive than the measures the Minister is taking here.

I look forward to his reply. This is only starting to become a major issue. He would take much of the pressure off himself – I know he does not succumb to pressure, which I recognise and appreciate – and would do himself much good if he accepted this modest proposal.

Mr. Noonan

This is a very good compromise between the amendment we tabled on Committee Stage and the Minister's attitude and it would, in effect, exempt the family car from the impositions he proposes. I spent 12 months in the 1980s traipsing across to Brussels negotiating the various national road blocks which were inhibiting the implementation of the Single Market. At the time the expectation was that when the Single Market came in all goods and services would trade freely in the euro zone.

The hit to the Exchequer in applying the Single Market to the motor trade was significant and VRT was introduced, in effect, to protect the revenue. There was an expectation that it was a temporary measure – do not tell me income tax was introduced in 1890 as a temporary measure – to protect the revenue for a period. The Minister's predecessors in office recognised it as such and movement had commenced in bringing down VRT to lower rates. It takes a good deal to amaze me but I was amazed on budget day that the Minister had gone in the opposite direction. He has gone in that direction for the wrong reasons, and those which he stated are not the real reasons for the change.

Transport policy is in an absolute mess and the level of taxation on motor vehicles is part of that policy. There is no way to solve the difficulties of traffic and transport by applying the stick without applying any carrot, and this is an attempt to apply the stick. As Deputy Deenihan point out, the argument that we are getting a more environmentally friendly result does not stand up, and yet that was the Minister's stated reason.

We know the real reason – VRT does not impact on the consumer price index. The Minister needed between £40 million and £50 million extra revenue but he decided not to put tax on cigarettes where it should have been put because it would have had a more significant impact on the consumer price index. There is a difference of about 135p in the price of a packet of 20 cigarettes between the Minister's position post-budget and that in the UK post-Gordon Brown's budget yesterday.

When I was Minister for Health somebody asked me what single thing would most benefit the health of the people. The answer is self-evident – stop smoking. If 28 per cent of the people stopped smoking, it would have a major impact on the health services. The Minister has gone against precedent by putting 5p only on the price of 20 cigarettes when he should have put at least 10p. His colleague in the United Kingdom has put 20p on the price of 20 cigarettes. To some extent, we rely on advertising, notices and health promotion programmes to stop people smoking but it is not working because the number of people smoking has gone up by 2 per cent according to the last figures I saw. The United Kingdom relies far more on excise increases on a price sensitive item to stop young people, in particular, from smoking.

Young women are smoking in increasing numbers, and that may be connected to their lifestyle and their desire to be slim. Young men in secondary schools are not smoking as much probably because they are involved in team games to a greater extent than young women. It is a very serious problem in that young women in their adolescent years are becoming addicted to nicotine and the Minister is feeding them by only putting that small imposition on the price of cigarettes.

The price of cigarettes is relevant here because the Minister made a policy choice to slam the increase on VRT because it did not have a consumer price index effect and he would not put it on cigarettes because at the time there was a fear of inflation and it being reflected in the CPI. It is a bad decision on a multiplicity of grounds which I do not believe the Minister can justify. As Deputy Deenihan said, the Minister dressed it up and argued for it as if it was a green tax and his first movement towards environmental tax. That does not stand up to any analysis. By increasing VRT, the Minister is being very unfair to the motorist and making the most expensive car in Europe still more expensive. He is doing so at a time when the Exchequer did not really need the revenue. While none of us were looking for great leaps downward, we thought the Minister would at least take a point or a point and a half off VRT across the range of cars.

If this is the first step of a new policy, what is the Minister's intention next year and the one after? Will he continue to increase VRT for the stated reasons or have we taken it to a ceiling now? Will the Minister indicate how he sees the future? Will there ever be a proper Single Market in terms of the motor industry? To make the environment even more friendly next year, will the Minister hit VRT again? The Minister has to put his cards on the table and plan forward. I am very mindful of what he said on a number of occasions, that the Minister and the Government decide on the day. However, when dealing with an industry such as the motor industry and the pressures of a failed transport policy, the public has a right to know in which direction the Minister is leading. Will he increase the level to take it down, will he take it up further the next time or leave it where it is? The Minister would do much to assure goodwill in the House if he accepted the amendment. It is a good compromise which exempts the family car and that most used by commercial travellers. For all the reasons that Deputy Deenihan has stated, I recommend the Minister to accept the amendment.

Mr. McDowell

I remember during the debate on Committee Stage of the Finance Bill, 1998, I asked the Minister why he had reduced VRT by what was actually a very small percentage. I think it was 0.2 of 1 per cent, if my memory serves me correctly. The Minister said he felt he had to give them something and 0.2 of 1 per cent was not much anyway. Nonetheless it was an indication of his thinking. Certainly, at that stage there was no thought in his mind of raising VRT for the purposes either of—

Mr. McCreevy

I abolished the scrappage scheme that year.

Mr. McDowell

That was the trade off? Still, the Minister was reducing VRT and in so far as we could glean anything in terms of Government policy from that, I assume the intention was to continue to reduce it. We have a high tax regime on cars. As Deputy Noonan rightly pointed out, it was continued during the 1980s, largely for revenue purposes to protect the Exchequer. That is no longer a sufficient reason to maintain a high tax regime on cars. With the emergence of the Single Market seven years ago, many people were disappointed that there was not an immediate benefit in terms of being able to buy cars at prices comparable to those of our European partners. Seven years later we are not only in the same position but VRT has started going up rather than down and most people will find that inexplicable. It can no longer be justified purely in terms of the needs of the Exchequer because clearly they are far less than they were only a few years ago. For all the reasons given by my Fine Gael colleagues, it cannot be justified on ecological grounds either.

If the Minister wants to discourage the use of cars, he should be looking precisely at that – discouraging their use, not discouraging ownership. One then has to start looking at admittedly difficult political issues, such as taxation of road usage or petrol. However, taxing the ownership of cars is not the way to go about it. From an ecological point of view it does not make any sense. The two primary arguments of protecting the Exchequer and the ecological one fall away.

There is an onus on the Minister and the Government to justify a high tax regime on cars because there is no obvious justification for it. Given the conflicting signals of this year and last, motorists are entitled to ask for a clear policy indicator as to what the Minister's thinking is for future years.

Mr. Perry

The Minister has made a major mistake concerning the combined expenses of a home. From my experience in business, I know that the financial institutions are making money freely available to people to buy cars. They can just sign up and get a car with little or no requirement for a surety. Given heavy mortgage and car repayments, it is grossly unfair to further tax a 1.6 litre family car which is a necessity.

Vehicles with 1.9 litre diesel engines are used widely in rural areas. Such strong vehicles are required for agricultural purposes, including transporting goods to marts. Householders need good cars, especially with the introduction of the roadworthiness test in the near future, and it is unfair to add £600 or £800 to motoring costs. The role of the banks must be questioned in this matter. Prior to Christmas I know of an instance where the banks said they would cushion the additional loss by getting 1998 cars registered in 1999. That certainly raises a question.

As Deputy Noonan mentioned, we have the most expensive cars in Europe. Car owners are already contributing considerably to the Exchequer and I appeal to the Minister to move the cc band cut off point from 1.4 to 1.6 litres. He should accept the amendment.

If one looks at any garage forecourt, one will see that the trade in used cars must compete with cheaper imports both from Japan and the UK. The high level of VRT makes such cars uncompetitive, even though the future of the industry depends on being able to dispose of these used cars. That question may not have an immediate impact but garage owners are already having extreme difficulty in selling used cars because of competition from importers of cheaper cars from Northern Ireland, Britain and Japan. This provision is a major mistake and the Minister should accept the amendment.

Mr. McCreevy

I am opposing the amendment. As I have stated previously on Committee Stage, the new three band structure for VRT was introduced both in order to raise revenue and to begin to tackle the environmental damage being caused by the motoring sector. It is designed in a way that favours the purchase of smaller-engined cars while discouraging the purchase of larger-engined vehicles. I consider that this new three band structure will be more effective in influencing the size of vehicle purchased, avoiding a harsh transition between bands and rates and allowing buyers to opt for lower-powered vehicles in a given vehicle class. The new structure can be further built on and refined in the future, if so desired.

These particular cc bands have been chosen because they are considered to best approximate to small, medium and large-engined cars, and also because there appears to be a natural divide in the car market at around these cut-off points between competing marques and models. I consider that this relationship is not present in the structure proposed by the Deputies.

Although it is early days yet, the figures for new car registrations for January and February 1999 show that the VRT restructuring has been effective. The volume of sales has not been adversely affected, as was widely predicted by opponents of the restructuring. New car registrations to the end of February 1999 are up by almost 24 per cent on the same period last year. In addition, and as was intended by the restructuring, the introduction of the three band structure would appear to have caused a shift in the cc profile of new cars registered. New car registrations to the end of February 1999 show an increase of 7.3 per cent in the market share of cars below 1,401 cc.

This matter was dealt with on Committee Stage and in various other fora. There has been intensive lobbying. I will not repeat all the arguments I made on Committee Stage and in other debates, both inside and outside the House. However, it is important to put a few facts on the record. I respect Deputy Deenihan, who has pursued this matter with great vigour since it was first announced in the budget. He is to be complimented on the research and expertise which he has brought to bear on the subject. I certainly commend his tenacity in pursuing this matter but I do not agree with his contention. During his contribution on Report Stage he referred to the fact that the family worker has been upset by all of this. It is my belief that this is nearly akin to when one hears politicians saying that the people do not want a general election. What they mean is that they, the politicians, do not want a general election.

As is evidenced by the figures, car purchasers have not been too upset by this change. The reason Deputy Perry adverted to, but used for another purpose, is probably the one which has had most effect – that the cost of motor finance has fallen considerably in the recent years, and particularly in the past year. That has compensated more than adequately for the increase in the average price of a car as a result of changes I introduced in VRT. I suggest that is the reason why the average person, either in rural or urban areas, has not been too agitated by this increase.

Deputy Deenihan should really have adverted to the fact that some motor dealers have been considerably upset. They have effectively lobbied Deputies on all sides of the House, as is the motor industry's job. I have no complaint with that but they are wrong in a number of points they put forward. Doom and gloom was being predicted for the motor industry in January and February 1999, yet the figures show records being achieved on top of previous records. There are many reasons for that, including the general state of the economy, but it disproves the point that the pur chasing public have been inconvenienced by this to any great extent. For the reasons I have just outlined, they have not.

As I pointed out on Committee Stage, I have always been up front about the reasons for making the changes on this occasion. They were environmental and revenue raising. As I further pointed out on Committee Stage, when the Minister for Finance comes to decide a number of taxation issues prior to the budget, he takes into account a number of factors, for example, the effect on the consumer price index of increasing the cost of cars, petrol, beer and other indirect taxes. The Minister for Finance must make up his mind having taking account of the overall economic picture.

The motor industry has done exceptionally well in recent years. New car sales were quite good in the early 1980s but in the following ten years they dropped by half. In recent years they have reached record levels and nobody in the motor industry can complain about the level of business. The scrappage scheme was a success and when I abolished it in 1998 I made an adjustment by lowering vehicle registration tax.

There is no point in Deputies advocating a reduction in taxes in all areas, income tax, corporation tax, capital gains tax, indirect taxes and vehicle registration tax. Someone has to pay for the running of the country. The £43 million which I expect to collect in vehicle registration tax may be a relatively small amount of money in terms of the Exchequer finances but it is a fairly significant amount when viewed in the context of acceding to requests to reduce hospital waiting lists. It is not too much to ask some sectors to pay a little. When viewed against cheaper car finance, the increase in vehicle registration tax has had a minimal impact on the motor industry. People who demand increases in public expenditure for improvements in the health service, roads and education should not complain if the Minister for Finance of the day makes a small adjustment to raise a small amount of money from an industry that is well able to pay. The proof of the pudding is in the eating. The sales figures are up. However, they indicate that the changes have had the desired environmental impact because people are switching to smaller cars.

Deputy McDowell asked about future changes in vehicle registration tax. Deputy Noonan and others referred to the Single Market. Historically even with the increase in the budget, the present rates of vehicle registration tax are still lower than when the tax was first introduced. It is better structured. On 1 January 1993 the vehicle registration tax rates were 25.75 per cent for cars under 2012cc and 31.80 per cent for cars with a capacity greater than that. At present the highest rate for vehicle registration tax is 30 per cent for cars greater than 2000cc, reducing to 22.5 per cent for cars less than 1400cc.

Deputy Noonan wants me to indicate my plans for the taxation of the motor industry in the coming year. I suppose Members would like me to announce my future actions on the price of drink and various other VAT and excise changes. Much as I know the Deputies gave force to their argument, I know that were they in my position they would have no intention of announcing future changes. No sane Minister for Finance would do that.

Deputy McDowell raised ecological concerns suggesting that increases in vehicle registration tax was not the way to make an impact on the environment. He suggests that people should continue to buy cars but use them less frequently. I do not see why a person would buy a car if he or she was not going to use it – perhaps to look at it in the garage. A friend of mine has a car which he takes out for a drive irregularly but this man has many other things to worry about and only occasionally makes a long journey. However most people use the car to go about their business. I accept that in the context of a transport policy we could have fewer cars clogging up the streets, and I have ideas on that which I outlined last year. I do not accept the arguments put forward by Deputy McDowell on car use.

I have formed the view that lobbyists succeed when speaking on behalf of groups that are well organised and from the middle and upper classes. They are likely also to get a response from Deputies across all parties who then put pressure on the Minister. They are also successful in putting the point across in the media. The job of a Minister, however, is to take on board the views of those who do not have successful lobbying organisations such as pensioners, the old, the sick and others who have no one to speak for them. Some of the lobbying has been a bit over the top. Deputy Deenihan who has many years experience of marking footballers from all over the country has studied their form for a long time and that probably stands to him as a politician and perhaps his assessment of my form is better than others when he suggests how I react. A Minister must take account of a wide range of considerations especially on behalf of those who do not have others to lobby on their behalf.

Mr. McDowell

I will respond to two points the Minister made in the course of his contribution. He tore the guts out of any ecological argument he wanted to make. Owning a car is not a problem and does not cause environmental damage. What causes the damage is the use of the car. If I use my car to come into Leinster House five days a week I cause environmental damage. However, if I leave it at home and use it for social reasons at the weekend I cause less environmental damage. It is the use of the car and the road space that causes the environmental damage, not as the Minister said, owning a car. To approach the issue from an environmental point of view one looks at pricing road usage and petrol. I accept that these are not easy political issues but if the Minister is genuinely serious about environmental policy that is the way to go. From the environmental point of view there is a perfectly persuasive reason for the Minister to state his intentions for the coming years. I presume if the reasoning relates to the environment the Minister would want to discourage some practices and encourage others. That will simply not happen if the Minister makes up his mind from year to year.

However, if people are told petrol will be taxed more in the coming years or vehicle registration tax will increase on larger cars people can base their judgment on the Minister's policy statement. The policy has to be stated for two or three years in advance instead of the Minister taking a piecemeal approach. For those reasons, the Minister's status as an eco-warrior is not well established.

Mr. Deenihan

Naturally I am disappointed with the Minister's attitude to this reasonable amendment. I am not here on behalf of the industry but of motorists—

Mr. McCreevy

I accept that.

Mr. Deenihan

—such as old age pensioners, the unemployed, widows and widowers, because this will affect them more than it will people who can easily afford a car. I am concerned about people who have to borrow money to buy cars and I will continue to fight this battle for them.

The Minister said someone had to pay but motorists and the motor industry is already contributing over £2 billion to the economy. This is one of the most productive sectors in revenue terms and it provides easy money. The Irish motorist drives on the worst roads in Europe, especially in rural areas. I have sympathy for the motorists in my constituency, where there are probably the worst roads in Ireland, who pay the same tax as people in Dublin who have better facilities. As we all know from driving here in the morning, urban motorists now leave an hour earlier than previously to get to work. They sit in gridlock, suffering from tension and frustration as a result of taking an hour to travel four miles.

Rural and urban motorists are penalised by paying high tax – 61 per cent of the cost of a car is taxation, including VRT and VAT. Cars in Ireland are about 25 per cent dearer than in most European countries. We thought we were moving towards harmonisation but at a European conference the Minister said that is not what a single European market is about. Perhaps he was misquoted. We want to protect European consumers and give them an equitable deal, and one thing they all buy is a car. We may not have a common language but we all drive. Car ownership in Ireland is far lower per person than in Europe or Britain. To catch up to car ownership rates in Europe, our people would have to buy a lot more cars, and if they do that they will be penalised.

The reason most cars bought have engines smaller than 1.4 litres is that more young people are working and they buy smaller cars. It is they who are fuelling the economy. Perhaps the Minister could have research carried out to confirm that.

The Minister recalled when VRT rates were far higher, but that was when the economy was in recession and, to keep the country funded, various Governments had to find money where they could. We now have a surplus of £1.5 billion. Why should motorists be penalised for the sake of £13 million, which the Minister could make up elsewhere? It is a small amount of money in terms of the surplus at his disposal.

I do not want to hold up the debate as there are other amendments, but this one is particularly important for consumers. The Minister could have accepted it because of the arguments we have made. It is reasonable and would not have cost much money. I am disappointed he has rejected it. As Deputy Noonan said, if we want people to buy better cars and to have cleaner air, we should use the carrot rather than the stick approach, as the scrappage scheme showed. The introduction of compulsory car testing will put more pressure on people to get better cars. They will be forced to buy second-hand cars rather than new ones, and the number of imported second hand-cars will increase. The Minister also said the 1.4 litre engine size is a natural dividing line for VRT rates but I do not know where he got that idea – 1.6 litres is a more natural divide, as I said earlier.

This is not a green tax and the Minister's party's candidates in Dublin will not get one extra vote because of it. I understand the Minister accepted the Green Party's proposals on VRT but he is not tackling the issue of emissions. He says he does not accept all his officials' advice but in this instance he has not followed his own reasoning. There is no long-term or even medium-term strategy in this proposal.

I will put this amendment to a vote. The Minister's party colleagues will have to vote against my amendment and then outline to consumers, not to dealers, the tax proportion of the cost of cars. Motorists are badly treated. Ireland will become the dustbin of Europe as a result of the second-hand cars which will be dumped here. This increase is contradictory from an environmental point of view.

Question put: "That the figure proposed to be deleted stand."

Tá

Ahern, Dermot.Ahern, Michael.Ardagh, Seán.Aylward, Liam.Blaney, Harry.Brady, Johnny.Brady, Martin.Brennan, Matt.Brennan, Séamus.Briscoe, Ben.Browne, John (Wexford).Callely, Ivor.Carey, Pat.Collins, Michael.Cooper-Flynn, Beverley.Coughlan, Mary.Cowen, Brian.Cullen, Martin.Daly, Brendan.Davern, Noel.de Valera, Síle.Dennehy, John.Doherty, Seán.Ellis, John.Fahey, Frank.Fleming, Seán.Flood, Chris.Foley, Denis.Fox, Mildred.Gildea, Thomas.Hanafin, Mary.Harney, Mary.Haughey, Seán.Healy-Rae, Jackie.Jacob, Joe.

Keaveney, Cecilia.Kelleher, Billy.Kenneally, Brendan.Killeen, Tony.Kirk, Séamus.Kitt, Michael.Lawlor, Liam.Lenihan, Brian.Lenihan, Conor.McCreevy, Charlie.McDaid, James.McGennis, Marian.McGuinness, John.Martin, Micheál.Moffatt, Thomas.Moloney, John.Moynihan, Donal.Moynihan, Michael.Ó Cuív, Éamon.O'Dea, Willie.O'Donnell, Liz.O'Donoghue, John.O'Flynn, Noel.O'Hanlon, Rory.O'Keeffe, Batt.Reynolds, Albert.Roche, Dick.Ryan, Eoin.Smith, Brendan.Smith, Michael.Treacy, Noel.Wade, Eddie.Wallace, Dan.Wallace, Mary.Woods, Michael.Wright, G. V.

Níl

Ahearn, Theresa.Allen, Bernard.Barnes, Monica.Barrett, Seán.Belton, Louis.Bradford, Paul.

Broughan, Thomas.Browne, John (Carlow-Kilkenny).Bruton, Richard.Burke, Liam.Burke, Ulick.Carey, Donal.

Clune, Deirdre.

Connaughton, Paul.

Níl–continued

Cosgrave, Michael.Coveney, Simon.Crawford, Seymour.Creed, Michael.Currie, Austin.D'Arcy, Michael.De Rossa, Proinsias.Deenihan, Jimmy.Ferris, Michael.Finucane, Michael.Fitzgerald, Frances.Flanagan, Charles.Gilmore, Éamon.Gregory, Tony.Hayes, Brian.Higgins, Jim.Higgins, Michael.Howlin, Brendan.Kenny, Enda.McCormack, Pádraic.McDowell, Derek.McGahon, Brendan.McGinley, Dinny.McGrath, Paul.

McManus, Liz.Mitchell, Olivia.Moynihan-Cronin, Breeda.Naughten, Denis.Neville, Dan.Noonan, Michael.O'Keeffe, Jim.O'Shea, Brian.O'Sullivan, Jan.Owen, Nora.Penrose, William.Perry, John.Rabbitte, Pat.Ring, Michael.Ryan, Seán.Sargent, Trevor.Shatter, Alan.Sheehan, Patrick.Shortall, Róisín.Stagg, Emmet.Stanton, David.Timmins, Billy.Wall, Jack.Yates, Ivan.

Tellers: Tá, Deputies S. Brennan and Callely; Níl, Deputies Barrett and Stagg.

Question declared carried.

Amendment declared lost.

An Ceann Comhairle

We now come to amendment No. 68. Amendment No. 69 is an alternative. Amendments Nos. 68 and 69 may be discussed together.

Mr. Noonan

I move amendment No. 68:

In page 271, between lines 31 and 32, to insert the following:

"116.–Section 8 of the Principal Act is hereby amended in subsection (3)—

(a) in paragraph (a):

(i) by the insertion of the following subparagraph after subparagraph (ia) (inserted by the Finance Act, 1998)

‘(ib) goods being pig semen, the total consideration has not exceeded and is not likely to exceed £40,000 and, in calculating that total consideration, supplies of pig semen to—

(I) any other farmer licensed as an artificial insemination centre in accordance with the provisions of the Live Stock (Artificial Insemination) Act, 1947, or

(II) a taxable person over whom that farmer exercises control, shall be disregarded, or',

(ii) by the substitution in subparagraph (iii) (inserted by the Act of 1998) of ‘services specified in subparagraph (i) and any or all of goods of the type specified in subparagraph (ia) and (ib) and goods of the type specified in subparagraph (ii) supplied in the circumstances set out in that subparagraph' for ‘services specified in subparagraph (i) and either or both of goods of the type specified in subparagraph (ia) and goods of the type specified in subparagraph (ii) supplied in the circumstances set out in that subparagraph',

(iii) by the insertion of ‘or' at the end of subparagraph (iii), and

(iv) by the substitution of the following for subparagraph (iv) (inserted by the Finance Act, 1998):

‘(iv) goods of the type specified in subparagraphs (ia) and (ib) and goods of the type specified in subparagraph (ii) supplied in the circumstances set out in that subparagraph, the total consideration has not exceeded and is not likely to exceed £40,000,',

and

(b) in subparagraph (ia) (inserted by the Act of 1998) of the proviso thereto by the insertion after ‘paragraph (a)(ia)' of ‘(a) (ib)'.".

The purpose of this amendment is to remove VAT on pig semen used for artificial insemination purposes. As the Minister's amendment is more skillfully drafted, I will allow him read his speaking note.

Mr. McCreevy

The aim of the amendment is to exclude flat-rate farmers involved in making supplies of pig semen from the requirement to register and account for VAT. For technical, drafting reasons the amendment does not achieve the result intended. On Committee Stage I undertook to table a Report Stage amendment to cater for the concerns of the pig industry in this matter. My amendment achieves the desired result by restricting the requirement to register and account for VAT to flat-rate farmers involved in the sale of bovine semen.

The 1998 Finance Act introduced a requirement for farmers involved in the supply of livestock semen to register and account for VAT. This change was mainly intended to tackle VAT induced distortions between farmers and non-farmers in the bovine trade. It is now clear that the scope of the 1998 provision was too broad. While there was a clear and well documented case of tax based distortion in the case of sales of bovine semen, there has been no comparable case of distortion in sales other than bovine. The best option is to restrict the application of the provision to bovine semen.

Mr. Noonan

What is the definition of "livestock" in the principal Act?

Mr. McCreevy

I do not have a copy of the definition but will send it to the Deputy.

Mr. Noonan

It is the key to the Minister's amendment. I presume it includes pigs. From memory of a previous Bill, I think it includes everything, including poultry. Will the Minister's amendment apply to the greyhound industry?

Mr. McCreevy

I do not know the answer to that question. The horse breeding and greyhound industries do not recognise artificial insemination. The bloodstock industry would collapse if it was allowed. One could visualise the consequences if it was possible to obtain semen samples from Northern Dancer. The same applies to the greyhound industry, although artificial insemination is technically possible.

Mr. Noonan

Does the same apply to the pedigree dog industry?

Mr. McCreevy

My expertise is confined to the betting track. When I am older I may take an interest in the pedigree dog industry.

Mr. J. Mitchell

Are these planned pregnancies?

Mr. Noonan

In view of the Minister's lack of knowledge I will withdraw my amendment.

Amendment, by leave, withdrawn.

Mr. McCreevy

I move amendment No. 69:

In page 276, before line 1, to insert the following:

"119.–Section 8 of the Principal Act is hereby amended in subparagraph (ia) of paragraph (a) of subsection (3) by the substi tution for ‘livestock', in each place where it occurs, of ‘bovine'.".

Amendment agreed to.

Amendment No. 70 not moved.

Mr. McDowell

I move amendment No. 71:

In page 281, between lines 21 and 22, to insert the following:

135.–The Minister for Finance shall by order amend the First Schedule to the Stamp Act, 1891 (as amended by this Act) in order to provide that the tax treatment of an instrument whereby an interest in new properties is acquired is not less favourable than the tax treatment of an instrument whereby an interest in second-hand property is acquired in similar circumstances.".

This amendment was discussed at length on Committee Stage. We should avail of the opportunity, however, to discuss some of the recommendations, in particular the recommendation on capital gains tax, made by Dr. Bacon yesterday. The purpose of the amendment is to reorient policy on the assistance given in the construction industry.

I said on Committee Stage that we have traditionally directed assistance at the industry to encourage building. While that is not necessary at present, it is necessary to direct assistance at specific types of buyers.

There is a consensus in the House that we should seek to assist first time buyers and I proposed two measures in that regard. First, if the first time buyers' grant is to be retained for new houses it should also apply to second-hand houses. Second, the alleviation of relief from stamp duty which applies to first time buyers of new houses should also apply to second-hand houses. Will the Minister outline the reasoning behind his response to the recommendation on capital gains tax in the second Bacon report published yesterday?

Mr. McCreevy

The purpose of this amendment is to grant the stamp duty treatment afforded to new houses to second hand houses. In effect, this would mean second-hand houses of 125 square metres in area would be exempt from stamp duty if purchased by an owner-occupier and that second-hand houses over 135 square metres in area would attract stamp duty on a quarter of the consideration paid for the house, again if purchased by an owner-occupier.

When this matter was raised on Committee Stage I advised that the reason new houses have been treated differently from second-hand houses for stamp duty purposes is that new houses are subject to VAT at 12.5 per cent, whereas the sale of a second hand house does not incur VAT. In addition, the concessionary treatment of new houses also acts as a support to the building industry. I would be reluctant to move in the direction sought by the Deputy in the absence of any detailed information on how the measure would affect that industry.

I am concerned that it does not conform with the recommendations set out in the first Bacon report which I implemented last year in the Finance (No. 2) Act, 1998. Apart from these considerations, this proposal would significantly reduce the yield from property. The estimated annual cost of the proposal would be approximately £60 to £70 million. For these reasons, I oppose the amendment.

Deputy McDowell also raised the question of the capital gains tax change introduced in earlier amendments on foot of the second Bacon report published yesterday. The Government reacted speedily to the first Bacon report in the Finance (No. 2) Act, 1998. No Bill was produced so quickly following the publication of a report.

A key recommendation of the first Bacon report was to speed up the supply of land. Both Bacon reports concentrate heavily on the supply side. The Finance (No. 2) Act, 1998, was also necessary to implement tax changes to distort the market in a specific direction. In his second report, Dr. Bacon confirms these measures have had some success. The emphasis has been on increasing the supply side to return supply and demand to equilibrium.

The first Bacon report recommended a temporary reduction to 20 per cent in the rate of capital gains tax for those disposing of land for the purpose of house building to be followed by an increase to 60 per cent after 5 April 2002, if houses were not built by then. This was implemented in the Finance (No. 2) Act, 1998, subject to the condition that planning permission had to be obtained. This was to ensure that houses were built. At the time I considered this was the only way to proceed with this recommendation.

It is not the case that designated zoning takes place in every county or borough. For example, county development plans may not have specific rezonings such as occur in Dublin. They may proceed on a case by case basis, for example, by designating zoning around a specific town.

Many of the measures recommended by Dr. Bacon in his first report and implemented in the Finance (No. 2) Act, 1998, have had some success. When he was asked to revisit the matter of planning permission he pointed out in his report yesterday that the requirement was causing difficulties and delays. In the course of the debate on the Finance (No. 2) Bill, I said outline planning permission would suffice. That is the case.

However, according to Dr. Bacon – there is evidence to support this – when developers offer to purchase land from farmers for housing development, the farmer applies for outline planning permission, which may take six to eight months to procure, following which the developer has to apply for full planning permission to build, which could take another 18 months to two years. This would mean a considerable delay from the time the land was offered for sale to the building of a house. In view of this, Dr. Bacon advocated the removal of the requirement for outline planning permission. The amendment on Report Stage adopts this approach and it will no longer be a requirement when availing of the 20 per cent rate for capital gains tax.

Mr. McDowell

How will the Minister ensure the land is used for housing?

Mr. Noonan

It must be rezoned for residential purposes.

Mr. McCreevy

Deputy McDowell has raised a legitimate question. Last year I and my officials, and officials from Revenue, spent considerable time trying to speed up the enactment of the Finance (No. 2) Bill to implement the first Bacon report as quickly as possible. We considered all of these matters. My purpose in requiring planning permission was to ensure houses would be built on the relevant site. Dr. Bacon did not suggest this in his report. At the time it was the only requirement I could think of to ensure houses would be built. The earlier amendment takes account of the second Bacon report and deletes this requirement to speed up the process. It should be successful.

Deputy Noonan proposed an amendment on Committee Stage regarding capital gains tax for industrial development. It gave me the opportunity to outline my views on the tax in general and they have not changed in a week.

Mr. J. Mitchell

There was a recent announcement by the Minister for the Environment and Local Government regarding designated areas. Before that there had been a lengthy delay, partly because of a continuing delay at EU level regarding one aspect of the incentives for urban renewal.

Mr. McCreevy

That delay is ongoing. We have not received approval from the EU.

Mr. J. Mitchell

It is also the reason the Minster for the Environment and Local Government delayed announcing the designated areas, even with limited incentives. Since before the 1994 tranche of renewal I have been pressing for the village of Inchicore to be designated for renewal because it has been destroyed by drugs, mainly because the Department of Health and Children has had a drugs agency located there for so long, and the complete mismanagement by Dublin Corporation of St. Michael's Estate, which is now being closed. There are sites for which planning permission has been approved which are ready for an urban renewal scheme, yet they have been excluded. It is almost certain the work will not go ahead because the neighbouring sites have been designated under the scheme. Given the dereliction in Inchicore – this also applies elsewhere – I cannot understand why it deliberately went out of its way to exclude areas which were ready for buildings and needed development.

Other parts of the village should have been designated because they are run down due to bad public policy. I discussed this with Deputy Noonan when he was Minister for Health and with his predecessors. This problem was inflicted on Inchicore by a well meaning chemist in the area who initiated a methadone replacement programme long before anyone else would do so. The result was that more than 500 drug addicts from throughout the country were serviced there and it destroyed the village. That, together with a bad allocation policy of Dublin Corporation which I fought for years, destroyed good flats which must be closed at enormous expense.

Official depredation destroyed the village of Inchicore. Prior to 1994 I pleaded with the then Minister for Finance and Minister for the Environment to visit Inchicore to see how it was destroyed, but they overlooked it. At least it is now included to some extent, but the areas which are ready for an urban renewal scheme have been excluded. I ask the Minister to review that decision as a matter of urgency.

Mr. Noonan

My recall of Dr. Bacon's first report was that there was no recommendation to reduce capital gains tax, that it was the Minister's initiative which was introduced in the Finance (No. 2) Act and that whatever conditions he attached to the proposal were his own because the proposal was his own. It was not that the Minister was trying to get away with applying a Bacon recommendation.

Mr. McCreevy

Bacon recommended in his first report the reduction of capital gains tax to 20 per cent on residential lands.

Mr. Noonan

I stand corrected. The Minister is right to do what he is doing. When we were debating the Finance (No. 2) Act, I said it would not work and land would not be brought in for housing purposes if planning permission had to be applied. It is a pity we cannot talk in more detail about it today. Most land is sold subject to planning permission. If the contract is subject to planning permission, will capital gains tax at 20 per cent apply to the original landowner or the builder in the event of a subsequent sale?

Mr. McCreevy

The original landowner.

Mr. Noonan

What happens if it is sold again?

Mr. McCreevy

The same rule will apply. If it was a building company, it could be a tradable activity but if it was a sale by an individual to an individual, the rate would be 20 per cent unless the person buying it and selling it on again could be deemed to be a trader in land, like a trader in sweets or cigarettes. However, that would be unlikely.

Mr. Noonan

It has been brought to my attention that 20 to 25 per cent of the prestige apartment blocks on the south side of the city, from the block opposite Kitty O'Shea's pub through Ballsbridge, are empty. Someone should address this supply issue. Many of them are section 23 apartments against which they can write off rental income from elsewhere. With prices rising rapidly, there is a big capital gain. Investors are beginning to regard tenants in these blocks and rent as a nuisance.

The Minister should look at what is being done throughout the UK, but particularly in London as it is a London problem. Commercial rates are applied on a month by month basis to apartments which are left vacant. In other words, if they are vacant for a year, an annual commercial rate is paid and if they are vacant for a month, one twelfth of the annual commercial rate is paid.

When the Minister is examining the Bacon recommendation to give tenants tax exemptions on their rent, he should look at what is happening in the market. The £500 exemption is being written off elsewhere. People are not claiming it because one landlord says he will increase the rent if it is claimed, while another says he will only charge rent for 11 months because he would prefer not to be reported. The Minister must apply a monthly criterion no matter what way it is applied.

The Minister should consider the issue of empty apartments. There must be 400 or 500 units on the south side of the city at a time when there is a shortage of rental accommodation. People are keeping apartments because they can get tax benefits but they do not rent them because they regard tenants as a nuisance.

Mr. McCreevy

I am told that section 23 relief would not have applied in that area. Since July 1992 section 23 relief has only applied to urban designated areas. I am not a learned economist like Dr. Bacon but I try to rationalise why people might leave apartments vacant. I accept the point the Deputy made in that regard.

Some people bought apartments in tax designated areas to keep down their income tax. However, they will be part of the supply side in the medium to long-term. They might enjoy a tax break for a few years and they might regard renting as a nuisance, but they will only gain if a punter is willing to buy the apartment for a particular purpose. If the market gets out of step in the longer term, it will not work. The Deputy is right that people bought apartments for tax reasons and that they regard rent and tenants as a nuisance. However, the situation should balance out.

In his second report Dr. Bacon made recommendations about possible increases in the rent relief taxation area. While I am responding to the change in capital gains tax, there is no commitment to increase tax relief in the rented area. It will be considered in the budgetary context. The Deputy adverted to other things which should also be considered in that context. I want to consider those before proposing any changes and that is why I did not table an amendment in that regard today.

As regards Deputy Jim Mitchell's point, in this era of openness, transparency and accountability the previous Government recommended and this Government supported the proposal that urban renewal areas should be proposed by local authorities and submitted to an expert panel which would recommend them to the Minister for the Environment and Local Government who would recommend them to the Government. The expert panel recommended these areas and the Minister for the Environment and Local Government did not change one comma. Unfortunately, Inchicore, for which the Deputy made a great case, was not included.

Mr. J. Mitchell

The absurdity is that the Government has taken steps because of the housing emergency. We have real potential in this but nothing is done.

Mr. McCreevy

I agree with the Deputy.

Amendment put and declared lost.

Acting Chairman (Ms Coughlan)

Amendment No. 72 is out of order as it involves a potential charge on the Exchequer.

Amendments Nos. 72 and 73 not moved.

Acting Chairman

Amendment No. 74 is in the names of Deputies Noonan and Olivia Mitchell. Amendments Nos. 75 and 78 are related so it is proposed to discuss amendments Nos. 74, 75 and 78 together. Is that agreed? Agreed.

Mr. Noonan

I move amendment No. 74:

In page 295, between lines 7 and 8, to insert the following:

"(2) Section 59 of the Finance Act, 1985, is hereby amended by the insertion of the following subsection after subsection (2):

‘(3) For the purposes of this section, the expression a spouse of the disponer shall include any person who immediately prior to the death of the disponer was one member of a couple, of whom the disponer was the other member, who, although not married to each other, ordinarily co-habitated with each other as man and wife for a period of two years or more ending on the death of the disponer.'.

(3) Paragraph 1 of Part 1 of the Second Schedule to the Principal Act is hereby amended by the addition at the end of the definition of class threshold of the words and provided further that for these purposes a person shall be deemed to be a child of the disponer if he is a child of any person who immediately prior to the death of the dis poner was one member of a couple, of whom the disponer was the other member, who, although not married to each other, ordinarily co-habitated with each other as man and wife for a period of two years or more ending on the death of the disponer.".

Amendment No. 74 in the name of Deputy Olivia Mitchell and myself states that for tax purposes, co-habitees will be treated as if they were married. We raised this issue on Committee Stage but the Minister was reluctant to deal with it. His primary reason for not doing so was that tax law should not move in advance of civil law, or words to that effect. That principle does not stand up to analysis and arrangements can be made in tax law which do not have to reflect a wider attitude introduced through social legislation in the House.

Rather than trying to make a fundamental root and branch change of the status of partnerships and confer on them a different status, a more focused approach would be to address the tax problem and simply provide a resolution to it. If it is treated as a general issue of principle, it will not be possible to make any progress until the status of the partnership is changed. Amendment No. 76 is a good example of that where children of partners, because they are not defined as stepchildren, cannot avail of certain benefits of which stepchildren would avail. I pointed out in great detail on Committee Stage the difficulties attached to this. One solution would be for the spouse to adopt the child of the partner but if the child is already adopted by the mother, it cannot be re-adopted. There is no solution to this problem other than changing the definition and there is no general principle in law that can be introduced by the Minister for Justice, Equality and Law Reform to resolve this problem. The proposal that tax law should not move in advance of the law in general is a mandate to do nothing. We should address the anomalies in tax law where the nature of relationships justify them and where there is no injury to any third party. The amount of tax foregone is minor because these are anomalies in exceptional cases. The cases I am talking about concern stepchildren and one could count on the fingers of one hand the number of instances to which this would apply, but it is important to those to whom it does apply.

Mr. McDowell

Referring to the discussion on Committee Stage, the Minister made the point that we could not deal with this in a piecemeal fashion. I would argue that we have to deal with cases of hardship and it is not difficult to identify some of those. Deputy Noonan pointed to one in relation to children.

Another case is that of co-habiting couples who own a house which is effectively their family home and where it causes immediate hardship to the surviving partner when the other person dies, even if the house is in both names. The likelihood is that they will be obliged, because of the low threshold in inheritance tax in those circum stances, to sell the house shortly after a partner has died.

The Minister pointed out that there is a general principle of application. If we wait for that to be resolved this case of hardship will not be dealt with and it will require a courageous Minister to examine cases where there is disproportionate hardship and to at least attempt to deal with those cases.

Mr. McCreevy

It is the practice to put on record if one has a vested interest. I am a co-habitee so I would be affected by these proposed changes, particularly those put forward by Deputy McDowell.

The intention of these amendments is twofold. First, to provide that co-habiting couples in non-marital relationships will be treated as spouses for the purposes of capital acquisitions tax. Second, that the child of one of the partners in a non-marital relationship will be regarded as the child of the other partner for the purposes of the tax.

While at face value it would seem equitable to accord the same tax treatment to co-habiting couples as is accorded to married couples, there are substantial legal and administrative problems to be overcome, particularly in the area of defining in legal terms what would constitute a co-habiting couple. The same problems arise in determining the tax treatment of a child of one of the partners of a co-habiting couple in receipt of a gift or inheritance from the other partner.

With the advent of divorce many co-habiting couples will be able to marry. Where co-habiting couples decide not to marry or cannot do so for legal reasons, any extension of the "married" treatment for capital acquisitions tax purposes would involve recognising relationships in the tax code which have not been recognised in the context of general law. In general, it is not appropriate for tax law to pre-empt general law.

Any extension of the tax treatment available to spouses must take cognisance of general law. An interdepartmental working group has been established, chaired by the Department of Social, Community and Family Affairs, to examine the treatment of married, co-habiting and one parent households under the tax and social welfare codes. Consideration of tax measures in this area will await the group's report which is expected to be completed later this year. For these reasons I regretfully oppose these amendments.

Deputy Noonan, when speaking on these amendments on Committee Stage, mentioned the case of a woman with a non-marital child marrying someone who is not the father of the child. In these circumstances I am advised the child would qualify as a stepchild of its mother's spouse by virtue of section 3 of the Status of Children Act, 1987, and section 74 of the Finance Act, 1988.

The Deputy spoke also of a case which had been brought to his attention where the mother had adopted her own child before marrying. I am advised that such a child would also qualify as a stepchild of its mother's spouse by virtue of section 2(5) of the Capital Acquisitions Tax Act, 1976.

Mr. Noonan

I am glad and also surprised to hear that because the briefing note I used on Committee Stage was supplied to me by the resident expert in this area, Deputy Alan Shatter. I understood from conversation with him that he was talking about actual cases where, in the first instance, there was a refusal.

Mr. McCreevy

Without naming the person perhaps the Deputy could bring that case to my attention and that of the Revenue and we will have it investigated.

Mr. Noonan

Perhaps one of the Minister's officials could forward that section of the speaking note to me and I will provide it to Deputy Shatter.

Mr. McCreevy

That is not a problem.

Mr. Noonan

On the general issue that relationships should not be recognised in tax law which are not recognised in general law, I am not sure that is an absolute principle on which the Minister can rely. I would have thought the relationships would be already recognised in general law in so far as common law recognises relationships. They may not be recognised in constitutional law but I would think they are recognised in common law. The Minister should not press that too far as the reason he cannot deal with hardship cases. If we are waiting for change in the general law in respect of some situations, there will not be any change because the position is not remediable through statute law and the anomaly will have to be dealt with for the particular case. I know hardship cases make bad law but there are situations where it is the only approach to resolve a problem.

Mr. McCreevy

I would like to do something in this area but it is extremely complex and difficult to get a universal solution. I will do my best between now and next year to come forward with some other adjustments in this area while recognising the difficulties for a large number of people. I hope, the interdepartmental committee under the Department of Social, Community and Family Affairs will bring forward suggestions in this area during next year. I give the Deputy my word that it is an area in which I hope to do something in the course of my tenure as Minister.

Mr. Noonan

That is fair enough. I will not press the amendments.

Amendment, by leave, withdrawn.

Amendment No. 75 not moved.

Mr. Noonan

I move amendment No. 76:

In page 295, between lines 7 and 8, to insert the following:

"195.–The Principal Act is hereby amended by the insertion of the following section after section 58:

‘58A. (1) In this section–

"Family Home" means any property which if the donee or successor were the owner prior to the gift or inheritance would be the principal private residence of such person within the meaning of section 604 of the Taxes Consolidation Act, 1997;

"Family Member" means a child, brother, sister or child of a brother or sister or a person in respect of whom the disponer stands in loco parentis who is domiciled in the State and in respect of whom not more than 50 per cent of the market value of the property to which the individual is beneficially entitled in possession, excluding any pension or death in service rights payable to the donee or successor on the death of the disponer or spouse of the disponer, is represented by the market value of property in the State which consists of a family home. For the purpose of this definition a deduction shall be made from the market value of a family home for any debts or incumbrances;

"Taxable Value of a Family Home" means the market value of the property reduced by 90 per cent.

(2) In so far as any gift or inheritance consists of a family home:

(a) at the date of the gift or at the date of the inheritance, and

(b) at the valuation date,

and is taken by a donee or successor who is, on the valuation date and after taking the gift or inheritance, a family member, the provisions of section 18 (other than subsection 7(b) thereof) shall apply in relation to a family home as they apply in relation to other property subject to the following modifications:

(i) in subsection (1) of that section, the reference to market value shall be construed as a reference to the taxable value of a family home;

(ii) where a deduction is made for any liability, cost or expense in accordance with subsection (1) of that section only a proportion of such liability cost or expense shall be deducted and that proportion shall be the proportion that the taxable value of a family home bears to the market value of that property; and

(iii) where a deduction is to be made for any consideration under subsection (2) or (4)(b) of that section, only a proportion of such consideration shall be deducted and that proportion shall be the proportion that the taxable value of a family home bears to the market value of that property.

(3) Where a taxable gift or a taxable inheritance is taken by a donee or successor who is a family member subject to the condition that the whole or part thereof will be invested in a family home and such condition is complied with within two years after the date of the gift or the date of the inheritance, then the gift or inheritance shall be deemed, for the purposes of this section, to have consisted –

(a) at the date of the gift or at the date of the inheritance; and

(b) at the valuation date,

of a family home to the extent to which the gift or inheritance is subject to such condition and has been so invested.

(4) (a) The taxable value of a family home shall cease to be applicable to a family home if and to the extent that such property, or any family home which directly or indirectly replaces such property:

(i) is sold or compulsorily acquired within the period of ten years after the date of the gift or the date of the inheritance, and

(ii) is not replaced within a year of the sale or compulsory acquisition, by another family home,

and tax shall be chargeable in respect of the gift or inheritance as if the property was not property which qualified for this relief:

Provided that this paragraph shall not have effect where the donee or successor dies before the family home is sold or compulsorily acquired.

(b) If an arrangement is made, in the administration of property subject to a disposition, for the appropriation of property in or towards the satisfaction of a benefit under the disposition, such arrangement shall be deemed not to be a sale or compulsory acquisition for the purposes of paragraph (a).

(c) The taxable value in relation to a gift or inheritance referred to in subsection (2) shall cease to be applicable to a family home if the donee or successor ceases to reside in the family home for any period of time which would not qualify for relief from Capital Gains Tax on any sale under the provisions of section 604 of the Taxes Consolidation Act, 1997.

(d) The taxable value in relation to a gift or inheritance referred to in subsection (2) shall not apply if the donee or successor is the owner of any property which is occupied by the donee or successor or is available to the donee or successor for their occupation excluding a property held under a lease or tenancy by the donee or successor from a person who is not connected to the donee or successor. For the purpose of this subsection, a person shall be connected with the donee or successor if that person is a spouse of the donee or successor, the relatives of the donee or successor, nominees of the donee or successor, nominees of a relative of the donee or successor, and the trustees of a settlement whose objects include the donee or successor or relative of the donee or successor. A nominee includes a person who holds shares in a company or any property directly or indirectly on behalf of any other person.

(5) for the purpose of this section if, in the administration of property subject to a disposition, property is appropriated in or towards the satisfaction of a benefit in respect of which a person is deemed to take a gift or an inheritance under the disposition, the property so appropriated, if it was subject to the disposition at the date of the gift or at the date of the inheritance, shall be deemed to have been comprised in that gift or inheritance at the date of the gift or at the date of the inheritance.'.".

The Minister has already recognised in the Finance Bill the taxation difficulties being experienced by certain classes of taxpayer as a result of rising property prices in Dublin. He substantially increased the threshold in respect of collecting arrears of residential property tax. That is evidence that he understands the problem I am discussing.

The same case applies, in a more onerous way, to persons who inherit the family home in which they live and who are faced with an impossible tax bill because of the rising price of property in Dublin. This lengthy amendment proposes to deal with that by defining the taxable value of a family home as the market value of the property reduced by 90 per cent. It would have the effect of substantially relieving from inheritance tax persons who inherit a family home.

The length of the amendment is dictated by the fact that all avenues for evasion are blocked. It is tightly focused on somebody who inherits the family home who is already living in that family home. It only applies in those circumstances. The house would have to be used as a family home.

The Minister is aware that there are sons and daughters, brothers and sisters, nephews and nieces and persons to whom the person who bequeathes the home is in loco parentis in this situation. These people find it increasingly difficult to pay the inheritance tax bill that arises as a result of a bequest.

I hope the Minister takes this issue on board. He should indicate how he intends to deal with this situation as it is causing great hardship. Nobody wants a person who has lived for 30 or 40 years in the family home to be obliged to sell it simply because they are unable to pay the tax bill. It is not like inheriting land. The person cannot sell a site or a field; either it all goes or it stays. People should not be forced out of their homes.

I do not want this provision to be spun into a relief for investment property or second houses or holiday homes. The amendment is tightly focused on the category of people who are suffering hardship. I recommend it to the Minister.

Mr. McDowell

The thrust of the amendment is sound. The problem identified by Deputy Noonan is real. When the thresholds were first established, particularly the parent to child threshold, they did not catch the vast majority of houses. However, they now apply to an increasing number of houses and that was never the intention.

The Minister will not be surprised to hear that I consider the amendment too generous. A reduction to 10 per cent of the market value would seriously damage the take from inheritance tax. It would effectively tear the heart out of inheritance tax and I do not wish to be part of that.

However, the problem should be examined and perhaps a less generous concession could be considered in the future.

Mr. McCreevy

The intention of this amendment is to reduce the value of a house, the subject of a gift or inheritance, by 90 per cent provided (a) the beneficiary is a child, brother or sister, nephew or niece of the disponer, (b) the beneficiary occupies the house for ten years afterwards as his or her principal private residence and (c) the value of the house represents more than 50 per cent of the beneficiary's total wealth excluding any death in service benefit payable on the death of the disponer.

I note that the amendment specifies that the value of the house should represent not more than 50 per cent of the beneficiary's wealth. I presume this is a mistake.

While it is true that business and agricultural property qualify for a 90 per cent reduction for capital acquisitions tax purposes, I am not sure that similar treatment should be accorded to someone inheriting a family home. In the interests of tackling unemployment and reducing the overall rate of income tax, it has been the policy of successive Governments to increase the yield from capital taxation while at the same time introducing a measure of relief in particular circumstances where the existing burden was perceived to be causing hardship. In last year's Fin ance Bill I increased the elderly siblings relief to 80 per cent of the value of a residence or £150,000, whichever is the lesser, and introduced a new relief for those inheriting their principal private residence from a close relative along the lines of the elderly siblings relief but subject to a ten year occupation requirement instead of a five year requirement.

It is estimated that this amendment, if confined to gift and inheritance of houses, would cost in the region of £15 million out of a current yield from mainstream capital acquisitions tax of approximately £83 million. The amendment actually goes further to the extent that it would grant the same relief to an inheritance of cash provided the cash was invested in the residence. This would increase the cost substantially.

A great deal of thought went into the drafting of the amendment. As Deputy Noonan pointed out, the intention is to focus it tightly and narrowly. I appreciate the sentiment behind the amendment. Increasing property values have outstripped the thresholds which were set many years ago and updated since then.

In my two budgets to date, I have addressed specific aspects of the overall taxation system. I made slight amendments last year to an extension of what could be termed the elderly siblings relief to overcome particular problems in that regard. I acknowledge the problems being caused for some people by the current low thresholds. I promise to address this matter in future budgets but I cannot accept the relief at this stage.

Mr. Noonan

I accept the Minister's criticism that the amendment is generous. However, it is narrowly focused and I hoped that focus would recommend it to him even though the benefits are generous. If the Minister was disposed to introduce a section along these lines in next year's Finance Bill, a less generous provision would be acceptable. I have highlighted the issue, as was my intention. I intend to put the amendment to a vote.

Amendment put and declared lost.

Mr. Noonan

I move amendment No. 77:

In page 295, between lines 7 and 8, to insert the following:

"195.–Section 19(1) of the Principal Act is hereby amended by the addition after the word 'incumbrances' in the definition of a farmer of the words ‘or is a person who comes within the definition of "young trained farmer" in section 112 of the Finance Act, 1994'.".

Mr. McCreevy

The intention of the amendment is to broaden the definition of the term "farmer" in section 19(1) of the Capital Acquisitions Tax Act, 1976, which provides for a relief from tax on the transfer of qualifying agricultural property.

The relief operates by reducing by 90 per cent the market value of agricultural property which is the subject of a gift or inheritance so that tax is calculated by reference to an amount – known as the agricultural value – which is substantially less than the open market value of such property. One of the conditions of the relief is that the gift or inheritance of agricultural property must be taken by a "farmer" as defined in the section. A "farmer" is defined as an individual who is domiciled in Ireland, at least 80 per cent of the gross market value of whose assets is represented by agricultural property after taking the gift or inheritance.

The requirement that 80 per cent of an individual's assets comprise agricultural property ensures that the relief is focused on genuine farmers rather than on individuals with substantial holdings of non-agricultural assets who may be engaged in farming.

The proposed amendment would broaden the scope of the relief by extending it to gifts or inheritances taken by "young trained farmers" as defined by section 112 of the Finance Act, 1994. Section 112 provides for a relief from stamp duty on transfers of land to young trained farmers. A "young trained farmer" is defined as an individual who is under 35 years of age on the date of execution of the deed of transfer and who holds one of the qualifications specified in the schedule of qualifications accompanying the section.

Extending the availability of agricultural relief to young trained farmers would mean that individuals with substantial holdings of non-agricultural assets could qualify for capital acquisitions tax agricultural relief. Such an extension would therefore blur the focus of the relief by making it available to individuals who farm rather than to genuine farmers. For this reason I oppose the amendment.

Mr. Noonan

Does the Minister have an estimated cost of implementing the amendment?

Mr. McCreevy

No.

Mr. Noonan

I tabled this amendment on the basis that a young trained farmer has completed the required training in agricultural college and his or her primary occupation is farming. Even if he or she had other assets, he or she should be able to avail of agricultural relief, since it was his or her intention, by disposition and training, to engage primarily in farming.

Mr. McCreevy

This relief is for the transfer of agricultural property. This amendment proposes that for the purposes of this Act and to qualify for the 90 per cent relief a farmer is defined as being in a particular category. This amendment seeks to include in the definition of farmer a young trained farmer. For the reasons I outlined this would broaden the focus of the relief and for that reason I am not inclined to accept it.

Capital acquisitions tax relief on the transfer of agricultural property is very generous. That relief has been in place for some years, but the generosity of Deputy McDowell's leader knew no bounds when it came to extending relief for the transfer of agricultural property and businesses. If Deputy McDowell had been Minister for Finance, I am sure he would not have been as generous.

Mr. Noonan

We pointed out the difficulty most farmer families are experiencing in encouraging any member of the family to take over the running of the farm. There are requirements under law in the case of installation aid and the Minister referred to stamp duty, where to qualify a young person undergoes training. If a young farmer intends to take over the running of the family farm for the purpose of farming and his or her bona fides has been established by undergoing the appropriate training, even if he or she has other assets, agricultural relief on the transfer of agricultural property should apply.

Mr. McCreevy

We may be talking at cross purposes. Young trained farmers would probably qualify under the assets test I outlined earlier. The requirement that 80 per cent of an individual's assets be comprised of agricultural property ensures that the relief is focused on genuine farmers rather than individuals who have substantial holdings of non-agricultural assets who may be engaged in farming. A young trained farmer would normally qualify under the assets test. The purpose of this amendment is to reduce that qualification to make it easier for a young trained farmer to qualify where he or she has non-agricultural assets.

Mr. Noonan

That is correct.

Mr. McCreevy

The relief is very generous. In effect, it is a 90 per cent rebate. The test of having non-agricultural assets is reasonable under the conditions. To extend it further for a young trained farmer would not be desirable.

The Deputy may have specific cases in mind where problems have arisen and that may be the reason he tabled this amendment. I could not agree to further concessions on agricultural relief.

My views on capital acquisition tax are not far removed from my views on all other taxes, which I outlined on many occasions. I am sure the Deputy would be opposed to any changes I might introduce in that regard.

Amendment, by leave, withdrawn.

An Ceann Comhairle

We now come to deal with amendment No. 78 which was discussed with amendment No. 74.

Mr. McDowell

I move amendment No. 78:

In page 295, between lines 7 and 8, to insert the following:

"195.–The Principal Act is hereby amended by the insertion after section 3 of the following new section:

‘3A.–A disposition effected on or after the passing of the Finance Act, 1999, between two persons who have been living together as husband and wife or otherwise in a relationship not primarily based on contract for at least 4 years prior to the date of the disposition shall be chargeable to tax under this Act as if it was effected between spouses.'.”.

Amendment put and declared lost.

Mr. McDowell

I move amendment No. 79:

In page 295, between lines 7 and 8, to insert the following;

"195.–The Second Schedule to the Principal Act is hereby amended by the substitution of the following paragraph for paragraph 3—

‘3. As and from the 2nd day of December, 2000 and subject to the provisions of paragraph 6, the tax chargeable on the taxable value of a taxable gift or a taxable inheritance taken by a donee or successor shall be of an amount equal to the amount by which the tax computed at the rate or rates of tax applicable under the table, on the aggregate of—

(a) that taxable value, and

(b) the taxable values of all taxable gifts and taxable inheritances (if any) taken previously by that donee or successor within the period of 12 years ending on the date of the gift or the date of the inheritance, exceeds the tax, computed at the rate or rates applicable under the table on the aggregate of the taxable values of all taxable gifts and taxable inheritances previously so taken included at subparagraph (b) of this paragraph:

Provided that the tax so chargeable on the taxable value of a taxable gift or taxable inheritance shall not exceed an amount equal to the tax computed at the rate or rates applicable under the table to such part of the aggregate of the values referred to in subparagraphs (a) and (b) of this paragraph as is the highest part of that aggregate and is equal to that taxable value.'.".

In his budget speech the Minister announced his intention to rebase inheritance tax by bringing forward the year in which it was based to 1987. The intention behind this amendment is to do that on a rolling basis whereby one would count back 12 years from the date in which an inheritance or gift was taken to aggregate one's tax liability. I propose this amendment not on the basis of principle but for practical reasons. It becomes difficult at a certain point for practitioners to have to go back 15 or 20 years to aggregate a lifetime of gifts or inheritances. From a purely practical point of view, 12 years is probably an adequate period. We do not run too much of a risk of people using that lengthy a period as a tax shelter. I consider this a reasonable proposition.

Mr. McCreevy

I brought forward this proposal at budget time for the reasons outlined by the Deputy. It was another of my great initiatives. I suggested it because such aggregation is cumbersome for practitioners, particularly those in the Deputy's profession. I put forward the idea of introducing a rolling relief, as outlined by the Deputy, on a ten or 12 year basis or 12 years. My officials said this would give rise to tax planning opportunities and that is the reason that section is framed as it is. I am prepared to revisit this proposal in the context of next year's Finance Bill for the reasons I outlined.

Mr. McDowell

I picked 12 years because is a sufficiently long period that would not give rise to a huge amount of tax planning of the kind the Minister described. I accept what he said and I will not press my amendment.

Amendment, by leave, withdrawn.

An Ceann Comhairle

We now come to deal with amendment No. 80, amendment No. 88 is related and, therefore, we will deal with amendments Nos. 80 and 88 together.

Mr. McDowell

I move amendment No. 80:

In page 295, between lines 7 and 8, to insert the following:

"195.–Section 53(1) of the Principal Act is hereby amended by the insertion after 'taxable gifts' of ‘or taxable inheritances'.".

The two amendments would have the effect of introducing a small inheritance allowance, a de minimus allowance. Any gift is aggregatable for the calculation of inheritance tax purposes or gift tax purposes. This amendment requires the Minister to introduce a small inheritance allowance and to increase the existing small gift allowance from £1,000 to £5,000. A sum of £1,000 is too small. We should encourage people to buy and sell stocks up to a reasonable limit annually without incuring a tax liability. That is something we can reasonably do.

There is also the practical problem of aggregating inheritance tax and gift tax. It is necessary to aggregate all small gifts going back almost an indeterminable period to assess the tax liability, even if those gifts would be lower than any of the existing thresholds.

Mr. Noonan

We are pressing the point in regard to amendment No. 88.

Mr. McCreevy

The intention of amendment No. 80 is to introduce a small inheritance exemption similar to that which operates for small gifts. At present a gift of up to £500 in any one year may be taken by a donee from a disponer without incurring a charge to capital acquisitions tax. I have increased this threshold to £1,000 in this year's Finance Bill. However, no such exemption operates in relation to inheritance tax.

The extension of such an exemption to include small inheritances could open up substantial possibilities for tax planning. A discretionary trust set up under a will trust could be used to appoint assets valued at £1,000 in successive years over a prolonged period of time and by doing so avoid a charge to mainstream inheritance tax. It would also be difficult to avoid extending the £1,000 exemption to all inheritances, thereby increasing the various thresholds by this amount. The cost of such a global exemption would be approximately £1.8 million in a full year.

Existing class threshold can already exempt an inheritance of up to £192,900 from tax. The intention of amendment No. 88 is to increase the small gift exemption from capital acquisitions tax from £1,000 to £5,000. In section 199 of the Bill I have increased the small gift exemption from capital acquisitions tax from £500 to £1,000. This exemption applies on an annual basis so that yearly gifts of up to £1,000 taken by a donee from a disponer will be free of tax. Increasing the exemption to £5,000 per annum would make it possible for a substantial amount of cash or assets to be transferred over time without incurring a charge to capital acquisitions tax. For these reasons I am opposing both amendments.

Mr. McDowell

There is a valid argument in what the Minister said. If you take an annual gift from a trust or inheritance from the same source it would clearly lead to tax planning of a kind which is undesirable. Surely, however, it would be possible to devise an amendment to the existing law that would prohibit inheritances taken from a particular source, be it a trust or a donor, while still meeting the intention of the amendment.

Mr. McCreevy

I will address all of these matters in my review of capital acquisitions tax.

Amendment, by leave, withdrawn.

Mr. McDowell

I move amendment No. 81:

In page 295, between lines 7 and 8, to insert the following:

"195.–The Second Schedule to the Principle Act is hereby amended in paragraph 1 in the definition of ‘appropriate Table' by the insertion after ‘spouse,' of ‘parent,'.".

This amendment is intended to deal with circumstances where a gift is given by a child to a parent. As the Minister knows there is a considerable threshold of £190,000 applying to gifts given by parents to children. This is intended specifically to deal with circumstances where children might be paying substantial nursing home costs for an elderly parent which would mean a substantial transfer of money over a period of time. At the moment that would be subject to tax at a high rate and it is not reasonable that it should be taxed in such circumstances. This is not intended to deal with inheritances but only with gifts from a child to a parent.

Mr. McCreevy

The intention of this amendment is to accord to an inheritance taken by a parent from a child the same tax treatment as an inheritance taken by one spouse from the other, in other words to exempt it from capital acquisitions tax.

Mr. McDowell

The intention behind the amendment was to deal with gifts only.

Mr. Noonan

Amendment No. 87 in Deputy Deenihan's and my name deals with the same issue.

Mr. McCreevy

Although it is similar, it is dealt with separately.

Mr. Noonan

Will the Minister include it? We only have three minutes left.

Mr. McCreevy

I will read the speaking note for amendment No. 81 and then read the speaking note for that amendment. The intention of this amendment is to accord to an inheritance taken by a parent from a child the same tax treatment as an inheritance taken by one spouse from the other, in other words to exempt it from capital acquisitions tax, although I understand from Deputy McDowell that is not the purpose of the amendment.

Section 116 of the Finance Act, 1991, already exempts inheritances taken by parents from their children. There are two conditions attaching to the relief: the interest taken by the parent or parents must be an absolute interest and not a limited interest and the inheritance must be taken on the date of the death of the child. In view of the availability of the relief provided by section 116 of the Finance Act, 1991, there is no requirement for any further provision in this regard. For this reason I am opposing the amendment.

The intention of amendment No. 87 is to exempt from capital acquisitions tax gifts or inheritances taken by a parent from a child for the purpose of support or maintenance. Section 58 of the Capital Acquisitions Tax Act, 1976, already exempts from tax gifts or payments made to a dependent relative, as defined by section 466 of the Taxes Consolidation Act, 1997, during the lifetime of the disponer for the purposes of maintenance or support, provided the gifts or payments are not excessive given the financial circumstances of the disponer.

The existing exemption goes much of the way towards addressing the concerns which gave rise to this amendment. Furthermore, the amendment as proposed places no limit whatsoever on the size of the gifts or inheritances that might qualify for exemption other than that the Revenue Commissioners must be satisfied that the payments are applied towards such maintenance. For those reasons I am opposing this amendment.

An Ceann Comhairle

It is 11.15 p.m. and I am required to put the following question in accordance with an Order of the Dáil of this day: "That the amendments set down by the Minister for Finance and not disposed of are hereby made to the Bill and the Fourth Stage is hereby completed and the Bill is hereby passed."

Question put.

Tá

Ahern, Michael.Ahern, Noel.Ardagh, Seán.Aylward, Liam.Blaney, Harry.Brady, Johnny.Brady, Martin.Brennan, Matt.Brennan, Séamus.Briscoe, Ben.Browne, John (Wexford).Callely, Ivor.Carey, Pat.Collins, Michael.Cooper-Flynn, Beverley.Coughlan, Mary.Cowen, Brian.Cullen, Martin.Daly, Brendan.Davern, Noel.de Valera, Síle.Dennehy, John.Doherty, Seán.Ellis, John.Fahey, Frank.Fleming, Seán.Flood, Chris.

Foley, Denis.Fox, Mildred.Gildea, Thomas.Hanafin, Mary.Harney, Mary.Haughey, Seán.Healy-Rae, Jackie.Jacob, Joe.Keaveney, Cecilia.Kelleher, Billy.Kenneally, Brendan.Killeen, Tony.Kirk, Séamus.Kitt, Michael.Lawlor, Liam.Lenihan, Brian.Lenihan, Conor.McCreevy, Charlie.McDaid, James.McGennis, Marian.McGuinness, John.Martin, Micheál.Moffatt, Thomas.Moloney, John.Moynihan, Donal.Moynihan, Michael.Ó Cuív, Éamon. Tá–continued

O'Dea, Willie.O'Donnell, Liz.O'Donoghue, John.O'Flynn, Noel.O'Hanlon, Rory.O'Keeffe, Batt.Reynolds, Albert.Roche, Dick.

Ryan, Eoin.Smith, Brendan.Smith, Michael.Treacy, Noel.Wade, Eddie.Wallace, Dan.Wallace, Mary.Woods, Michael.Wright, G. V.

Níl

Allen, Bernard.Barnes, Monica.Barrett, Seán.Bell, Michael.Belton, Louis.Bradford, Paul.Broughan, Thomas.Browne, John (Carlow-Kilkenny).Bruton, Richard.Burke, Liam.Burke, Ulick.Carey, Donal.Clune, Deirdre.Connaughton, Paul.Cosgrave, Michael.Coveney, Simon.Crawford, Seymour.Creed, Michael.Currie, Austin.D'Arcy, Michael.De Rossa, Proinsias.Deenihan, Jimmy.Durkan, Bernard.Ferris, Michael.Finucane, Michael.Fitzgerald, Frances.Flanagan, Charles.Gilmore, Éamon.Gregory, Tony.Hayes, Brian.Higgins, Jim.Higgins, Michael.

Howlin, Brendan.McCormack, Pádraic.McDowell, Derek.McGahon, Brendan.McGinley, Dinny.McGrath, Paul.McManus, Liz.Mitchell, Jim.Mitchell, Olivia.Moynihan-Cronin, Breeda.Naughten, Denis.Neville, Dan.Noonan, Michael.Ó Caoláin, Caoimhghín.O'Keeffe, Jim.O'Shea, Brian.O'Sullivan, Jan.Owen, Nora.Penrose, William.Perry, John.Rabbitte, Pat.Ring, Michael.Ryan, Seán.Sargent, Trevor.Shatter, Alan.Sheehan, Patrick.Shortall, Róisín.Stagg, Emmet.Stanton, David.Timmins, Billy.Wall, Jack.Yates, Ivan.

Tellers: Tá, Deputies S. Brennan and Callely; Níl, Deputies Barrett and Stagg.

Question declared carried.

Mr. Noonan

I ask the Minister to convey to his officials and the officials in Revenue our gratitude for their help and assistance on all Stages of the Finance Bill.

Mr. McDowell

I wish to be associated with those comments.

Mr. McCreevy

I note the compliments paid to my officials and those in Revenue. I thank Deputies on all sides of the House for their co-operation on Committee and Report Stages. The debate was helpful in many areas.

An Ceann Comhairle

This Bill is certified a Money Bill and will be sent to the Seanad.