Finance Bill 2014: Report Stage (Resumed)

Debate resumed on amendment No. 6:
In page 16, between lines 38 and 39, to insert the following:
"Amendment of section 462B of Principal Act (personal allowances and reliefs)
12. Section 462B of the Principal Act is amended by inserting the following new subsection (2A) after subsection (2) -
"(2A) Where the primary carer has insufficient income to avail in full of the single person childcare credit the other parent may avail of the full or unused amount of the credit, on condition that the other parent has met any court ordered maintenance payments.".".
- (Deputy Michael McGrath).

Deputy Donnelly had spoken on amendment No. 6 and the Minister was to respond but I will recap briefly. The amendment relates to the single person child care tax credit, which replaced the one parent family tax credit last year. As a result of the change in last year's budget, some parents were out of pocket to the tune of €2,500 - €1,650 by virtue of the loss of the credit and a further €800 by virtue of the loss of the additional band at the lower rate. The essence of this amendment is to allow the primary carer, who does not have a sufficient taxation liability to absorb the tax credit in full, to transfer any unused portion of the tax credit to a qualifying secondary carer.

As I said last night, the principle of there being only one tax credit in respect of the child is honoured, because that was the fundamental shift the Minister made last year, but this recognises the reality that when many relationships break up, there is the primary carer and the secondary carer, who also plays a very important role in the upbringing of the child, who pays maintenance payments in the vast majority of cases and who is heavily involved in the day-to-day upbringing of the child and deserves recognition for that role. It is a very modest proposal and might present some technical difficulties for the Revenue but if the will was there, it would be possible to implement this.

I thank Deputy McGrath for his contribution. Although I was not here last night, I watched this debate, which was quite constructive in regard to this important matter. The Minister for Finance wants to thank Deputies Michael McGrath, Doherty and Donnelly for their contributions and clarifications on this issue during the debate last night.

The amendment appears to envisage a number of changes to the current system. The first is that entitlement of the secondary claimant would be linked to compliance with the court maintenance order, the second is that a parent would have some preference over the possible secondary claimant, such as a grandparent, and the third is that part of the credit rather than the whole credit could be transferred. It is not clear in the amendment whether the Deputy envisages that the current requirement that the child reside with the secondary claimant for at least 100 days of the year would continue.

Linking the transfer of the credit, or part of the credit, to parentage or court-ordered maintenance payments could raise constitutional concerns. From a practical point of view, it is difficult to see how it would be administered. Disputes about whether maintenance was paid or not would then give rise to disputes about whether the tax credit was due or not. As I said, it is not clear whether the Deputy sees his amendment as giving a parent with whom a child resides for only a minimal period of the year preference over say a grandparent with whom a child resides for more than 100 days of the year.

While the Minister does not propose to accept the amendment at this time, he will on foot of last night's debate ask his officials to seek the advice of the Attorney General's office on this matter. As regards relinquishing a portion of the credit, the Minister will instruct his officials to work with the Revenue Commissioners to investigate the administrative, operational and data protection issues involved. It is worth noting that the relinquishment of a portion of the credit is likely to give rise to significant difficulties in some situations - for example, where the primary claimant has children with more than one partner. There is also likely to be budgetary implications which will have to be considered but we get the thrust of what Deputy McGrath is trying to achieve in the amendment. The Minister has outlined the difficulties and the unanswered questions he sees and has asked his officials to engage with the Attorney General's office on this matter. Once that is done, the Minister will consider the matter further.

I thank the Minister of State for his reply, which was reasonably positive and I accept it in good faith. As he will know, under the existing arrangements, it is possible in certain circumstances for the primary carer to transfer the credit in full to the secondary carer. That would arise if, for example, the primary carer does not have any employment income and has no use for the tax credit as such. The transfer of the full credit requires the consent of the primary carer. That can create difficulties on occasion. When relationships breakdown, it is not always amicable.

In regard to the thrust of my proposal, I accept what the Minister of State has said and I will not press the amendment. I hope the Minister will examine this in good faith to see if it is possible. The idea is that if one parent does not have enough of a tax liability to use all of the credit, the other parent, who meets all of the normal qualifying conditions, can benefit from the reminder of it. That is an objective we should seek to achieve.

Amendment, by leave, withdrawn.

Amendment No. 7 arises out of committee proceedings.

I move amendment No. 7:

In page 20, between lines 15 and 16, to insert the following:

"Annual Report of the Special Assignee Relief Programme

14. The Minister shall lay before the Houses of the Oireachtas an annual report showing the number of people who have availed of the Special Assignee Relief Programme (SARP), the number of additional jobs created by SARP and tax foregone as a result of SARP.".

Táim ag cur chun tosaigh an leasú seo ó thaobh SARP de. Mar atá a fhios ag an Aire, is ábhar cunspóideach é seo ó thaobh an pháirtí s'againne. Sílimid go bhfuil an Rialtas ag déanamh leathnaithe ar an scéim atá ann agus go bhfuil sé ag tógáil an uasmhéid de €10 milliún amach as an reachtaíocht agus ag rá gur féidir le duine ar bith buntáiste a bhaint as an ábhar seo. Is cuma cén ioncam atá siad ag saothrú agus caithfimid cuimhneamh gurb é an rud atá ar fáil anseo ná go mbeadh 30% den méid airgid atá tú ag saothrú i ndiaidh €75,000 bainte amach as, gur féidir leat ísliú cáin a fháil air agus nach nglacfaí ach an 30% sin de d'ioncam nuair atáthar ag déanamh suas cé mhéad cáin ba chóir duit a íoc. Is é an rud atá á chur chun tosaigh sa leasú seo ná go mbeadh tuairisc curtha i láthair i dTithe an Oireachtais ina sonraítear cé mhéad duine a bhain tairbhe as an scéim seo, cé mhead poist sa bhreis a chruthaíodh mar gheall ar an scéim seo agus cé mhéad cáin ar chailleadh don Stáit mar gheall uirthi. Mar a dúirt mé nuair a bhíomar ag déileáil le seo ar Chéim an Choiste, dúirt an Tánaiste ar úrlár na Dála gurb é an rud a bhí i gceist anseo ná go gcruthófaí 500 post do gach duine a bhain tairbhe as an scéim seo. Feicfimid ó na figiúirí a tugadh don Choiste Airgeadais an tseachtain seo caite nach sin atá i gceist ar chor bith, nach bhfuil na poist seo á gcruthú agus sílim go bhfuil sé an-tábhachtach go gcuirfear i dtuairisc i láthair gach bliain ar úrlár na Dála agus an tSeanaid ag déanamh cur síos ar stádas na scéime seo ag an phointe sin.

I thank Deputy Doherty for his contribution. We had an extensive discussion about this on Committee Stage. Amendment No. 7 proposes that an annual report be laid before the Houses of the Oireachtas showing the number of people who have availed of SARP, the number of additional jobs created and the tax foregone as a result of SARP. I tried to provide some relevant information on Committee Stage and it would be useful to repeat it. Some 12 employees claimed SARP for the 2012 tax year and the amount of tax foregone in that year was €111,722. According to the information provided to Revenue by employers in the employer annual return, five jobs were created in 2012 as a result of SARP and a further five jobs were retained.

In regard to 2013, as I outlined on Committee Stage and as the Deputy knows, the deadline for filing the self-assessed tax returns has just passed and as those figures have not yet been fully processed, I am only in a position to provide the House with provisional figures for 2013 at this time. The provisional information to date indicates that 36 employees availed of the incentive in that year and that the tax foregone was approximately €300,000. However, I emphasise that this is not a definitive figure, pending the full processing of the self-assessment returns for 2013. According to employer returns, an additional 25 jobs were created in 2013 as a result of SARP and four jobs were retained.

I can assure the Deputy that the Minister for Finance and I want to ensure the relief is effective in terms of achieving its objective of attracting key executives and decision-makers to Ireland and with them foreign direct investment. For that reason, in this year's Bill, the Minister for Finance has increased the information which employers are required to provide to Revenue to include matters such as the job title of the SARP employees, a description of the roles carried out by these employees and details of the countries in which these employees worked prior to their arrival in the State.

The purpose of requesting such information is to ensure that the relief can be properly evaluated when it is due to be reviewed again in 2017. Information of the kind sought in the amendment is readily available and for that reason the Minister for Finance does not propose to accept the amendment.

If it is so readily available there should be no reason why a report would not be laid before the Houses on this issue. If it is so easy to compile such a report why is the Government opposed to such a measure? I attempted to oppose this section but was ruled out of order because of the stringent rules placed on the Opposition in respect of money Bills. The Government is increasing the threshold under which one can apply for SARP. It was not enough to cover those employees who earn €500,000 but the Government has removed that threshold and made it limitless so people who earn millions of euro will be able to avail of this scheme which deducts 30% of an individual's income, excluding the first €75,000, for tax purposes. It is a significant benefit for those individuals.

I have always acknowledged the need to take risks in finance Bills, particularly where they can create employment and spur on secondary benefits for tax take and so forth but they need to be based on evidence and I have not been presented with any evidence to say this is required to remove the threshold from €500,000 up to €1.5 million or €2 million or whatever because there are no limits. When the Government brought in this controversial measure I questioned the Tánaiste, who stood where the Minister of State now stands, and she said that each person who avails of SARP will be required to create 50 jobs. It was budgeted for 100 persons to avail of this scheme but the figure is approximately a quarter of that and those jobs have not been created. Not even ten have been created for each person. The number is closer to one. This was intended to create employment but it obviously has not done so. That is why a very transparent report should be laid before the House which deals with the tax foregone, the number of jobs created and the number of people who avail of SARP. I say that irrespective of my opposition to what the Government is doing on the threshold because there is no evidence to support such a move now.

It may not sit very comfortably with us as a people but in reality the countries we compete with for inward investment use tools such as SARP. I support it on condition that it does deliver the promised employment dividend. Deputy Doherty’s amendment is quite modest because it is looking for timely information on how SARP is doing. It would save us all tabling a lot of parliamentary questions if an annual report was given to us because the measure of SARP is whether it delivers additional employment.

I support the principle of attracting the top executives into Ireland because inevitably jobs and investment will follow. Many countries competing very aggressively for inward investment are using attractive SARP-type schemes. I am not very comfortable with it but I recognise the potential benefits of a scheme like this. I support the amendment, which is only looking for information that we should not have to try to dig out with regular parliamentary questions.

I do not have a difficulty with this amendment in principle because I do not believe that additional transparency can in any way cause a difficulty. In fact the greater level of transparency we have for Members of the Oireachtas and for the public, the greater confidence can be in how the scheme works. I support the scheme.

The idea of the Tánaiste and Minister for Social Protection announcing that one exemption under SARP would create 50 jobs is ludicrous. I do not know how that statement could have been made. The point of the programme is not just to attract new investment to Ireland but also to maintain investment here. We are doing our level best as a nation to compete with the rest of the world.

Deputy Pearse Doherty has tried, somewhat unsuccessfully, to create a narrative around closing off tax incentives for Ireland which attract multinational investment in this country. That is flawed and wrong because one small country alone cannot clean up a globally dysfunctional tax system. This seems to be another backhanded attempt to disadvantage Ireland in competing on taxation with other countries, and particularly with London, our biggest competitor for attracting financial services and other multinational industries and sectors. I can understand the logic of the amendment seeking transparency but I cannot understand the logic which states that we should not put in place tax arrangements that attract the top executives from around the world whose companies will not come here if they refuse to come here. If they decide they do not want to stay their companies will also leave because we do not have the talent on our own to sustain and maintain these companies. We have to attract talent from other regions. That is a fact and I support this programme.

I appreciate what Deputy Pearse Doherty says about taking risks in finance Bills and it is worth trying things out. The Minister for Finance, Deputy Noonan, has always said that initiatives such as SARP set out to do exactly what Deputies Michael McGrath and Creighton have outlined, aligning ourselves with our competitors, taking chances to see if we can do anything to create more jobs.

In my four or five months in situ with responsibility for the international financial services I have seen how important it is for global firms to get their decision makers to come here, to get the head honchos living in Ireland, to see how our economy works, to want to invest further, bring new products, retain jobs and not allow them go to other competitors. Many Deputies whose amendments have been ruled out of order would like to end this scheme. That is not the position of Government.

It is perfectly reasonable to request that data is made available. I made everything I was given available during the budget debate. I accept, however, that there is a better way to do that. The Revenue Commissioners will now include in their annual statistical report the data people are looking for. That report will be published. We are not rejecting the amendment on the basis that we do not want the data put out there, but on the basis that the Revenue Commissioners' annual statistical report will provide the data anyway. I welcome more debate. We will have the opportunity for further debate on international financial services and how to attract companies here. We will have a new strategy, published by March and there will be an opportunity for Deputies on all sides of the House to put their cards on the table and say what kind of policy measures they think we pursue to attract more foreign direct investment, FDI, to this country and keep it here. I am not accepting the amendment on the basis that the Revenue Commissioners' annual statistical report will provide much of the data Deputy Pearse Doherty seeks. He can read it when it is available and if he has further questions we can continue to engage. It is welcome and appropriate that the information will be included in the report and that will provide more transparency.

This is a very simple amendment. I have stated before that I oppose the increase in the threshold. People who come from different political ideologies have found a voice now that they are on the other side of the House but when the Tánaiste and Minister for Social Protection claimed that people availing of SARP would create 50 jobs those individuals were very silent. I make no apology for bringing forward amendments to close loopholes which the Government has accepted today. We will deal with them later, in respect of the "double Irish" and tax resident companies that are not tax resident anywhere on the globe. In response to the accusations levelled against me and my party that we are trying to close down incentives for people to take up employment here, that is wrong.

There is no opposition to the extension of research and development reliefs or to many of the other provisions that are in this Finance Bill, or indeed other Finance Bills I have debated in this House on behalf of my party in the years since I was elected to this Chamber. Where bad tax practices like the double Irish system exist, and where companies are allowed to be incorporated here without having any tax residency anywhere in the world, Sinn Féin will stand up to say that such loopholes are wrong and to make proposals to close them.

This amendment relates to a tax relief that applies to a small number of individuals. The statistics show that the individuals who benefit from the relief have not created substantial numbers of jobs in the Irish economy as a result of that relief. It is important to put this in context. Those who were absolutely hammered by the austerity that was imposed by this Government, its predecessor and current Opposition Deputies who were previously supportive of this Government are still suffering. The special assignee relief programme allows individuals to have over €125,000 of their income not declared for tax purposes. People can allow themselves to have 30% of €425,000 of their earnings excluded for income tax purposes. I refer to what has been the 41% rate of tax and will now be the 40% rate.

The big problem is that the Minister is introducing a measure in this area without any evidence to back it up. I am surprised that the so-called Reform Alliance is disputing the idea that we should have evidence when we are debating a proposal to extend a provision that allows people to set aside €125,000 of their incomes for the purposes of direct taxation to a limitless number by allowing them to set aside 30% of incomes of €1.5 million for tax purposes. That is what is being put before us today. It is right and proper that these issues should be challenged. It is fit and proper to demand from the Government the evidence that suggests that a handful of individuals will be able to benefit from having tens of thousands of euro of their incomes exempted from the 40% or 41% rate of direct taxation. I accept that it will be subject to PRSI and the universal social charge. The answers we are looking for in this regard have not been given on Committee and Report Stages.

I assume the Minister of State will say that this is being done on the word of IDA Ireland. I remind him that 150,000 people recently took to the streets of towns and villages across this State with a simple message, which was that water charges should be scrapped. Many tens of thousands of people will take to the streets on 10 December. I am sure hundreds of people will take to the street in my own parish of Gaoth Dobhair on Saturday. Their voices do not find an echo in the corridors of power. By contrast, the handful of individuals who are able to have massive amounts of money written off their tax bills seem to have no problem getting their voices heard in Government Buildings and in the corridors of power. It is about time that the Government started to provide evidence of why such a measure should be extended to a limitless income figure. The Government should start to listen not just to the few, but to the many.

Do I not get an opportunity to respond?

The Minister of State has spoken twice.

So I cannot respond. Okay.

The person who moved the amendment has the right of final reply.

I only spoke once.

If the Minister of State wishes to say something, I will allow him to do so.

In the interests of transparency and debate, it is important to respond to some of the points that have been raised. I will not even go down the road of getting into the water debate. I do not agree with Deputy Pearse Doherty on it. I will stick to the amendment. We heard people clearly and we have tried to respond to people's concerns while recognising that we have to invest in water.

I do not accept the concept that there is "tax forgone", although it is a wording that I used on Committee Stage. The whole idea is that this relates to tax that would not otherwise have been paid in this country. If new people come to this country, they will bring their incomes here. The Deputy raised the question of their income levels. Their income is not paid by the State. Their income levels are not much to the Deputy or to me. They are being paid privately through business. I will give an example. Someone who is on €500,000 is paying approximately €177,000, even under the enhanced special assignee relief programme, in taxes that we would not normally get into the State. This is tax that we would not otherwise be getting. I would argue that we are bringing in decision-makers with the capability of creating employment here. The Deputy is right when he says the numbers have not been massive. According to Revenue's provisional figures for 2013, there are 29 people in employment who would not otherwise be in employment without this programme.

When I suggested that some people are trying to throw out all of these initiatives, I was not referring to Deputy Pearse Doherty. I was alluding to amendment No. 8, which has been ruled out of order. The Socialist Party tabled that amendment because it wants to scrap the scheme entirely without having any interaction as we have had in this case. I think I have outlined clearly why we are in favour of this scheme. I will conclude by commenting on the idea that this was done on the basis of a kind of hunch, or just for the sake of it. A full review of the special assignee relief programme has been carried out and published on the website of the Department of Finance. A number of these schemes have been subjected to significant review. The Deputy is right when he says we listen to organisations like IDA Ireland, which is selling Ireland every day. I think it is worth taking a chance on this. I do not think there is any downside to the country. I think we can get extra tax revenue by locating people here. I refer to people on high, privately-paid salaries who would not otherwise be paying tax here. We should give it a try. It will be reviewed again in 2017.

Amendment put and declared lost.

Amendments Nos. 8 and 9 are out of order.

Amendments Nos. 8 and 9 not moved.

As amendments Nos. 10 to 12, inclusive, are related, they may be discussed together by agreement.

I move amendment No. 10:

In page 30, line 1, after "transfer" to insert ", on one occasion only,".

Amendments Nos. 10 to 12, inclusive, relate to various provisions in section 18 that deal with pensions tax legislation. We had a good discussion on this issue on Committee Stage. As regards amendment No. 10, section 18(2)(b) of the Bill amends the approved minimum retirement fund provisions in the Taxes Consolidation Act 1997. This change will allow the beneficial owner of an approved minimum retirement fund to draw down up to 4% of the value of the assets in the fund each year. Before now, the capital invested in the fund - a maximum of €63,500 - was in effect locked in, generally speaking, until the owner reached the age of 75 and only the income, profits or gains arising from the fund could be drawn down. The purpose of amendment No. 10 is to put it beyond any doubt that the option to draw down up to 4% of the approved minimum retirement fund assets can be exercised by the beneficial owner of the fund on one occasion only in a tax year. The intention of the provision to which this amendment is adding clarity has already been agreed on Committee Stage.

Amendment No. 11 corrects a minor drafting error in section 18(4), which deals with the maximum tax relievable pension fund at retirement, known as the standard fund threshold, and its interaction with pension adjustment orders. Amendment No. 12 relates to section 18(5)(b) of the Bill, which inserts a new section 790E into Chapter 4 of Part 30 of the Taxes Consolidation Act 1997. The new section is part of the pensions-related anti-avoidance provisions included in the Bill this year. It provides that any investment returns to certain pension arrangements linked to the avoidance scheme in question will be subject to income tax in the hands of the trustees or administrators of the arrangement. The amendment I am now making is a minor technical one to correct a section referencing error in the Bill. The Bill, as published, included a reference to "section 784(A)" where the reference should have been to “section 784A”. In other words, the brackets in the original text should not be there. These three technical amendments will carry out the provisions we approved on Committee Stage. I commend them to the House.

Amendment agreed to.

I move amendment No. 11:

In page 39, line 28, to delete "is" and substitute "are".

Amendment agreed to.

I move amendment No. 12:

In page 43, line 39, to delete "section 784(A)" and substitute "section 784A".

Amendment agreed to.

Amendments Nos. 13, 15 and 16, in the name of Deputy Donnelly, cannot be moved as the Deputy is not present. Amendments Nos. 14, 17, 21 and 22, in the names of Deputies Higgins, Coppinger and Paul Murphy, are out of order. Amendment No. 18, in the names of Deputies Higgins, Coppinger and Paul Murphy, cannot be moved as the Deputies are not present. Amendments Nos. 19 and 20, in the names of Deputy Michael McGrath, are out of order. Amendment No. 23, in the names of Deputy Pearse Doherty, is out of order.

Amendments Nos. 13 to 23, inclusive, not moved.

I move amendment No. 24:

In page 63, between lines 36 and 37, to insert the following:

"Report on section 372AAC of Principal Act

32. The Minister shall lay before the House, within six months, a report on the effect of the deletion of paragraph (c) of section 372AAC of the Principal Act.".

We have held a lengthy debate on this section, which deals with the living city initiative. My amendment asks the Minister to lay before the House within six months a report on the effect of the deletion of paragraph (c) in section 372AAC of the principal Act. Under that paragraph, the living city initiative tax relief can be availed of where the basements, ground floors or upper floors of two-storey houses are refurbished. This condition was included in the original legislation to ensure that the living part of the living city initiative was fulfilled.

Three years into the scheme, it is still not up and running. As a result of EU state aid approval, we are probably at the finish line. The scheme has been transformed. Originally, it was envisaged for Georgian houses. Subsequently, a "relevant house" was stipulated as one that had two storeys, with or without a basement. Today, the Finance Bill is moving us into a position where a "relevant house" does not need to be a two-storey house, with or without a basement. Any pre-1915 house within an area designated by a local authority could qualify. The new definition of "relevant house" will allow for single-storey dwellings to be converted in this way.

The Government has argued that if the ground floors of such houses are developed for commercial use, which was always the intention in the original legislation, one cannot necessarily ask the owner to refurbish the living parts as well, as commercial bungalows would not have living parts. That is a relevant argument. However, it is a far cry from the original intention, namely, to get people living and businesses operating in city centres again. There was always a dual purpose to the initiative.

I am not opposed to an extension of the scheme to other pre-1915 dwellings, including two-storey houses and bungalows. Even if this was done there would be no argument for deleting paragraph (c). That section could still take effect if bungalows were allowed into the scheme. I will outline the impact of the deletion. If one had a single-storey pre-1915 dwelling in a relevant area in, for example, Limerick or this city, one could develop it for commercial use and the money spent on it, up to a limit of €400,000, could be clawed back over a ten-year period. Many people would find this incentive appealing. That is fine. However, this legislation allows one to commercialise the ground floor or basement of a two-storey house without also requiring one to do anything with the upper floor. That is wrong. We should, at the minimum, live up to the ideas and aspirations contained in the living city initiative. Let bungalows be commercially developed under the initiative. That is not my argument. I have strong views on it and am not convinced but I am always willing to take risks. We know of the dilapidation in some of our town and city centres. As such, let us consider this as an option.

However, where there is a two-storey house there is no reason to move from what was originally envisaged, namely, the commercialisation of the ground floor and basement with a requirement to refurbish the upper storey. For this reason, we should not delete paragraph (c). I oppose the removal of that condition. Were I to oppose it in an amendment, however, it would be ruled out of order and I would not even be able to debate the issue. Instead, I suggest that a report on the matter should at least be laid before the House. My amendment refers to six months, but that timeframe is open to discussion. Despite my opposition to the deletion of paragraph (c), we should at least consider its effect within an appropriate period. For example, were the upper living quarters of those Georgian and other pre-1915 buildings reconstructed or was the commercial element the only focus? Under this Bill, someone could benefit from the commercialisation of one part as well as the living part, but there is no longer any requirement to do both. I would be interested in knowing whether a swathe of two-storey houses in the scheme only had their lower parts refurbished. If so, it should be identified and the provision should be closed. There is no reason to allow it in the first place. The scheme has not been up and running, so we should allow it to run its course. If we find that the current requirement becomes an issue, we could consider deleting paragraph (c), but I am not convinced on that front. Deleting it now is a mistake.

As the Minister of State knows, I support this initiative. I am frustrated that it is still not up and running two years after its announcement. As I stated on Committee Stage, my city of Cork could benefit significantly from it. Our city has seen its population decline in recent years. We need the scheme up and running.

The scheme is called the "living city initiative". In all cases, the works attracting tax relief should involve the conversion of living quarters. However, that does not appear to be the case. Deputy Pearse Doherty has made a strong case to which we should listen. The essence of the scheme is the conversion of old buildings to make them habitable again and to attract people into our cities' urban areas. It is not just another commercial tax incentive scheme.

I thank Deputy Pearse Doherty for his engagement on this matter. It was not my finest hour on Committee Stage. I am willing to acknowledge that it was about as clear as mud by the end, as we got into a technical discussion, produced lofty books and tried to find relevant passages of legislation. The opportunity to discuss the Bill on Report Stage is welcome. I accept the Deputy's bona fides on this issue. He has held his viewpoint consistently since the scheme's introduction.

The Minister for Finance and I agree that the initiative's operation should be kept under regular review. For this reason among others, he has decided to insert information gathering provisions in section 31. It is his intention that all aspects of the scheme will be kept under review, not just the element relating to the deletion of paragraph (c). The scheme would probably have to operate for at least a year before any useful information was obtained. The Deputy has implied that the six-month period is open to discussion. The scheme has been in place for two years, but we have not seen it operate while we have awaited EU state aid approval. The passage of the Bill will be an important final piece of that jigsaw.

The Minister believes he already has put in place the information-gathering provisions and wants to get the scheme up and running to ascertain how it operates. There already are mechanisms to gather information, the matter will be kept under review and he sees no reason to legislate specifically for this issue as per the Deputy's amendment.

On a more general point, the Deputy has questioned a particular modification the Minister has introduced to this initiative. The Deputy has argued that it severs the link between the living and the commercial elements of the initiative and has suggested this could do irreparable damage to the scheme and Deputy Michael McGrath implied something similar. I believe the significance of the change being introduced in the Bill is being overstated somewhat and I welcome this opportunity to put the record straight. The living city initiative, which will apply to special regeneration areas in the six cities, has two separate elements to it, namely, an owner-occupier residential relief and a commercial relief. For the most part, these focus on different types of property.

The residential element originally applied only to a Georgian house of two or more stories but this subsequently was expanded to include pre-1915 houses of two or more stories in the Finance (No. 2) Act 2013. In this year's Finance Bill, the Minister proposes to extend this further to all pre-1915 buildings that originally were built as dwellings. The residential relief allows an individual to claim a deduction from total income for income tax purposes of qualifying expenditure on the dwelling that the claimant occupies as his or her only or main residence.

The commercial element of the relief is and always was envisaged to be completely separate and is given in the form of accelerated capital allowances. This relief applies to all buildings in the special regeneration areas, not just the pre-1915 dwellings. This includes buildings constructed in the past 100 years, whether as dwellings or as commercial premises, as well as pre-1915 buildings that had not been constructed as dwellings. If a commercial operation was located inside the building, there was no requirement to have a residential element in the refurbished building. As I have stated, the commercial element of the scheme does not solely relate to the pre-1915 properties. However, there was a requirement that where a commercial development was planned for a pre-1915 dwelling, then the commercial development was restricted to the ground floor, and basement and upper stories had to be refurbished or converted for living accommodation. This is the condition the Minister is removing.

However, he does not believe this fundamentally alters either the residential or commercial elements of the relief since it was a minor element of the initiative in the first place. The decision was taken after careful consideration of the following practical issues relating to the initiative.

First, the link between residential and commercial, which has existed up until now, is a small but additional complication to a scheme the Government needs to get up and running. The Minister believes that a simplification of the initiative will achieve a greater good. Second, many of the buildings to which the relief could potentially apply are very small. In Limerick, for example, some of the two or three-storey buildings are only one room deep and there may be insufficient floor area on the upper floors to form a residence any way, given that the minimum residential floor area must be at least 38 sq. m. Third, the person incurring the refurbishment expenditure on the ground floor may not actually own the upper stories and consequently, investment in these areas may not be an option. Fourth, financially the person incurring expenditure on the commercial enterprise on the ground floor may not have access to the resources to refurbish the other floors.

The choice here is between retaining the restriction, which will mean that some pre-1915 dwellings probably will not be refurbished because, for any one or other of the reasons I have just mentioned, it will not be possible or attractive to refurbish it wholly or partly as a dwelling or, on the other hand, removing the restriction and allowing the commercial relief to extend to all properties in the regeneration area.

In addition, I believe strongly that the €200,000 cap that is being introduced in this Bill to the commercial element of the relief will act as an adequate restriction on unsuitable commercial development. Members already have discussed the European Union state aid issue. The amount of tax relief that will be available for any individual project now is effectively being capped at €200,000 regardless of how many investors there are. This is an overall limit and must be shared out among all the participants.

In conclusion, I agree with Deputy Pearse Doherty that in particular circumstances where there would be a commercial development in a residential pre-1915 dwelling, the link between residential and commercial has been removed. I disagree with him on the significance he has attached to it and am completely satisfied that the change is justified. Ultimately, as I have outlined, this comes down to a judgment call and in my view and that of the Minister for Finance, the changes being made in the Bill try to get the balance right.

That said - this is important - if it becomes clear after a period that a distortion has been created by the removal of this link, then this matter can be looked at again. I believe this is the substance of the amendment that Deputy Doherty ultimately is trying to bring about.

However, the attitude of the Government is that this scheme has been announced, it is evolving, the Government is trying to get it off the ground and it awaits European Union state aid approval. Let us get the scheme up and running and let us ascertain how it actually operates in practice. However, the Deputy may be sure that the Minister for Finance will keep a close eye on it and Members undoubtedly can have further engagements on this matter during debates on future finance Bills. However, I suggest the scheme be allowed to operate for a year first and therefore, I do not propose to accept the Deputy's amendment.

I am disappointed that this is the Government's position. As for the Minister of State's comments about letting the scheme operate for a year, I argue the same thing, which is to let the scheme operate for a year. I note the scheme has never operated and yet there have been substantial changes to it, some of which were for the better. Moreover, some of these did not originate from the Government but from Europe. When the scheme originally was envisaged, I spoke on how no limit was placed on the benefit people could accrue from it, which was a flawed approach. A limit has been placed on it now and whether it is appropriate, too low or too high is questionable. I am not sure and while one must see the scheme in operation, at least some type of limit is in place.

However, as the Minister of State has acknowledged, there was a link between the living part and the commercial part for the pre-1915 houses. I will set out my fears in this regard. This scheme originally was about enticing people back into living in Georgian houses and then into relevant houses, that is, two-storey pre-1915 buildings. I refer to the way in which one would entice people into them and the argument put forward was these Georgian houses and relevant houses are so old - some of them have conservation orders and so on - that it would cost a lot of money to refurbish them. Consequently, the idea was that people would be allowed to develop the commercial part on the ground floor and basement, they could be rented out and one would have the living quarters upstairs.

The Minister has pointed out that there may be pre-1915 buildings that are not suitable to having living quarters and that is completely fine and is a completely relevant point. I argue that the way to deal with this is not through basically removing the link for all pre-1915 properties but by dealing with that situation by providing that paragraph (c) of section 372AAC of the Principal Act would not apply to those properties in which conversion of the upper storeys to living quarters would be deemed not possible. Areas like this can be examined and can be dealt with. I am disappointed that the Minister has not considered this issue from that point of view. Members have argued this issue to death on both Committee and Report Stages and I do not believe we will see eye to eye on this issue.

The Deputy will have an opportunity to come back one more time.

I will conclude on this point. I would like the Government to keep a close eye on it. While I acknowledge the Minister of State indicated the entire scheme will be under review, I ask him to pay close attention to that link in the context of breaking the link between living and commercialisation. Perhaps before this time next year, Members might have something published to enable them to inform themselves better in this regard for next year's finance Bill.

I can assure Deputy Doherty that the Minister will keep a close eye on it and specifically on that element about which the Deputy has expressed concerns throughout this debate. I will make the broader point, in response to Deputy Michael McGrath as well, on the question as to what a living city is. There is no point in pretending other than the concept has evolved as there has been an interaction with local authorities and examination of some of the buildings involved. However, a living city is not simply about sleeping in the city and requires an element of small-scale commercial development. While the Deputy is correct in respect of the European element, the capping of the tax relief at €200,000 helps to ensure it will be kept to small-scale commercial developments. The issue will be kept under active review and once the scheme is up and running, Members can always return to the issue. I will pass on the Deputy's views to the Minister for Finance that it would be useful to have an exchange of some sort on how the scheme is progressing throughout the year. I presume this will be possible by way of parliamentary question and so on but I will discuss that with my colleague.

Amendment put and declared lost.

Amendments Nos. 25 to 27, inclusive, are related and will be discussed together.

I move amendment No. 25:

In page 64, lines 9 and 10, to delete “with regard to aid intensity for enterprises,”.

These three amendments are concerned with section 32 of the Bill. That section sets down a number of requirements that must be met to claim relief under the incentive scheme for the provision of aviation services and facilities. Amendment No. 25 corrects a minor ambiguity in section 32 and ensures that any capital expenditure on the construction or refurbishment of such industrial building must satisfy all the conditions in the European Union's guidelines on regional state aid for 2014-20. Consequently, it is a technical amendment to correct a minor ambiguity. Similarly, amendment No. 26 corrects a minor drafting error in the original section, while amendment No. 27 provides that despite the general rule regarding the confidentiality of taxpayer information, the Revenue Commissioners may share certain tax information relating to this relief with officials of the European Commission to ensure compliance with state aid rules.

Provision is also made to allow the Minister for Finance, following consultation with the Revenue Commissioners, to draw up detailed guidelines regarding the kinds of facilities to which the relief can apply, the circumstances in which it can be given and any restrictions or limits which might obtain. The amendment also emphasises that unless the various conditions contained within those guidelines are satisfied by the claimant, no relief will be provided. These additional requirements are being inserted at the request of the European Commission in to ensure that relief will not be provided automatically without the conditions being met.

The first two amendments are technical in nature, while the third involves a tightening-up exercise designed to satisfy the European Commission.

I support these amendments. These three amendments and the enactment of the Finance Bill, in its final form, are extremely important for the mid-west and Shannon Airport in particular. The airport has had a bumper year in terms of growth in passenger numbers. The creation of the international aviation services centre at Shannon is the second piece of the jigsaw. Issues have arisen in the context of the European Commission but, thankfully, these will be resolved by the inclusion of these amendments in the legislation. I again express my support for them.

I thank Deputy Carey for his comments. He is quite correct. Once the Finance Bill is passed, we will be in a position to ensure that the process can move to the next stage. I know this will come as a great relief to people in Clare and the mid-west in general.

Amendment agreed to.

I move amendment No. 26:

In page 64, line 16, to delete “its construction” and substitute “the construction of the building or structure”.

Amendment agreed to.

I move amendment No. 27:

In page 64, to delete line 23 and substitute the following:

"respect of which the claim is to be made.

(5B) Notwithstanding any obligation to the contrary imposed on them by section 851A, the Revenue Commissioners may furnish to one or more persons such information as is referred to in subsection (5A)(c) where the Revenue Commissioners are satisfied that doing so is reasonably related to achieving the following objective.

(5C) The objective mentioned in subsection (5B) is ensuring that any claim to relief in respect of expenditure which has been incurred or deemed to have been incurred on the construction of a building or structure to which subsection (1)(n) applies is in compliance with the Guidelines referred to in subsection (5A)(b).

(5D) The Minister for Finance shall, after consultation with the Revenue Commissioners, draw up—

(a) guidelines for determining whether, and to what extent, expenditure incurred by a person is to be treated as expenditure on the construction of a building or structure to which subsection (1)(n) applies, and

(b) guidelines (being guidelines that are expressed to be for the purpose, and which shall operate for the purpose, of enabling full regard to be had to the Guidelines referred in to subsection (5A)(b) as concerns the operation of that provision) whether the foregoing expenditure qualifies for a writing down allowance in accordance with the last-mentioned Guidelines, with particular regard (but not limited) to—

(i) any restrictions that may apply as respects aid to firms in difficulties,

(ii) the maximum level of aid intensity permitted for enterprises, and

(iii) any restrictions that may apply to aid aimed at a reduction of current expenses of an undertaking.

(5E) In determining a claim to a writing down allowance that is made in respect of expenditure on the construction of a building or structure, being expenditure claimed to be expenditure to which subsection (1)(n) applies, regard shall be had to whether each of the provisions that are set out in the guidelines drawn up under subsection (5D)(a) and (b) concerning the building or structure and the expenditure, respectively, has been satisfied.".

Amendment agreed to.
Amendments Nos. 28 to 30, inclusive, not moved.

I move amendment No. 31:

In page 70, to delete lines 24 to 37, and in page 71, to delete lines 1 to 30.

This amendment relates to section 42, which proposes the abolition of the double Irish in respect of corporation tax. This matter was discussed at some length on Committee Stage but I just want to reiterate my perspective on it. As the Minister of State is aware, certainty is a much sought after commodity when it comes to corporation tax. My main concern regarding this unilateral move on the part of the Government is that it removes the certainty which has obtained historically in the context of our rate of corporation tax. I accept that the Government is fully committed to the 12.5% corporation tax rate, as are all of the main political parties represented in this House. Last year's budget brought about a change in respect of stateless companies and this year's is amending the position with regard to the double Irish. The latter is despite the fact that the Minister for Finance, Deputy Noonan, stated in the House two years ago that the double Irish was not an issue in Irish law at all. However, he is now moving to change the position in respect of it.

Ireland competes with many other countries for inward investment from multinationals, etc. Our corporation tax regime has given us a critical competitive edge in that regard in recent decades. I do not want Ireland's competitive advantage to be diluted in any way. It must be remembered that this is not an abstract or theoretical debate. Rather, it is a debate which centres on the 150,000 jobs which have been directly created by multinationals and on the many thousands more which have been created as a result of foreign direct investment here. We do not really have brass plate operations in this country that are availing of corporation tax rules. The information which emerged as a result of the Lux leaks scandal relating to Luxembourg shows that Ireland really is in the ha'penny place.

The base erosion and profit shifting, BEPS, process being advanced by the OECD is really only at an interim stage. This process is a long way from being finalised. The Government has made a calculation that there is a first mover advantage to be gained by closing off what many people regard as a loophole. It may be correct in that regard and I genuinely hope this proves to be the case. However, my concern is that Ireland is making its second change in 12 months. Those who are seeking to exploit any potential weakness, namely, our competitor countries, will inform multinational companies which are considering investing in Europe that they cannot trust Ireland because it is willing to move the goalposts and change its corporation tax regime when pressure is applied. I am concerned that they will state that such companies should not invest in Ireland or create employment here.

On Committee Stage, the Minister took action to close off the issue relating to the creation of shelf companies, which issue had been highlighted in the media. That was the correct course of action to take. I hope the Government has made the right calculation in respect of this matter. If I were in the Minister's position, I would not have made the change. I would rather have waited to see how matters develop internationally. As stated, the BEPS process has not yet been finalised but it is clear that the Minister's European counterparts, the European Commission and the OECD pressured him into dealing with the double Irish. Ireland alone cannot deal with the issue of multinationals using aggressive tax avoidance strategies to minimise the amount of tax they pay. Ireland is but one small cog in the machine. I sincerely hope, therefore, that we are not in any way disadvantaging this country in the context of the change being made.

I strongly disagree with the amendment. It is only right and proper that the Government has finally moved to close off the double Irish. On previous occasions I have made my points clearly in respect of this matter and the transcripts of the proceedings of this House show the engagement I have had with the Minister, Deputy Noonan, on it. It is obvious that either the Minister was not aware of the situation regarding the double Irish or that he misled the Dáil in the context of his assertions that nothing could be done in domestic law to close off the double Irish.

Today, we are moving to close off the double Irish. Like Deputy Michael McGrath, I welcome the fact that the Government has also moved to close the loophole in respect of shelf companies. However, I do not believe one can welcome the closing off of the loophole relating to shelf companies and then be opposed to the ending of the double Irish. Such shelf companies are being established in order that certain entities might avail of the double Irish for the next five years. As stated previously, I am concerned that the double Irish will remain in existence for the period up to 2020. I do not believe there is any reason for this to be the case.

Ultimately, a very clear signal is being sent out. We are sometimes overly precious when it comes to making continual assertions about our corporation tax regime. There are very few major speeches made by members of the Government wherein it is not stated that Ireland is committed to its 12.5% corporation tax rate. That is a given. The Government, Fianna Fáil and Sinn Féin all support the 12.5% tax rate. Three motions have been agreed by the House to show that there is a united front among the main political parties in respect of this matter. It must be acknowledged that there are others, including the smaller political parties, who have a different view on this issue. It is only fair, right and proper that these individuals and entities are able to articulate that view. However, the vast majority of people elected to this House support our corporation tax rate.

The fact that widespread support for the 12.5% rate is a given should not be used as an excuse for allowing the use of what, in my view, are bad tax practices. Such practices can be used by businesses and brass plate operations because our tax code allows this to happen. I have made this point to the Minister on numerous occasions during recent years. He responded that it was all in the name and that if it were not referred to as the double Irish, everything would be fine. The reality is that our tax code facilitated the double Irish. I am not stating that anyone intentionally set out to facilitate it. In that context, it is obvious that the double Irish comes into play as a result of the way in which different tax codes interact. When the tax codes which operate in two different countries interact, the authorities in either jurisdiction have the opportunity to move in one direction or the other. This State always had the option to close down the double Irish and that is the course of action it is taking today, despite the fact that it will allow the facility to remain in place for a further five years.

I welcome what is being done in the Bill in this regard because where bad practices exist, they should be brought to an end. Pressure is mounting in respect of Ireland's corporation tax regime. Some of the difficulties which have arisen are of the State's own making. In that context, it should not have facilitated the double Irish in recent years.

This State should not have been allowing companies incorporated in this jurisdiction to have no tax residency here. We cannot control whether companies have non-tax residency elsewhere in the world but we can control their tax residency here, as happened in last year’s Finance Bill. This State should not have allowed the types of tax rulings made by the Revenue Commissioners to span 15 years without being reviewed. This subject is part of the investigation the European Commission has launched in respect of Apple.

In all this discussion, we must be mindful that there are thousands upon thousands of companies or corporations that pay corporation tax at a rate of 12.5%. They are able to avail of reliefs for legitimate purposes, such as research and development, and their effective tax rate is very close to the marginal rate. However, there are other companies that have abused the system. They make huge profits and legally avail of the services of super-accountants who try to pick holes in what the Government has introduced in various Finance Bills. This will happen, and it will happen today. There is no doubt but there are people in offices today examining what has been done in the Finance Bill with a view to seeing whether there is a way to circumvent it. They are asking what type of model could be created within legal parameters in this State that would allow a company to secure more profits and pay fewer taxes to the Exchequer. This will always happen no matter what kind of Government is in place. There will always be those who will try legally to find a legal benefit for themselves. Our job is to try to be one step ahead or, when we know this practice is occurring, close it down. I am glad the loophole is being closed down today. However, it is not really being closed down today because we are allowing for a five-year tail effect. At least, there is some movement.

I am dissatisfied with a number of factors. First, the Minister played the likes of me, my party and others who suggested it was within our gift to end this as fools. That was wrong and disrespectful, and not just to me. I am thick-skinned enough to take this but I am elected on behalf of the people in Donegal South-West. I had to take the previous Government to court to assert my constitutional right and that of the people who elected me to have a by-election this time four years ago. Given my position, I understand the importance of being able to represent one's constituency and of holding the Government to account. Consequently, I am disappointed with the type of engagement we have had over this issue.

I have said on the record before that my party and I have found the current Minister for Finance, Deputy Noonan, and Department, particularly in the first few years of government, far more informative than the previous Government. I acknowledge that the Minister was open but there has probably been a shift in this regard in the past 12 months. Whether it is deliberate, I do not know. The attitude of the Minister to the subject under discussion was actually wrong. He should have been upright and honest in saying we could make the desired change within the tax code. He should have outlined why he did not want to do as requested at the time in question. Perhaps the reasons were those that Deputy Michael McGrath legitimately outlined to the Dáil today. Perhaps the belief was that a change would create unease and a view that if the Government was open to this, it might be open to other things. That is a fair response that the Minister should have given. Instead, however, he said the change was nothing to do with Ireland and that there is nothing in Irish legislation that could actually close the loophole.

Second, we acted under pressure. It is never good to act under pressure if one can at all avoid it. What we should be doing is preventing pressure from building up in the first place. This is why we should have taken the initiative. There are many people with genuine reasons for advocating the closure of loopholes and a higher corporation tax rate, but there are others of the view that we should have a higher tax rate so their state can benefit from the employment and tax revenue we bring in from multinational companies. Therefore, we must always be mindful of the various realities and where different people come from. By allowing bad tax practices to exist, one is bolstering the argument of the latter. It is not really about stopping certain tax practices but about trying to gain advantage over this State.

Sinn Féin very much believes this State should have the ability at all times to direct its own tax policy. However, by having allowed what has occurred to develop for so long, we have ceded ground to those who have a selfish and strategic interest. I am not talking about those who believe corporation tax should be increased on the basis of their political perspective but about those in jurisdictions such as France and Germany who want it increased because they want some of the benefits Ireland has been able to obtain.

I oppose the amendment. The loophole should be closed. The Government should have gone further as a five-year tail is far too long. At least, it is finally happening.

As Deputy McGrath said, we had a very lengthy exchange on this on Committee Stage. We also heard exchanges on corporation tax in general on a number of occasions on Committee Stage. Those in this House who advocate increasing corporation tax — I am not referring to those from Fianna Fáil, Sinn Féin or the Government — would want to do a bit of reading and interacting regarding the impact of the charges. If these people are serious about wanting to play a part in government, they will have to determine the impact of their rhetoric on employment. It is not rhetoric from me because, on budget day, a number of documents were published, as was the ESRI report. The report examined the impact of increasing corporation tax from 12.5% to 15.5% and 22.5%. According to the ESRI report, had the corporation tax rate been increased to 22.5%, there would have been 50% fewer new foreign direct investment opportunities in the country. That is worth saying. It is encouraging to note that there was a report issued this week by the World Bank showing that, yet again, Ireland's headline rate, versus the effective rate, is very favourable. I am sorry to deviate from the amendment but believe this is worth saying.

I accept Deputy Michael McGrath's sincerity and bona fides on this. He approached the matter in good faith but we disagree. I accept he hopes we are right on this because the country needs to be right on it.

We discussed this issue on Committee Stage already. It has always been clear that the double Irish arrangement is not part of the Irish tax offering; it is just one example of the many international tax planning arrangements that have been designed and developed by tax and legal advisers to take advantage of mismatches between the tax rules in two or more countries. It is important to note that the idea that a Government or official in Merrion Street tried to devise a double Irish arrangement does not stand up to scrutiny. My colleague, the Minister for Finance, made the point that the double Irish arrangement was not devised in this country.

International tax law predates the independence of this State. However, the reality is that our company tax residency rules have not kept pace with international developments. Being associated with the double Irish arrangement, and the term "double Irish", is damaging Ireland's reputation. The corporation tax offering and the foreign direct investment offering are associated with the three Rs: rate, regime and reputation. We have discussed the rate. The four large parties are in support of its maintenance. With regard to the regime, we are introducing a number of measures in the budget to try to improve the offering of Ireland. Reputation is important. The phrase "double Irish" was damaging Ireland's reputation so the Minister decided to act. In essence, the residency rule has meant that companies that were not tax resident in Ireland could be presented as Irish because they were incorporated here. The change introduced by this Bill will mean it will no longer be possible for a company to use an Irish label of a corporation without it also being tax resident here. Removing the element of the structure that gives it the double Irish name should help restore our international reputation in the context of current EU and OECD initiatives to combat aggressive tax planning.

Ireland does not make changes in respect of corporation tax lightly. The Department of Finance consulted widely all interested parties on this issue through its broader public consultation process, launched in May 2014, well in advance of the budget. It is important to note that this change is but a small part of a much broader initiative set out in A Road Map for Ireland's Tax Competitiveness, which contains a comprehensive package of competitive tax measures designed to position Ireland to reap the benefits of sustainable foreign direct investment in the changed international tax landscape. This new roadmap will provide the foundations for Ireland to advance and prosper as a thriving hub for foreign direct investment. That map and the decision to end the double Irish provision have been warmly welcomed by the business community and many representative bodies. Deputy Michael McGrath was kind enough to acknowledge this on Committee Stage. We are, therefore, not in a position to accept the amendments.

Let me consider the points of Deputy Doherty, who comes at this from a different perspective, characterised by a desire to end the arrangement sooner.

We have, as both Deputies acknowledged, provided measures in the Finance Bill at Committee Stage to rule out shelf companies. It is really important that this closes with immediate effect for any new company trying to establish after 1 January, but that there is certainty and that there is time for those in transition to make arrangements. Certainty is so important to investment. Businesses plan their investment on the basis of a five-year period or thereabouts, and it is prudent that we would give this time. Therefore, I am not in a position to accept Deputy Michael McGrath's amendment.

Debate adjourned.