Deputies Michael McGrath, Pearse Doherty and the Minister have already spoken on the amendment and we are on second contributions, which are two minutes each.
Finance Bill 2014: Report Stage (Resumed) and Final Stage
Debate resumed on amendment No. 31:
In page 70, to delete lines 24 to 37, and in page 71, to delete lines 1 to 30.
—Michael McGrath.
We had a good debate on this issue on Committee Stage and earlier on Report Stage. We have a difference of opinion, and such is the nature of parliamentary debate. We will not agree on the issue of the abolition of the double Irish. I made a point earlier about the countries with which we compete for foreign direct investment.
I have heard this back from those who represent Ireland seeking to attract investment. Professional firms and others have made the point that competitor countries will seek to exploit any potential weakness they see. That is my concern. I am conscious of the comments of representatives of IDA Ireland and others that this issue will not be a problem and I hope that is the case. However, I believe it is a pre-emptive move by the Government which comes with a significant level of risk. I hope the Minister's calculation is correct, but I will press the amendment.
I have said all I have to say and we are not going to have a meeting of minds on this.
Amendment put and declared lost.
I move amendment No. 32:
In page 71, to delete lines 35 to 38 and substitute the following:
“ “(3A) (a) In this subsection ‘relevant treatment of a gain’ means the treatment, provided by this section or section 626C, of a gain as not being a chargeable gain.
(b) Notwithstanding any provision of section 590, the relevant treatment of a gain shall not apply for the purposes of section 590, but this is subject to paragraph (c).
(c) The relevant treatment of a gain shall apply for the purposes of section 590 where the participator (within the meaning of that section) is a company.”.”.
This amendment relates to section 43 of the Bill as passed by the select sub-committee. Section 43 was introduced on Committee Stage to ensure that the exemption from capital gains tax provided for by section 626B, and a related provision in section 626C, cannot be used by Irish resident individuals and trusts to avoid a charge to tax imposed under section 590.
Section 590 is one of the oldest anti-avoidance provisions in Irish tax legislation, and acts to attribute certain chargeable gains, made by a non-resident company, to Irish-resident participators in that company. The purpose of section 590 is to prevent persons from avoiding capital gains tax by transferring property to a non-resident controlled company.
It has come to Revenue’s notice that some individuals are seeking to invoke section 626B, which exempts certain disposals of shares by companies from capital gains tax, in order to avoid a charge to tax under section 590. There is considerable tax at risk in respect of the cases that the Revenue Commissioners are aware of at present, with the potential to run to millions of euro.
This is a technical amendment to ensure that the proposed wording cannot create any uncertainty in the application of relief under sections 626B and 626C. I commend the amendment to the House.
Amendment agreed to.
Amendments Nos. 33 to 36, inclusive, are out of order.
Amendments Nos. 33 to 36, inclusive, not moved.
Amendment No. 37 is in the name of Deputy Naughten who is not present.
Amendment No. 37 not moved.
Amendments Nos. 38 and 39 are related and may be discussed together by agreement.
I move amendment No. 38:
In page 86, between lines 10 and 11, to insert the following:
“Amendment of section 109 of Finance Act 1999 (penalties for diesel laundering)
58. Section 102 of Finance Act 1999 is amended in subsection (4)(b) by the substitution of “not exceeding €150,000” for “not exceeding €126,970”.”.
I hope the authorities in the State are now getting to grips with the issue of diesel laundering. I was very encouraged to hear the Minister state on Committee Stage that the Government, the Department and the Revenue Commissioners have great hopes for the new marker system, which I understand is being introduced in March or April 2015. However, the reality is that diesel laundering is costing the State an unknown amount of money but it is certainly many millions of euro each year. It is a particular problem in Border counties with serious criminal elements involved, including many so-called republicans.
The thrust of amendments Nos. 38 and 39 is to send out a very strong signal that the State regards this criminal activity as completely unacceptable and that every tool at the State's disposal will be used to counter this illicit activity which is affecting many legitimate bona fide businesses and also depriving the State of vast sums of money every year. I hope the new marker system will have the desired effect. I wish the Revenue Commissioners well in their fight against diesel laundering. My proposals will increase the existing financial penalties that can be applied by the courts on conviction for those found guilty of this very serious crime.
I thank the Deputy for his amendments, which, as he outlined, propose changes to the levels of fine applying to mineral oil tax offences under section 102 of Finance Act 1999. The fines applicable for an offence of evasion, or attempted evasion of excise duty on excisable products were increased significantly in Finance Acts 2008 and 2010. For a summary conviction, the fine was increased to €5,000 in Finance Act 2008. For a conviction on indictment, the maximum fine was increased ten-fold under Finance Act 2010 to €126,970.
The Deputy seeks to separate out the penalties for offences relating to excise duty on mineral oil from offences relating to the other excisable products, that is, tobacco and alcohol products. In addition, the amendment would increase the fine on summary conviction to €10,000 and the fine on conviction on indictment to €150,000.
In response to the Deputy’s suggested amendment to increase the level of fine on summary to €10,000, I point out that the current set fine of €5,000 is already equal to the maximum applicable by a District Court. On the increase proposed in the maximum fine for an indictable offence to €150,000, the Minister for Finance points out that the courts decide on the fine to be applied in any particular case and in practice do not apply fines up to the existing limits. Therefore, at present, the Minister is not convinced that any purpose would be served by the proposed increase. However, I share the Deputy’s concern to ensure that penalties are a deterrent and the Minister will keep this matter under review, particularly as more cases are finalised in the courts.
The Minister does not believe that the penalties and fines for offences relating to excise duty on mineral oil should be set at different levels from those relating to excise duty on tobacco and alcohol products. On the basis of these considerations, he cannot accept the amendments.
I thank the Minister of State for his reply. The overall purpose of the amendments is to strengthen the deterrent by increasing the penalty regime that applies. The courts are, of course, independent and exercise their functions accordingly. I find it disappointing that they do not avail of the maximum fines on more occasions than they do but they are a separate arm and will make their decisions based on their own judgment.
However, agreeing these amendments would send a signal that the State is declaring war on those involved in diesel laundering. The Revenue Commissioners are doing outstanding work in this regard. They have had considerable success and deserve our full support and backing. We should encourage everyone with information about those who may be involved in diesel laundering to make that information available to the authorities so that the existing regime can be applied against those involved in an illegal activity that is very damaging for the economy and damaging to many legitimate businesses, particularly those in Border counties. It is something we should continue to work on.
I will accept what the Minister of State has said in good faith. I will not press the amendments. I reiterate my view that the Revenue Commissioners should redouble their efforts to deal with this issue.
I support the principle of the amendments, which relate to the previous amendment and deal with the issue of fuel laundering, particularly petrol stretching which is a major issue in my part of the country.
I mentioned on Second Stage that people feel we do not have the deterrent regarding fuel laundering and particularly petrol stretching that we should have. I raised this issue with the Minister of State in the House last week. If we cannot secure criminal convictions, we need to ensure that the information that has been collated by the Revenue Commissioners is made available for a civil action because it may be possible to have a civil class action in the future. The Minister of State was to take the matter up with the Revenue Commissioners. If he has any response from them, I ask him to furnish me with that response or come back to me later. Based on SIMI figures, up to 800 people have been affected by petrol stretching across the country.
I asked the Minister on Committee Stage if he examined the possibility of providing financial assistance to people who have been affected, particularly those whose insurance does not cover them or those who have only third party cover. It is estimated the total cost to motorists of petrol stretching since June of this year is approximately €3 million and in that respect the Exchequer has taken in roughly €400,000 in VAT alone. If that money could be recouped by those people who cannot access compensation, it would at least provide them with some financial assistance. The Minister was to examine that issue for Report Stage.
The third issue I wish to raise is one I raised with the Minister for Finance last week, namely, that there is a differential in the standards required in regard to diesel compared to those required in regard to petrol. The returns and paperwork required of retailers in regard to diesel by the Revenue Commissioners are far higher than those required in regard to petrol. We need to make sure we can successfully prosecute those who have been involved in this practice. We also need to consider what financial assistance we can give people and ensure we do not find ourselves in this situation down the road. The only way to do that is to ensure the level of policing in regard to diesel laundering that has been introduced by the Revenue Commissioners is also introduced in regard to petrol stretching. The Minister made the argument on Committee Stage that the reason there was a far higher level of scrutiny in regard to diesel was because of the huge potential loss to the Exchequer. I made the point to him that the potential loss to motorists as a result of petrol stretching is far greater than is the case with diesel laundering and that we need to have similar standards in place. I hope those issues can be taken on board and that the Minister of State can indicate some progress on those three important issues.
I support the comments made by my colleagues, Deputies Michael McGrath and Naughten. The Minister of State will not be surprised to see me on my feet again speaking about petrol stretching. There is an issue of confidence around petrol supply. Legitimate retailers who employ people and go through all the necessary steps are being hit in the same way as those who have caused this situation to happen. Given that 57% of every litre of fuel goes back to the Exchequer through tax, the Department of Finance and the Revenue Commissioners have a duty to restore confidence to the retail fuel market.
Diesel laundering has been an issue in this country for many years. I welcome the initiatives in that respect that have been taken by Revenue because there is no doubt such practice has been used to fund illicit activities, attacks on the State etc. As Deputy Naughten has laid out, we now need urgently to tackle the problem of petrol stretching but there is no sign of such urgency. It is August since this problem first came to light and we are no further on in terms of the public seeing a response or outcome to the investigations. I emphasise the damage that has been caused in an area stretching from County Mayo to County Roscommon up as far as County Meath. This has caused people inconvenience socially and in respect of their family life and also financial damage but people do not see any response to tackling it. If they went out with green diesel in their car in the morning, Revenue would be down on them like a tonne of bricks testing them. Some people have been left with two cars in the yard that they cannot use because they went in good faith to buy petrol from a legitimate and branded operator, like we all do, and they are now suffering the consequences but they do not see anybody responding to their situation. The Minister, the Revenue Commissioners and Customs and Excise have a duty to restore confidence in our retail fuel market because if they do not, they will drive more people to the illicit operators.
I want to pick up on the issue of petrol stretching. This saga has been going on for months and we know the Revenue Commissioners and the Garda have been investigating it. Rather than repeat the points that have been made, I would like to have clarity on whether Customs and Excise has got a handle on the chain of supply, namely, from where this fuel came. In particular, the Minister of State might confirm if reports stating a contaminated batch of petrol in Bournemouth in May or June, which was deemed unfit for use in the UK, was subsequently imported into this country. What testing of such fuel entering the country was done by Customs and Excise? What testing of trucks is being carried out on roadsides? Since the problem came to light, petrol tanks in filling stations are being tested. That can be compared to the situation that prevails in regard to diesel which has been happening as a matter of practice.
There still seems a great many unknowns and there have definitely not been the prosecutions with people being brought to justice that we would like to see, considering the shocking damage and financial loss suffered by many ordinary citizens as a result of petrol stretching. We need to see some answers formulated and some quality assurance for people that when they go to petrol stations and fill their petrol tanks that the fuel they purchase is of quality and will not damage their vehicles. While there are many components in petrol perhaps an initiative could be funded by petrol suppliers and wholesalers to provide an independent assessment or quality assurance in respect of fuel for customers and the process tightened up. I know investigations are taking place but there does not seem to be too much by way of answers. The Minister of State might respond to the point I raised about contaminated fuel having been imported into the country.
The debate has moved on considerably from the amendment tabled by Deputy McGrath and that is understandable and perfectly acceptable given the seriousness of the issue. I will not have all the answers to hand on some of the wider issues outside of the Finance Bill but I have discussed this with my officials and I will ensure that we revert to each of the Deputies on the issues they raised.
To pick up on Deputy Naughten's comments, I know he had an exchange with the Minister for Finance on Committee Stage and he asked that consideration be given to an amendment to provide the same reporting conditions for petrol as currently apply to diesel. The Minister has given this consideration. Section 101 of the Finance Act 1999 provides that all mineral oil traders dealing in marked mineral oil, petrol or auto diesel must hold a mineral oil trader's licence issued by the Revenue Commissioners. Section 101(7) of the Act provides that the commissioners may specify the conditions applying to an auto fuel trader's licence and a marked fuel trader's licence and they may specify different conditions, having regard to the activities to which the licence relates. Accordingly, under the current legislation, the commissioners are empowered to apply the same reporting conditions to the supply of all mineral oils. However, until recently fuel fraud was largely confined to diesel laundering and in view of the low risk and large volume of petrol transactions up until recently, it was not considered necessary by Revenue to impose the additional administrative burden of daily reporting on the mineral oil trader for petrol transactions. However, in light of recent events and concerns that have been expressed by Members in this House and during the Committee Stage debate, the Revenue Commissioners, at the request of the Minister for Finance, are now reviewing this approach with regard to the reporting of petrol transactions. That is important and welcome.
As the commissioners are already empowered to specify that mineral oil traders dealing in petrol and diesel are subject to the same conditions and as it does not provide any additional assistance in that regard, the Minister would not be minded to accept an amendment but the Deputy will be able to see where the Minister wishes to go. We can assure the Deputy that the situation is being actively reviewed.
We already discussed on a previous occasion in this House the fact that staff resources within the State laboratory have now been prioritised in regard to this area. That is quite important. A large number of samples are awaiting testing. Speaking from memory, I think I gave figures to the House on the last occasion that one prosecution was pending and that there is a possible second prosecution.
From midnight on 31 March next year, there will be a new marker in use for all marked fuels, including kerosine, that will make the detection of the presence of marked fuels more effective. The new marker will be implemented in Ireland and in the UK simultaneously.
The Minister for Finance is taking this issue seriously. I hear clearly the frustration of Deputies on all sides of the House in relation to the frustration being expressed to them in their constituencies by people who have been adversely affected. The Minister has considered the issue of a VAT rebate on car repairs post-petrol stretching. We are guided by the EU VAT directive with which Irish VAT law must comply. EU VAT law does not allow for reductions in VAT based on a particular category of purchaser: in this case, persons affected by fuel crimes. A charge of VAT is based on the nature of the particular good or service supplied.
While we are not minded to accept the amendments put forward by Deputy McGrath I understand the logic by which they were put forward. As I have outlined, the courts do not currently apply the existing maximum levels of fines available to them. Obviously, a practical difficulty arises in relation to a summary conviction and the level of charge permitted within the District Court.
This is a matter which we are taking seriously. I think the Minister had a good engagement with Deputies on it on Committee Stage. I hope Deputies will welcome the progress made in terms of Revenue reviewing its approach to petrol vis-à-vis diesel. I will ensure through my officials that we revert to Deputies Mulherin, Calleary and others on the specific issues raised by them.
I thank the Minister of State for his response. I would like further clarification on the provision of financial assistance in this area similar to that provided in the context of the home refurbishment incentive scheme which has been extended to landlords. In that case, landlords or private home owners do not get a VAT refund but they do get an allowance against their tax at the VAT rate of 13.5%. Last week, I made the point to the Minister that the equivalent of a VAT refund is being paid to people under the home refurbishment scheme through a roundabout mechanism while a couple in my constituency whose cars are eight years old and ten years old and who both earn minimal wages and have three young children have no cars to get to work tomorrow morning because of damage caused by petrol stretching. For them, Christmas has been cancelled. The Exchequer is taking in €400,000 on the back of the measure introduced to address petrol stretching. Surely, it is possible to introduce some type of innovative mechanism to assist families affected by damage caused to their cars owing to petrol stretching. I understand that the amount that could be provided would be only small and that it would not solve their problems, but it would be of some assistance to them in situations where their insurance provider, even though they have comprehensive insurance, refuses to cover them. In the case I mentioned, that family cannot afford comprehensive insurance and because they have had only third party insurance, they are not covered at all.
Deputy Mulherin referred to contaminated fuel having been taken off the market in the UK and the concern that that batch of fuel may have ended up here. There is genuine concern in relation to this matter. It is not good enough if that happened. People need answers. Last week, I also raised with the Minister the importance of evidence collected by Revenue, which does not result in it securing a criminal conviction, being made available to the 800 victims in order that they can take a class action against anyone who has been involved in this practice.
On the issue of compensation, during the Second Stage debate on this Bill I raised the possibility of seized assets being used to fund compensation. For example, in regard to the diesel laundering plant in Monaghan that was shut down a few weeks ago perhaps its profits or machinery such as tankers could be sold to fund compensation to people who are out of pocket because of the contamination of fuel. This is a serious issue for the people who have no insurance and nowhere else to turn. Taking from those who have caused the problem would be directing compensation in the right direction.
I am happy to use my office to try to have the Deputies who have consistently raised this matter updated by the relevant authorities in terms of where we are at in relation to Revenue, Customs and Excise, the State Laboratory and so on. I am happy to try to facilitate a round-table discussion with Oireachtas Members who have raised this concern. I think that would be a practical and proactive measure that we can take in relation to the issue of compensation. I will convey the Deputies' views to my colleague, the Minister for Finance.
Amendment, by leave, withdrawn.
Amendment No. 39 not moved.
Amendment No. 40 is out of order.
Amendment No. 40 not moved.
Amendment No. 41 in the names of Deputies Joe Higgins, Ruth Coppinger and Paul Murphy cannot be moved as the Deputies are not present.
Amendment No. 41 not moved.
I move amendment No. 42:
In page 94, between lines 18 and 19, to insert the following:
"(c) in paragraph 11 of Part 1 of Schedule 2 of the Principal Act is amended by inserting a new subsection (1A) as follows—
"(1A) The supply of nicotine replacement therapies.".".
We discussed the VAT treatment of a number of goods and services at length on Committee Stage. As the Minister outlined in detail at that stage how best to deal with those matters, I am happy to withdraw amendment No. 42.
Amendment, by leave, withdrawn.
Amendment No. 43 in the names of Deputies Joe Higgins, Ruth Coppinger and Paul Murphy has been ruled out of order.
Amendment No. 43 not moved.
I move amendment No. 44:
In page 96, between lines 12 and 13, to insert the following:
"Amendment of section 125(B) of the Stamp Duties Consolidation Act 1999
75. Section 125(B) of the Stamp Duties Consolidation Act 1999 is amended by substituting the following for subsection (3):
"(3) A stamp duty of an amount equal to 0.075 per cent of the chargeable amount for 2015 shall be charged on every statement delivered by a chargeable person pursuant to subsection (2).".".
I tried to submit this and other amendments on Committee Stage, but unfortunately the Ceann Comhairle's office would not accept any of them because of a technicality, which was deeply frustrating. I do not expect the Government is going to make any move on this. In fact, I do not believe any of the Report Stage amendments will be accepted.
This amendment relates to the pension levy. The Minister, Deputy Noonan, made a promise to the pension industry which it took at face value but he then broke that promise. He said that the pension levy would be abolished within a timeframe that was shorter than that for which it had been in existence, but it is still in place and causing many problems in the pensions industry. We face a serious challenge over the next few years in terms of private and public sector pensions. We are starting to see the collapse of private and semi-State pensions, as happened in relation to Aer Lingus. There is a great deal more of this to come.
Public pensions, which I mentioned yesterday in this Chamber, are not safe either. The ratio of workers to pensioners is moving from 5.5:1 to 2:1. By the time we get to 2:1, based on the fact that public sector pensions are funded out of current taxation, there will not be enough workers to fund them. People who are currently clocking up public sector pensions and hoping to retire in 20 or 30 years need to think about this too because there are not going to be enough workers to pay their pensions.
Part of the problem is the private pension sector and what the Government has done and continues to do every year in this area. Essentially, the Government is taking people's assets. What it is doing is the equivalent of reaching into everybody's deposit accounts and taking money out of them every year. It is not a tax on the profits or the yield from the pension fund every year, rather it is a grab on the actual amount within it. That is no different from reaching into people's current bank accounts and taking their money out. The fact that the levy is still in place is as damaging as its introduction because the pensions industry no longer believes this Government.
This amendment seeks to signal clearly to the industry that the pension levy is being phased out. It seeks not that it be eradicated in the first year but that what is currently provided for is halved, with the intention of it being fully eliminated the following year. As I said earlier, I do not expect the Government to accept this amendment but it is worth making the point that the Government's behaviour and, in particular, the behaviour of the Minister for Finance, Deputy Noonan, in terms of his having broken his promise to the pensions industry has caused an awful lot of damage and should be recognised.
I thank Deputy Donnelly for his amendment and for the engagement on this issue. As the Deputy outlined, in last year's budget and in the subsequent Finance Act, the Minister introduced an additional levy of 0.15% on pension fund assets for 2014 and 2015. He did this, in the main, to continue to help fund the jobs initiative, launched in 2011. The measures included, in particular, the VAT reduction to 9% on tourism-related activities. They have been successful in both protecting and creating employment in the economy and it is an initiative the Minister is eager to continue. The original 0.6% levy on pension fund assets ended this year and the 0.15% levy will end after next year. We can give an absolute assurance on that matter. As the Minister made clear in his 2015 Budget Statement last month, without the pension fund levy, there would have been no reduction in the VAT rate to 9% on tourism-related activities.
As he outlined, Deputy Donnelly's proposed amendment would reduce the pension fund levy for 2015 in half to 0.075%. The 0.15% levy is forecast to yield approximately €135 million this year and, therefore, the Minister fears that by acceding to Deputy Donnelly's amendment, he would have to find more than €67 million in additional taxes elsewhere to make up the shortfall. Therefore, he does not propose to accept the amendment.
The pensions raid was one of the most daring political strokes I have experienced. As Deputy Donnelly said, it was akin to taking money out of people's private savings. That is, essentially, what it was. When it was introduced in 2011, I feared it would not end after four years but, thankfully, it will end after five years. However, it has done enormous damage. It has resulted in approximately €2.3 billion being taken out of the private pension savings of our Irish citizens and it will continue to result in reduced pension benefits being paid for thousands of existing pensioners and current workers, who will depend on a pension income stream in the future.
One of the most amazing aspects of it was that it applied equally to schemes which were already under the water. Many of the defined benefit pension schemes are in serious deficit and workers were having to come around to the inescapable conclusion that their pensions would not be anything near what they were originally expecting but now they are going to have even less of a pension because of direct intervention by the State.
This was an extraordinary policy decision by Government. It ran contrary to the stated policy objective of successive Governments in respect of pension provision whereby people were encouraged to save for their future retirement, to invest in their pension schemes and to get tax relief on the pension contributions they made. It did enormous damage to the pensions industry. The dye has been cast and it will be 0.15% next year. I am glad the Government has committed to finally abolishing it at the end of 2015. I hope this time the promise will be kept.
I can assure the Deputy that it is the Minister's intention to do as he outlined in his Budget Statement in regard to the pension levy. It was a difficult levy for many and it is important to note the context in which these decisions were taken. It was a time when there was very little flexibility available to Government, which was in an international programme. Any limited flexibility there was had to be directed in the area of job creation and reductions in VAT in a specific job intensive area - tourism. I accept the difficulties it has posed for some and I am pleased it will end next year.
Amendment put and declared lost.
Amendment No. 45 arises out of committee proceedings. Amendments Nos. 45 to 47, inclusive, form a composite proposal and they will be discussed together.
I move amendment No. 45:
In page 99, lines 4 to 9, to delete all words from and including "who" in line 4 down to and including "herself," in line 9.
I am pleased to have an opportunity to speak on this amendment as I did not have a chance to do so on Committee Stage. I am very concerned about the Government's plans to essentially introduce a new, or an expanded, tax on inheritance. Put simply, what the Government proposes to do is to limit tax exemptions for a parent who wants to provide support to his or her child if that child is over 18 years of age, or is not in full-time education, to €3,000 per year. This is on top of the 33% lowering of the threshold over the lifetime for tax relief on gifts or inheritances from a parent to a child which has taken place over the past three years, specifically since 2012 when these changes began.
What I would like to highlight is the unfairness that exists when one starts to look at the distinction that can be drawn between two children, one of whom goes directly into full-time education at 18 years of age and another who does not for a variety reasons. In these straitened times, many children are not going directly into full-time education. They are delaying it, deferring it or are doing it in a part-time capacity, none of which will be covered by the exemption in the legislation. I consider that to be an entirely unfair scenario. Another example is where a child is over 25 years of age and has faced illness, or who for some other reason, does not potentially benefit from the same exemptions as is currently the case.
The Revenue Commissioners issued a statement last week or the week before that the changes would not include the imposition of a tax on board or lodgings, food or other services provided by a parent to children over 18 years of age or over 25 years of age, depending on the circumstances, but we do not have any detail or clarity as to how the Revenue Commissioners intend to implement this amended legislation. This information should be published prior to the adopting of this legislation and not after it. We simply do not know how it will operate.
Some €3,000 per year in tax free gifts from a parent may sound somewhat reasonable but what is not said is that every gift from a parent to a child is included and many of them are gifts we would take for granted, for example, a deposit towards a house, paying for a wedding, which is the norm in this country, a car or money to start up a business. All of those payments or gifts valued above €3,000 in a year will increase the amount of tax liability for a child when, or if, he or she inherits from their parents.
Currently, there is a lifetime tax relief of €225,000. It is a significantly diminished amount from where it was a few years ago. This lifetime tax used to be linked to inflation in the economy. This was the case for decades so as to avoid a situation where, if house prices increased rapidly, children would not be left with huge tax bills and huge liabilities on inheritance. This changed in 2010 in order to meet various troika targets. The cap was lowered and indexation was eliminated. That did not have a particularly negative impact in 2012 when house prices were on the floor but things have changed. The average house price in Dublin now is €242,600, which is €25,000 above the current threshold for tax exemption for inheritance on once-off gifts. If a parent dies in the morning and leaves his or her house to his or her children, they will have to pay a 33% tax on that €25,000 difference. That is just an average house price but in Dublin, many house prices are a lot higher than that. That is assuming that the parent did not give their children any other help along the way by way of the kinds of gift I mentioned, whether a deposit for a house, assistance with a loan for a business or paying for a wedding. If the parent gave them other assistance when they were over 18 years of age or over 25 years of age, that will now be taxed at 33%. A child will, in essence, be paying on the double.
For every investment a parent makes in his or her child over the age of 18, if the child is not in full-time education, or over 25 years of age in a case where the child was in full-time education, which is above €3,000 a year, that will increase the amount of their inheritance, which will be taxed at 33% in the future. It is profoundly unfair.
It mitigates against the sort of society where families help each other and are not reliant on the State for a range of supports that they would otherwise need. It is illogical. It would be more honest if the Minister of State would tell us this is not a tax focused on the super wealthy but that it will affect ordinary people the length and breadth of the country. The Government is forecasting a 20% rise in the amount of revenue it will collect next year. For context there was a virtually identical number of deaths in 2011 and 2012 according to the Central Statistics Office, CSO, but the tax collected on inheritance in those years increased by 20%. That is illuminating because it shows the intention of the Revenue Commissioners, the Department of Finance and the Minister for Finance is to raise additional revenues by broadly applying this to ordinary citizens. The notion that this closes a loophole for the super wealthy does not stack up. The proof is in what has happened over the past few years and the fact that this will apply to everybody. It will disadvantage parents who work hard, pay their taxes honestly and want to support and help children, particularly those who are trying to improve their lot in life or children who have fallen on hard times and need financial support from their parents. They will be punished for getting that support.
I could not have put it better myself. Finance experts came to me about this. I had not spotted it at all. Deputy Creighton has articulated the case very well.
The finance and tax experts tell me this will mean that if parents give their child a few bob for a wedding it will be taxed, sooner or later. There is a second issue which the Revenue Commissioners have clarified but which I would like to hear the Government clarify as well. The fact that the Revenue Commissioners had to clarify it means that this is a badly written and badly thought through amendment to the principal Act. The issue is that people could be taxed for living with their parents. The Revenue Commissioners have said that is not the case but that is their interpretation. I hope that is not what the Government proposed. Maybe this was discussed on Committee Stage but I would like a further reassurance from the Government that there is absolutely no intention that in any future situation the Revenue Commissioners could interpret the legislation in such a way that people could incur a benefit-in-kind tax for living with their parents.
We discussed this on Committee Stage. It would be helpful if the Minister of State could clarify the type of payments that would be permissible from parents to grown-up children who are living at home and are no longer covered by the exemption. It has been clarified that the change does not capture board and lodgings. I suspect that the origin of this change in the legislation lies with the Revenue Commissioners. I have great regard for them and assume they have identified a pattern of abuse which leads to this change. If wealthy parents dole out tens of thousands of euro to Johnnie every year to circumvent the lifetime threshold that loophole should be closed off. The Minister of State needs to clarify the type of payments that will be permissible under the new regime as proposed. He tabled an amendment on Committee Stage to deal with ongoing payments in respect of a grown-up child with a disability, a mental or physical incapacity. That was warmly welcomed.
A bigger issue is that over the past few years the threshold of the allowable lifetime gift from a parent to a child has been reduced by 60% to €225,000 and the rate of capital acquisitions tax has gone up from 20% to 33%. For many families when a house is passing from one generation to another a very substantial inheritance tax liability would be triggered which will force the sale of the property to settle the tax liability. That is a separate issue and I agree with Deputy Creighton that the threshold should be index-linked again. That would be a very modest change. In respect of the amendments tabled, if the change by the Government is to close a loophole that is being abused I am all for it but it would be helpful if the Minister of State could clarify exactly which type of payments will continue being allowed and will not fall foul of the new regime.
I support the principle of these amendments. None of us wants to see abuse of the law in this area. There is an unintended consequence of the way legislation is published. House prices are creeping up and up; the thresholds for inheritance have come down and there are completely new deposit criteria for young couples in order to draw down a mortgage. In many cases they will have to turn to their parents for assistance to get that money. As Deputies Creighton and Donnelly have said, if people are not taxed on that money today they will be taxed on it down the road. Many of these families struggle to make ends meet on a day-to-day basis. If their parents pass away and they have to face a tax bill from the Revenue Commissioners because they got financial assistance, whether to put down a deposit on a house or for a wedding it is unfair. The threshold is €3,000 or €60 a week. Changes have been made for people with a disability, which are welcome. I hope the Minister of State can clarify this. It is disappointing that we have not received a guidance note from the Revenue Commissioners in advance which could make matters far clearer than they are. Deputies Donnelly and Creighton have raised genuine concerns that need to be addressed.
This is an important discussion. There is a degree of uncertainty as to how this provision will be interpreted. What is the position where, in a situation of relationship or marital breakdown a spouse, civil partner or cohabiting partner succeeds in getting a lump sum payment order from the courts to facilitate paying for educational and support expenses for a child over 18 years of age, and that lump sum order is of a substantial amount - it may be intended to pay university fees over a four to six year period, and include postgraduate or doctorate fees? In the context of this provision could that have unintended tax consequences? Could it be taken into account for the purpose of capital acquisitions tax at a time when the court making the order did not intend that would be the case?
I have a great deal of sympathy with some of the problems raised in this area and Deputy Michael McGrath might find it odd to discover that we have one concern in common although the increase in the thresholds occurred during the lifetime of the previous Government. As someone who was a member of the current Government for three years I know the increase in capital acquisitions tax in these areas, in the thresholds and the rates was part and parcel of very difficult action that had to be taken at a time when the State was teetering on the edge of bankruptcy.
Funding had to be identified and obtained from different sources to meet the day-to-day expenditure of the State and to assist in the balancing of the books. The change in the thresholds appeared to be reasonable a couple of years ago, when residential property prices had crashed and were still in enormous difficulty. I will give a practical example. Residential property prices and values in the city and county of Dublin had decreased by 50%. I believe these thresholds are no longer appropriate in the context of where the residential housing market is today and where it is anticipated it is likely to go over the next couple of years. It is of crucial importance for this area to be revisited in the next budget. It is also crucial that Fine Gael is not constrained by the Labour Party into prescribing penal rates of capital acquisitions tax in return for a deal on some other aspect of the budget.
It is important and in the public interest to highlight where we now stand. I am particularly concerned with the position of the children - sons and daughters - of deceased parents. As Deputy Creighton rightly pointed out, the 33% rate of inheritance tax kicks in from a threshold of €225,000, regardless of whether it is inheritance simpliciter or a mixture of inheritance and gifts. The 2014 threshold of €225,000 is actually more penal than the threshold that applied in 1995, when the threshold before inheritance tax arose was €226,267. Given that the value of money has substantially changed in the intervening 20 years, it is clear that we are now providing for inheritance tax to be applied at a substantially lower level. That comparator is very stark. In 1995, one could inherit €226,000 worth of property or assets in any part of the country without having any tax liability. In 2014, one can inherit €225,000 worth of property without liability. I have not done a computation to assess what the monetary value of €226,000, as it was in 1995, would be in today's terms. I suspect that if I took a reasonable stab at it, I would find it is not less than €325,000. We now have what I would describe as a penal threshold for the payment of inheritance tax.
In the period between 1 December 1999 and 19 November 2008, inclusive, the rate of inheritance tax was 20%. We had a lower threshold and a less penal rate at that time. The rate was increased to 25% during the lifetime of the previous Government and it is now 33% as a result of a decision taken during the lifetime of this Government. I believe sons and daughters should be allowed to inherit a reasonable amount of property from their parents, who have lawfully and properly acquired assets, paid taxes and met their financial and personal obligations, without having to incur penal tax rates. In a sense, inheritance tax is a little like the robber baron coming back for a second time. Even though taxes relating to the acquisition of property and taxes on the acquisition of income were previously paid by the deceased, the State dips into the pockets of the deceased again to secure for the benefit of the State and to meet State expenditure a portion of properties and assets lawfully acquired by the deceased.
Most countries in the EU and across the world have some level of inheritance tax. In principle, I think it is defendable, but not when it reaches expropriation levels. My concern is that the legitimate issues which are being raised here would be of less importance if the threshold was higher and the rates were not as penal. The real problem here is that in years to come, when parents pass on, the primary inheriting generation is likely to be the generation that has lived through the economic and financial collapse. Many people in that generation are currently over-burdened with borrowings and in negative equity. We should not apply a penal inheritance tax threshold and rate to the same people all over again. The problem that is being raised with regard to the technical drafting of this section of the Finance Act and the uncertainty about how it might be applied is hugely exacerbated by the threshold being too low and the level of payment being so high.
I will explain why the threshold is now inappropriate. One of today's newspapers - I am speaking from recollection, as I do not have it in front of me - reported that property prices in the Dublin and County Dublin area have increased by between 16% and 18% over a 12-month period. We are now in a space where we expect property prices to continue to increase for a time. The blindingly obvious reason for that relates to the type of property collapse that was experienced by this State. Traditionally, property falls to at least 20% below what should be its real value. In this case, it had climbed to substantially above its real value during the property bubble. When the State's finances stabilised, as has now happened, there was always going to be a bounce, as opposed to a second bubble. The effect of the recent bounce means that the current threshold is dramatically out of sync. I do not think Members of this House, particularly those who represent urban areas, will disagree with that. I know property prices in rural areas are recovering at a slower rate, not as dramatically as in the cities and certainly not as dramatically as in Dublin.
I do not believe a son or a daughter who inherits a property in the city or county of Dublin now - a house, an apartment or a bungalow or whatever other residential form it comes in - will be regarded as inheriting something of great luxurious value if its current value is €225,000. There are apartments in this State that one might have been able to buy for less than €200,000 four years ago, but that one could not buy for less than €300,000 now. There has been a substantial and dramatic change. If we do not want to unduly burden individuals who lawfully inherit property on which tax has already been paid, we need to substantially increase the thresholds. I think that is the first issue. I hope the thresholds will be increased to a minimum of €300,000 in the next budget. Ultimately, we will need to consider reducing the 33% rate that has to be paid when one exceeds the inheritance threshold of €225,000. I suggest that the retention of the current rate will force young married couples who inherit property to sell their property to generate the payment that needs to be made or to raise borrowings unnecessarily and thereby burden themselves with the repayments that arise in circumstances in which, in the past, no such repayment would have arisen.
Finally, I think it would be instructive when comparing the positions in 1995 and 2014 to look at where we were in 2009. In 2009, a son or daughter could inherit property to the value of €542,544 without any inheritance tax liability arising at all. That was the threshold. I can understand why some Members of this House might argue that such a threshold for inheritance tax liability was somewhat high.
Unfortunately, I can recollect how, at the time of the property bubble, that threshold in Dublin would have got one a fairly modest semi-detached home for a family with a relatively small garden. That is where we were at that time. I am not necessarily advocating that the threshold should come up to €544,000, but it is an extraordinarily dramatic difference between having had no inheritance or, indeed, gift tax liability until one acquired from one's parent an asset the value of which exceeded €544,000 and, when one had to pay tax, it was at a rate of 20%, and being in a position where, if one inherits assets to a value in excess of €225,000, one now pays tax at a rate of 33%. This is a serious issue that requires addressing. I appreciate it was not possible to address it in the current budget. It is very important that this issue be revisited and addressed next autumn. In the intervening period, it is important that the issues the Deputies opposite have raised about the application of these particular sections in this year's Finance Bill be clarified.
There has been a great deal of media commentary on this section. That commentary has stemmed from Arthur Cox, a law firm with many clients at the top levels of Irish society. I am not sure that they are sons or daughters whose parents are passing small or moderate amounts of money on to them. However, that does not take away from the issues with this section of the Bill that have been genuinely or otherwise highlighted.
As with other matters that we addressed on Committee Stage, Revenue has issued guidelines on how this process will apply, but there is a degree of uncertainty about it. As Deputy Michael McGrath stated, if this is a question of closing the loophole, and keeping in mind what Revenue or departmental officials have stated about people trying to make cash payments of €150,000, such transactions should not be allowed. It is as simple as that. There is probably an ideological debate to be had about whether the State should interfere if a parent wants to give something to a child. It could be genuinely argued for, although I would disagree. Aside from that, I also disagree with the idea of taxing a parent's provision of lodgings, small gifts and small supports to a child, which I understand is not the intended case.
The debate has entered into a wider field to address the appropriate threshold to tax children's inheritance from their parents. I assume the reverse would be applicable like it currently is, with a threshold of €225,000. I actually believe that this threshold is fine. It has to do with the debate of whether there should ever be a tax on a transfer from a parent to a child. The high thresholds of the past were inappropriate.
There are ways around paying inheritance tax, for example, if one lives in a house or apartment for a number of years before being gifted it, establishing of trusts, etc. People are constantly availing of these methods. Those who are well-off and have multiple properties can avail of the expertise that allows them to do this. However, exempting €225,000 from inheritance tax is fair. Property prices are escalating rapidly, for example, by more than 25% and 23% this year for apartments and houses, respectively, in the capital city and by 16% across the State. We need to remain cognisant of that situation, but increasing the thresholds because of the possibility of an emerging property bubble is not an appropriate Government response. Rather, we must deal with the issues underlying the rapid increase in house prices.
When someone inherits something from a parent, although the first €225,000 is exempt from tax, it remains an asset for that person. It is not his or her family home. Rather, it is a rental property or a property that he or she will sell on regardless. It is sometimes suggested that inherited properties are kept as shrines to mothers or fathers. That may be the case in some scenarios, but the properties are sold in many cases and the benefit accrues to the children. Deputy Shatter argued that to do this would be to tax them twice. I have difficulty trying to find anything that is not taxed twice. If a company down the road creates a bar of chocolate, we tax the company on the supplies needed to make it, we tax the company on its profits, we tax the shop the bar is sold in, we tax the consumer who buys it and, when the wrapper is disposed of, we tax the waste company. Anyone who understands taxation will know that the bar is taxed approximately eight times. Inheritance tax should be no different.
Reverting to the substantive issue, we need clarity on the questions raised today about whether this section of the Bill will be too burdensome. Will it achieve the Department's stated intention of closing a loophole or can it be abused by penalising those parents who support their children in modest ways? I hope the Government's aim for this section is not the latter, but to clamp down on those who use the loophole to transfer substantial amounts of wealth to their children without paying tax on same.
I concur with most of the contributions made so far. I have an ideological difficulty with the concept of an inheritance tax. Recently, I read an historical document about a landed estate that ceased to exist during the early part of the last century because of the payment of debt duties.
No less than other Deputies, I get around quite a bit. I have never met anyone who likes paying tax. Most people are compliant because they are concerned they might be caught out, but they would avoid paying if they could get away with it. That is human nature and it is important that we acknowledge this.
In Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations, one of the four desirable characteristics of taxation is fairness. Something is inherently unfair in a tax that, to be paid, could necessitate the property's sale by a family member. I do not care what perceived echelon of society one is in, be it Arthur Cox's, Arthur Fox's or whoever's. It is immaterial. If a tax is unfair, it is as unfair in Carnsore Point as it is in Malin Head or Merrion Square.
Deputy Creighton referred to students, lodgings, etc. It is impossible to see how that system could be implemented. Another desirable characteristic of taxation is that implementing it must be possible.
This issue will not bring people out onto the streets. We will not have marches about it. While it has received some publicity, most people will not be aware of it until they face the difficult situation of, following a bereavement, they are told by their solicitors or accountants that a large payment must be made. We have all encountered people who were unaware of certain elements of the tax code until they were hit with them. It can cause a great deal of difficulty.
I hope that the Minister of State will accept this amendment. If he does not, it is imperative that the Government articulate why this change has been made. At least let people know about it.
I do not expect to see Government backbenchers on the plinth trying to sell this as something that will gain them favour with the public. However, there is an onus on the Government to point out these things. I believe Deputy Shatter mentioned a threshold of €542,000 in 2009 and, if I am correct, the rate then was still at 20%. There has been a huge change during the downturn in recent years. I note rather cynically that were one to encounter a speeding fine back at the height of the Celtic tiger, it was €80. It still is €80 and Members have never sought to reduce that fine. Taxation should be upfront and should be on the wealth one creates, not the wealth one accumulates, because it does not encourage people to invest in a country if it has such penal rates of taxation on something one has created and one wishes to pass on to one's family.
I thank Members for their wide-ranging contributions on this issue and on these amendments. This has been useful and I will endeavour to respond to as many of the queries raised as possible. At the outset, it is important to state this is not a new tax and the idea is not to introduce an expansionary tax. The idea is to address a reality on which the Government has been advised by Revenue. In this context, I will respond to Deputy Michael McGrath's call to give some tangible examples of what precisely the Government is responding to from Revenue.
We have a scenario in which an exemption is being applied in situations in which it was never intended to be applied by any party in this House during the debate on any Finance Bill. It is also important to state that, as some Deputies have observed, no tax at all is paid until the aggregate of all gifts exceeds €225,000. One does not pay a single euro until one reaches that point. I wish to inform the House that the Revenue Commissioners, in the course of their compliance programmes, have established that this exemption, designed to cater for normal everyday payments related to the provision of support, maintenance and education for people's children, is being abused.
For reasons of taxpayer confidentiality, the Revenue Commissioners will not give the Government a list of names, but they have provided some anonymised examples, which are worth sharing with Members. The first example is where an exemption was claimed where a wealthy individual gifted a house worth €400,000 to an adult child. In the second example, an exemption was claimed in respect of a €90,000 cash gift to an adult child to purchase a car and furnish and maintain a house. The adult child was not a dependant, that is, not one of the dependent relatives discussed earlier and had a substantial income in that person's own right. The third example with which Revenue has provided me is of a taxpayer who has given free use of a credit card, through which more than €150,000 was gifted over a two-year period.
These are realities that are being faced by Ireland's taxing authority today and in a time of scarce resources, the Oireachtas at present is allowing this to carry on. The Government is endeavouring to close that loophole in this Finance Bill. This is an attempt to rectify the fact that, currently, an exemption that never was meant to be used for such a purpose is being so used. I doubt it is a purpose for which this House ever intended its use. It is also important to note that over and above payments for support, maintenance or for education, the legislation also exempts from capital acquisition tax gifts of up to €3,000 in any one year from any one person. Thus, two parents can gift €6,000 to each child in any year without giving rise to a capital acquisitions tax liability. Gifts over this amount only give rise to such liability if the group tax threshold of €225,000 pertaining to parents and children is fully used. Beyond these exemptions, it is difficult to justify making any further allowance to parents who seek other means of making tax-free gifts to their children by trying to bring them within the terms of section 82 of the Capital Acquisitions Tax Consolidation Act 2003.
As for some of the points raised, one logical and important point concerned wedding gifts. Each parent can make a gift of €3,000 in any year to each of the persons getting married. In effect, this means it is possible that a gift of up to €12,000 can be given by parents without incurring a capital acquisitions tax liability. Obviously, if only one parent is involved, the maximum tax-free amount is €6,000. If the amount of the gift is more than that, the gift would be subject to gift tax, but, of course, the gift again would not give rise to a tax liability unless the €225,000 exemption threshold available to the child has been used against other gifts or inheritance from his or her parents. While I think Deputy Michael McGrath and others may have clarified this matter, I refer to adult children who are permanently incapacitated by reasons of physical or mental infirmity and who are dependant on parents. Obviously, the amendments being proposed by the Government in the Finance Bill do not apply and there is no change to that scenario, and rightly so.
In respect of the discussion on property prices - there also was a broader contribution by Deputy Shatter - the property market continues to improve, with positive developments that originally had been restricted to the Dublin area now manifesting themselves in other areas of the country, albeit thus far not to the same extent. I recognise there are supply issues in certain areas of the Dublin property market. The group tax-free thresholds are kept under review in the same way as other relevant tax provisions, and in this regard, it is important that the Government bears in mind for future budgets the comments of Deputies Shatter, Creighton and others in respect of these thresholds. As Deputy Shatter quite correctly outlined to the House, the Government has found itself constrained on many levels in its three and a bit years in office. However, as we move into a different period of economic recovery, these issues are being kept under review by the Minister for Finance.
It is important to put some figures on the record of a House. As one is only taxed on amounts over €225,000, a child who inherits €250,000 will pay a tax of approximately €8,000. The question for the House is whether that is penal and I do not believe it is. A child who inherits €300,000, which is a huge sum to ordinary people, will pay approximately €25,000. However, I acknowledge the issue of thresholds is a valid point that no doubt will be looked at and reviewed by the Minister for Finance. As for the question posed by Deputy Shatter, whose legal knowledge is much greater than mine, I am informed by my officials that the transfer of assets on the dissolution of a marriage or civil partnership is exempt from capital acquisitions tax under section 88 of that Act, but I would be happy to have further engagement with Deputy Shatter on that issue.
For these reasons, the Government does not propose to accept the amendments. Constructive comments have been made in respect of thresholds and the need for them to be kept under review in the context of changing and rising property prices. However, the point is that the purpose behind the Government's action is genuine and sincere and is informed by Revenue. As has been alluded to by many speakers, the Revenue Commissioners have made a statement with regard to the bed and board issue. I take them in good faith and do not propose to accept the amendments.
A few thoughts arise from the contributions made on the amendments, and as I did not hear some of the earlier ones, I hope I am neither failing to grasp a point already made nor doubling up. However, I refer to some situations that may arise, especially after the recent credit collapse and destruction of the economy. There could be some cases in which a parent clears half a million of debt for a son or daughter as a result of negative equity. Is that a gift? The Minister of State might think about that. On top of clearing the debt, one has tax to pay off the difference between €500,000 and €225,000, which would be absurd when the essence of clearing the debt is to improve the economy. There are other situations, such as expensive elective surgery for relations. For instance, I believe Deputy Adams was in the United States for highly expensive surgery.
Sorry, leave out personal things.
I am saying it in a respectful way. The Minister of State cited some anonymous examples but these actually are real-time examples. In addition, as Deputy Shatter pointed out, the threshold has come down from €542,000 in 2009 to €225,000 now and one is told there has been a recovery in asset prices. While I can demonstrate that is exaggerated, the entire thing appears to be driven by some kind of agenda that is not being declared openly. For instance, if one takes the example of somebody who has accumulated capital of €100 million, it could reasonably be expected that the home or residence element of that €100 million net might be €2 million, €3 million, €4 million or €5 million. As that would be reasonable accommodation for a family, the rest of the capital that might be left to family members is what one calls mobile capital.
Such capital has easy market realisation. On the basis that it is a gift, this would be taxed at a rate of 33%. This means that for the super-wealthy, the rate of tax on the exposed amount of assets is the same as that which applies to someone with a modest level of capital of, for example, €500,000. A house in a modest suburban area of Dublin which is inherited by one child could easily realise a value of €500,000. Some €275,000 of this amount would be exposed to tax at a rate of 33%. Multimillionaires would be taxed at the same rate. On a capital taxes basis, this provision is somewhat regressive as a result of the exemption limit being brought so low as to correspond with prices on the secondary housing markets in Dublin and Cork.
There is a need for an open discussion on this matter rather than seeking to separate out the complexities of and the subscript algebra relating to the tax. The problem with taxes in this country is that they are too complex. Deputy Creighton referred to the taxes which new businesses in the start-up or early growth phase must pay. Those taxes are depressingly complex and severe in nature. The authorities in the United States give much greater recognition to the framework parameters required in the area of taxation, regardless of whether it is income, capital or capital gains tax. In his book Capital in the Twenty-First Century, Thomas Piketty highlights the fact that the returns to capital are far higher than those brought about by labour or individual personal effort. As a result, those with super-accumulations of capital are much more capable of bearing taxation and contributing resources to exchequers.
Efforts must be made to consider the bigger picture in respect of this matter. When one gets down to examining the nitty-gritty arithmetic involved, one can almost become depressed. An exemption is suddenly being introduced in respect of farms that are either on or near the borderline of the €225,000 exemption. That is because one does not want people to become discouraged and leave the land. Neither does one want to break up holdings which are small enough in any event. As a result, those involved are given an exemption. What is the difference in this regard in terms of the capital platform of €150,000 or €200,000 that might be needed by the members of a family who have grown up and attended school in the suburbs - accumulating the language and skills of business along the way - in order to start a business? That money will be taxed at 33% before the business even gets off the ground.
These matters must be given due consideration. There is no evidence to convince me that there is good thinking behind the provision in the Bill. As was the case with water services, the message has not emerged.
I thank the Minister of State for his reply. Unfortunately, I cannot say I am satisfied with it. I appreciate that tax evasion takes place. There is tax evasion in every walk of life in Ireland and across the globe. We are all well aware of that and we all want to eliminate tax evasion. However, the provision set out in the Bill is a blunt instrument. It is too broad, it is not sufficiently specific and is lazy in its construction. If the Revenue Commissioners are finding it difficult to clamp down on fraud, they should have brought to the Minister, Deputy Noonan, a provision that was better thought out and that would not discriminate against families, which is what this actually does. It is unacceptable that the Revenue Commissioners are refusing to publish their so-called guidance document in advance of Members voting on the Bill. The Revenue Commissioners have indicated that they will publish the document when the legislation has been passed. That is not acceptable because Deputies are being asked to vote in the dark. It is incumbent on the Minister of State and the Minister to ensure that there are much greater levels of - to steal a phrase that has been trotted out by every Minister in the past two weeks in respect of Irish Water - certainty and clarity. There is neither certainty nor clarity with regard to how the mechanism outlined in the Bill will function in practice. What we do know is that anybody of 18 years of age or 25, if he or she is in full-time employment, will be caught by this provision, which is not targeted at or focused on individuals who are evading tax by gaming the system.
I reiterate my view that the threshold which, as Deputy Shatter pointed out, has dropped by 60% to €225,000, is inadequate. I would be very concerned when a Fine Gael Minister for Finance is introducing amendments to the tax code in respect of which he is receiving support from Sinn Féin. We are aware of the direction in which that party's finance policy has the potential to lead the country.
I do not often bring issues relating to my constituents or individuals I meet in my constituency to the attention of the House. However, I wish to highlight the example of one individual by whom I was approached in 2013 when I was serving as a Minister of State. The man in question inherited a property in my constituency from one of his parents. The man's father had previously inherited it from his father. The property is located in Sandymount but I will not be any more specific than that.
The Deputy's two minutes are exhausted.
I want to make this point because it is very important. I will be brief. The property to which I refer has been a family home for three generations. As a result of the hugely unfair and anti-urban property tax being introduced by the Government at the time, however, the man by whom I was approached was going to be obliged to sell it. He had already paid a substantial whack of inheritance tax when he inherited the property. I am of the view that this was wrong.
What we are proposing to do here is to make certain urban areas exclusive and state that people of a particular class or income level cannot live in them. There has always been a fairly good level of diversity in most areas, villages and communities in my constituency. This is going to be eliminated by what is an unfair property tax. I discussed this matter with the Minister, Deputy Noonan, on many occasions but to no avail. What is being done in the Bill will only add to the problem. The average house price in my constituency is approximately €500,000. I am not talking here about mansions, rather I am referring to very basic small family homes. Some €275,000 of this money is now going to be taxable. Essentially, people are going to be liable for capital acquisitions tax bills amounting to €90,000.
The Deputy has gone way over the two-minute limit.
The Government is doing nothing to address that matter. What is proposed here is a family tax. It has nothing to do with establishing shrines to people's parents. What we are discussing here are the homes in which people have lived all their lives and out of which they are being forced as a result of the unfair policies being introduced by this Government.
I remind Members that on Report Stage a two-minute limit applies to second contributions.
I appreciate that. There is a need for greater clarity on this matter. Deputy Creighton made a number of remarks in respect of homes in which people have lived all their lives. My understanding is that if one has lived in a house all one's life and if it is one's principal private residence, one is not liable to pay this tax in the first instance. Perhaps Deputy Creighton does not understand that fact.
To return to the discussion on the amendment, will the Minister of State clarify that what is proposed will only come into play if one has reached the €225,000 threshold? In other words, a person would have to be gifted €225,000 by his or her parents before it would kick in and the income above that would be taxed. Am I correct in stating that if someone's parents intend to provide him or her with financial assistance in respect of his or her wedding, the provision will only apply if that person has already received €225,000 from his or her parents?
Correct.
That is fine.
I want clarification on a second point because I could not follow the Minister of State's reference to €12,000. The threshold is €3,000. Is the Minister of State talking about a 24-month period? What is the position?
If the two parents of the bride and two parents of the groom gave money, it would amount to €12,000.
Four parents. The Minister of State is stretching it a wee bit there.
Consider the guidelines that are to be issued. The measure exists in the tax code at present. It is very clear and it is right that it is included because it protects parents who support children through normal duties and education. I welcome the closure of the loophole if it is for the purpose intended but I question how the individuals concerned could have a ruling in their favour if they received money to purchase a car. It does not make any sense. The exemption is for normal supports and education. I do not understand how those concerned could have fallen into this bracket.
Could the Minister of State confirm the position on the types of abuses he mentioned, using three examples, if amendments Nos. 45 to 47 are accepted by the Government? I do not believe it is the intention of anyone in the House to prevent the Revenue Commissioners from dealing with issues like these. The transactions in question are clearly designed to circumvent the established gift tax rules. I would certainly support any measure to close down those loopholes. We have to come to a determination on the amendments before us. Can the Minister of State clarify for the House whether the Revenue Commissioners will be powerless to deal with these issues if the amendments are adopted?
Second, can the Minister of State elaborate further on what constitutes a normal and reasonable payment from a parent to a grown-up child living at home? The Revenue Commissioners have clarified that bed and board and normal lodging-related expenses will not be affected by the change. It is important that the Minister of State articulate, in as much detail as possible, the types of payments designed to be captured by way of the change.
If we accepted the amendments, legislatively the status quo would remain in place. The Government is introducing legislation in this area on the basis of advice from the Revenue Commissioners to try to crack down on abuses of an exemption that was never intended to be applied as it has been applied. I fully accept that no Member of this House wishes for a continuation of this kind of application of the exemption and I fully accept that is not why the amendments have been tabled. It is our view that the legislative proposals are prudent in terms of giving the Revenue Commissioners the tools they need to crack down on the abuse. I gave the Deputies three examples. The Revenue Commissioners are of the view that the problem is quite large.
Some of the questions Deputy Doherty asked relate to the fact that there is self-assessment. There is an element of self-assessment and of taking people at their word regarding the tax. People can receive €225,000 before €1 of tax is paid. That is the aggregate amount that can be received by a child from a parent in a lifetime.
I take the point that some Deputies, including Deputy Creighton and Deputy Shatter, have made on property prices. I have outlined the position of the Minister for Finance that the property value thresholds and their interaction with the tax are kept under review. Were I to accept the amendments, I would be ignoring the advice of the Revenue Commissioners and leaving the status quo legislatively in place. Therefore, I do not propose to accept them.
Is the amendment being pressed?
Yes. Vótáil.
Will the Deputies claiming a division please rise?
Deputies Lucinda Creighton, Stephen S. Donnelly, Terence Flanagan, Michael Healy-Rae, Mattie McGrath, Peter Mathews, Denis Naughten and Billy Timmins rose.
As fewer than ten Members have risen, I declare the amendment lost. In accordance with Standing Order 70, the names of the Deputies dissenting will be recorded in the Journal of the Proceedings of the Dáil.
Amendment declared lost.
On a point of order, are there ways, under Standing Orders, by which the Ceann Comhairle could establish whether there were enough Deputies to call a vote before we would be called from all over the House for a vote?
One cannot do that until the Members arrive into House.
Amendments Nos. 46 and 47 not moved.
Amendment No. 48 in the name of Deputy Pearse Doherty is out of order.
Amendment No. 48 not moved.
Amendments Nos. 49 to 52, inclusive, are related and may be discussed together.
I move amendment No. 49:
In page 132, between lines 30 and 31 to insert the following:
"Amendment to Section 10(A) of the Finance (Local Property Tax) Act 2012
99. The Finance (Local Property Tax) Act 2012 is amended in section 10(A) by substituting the following subsection for subsection (3):
"(3) Notwithstanding subsection (1) and (2) and subject to subsection (4), the Minister for the Environment Community and Local Government shall ensure in the making of regulations, that a residential property shall not, for the purposes of this Act, be regarded as a relevant residential property if a certificate has been issued in relation to it having a building condition assessment damage rating of 2, or a building condition assessment damage rating of 1 with progression, and has either been accepted by the Pyrite Remediation Board for remediation, or is in any area where the presence of pyrite has been established, regardless of whether a hardcore infill test has been carried out.".".
There is an urgent need to bring clarity to the situation whereby homes which are affected by pyrite were supposed to be exempt from the property tax. Home owners are unable to avail of that exemption because of the mechanism used to achieve it.
I refer to persons who own homes which are essentially valueless and persons who cannot sell their property. I tabled this amendment only after lengthy correspondence with both the Minister for the Environment, Community and Local Government and the Minister for Finance.
Both Departments have recognised a serious anomaly exists in that people who have pyrite in their house cannot avail of their legitimate exemption. The amendment seeks to make the process easier. I am sorry, Acting Chairman, but it is difficult to speak with the noise level.
Could Members leaving the Chamber please do so quietly?
It is in light of the fact that the Department has recognised the anomaly that I am tabling the amendment today. Currently, if one owns a property with pyrite, which is valueless, in order to get the exemption one is required to spend thousands of euro to have a hardcore infill test carried out on the property in order to avail of what will be an exemption of hundreds of euro over a period of three years. Nobody could possibly stand over that scenario. It is particularly offensive when one considers that the Government, in response to pressure from affected home owners, set up the Pyrite Resolution Board. The criteria for houses to be remediated under the State scheme does not require an underground hardcore infill test to be carried out. We have a ridiculous scenario where homes have been approved for remediation under the Government pyrite scheme, but they cannot get a property tax exemption because no infill test was done. That is frankly ludicrous. The matter must be addressed urgently because at the moment those home owners are getting letters from Revenue, and in some instances the money is being forcibly deducted. In instances where an exemption has been given, the money is being taken back from them. They are people whose backs are to the wall. That is a serious problem.
My proposal is not that a person should get an exemption just for the sake of it, but a home owner with pyrite must confirm that he or she has a building condition assessment rating of two or one plus progression, which means there is significant damage to the property and has either been approved by the remediation board or be in an area in which the remediation board is well aware pyrite exists. Those two measures give the State adequate protection but make it easier for people to avail of an exemption. I am curious to see how the Minister could possibly stand over a situation where to save hundreds one has to spend thousands, which is the way the legislation is currently framed.
When I raised the matter in correspondence in recent months, I was initially told the Departments were examining the matter and that the statutory instrument could be amended. On the previous occasion when I inquired, I was told the responsibility lay with the primary legislation, which is the reason I have tabled the amendment.
I wish to speak initially to amendment No. 50, which proposes that the local property tax, LPT, would be a deductible expense for landlords when calculating their taxable rental income. There is something of a political consensus in this country that landlords should be hammered into the ground in so far as possible, but of course that has one very direct consequence, namely, that rents continue to increase. The issue should be addressed. It was recommended in the Thornhill report that LPT would be tax deductible for landlords. The Minister has signalled by way of reply to parliamentary questions that he is in favour of such a measure, in principle. I suggest the Minister would make a move in that direction in the Finance Bill.
Amendment No. 51 is similar to an amendment we discussed on Committee Stage. It relates to the valuation date in the local property tax legislation of 1 November 2016. As the Minister is aware, properties are currently valued in respect of the LPT as of May 2013 and they are locked into the relevant band for another two years up to 2016. People will be required to revalue their properties in 2016. Given the direction in which property prices are going, that will become a very serious issue, in particular in urban areas and most acutely in Dublin, but also elsewhere. Since the May 2013 valuation, property prices in Dublin have increased by at least 40%. We can see from statistics available today that prices in Dublin have increased by 24% in the past 12 months and now prices are beginning to rise at an accelerated pace elsewhere in the country.
I accept there is still time to deal with the issue because the amount people have to pay next year and in the following year is fixed and nothing we do in the Bill can change that. However, people essentially face a time bomb. For every band one jumps up in the LPT, one pays an additional €90 per year and some people certainly face the prospect of going up by two bands, which would mean an increase of €180 per year. The Government has been of the view to provide certainty for people for the next four years on water charges but they do not have the same certainty on the property tax. Many Government backbenchers, especially in Dublin, are very exercised about the issue. The Minister could provide clarity now that there will not be a further valuation of properties required in 2016, by way of accepting the amendment. Amendment No. 52, which is related, is essentially a repeat of amendment No. 50 and therefore I intend to withdraw it.
I support amendment No. 49. Some of us engaged with the Pyrite Resolution Board for a period prior to the remediation scheme being put in place. Essentially, the object of the exercise was not to force people to incur needless expense. If a condition survey had been carried out and it was obvious that bits of a house were literally falling down on top of people, then it was not necessary for every house in an estate to go through an assessment. A sensible approach was to be taken. People who are affected by pyrite are in a very stressful situation because they see their house literally disintegrate. Some might not yet be in category two. While the board might wish to group houses together, I am aware of one housing estate where three or four houses require urgent remediation but other houses are not at that stage yet. It would be wrong if one side of Government were to take one approach and another side of Government were to take a punitive approach in terms of property tax relief. The Government’s approach must be consistent.
If one lives in a housing estate with pyrite, there is a blight on the estate and the houses are valueless in that nobody will want to buy them until the remediation has taken place. It is important that we do not put further pressure on people and that we do not make them jump through hoops or expend large amounts of money that might not be necessary. The Pyrite Remediation Board will not require every house to do a core test. We have been told that if one house in an estate has pyrite and the house next door looks like it has similar damage, the board will not require each and every house to carry out a test. There must be a relationship between the pyrite remediation scheme and the corresponding measure on pyrite in the Finance Bill. For that reason I support Deputy Clare Daly’s amendment, which I hope she will put to a vote if the Minister does not accept it. I hope sense prevails as the situation is difficult enough for people.
I wish to support Deputy Michael McGrath’s point on the local property tax. It is something that has come up in my area, in particular what will happen post-2016. While the issue might not be addressed in the Bill, I hope the Minister could examine the issue as people are concerned they will receive large property tax bills in 2017. Could the Minister consider the introduction of a cap on the level of local property tax paid or a change in the band ratings? Another option would be to give the power back to local authorities, which have the power to reduce the tax by 15%. We always say we would like to give councillors a bit more power.
If something could be done to empower local councils to decide for themselves whether a cap is required, this would be important in the case of my constituency and those on the east coast and in larger towns around the country.
I will deal first with Deputy Daly's amendment and then Deputy Michael McGrath's amendment, taking into account the contributions of other Deputies.
I am aware of the issues that Deputy Daly is attempting to address with her amendment. Officials of my Department, along with officials of the Department of the Environment, Community and Local Government, have been examining the alternative other than testing that will be available in order to confirm entitlement to local property tax exemption, with a view to coming up with an early viable solution for all.
The Deputy's amendment removes the requirement for sub-floor hard core testing and replaces it with either acceptance by the Pyrite Remediation Board for remediation or location in any area where the presence of pyrite has been established. As I am sure the Deputy is aware, the Pyrite Remediation Board's pyrite resolution scheme is limited to properties with a damage condition rating of two and this requirement would therefore be of no use to a property with a damage condition rating of one with progression. As the Pyrite Remediation Board's pyrite resolution scheme is a scheme of last resort, it would also be of no use to properties being remediated through other avenues, for example, through insurance or directly by builders. It is important that any changes that may be made to the LPT legislation do not go beyond the objectives of providing a temporary exemption for homes with significant pyritic damage. As I have advised on many occasions in the past, a liability to LPT should apply to all owners of residential property with a limited number of exemptions. Limiting the exemptions available allows the rate to be kept low for those liable persons who do not qualify for an exemption. The other option proposed by the Deputy, that is, location in any area where the presence of pyrite has been established, does not in itself establish the presence of pyrite in any particular property. In this regard, I believe the Deputy's proposal is too broad and could result in the relief being available to those beyond the intended target group.
The local property tax operates on a self-assessment basis and it is a matter for the property owner in the first instance to calculate the tax due, based on his or her assessment of the market value of the property. Where a property owner does not qualify for an exemption, when making an assessment, issues such as the presence of pyrite in a particular area would be one of the factors that he or she could take into account in valuing the property. For the reasons outlined above, I am not accepting the Deputy's amendment although I hope the issues she has raised can be resolved outside the Bill. I can confirm that while I am not accepting the amendment, officials are and will continue to examine how the issue - which is problematic - can be dealt with. We will continue in discussion with the Department of the Environment, Community and Local Government to see if we can arrive at an appropriate solution.
Deputy McGrath's amendment deals with the local property tax deduction for landlords. Chapter 4 of Part 8 of the Taxes Consolidation Act 1997 provides for the charging to tax under Case V of Schedule D of income arising on rent from property in the State. The income chargeable under Case V in respect of such property is computed by making the deductions for expenditure authorised by section 97(2) of the Taxes Consolidation Act from the gross rent. These deductions include, for example, expenditure on rates, maintenance, repairs and interest on a loan used to purchase, improve or repair the rental property. Amendment No. 50 seeks to add to these allowable deductions by proposing a new deduction for local property tax paid in respect of rental property.
Deputies will be aware that as part of the process leading to the introduction of local property tax, an interdepartmental group on property tax was tasked with the design of the tax. In its report to the Minister for the Environment, Community and Local Government, generally referred to as the Thornhill report, the group suggested that there seemed to be an argument for allowing at least a portion of LPT paid in respect of a rented property to be deductible for tax purposes in the same way as commercial rates are so deductible. However, having regard to the pressures on the public finances and the need to bridge the gap between expenditure and revenue, the report also suggested that consideration be given to phasing in deductibility, having regard to the prevailing budgetary situation, over a period of years. This approach was accepted in principle by the Government.
As I stated in my budget 2015 speech, both the taxation and expenditure sides of this year's budget are designed to support and broaden the economic recovery that the country is now experiencing. As such, available resources have been carefully targeted at initiatives that will build consumer confidence, support jobs and strengthen demand in the domestic economy. In this context, I consider that now is not an opportune time to introduce a deduction for local property tax paid in respect of rental property.
Amendment No. 52 requires me to issue a report, within six months of the enactment of this Act, detailing how and when I will introduce a deduction for local property tax paid for the purposes of computing taxable rental income. I consider that the question of if, or when, such a deduction is to be introduced and the extent of any such deduction is best considered as part of the budgetary and finance Bill process rather than by issuing a report on the matter in the manner suggested by the Deputy. For all of these reasons, I am not accepting these amendments.
Deputy McGrath's amendment No. 51 wishes to give broad discretion to the Minister as to when properties should be revalued for LPT purposes. As the local property tax is a new tax, the Government wished to provide certainty to home owners and for this reason valuation periods of three years were introduced, with the exception of the first valuation period which covers three and a half years. In addition to providing certainty, it also eases the administration burden on home owners by not having to revalue their houses each year.
The Deputy may be aware that under the LPT legislation, where a property is not a relevant residential property on a valuation date, that is, not liable to LPT, with certain exceptions, that property will not be a relevant residential property until the next valuation date. In the interests of equity to those who are compliant payers of the local property tax, it is important to have regular valuation dates so that newly built properties are brought into the LPT net. It also provides certainty to those home owners as to when they will become liable for LPT.
In the absence of further valuation dates, new properties built after 1 May 2013 would not be liable to LPT and would not have a valuation for LPT purposes. Should those properties be brought into the scope of LPT using a different valuation date, it would be inequitable to those home owners as their LPT liabilities would be assessed using a later valuation date, where property prices are increasing, compared to those currently on the register.
While I am very conscious of the concerns of home owners over increasing property prices and the effects this will have on their LPT liabilities, particularly in urban areas, I do not believe the Deputy's amendment is the most appropriate way to address these concerns. The next valuation date is not until 1 November 2016. In advance of that date, in conjunction with my officials, I will be examining the LPT and any impacts on LPT liabilities due to increasing property prices. However, any consideration at this stage would be premature. For the reasons outlined, I am not minded to accept the Deputy's amendment.
I am looking for clarification from the Minister on amendment No. 49. If it cannot be proved that a house has a certain level of pyrite - that it is at level one rather than level two - is this the reason the Minister does not wish it to get through the net and to avail of the exemption from the local property tax? Is my understanding correct? If this is the argument, I would counter-argue that given that the rating of one is not as bad as two and major works may not be necessary, the Minister would acknowledge that the owner's chances of selling the house at a fair price are around zero because of the level one rating.
The Minister acknowledged there is a problem here. The deadline is this week but the uncertainty will continue for people in this position. Does the Minister expect the issue to be resolved before the property tax is payable for next year? If so, will it require further legislation? What initiatives could be put in place to give clarity in advance of people being obliged to register and pay the property tax next year?
I thank the Minister for his reply. In response to what he said on amendment No. 50, on allowing the local property tax payment as a deductible expense, it is as legitimate an expense as any other a landlord has. We should be under no illusions as the additional taxes heaped on landlords in recent years have directly resulted in rents increasing. They have certainly been a factor. Part of the story is with regard to supply, but the additional costs have simply been passed on to tenants. In the past the Minister has accepted the principle of allowing the local property tax as a deductible expense, and he should signal when he intends to make a move in this direction.
With regard to amendment No. 51, concerning the next valuation date for properties in respect of the local property tax, I accept the point about capturing new homes and that if the valuation date is continually delayed, new homes which have come on stream will not be captured, or if they are captured by way of self-assessment they will, by definition, have different valuation date. The Minister should address the issue as to when the review he will undertake in respect of the local property tax will be completed. I welcome the fact the Minister will do a review because people are concerned about this revaluation of properties, which is coming down the track very quickly. Somebody in band three, whose property was valued at just under €200,000 in 2013, faces a bill of €315 per annum. If the property is now worth just under €300,000 the annual bill will be €495, which is an increase of €180. As a result of how it is structured, with the liability linked directly to the market value of the property, this scenario has arisen. Will the Minister confirm when he expects the review to be concluded? Will he publish it? Will it be next year or 2016?
The Minister's reply seems to suggest he is concerned my amendment might have the result of allowing too many people avail of the exemption, and that it was in some way too broad. I will take a step back to the origin of the exemption in the first place, which was that those home owners whose property had pyrite, was dangerous, was unsellable and was valueless would not be taxed for something that was, in essence, a liability. I remind the Minister that when the exemption was introduced, Government backbenchers in the relevant constituencies went around and told residents they had obtained this exemption for them and they did not have to worry about the property tax. All we are looking for is that homes affected can avail of the exemption intended for them in the first place.
We are speaking about properties which have a certain level of damage, not category two but category one with progression, because Deputy Wallace is quite correct this means the property is valueless, and in an area where everybody knows there is pyrite. In essence, if it looks like a dog and barks like a dog, the chances are it is a dog. If the interpretation of the Pyrite Remediation Board is that if a house is damaged and in an area with pyrite, and it accepts it has pyrite for the purposes of remediation, surely to God the same criteria would apply for the purposes of exemption to the property tax? It would not be much comfort to people whose homes have been damaged to the extent that remediation will cost tens of thousands of euro, as we are speaking of an exemption that would benefit them to an amount of €1,000 over the course of the three years it will apply.
I note the point made by the Minister that the Department and the Department of the Environment, Community and Local Government recognise there is a problem and they are looking at alternatives. My problem is this is the response I got six months ago. I do not in any way mean this in a disrespectful or a flippant way. I very much mean it in the context of home owners who are receiving letters from Revenue at present and who are wondering how long it will take to sort this out and who think it really is not that difficult to come up with criteria. The criteria I have outlined are not quite as the Minister outlined. I state if the property has a building condition assessment rating which shows category two or category one damage, and has either been accepted by the board or is in an area where pyrite is present-----
The Deputy will have an opportunity to make another contribution as the proposer of an amendment.
Excellent.
I welcome what the Minister said on reviewing it before 2016. I reiterate that should I be around, I will be keeping an eye on it. I would like to see more control over the local property tax given to local authorities. It has been done with regard to local authorities being able to reduce or increase it. If local authorities could decide what they wanted to do with the property tax, it would be appreciated.
I thank Deputies for their contributions. Deputy Daly has again illustrated that there is an issue which is problematic and I agree with her that there is an issue. I would like, and have instructed, my officials to do everything they can to resolve the problem. My difficulty with the amendment is different. It does not solve the problem without raising other issues. The issue can be resolved outside of the legislative process and I would like to have another go to see whether this can be done as quickly as possible.
Dealing with the pyrite issue may require an amendment of the pyrite regulations and possibly the legislation. Officials from the Department, Revenue and the Department of the Environment, Community and Local Government are examining the issue. I will examine the scope for an administrative solution with Revenue, so people who have the problems outlined by the Deputy will not have to pay the property tax.
With regard to Deputy McGrath's amendments, I agree in principle that local property tax should be offset against rental income in the same way as commercial rates. I will do so as soon as I have the resources and it is appropriate to do so. The advice of the Thornhill report was to do it on a phased basis, and we will take this into account.
The next valuation date is November 2016, which is two years away. There is no need to deal with an issue which will be the subject of the review now, in the absence of advice. We will wait until we receive advice on this and other issues in the review and then we will see what action we will take.
I accept the Minister's bona fides on this issue and I fully accept he has, and will, instruct his officials to deal with the situation, but I must press the amendment from the point of view that I heard this response months ago. Again, I do not mean this in a derogatory way. I was told in answer to a recent parliamentary question on the issue that it had to be dealt with through legislation. Originally I sought for the problems to be dealt with by changing the statutory instrument which was implemented to give effect to the exemption. I was told this could not be done and it had to be done by way of legislation. I do not think the amendment I have drafted is perfect, but it is better than what is there at present.
It means that a house, which has considerable damage and is in an area where it has either been accepted by the board or where we know pyrite is in existence, will be covered by the exemption. That will practically cover every relevant home owner.
I note the Minister did not respond to the point Deputy Wallace made. In answer to the important issue the Deputy raised, I believe the Minister of State in essence said that somebody whose house had pyrite but only a damage condition rating of one should not get the property tax exemption. That is a complete and utter reversal of what Government backbenchers told their constituents. Deputy Wallace is quite correct in pointing out it does not matter what level of pyrite a house has. Any house with pyrite is unsaleable. The idea that a tax would be levied on the owner of such a house is an absolute insult to families who in most cases are in the commuter belt and paying for overpriced properties that they bought at the height of the boom. In many cases they are in negative equity. In some cases their family circumstances are such that they would like to move on and they are basically shackled to that redundant property. It is incredible that they would be charged a tax on that property.
I believe the Minister wants to sort it out, but it is not that hard. All he needs to do is sit down with the Pyrite Resolution Board. A pyrite survey was done of where it exists throughout the country. The Minister could easily do it and protect the taxpayer. Failure to do so would indicate that the exemption was a scam in the first place. The Government does not really want people to be able to avail of it. It was just a fig leaf to pretend it was giving something to those afflicted home owners.
I will press the amendment given the way the Government behaves on these issues. I expect it to be lost, but it is important to lay down a marker. If that is the case, I appeal to the Minister to pursue the avenues he said he would to get justice on this issue for the people who deserve it.
Amendment put:
The Dáil divided: Tá, 46; Níl, 75.
Tá
- Adams, Gerry.
- Boyd Barrett, Richard.
- Broughan, Thomas P.
- Calleary, Dara.
- Collins, Joan.
- Collins, Niall.
- Colreavy, Michael.
- Creighton, Lucinda.
- Crowe, Seán.
- Daly, Clare.
- Doherty, Pearse.
- Donnelly, Stephen S.
- Ellis, Dessie.
- Ferris, Martin.
- Fitzmaurice, Michael.
- Fleming, Sean.
- Fleming, Tom.
- Grealish, Noel.
- Halligan, John.
- Healy-Rae, Michael.
- Higgins, Joe.
- Kelleher, Billy.
- Lowry, Michael.
- McConalogue, Charlie.
- McDonald, Mary Lou.
- McGrath, Finian.
- McGrath, Mattie.
- McGrath, Michael.
- McGuinness, John.
- McLellan, Sandra.
- Martin, Micheál.
- Mathews, Peter.
- Murphy, Catherine.
- Murphy, Paul.
- Naughten, Denis.
- Ó Caoláin, Caoimhghín.
- Ó Cuív, Éamon.
- Ó Fearghaíl, Seán.
- O'Sullivan, Maureen.
- Pringle, Thomas.
- Ross, Shane.
- Shortall, Róisín.
- Stanley, Brian.
- Tóibín, Peadar.
- Troy, Robert.
- Wallace, Mick.
Níl
- Bannon, James.
- Burton, Joan.
- Butler, Ray.
- Buttimer, Jerry.
- Byrne, Eric.
- Carey, Joe.
- Coffey, Paudie.
- Collins, Áine.
- Conaghan, Michael.
- Conlan, Seán.
- Connaughton, Paul J.
- Conway, Ciara.
- Corcoran Kennedy, Marcella.
- Costello, Joe.
- Coveney, Simon.
- Creed, Michael.
- Deasy, John.
- Deering, Pat.
- Doherty, Regina.
- Donohoe, Paschal.
- Dowds, Robert.
- Doyle, Andrew.
- Durkan, Bernard J.
- English, Damien.
- Farrell, Alan.
- Feighan, Frank.
- Fitzgerald, Frances.
- Griffin, Brendan.
- Hannigan, Dominic.
- Harrington, Noel.
- Harris, Simon.
- Hayes, Tom.
- Heydon, Martin.
- Howlin, Brendan.
- Humphreys, Heather.
- Humphreys, Kevin.
- Keating, Derek.
- Kehoe, Paul.
- Kelly, Alan.
- Kenny, Seán.
- Kyne, Seán.
- Lawlor, Anthony.
- Lynch, Ciarán.
- Lynch, Kathleen.
- Lyons, John.
- McCarthy, Michael.
- McEntee, Helen.
- McFadden, Gabrielle.
- McGinley, Dinny.
- McHugh, Joe.
- Maloney, Eamonn.
- Mitchell O'Connor, Mary.
- Mulherin, Michelle.
- Murphy, Eoghan.
- Neville, Dan.
- Nolan, Derek.
- Ó Ríordáin, Aodhán.
- O'Donnell, Kieran.
- O'Donovan, Patrick.
- O'Dowd, Fergus.
- O'Mahony, John.
- O'Reilly, Joe.
- Penrose, Willie.
- Perry, John.
- Phelan, John Paul.
- Quinn, Ruairí.
- Rabbitte, Pat.
- Reilly, James.
- Stagg, Emmet.
- Stanton, David.
- Tuffy, Joanna.
- Twomey, Liam.
- Varadkar, Leo.
- Wall, Jack.
- Walsh, Brian.
Tellers: Tá, Deputies Clare Daly and Catherine Murphy; Níl, Deputies Paul Kehoe and Emmet Stagg.
Amendment declared lost.
I move amendment No. 50:
In page 132, between lines 30 and 31, to insert the following:
"Amendment of Finance (Local Property Tax) Act 2012
99. Finance (Local Property Tax) Act 2012 is amended by inserting the following new section 53A—
"53A. Local property tax paid in respect of a rented property shall be deductible by a liable person in accordance with section 11 for income tax or corporation tax purposes.".".
Amendment put and declared lost
Amendment No. 51 not moved.
I move amendment No. 52:
In page 132, between lines 30 and 31, to insert the following:
"Report on local property tax
99. Within 6 months of the enactment of this Act, the Minister shall, issue a report detailing how and when he will introduce a provision whereby Local Property Tax paid in respect of a rented property shall be deductible by a liable person for income tax or corporation tax purposes.".
Amendment put and declared lost.
Amendments Nos. 53 and 54 have been ruled out of order.
Amendments Nos. 53 and 54 not moved.
Amendment No. 55 not moved.
Bill, as amended, received for final consideration.
Question put: "That the Bill do now pass."
The Dáil divided: Tá, 78; Níl, 48.
Tá
- Bannon, James.
- Barry, Tom.
- Burton, Joan.
- Butler, Ray.
- Buttimer, Jerry.
- Byrne, Eric.
- Cannon, Ciarán.
- Carey, Joe.
- Coffey, Paudie.
- Collins, Áine.
- Conaghan, Michael.
- Conlan, Seán.
- Connaughton, Paul J.
- Conway, Ciara.
- Corcoran Kennedy, Marcella.
- Costello, Joe.
- Coveney, Simon.
- Creed, Michael.
- Deasy, John.
- Deering, Pat.
- Doherty, Regina.
- Donohoe, Paschal.
- Dowds, Robert.
- Doyle, Andrew.
- Durkan, Bernard J.
- English, Damien.
- Farrell, Alan.
- Feighan, Frank.
- Fitzgerald, Frances.
- Griffin, Brendan.
- Hannigan, Dominic.
- Harrington, Noel.
- Harris, Simon.
- Hayes, Tom.
- Heydon, Martin.
- Howlin, Brendan.
- Humphreys, Heather.
- Humphreys, Kevin.
- Keating, Derek.
- Kehoe, Paul.
- Kelly, Alan.
- Kenny, Seán.
- Kyne, Seán.
- Lawlor, Anthony.
- Lynch, Ciarán.
- Lynch, Kathleen.
- Lyons, John.
- McCarthy, Michael.
- McEntee, Helen.
- McFadden, Gabrielle.
- McGinley, Dinny.
- McHugh, Joe.
- Maloney, Eamonn.
- Mitchell O'Connor, Mary.
- Mulherin, Michelle.
- Murphy, Eoghan.
- Neville, Dan.
- Nolan, Derek.
- Noonan, Michael.
- Ó Ríordáin, Aodhán.
- O'Donnell, Kieran.
- O'Donovan, Patrick.
- O'Dowd, Fergus.
- O'Mahony, John.
- O'Reilly, Joe.
- Penrose, Willie.
- Perry, John.
- Phelan, John Paul.
- Quinn, Ruairí.
- Rabbitte, Pat.
- Reilly, James.
- Stagg, Emmet.
- Stanton, David.
- Tuffy, Joanna.
- Twomey, Liam.
- Varadkar, Leo.
- Wall, Jack.
- Walsh, Brian.
Níl
- Adams, Gerry.
- Boyd Barrett, Richard.
- Broughan, Thomas P.
- Calleary, Dara.
- Collins, Joan.
- Collins, Niall.
- Colreavy, Michael.
- Creighton, Lucinda.
- Crowe, Seán.
- Daly, Clare.
- Doherty, Pearse.
- Donnelly, Stephen S.
- Ellis, Dessie.
- Ferris, Martin.
- Fitzmaurice, Michael.
- Flanagan, Terence.
- Fleming, Sean.
- Fleming, Tom.
- Grealish, Noel.
- Halligan, John.
- Healy-Rae, Michael.
- Higgins, Joe.
- Kelleher, Billy.
- Lowry, Michael.
- McConalogue, Charlie.
- McDonald, Mary Lou.
- McGrath, Finian.
- McGrath, Mattie.
- McGrath, Michael.
- McGuinness, John.
- McLellan, Sandra.
- Martin, Micheál.
- Mathews, Peter.
- Murphy, Catherine.
- Murphy, Paul.
- Naughten, Denis.
- Ó Caoláin, Caoimhghín.
- Ó Cuív, Éamon.
- Ó Fearghaíl, Seán.
- O'Brien, Jonathan.
- Pringle, Thomas.
- Ross, Shane.
- Shortall, Róisín.
- Stanley, Brian.
- Timmins, Billy.
- Tóibín, Peadar.
- Troy, Robert.
- Wallace, Mick.
Tellers: Tá, Deputies Paul Kehoe and Emmet Stagg; Níl, Deputies Seán Ó Fearghaíl and Pearse Doherty.
Question declared carried.
In accordance with Standing Order 140, I would be obliged if the Ceann Comhairle would direct the Clerk to make the following minor drafting corrections to the text of the Bill: on page 48, line 15, to substitute (I) for (A); on page 48, line 18, to substitute (I) for (A) and to substitute (II) for (B); on page 130, line 23, to substitute "or rescission" for "rescission"; and on page 130, line 27, to substitute "or rescission" for "rescission". These changes are being made in the interests of textual clarity and do not affect any substantive amendments.
I take it the House is agreeable to the Minister's corrections.
This Bill, which is certified to be a money Bill in accordance with Article 22.2.1° of the Constitution, will be sent to the Seanad.