JOINT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE díospóireacht

Business of Joint Committee.

Chairman

The first item on the agenda is the minutes of the meeting of 5 October 2005, a draft of which has been circulated. Are the minutes of 5 October agreed? Agreed.

In regard to matters arising from the minutes of our previous meeting, we deferred to this meeting consideration of a letter to the Chairman from an individual taxpayer who is dissatisfied with the treatment of his case by the Ombudsman and the chairman of the Revenue Commissioners. It is correspondence item 2005/0163. Have members had an opportunity to read the correspondence from the taxpayer? I do not want to mention his name because we are in public session and the person concerned is entitled to confidentiality but as we are dealing with correspondence and matters arising from the minutes of a public session——

Deputy N. O’Keeffe

Has it been circulated?

Chairman

It has been circulated. I can give the Deputy an additional copy. It is item number 2005/0163. It was circulated for the previous meeting and we deferred consideration of it until today.

Deputy Ó Caoláin

You will be aware, a Chathaoirligh, that this case has been an ongoing matter for address by this committee. Despite our best efforts as a committee, the situation we have reached is stated by the Minister for Finance in his reply to us dated 11 July 2005 regarding this case. In that reply to our detailed submission to the Minister, Deputy Cowen, he indicates that it is, in his view, inappropriate for him to intervene given that both the Revenue Commissioners and the Ombudsman consider the case to be closed. I have read the taxpayer's further missive to this committee and have to say one can only admire his stoicism and tenacity. It must be noted that there is €300,000 of his tax involved in all of this, since he has received only a 50% compensation payment so far. In any of our situations that would be an incentive.

Taking note of the correspondence the Chairman referred to as 2005/0163, I must sadly conclude that as a committee we have probably exhausted the efforts we can employ to win either address or redress of the issues raised. I believe we should write to the Minister for Finance——

Chairman

Again?

Deputy Ó Caoláin

——again to advise that we remain unhappy with his position not to intervene and to request that he re-examine all of the information. It is possible to cite precedence in regard to the redress of an income tax issue that was addressed previously and saw a Minister and the Houses of the Oireachtas take a position which resulted in a change of heart on the part of the Minister. Ultimately, that is how it transpired. It may not be an exact analogy but a precedent exists. I appeal to the Minister to take on board the strong discomfort I and members of this committee have reflected regarding this case. I ask that he revisit his decision as communicated on 11 July.

While making that further appeal to the Minister, we should also write to the citizen and outline, truthfully and honestly, that, as a committee without compellability powers regarding any action by the Minister, the Ombudsman or the Revenue Commissioners, we have exhausted every avenue open to us in pressing for further action in this case. We should ask the correspondent to note that and tell him that we appreciate that any other avenue of address open to him is an alternative for him in the future. I do not believe that we should string him along, which would be unfair, by giving him a false sense that we can make further progress. We cannot. Our last throw of the dice, so to speak, is a further appeal to the Minister at this late stage to reconsider his position of 11 July.

I propose that two items of correspondence should issue from today's meeting, one to the Minister, as I have described, and one to the individual taxpayer and correspondent. The latter should be forthright and clear.

Chairman

Does the Deputy agree that we should forward a copy of the letter we received from the taxpayer with our letter to the Minister so that the latter will appreciate the former's position? We can enclose it with our letter.

Deputy Ó Caoláin

Absolutely.

Deputy P. McGrath

This item constantly recurs on our agenda. We are now in public session and it is appropriate that we give a brief outline to journalists, who might not have been following the case, of what occurred. This involves a taxpayer who was in dispute with the Revenue Commissioners about the amount of tax he owed. He referred his case, as he was entitled to do, to the Ombudsman. The Ombudsman reviewed the case and the paperwork associated with it and received presentations from the Revenue Commissioners about it. The Ombudsman arrived at the independent view that this taxpayer should be paid €600,000, some in compensation and some to refund tax, that had been wrongfully collected.

A strange thing happened. The Revenue Commissioners said they would not pay it. They then took the option of horse-trading where the Ombudsman, in effect, said, "If you are not going to pay €600,000, what will you pay?" Eventually they arrived at a figure of €300,000. The taxpayer had no involvement. This was done over his head and without his agreement. He subsequently received a cheque for €300,000. Some people might be of the view that he did not do too badly in that he got a refund of €300,000. However, the independent review decided that the amount should be €600,000. Everybody respects the decisions made by the Ombudsman but in my 16 years in the Oireachtas, I have never seen a recommendation or an award from the Ombudsman being overturned or set aside in that way.

What would happen in the opposite situation? The Chairman is an accountant and has worked in this area for a long time. If the Revenue Commissioners raised an assessment against him for €300,000, would they set that aside and embark on horse-trading with him and accept what he offered? It does not work that way. Consider the case of a big company that has the wherewithal to take a legal action against the Revenue Commissioners. What would happen in that case? The company would get its pound of flesh plus its legal costs. This case involves a taxpayer who does not have the resources to take a legal case. He took the route that is followed by ordinary individuals who do not have the resources to take legal action, namely, the Ombudsman, but his award was not honoured. Is that not a terrible injustice? The Minister for Finance, like his predecessor, has run away from this matter.

This raises a question about the independence of the Ombudsman, the competence of the Ombudsman to reach decisions and make awards and confidence in the institution of the Ombudsman. This is not right. An injustice has been done to this taxpayer. I note Deputy Ó Caoláin's proposal that the committee write to the Minister again but what stronger action can we take? The wish of this committee is being ignored. Is it in our power to bring a motion before the Dáil to the effect that the committee recommends that the recommendation of the Ombudsman be followed through and delivered upon? We should take that type of stern action because the Minister and the Department of Finance are giving us the back of their hand. They do not care what the committee says.

We should pursue how we can make definite progress on this matter. It is not something we should allow to be set aside. It is unprecedented in all the years I have been a Member of the Oireachtas. Perhaps we should obtain advice on sending an agreed motion from the committee to the floor of the House.

Chairman

Where will we conclude on this? Will we proceed with the option suggested by Deputy Ó Caoláin of writing again to the Minister and to the taxpayer? Is Deputy Paul McGrath saying that we should reserve the other alternative?

Deputy P. McGrath

We should review the option. Perhaps the clerk would review the options available to the committee and examine whether it is possible to send a motion to the Dáil. The clerk could advise us at the next meeting. We could then decide on the best way to proceed.

Deputy Ó Caoláin

To give Deputy Paul McGrath's suggestion every opportunity and a fair wind, perhaps the letter to the individual taxpayer could be put on hold until we get a report from the clerk as to what means might be open to the committee to bring such a motion before the Dáil. I am not aware of such a means. In my short number of years in the Oireachtas, I do not recall any such precedent. However, if such a facility is available to the committee to pursue, I am open to it.

There is a schedule here. We postponed dealing with it on the previous occasion. It is on the list and I am sure we will come to all the items the Deputy has in mind.

The first item is the fax to the clerk from the Arts Council regarding attendance at the committee's meeting on 21 September 2005. We note that. The next item is an e-mail to the clerk from George Treacy, head of the consumer protection codes department, IFSRA, regarding a letter from the chairman——

Deputy Bruton

Forgive me if I am wrong but it seems an extraordinary reply. This relates to our interest in the position of people with endowment mortgages. I understand the UK has deemed that some of the mortgages were missold and, as a result, some of the companies involved have shouldered part of the cost. We held off having hearings on this issue on the basis that the regulator was carrying out a survey. My recollection is that it was to be completed by last July but we got a strange letter stating that delays in fully responding are largely due to difficulties in reconciling and analysing relatively poor quality information available and the intervening holiday period. It stated that it is currently drafting a response to the request letter and hopes it will issue shortly.

We are not even getting a promise that a proper survey will be presented. We are just being told to wait even longer. We need to get a fairly straight answer as to what exactly is happening. Is a detailed survey still going on? Is it effectively abandoning the survey which was to be carried out? Many people felt there was some injustice in the way this happened. Perhaps circumstances here were very different from those in the UK and one could not contend that endowment mortgages were missold. However, my recollection is that the products were largely similar in the two jurisdictions. The only difference is that there was a lower take-up here than in the UK.

I am not satisfied. It is nine months since we expressed an interest in looking at this issue and we have been holding back on it. Perhaps the clerk could contact IFSRA to discover whether a report will be presented so that we can be satisfied as to whether there was fairness. Is it backing off presenting such a report?

Deputy N. O’Keeffe

I support Deputy Bruton. This issue has been around for a long time. One of the British mutual companies is now moving into the private market and I understand it has had some negotiations with IFSRA. I received telephone calls from people who are policyholders in Standard Life, the company concerned. It is a large Scottish mutual company which is very reputable and able. The policyholders have told me it will not be able to move into the private market next year because of the delay in the investigation by IFSRA. On one hand, it is creating hardship for policyholders who want the company to demutualise and to move into the private market while, on the other, it has not completed an investigation.

Chairman

It only came to us at the end of September with less than a week's notice of the particular conference. There was nothing we could do about it.

The next item to be noted is the legislative programme for the current Dáil. The Development Bank Bill is scheduled and it may come before this committee in this session.

The next item to be noted is a fax from CORI regarding its attendance at the committee on 5 October. CORI has indicated that it is available to attend on that date. I suggest that, like last week, we hold a 9.30 a.m. meeting on Wednesday with a view to finishing early. CORI indicated that it is available next Wednesday morning. It will be somewhat similar to the meeting with the Arts Council, which will facilitate members seeking to go to the Chamber afterwards. I am sure the meeting will be over by 11 a.m. at the latest. Is that agreed?

Deputy Burton

Will the meeting start at 9.30 a.m. or 9 a.m.?

Chairman

It will be at 9.30 a.m. We cannot meet at 9 a.m. It will be a meeting like the one with the Arts Council in which we give members an opportunity to speak before they must leave.

While I am on the subject, I propose that IBEC and ICTU, and possibly the Construction Industry Federation, CIF, if it is available, come before the committee on Wednesday, 26 October, on these tax reliefs and exemptions. That will be two weeks from today in our regular slot.

Ms Burton

Will that be at 3 p.m.?

Chairman

Yes, that is our regular afternoon session. We will try to meet a couple of groups on that day. On Wednesday next, we have a morning meeting with CORI and two weeks from now our meeting with the other groups will take place in the regular afternoon slot.

That neatly brings us to the letter from Deputy Burton, reference No. 2005/0187, on the issue of tax breaks in the health and education areas in which she requests that the committee invite the Tánaiste and Minister for Health and Children and the Minister for Finance to come before the committee. All I will say is that it is not reasonable to expect the Minister for Finance to discuss tax reliefs and exemptions with the committee in the run-up to the budget.

Deputy P. McGrath

I came across an important issue the other day when asking a question on nursing homes. When many of these structural tax breaks are given, for example, for nursing homes, neither the Department nor the Revenue knows how many have claimed tax breaks even though it has been in place since 1997. However, the Minister told the committee how many extra beds have been provided by use of these tax breaks. An interesting issue arises, as the Chairman, through his profession, will be aware, namely, that if the structure does not continue as a nursing home for ten years from when one claims the tax breaks, the claimant must repay all the money gained by virtue of the tax break as far back as year one. If Revenue does not know what money has been claimed on the nursing homes, how can that be enforced? If a nursing home closes, how can the Revenue trace back what has been paid? Is the law an ass in that regard in that we have built into it that a person must operate such a facility for ten years to avail of the tax break and yet we cannot trace what tax breaks have been claimed on the facility? That is ludicrous. Has the Minister a case to answer in that regard? Does the Chairman agree that it is important to get the Minister to come before the committee to answer that specific case and similar ones?

Deputy Burton

The reason I asked that the Tánaiste and Minister for Health and Children and the Minister for Finance should answer to the committee is that this is a policy which is being developed on the hoof at present. If the committee invites the Secretaries General of the two Departments to come before it, we will be told that, because this is a matter of evolving and developing Government policy, they are not in a position to comment in any substantial way. Prior to Mr. Kevin Cardiff of the Department of Finance coming before the committee a couple of weeks ago, the committee received an advisory memo stating that while he could talk to us, he could not stray outside a strict remit because he was on order from his Ministers to follow a certain policy line. If they are not in a position to answer the policy questions, what is the point of inviting civil servants from either Department to come before us?

These are policies decided politically on budget day which have never been costed or evaluated. I have been asking these questions for the past couple of years. There are nursing home reliefs which allow the establishment of nursing homes with substantial tax benefits around the country. In my constituency, some of those nursing homes are in remote areas with no bus services, local shops or pubs. The persons who go into these nursing homes are in some ways facing potential life sentences if their families do not come near them. However, we provide tax breaks for that.

We now have statements accumulated from the Tánaiste and Minister for Health and Children that she will seek to sell public hospital land to establish private hospitals, which will receive significant tax breaks. According to various stories in the media, people are queuing up to invest in them. We have no idea of the implications. We have been told that the origin of this particular tax break was a letter two or three years ago to the Minister for Finance from a doctor in his constituency, following which the Minister decided to grant a tax break. The people who are the policy makers in this instance are the politicians, specifically the Minister for Finance and the Tánaiste and Minister for Health and Children. They should come before the committee, along with a couple of the people I mentioned such as Dr. Maeve-Ann Wren, who is the recognised author on Irish health service economics, and Dr. Sheehan, who is the founder of a private hospital and a private hospital provider with an interest in the sector. I am sure fellow members could suggest others who might appear.

The only additional provision the Tánaiste and Minister for Health and Children has had to offer for the health services and the hospital sector is private tax-incentivised investments. It has significant implications for the health system. The committee is entitled to ask the people who designed the policy to tell us the implications they have worked out. If the Chairman is refusing to call the Minister for Finance and the Tánaiste and Minister for Health and Children, he is protecting them. The Minister for Finance comes into the Dáil only three to four times per session for Question Time on the Department of Finance. In other words, he spends two hours in the Dáil, during which he answers questions. By and large, he only comes before this committee for Committee Stage of the Finance Bill and he appears on budget day. We are asking for more accountability. While he is off giving speeches and availing of photo opportunities with this, that and the other person, his job is to come here to talk to the committee about how he makes policy and to defend this area of policy that he is evolving.

Deputy N. O’Keeffe

The argument has some relevance. Today I have seen a substantial offer of seaside schemes, of which there are 42 in my constituency in Youghal, County Cork. That was brought about by a tax break. The committee knows of the requirement for acute hospital beds. Tax breaks are effective and efficient and can facilitate great work but we could finish up with wastage, which could upset the economy and the tax-paying public. Private hospitals are beginning to mushroom like hotels. One must impose efficiency and cost effectiveness in that area. That is my tuppence worth on the matter.

Deputy Bruton

It is not desirable that the committee should divide along party political lines on a matter of this nature. There is a serious issue at stake here. I understand what the Chairman is saying, namely, that the Minister is drawing up a budget, that it is difficult to expect him to come before the committee and that if he does, he will probably say that he cannot comment on anything. On the other hand, the members of the committee stand as the guardians of taxpayers' interests. The committee is expected to see the Finance Bill, published after Christmas, in late January or whenever. At that stage, we will have 20 days or less to get it through. We will then end up with a Committee Stage debate which is a series of truncated discussions where, typically, 80% of the Minister's proposals will not be reached.

The committee needs to decide what it will do to shape tax policy. If what we are doing is no more than what used happen a few years ago, where a heap of pre-budget submissions came before a committee whose members listened wisely, nodded their heads but knew they could do nothing about them, then it will be a waste of time meeting the Combat Poverty Agency, IBEC, ICTU or any such organisations because we have no authority and we will not be able to exercise a role. The time has come for us, as the key committee dealing with tax strategy and tax policy, to start asserting ourselves.

It is not good enough that Ministers think they can appear before the committee each February with 300 proposals that must be agreed within a deadline of ten or 15 days in order to get them through and say that the committee should sit until midnight on each of those days or the proposals will otherwise go through on the nod. That is no way to run a railway. The history of this process is that many decisions have been rushed and that people subsequently regretted that they were not properly evaluated. They sometimes did not know where the proposals fitted into public policy and wondered whether this was the correct way, for example, to run a nursing home, hospital or stallion regime.

There comes a time where we must say that we want to shape tax policy in a serious way and that we want non-partisan discussions with the Minister, as a key policy maker, included. Perhaps the Chairman is correct that the committee will not be able to do that before the budget is announced but we must be able to conduct analysis on issues as serious, for example, as what role tax relief will play in the development of health policy. That is an important policy issue and we must get a handle on it because we are the committee that will hold back the tide on it. We are in somewhat of a dilemma and the committee needs to develop an improved approach to its business in this regard. I am sure the Chairman will agree that debate at this committee is a joke. Many proposals are never even considered and we do not have the time or opportunity to hear and assess the options.

Deputy C. Murphy

The process of inviting groups to appear before the committee to discuss tax breaks is a strange exercise if we do not properly evaluate which new tax breaks will be introduced and convince ourselves that the correct approach is being taken. We will end up engaging in the same exercise in two or three years. Many confusing messages have emerged in the recent past regarding the health services. Professor Drumm of the Health Service Executive stated that there is no need for significant numbers of new beds. The implementation of the Hanly report is also an issue. Many elements, including the appropriateness of tax breaks, are in the mix. The proposal to consider this issue now and engage with those directly involved is sensible and I support it.

Deputy Ó Caoláin

It is not long since the Minister was asked by the committee to indicate the cost to the Exchequer of tax reliefs that are in situ but neither he nor the Revenue were in a position to furnish us with the information. This morning’s newspapers report that €350 million was lost to the Exchequer under the seaside holiday home development scheme between 1996 and 1999 at a specified number of locations.

We have no information regarding private hospital and health care provision, which the Tánaiste is keen to develop. I support the contention presented by Deputies Burton and Bruton that we need to engage with the Minister and the other identified interests. Deputy Catherine Murphy alluded to a key issue, namely, the embargo on recruitment to the health services, which is creating major problems. A number of sectors are experiencing difficulties bringing in key personnel. The embargo does not only relate to the Civil Service, it is manifest also in a number of areas in the health service. These issues need to be addressed. We need to establish if moneys are being properly spent in these areas. If not, the reforms in situ need to be reformed.

Chairman

Is it agreed that we will first invite both Ministers to appear to discuss tax expenditure and exemptions in the health sector?

Deputy Burton

I specified in my letter the critical reliefs. These relate to private hospitals, sports injury treatment centres and nursing homes. While the Minister for Finance may have a problem with this, it is incumbent on the Tánaiste and Minister for Health and Children to appear before the committee to give us an understanding of whether her Department has costed the proposals for private hospitals and conducted a cost benefit analysis. Perhaps consultants will be engaged to do this. Based on material emanating from the media and tax practitioners, there is significant interest in investment in these institutions. The tax forgone under the proposed scheme will be many multiples of the amounts forgone under the seaside scheme because the cost of building a private hospital is expensive. Most of the proposed hospitals will only provide 100 beds and will contravene many aspects of the Hanly report. No indication is given as to whether 24-hour care will be provided. Surgical procedures are mentioned and, therefore, State hospitals will be left for the use of the poor and the elderly. A detailed cost benefit analysis should be provided by the Tánaiste and Minister for Health and Children. She should also outline her dealings with the Department of Finance on the cost of these tax reliefs. The nursing home relief has been in place for a number of years, with diverse results. Have the Departments examined how the relief has affected nursing home provision? We have been informed that a specified number of beds has been provided but, for example, Leas Cross was a large extended nursing home which fell well short in terms of proper standards of care. This tax-driven policy has important social considerations.

Chairman

There is a consensus to invite both Ministers to attend the committee and I will proceed on that basis.

The next letter was sent by the Clerk of the Dáil to the clerk to the committee regarding the change of membership. We welcomed Deputy Catherine Murphy at our previous meeting.

The next item is a fax to the clerk from the Arts Council regarding attendance at our last meeting. That is history.

The next item is a letter about the Combat Poverty Agency annual report launch, which we have all seen. I propose that we note it. The agency will appear before the committee shortly.

The next item is an e-mail from the Construction Industry Federation regarding its delegation's attendance at a meeting on 12 October. The delegation hopes to appear on 26 October but that is subject to confirmation.

I received a letter from the clerk to the Sub-Committee on European Scrutiny regarding proposals to be referred to the committee. I propose to defer their consideration until a future meeting.

Deputy N. O’Keeffe

What about correspondence from the banking institutions?

Chairman

That is almost the last item of correspondence. The next item refers to a statutory instrument, Disabled Drivers and Disabled Passengers Tax Concessions (Amendment) (No. 2) Regulation. It is a commencement order for 2005, which we will note.

The next item is a letter to the Chairman from the Minister for Finance regarding non-residency rules. That was sent by the Department, unprompted, following our previous meeting.

Deputy Burton

This issue is linked to our earlier discussion. The Minister, in reply to a parliamentary question I tabled, amended, to some extent, what he had said previously. The Taoiseach indicated in the House that the non-residency rules were the subject of review, implying that they were included in the review of tax breaks. That is not the case. Nonetheless, the Minister for Finance states that he has asked the Chairman of the Revenue Commissioners to monitor the application of the non-residency rules and to provide a report in that regard. I tabled a parliamentary question on this issue. Excluding his budget presentation, the Minister for Finance only comes before the Dáil on three or four occasions per session. The opportunity to have any dialogue with the him is, therefore, limited. He confirmed to me that the operation of the non-residency rules means that one can leave the State at 11.55 p.m. and return shortly thereafter. The length of time people must be out of the State is not specified; they simply have to be out of it by midnight. This is something that deserves a fairly detailed examination by the committee. We need to talk to the Revenue Commissioners about the matter. They have already said that some people live here all the time but are non-resident for tax purposes. This aspect must be explored.

Chairman

We will deal with exemptions as part of the committee's current work programme.

The next item is a letter from the private secretary to the Ceann Comhairle enclosing correspondence received from the European Parliament for the committee's attention. I am informed that this matter is more appropriate to the Joint Committee on Justice, Equality, Defence and Women's Rights. Can we move on?

Deputy Ó Caoláin

No. This matter was addressed at that committee. I understand it was advised that there should be no representation at this meeting which deals with improving parliamentary scrutiny of judicial and police co-operation in Europe. While it is more appropriate to the Joint Committee on Justice, Equality, Defence and Women's Rights — at which we raised the matter — the issue to which the President of the European Parliament draws our attention is one that should be of concern to the Houses of the Oireachtas because it impinges on the whole area of justice and policing and addresses concerns in regard to co-operation. From a cursory examination, there appear to be serious civil liberties implications. It is my view that this matter should be revisited and that there should be representation from the Houses of the Oireachtas at the forthcoming event in Brussels.

The event will take place in a month's time. If members have a keen interest, they should report back to me at the meeting next Wednesday. Members have until next week to consider the matter.

The next item is the National Women's Council of Ireland pre-budget submission, which we should note. We will postpone any further scrutiny of EU items until a subsequent meeting. The last item is S.I. No. 612, regarding the Central Bank and the approval scheme of AIB capital markets with Allied Irish Banks plc. This is noted, as there is nothing of significance in it.

Following a long schedule of correspondence, I propose that we should move on immediately to the main item of business dealing with the review of tax reliefs and exemption for high earners. There will be a discussion with the Combat Poverty Agency.

Sitting suspended at 4.06 p.m. and resumed at 4.07 p.m.

JOINT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE díospóireacht - Wednesday, 12 Oct 2005

Business of Joint Committee.

JOINT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE díospóireacht -
Wednesday, 12 Oct 2005