Before we commence the Finance Bill, 1988, Committee Stage, I want to inform the House that recommendation No. 19 has been ruled out of order as it involves a potential charge upon the Exchequer. I have arranged for a list of the proposed grouping of the recommendations to be circulated for the information of all Senators. In addition, Senators will be aware that there are two lists of recommendations before the House, namely, the printed list and the list of additional and substitute recommendations.
Finance Bill, 1988 [ Certified Money Bill ]: Committee Stage.
On the ruling out of order of recommendation No. 19, while I accept your ruling, of course, and understand now the reason why you considered it was not appropriate, I was disappointed that the Minister had not introduced the possible Financial Resolution which would have put it in order and it would have addressed the problem of derelict sites. This is my sole concern.
If you accept my ruling I do not think we can have a debate on it.
Yes, but the Minister is present and I am availing of the opportunity to bring to his attention the matter of derelict sites. He has the power by way of Financial Resolution to do this.
SECTION 1.
Recommendations Nos. 1 to 6, inclusive, are related and Nos. 7 to 12, inclusive, are consequential. If recommendations Nos. 1 to 6 are not accepted, recommendations Nos. 7 to 12 cannot be moved. I am taking recommendations Nos. 1 to 6.
On the section in general, could I ask a question before you actually take the recommendations?
We will take the recommendations first and then we will take any questions, no matter how long you want to go on. Senator Ferris to move recommendation No. 1.
Shall I move all the recommendations together?
You will move the first one and you can discuss all the others, Nos. 2 to 6, inclusive, with it. They are related, and Nos. 7 to 12, inclusive, are consequential. You are on recommendations Nos. 1 to 12. If you get bogged down, which you rarely do, I will help you.
I know you will and I will try to be helpful to you as well. I move recommendation No. 1:
In page 7, paragraph (a), line 19, to delete "£5,500" and substitute "£6,000".
In recommendation No. 1 to section 1 on page 7 of the Bill, it is suggested that the figure £5,500 be deleted and substituted by the figure of £6,000. This is in line with an amendment which we moved in the other House which was not accepted but it still does not remove the principle involved in the recommendation. We seriously put it forward to the Minister for consideration. It deals with a specific group of people who now find themselves threatened by the tax net if we do not keep these guidelines or allowances at this level. These are the kind of people about whom the Minister and most of the Opposition passed favourable comments. We find that this group of people are now coming into the area of the tax net and they are people that we never intended to be seriously considered as taxpayers under the PRSI and PAYE nets.
We have found from experience that people who are included in this category, like single people, widowed persons, or people of certain age groups are now paying quite a considerable amount of income tax. They are old age pensioners who have other small incomes from their late husband's employment with local authorities, forestry and various other public service jobs and they also have qualified for contributory old age pensions and there are people, to my own personal knowledge, in the high eighties who, unbelievably, are now paying income tax. These recommendations are an effort to push up the allowances that are applicable to people in that specific category, particularly people in the old age categories. They just do not understand why this Government or, indeed, any Government have seen fit to tax them on what are in fact pensions that their late husbands had worked hard for and contributed towards all their lives. They are added to the social welfare income. Both are bulked together for income tax purposes and these people find themselves paying a considerable amount of income tax out of their other pensions.
I think the principle of all incomes being considered for tax purposes is fine but there must be exclusions for particular categories. The Minister in the budget has recognised that there was a special case to be made for these people but we are suggesting that the figures to which he has increased the allowances in the Finance Bill are not at all in accordance with what we consider reasonable. The figures we have suggested here are not unreasonable. We have not just pulled a figure out of the air, so to speak, and decided to round it up from £5,500 to £6,000 in page 7, paragraph (a) line 19. That is a specific figure that we feel would just remove the anomaly that has now come into these categories. I do not think our proposals are unreasonable. I hope the House will agree with this recommendation and that the Minister will see the argument we are making as reasonable, particularly for the categories that I have described.
Recommendations Nos. 1, 2, 7 and 8 propose to increase the general exemption limits as set out in the Bill by £500 for married couples and by £250 for single and widowed persons. Acceptance of these recommendations would result in an additional cost to the Exchequer of £4.5 million in 1988 and £7.6 million in a full year and would exempt some 10,600 taxpayers from the tax liability. Recommendations Nos. 3, 5, 9 and 11 propose to increase the age exemption limits as set out in the Bill by £500 for married couples and £250 for single and widowed persons aged 65 years or over but under 75 years. Acceptance of these recommendations would cost the Exchequer £1.4 million in 1988 and £2.1 million in a full year, while some 4,200 taxpayers would be exempt from tax liability as a result. Recommendations Nos. 4, 6, 10 and 12 propose to increase the age exemption limits by £500 for married couples and £250 for single and widowed persons aged 75 years or over. If these recommendations were to be accepted it would cost the Exchequer £400,000 in 1988 and £600,000 in a full year and approximately 1,200 taxpayers would be removed from tax liability. The total cost to the Exchequer of recommendations Nos. 1 to 12 combined would be £6.1 million in 1988 and £10.3 million in a full year and a total of 16,000 taxpayers would benefit.
As indicated in my reply to similar requests in the Dáil, section 1 already provides generous increases in the exemption limits: £200 in the case of a married couple under 75 years of age, or £100 in the case of a single or widowed person in this age category; £250 in the case of a married couple where either spouse is aged 75 years or over, or £125 in the case of a single or widowed person in this age category. These increases and the associated marginal relief will cost the Exchequer £2.3 million in 1988 and £4.1 million in a full year and will exempt a total of 9,100 persons from liability to income tax. A further 33,200 will have reduced liability because of the operation of marginal relief as a consequence of the increases. The increases in the exemption limits provided for in section 1 of the Bill are the most generous that can be afforded at this time especially as other significant reliefs — the increases in the rate bands and the main personal allowances and the renewal of the PRSI allowance, beyond that promised in the Programme for National Recovery— are provided for in the Bill and in those circumstances, as I said in the Dáil in reply to similar requests, I cannot accept the recommendations.
The Labour Party recommendations as outlined are laudable in themselves. I would dearly like to see the kind of increases proposed but it is somewhat disingenuous of the Labour Party to bring forward suggestions such as this, laudable and all as they are, without indicating where the substantial sums which the Minister has said they will cost will come from. These increases in allowances have to be financed and the onus is very firmly on The Labour Party to state how the money can be obtained. Are they talking about additional expenditure cuts? I would think they are. Are they talking about broadening the tax base? Have they themselves costed these proposals? Any suggestions like this coming forward should be more specific. We do not live any longer, I contend, in an age of populist politics and these amendments brought forward without solid backing, sound costing and specific suggestions, fall into the realm of populist politics. So, while I would like to see these measures introduced, without the background and the context in which I speak I cannot go along with them.
I thank the Minister for responding to our recommendations. We realise, because we had also done the costings on them, that they would cost about £10 million. We have no problems whatsoever because they are specific categories of people in which everybody, including Fine Gael, have avowed a special interest. Indeed, if we talk about populist policies Senator Bulbulia's party published such a populist policy document in the last couple of days with no costings whatsoever. At least we were being specific in requesting that the allocations would be made to a particular category of people who are certainly disadvantaged at this time and who have already suffered from savage cuts through lack of allocations for funding in the capital programme and in the health estimates and all the others to which Fine Gael have acceded.
We are being specific. We picked out a category of people we feel would and should benefit from recommendations like this. We accept, of course the figure presented by the Minister of £10.3 million as the cost of conceding this proposal but the Minister has himself confirmed the argument here because he has made some adjustments in the Finance Bill to cater for this category of taxpayer which all of us agree is possibly stretching the whole concept of PAYE to its very limits. We are now taxing people aged 65 and over and under 75, and then 75 and over and under 80, whose husbands worked all their lives and who now have outside pensions apart from their social welfare pensions. Of course the concessions have to be funded and, of course, we would suggest that the tax net should be broadened to accommodate this, but is that not what Fine Gael have been suggesting in the last couple of days, that we should broaden the tax net to do this?
I am sure the Minister has his own views on this because his party are on record as saying that if you suggest options in a tax programme, you must cost it. At least we were doing it specifically in the budget. We were making a recommendation that was ruled out of order because it would impose a charge on the Exchequer. This was one way in which you could help to fund this kind of desirable social policy in the area of tax. We are also suggesting here a change in the farm tax system which we feel would have brought in additional funds for the Minister. However, the responsibility for all these matters lies with the Minister and it is our responsibility in the Labour Party — and no other party will take it from us — to point out particular areas in this category we feel are disadvantaged and need to be recognised by the Minister of this minority Government and by any other party who might want to support them in Government. We in the Labour Party are concerned about these categories. We feel that injustices are being done. We feel they are paying more than their fair share to survive in a system of cuts in areas in which they need assistance and services like health care.
I have no apology to make to anybody for doing what we consider is our social responsibility to make the Minister aware of the position. He accepts himself that he has a concern in this area because he increased these limits. What we are saying is that the increases are not enough for this category. The Minister has the purse strings: he can decide which other sector can be asked to pay a fair share. I said in my Second Stage contribution to this Bill that we are in favour of a programme of re-assessment of what income tax is all about and what tax people are expected to pay to the State. We find an inability by some people to consider that there anomalies. We consider there are anomalies, in particular in these categories of disadvantaged people on relatively low incomes. Unless we keep indexing their allowance bands and increasing their allowances, they will find every other day, with small increases in social welfare and indexed linked increases from their pension funds from county councils and otherwise, that they will be paying more and more tax.
The fact that there are only 16,000 beneficiaries of this proposal indicates that the number of people is fairly confined but that does not remove the anomaly because among these 16,000 people there are many older people who have made a major contribution to the economic life of this country for well nigh a half century. We feel, at least, that we have a responsibility to highlight what we consider is the plight of those people. The fact is that 16,000 people pay to the Exchequer £10.3 million — that is what the Minister has costed these recommendations at and that is the kind of imposition we have made on people in the old age categories. Why should anybody have to apologise for putting that kind of case to the Minister for Finance in a democracy, in which there is at least a socialist voice that is prepared to state its case unequivocally, in and out of Government, and we continue to do that.
May I make a point in support of Senator Bulbulia that, if the Labour Party wish to do what they are suggesting in these recommendations, they should indicate to us where the money is to come from. They should be consistent. The fact is that when they were in Government they gave miserly increases to social welfare recipients. Not alone did they give miserly amounts but rather than giving them in April and July, as was the tradition with the Fianna Fáil Governments over the years, they put the increases back as far as they could, to November. I am making the point that they had their chance to be magnanimous but failed, when in Government.
I would just like to say in reply to Senator Ferris that nobody asked him to make any apology for putting down this list of recommendations. He is, of course, quite entitled to do so and in principle I would support giving increases to the categories of people he mentioned. I have found the Labour Party to be very long on analysis but very short on specifics in relation to suggestions and hard information as to where money is to come from.
I gather from what Senator Ferris has said that the Labour Party are in support of broadening the tax base in order to fund this kind of increases. I assume he is opposed to further expenditure cuts in order to fund them since his party are opposed, it would appear, to all expenditure cuts. I would invite Senator Ferris and his party to join with us and other interested parties in sitting on an all-party committee to discuss how there can be meaningful reform of our tax system in order to give these very people the type of increases which these recommendations suggest and, indeed, which I believe they are entitled to. Senator Ferris should not feel that on my own account or on anybody else's account he must apologise for putting down these amendments. He certainly should not.
Nobody should ever apologise for putting down things that would help the community outside and that is why section 1 is doing just what is proposed by the Government in the budget. We are doing that and doing what we can afford in the context of the budgetary constraints of this year. We did show our concern and the difficulties of elderly persons are recognised in the tax code by increased exemption, according to the appropriate age allowances. Deputies and Senators know that well. What we have done in this range of allowances is spend the kind of money we have available in the context of the overall budgetary position.
Is recommendation No. 1 withdrawn?
No.
I would like to respond to what was said previously by Senator Fallon about the social welfare increases during the terms of the previous Government. I want to put it on the record that the only country in the EC where increases in social welfare stayed ahead of inflation was this country, under Deputy Barry Desmond as Minister for Social Welfare. So the statement made by Senator Fallon was incorrect. Regarding apologising or anything else — we put down our amendments and that is it. We will pursue them and where money comes from is a matter for the Minister. Let me make one suggestion, and it will come up later on as we deal with another recommendation. Figures presented by the ICMSA would indicate that £30 million a year is spent on accountants for the processing of returns to the Revenue Commissioners for income tax and a further £10 million of State money is used in the administration of these returns. That is £40 million the Minister could very well look at.
I wonder could I get Nos. 1 to 6 and Nos. 7 to 12 out of the way and then you can speak about the ICMSA?
I was relevant there because the point has been made by two speakers about where the money is to come from. This is an area where money can come from.
Have the ICMSA agreed that they will pay it over to the Senator?
It is the State we are talking about.
That is a fairly flippant remark.
The Minister was flippant.
It is not flippant. The ICMSA are on record as saying that this is an expenditure they would prefer to go to the coffers of the State. Just because the Minister decides to make a political promise to somebody and then abolish a tax code that was set in place, does not mean it was right. It was wrong, but the Minister had to fulfil a promise. We were asked by two speakers — not by the Minister because I said it was the Minister's responsibility — where is the money coming from? We are suggesting a specific amendment which might be of assistance in that area. We are not being unrealistic. Our record in and out of Government has proved to be not alone realistic but generous. We have been blamed for creating a deficit in the balance of payments and extra borrowing. The vast majority was borrowed by this Government when they were in office.
Is recommendation No. 1 withdrawn?
No.
The question is: "That the figure proposed to be deleted stand."
Question put.
Senators
Vótáil.
The question is: "That the figure proposed to be deleted stand". On that question a division has been challenged. Will those Senators who are challenging a division please rise in their places?
Senators Ferris, Harte, Norris, J. O'Toole, O'Shea and B. Ryan stood.
The division will now proceed.
The Committee divided: Tá, 24; Níl, 6.
Tá
- Bohan, Edward Joseph.
- Byrne, Seán.
- de Buitléar, Éamon.
- Doherty, Michael.
- Eogan, George.
- Fallon, Seán.
- Farrell, Willie.
- Fitzsimons, Jack.
- Haughey, Seán F.
- Hillery, Brian.
- Hussey, Thomas.
- Kiely, Dan.
- Kiely, Rory.
- Lanigan, Mick.
- Lydon, Donal.
- McEllistrim, Tom.
- McGowan, Patrick.
- McKenna, Tony.
- Mullooly, Brian.
- Mulroy, Jimmy.
- Ó Conchubhair, Nioclás.
- O'Toole, Martin J.
- Ryan, William.
- Wallace, Mary.
Níl
- Ferris, Michael.
- Harte, John.
- Norris, David.
- O'Shea, Brian.
- O'Toole, Joe.
- Ryan, Brendan.
Tellers: Tá, W. Ryan and S. Haughey; Níl, J. Harte and B. O'Shea.
Question declared carried.
Recommendation declared lost.
Recommendations Nos. 2 to 12, inclusive, not moved.
That vote registered the view of the House on all those recommendations. I do not want to abuse the privilege of the House, but the principle is still right.
Question proposed: "That section 1 stand part of the Bill."
Could the Minister give us some further insights into his thinking on the reliefs he has given in the section, welcome as they are?
There are Senators who are not too interested in what is going on.
I would like the Minister to give us some background into his thinking on section 1. I welcome the measure but I would like to hear more from the Minister as to how he arrived at the figures. The changes between section 1 and 3 will cost an estimated £152 million in a full year and, in 1988, £91 million, whereas in the Government programme the figure was much less. I am interested in hearing more details from the Minister about this thinking in this area.
The Senator has put her finger on a very important statistic. The Programme for National Recovery suggested that about £30 million would have been sufficient in tax concessions or reliefs to honour the commitment given by the Government there last year and agreed by the social partners. Because we were in the position of keeping the budget deficit and the borrowing requirement with reasonable reductions in them for this year, it allowed us to give over £90 million of a concession this year and £152 million in a full year. We, as a Government, will continue to go along that road. I have said on numerous occasions and the Taoiseach and many spokespersons and Ministers have said that tax is too high and the contribution the PAYE sector make is enormous. When money becomes available this year it as given in tax reliefs under the various sections as outlined from 1 to 3.
Question put and agreed to.
Section 2 agreed to.
NEW SECTION.
There is a substitute recommendation to section No. 3.
I move substitute recommendation No. 13:
In page 8, before section 3, to insert the following new section:
"3. — Section 2 of the Finance Act, 1986, is hereby amended, as respects the year 1989-90 and subsequent years of assessment, by the substitution of the following Table for the Table to the said section:
‘TABLE
PART I
|
Part of Taxable Income |
Rate of tax |
Description of rate |
|
The first £5,700 |
25 per cent. |
the standard rate |
|
The remainder |
40 per cent. |
the higher rate |
PART II
|
Part of Taxable Income |
Rate of tax |
Description of rate |
|
The first £11,400 |
25 per cent. |
the standard rate |
|
The remainder |
40 per cent. |
the higher rate |
'."
As the Minister said on Second Stage, and in moving this recommendation it is important to make these points again, we must address a particular problem which we face and the greatest problem facing the country is a two pronged one, unemployment and emigration. Yesterday we talked about figures of 256,000 persons on average being unemployed during 1988 and 30,000 people emigrating annually. All of that is quite horrifying in its impact and that is the reason behind the putting down of this substitute recommendation on the part of Fine Gael.
In putting forward this recommendation I would like to summarise the Government's economic policy and we dealt at length with that in the debate on Second Stage. If the Exchequer borrowing requirement is reduced to stabilise the debt/GNP ratio this will reduce interest rates and increase business confidence. If this is paralleled by effectual sectoral strategies we will achieve sufficient growth in our economy to solve our problem. This is fine as far as it goes and credit where credit is due, but Fine Gael believe and I believe that this strategy alone will be insufficient to achieve the growth rates necessary to reduce unemployment and emigration where the figures are absolutely scarifying.
There is little or no hope of reducing unemployment and cutting emigration unless we achieve continual annual growth rates of in excess of 4 per cent of GNP. Present policy is not going to achieve this because there are a whole series of road blocks to growth which are now deeply embedded in our economy and which are not to date being tackled by Government. All our cost factors are higher than our competitors and, in particular, they are higher than those that pertain in the UK and these include wage costs, costs of energy, costs of telecommunications and transport costs.
We are bringing forward this recommendation and we want written into the Finance Bill of 1988 an introduction of the 25 per cent standard rate and a 40 per cent higher rate to income tax effected in the 1989-90 tax year. We also want cross-party consensus on the necessity of lower marginal income tax rates as a prerequisite to economic growth. In the earlier amendment I submitted, I suggested the all-party committee which would examine such a proposal. We in Fine Gael believe in being absolutely realistic and we can talk, and people have talked, for years about the necessity for reform of our tax system but we have foundered when it has actually come to implement it because it involves very, very harsh choices. The Commission on Taxation issued a report which put forward all the options before the people. So, in fact, the homework has been done. What is lacking is agreement on specifics which would allow the introduction of meaningful tax reform.
It is true to say, and I think everybody who has spoken in the Second Stage debate on the Finance Bill about our personal taxation said that it is a major block to growth. It is not so much the overall level of taxation that inhibits growth, it is the fact that people on quite low incomes are on very high marginal rates. Single persons move to an effective marginal rate of income tax/PRSI of 55.75 per cent on a gross income of about £8,500. They move to a marginal rate of 65.75 per cent on reaching a gross income of less than £11,500. In the UK, which is really not so far away and now a very inexpensive flight away, single persons there are taxed at the standard rate of 25 per cent until they reach an income in excess of £19,000 and then they proceed to a higher rate of 40 per cent.
Our high marginal income tax rates reduce the work ethic. They encourage emigration and they militate against the establishment here of overseas industries. I know the Minister supports that opinion. I am sure he would also agree that these very high marginal rates put serious upward pressure on wages. The fact that there is now a benign personal tax rate in the UK is adding to our problem. People are being pushed out of this country by adverse economic circumstances and they are going to the UK and are being joined there by people who like what they see there, in the benign personal tax situation. Therefore, our personal income tax code is a major block to growth.
Income tax reform is essential to growth and as essential as the stabilisation of the debt. The Minister has merely tinkered at the margins in relation to the reforms he has introduced in this budget and Finance Bill and we in Fine Gael want to see so much more. Many countries have attempted to reform taxation. Those that succeeded pursued a package of reforms; those that failed adopted a graduated approach and proceeded incrementally which appears to be the approach being adopted by the Government. We believe it is an approach that will not bring about the reforms quickly enough. The difficulty with the gradual approach is that in all tax reform there are those who win and those who lose. The winners pay less tax and the losers pay more and most people in this country would feel that there are more losers than winners in our tax situation.
Where reform is introduced gradually, the losers, and the pressure groups who represent them, identify their losses and they combine with opposition parties and seek to frustrate and prevent implementation of the Government's proposals. If the Government insist on proceeding with the gradual approach we will see massive pressure groups and massive lobbying and weak-kneed politicians who will succumb to that kind of lobbying and so reform will founder and it will not proceed. If the Minister insists on proceeding in that gradual way the longed for reforms just will not come about in this country and I dread to think what will happen if we do not get the reform of the tax system which is so urgently needed. The winners in this gradual approach system, those who will pay less tax, perceive the gains as being small and inconsequential and certainly not important enough to encourage them to support Government proposals. The losers win the political argument and incremental policies to reform tax grind to a halt, but where a package of proposals is presented to the public and where there is a political coalition in favour of reform and where it is strong enough to implement the proposals there is some chance of success.
This method of proceeding in this area has been successful in the United States and more recently in New Zealand and that is why we, in Fine Gael, are looking for this coalition of interest or consensus politics. We have seen it succeed in the area of controlling the national debt and of cost containment and there is no reason why it should not succeed in the area of income tax reform. The Minister on Second Stage said that an all-party committee on tax reform was, at the end of the day, "merely a recipe for fudging and indecision." It does not have to be like that. If the Government take democracy seriously, if they take parliament seriously, if they take the status and importance and centrality of all-party committees seriously, then we can have consensus in the area of tax reform, we can have a coalition of interest and we can proceed and we can succeed. Tax reform is urgent, it is vital and it is necessary.
Coming back again to the areas where the package type of approach has been successful, I would like to remind the Minister that in many individual states in the United States, particularly in Massachusetts and California, tax reform packages were underpinned in advance by statutory provision and tax reform not only succeeded in these two states but was rapidly implemented. I think people in this country are running out of patience and I do not know how long more they will stand for the gradual approach, welcome and all as the improvements are this year.
Senator Bulbulia you are not going into a Second Stage speech again?
I hope you do not think that. I will conclude by reiterating that we want to see a standard rate of income tax of 25 per cent and a higher rate of 40 per cent. Our attitude to stabilishing the debt-GNP ratio has established a consensus both nationally and within the Dáil on the question of the debt, even though the debt is still rising, but the debt-GNP ratio is improving. I would like the Minister to take on board this recommendation. It does not apply to this tax year, it is looking ahead to the next tax year and I am sure it is an objective which Government support. I feel very strongly that he would very much like to be standing before us as Minister for Finance introducing 25 per cent and 40 per cent rates of taxation.
He may be elsewhere.
It is rumoured, and rumoured very strongly, that he may be elsewhere, but nevertheless I am sure even in the context of this particular Finance Bill he would like to signal his willingness to support the kind of tax regime of which I speak.
If I wanted to be facetious I could make exactly the same criticism of this amendment as was made of mine.
You would not do that.
You can tell fairy stories to children all right and they enjoy them, but when you are dealing with taxation at this level you must talk about the facts. People will ask: "Are you really serious up there in Leinster House when you suggest something like this, admirable and all as it might be"? I am delighted, first of all, that Senator Bulbulia has removed the first amendment which she had suggested, which talked about this committee that has been taken off the board now, as indeed is the 35 per cent that she has talked about and the £5,700.
On a point of order, the 35 per cent was a misprint and the second part was disallowed under the rules of the House. It was not any willingness or enthusiasm on my part to remove it.
But the Senator has now decided on 25 per cent?
No, that was a misprint, it was always 25 per cent.
It is 35 per cent all the time?
It is 25 per cent.
I just want to see which kind of fairy story I will be telling the children.
That is unfair.
This is 25 per cent. We want to know exactly what amendment we are talking about.
There is only one before the House so you need not bother your head looking at the other one. Read the one before you on white paper in black print.
The 35 per cent and the taxation committee have gone and we are now talking about the 25 per cent. That is the one I was looking at with particular interest. We have to be very serious about what we are doing now. This is populist politics at its greatest because much as every one of us, on all sides of the House would dearly love to feel that a Minister of Finance, any Minister for Finance, could do this, the costings put on this by the Department of Finance are so spectacular that unless we agree to a massive continuation of cuts, then there is no way that this tab could be taken up except by broadening the tax net and then we should be specific.
I listened to Deputy Noonan in the Dáil on this and he was talking about other areas of taxation which might cover this, but he has not been specific. He dreaded being specific because there are many vested interests out there, which is possibly one of the reasons why he had hoped that you could have an all-party committee dealing with this particular process to get a consensus. In a minority Government situation, where the Opposition at times will get blamed for everything that is wrong and the Government will take credit for everything that is right, it is appropriate that consensus politics on the right should try to have a sort of all-party get-together where at least the majority view should be in agreement and that they would not necessarily be blaming one another. It is a difficult task that Fine Gael have taken upon themselves in being constructive as they see it and I am not denying how difficult a task that is. It is difficult for the electorate to understand what it is about and it is a new era in politics. Maybe it is a refreshing one too, because at least we can argue and talk about it, but I want to put by tuppence halfpenny worth on it.
When the Minister was replying on the previous section he said that the social partners said £30 million in hand back would be sufficient and then he was very generous, money came on stream and he was a bit better off and he gave £90 million, and £150 million in another section. We had the Minister going overboard in what he had actually promised to the social partners. I doubt if the social partners would agree that that is all they looked for in their arguments, but I accept what the Minister said. However, here is a commitment in an amendment to the Minister that in future years, in the years 1988-89 and 1989-90, he would commit himself to these figures without costings. I would not like to remove from him the responsibility as Minister for Finance to make the decision as to how he would fund this proposal. Whether there is an all-party committee or not is irrelevant. In the final analysis it will be down in the House when there is a vote on the budget and that is how the Government will act in a democracy as always. But how do I know that if the Minister's commitment to 20,000 jobs this year and over a three-year period is not matched at the request of the social partners——
I am confused this evening. Are you making Second Stage speeches or are you dealing with the amendments that are here on my desk before me?
I am. The Minister——
Do not mind the Minister, you make your case for the amendment.
One of the reasons why I have reservations about this is that the social partners in the Programme for National Recovery may not necessarily accept in 1989-90 that what the Minister has done this year is going to be sufficient, particularly if he does not deliver on jobs. If he does not deliver on jobs, there could be a massive demand in the area of tax reform, particularly in the brackets that we have dealt with in a previous section and, indeed, in some of these brackets.
I would like to know how it could be possible in 1989-90 to do this without rewriting the whole tax code, which perhaps, is what should be done, in one fell swoop of 12 months in an all-party context or otherwise, and still retain credibility with the electorate. You cannot have it that way unless you agree in principle to massive cuts and we do not agree that there should be further cuts to try to meet this. Certainly, if there are proposals there to broaden the net to try to meet this, then this kind of amendment would stand up to critical analysis, but at the moment it does not and it is, as Senator Bulbulia has said in her own way, populist politics. It is the politics of confusion, the politics of throwing it out to the public because it is popular to do so, without the responsibility of how you can actually make any effort to fund it. I will wait with bated breath to see what the Minister will say on how it could be done and I will accept the Minister's suggestions in this area before we decide whether we will support this amendment or not.
Let me make this comment and, indeed, I touched on it in my Second Stage speech. The fact that the Government have had such success in the organising of public finances for 1987 in its own way can bring a problem. That problem would be — and it is obvious here this evening — that the public at large, political commentators, political parties feel that, if you like, the worst days are over, that we can now relax, allow the old ways of indifferent management and so on to continue. That is far from the truth, unfortunately. The hard grind must still continue. I am quite certain the Minister will be able to tell us very quickly what is wrong with this recommendation. Above all he must spell out to us, as he has done in the past, that we cannot relax that this hard grind must unfortunately continue for some years to come.
I wish to comment on the point raised by Senator Bulbulia. We would all have to admit that it is, as she stated, abundantly clear that our present taxation system is a huge disincentive to employment and is a major contributory factor to emigration. When we speak of emigrants we speak from time to time of those who are forced to go abroad in search of work because they were unable to find it at home. There are also those whom we call the voluntary emigrants who go in search——
Senator Bradford, come back to the recommendation.
These people who leave voluntarily do so to get work in regimes where the tax system is not as penal as it is in this State. Recently in London, as part of a Fine Gael emigration group, I met with a personnel consultant who made the point to me — I do not think I am straying too far from our discussion — that when she comes to Ireland in search of people for her firm she no longer meets people who are unemployed but rather those who are working here in what we would think of as gainful employment. Because of the huge burden of taxation they are leaving to go to places where the tax regime is not as harsh. It cannot be argued any longer that our tax system is helping in the creation of wealth or jobs. A simple feature of our economic policy must surely be the creation of jobs.
Senator Fallon referred to the success of the Government's economic policy over the past year and I would have to admit that in many ways it was successful. The tax cuts which have come about as a result of this amount to over £100 million but yet they will not really be evident in terms of jobs created over the next year. If we wish tax reductions to result in extra jobs and to alleviate the plight of people emigrating from this shore, we must talk about radical solutions now. For the past not just five or six years but ten years, we have been playing around with the taxation system. It has not worked; it is not working; and it will not work. It is time to look for new solutions.
The recommendation proposed by Senator Bulbulia not only makes common sense but also makes economic sense. We will have to go down that road now because if we continue with our present policies we will be left with nothing at the end of the line but continuing numbers of young people emigrating from our shores because they see no future and no hope in this country. We will be left with a minimum of 250,000 people out of work, and that is totally unacceptable. The taxation system is a central part of the problem and it is a central part of the solution. Our recommendation must be seriously considered because it is worthwhile, and if it is accepted it will produce dramatic results.
I am a little bit confused by this recommendation because it appears to be, in substance, close to measures that were suggested by another party not represented in this House who came in for a certain amount of derisive comment from the party who are now the force behind this recommendation.
An Leas-Chathaoirleach
This is hardly appropriate to the recommendation.
I think it is because one looks for consistency in Opposition as well as in Government.
An Leas-Chathaoirleach
The Chair wishes speakers to be relevant to what is before the House.
I shall certainly do my best to be so relevant. Although I am one of that persecuted minority of people in this country, those who actually work and are on PAYE at a rate of 58 per cent, and obviously would welcome the spirit of this if it was attainable, my understanding of the Minister's difficulty in this regard is that the national debt is still rising and what is actually coming down is the rate at which that rise is occurring. We are still in some difficulty. Although everyone would like to have lower rates of tax, that is simply not possible to achieve in this quantum leap. I have some difficulty with this recommendation.
Unlike Senator Norris I have no difficulty with the recommendation. The problem is that people are leaving the country to find jobs elsewhere. It is emigration out of necessity, as I said yesterday. A new phenomenon has hit this country in the past year or so. Skilled and well-trained people are leaving here to find employment in areas where the tax rate is much lower than it is here. The Minister in his speech yesterday said he is giving tax allowances of £150 million this year. He said that is not insignificant in view of our economic position. In 1986 the Government made taxation reductions of over £200 million and it almost went unnoticed. They gave little or no relief. The reductions were spread out over all the people who pay income tax and when 5 April arrived people saw little or no relief in their pay packets. The same will happen with the Minister's reduction in taxation. We do not need a tax reduction of the kind the Minister is proposing; we need tax reform.
Our recommendation proposes a different structure in taxation, a reform of the taxation system that is in existence at present. The Minister said yesterday that he is open-minded about a discussion on this matter. I regret that he has not agreed to the all-party committee. Unlike the other party we are not suggesting this in an election manifesto. We are suggesting it for the agreement of all political parties, especially the three major parties who are committed to reducing the national debt and to consensus. We have a good reason for asking not just for a tax reduction but tax reform.
To sum up on this recommendation which we will press and which we very firmly believe in, I want to state once again that it is not a proposal for the current year but rather for 1989-90. Everybody agrees that we have a very bad tax system. It has been universally agreed that this is the case. The Minister himself has expressed grave unhappiness with it. The majority of taxpayers object to it. Those who can flee from it do so. Many people are forced out because of it. We want a definite time scale for reform. It just cannot be pushed off into the far distance. It has to be finally focused. There is an urgent requirement for political will and political support for the notion of tax reform. It is not populist politics, as Senator Ferris has said. It is not pie in the sky. There are no hidden resources with which to do this; no crock of gold. We have to identify resources. The Commission on Taxation did that for us. In the first report they actually identified and spelt out the different options. All the information is there. What is required now are political decisions. We in Fine Gael are open to suggestions on this. Nothing, but nothing, should be sacrosanct.
I do not see why we cannot talk about property tax, for instance, even though the Senators on my left in every sense shudder in their shoes at the very mention of the words property tax. It is something that we should actually put on the table and discuss. That is the kind of discussion we would like to see taking place within an all-party committee so that concrete and substantial proposals and ones that have political backing can be brought forward.
Tax reform is largly a political matter. All the analyses have been done and endless thinking went into the commissioning of a report. What we really are talking about — and I want to be very clear about this — is taking resources from one area and applying them in another in order to give relief. Consensus is working in another area. It has worked over the past 12 months in this House. I see no reason why it should not work in the area of tax reform and in agreeing to the kinds of proposals which are part and parcel of this Fine Gael recommendation. We are not just putting it down on the basis of a populist proposal because everybody wants to see reductions; we are putting it down in the context of hard economic choices that will have to be made and which will hurt in some areas. We are looking for consensus on it on the basis of an all-party approach and finding the political will to bring about the changes which the people are demanding.
As I said in the Dáil, and it is relevant here too, there is an air of unreality about this whole debate and particularly this recommendation. What we are saying here is that not for this year but for next year we commit the Exchequer to a cost of £662 million. It is all very fine for Senators to get up and say how committed they are to tax reform and tax rates, such as those mentioned in the recommendation, of 25 per cent and 40 per cent. I want to say at the outset that tax cuts do not necessarily create jobs. There is no evidence that this is the case. I am amused, having listened to the debate since we started this evening. Senator Bulbulia mentioned populist politics. Senator Ferris has already referred to the way he was criticised when he talked about amendments that would cost something like £10 million in tax concesions for particular sectors of the community. That was described by Senator Bulbulia and Fine Gael as populist politics. I wonder how would it be best to describe——
On a point of order, I criticised the Senator for not saying where the £10.3 million would come from. I support the principle of his recommendation.
An Leas-Chathaoirleach
The Minister should be allowed to make his reply without interruption, please.
I have listened to the Senator. I do not wish to be personal in any way but she did not tell me how we would get the £662 million in respect of this recommendation. If £10 million as proposed by Labour is populist politics then £662 million must be really pie in the sky politics. That is the only way I could justifiably describe this proposal which does not include any suggestion as to where the money might be raised. A committee to do such work would not, in my view, be of any advantage whatsoever because, as Senator Ferris has rightly said, at the end of the day it is a matter for the Government and they must introduce whatever measures are necessary to provide the resources for services, concessions or reliefs that are given.
It is no harm to remind the House that this year we will borrow £1,457 million just to keep going. As Senator Norris said, the national debt continues to rise, albeit at a much reduced rate. We hope to have it stabilised in the not too distant future. That is our aim. When it is stabilised we just cannot stop there. We will have to reduce it. We have to be realistic about all these suggestions. I am not surprised that these kinds of proposals have emerged.
Notwithstanding the present difficulties we are in a position to bring in certain tax reforms in this area, such as those in sections 1 to 3, regarding self-assessment, the extension of PRSI to the self-employed, the corporation tax changes, the incentives for payment of arrears and so on. There is more reform contained in the budget of this year and in the Finance Bill before the House than there has been for some time. Because of that, people think that we can just open the gates, but we cannot do that. We can live only within our resources and even at this stage we are not doing that. We are borrowing £1,457 million to survive this year. It would be very difficult for anybody even to contemplate accepting this recommendation. Even if the Government were in a position to provide the resources as Senator Bulbulia said to change the taxation from one sector of the economy to another, or one section of the community to another, that would not reduce our national debt by £1. The national debt has doubled in the last five years. Unlike what Senator Ferris said earlier, the fact is that the Coalition partners were responsible for the huge increase in the national debt. I am not going to get into that area but I can get the facts to show that what I am saying is true.
We must continue on the road of reducing the national debt and controlling the public finances. It is only right to put on record in this House that the success of the Government's approach over the last 14 months has led to sharply reduced interest rates, low and stable prices, better cost competitiveness, a better export and balance of payments position and specific development programmes for individual sectors. Those were major achievements in 14 months. Any relaxation at this stage in our determination to sort out the budget and debt problems would have a disastrous effect on confidence and we cannot and will not contemplate that. If we were to be fair and honest to the public at large and put the full picture before them, as I think we are all entitled to do as politicians and not just the carrot of the 25 per cent and the 40 per cent tax rates — that means a lot to all of us, as Senator Norris has rightly said, because we pay tax at very high rates — we must also put the other side of the coin.
Senator Doyle talked about how committed they are and how they would press this recommendation but how committed would those same Senators or their party be to the kind of proposals that would be necessary to implement the essence of this recommendation? Mortgage interest relief would have to go, at a cost of £160 million. That applies to every person who is buying a house, who went out and borrowed, are now committed to paying for that house and are getting a tax concession for doing so. Are the Fine Gael Senators committed to telling all those people that their interest relief will be removed? Secondly, is the relief to those people who have not got medical cards, who provide their own health services through the VHI, to be removed? That relief costs £48 million. How committed would the Senators be to that or to the removal of life assurance relief which costs £44 million? Are we going to tax lump sum payments on retirement which are not taxed at present? That would save £49 million. When we add up all those we are not half way to the £662 million. We would have to consider further measures such as a 15 per cent VAT rate on food and children's clothing which is not there at present. How committed are people to that? That is the kind of committment you are going to need if you want to have tax rates of 25 per cent and 40 per cent in 1989 and 1990.
One issue that was raised by Senator Bulbulia is the question of property tax which would have to bring in something in the order of £200 million plus, before we would reach the £662 million which would be the cost of implementing this recommendation. It is better to put both sides of the coin on the record for all to see so that the public at large will know exactly what is being proposed by any individual politician from any party. When people get up, as they have done in the past, and promise one thing or another for the future, whatever party or individual it might be, the public at large will be in a position to see whether or not it is realistic and how it is going to be paid for. We cannot give ourselves concessions or reliefs out of borrowings any more. Those days are gone.
Tax cuts in the UK were mentioned. It is no harm to put it on record that they have been funded from privatisation, the selling off of enormous assets belonging to the people and also by huge resources, which are beginning to run out, from North Sea oil. We do not have either. We have to be realistic when we put forward these sorts of suggestions and compare the situation here with that in other countries. How did the US, which was mentioned, finance their tax cuts? They did so by borrowing and now they are up to their necks with the twin deficits and they do not know what to do to get out of either one. We got ourselves into that difficulty over a number of years too. They will have to take a lot of corrective action to pay for these concessions that have been given. We have to move very cautiously and very carefully as the Government are doing in their taxation proposals and the kind of measures they introduced in this budget.
Our ambition during the election — and it is contained in the Programme for National Recovery, was to have two-thirds of the taxpayers on the standard rate as soon as possible. This year 63 per cent of taxpayers will be on the standard rate. That is major progress and we hope to continue in that way. There is nobody in public life and no taxpayer of the million taxpayers who are out there who would not love to see these two rates apply. There is no Minister for Finance who will ever pass through this or the other House who would not like to see rates of 25 per cent and 40 per cent or even lower, but that will not happen unless we take away reliefs or concessions people already have, or unless we make further huge cuts in expenditure which would amount to taking 39 per cent of this year's social welfare budget. That is what we are talking about. It would take almost 40 per cent of the social welfare budget or 58 per cent of the education budget to pay for this tax concession. Nobody is going to be too committed to that.
We can see the kind of turmoil that would be created by making savings of millions of pounds in certain areas or by the imposition of tax costing millions of pounds. Yet in one fell swoop this sort of measure is proposed. I will not say it is populist politics because Senator Bulbulia has denied that even though she said that the proposal of £10 million by the Labour Party is populist politics. For the foreseeable future it is pie in the sky.
An Leas-Chathaoirleach
Is the recommendation withdrawn?
No, the recommendation is not withdrawn. I wish to say in reply to the Minister that, in putting forward this proposal, we have been just as realistic as he has been in his reply. We talked about the hard choices that would be involved and about the necessity for political will.
I just listed them.
Yes, and I do not deny it. I talked about taking resources from one area and applying them in another. In that sense what I proposed is not populist politics because it is about hard choices, about political will and about seeing through an objective from the inception of an idea to the delivery of it. I find it absolutely galling for the Minister to talk about a lack of realism and a lack of honesty. The Minister and his party spent four years in Opposition denying the reality of the debt——
The Senator's party were in Government.
——they are now so vigorously going about cutting. We lost many seats in the last election because of our honesty about the debt. The Minister finds himself in Government and Minister for Finance because his party exhibited a total lack of honesty and committed what was by any standards the greatest U-turn probably in the history of politics when they found themselves in a minority Government. Our proposal is an honest one. It was not prepared without a lot of thought. We know that it cannot succeed unless we bring about the consensus in he area of tax reform that we have brought about in the area of debt control.
If the Minister wishes to see the tax rates as outlined in this amendment I do not believe Fianna Fáil will show the necessary courage to take resources from one area and apply them to another — the kind of hard choices which he so correctly outlined in his reply to this recommendation. If he does want to see reform, he must accept that the consensus approach which is being advocated by Fine Gael is the only one that has any chance of succeeding. If we want to have the reform of tax which is so necessary — taxation rates are killing incentives, are forcing emigration and are causing unemployment — the only way we can do so is to sit down together, make the hard choices and, if necessary, hang together rather than hang separately which is what the Minister appears to be advocating.
I would like to make one comment and, that is, to welcome the Minister's conversion to the Communist ideal, which I approve of heartily, which is: from each according to his means, to each according to his needs. It is not just a Communist creed; it is a Christian one. I welcome the clear indication the Minister has given that he approves of this and that the kind of swingeing cuts that have been outlined as being necessary — a 58 per cent cut, he said in the social welfare budget——
Education.
I beg your pardon, education.
Bang goes your job.
Bang goes my job, exactly. I am quite prepared to admit that that would be serious for me. This kind of swingeing cut would be resisted by the vast majority of the people, in particular with regard to social welfare. I am unashamed to say that the abolition of the mortgage interest relief would be regarded with horror by a very large number of people who consider that they have really what amounts, if not in law at least in spirit, to a contractual relationship with the State, having entered into commitments of debt over periods of 20 to 30 years and suddenly finding the ground cut from beneath them. In particular young married couples setting out in life would find this extremely difficult. I am more and more persuaded by the cogency of the Minister's arguments.
I will have to do some research to see what compatibility there is between Christian and Communist teaching and doctrine. The Minister made one correct statement to the House, one that I fully endorse and agree with. A reduction in taxation does not necessarily lead to an increase in jobs. The Minister is quite correct in saying that. I have to say to the Minister that tax reform will lead to an increase in jobs. That is a different issue altogether. No one is suggesting in the House that we should borrow extra to fund the lower taxation which is proposed in this recommendation. I want to make that clear.
The Minister picked on very emotional areas in his reply — tax, mortgage relief and VHI relief. I am certain that if we had tax rates as proposed in the recommendation, a large number of people would be receiving mortgage relief and other reliefs and would benefit because of the lower rates of tax. I have no doubt about that. What we have asked is that we should look at how we can reform our tax system so as to have rates of the kind which are proposed in this motion. The Minister said yesterday that he was quite open to suggestions. I regret that he cannot see his way to having an all-party committee to examine the proposals. The Government would not have to accept them but there would be a broader range of party support on taxation which could only be of help in the future.
I regret the Minister has had such a complete thumbs down approach to this recommendation, because while I realise that there cannot be U-turns with regard to reducing the national debt and paying interest, and that is something that happened a long time age, we have to be creative about the future. The present tax code is having a devastating effect on this country, as has been said repeatedly here today and elsewhere. The approach has to be imaginative. I would like to think the Minister would not have such a closed mind with regard to getting the opinions of, and an input from, the people in the Oireachtas. We cannot leave it as it is. We cannot say this is what it is and this is going to stay for the next four or five years. We have to plan ahead. There is a great deal of documentation with the Commission on Income Tax Reform. There is a lot of talent, views and opinions within the Oireachtas, and given the consensus that exists in the Dáil, it would be a pity if we did not build on it.
Of course, we know the people would not expect to maintain all the allowances they have with regard to house purchase, mortgage interest, life assurance and so on. We should be looking at options — perhaps a sales tax, and somebody mentioned a property tax. However, I do not think I would support that. The options should be spelled out in the kind of all-party committee and we see, and have seen, operating for a number of years in the Oireachtas, without anybody exerting great pressure, or having any great expectations at the start. Maybe it would have to be taken at a different level in the shorter term; it does not have to be written on tablets of stone. I think we should be talking about it. I do not believe it is something that in the present climate should be within the orbit of the Government party alone. I appeal to the Minister to, perhaps, be a little more open-minded about the proposal because we are going to have to work our way towards lower tax rates.
Everybody in this Chamber knows that in the present climate the proposals are totally unrealistic, and we should accept that that the factual situation.
The Minister said that the £600 million being sought by Fine Gael could only be found through hard choices and we agreed with him, but when he listed the hard choices he went to the limit. I was surprised he missed out on the health aspect because I expected all the hospitals would be closed as part of the final solution to our problems. We have to accept the fact that if we do go out and search for this necessary funding, certain people will be affected. With our present regime, the tax concessions are almost going unnoticed because they are miniscule.
The difference between the £160 million being offered by the Minister in this year's Finance Bill and the £600 million we would like to provide to the taxpayer next year, would create major buoyancy in the economy. I know that is a word that the Minister has forgotten. Before his overnight conversion last year, "buoyancy" was a very popular word with his party, as were the words "creative economics" and "self-financing". Those words, of course, have now disappeared, but there is still room for some movement in the economy.
The Minister listed some reliefs we have at present and mentioned those which will hit people straightaway. As of now, people have a great meas for their mortgage interest relief, and one of the reasons they have this meas is that it helps to reduce their present crushing burden of taxation. It is part of our tax proposals to have some of this mortgage interest relief reduced. We are not speaking of 10 per cent or 100 per cent; we are not even mentioning it as part of the solution at the moment, but their tax bill would be reduced. The picture is not as bad as the Minister is trying to paint it. There are, of course, hundreds of millions of pounds being offered in capital relief. Much of this money is not doing anything to add to the labour force. Indeed it is helping to replace men with machinery. That is something which has to be looked at too, and that is where savings can be made.
The point I am trying to make is that the dreadful options the Minister tries to present are not the only options available. There are many options open to us. Surely we are all responsible enough to be able to discuss them. I do not think we should throw them out because we have a duty to all taxpayers to look at ways in which their taxation bill can be reduced in a fair and efficient manner and in a way which will result in extra jobs and a better economic future in the long term, a future that will see the national debt decreasing and coming under control. As I mentioned earlier, our proposals are central to this solution because the playing around that has gone on up to now is not working and will not work.
I was astonished when I saw this recommendation because it is possibly one of the most unrealistic proposals I have ever seen put down by any political party since I have been in this House. I can understand the great benefits of irresponsible Opposition, which all parties have been guilty of in their time, but this extends beyond anything I ever saw proposed by even the Fianna Fáil Party in their worst periods in Opposition. That is, quite honestly, a fairly deep stark condemnation.
I was surprised to see Fine Gael who, up to now had been, in fiscal and economic terms, a responsible Opposition in supporting the Government and doing things which nobody liked doing but which were recognised almost generally as necessary, suddenly losing their nerve, breaking ranks and coming out with a proposal like this. As the Minister said, it is not a runner.
I would love to see income tax rates down. Everybody would love to see income tax rates down, but it is a non-runner as those who proposed it know. It is wasting the time of this House, the other House, and of everybody else, to put down proposals like this which they know are not going to come into effect and which they would not bring into effect if they were in Government. The easy decision is made by Fine Gael, and it is to reduce income tax. We just reduce income tax and everybody is richer, but the difficult decisions are referred to somebody else — an all party committee — which is a sort of crazy, mad, Pontius Pilate tack by the Opposition party. If they are going to put one side, let us see where it is going to hurt.
That is what we said.
Where is it in the recommendation? There is no mention of it in the recommendation. That the recommendation says is that it should go to an all-party committee. One thing I have learned in the seven years I have been in this House is that all-party committees are a reference point for difficult decisions which a party cannot decide on their own because the decisions are unpopular. We had, and the Fine Gael Party of all parties ought to know, an all-party committee on divorce which was a joke. That committee was set up specifically to avoid rather than to solve a problem. I suggest that Fine Gael are proposing to set up this all-party committee because they have not, and did not have the guts, when they were first announced, to actually spell out where these proposals are going to hurt. I think it is ridiculous, irresponsible and a great pity that this proposal has been put forward at this time.
I do not want to repeat what I have said because not too many new points were raised in the responses to my remarks. It is interesting to note that we got some fairly concrete suggestions. Senator Fennell proposed that we should have a sales tax, but she disagreed with the property tax suggested by Senator Bulbulia. Maybe if we had time and with the permission of the House, we could get to the stage Senator Ross was talking about where we would have a package balancing at least. If we were able to do things like that, we would be well advised, as public representatives, in the interest of the present generation and future generations, to do something about our huge national debt and see how we can reduce that before we start giving ourselves concessions or reliefs.
Senator Doyle suggested that we should talk about it. That is what we have been doing, but the talk has to be realistic. What we try to do is be realistic about what we are saying. Senator Bradford raised the question of capital allowances being reduced. We are already dealing with capital allowances in this Bill. Senator Doyle described the suggestions I made as the emotional items of taxation. I am waiting to hear his menu. We had expected that Fine Gael would be giving us some ideas on how this money was to be raised because, in fairness to that party, when they put forward proposals, at least they tried to cost them and say where the money would be found. There is a new departure here. Senators cannot on the one hand criticise the present Government for what they did in Opposition and on the other justify what they are doing by saying we did it when we were in Opposition.
We are not running away from that problem.
Senators have to face reality. I deal with reality, and it is very difficult reality.
I agree——
(Interruptions.)
Senator Connor might be well advised to go back and read some of the scripts that were put out by his headquarters when they were in Government, and bring them in now as they used to be published in the provincial papers I used to read, funnilly enough. Apart from all that, I could not accept this recommendation, either here or in the other House, mainly because it is totally unrealistic at the present time.
Recommendation put.
The Committee divided: Tá, 12; Níl, 27.
Tá
- Bradford, Paul.
- Bulbulia, Katharine.
- Connor, John.
- Cregan, Denis.
- Doyle, Joe.
- Fennell, Nuala.
- Hogan, Philip.
- Kelleher, Peter.
- McCormack, Padraic.
- McMahon, Larry.
- Manning, Maurice.
- Reynolds, Gerry.
Níl
- Byrne, Seán.
- Cullimore, Seamus.
- de Buitléar, Éamon.
- Doherty, Michael.
- Eogan, George.
- Fallon, Seán.
- Farrell, Willie.
- Fitzsimons, Jack.
- Haughey, Seán F.
- Hillery, Brian.
- Hussey, Thomas.
- Kiely, Dan.
- Kiely, Rory.
- Lanigan, Mick.
- Lydon, Donal.
- McEllistrim, Tom.
- McGowan, Patrick.
- McKenna, Tony.
- Mullooly, Brian.
- Mulroy, Jimmy.
- Norris, David.
- Ó Conchubhair, Nioclás.
- O'Toole, Joe.
- O'Toole, Martin J.
- Ross, Shane P.N.
- Ryan, William.
- Wallace, Mary.
Tellers: Tá, Senators Cregan and Doyle; Níl, Senators Haughey and W. Ryan.
Recommendation declared lost.
Section 3 agreed to.
SECTION 4.
I move recommendation No. 14:
In page 9, paragraph (b), line 10, to delete £286" and substitute "£500".
This recommendation will give an additional special allowance to people, employees in particular, who pay the higher rate of pay-related, and is along the lines of our previous suggestions. This is an area in which the small additional allowance could be of considerable importance, in particular to those who pay the higher rates. I hope the people who voted for the last recommendation and who were worried about these high rates, will see this anomaly and decide they would like to see some additional indexation of figures by way of increasing the allowances.
The increase proposed would cost an extra £34.8 million in 1988, and the full year cost would be £58 million. About 579,000 taxpayers would have incomes sufficient to benefit in whole or in part from the increase. It must not be overlooked that the cost of the retention of the allowance at last year's level of £286 as proposed in the Bill is estimated at £50 million in 1988 and £84.3 million in a full year. Some 592,000 taxpayers benefit, of whom 579,000 will have a reduced tax liability and 13,000 will be relieved of tax altogether. I have said already in relation to other recommendations between sections 1 and 3, that the tax reliefs we have given in this Bill since the budget go beyond those promised in the Programme for National Recovery and are the maximum that can be afforded at present. Because of the cost of this recommendation, I have no other option but to oppose it.
Is the recommendation withdrawn?
Yes, in view of what the Minister said. I hope he will take on board our concern in this area. We were delighted he retained the existing limit because it is of considerable significance, and is worth £50 million. We realised that by indexing it upwards, it would cost £58 million, but it would benefit 579,000 people. We want to be realistic. Is there a continuing commitment to maintain this or to look at increasing it in the future? It is a desirable part of the tax structure as we know it.
As the Senator knows, the tax concession has to be renewed each year and has to be considered by the Minister for Finance and the Government each year. All I can say is that it is there for this year and will be reviewed for 1989.
Recommendation, by leave, withdrawn.
Section 4 agreed to.
SECTION 5.
I move recommendation No. 14a:
In page 9, between lines 27 and 28, to insert a new paragraph as follows:—
"(c) that Farmers under 80 adjusted acres be given the facility of opting for Farm Tax for 1988/89."
This Labour Party recommendation emanates primarily from a survey which was carried out on behalf of the ICMSA which indicated that two-thirds of farmers were against taxation on accounts. It was found that when accounts were submitted one in four farmers had no taxable income and that on average farmers were paying £460 a year to accountants. Estimates suggest that £35 million came in from farmer taxation last year. The survey indicated that £30 million was paid to accountants for dealing with the accounts of farmers and it has also been alleged that it costs the State £10 million to process the forms.
Farm tax would result in no diminution in the income to the State. It would be easier for the farmer to administer and it does not penalise enterprise. For example, a farmer who is efficient and gets the best return from his farm of under 80 adjusted acres is not being penalised for that. It also takes on board the family farm unit where the farmer's wife and some of the children can be involved. I am asking the Minister to give an option to farmers with under 80 adjusted acres.
This recommendation proposes to add a new subsection to the existing section 5. I thank the Minister for accepting this new section 5 in the other House, as a commitment was given by a previous Government to people who had paid farm tax, or land tax as it was popularly known as, that they be allowed the option to write off the land tax against their income tax. I am glad this Government have honoured that commitment because otherwise politicians would come in for contempt from taxpayers in this category. The new subsection requests the Minister, for the tax year 1988-89, to consider allowing farmers with 80 adjusted acres or under the facility of opting this year to pay their income tax by way of farm tax or land tax.
Senator Ferris, may I interrupt you? I do not know about you, but I do not want the Minister for Finance to miss the vote. Could the Leader of the House indicate what we will do?
A Chathaoirligh, you should not make that kind of statement out of concern for the Minister.
I am concerned about myself.
I would want to facilitate him.
I announced in my budget speech last year that it was the view of the Government that farmers should be taxed in the same manner as other sections of the community, that is, an actual income. The Government, therefore, decided last year to discontinue the farm tax for 1987 and onwards. They believe that for equity reasons farmers should be taxed on the same basis as other income tax payers and, in particular, the same as other self-employed traders, and not by reference to special capital value criteria which were the basis for the farm tax. This is also the view of the main farming organisations.
Senators are recommending that farmers with holdings of under 80 adjusted acres by given the option of either paying income tax like other taxpayers or paying farm tax. This recommendation could not be accepted. In the first place, it would be totally unfair to other taxpayers who have no such option as to what system of taxation should apply in their case. Secondly, it could be expected that farmers would in practice choose the option which would maximise the benefit to themselves and minimise the tax charge. A farmer likely to have no income tax liability because of capital allowances, interest charges or other reasons, would decide for the income tax system. On the other hand, a farmer likely to have a significant income tax liability would opt for the farm tax system which, on the 1986 basis, would mean a farm tax payment of £700 for a farmer with 70 adjusted acres and £500 for a farmer with 50 adjusted acres. Thirdly, the administrative arrangements necessary to operate such a dual system would be extremely costly to the Exchequer. The whole farm tax evaluation process would have to be re-activated and would take at least three years before all holdings between 20 and 80 adjusted acres were valued for farm tax purposes. At the same time the present arrangements for extending the farm profile system to cover more and more farmers for income tax purposes would have to be continued. For all these reasons I would not accept this recommendation.
Sitting suspended at 6.5 p.m. and resumed at 6.15 p.m.
Before the vote, the Minister explained that he could not accept this recommendation. One of the reasons he gave was that it would be unfair to other taxpayers who were allowed no such option. We were looking for a specific option for people who wanted to use this system for this particular year. We had a genuine reason for doing that. The ICMSA, a responsible farming organisation, recently suggested that this was a more desirable system of taxation for their members and, as Senator O'Shea said, was certainly not a disincentive to production, and they had geared themselves to opting for the land tax as it was the policy of the last Government, which they had accepted. Unfortunately, the IFA had other interests because basically they represent the bigger farmers who were in favour of changing to the accounts system and convinced the Minister that he should revert to the accounts system.
I realise that in legislation which has come from the Government this year, particularly in the area of social welfare, the Minister is moving towards a system where accounts are the norm that will be used for all determination of farmers' obligations to the State, whether on the new extended PRSI for farmers and self-employed, for health contributions, or otherwise. The Minister for Social Welfare confirmed that he had profile forms sent out throughout the country and obviously this Government are gearing themselves for the system of tax based on accounts.
We are suggesting an option for this year only. I am surprised by the Minister's response that this would be unfair, because other people would not have the option. This is supposed to be the revolutionary Finance Bill of the century. Certainly the Minister claims he has made more changes than have been made for many years. The Finance Bill allows the opportunity for self-assessment. It is a change in taxation policy that people will be allowed to assess themselves for income tax purposes. Here was an option for the farmer, he would have a norm to use, a multiplication of his adjusted acres by the accepted and determined rate per adjusted acre which the last Government — which we were in — decided was a fair system. All we are asking for is that the Minister would give farmers this option for the year 1988-89. Many had geared themselves towards this option, many small farmers, in particular, after recovering from two disastrous years were prepared to use this system which, of course, gave the county managers the opportunity to take account of hardship cases and all other requirements that we felt should be written into it.
I considered that was reasonable. I considered that it was in line with the new progressive taxation policy of self-assessment and an amnesty for those who behaved themselves between now and September. Here is an option for a sector who are not the best at keeping accounts and have great difficulty in coming to grips with a system required by the Revenue Commissioners. We, in the Labour Party, believe that it would not be a cost on the Exchequer and would certainly ensure that money would flow quickly from farmers, particularly those who are already assessed and investigated. We know that for farmers who have not been assessed or adjusted, it would be inoperable. We are not suggesting to the Minister that he should do that because administratively that would be an unfair request, but we certainly feel that many farmers in this category should have the option, that is all. It is an optional extra in the Bill.
The Minister is allowing for the carry over of overpayments on farm tax by farmers into their income tax affairs for 1986-87, that is, assuming they did not have taxable income to absorb it last year or, indeed, the year before. We welcome very much the fact that he has allowed it to be carried forward into the 1987-88 tax year. The Minister might keep it in mind that next year many farmers might still not have the taxable income to absorb it and that it should be kept there for the 1988-89 year.
Are you speaking on the section or the recommendation?
We in our party do not disagree with what Senator Ferris said. It is eminently reasonable that we should make this recommendation because there are many farmers who were geared up for farm tax, especially farmers who had 80 adjusted acres and under, and were to be assessed purely and simply on what was called the land tax. Senator Ferris has qualified the recommendation by saying he is not applying it to farmers who have not been assessed or whose acreages have not been adjusted. That is eminently reasonable, and our party have no difficulty in going along with that.
I appeal to the Minister to accept this recommendation so that a number of farmers with 80 adjusted acres and under whose acreages have been adjusted by the land classification office can opt for land tax. It is a great pity — we said it last year — that the land classification office was closed down last year, because the former Land Commission officers were literally doing nothing for more than a year and yet being paid from State coffers. They had no work to do and they could easily have been abroad in the field carrying out the land assessment work, not necessarily for taxation purposes. If there is one thing that needs updating, it is information on the agricultural land of Ireland for a whole lot of reasons.
Senator, could we have recommendation No. 14. We will discuss general policy on agriculture another time.
It is related to the recommendation. Moneys were found in this year's and last year's budget to pay officers who had nothing to do. I am merely saying there was a lot of useful and gainful work for them to do and they were not allowed to do it. In fact, it took a court case to reinstate them as Land Commission officers. We support the recommendation and find it eminently reasonable.
One final point regarding farmers whose land has not yet been assessed. There was an offer from ICMSA in late 1986 when their members were agreeable to pay the land tax on an arbitrary basis until the land survey was actually carried out. The spirit of our recommendation is to extend that to all people owning under 80 adjusted acres. I would like to clarify that point.
This debate has gone on quite some time in relation to farmer taxation and the difficulties between what the PAYE sector and the other sectors of the community, including farmers pay, I had hoped that, when we introduced the changes and the extension of the profile system in the 1987 budget, that would be the end of this argument. I have listened to farmers and farming organisations for quite some time saying they were prepared to pay their fair share of tax and be taxed on the basis of their income. That system is in operation now. Therefore, there can be no argument from any section of the community saying that a sector is not paying what it should. All are now taxed on income. That is what we had decided we would do and we introduced it last year. I will not repeat what I said before, and in the debate in the Dáil. I could not contemplate this for a number of reasons and I have already given them.
I would like to say that the arrangements for the PRSI, which were referred to by Senator Ferris, are in place and there will be no question of any changes being made as was suggested. Senator Ferris talked about my statements about the amount of tax reform involved in this legislation, but it was not and would not be the intention of a Minister for Finance in any reform to allow anybody the option to reduce his tax charge, as is being suggested by this amendment.
Recommendation put.
The Committee divided: Tá, 15; Níl, 27.
Tá
- Bradford, Paul.
- Bulbulia, Katharine.
- Connor, John.
- Cregan, Dennis.
- Doyle, Joe.
- Fennell, Nuala.
- Ferris, Michael.
- Harte, John.
- Hogan, Philip.
- Kelleher, Peter.
- McCormack, Padraic.
- Manning, Maurice.
- O'Shea, Brian.
- Reynolds, Gerry.
- Ryan, Brendan.
Níl
- Bohan, Edward Joseph.
- Byrne, Seán.
- Fallon, Seán.
- Farrell, Willie.
- Fitzsimons, Jack.
- Haughey, Seán F.
- Hillery, Brian.
- Hussey, Thomas.
- Kiely, Dan.
- Kiely, Rory.
- Lanigan, Mick.
- Lydon, Donal.
- McEllistrim, Tom.
- Cullimore, Séamus.
- Doherty, Michael.
- McGowan, Patrick.
- McKenna, Tony.
- Mooney, Paschal.
- Mullooly, Brian.
- Mulroy, Jimmy.
- Norris, David.
- Ó Conchubhair, Nioclás.
- O'Toole, Joe.
- O'Toole, Martin J.
- Ross, Shane P.N.
- Ryan, William.
- Wallace, Mary.
Tellers: Tá, Senators Harte and O'Shea; Níl, Senators W. Ryan and S. Haughey.
Recommendation declared lost.
Progress reported; Committee to sit again.