Finance Bill 2010 [Certified Money Bill]: Report and Final Stages.

Before we commence, I remind Members that a Senator may speak only once on Report Stage, except for the proposer of a recommendation who may reply to the discussion on it. Each Report Stage recommendation must be seconded. Recommendation No. 1 in the names of Senators Alex White, McCarthy, Ryan, Prendergast, Bacik and Hannigan is out of order because it involves a potential charge on the people.

On a point of order, I ask the Cathaoirleach to reconsider his ruling or if he is not prepared to do so — in which case I will respect his ruling — to indicate the basis for it. I note that two Committee Stage recommendations were drafted in precisely the same terms, that the Minister should within a particular period from the passing of the Bill "prepare and lay before Dáil Éireann a report . . .". Committee Stage recommendation No. 29 read: "The Minister shall within one month from the passing of this Act prepare and lay before Dáil Éireann a report on the estimate of the VAT likely to be charged by local and public authorities . . .". Committee Stage recommendation No. 34 referred to uncommenced finance legislation. The recommendations were drafted in precisely the same terms in calling for the preparation of a report and the laying of that report before Dáil Éireann. While I respect the ruling of the Cathaoirleach, as Members, we are entitled to an explanation as to the basis for his ruling, rather than simply being told the matter has been decided.

The practice is that, with the exception of social welfare Bills, the inclusion of a reference to the compilation of a report is not sufficient to bring into order a recommendation which involves a potential charge on the people. The inclusion of a reference to the compilation of a report is seen as a means of circumventing the provisions of Standing Order 40. The subject matter of this recommendation is the introduction of a financial transaction tax which clearly involves a potential charge on the people.

There is no proposal for the introduction of such a tax. That is a misreading of the recommendation.

I have ruled on the matter. It is standard practice.

It might have been better if perhaps the decision had been communicated in those terms earlier.

Recommendation No. 1 not moved.

I move recommendation No. 2:

In page 25, between lines 45 and 46, to insert the following:

21.—The Minister may, by regulations, and after consultation with the Minister for Health, introduce specific reliefs to help equip Primary Care Centres with appropriate diagnostic and treatment facilities where he is satisfied that they bring commensurate social benefits in the more effective provision of health services.".

I have resubmitted this recommendation because there was a lot of discussion about primary care and the need for funding, as this aspect forms part of Government policy. There seems to be confusion about the way in which primary care centres should be funded. It is regrettable that the Minister for Finance has not accepted a recommendation on this issue, as it affects Government policy to a significant degree. It is not the same as funding hotels or other properties. This would not a property-based tax relief; the aim is to provide for the provision of equipment in new primary care centres to ensure they work for the people.

I second recommendation No. 2.

I understand this issue has been raised on a number of occasions, including on Report Stage in the Dáil. Reference was made to the report recently published by the Oireachtas Joint Committee on Health and Children on primary medical care in the community. The report contains a recommendation for a suite of tax incentives and other supports to be considered to facilitate investment in primary care centres. It is understood the report which was published last month has been submitted to the Minister for Health and Children. It is a matter for that Minister in the first instance to consider the detail of the report and its various recommendations. It is important to bear in mind that the Government's primary health care strategy is being advanced on a number of fronts and the specific issue raised of tax incentives cannot be considered in isolation.

With regard to the funding of the physical development of primary care centres, the HSE is utilising a number of approaches involving both direct funding of the building of such centres with public funds and the development of other centres via leasing arrangements. This would involve the private sector funding and building the centres and the HSE leasing space from the private sector to provide accommodation for HSE staff assigned to primary care teams. In this regard, in the region of 200 primary care centres are under consideration for leasing arrangements, with more than 90 being the subject of contract negotiations. More than 30 of these developments are expected to open this year. All of these developments involve some form of Exchequer funding. If the Government is to be asked to further supplement the existing and prospective levels of direct Exchequer funding in this area with further moneys via tax reliefs, there will need to be a very compelling reason for so doing. It is particularly important, given the fact that other property-based tax incentive schemes in the health sector, including the child care facilities scheme, have also been terminated in the Bill. We are making a worthy contribution to the debate on primary medical care in the community.

The report from the joint committee does not include a reasoned rationale for its recommendation of various tax incentives. Arguments have been made by some that it is necessary to provide tax incentives to encourage doctors and others to move from their existing premises into the new primary care centres. These arguments are not compelling at this time and while a reasoned case on the matter will be examined, it will be very difficult in the current economic environment to provide tax reliefs in a situation where the incremental benefit is neither clear nor certain.

It might be noted that expenditure incurred by doctors or health centres on diagnostic or treatment equipment wholly used for the purpose of their trade already qualifies for tax relief as expenditure on plant and machinery. Capital allowances are available on such expenditure at a rate of 12.5% per annum over eight years. These allowances are provided in recognition of the fact that plant and machinery suffer wear and tear and must ultimately be replaced.

I realise that this recommendation implicitly recognises the process I have outlined in my response involving, for example, the Minister for Health and Children, and does not ask for the introduction of tax reliefs in the Bill. The process will take its course. At this stage I do not intend to accept the recommendation.

Since this recommendation will not be accepted by the Minister for Finance and the Minister of State has expressed the opinion that the Minister for Health and Children is responsible for the matter, we will seek a debate on the primary care sector. It is possible the gains made in the field may be lost.

Recommendation put.
The Seanad divided: Tá, 11; Níl, 26.

  • Bradford, Paul.
  • Buttimer, Jerry.
  • Coffey, Paudie.
  • Cummins, Maurice.
  • Donohoe, Paschal.
  • Fitzgerald, Frances.
  • O’Toole, Joe.
  • Phelan, John Paul.
  • Regan, Eugene.
  • Twomey, Liam.
  • White, Alex.

Níl

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Callely, Ivor.
  • Carroll, James.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Dearey, Mark.
  • Feeney, Geraldine.
  • Hanafin, John.
  • Keaveney, Cecilia.
  • Leyden, Terry.
  • MacSharry, Marc.
  • McDonald, Lisa.
  • Mooney, Paschal.
  • Ó Brolcháin, Niall.
  • Ó Domhnaill, Brian.
  • O’Brien, Francis.
  • O’Donovan, Denis.
  • O’Malley, Fiona.
  • O’Sullivan, Ned.
  • Phelan, Kieran.
  • White, Mary M.
  • Wilson, Diarmuid.
Tellers: Tá, Senators Maurice Cummins and Liam Twomey; Níl, Senators Niall Ó Brolcháin and Diarmuid Wilson.
Recommendation declared lost.

Recommendations Nos. 3 to 5, inclusive, are related and may be discussed together. Is that agreed? Agreed.

I move recommendation No. 3:

In page 90, between lines 22 and 23, to insert the following:

"(b) in subsection (1)(a) in the definition of “group expenditure on research and development” by inserting the following after subparagraphs (i) and (ii):

"(iii) expenditure (in this section referred to as ‘relevant expenditure') on research and development incurred by a company which is a member of a group in developing intellectual property within the meaning of section 291A that is transferred to a company incorporated in the State that complies with section 495 shall not be included in group expenditure on Research and Development in relation to that group. The relevant expenditure will be treated as a separate Research and Development activity distinct from all other R&D activities carried on by the group for the purposes of this section.",".

When we debated these recommendations on Committee Stage, the Government indicated that it would investigate whether the legislation merited changes. This a good idea that would tilt the balance towards encouraging innovative start-up companies. In the light of the Government's commitment to consider the issue, I will not press the recommendations. However, if I consider the issue has not been sufficiently progressed by this summer, I intend to use the recommendations as the basis of a Private Members' Bill.

I second the recommendation.

I have already indicated my support for Senator Donohoe's recommendations. We need to do everything we can to support the smart economy, innovative start-up companies and intellectual property rights. I intend to communicate with the Minister for Finance on the issue of liquidation, although I accept it is more relevant to company law than the Department of Finance.

In regard to the Committee Stage recommendation on primary care centres, I do not have an interest in intellectual property, primary care units or nursing homes. My family may well have such interests or my family and I may have in the future.

In terms of collective government responsibility, at times it seems like there is little compatibility between Government policies and the desire to provide incentives through the Department of Finance to further these policies. Examples include the Government's policies on intellectual property, the smart economy, primary care centres and nursing homes. That is why I support Senator Donohoe's recommendations on the smart economy and innovative start-up companies.

I thank Senator Donohoe for acknowledging the response of the Minister for Finance who considers the proposal is worthy of consideration, even if he is not prepared to accept it in its current form. He will be asking his officials to consider it in the context of a range of incentives to encourage and support innovation and the knowledge economy.

Recommendation, by leave, withdrawn.
Recommendations 4 and 5 not moved.

I move recommendation No. 6:

In page 232, between lines 15 and 16, to insert the following:

"(4) The Minister shall make regulations that the lookback clause would be abolished for those individuals that are subject to the new Domicile levy.".

This proposal was brought forward in the debate on the Bill in the Lower House as well as on Committee Stage in this House. It would involve a simple change to recognise the massive contribution non-domiciled individuals make to the economy. They are being asked to pay a levy of €200,000 to differentiate them from others who live abroad to avoid paying tax in this country. This recommendation would amend the look-back clause in order that the individuals in question could spend more time here in the light of how much they contribute to the economy. It would represent a very small concession.

I second the recommendation.

While the Minister of State may not be able to accept the recommendation, this issue deserves further investigation because certain individuals make a significant financial contribution to the country, even though they may not pay income tax directly. If it is possible through the look-back clause to take account of the days that these people can or cannot spend here, it may be worthwhile. I call on the Minister to examine this area in the weeks and months ahead.

The recommendation before the House suggests a change to section 150 which concerns the domicile levy. The levy will be payable by an individual who is Irish-domiciled and an Irish citizen, whose worldwide income exceeds €1 million, whose Irish-located capital is greater than €5 million and whose liability to Irish income tax in a tax year is less than €200,000. The Senator's recommendation seeks to change our tax residency rules for an individual who pays the domicile levy. An individual is treated as resident in Ireland if he or she is present here for 183 days in the year. Alternatively, an individual is tax-resident if he or she is present in the State for 280 days or more between the current and previous year. This is known as the 280-day rule, sometimes known as the look-back rule.

It is assumed the intention behind the recommendation is to remove this 280-day rule in the case of anyone liable to the domicile levy. The effect of the abolition would be that an individual liable to the domicile levy would be able to spend at least 182 days in the State each year and never be treated as tax-resident in Ireland. At present, individuals can stay an average of 139 days in the year without being deemed resident. The measure would effectively allow these individuals an additional 43 days for which they could be present in the State without becoming resident. Therefore, I cannot accept the recommendation for the following reasons. It would create a two-tier system for determining tax residents, a particularly favourable one for those subject to the domicile levy and a stricter system for everyone else. This is not in line with the thrust of certain measures in the Bill, for example, section 151, which follows a recommendation of the Commission on Taxation by abolishing a measure which allowed a more favourable residency regime for certain individuals, or the recent abolition of the Cinderella rule. It would bring considerable doubt and uncertainty to determining tax residency and it may not be possible to administer the measure easily.

An individual's tax residence for a year is not capable of being determined unless his or her liability to the domicile levy is determined. It is not clear how, if at all, the recommendation could be made to work for an individual not consistently liable to the domicile levy year on year. It would become impossible to apply the tax residency rules year on year in any consistent fashion where an individual is only liable to the domicile levy occasionally. The individual might be subject to the 280-day rule in one year but not the following year.

I presume the intention behind the recommendation is to provide a favourable tax regime for an individual who wishes to invest in the country. In this context, I point out to Senators that the domicile levy legislation provides that the Revenue Commissioners may give an advance opinion to an individual who is considering whether to make a significant investment in the State. This opinion may relate to whether he or she would be likely to be regarded as an individual domiciled in and a citizen of the State in the relevant tax year. However, there is no obligation on the Revenue Commissioners to give such an opinion.

While there has not been time to consider fully the implications of the recommendation, there is a possibility that its acceptance could result in a loss of income to the State. For example, someone who is a tax resident under the look-back rules is liable to income tax on his or her worldwide income. If that rule were abolished, he or she would only be liable to Irish income tax on Irish-sourced income. The payment of the domicile levy may not be sufficient to compensate the Exchequer for the loss of income from people who become non-Irish tax-resident as a result of the change. For these reasons, I cannot accept the recommendation.

Recommendation, by leave, withdrawn.
Question put: "That the Bill, with recommendation, be received for final consideration."
The Seanad divided: Tá, 26; Níl, 11.

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Callely, Ivor.
  • Carroll, James.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Dearey, Mark.
  • Ellis, John.
  • Feeney, Geraldine.
  • Hanafin, John.
  • Keaveney, Cecilia.
  • Leyden, Terry.
  • MacSharry, Marc.
  • Mooney, Paschal.
  • Ó Brolcháin, Niall.
  • Ó Domhnaill, Brian.
  • O’Brien, Francis.
  • O’Donovan, Denis.
  • O’Malley, Fiona.
  • O’Sullivan, Ned.
  • Phelan, Kieran.
  • White, Mary M.
  • Wilson, Diarmuid.

Níl

  • Bradford, Paul.
  • Buttimer, Jerry.
  • Coffey, Paudie.
  • Cummins, Maurice.
  • Doherty, Pearse.
  • Donohoe, Paschal.
  • Fitzgerald, Frances.
  • O’Toole, Joe.
  • Regan, Eugene.
  • Twomey, Liam.
  • White, Alex.
Tellers: Tá, Senators Niall Ó Brolcháin and Diarmuid Wilson; Níl, Senators Maurice Cummins and Liam Twomey.
Question declared carried.

When it is proposed to take the next Stage?

Question put: "That the Bill, with recommendation, be returned to the Dáil."
The Seanad divided: Tá, 26; Níl, 11.

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Callely, Ivor.
  • Carroll, James.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Dearey, Mark.
  • Ellis, John.
  • Feeney, Geraldine.
  • Hanafin, John.
  • Keaveney, Cecilia.
  • Leyden, Terry.
  • MacSharry, Marc.
  • Mooney, Paschal.
  • Ó Brolcháin, Niall.
  • Ó Domhnaill, Brian.
  • O’Brien, Francis.
  • O’Donovan, Denis.
  • O’Malley, Fiona.
  • O’Sullivan, Ned.
  • Phelan, Kieran.
  • White, Mary M.
  • Wilson, Diarmuid.

Níl

  • Bradford, Paul.
  • Buttimer, Jerry.
  • Coffey, Paudie.
  • Cummins, Maurice.
  • Doherty, Pearse.
  • Donohoe, Paschal.
  • Fitzgerald, Frances.
  • O’Toole, Joe.
  • Regan, Eugene.
  • Twomey, Liam.
  • White, Alex.
Tellers: Tá, Senators Niall Ó Brolcháin and Diarmuid Wilson; Níl, Senators Maurice Cummins and Liam Twomey.
Question declared carried.

When is it proposed to sit again?

At 2.30 p.m. on Tuesday, 30 March 2010.