Léim ar aghaidh chuig an bpríomhábhar

Seanad Éireann díospóireacht -
Thursday, 3 Dec 2015

Vol. 244 No. 3

Finance Bill 2015 [Certified Money Bill]: Second Stage

Question proposed: "That the Bill be now read a Second Time."

As we begin our debate, it is encouraging for me as Minister for Finance to be speaking in the context of a growing economy in which more people are now at work. The end-November Exchequer returns show very robust tax figures, reflective of the continued recovery in the real economy. While corporation tax is the stand-out performer against profile, the year-on-year increase in taxes is broad-based. For example, VAT receipts are up 9% and income tax receipts are up 5%. As a result of these stronger than expected revenues, our deficit forecast for this year is below 2% of GDP and we are well on our way to a balanced budget earlier than originally forecast. Ireland's debt, which peaked at 120% of GDP in 2012, is forecast to be below 100% of GDP by the end of this year.

While all of these metrics are going in the right direction, the Government is not complacent. Far from it. Budget 2016 which delivered a tangible return to the public through reduced taxes and focused increases in expenditure was framed to comply with our fiscal rules which are designed to prevent a return to the boom-bust policies of the past. The economy is growing strongly and we have made significant progress, but the job of recovery is not yet complete. There is work to do and the Government and the country will continue to do it.

The Finance Bill 2015 as passed by the Dáil contains 90 sections and is 124 pages long. I turn to those sections now, although Senators will understand that time does not permit me to cover everything.

Part 1 of the Bill deals with the universal social charge, income tax, corporation tax and capital gains tax. Sections 2 and 3 provide for income tax and USC changes. From 1 January 2016, the entry threshold for USC will be increased from €12,012 to €13,000, thereby removing more than 40,000 workers from the scope of the charge entirely. It is estimated that more than 700,000 income earners will not be liable to USC at all from next year. It should be noted that this statistic includes individuals with incomes in excess of €13,000, as not all income is within the scope of USC. For example, social welfare payments are not liable to the charge. The Bill also provides for reductions in the three lowest rates of USC. The amount of income liable at the second USC rate is also being extended to ensure a full-time worker on the newly increased minimum wage does not become liable for the third rate of USC, which is itself being reduced to 5.5%. In addition, section 2 provides for an exemption for employees from USC on employer contributions to PRSAs, to bring the USC treatment of such contributions in line with employer contributions to occupational pension schemes. I brought forward these changes following the significant discussions on the USC treatment of PRSAs, to which I listened carefully, during the course of the debate on the Finance Act 2014 last year.

Section 4 provides for an increase in the home carer tax credit to €1,000 per annum and also increases the income threshold for home carers at which the credit begins to be withdrawn. The change is from €5,080 to €7,200.

Section 9 extends the home renovation incentive for a final year to the end of 31 December 2016.

Section 11 provides that an employer may provide an employee with a single annual voucher or non-cash benefit to a maximum of €500 without applying PAYE, PRSI or USC.

Section 14 removes from the list of specified reliefs for the purpose of the high earner restriction the exemption from income tax for profits and gains from the management of woodlands.

Section 15 introduces an incentive to encourage landlords to make their properties available to tenants in receipt of social housing supports. It is one part of a package of measures developed by the Government to improve rent stability, which was introduced on Report Stage in the Dáil. The incentive will be available to landlords who enter into a three-year commitment to rent a property to a tenant in receipt of housing supports. When the conditions of the incentive are met, the landlord will be allowed to claim a deduction for 100% of relevant mortgage interest, an increase on the 75% which is currently available. The increased deduction will be claimable on an arrears basis at the end of the three-year period provided the conditions of the scheme have been met.

Section 17 amends the film tax credit following the budget announcement of an increase in the cap on qualifying eligible expenditure at €70 million per production.

Section 18 makes a number of amendments to the employment and investment incentive. Certain changes to the terms of the employment and investment incentive are made in order to ensure it complies with the European Commission's general block exemption regulations from a state aid perspective. In addition, the incentive is being extended to companies which already own and operate nursing homes for the purpose of raising funding which can be spent on extending such nursing homes or residential care units associated with them. The changes are included in a financial resolution that came into effect on budget night. The increased amounts a company can raise in single year and over its lifetime which I announced last year have now come into effect.

Section 19 makes a number of amendments in relation to certain tax reliefs for farmers. It extends the period for which stock relief is available to 31 December 2018. This includes standard stock relief, stock relief for young trained farmers and stock relief for registered farm partnerships. It also makes a number of amendments to the registered farm partnership regime. These clarify certain conditions and introduce a requirement that all participants in the partnership are active farmers. A provision to allow the Minister for Agriculture, Food and the Marine to appoint inspectors to determine whether registered farm partnerships are operating as required is also included.

Section 19 also introduces limited tax relief for succession farm partnerships, a succession planning model that encourages older farmers to form partnerships with young trained farmers and to transfer ownership of the farm within a specified period to that young trained farmer. The section also provides for an appeals mechanism with regard to decisions made by the Minister for Agriculture, Food and the Marine on registered farm partnerships or succession farm partnerships.

Section 20 introduces the petroleum production tax. The tax will apply to petroleum profits from discoveries made under petroleum authorisations issued from June 2014. An Oireachtas joint committee report on Ireland's offshore oil and gas regime published in May 2012 recognised that retrospective changes to fiscal and licensing terms carry a risk of long-term reputational damage, and recommended that existing agreements be adhered to, irrespective of changing circumstances. Therefore, the new terms are designed to strike a balance between maximising the financial return for the State from future discoveries and attracting high-risk exploration investment to prove the potential of our offshore natural resources.

Sections 26 and 28 make minor amendments to the Taxes Consolidation Act 1997 regarding the introduction of Irish collective asset management vehicles and alternative investment funds. These changes bring the tax regime into line with the regulatory regime and ensure that Ireland will maintain its place as an internationally renowned centre for fund management and administration.

Section 27 amends the tax code in respect of capital allowances for certain aviation services facilities to comply with EU state aid de minimis guidelines. These amendments were brought into effect by a financial resolution on budget night.

Section 29 provides that additional tier 1 or AT1 capital instruments are to be regarded as debt instruments for corporate and withholding tax purposes. This will ensure the same tax treatment applies to these instruments as in other European countries.

Section 30 extends the three-year start-up corporation tax relief for new start-ups that begin trading over the next three years.

Section 32 contains the legislative provisions to implement the knowledge development box tax arrangement that I announced in the budget. The section provides that a 6.25% rate of corporation tax will apply to profits attributable to certain patents and copyrighted software which are the result of qualifying research and development carried out in Ireland. The intention behind the knowledge development box, or KDB, is to encourage companies to develop intellectual property and thereby engage in substantive operations that have high added value for the Irish economy. The Government has already made a commitment that the KDB will comply with OECD rules and, once introduced, it will be the first OECD-compliant box in the world. This puts Ireland in a unique position to offer long-term certainty to innovative industries planning their research and development investments.

Section 33 introduces country-by-country reporting in line with the approach agreed as part of the OECD's BEPS project. This introduces a requirement for multinationals with Irish parent companies to file country-by-country reports of their income, activities and taxes with the Revenue Commissioners.

It will apply for fiscal years beginning on or after 1 January 2016 and the first reports must be filed with Revenue by the end of 2017.

Section 35 replaces the existing capital gains tax relief applying to disposals of qualifying business assets by individual entrepreneurs and business people with a simplified relief which will apply, from 1 January 2016, a capital gains tax rate of 20% rather than the general rate of 33% to the first €1 million of qualifying gains.

Section 38 amends section 542 of the Taxes Consolidation Act 1997 in order to put individuals who dispose of land used as part of their business before and after 1 January 2016 but who receive compensation payments in 2016 in the same position for tax purposes, particularly with reference to the capital gains tax entrepreneur relief, by specifying that, in respect of compensation payments received on or after 1 January 2016, the date of receipt of the payment will be treated as the date on which the disposal of the land occurred.

Section 43 provides for the budget announcement that the reduced rate of alcohol product tax available for beer brewed in small breweries may be claimed upfront or by repayment. This is subject to a commencement order and will come into operation once the Revenue Commissioners have made the necessary changes to the collection system. This section also updates the definition of “counterfeit goods” to reflect the new definition in EU legislation.

Section 45 gives effect to the increase in the rates of tobacco products tax, which came into effect on budget night. This measure is expected to raise €8 million in 2015 and €61.4 million in 2016.

Part 3 of the Bill deals with value-added tax, VAT. The VAT-related sections in the Bill, sections 51 to 60, inclusive, do not signal major policy changes and are largely technical in nature. Their primary focus is to prevent fraud, provide clarity and correct anomalies in the existing VAT Consolidation Acts.

Part 4 of the Bill deals with stamp duties. Section 62 adds an additional qualification for the purposes of the young trained farmer stock relief. The new qualification is the bachelor of science honours degree in agriculture awarded by the Dundalk Institute of Technology.

Section 63 extends the relief from stamp duty on transfers of agricultural land, including farm houses and buildings, to young trained farmers until 31 December 2018.

Section 64 provides for the new stamp duty charge on cash cards and combined cards. The current position is that stamp duty is charged annually at the rate of €2.50 for each cash card and €5 for each combined card, subject to certain exemptions, which are to remain unchanged. This flat rate charge is being replaced with a 12 cent charge on withdrawals of cash from ATMs using these cards, which will be capped at either €2.50 in the case of cash withdrawals or €5 in the case of combined card withdrawals. The new basis of charge and the revised reporting requirements for issuers of cards will come into effect on 1 January 2016.

Part 5 of the Bill deals with capital acquisitions tax. Section 67 increases the group A tax-free threshold for transfers of gifts and inheritances from parents to their children and below which capital acquisitions tax does not apply by approximately 25%, from €225,000 to €280,000, with effect from 14 October 2015.

That is a full summary of the main aspects of the Finance Bill. There were a limited number of amendments in the Dáil and I have referred to them and explained their purpose. I commend the Bill to the House and thank Members for their attention.

The Minister is very welcome. It is a pleasure to listen to him. I congratulate him on his expertise and, if I may say so humbly, his application to his job and his ambassadorial skills, representing us in Brussels on all occasions. As I said before, I used to love listening to him reviewing the Fianna Fáil budgets when he was in opposition, at 6.30 p.m. the evening after the budget. He was as clear as a bell, succinct and did not use any jargon we could not fully understand.

There are two very important issues which arise. I will be as brief as possible. I want to speak about the budget and capital gains tax. Ireland was innovative when it introduced the 12.5% corporation tax. The beauty of it has been that all Governments, consistently, whatever their composition, supported the 12.5% corporation tax rate. We dare not think where we would be without the multinationals. I have come here today to say we have to be innovative, as we were on the 12.5% corporation tax for multinationals to come to Ireland. We are too dependent on them. We have to be innovative in terms of our own high-tech entrepreneurs, of whom there are many.

On budget day, the Minister reduced capital gains tax from 33% to 20% on net gains from the disposal of a business or assets up to €1 million. As a business person, I am of the view that we are not at the races on this ossie. I believe passionately that we have to be as innovative with our indigenous entrepreneurs as we have been with the multinationals. The British came down from a 28% capital gains tax to 10% over the last five years because they had a brain drain of entrepreneurs fleeing to the United States and to Australia because they had a better capital gains tax. I cannot comprehend how Department of Finance officials do not understand that although they reduced the rate to 20%, it is not as attractive as the British ones. There is a possibility that many Irish entrepreneurs will go to Britain because of the attractiveness of their capital gains tax rate.

I am coming from the perspective that the success of any business lies in innovation. We have to be as innovative as possible in our taxation systems for Irish entrepreneurs and have to come down as close to zero as we can. We have to be better than the British because the Irish entrepreneurs will leave the country. I am very upset about this matter because I know it is critical that action be taken. Where will we be if we do not have people setting up businesses? We still have an unemployment rate of 19.5% among young people. That is 37,000 individuals. I meet many young people in an affluent area of the city who have no jobs. They do not have third level education and they are falling out of the system because they have not achieved any serious academic qualifications that will assist them in gaining employment. They are in dire straits.

I am here on behalf of potential Irish entrepreneurs in the high-tech industry who have very innovative products and have become very successful and very profitable. Ireland's is a small economy, floating around on the periphery of Europe. We need exporting companies to earn our income. I am starting to believe many people in this building do not understand that one cannot run an economy on the basis of a services sector. We have to have a productive sector of the economy to make money and keep the rest of the place going. Unless we have people selling goods and growing their markets, we cannot keep the country running.

The officials of the Department of Finance and the Department of Jobs, Enterprise and Innovation would want to get their act together in acknowledging the requirements of being an entrepreneur. The Minister knows as well as I do that being an entrepreneur is quite like trying to win an election in that the work is 24-7. Ms Connie Doody and I worked 24/7 for 16 years in Lir Chocolates. In saying that, I mean it. We innovated day in, day out. If we had said we would wait until the following year to produce a new product in the hope of getting business, we would not have succeeded. We had to innovate relentlessly day in, day out, and week in, week out. We are not at the races. Ultimately, the politicians are the people who make the decisions, not officials in the Department of Finance. That said, and I am not being personal in saying this, those officials do not understand what it is like. We need a very innovative capital gains tax regime to encourage people to set up business and Irish entrepreneurs to stay in Ireland. We cannot let them run off to the United Kingdom.

Another point that is very dear to my heart and about which I spoke to the Minister concerns inheritance tax. I live in the south County Dublin area where, very quickly in a matter of a week, we got more than 2,000 people to sign a petition on inheritance tax. I do not understand the rationale behind inheritance tax or why the hell we bother with it. People in this country, particularly in Dublin, have saved all their lives for the one little capital asset, but when they hand that property over to their child, he or she must raise the money to pay the awful inheritance tax or sell it. It is communism. I have said this to the Minister before. I do not understand why we would do that to citizens. I meet people in Dún Laoghaire–Rathdown who are heartbroken because their children will have to pay inheritance tax at such a high rate. I found my own party to be very parochial about this. The threshold should be changed back to €500,000, which applied in 2008. I am not being personal and would not like to hurt the Minister's feelings because I have respected him so much over so many years, but I believe his change to the inheritance tax regime was miserly. It was meaningless. In respect of a house worth €500,000, one only saves an extra €18,000 on inheritance tax.

These are two passions of mine. We really have to grab the issue of capital gains tax for Irish entrepreneurs by the scruff of the neck. I hope the Minister's adviser who is sitting behind him is listening to me because we are not at the races with the British. One has to be better than one's competition. We have to have a better capital gains tax regime than the British.

Many countries have abolished inheritance tax, including Portugal, Norway, Sweden, Russia, Hungary, Austria, Canada, New Zealand and Australia. It is deemed double taxation. Why are we imposing it? I do not approve of it whatsoever. I meet older people in the Churchtown area who are devastated. They are only copping on to this. They say they have paid off the mortgage on their house, their one capital investment, but that their child will have to pay a very serious tax on it.

I wish the Minister continued success because he is a role model for us all.

I welcome the Minister. I am substituting today for my colleague, Senator Michael D'Arcy.

There are a few points in the Finance Bill I wish to address. I have spoken to the Minister about these matters prior to the budget. No more than my colleague on the other side of the House, Senator Mary White, and others, I have hobby horses. I recall how long it took the Minister to deliver the budget on budget day and the number of pages in his statement. Despite this, many people said to me the following day that they took only one line from the budget, the line implying there was an extra week's wages in it for everyone. Subsequently, the ESRI stated there were three weeks' wages in the budget for everyone. I do not know whether the Minister was underestimating himself in that regard.

Budgets and finance Bills in recent years have been to get the country back on track. Everybody on both sides of the House understands that. Senators understand all the holes cannot be filled in one budget. In the most recent Budget Statement, it was specified that the universal social charge benefits were directed primarily towards people on low incomes or those the media call "the coping classes". This was the right decision in the interest of a fairer society. However, the sector that contributed a lot to the economy comprises older people. I was disappointed, therefore, that the telephone allowance was not reinstated for them. This could have been achieved at a nominal cost to the State, and it would have meant so much to them. I would not write off the fact that the Minister will keep this in mind. He might be able to reinstate the allowance at another stage.

Another issue for which I will continue to fight concerns that the fact that Down's syndrome ought to be included in the qualifying criteria for a primary medical certificate. I hate using the word "burden", but there is a burden on the parents of children with Down's syndrome. They have to bring them everywhere. There are great services now and I hope we will never again treat people with disabilities and the disadvantaged as we did years ago but it should be acknowledged that children with Down's syndrome are the whole life of their parents for all their lives. I have four children and hope they will be reared and independent in the next ten to 15 years but parents of a child with Down's syndrome must focus on their child all their life. I hope that in the future the Minister will be in a position to include Down's syndrome among the conditions that qualify for a primary medical certificate.

I congratulate the Minister on the way he has brought the country back from where it was. I acknowledge that there is a good bit to go. Having spoken to people in the business community, I have learned there are many more people back working. We are going the right way although we are not there yet. I hope the people in the sectors of society that have not yet benefited will get their just reward for the sacrifices they made after the financial meltdown. As the saying goes, "A rising tide lifts all boats."

I thank the Minister for attending to present the Finance Bill to us. As with Senator Mary White, I wish to talk about the changes the Minister is effecting. I was delighted to see he started the journey. He took a step but never even got his shoe off the ground. He intends to reduce the capital gains tax rate for Irish entrepreneurs should they ever reach the welcome day on which they wish to sell their businesses. The rate is to be reduced from 33% to 20% of the first €1 million.

As with previous speakers, I so admire what the Minister has done. I will never forget the feeling of despair when, having been fortunate enough to become a Senator, I read some of the documentation from Europe. I looked upon this Oireachtas as a business and there was fear in my heart. Today, however, we note the wonderful positivity that the Government has driven.

The Minister is to be congratulated.

Our mantra now is that Ireland is the best small country in which to do business, but I can tell the Minister with certainty that Ireland is most definitely not the best country in which to start a business. I am not sure if the Minister was in the room at the Global Irish Economic Forum in Dublin Castle two weeks ago when a wonderful young man from Cork spoke about his new business. Unfortunately, however, he is based in London, and I do not blame him. I am going to invest in his business. He has an amazing idea involving the food industry which will help diabetics. I was talking to him yesterday and I told him he would be mad to start his business in Ireland because he will pay 10% of £10 million in England and this boy's product will sell out.

Unfortunately, the Seanad is not allowed make amendments to this Bill. I wish that were the case, because I would have fought tooth and nail to get the Minister to take a much braver step. He is in a position to do that. Why let the English have it? Part of my business has been sold and if I want to start a new business I may go to Northern Ireland to do so. I remind the Minister that, like the previous speaker, Senator Mary White, I started a business. One goes through the feasibility stage, the excitement stage, the risk stage, the borrowing of the money stage, the mortgaging of one's house stage, the worry stage and the 24/7 stage that lasts for about ten years, following which one gets to look the way I do at 55, which is about 90. There is the ongoing stress, an incredible amount of work and then the employment stage and dealing with employment law, which is very difficult for a small company like mine, but I employ 220 people and will employ more before I am finished. There is also the question of VAT, the universal social charge and PRSI. At the end of the journey, the more value one adds to one's business, the more tax one will pay to the Government.

We want more entrepreneurs not only in the technology space but also in the crafts, services and manufacturing spaces to create businesses, rural employment, thriving communities and innovation. There are many people with ideas who will help us in the climate change space but there is no incentive in that regard. I hope the Minister is hearing what I am saying and I hope he will go much further. We are in a position to do it and therefore we should level the playing field so that our young entrepreneurs can have a go, because the situation is madness.

I will not read out the relevant section of the Bill, but we are not talking about people who buy tracts of land or big properties that they leave idle and on which they make a fortune. We are talking about people who give their blood, sweat and tears to employ people. They put their life and soul into their businesses. They love this country. We should re-examine that situation. I thank the Minister for listening to me.

I welcome the Minister. The economy is one of the fastest growing economies in Europe, if not the fastest growing. The latest ESRI forecast states it will grow by 6% this year and 4.8% next year. The ESRI previously forecast in its quarterly economic commentary that the growth rate would be 4%; therefore, we continue to exceed expectations, which is a very good place for the economy to be in.

There are 37,000 young people unemployed.

I did not interrupt the Senator.

I know, but 37,000-----

Regarding unemployment, the best route out of poverty is a job. The Government has been determined to see the economy return to full employment and has pledged to achieve this by 2018. At the start of the year the ESRI predicted that unemployment would fall to 9% by the end of the year and we have already reached that target. In fact, we are ahead of it. That is down from 14% at the height of the crisis. I do not want to be political about this in the way Senator Mary White has been, but the reason the country is in this crisis-----

I am here to help my country, not to be political.

-----is largely down to the mismanagement of the economy by the previous Fianna Fáil Government.

In spite of commentary to the contrary, we have a highly progressive income tax system, with a tax wedge for those in receipt of 160% of the average wage in comparison with those who are on 60% less than the average wage, placing us second highest in the OECD in this regard, and this budget ensures that it is more progressive. The Irish tax and welfare systems have been highly effective in reducing inequality during the crisis. A recent OECD report pointed out that Ireland, in comparison with France, for example, reduced inequality during the crisis, which is some achievement. We are a more equal society now than we were at the beginning of the crisis.

The Finance Bill before the House today is one element of a package of measures designed to secure the recovery of the economy. The Social Welfare and Pensions Bill which is before the House contains a package of measures to support families and restore some of the unavoidable cuts made necessary by the mismanagement of the economy by other Governments during the worst years of the recession.

There was a world recession.

From January onwards we will see an increase in the minimum wage, and last week we saw the reversal of the financial emergency measures in the public interest, FEMPI, legislation-----

Who paid the minimum wage?

-----by way of measures that recognise the sacrifices of some public and civil servants. In recent weeks we have seen a package of measures designed to combat homelessness and safeguard the one in five families who are renting in our society, together with another package of measures designed to improve housing supply. That follows on from the announcement in last year's budget of resources for one of the largest social housing programmes in the history of the State.

There is no doubt that the country is in recovery. The unemployment figures, more than anything else, are an indication of the extent of the economy's recovery. Tax receipts are almost €3 billion ahead of target and, as the Minister stated recently, Government borrowing will be eliminated in a few years. We expect the debt-to-GDP ratio to fall to 100% by the end of this year, well exceeding expectations. I believe it was Foreign Policy magazine that had Ireland reaching 109% by the end of the year. Again, we are exceeding expectations.

On the specific budget measures, I welcome the tax and universal social charge changes. I am particularly pleased that they target the lowest paid and middle earners. I welcome also section 9, which deals with the extension of the home renovation incentive for an additional year. That has had some success, particularly in improving the housing stock. That it was extended to include landlords renting private rented housing means that those people renting are not forgotten.

Section 15 which introduces tax relief for landlords who make properties available to tenants in receipt of social housing supports is also to be welcomed because we know it is particularly difficult for tenants receiving rent supplement or housing assistance payments to secure housing. However, I would like to see tax relief extended to all landlords because it is one area where there is inequality between landlords renting domestic housing and commercial renters. It is only fair to treat landlords equally, whether they are in the domestic market or the commercial sector.

Regarding section 32, I welcome the legislation to implement the knowledge development box. It encourages companies to develop intellectual property in this country, which brings in a higher added value for the economy. One of the criticisms of foreign direct investment is that we do not get the additional value added that the economy requires.

In terms of my overall concerns, as the country-specific recommendations for Ireland pointed out, the level of private debt in our economy remains worryingly high. I highlight, for example, the mortgage arrears issue. I very much welcome the decision the Government made recently to change the bankruptcy laws, as I believe it will encourage more lenders to reach realistic settlements with people in mortgage arrears.

We continue to struggle with the banking sector. I am particularly concerned about the equity gap in the housing market. There is a 40% equity gap in terms of access to finance for developers which is forcing them to secure expensive funding from the venture capital funds. Recent research done for the Society of Chartered Surveyors Ireland identifies access to capital as the factor that most limits development in the country.

The additional cost of finance is in the region of €7,000 per unit.

The operations of the banks generally need to be reviewed. Recently, Bank of Ireland attempted to introduce a €700 minimum for over-the-counter withdrawals. That was subsequently withdrawn. However, it is an indication of the activities that banks intend to pursue in order to improve their profitability. The budget represented a missed opportunity to secure movement on variable interest rates. Ours remain the highest in the eurozone. That is unacceptable. They are being paid by people who are in mortgage arrears and negative equity. This issue must be addressed.

Lending to small and medium-sized enterprises, SMEs, was highlighted as a leading challenge. This banking issue needs to be addressed as part of a wider policy, as the banks continue to fall short and there is not likely to be any improvement in the lack of competition in the near future.

The future looks good for Ireland. We have issues that need to be addressed, in particular mortgage arrears, but Europe is proving resilient to the shocks of recent months, for example, those owing to difficulties in China. Energy costs remain low. Of most importance is the fact that the European Union has shown itself to be willing to engage in quantitative easing to support the European economy. We might have an additional rate cut soon, which is a matter on which the Minister might be able to comment. It would assist in dealing with the mortgage arrears issue.

I welcome the Minister. Senator Tom Sheahan mentioned that he was standing in for Senator Michael D'Arcy. We are working on the banking inquiry report. I thank the Minister for the evidence he gave when he appeared before us.

We have robust tax receipts. It is wise that mention has been made of keeping some of these out of financing day-to-day expenditure in case they are one-offs or exceptional. I welcome the debates between the Minister and Professor John McHale and the Irish Fiscal Advisory Council, IFAC, because they have been useful and form part of a democracy. In other spheres of Government policy, there is a certain dislike of contrarianism but it should always be present, including in the Seanad. Let us debate the issues. I hope it will lead to better policy-making.

Vigilance of public expenditure is always required. That is substantially the reason that we got into trouble. My white elephant prize for this year goes to the seven-digit, non-sequential address code, which was rightly criticised by the Comptroller and Auditor General. It cost €38 million and no one uses it. From the evidence given to the committee, it was obvious to every member that there was no great appetite for the code. If 98% of post is delivered the next day why spend €38 million on trying to improve Postman Pat, who is doing well?

In many other ways, we are going in the right direction. The 9% VAT rate for tourism and the abolition of the air travel tax gave rise to proven results, but there are concerns about some hotels, particularly in Dublin. I do not know whether the 9% VAT rate can be geographically differentiated but many Senators have told me that the cost of staying in Dublin has increased in the past year, which is not quite what the Minister and the House had in mind when we introduced the lower rate.

The Minister stated that debt-to-GDP ratio would fall below 100%. He also mentioned USC. While I welcome the reductions, a peculiar feature of USC is that the allowance does not apply once one exceeds it. If one earns more than €12,012, the entire €12,012 below the exemption limit becomes taxable. I have never seen this with any other Irish tax. I hope that there will be genuine attempts to take people out of the net. Similarly, no full-time worker on the minimum wage should be liable to tax. The Minister stated that the third rate of USC had been reduced to 5.5%. That is what "minimum wage" means, namely, the amount that people need to live. We should remove it from the tax net if possible.

In conversations with the Minister's distinguished predecessor, Mr. Brian Lenihan, I detected that there was a view within the Department of Finance that low-income earners did not pay enough tax. That might be true but it is because they are low-income earners. Going after them did not strike me as being a progressive way of running the tax code. Some of that thinking was reflected in tax measures in recent years.

Turning to section 9, the banking commission would have serious reservations about all of the tax breaks for housing. They are difficult to get away from once we start. They begin as a Keynesian mechanism and continue even when the economy is growing at 6%. I am wary of such measures. Another of the Minister's predecessors, Mr. Alan Dukes, stated in his evidence to the banking inquiry that a prosperous economy made for a prosperous construction sector, but that it was not necessarily the other way around. We might bear that in mind as a principle.

Section 11 on vouchers from employers for rewarding staff is interesting.

Senator Aideen Hayden referred to housing issues. On the Order Paper is the National Mortgage and Housing Corporation Bill 2015. We introduced it when the Minister and the Minister of State, Deputy Simon Harris, were away, so three of their ministerial colleagues from other Departments sat in for it. There is some potential to emulate the Canada Mortgage and Housing Corporation experience in order to borrow money at low interest rates on the condition that it is channelled into houses at below-average prices. I have misgivings about the ability of the construction industry and financial sector to solve our housing problem. According to evidence given by Mr. Michael O'Flynn to the banking inquiry, housing in Ireland has priced itself out of the market. We used to be able to provide houses at 2.5 times the average income but that increased to 12 times before falling to approximately six times now. Pressure must be applied to re-orient it to address our serious housing problem.

Section 17 on the film tax credit will cap qualifying expenditure to €70 million per production. My inclination is to put a €70 million cap on the whole lot. I have different priorities than allowing movies to be made for €70 million each for a tax credit, but I have discussed this matter with the Minister in the Seanad in previous years.

I note the fuel tax provisions under sections 81 to 83, inclusive. Between the authorities in Northern Ireland and the Republic, there must be a clampdown on fuel laundering and smuggling in Border areas in order to address criminality as well as the loss of revenues.

Section 35 relates to entrepreneurs. The problem is that, as proposed, it gives the tax break when one becomes an ex-entrepreneur and sells the business. One might buy another business but are there other ways of channelling assistance to entrepreneurs than requiring them to sell their businesses?

I note the Minister's interest in the knowledge box. I wish that project every success. We must get away from inversion and the type of adverse publicity that we get, in particular in the United States, for being seen as a place where companies buy small subsidiaries in order to avoid their corporate tax responsibilities in the United States. The United States is our great partner in economic development. The fact that the Minister is implementing the OECD rules by setting up the first OECD-compliant knowledge box in the world is to his credit. I wish him well in that endeavour.

We are supposed to be espousing technology. The ATM is a form of technology. It makes no sense to charge people a tax every time they use an ATM, particularly if their finances are not looking well. It seems a puny thing to do to annoy people. The measure is contained in section 64.

As the other speakers have said, the Minister for Finance has brought the finances to a far better place than they were in. We must keep vigilant on expenditure programmes. There are far more Ministers, aside from the Minister in the House now and the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, who are working on new ways to spend money. The Irish Fiscal Advisory Council has a role in advising and debating with the Minister on tax. We need something similar on the expenditure side rather than waiting until the Comptroller and Auditor General turns up after the event to tell us that €38 million was spent on the seven-digit address code. It makes no sense but we know that already. A better appraisal of projects on the expenditure side would help to complete the journey that we have undertaken remarkably well in recent years.

I join Senator Cáit Keane in welcoming the Minister for Finance, Deputy Michael Noonan. On behalf of the House, I thank him for coming to deal with the Finance Bill. Members appreciate it very much.

I am impressed with the lovely tributes paid to the Minister, particularly from Senator Mary White in her contribution.

I have not spoken yet.

It is true to say he has done a remarkable job as Minister since he assumed office in 2011. I pay tribute to him and to the Minister for Public Expenditure and Reform, Deputy Brendan Howlin. Between them they have held the Government together.

Where has the €1.5 billion gone?

The Senator had her opportunity to speak.

They have got the ship of State back off the rocks. One measure of the success of the Minister can be garnered from the Exchequer returns at the end of November. They show a surplus of €343 million for the first time since 2007. At the end of November, tax receipts were up 11.9% on the same period last year. One good thing about those figures is that the strong performance is across all tax headings rather than only one tax heading. This is an indication of improved trading and of how consumer confidence is improving.

The signs of the recovery are all around us. One need only take to the roads to see the increased traffic, particularly in the past year. There are far more commercial vehicles on the roads and many more builders and tradesmen who are particularly busy now. Some of them tell me they are finding it difficult to recruit staff. That has a knock-on effect on builders providers, hardware stores and shops. All of that is adding significantly to the tax take.

The hospitality and restaurant sector is doing exceptionally well in many parts of the country. This was due to the innovative measure the Minister introduced in his first year, namely, the 9% VAT rate for the hospitality sector and the reduction in the travel tax. Like Senator Barrett, I am concerned that some hotels are abusing the measure. The Minister was right in the recent budget to issue a warning and set out how if the measure continued to be abused he would have to reconsider the measure in future budgets. I was concerned this week following the comments of the chief executive of the Restaurants Association of Ireland. He said restaurants were now likely to start charging €1 for a glass of water.

They have to pay water charges, for God's sake.

While there are water charges, the benefits they have garnered from the reduction in the VAT rate more than compensate for it. I caution the restaurants association to be careful with that measure.

We still have not seen the level of improvement and benefit spreading to some more rural areas. One measure we can all help with coming up to Christmas is to consider shopping locally to boost the local economy. One measure in particular in the budget should be helpful. Some of the larger employers give Christmas bonuses to employees. The measure in the budget now enables employers to give vouchers to the value of €500 to employees. The figure has gone up from €250. That should certainly help to pump more activity into the local economy. It should help smaller towns in particular.

Senator Mdary White referred to the inheritance tax issue. I know this is something she feels passionately about. The fact that the Minister has adjusted the limit from €225,000 to €280,000 in the budget is to be welcomed. I hope this is simply a start. We need to see that significantly increased in the future.

We need to abolish it.

Senator Mary Ann O'Brien spoke in her contribution about the need to support indigenous businesses as well as rewarding innovation, hard work and risk-taking. I very much support that. The measures being taken in An Action Plan for Jobs will address some of issues. However, from a taxation point of view this is something I know the Minister will keep under close review in future.

Another measure I very much welcome is the VAT refunds for home improvements. The Minister has continued the measures for next year. This has certainly been of major benefit to small builders. It has kick-started some economic activity in some of the smaller rural areas. Now that people are spending a little more, there is no doubt that tradesmen, electricians, plasterers and plumbers are beginning to benefit from that measure. I am keen to see that continue.

I thank the Senator. Does he remember when I was on the health board? I used to use the bell, but I will not use it today.

It is true to say the ship of State has been steadied. Our debt levels are reducing. We are getting to a situation now where we are heading for balanced budgets. I hope the country will continue to grow and prosper. I hope the people make the right decision in several months time.

I welcome the Minister of State, Deputy Simon Harris.

He must not be meeting unemployed people.

I thank the Minister of State for coming. He is very welcome and I wish him season's greetings. I call on Senator Darragh O'Brien to add to the debate.

I have no wish to burst anyone's bubble, but given the amount of bouquets being thrown at the Minister for Finance, Deputy Michael Noonan, today, he could open a florist shop. It is a little galling to be honest because we are here to debate a Bill, what is good about it and what is in it.

It is the season that is upon us.

I am not feeling too Christmassy right now. We have a great deal of work to do between now and Christmas. Let us consider some of the issues that have not been covered or addressed. All of us welcome the improving economic climate in the country. Having said that, we must recognise how this is not impacting on thousands of people in this country, especially those in middle Ireland. There are no provisions in this Bill in real terms to alleviate child care costs. There is no direct tax credit for that. There remains an anti-urban or anti-Dublin slant on the local property tax.

Let us consider the VAT decreases to which Senator Michael Mullins referred. He commended the Minister on the reduced VAT rate on the hospitality sector. I agree with him in this regard. However, let us remember where the money came from. Fully €2.4 billion came from private pension funds. It has been taken out of peoples' savings. I am unsure where that balances the books because there was certainly no €2.5 billion reduction in VAT with that requisite amount.

Let us consider the mortgage arrears issue. There are no measures in this budget for mortgage arrears. There are no measures relating to the variable mortgage rates. We have repossession rates and civil bills, more than 6,000 of which have been issued this year already. These have been facilitated by the Government through the passing of the Land and Conveyancing Law Reform Act. The Minister of Finance watered down the code of conduct on mortgage arrears to make it easier for banks to attack mortgage holders in difficulty.

While we look at some of the positives in the Bill, it is only fair for people to see where actions are required in other areas where no progress whatsoever has been made. More than 200,000 people are in mortgage arrears and people have repossession orders hanging over their heads. Some people are working simply to pay the bills and are paying an extra mortgage in terms of child care, in particular those living in urban areas in Dublin. I did not get an opportunity to speak to the Minister, Deputy Michael Noonan, but perhaps the Minister of State might consider those who are paying for everything and getting nothing, that is, middle Ireland, where couples are out working every day and are paying for everything.

I do not want to burst the Labour Party's bubble, but the fact is that this budget is better for high-income than low-income earners. That has been the trend with the Government over the past five years. Senator Aideen Hayden can shake her head, but she should read the figures.

I am beginning to think Senator Darragh O'Brien does not know-----

Let us consider the budget. The highest benefit in terms of tax changes will be felt by higher income earners. Tax changes will result in a gain of 1.9% for those earning €75,000 a year and 0.8% for those earning €20,000 year. They are the figures and the facts. Senators can dispute them all they want, but that is the way it is.

I want to raise one matter which has been brought to my attention with the Minister of State, namely, the employment and investment incentive scheme, which I would like him to address on Committee Stage. It is a vital scheme for domestic firms which want to raise non-bank finance. However, changes being made will have the effect of ruling out trading SMEs over seven years old unless they can raise funding equivalent to over 50% of the average of the most recent five years' turnover. For example, an eight year old company with a turnover of €4 million cannot, under the current rules, take in employment and investment incentives unless it raises more than €2 million. This may be more than it can raise. I would like the Minister of State to examine this because it is an unintended consequence.

Growing bank funding for the SME sector was mentioned. It is still incredibly difficult for small firms to get loans from banks. This could be a very good scheme to allow SMEs to raise funding. I do not think the Government intends for an eight year old company which is growing to have to put up 50% of the finance, while a business that is seven years old or less can access the scheme. Obviously on Second Stage we cannot table amendments, but I will put forward recommendations in this regard on Committee Stage. It is worth examining the issue. I will give the Minister of State an example when he concludes, and he might ask his officials to consider it. We will have a better chance to unpick this Bill on Committee Stage.

This and any future Government needs to consider those who, in the main, are carrying the tax burden. We have to look after those who need assistance and I have always stood over a good social welfare system. The reality is that thousands of people are working simply to pay bills and see their tax burden increasing each year with water charges, local property tax, child care costs and high variable mortgage interest rates. They are the people on whom we need to focus. They believe no one is speaking for them.

I look forward to Committee Stage. It is up to Members on the Government side to commend their Minister for the work he has done. I commend the Minister, Deputy Michael Noonan, for some of the work he has done, but in doing so one has to consider areas that have not yet been addressed and how we got to this situation. It might not suit Members on the Government side to realise that 70% of the adjustments that were required were made by the previous Government and were opposed by the Labour Party and Fine Gael at every single stage in the Dáil, yet effectively the same plan was followed. They cannot have it both ways.

People do not want to see us arguing over political points. We have to try to include those who have been left behind, something I understand cannot be addressed in one Bill. Those people who are paying for everything and getting nothing can be the focus after the next election. I welcome the Minister of the State to the House and look forward to his response. I will give him specific details on the investment scheme.

I welcome the Minister of State. I am delighted to have him here. What is particularly pleasing in the finance results that are coming through is that we have a surplus way beyond that which we anticipated, on which I congratulate the Minister of State and the Department. I got one piece of advice from Senator Sean D. Barrett, namely, not to forget the shoe box. I asked him what he meant. I am not sure who came up with the shoe box idea. I understand it was Brian Farrell who said when one got a one-off benefit, one should put it in a shoebox rather than spending it or including it in a budget because suddenly it would all be gone. There is a temptation to do that. Let us remember the shoebox and any surplus money we have on that basis.

The debate today was very interesting. I listened to Senators Mary White and Mary Ann O'Brien, both of whom are entrepreneurs and started businesses. I remember someone telling me he had huge confidence in anybody who has ever run a business because they lie awake wondering where they will get the money to pay wages at the end of the week. It seems that is what the two Senators have done. They spoke of the importance of running a business. The fact that they are both in the chocolate business is very useful.

It is an aphrodisiac.

I welcome the chance to speak on the Bill. I would like to raise some issues relating to business, in particular, SMEs. Part 3 deals with various VAT issues. I would like to see the Minister doing more to help the retail sector, something Senator Michael Mullins mentioned. In particular, we need to make it easy for retailers to succeed online. As we saw with black Friday and cyber Monday, this is where the future of sales is likely to be.

Unfortunately, many retailers are still not very good at getting their business online and, therefore, are missing out on thousands of potential customers from all over the world. I mentioned that I visited Estonia a few years ago. I went into a shop which had, if I recall correctly, three people on the shop floor but 11 people working upstairs trading online all over Europe. They succeeded in doing business on that basis. It is possible to do something. We are missing out on thousands of potential customers from all around the world.

One proposal is that the Government could introduce a measure that would offset the cost of web development against VAT costs. That has happened in other countries and we could do something. Perhaps there is still time to introduce this small, but possibly very beneficial, incentive. It may give those retailers which need to get online the knowledge that they need. It would be at a small cost to the Government and would involve setting the conditions to create jobs in that sector. If this cannot be done now, I hope we will return to it at some point in the future.

Senator Darragh O'Brien raised an issue about which I feel very strongly, namely, the employment and investment incentive scheme, which allows for tax relief on investments in SMEs. In particular, it seems that in the new rules, companies over seven years old will not now be eligible. I do not understand that. Perhaps the Minister of State could explain the reasoning for it. The Government should implement measures to protect established businesses rather than just helping new businesses.

As Senator Darragh O'Brien said, banks are often not lending enough. Given that the economy is still relatively fragile, it seems that measures such as the employment and investment incentive scheme should help all SMEs, not just the newer ones. The scheme requires that a qualifying company now has to be a company that never traded, a company within its first seven years of trading or that the funds the company raises must be higher than 50% of the company's average turnover in the past five years. I do not understand the reason for these conditions. Perhaps the Minister of State will be able to explain them.

These changes were not communicated during the budget. They appear to have been agreed only very recently. This proposed change essentially rules out trading SME companies over seven years old, unless they can raise an investment amount of over 50% of an average of five years' recent turnover.

An eight-year old company with a €4 million turnover cannot take in investment unless it raises over €2 million in funds. Most companies simply would not need that funding. The provision has been sprung on us. The thinking behind it needs an explanation and I think it needs to be changed. The Minister of State may say, "Here is the explanation and here is the change we are going to make," and I hope we do make a change. I believe the change can be done through recommendations on Committee Stage. I will e-mail my suggestions to him because the matter needs careful attention and I know he will give the matter the scrutiny it deserves.

I welcome the Minister of State. I welcome the Finance Bill and the steps that have taken place. In particular, I welcome the success of the tax incentive in the past year. Let us make sure we do the right thing in the future and continue to improve the economy, which would benefit us all.

I thank the Senator. I wish him well in the forthcoming Seanad election, although I understand he may not stand as a candidate. I can assure him that he would be a loss to this House. He has always been very fair and balanced in his contributions.

I thank the Acting Chairman.

I, too, welcome the Minister of State. We all know that there is an election coming; it is inevitable. An election is about choices, but when we were faced with making choices to substantially address income inequality and deprivation, for example, it was not done in this legislation or in the budget. The fact that economic recovery has led to worsening inequality should be of major concern to everyone. Having said that, my party recognises that there are some positive elements in the Bill, and we support them. The extension of the tax credit to self-employed workers is overdue, although my party would have chosen to phase it out. Sinn Féin proposed the removal of people in receipt of the increased minimum wage of €19,572 from the USC net. However, I welcome the removal of some people who earn less than that sum from the USC scheme.

We believe a high earner will gain €900 and the top 14% of earners will gain €190 million from this budget and the Finance Bill. It is our belief this Bill is the embodiment of the Government's ideological commitment to tax cuts above the protection of public services. It is some statement that tax cuts for top earners trump all other considerations.

We have been told everyone can see there has been an economic recovery, particularly when travelling on roads, where one can see that there are a lot of new commercial cars and more builders. What I see in the real world is homelessness, people on hospital trolleys, people sleeping on hospital floors, poverty, deprived children and people struggling to feed and heat themselves, let alone live comfortably. Hard-working families are living on poverty wages, the squeezed middle are struggling to cope day to day, and there are families with children in school and college who are struggling financially. Plus, young people will be less well off than in previous generations. Families have been torn apart by emigration, and elderly people are struggling to meet their basic needs. I am not asking the Minister of State to take my word for what has happened. Dr. Rory Hearne, for example, has carried out an interesting analysis of inequality within the economic recovery that is based on the results of last week's survey of income and living conditions by the CSO. Based on the survey and his analysis, it would appear that Ireland is deeply unequal and that the level of inequality is worsening. Perhaps the Minister of State might respond to some of his points. Dr. Hearne claims:

The share of income going to the top 20 percent in Ireland has increased each year since 2011 and is now back at pre-crisis levels. In contrast, the share of income going to the bottom 40% of the population has fallen.

As has been said, inequality has increased since 2011. Dr. Hearne continued:

Ireland's Gini co-efficient worsened between 2013 and 2014 as it increased from 31.3% to 31.8%. As the CSO notes, “this indicates an increase in income inequality across the total income distribution."

This is the highest the level of inequality in Ireland since 2006, when the Gini coefficient was 32.4.

As we sit here discussing the Finance Bill, discussing its provisions and measures, I want to ask the following: what effects have the past number of budgets had on the economy? What about the significant amount of social scarring that is evident to everyone? We need only look at the reality. There has been an increase in the proportion of the population who suffer deprivation and are at risk of poverty. In 2004, for example, 12% of the population experienced two or more types of deprivation, but in 2014 that figure had almost trebled to 29%. Before coming here this morning I calculated that the 29% figure means there are 765,000 people suffering from deprivation, which is the equivalent of the entire population of Cavan, Monaghan, Meath, Louth, Donegal, Sligo, Leitrim and Roscommon. My calculation may be a few digits over or under. We need to include social and human impact indicators when we discuss the budget and the finance Bills. The historically high rate of deprivation is of major concern to me. Unfortunately, neither economic growth nor Government policies have addressed these unacceptably high rates. Therefore we need to question successive budgets and finance Bills.

CSO statistics have revealed that poverty and deprivation rates for those at work have increased significantly in the past year. The deprivation rate for households with one person at work rose from 33.8% in 2013 to 35% in 2014. The at-risk-of-poverty rate for these households rose from 13.4% to 15.9%. Looking at those figures, I strongly refute the claim made here this afternoon that a rising tide lifts all boats. I ask the Minister of State to comment on this.

I want to briefly mention how the Government's attitude to the budget has worked in reality. For example, local authorities use the housing assistance programme, the rental accommodation scheme and long-term leasing schemes for social housing. They have funding for 2015 to 2017, yet they have signed leases of between five and ten years' duration without knowing for certain how much money will be allocated for the schemes after 2017. Most local authorities have signed up for rate harmonisation for periods of between five and ten years. When central government reduces the allocation for social housing schemes while local authorities are tied into contracts costing €14 million plus a year, where will they make up the shortfall in funds? Let us bear in mind that under fiscal rules, any increase in expenditure by local authorities counts towards expenditure benchmarks. Therefore, even if it is a good year for rates and other local funding, the money cannot be spent. That is just one example of short-term thinking. Regardless of how much corporation tax is brought in this year or next year, we still have a fixed amount of money to spend over the next five years. Local government, health, child care, housing and public services do not seem to be in the plan.

When the Minister for Finance was here this morning, he commenced by talking about the growing economy and having yet more people in work. One can see that having a job is not enough any more. Now one requires a living wage and affordable housing, child care and health care to ensure that low-paid workers can get out of poverty and deprivation. According to Social Justice Ireland, budget 2016 has widened the gap between rich and poor. Also, the Irish Fiscal Advisory Council does not think the budget is prudent and the European Commission has warned that it has not been built on solid foundations. At the beginning of my contribution I mentioned that my party agrees with some elements of the Bill. However, it is not a Bill to stand over and my party will not support it.

I shall begin by thanking all of the Senators for their contributions on the Finance Bill. Any time I have come to the House we have had an interesting and informative debate and today has been no different. On my own behalf and that of the Minister for Finance, I thank everybody for their comments and viewpoints. There were some suggestions and advance warnings about matters that Senators wish to pursue further on Committee Stage.

Some of the issues raised, while relevant in terms of fiscal policy development, relate to areas which are beyond the direct scope of the Finance Bill under debate. Therefore, I hope Senators will understand if I focus in the first instance specifically on the issues raised about the Bill and then the related issues, if I have time.

Senator Mary White raised the issue of inheritance tax while the Minister was here. I know that she has strong feelings about it. The Minister raised the group A threshold that applies to gifts and inheritance bestowed by parents to their children from €225,000 to €280,000, which represents an increase of about 25%. The Minister did so in recognition of the improving state of the national finances and the concerns expressed to him and to many Members by people making and receiving gifts and inheritance, particularly in the context of rising property prices. The scale of the increase may not be considered sufficient by some. I understand that is the point that was made by the Senator.

A significant change has been made and it is as much as we could afford on this occasion. The Minister has, however, indicated that he sees a change to the group A tax-free threshold in this year's budget as the start of a process. Provided, among other factors, that our economic recovery continues, and if the Minister remains the Minister for Finance, he intends to examine the scope for further improvements in the tax-free threshold in the future. The yields from capital acquisitions tax only represents 1% of overall tax revenues and generates about €400 million per annum. If that yield was not there, obviously other taxes would have to be increased or expenditure reduced to fill the gap had we gone beyond what we did in this budget. Taxes on certain fixed capital are much less distortionary for economic activity than taxes on income and employment. However, I take the point made.

Senators Mary White and Mary Ann O'Brien referred to the revised CGT entrepreneurial relief and the issues around competition with the United Kingdom. The level of gains qualifying for relief under the UK scheme commenced at £1 million and was subsequently increased over time. We are setting out a similar roadmap here. The Minister did as much as the resources allowed him to do in this space.

I accept the logic of that, but we do not have time to wait.

The United Kingdom started in the exact same way as we are doing. Unfortunately, we must remain within the fiscal rules. If we put more into one area, we have to take it away from another. It is about getting that balance right. The relief will be kept under review and subject, among other factors, to the economic recovery continuing, we see significant scope for further enhancing it into the future. Moreover, on foot of issues raised with him regarding aspects of the relief as set out in the Bill, the Minister put forward amendments as the legislation went through the Dáil which further broaden the scope of the relief and ensure it will operate as it was intended to do.

As well as changes to the CGT entrepreneurial relief, the budget included other tax measures to improve the environment for business, including the earned income tax credit, for which organisations such as the Irish Small and Medium Enterprises Association have been campaigning since the 1980s. We have an opportunity now to ensure there is tax equalisation for the self-employed in this country by 2018.

My colleague, Senator Tom Sheahan, rightly referred to the focus in the budget on the benefits for the coping classes and low and middle-income earners. The Department of Social Protection has conducted a social impact analysis of the budget package, including both tax and expenditure measures. This analysis shows that while 98% of households benefit from the budget, the gains for individuals in the lowest two fifths of the income distribution are the greatest, while the smallest gain is experienced by those in the top one fifth. In fact, it was shown that households with children, particularly those headed by working lone parents, are the greatest beneficiaries of budget 2016.

The Senator indicated his preference that the free telephone allowance be restored. In addition to the cuts to the three lowest rates of universal social charge, budget 2016 preserves the exemption from the higher rates of USC for medical card holders and persons aged over 70 whose income does not exceed €60,000. This measure, in addition to the age tax credit and age exemptions, limits the exposure of older individuals to higher rates of USC and income tax. Budget 2016 also provides for the first increase in State pension in several years and the partial restoration of the Christmas bonus, both of which are of much higher value to recipients than the restoration of the telephone allowance. That was the basis on which the decision was taken. All of these measures will support the net incomes of our older population.

Senator Tom Sheahan also referred to the eligibility criteria for the disabled drivers and passengers scheme, an issue about which I feel strongly. Although constrained by expenditure limits, the Minister has said he will consider and reflect on the Senator's contribution in this regard.

I thank Senator Aideen Hayden for her welcome for the USC changes, the extension of the home renovation scheme and the inclusion of landlords in that incentive. Those measures are important if we are to have high-quality rental accommodation. The scheme has proved very successful and we hope it will continue to incentivise both home owners and landlords to employ legitimate contractors to carry out works on their homes and properties. I thank the Senator for her support for the knowledge development box, in particular the additional benefit for the Irish economy these measures will seek to incentivise.

Senator Sean D. Barrett likewise welcomed the knowledge development box, particularly the focus it will bring to substance. That is the important thing. We want people to come to the country and we want our own companies to do their research and development and carry out their copyright and patenting here in Ireland. If we can ensure the knowledge development box is absolutely linked to substance, we can only benefit in terms of jobs and investment and also in terms of ensuring our economy is well positioned for a fast-changing and innovative economic environment.

The Senator also raised concerns about the extension of the home renovation scheme. To clarify, this is not seen as a property relief but rather as very much a modest tax credit that is designed to encourage home owners and landlords to employ legitimate contractors to carry out works on their homes and properties. The incentive is designed to provide a boost to the tax-compliant construction sector. Next year, 2016, will be the final year of the incentive.

Senator Feargal Quinn had wise words about not forgetting the shoe box. Every political party should probably have those words framed and placed in members' offices. Certainly, it is a mantra by which this Government is living. We do not accept that the increase in Exchequer returns in regard to corporation tax amounts to a gift to put in a shoe box. The chairman of the Revenue Commissioners advised the Minister by way of a letter dated 20 November that he expects all bar €300 million of those returns to be recurring. In addition, while we have made some supplementary budgetary decisions in regard to the health service, schools and roads, of the overwhelming amount of additional tax revenue that has been taken in this year - above €3 billion on profile - most of it will go to paying down debt. It is never attractive or exciting to talk about paying down debt but it does help to future-proof our economy from any external shocks that might arise.

The Senator's point about online trading is very important. The local enterprise offices run an online trading voucher scheme which offers incentives to business to set up an online presence.

I will reflect further on the concerns expressed by Senators Mary O'Brien and Feargal Quinn in respect of the employment and investment incentive. We can provide a briefing with officials on this element of the Bill in advance of Committee Stage if Senators would find it useful.

Senator Kathryn Reilly entered the Oireachtas as its youngest Member and I as the youngest Member of the Dáil. While I admire the work she does, I do not accept several of the points she raised. First, the Fiscal Advisory Council did not describe the budget as lacking in prudence. Although it expressed a view on the supplementary expenditure for 2015, it did, in fact, describe the 2016 budget as prudent. While one overenthusiastic journalist put it to a member of the council during a radio interview that the council had criticised the budget, the council member clarified that it had both criticised and praised the budget. I become rather frustrated when the debate around economic and fiscal policy is reduced to a question of tax cuts versus public spending. In fact, if we go about it in the right way, we can do both. In budget 2015, for example, the Government reduced the two lower rates of USC, reduced the marginal rate of tax and increased the entry point into tax. In other words, we decreased rather than increased taxes and the result was that we took in more tax, which, in turn, enabled us to provide for extra spending in the important areas Senator Kathryn Reilly highlighted. The argument about tax cannot be dumbed down to a type of Robin Hood scenario. It is about more than redistribution. The latter is important, but it is also about economic stimulus. If we use tax as a policy to create economic growth, it can do much more in an economy than just redistribute.

I fully agree that there are many challenges remaining to be addressed, including housing, health and so on. The Senator can list them off, as can I. She sees them in her constituency and I see them in mine. The question in the forthcoming election will be about who has the plan to fix them and I look forward to debating that question with her. We need to be careful when talking about progressive versus regressive budgets. For example, the ESRI described the 2010 budget as progressive even though it was the budget that introduced USC and cut all social welfare payments, including the blind pension and disability pension. I would not have described it as terribly progressive. We must be careful about the terms we use because they sometimes can suggest a level of social fairness that does not tally with the economic realities. The OECD has a very different outlook on our progressive tax system and some of the reports to which the Senator referred do not take into consideration the issue of social transfers. When they are taken into account, alongside the taxation system, we can see that Ireland has a very progressive system.

The idea that most people who are working are not earning a decent salary does not tally with the fact that average earnings have increased somewhat this year. We have, moreover, increased the minimum wage. Ultimately, however, it is by reducing the tax burden that we will put more money in people's pockets. The Senator's party has a different view, which I respect. She is probably proud I do not agree with it. Policies like having a marginal tax rate that is 19% higher than the corresponding rate in Britain and Northern Ireland would clearly lead to highly mobile individuals and companies deciding to relocate to those jurisdictions. Having a capital gains tax on business that is 10% higher in this State than up the road in Belfast does not make much sense. Ironically, it amounts to partitionist economics. However, we will debate these issues more fully next year.

I commend the Finance Bill to the House and look forward to discussing the provisions in more detail and hearing the recommendations of the Seanad on Committee Stage.

I thank the Minister of State for responding to the debate and the departmental officials for their attention to their duties.

Question put:
The Seanad divided: Tá, 23; Níl, 14.

  • Bacik, Ivana.
  • Brennan, Terry.
  • Burke, Colm.
  • Cahill, Máiría.
  • Coghlan, Eamonn.
  • Coghlan, Paul.
  • Cummins, Maurice.
  • D'Arcy, Jim.
  • Hayden, Aideen.
  • Healy Eames, Fidelma.
  • Henry, Imelda.
  • Keane, Cáit.
  • Kelly, John.
  • Mulcahy, Tony.
  • Mullins, Michael.
  • Naughton, Hildegarde.
  • Noone, Catherine.
  • O'Neill, Pat.
  • Power, Averil.
  • Quinn, Feargal.
  • Sheahan, Tom.
  • van Turnhout, Jillian.
  • Zappone, Katherine.


  • Barrett, Sean D.
  • Byrne, Thomas.
  • Crown, John.
  • Daly, Mark.
  • Heffernan, James.
  • Leyden, Terry.
  • MacSharry, Marc.
  • Mooney, Paschal.
  • Ó Clochartaigh, Trevor.
  • O'Brien, Darragh.
  • O'Sullivan, Ned.
  • Reilly, Kathryn.
  • White, Mary M.
  • Wilson, Diarmuid.
Tellers: Tá, Senators Paul Coghlan and Aideen Hayden; Níl, Senators Ned O'Sullivan and Diarmuid Wilson.
Question declared carried.

When is it proposed to take Committee Stage?

Hold on, they must have that agreed.

Question, "That Committee Stage be taken next Tuesday," put and declared carried.
Committee Stage ordered for Tuesday, 8 December 2015.