In relation to the Companies Acts and the Finance Bill, I have received representations that the preference given by the Revenue Commissioners in relation to security over book debts is causing a lot of trouble to small companies because they can no longer get proper factoring which they used to. This is because the Revenue, effectively, can wipe out a factoring agreement.
SECTION 101.
Question proposed: "That section 101 stand part of the Bill."
This is what was known as section 115.
Yes.
Using your debtors book.
In some cases companies actually sell their invoices directly and get cash straight from a bank. I want to indicate that this is an issue so that I can raise in on Report Stage in relation to the amendments to the Companies Act.
Did we not make a change in the 1995 Finance Act in that regard?
We did. We brought in a change but I am aware that there has been some dissatisfaction as to the effect with which it operates in the real world. It is not having the desired effect.
It seemed very simplistic. I remember thinking at the time that it was a good idea but I also hear that it has not worked out like that.
Is Deputy McDowell contemplating moving an amendment on Report Stage?
I will be moving an amendment on Report Stage to preserve the right of small companies to factor their debts on an ordinary arm's length basis and as part of their ordinary business.
As soon as the Deputy puts forward that amendment we will try to give a measured response to it.
I will have to work on it.
I got an horrific letter about it.
Question put and agreed to.
Sections 102 to 106, inclusive, agreed to.
NEW SECTION.
I move amendment No. 82:
82. In page 109, before section 107, to insert the following new section:
Exemption from stamp duty of Community trade marks and international trade marks.
107.—(1) In this section Community trade mark and international trade mark have the same meanings, respectively, as they have in section 56 and section 58 of the Trade Marks Act, 1996.
(2) Stamp duty shall not be chargeable on an instrument relating to a Community trade mark or an international trade mark, or an application for any such mark, by reason only of the fact that such a mark has legal effect in the State..
—An tAire Airgeadais.
Amendment agreed to.
Section 107 agreed to.
Chairman
Amendment No. 84 is an alternative to amendment No. 83. Amendments Nos. 83 and 84 may be taken together by agreement.
I move amendment No. 83:
In page 110, before section 108, but in Part IV, to insert the following new section:
108.—Part VI of the Finance Act, 1983 is hereby repealed with effect from the 6th day of April, 1996.
This is part of an express commitment on behalf of the Fianna Fáil Party to abolish residential property tax when back in Government. The Minister knows that I have long been an opponent of this tax since it was first introduced in the mid 1980s, on the grounds that it is neither income nor property tax but a mickey mouse nonsense tax. Over the years it has lain on the Statute Book even though not much money is collected annually by it. The Minister will recall that small changes were made to the Finance Act two years ago regarding residential property tax, but for the amount of money it collects it has caused considerable grief to everybody concerned.
I doubt if this tax has the support of every Member of the House. If Deputies were asked individually and answered honestly they would say they did not think it was worth a candle. The tax collects in the order of £10 million to £15 million at best, and last year is raised only £9.2 million. It is a tax on where you live. If you have a big 3,000 or 4,000 square foot house in a certain part of the country you will not come into the property tax net, but if you have a similar house in another part of the country you will come into the net. Much also depends on your income. The tax threshold has been moved upwards and downwards, amended and adjusted, but it is a tax on people living in their own homes.
If a future Government wishes to make some study as to any of the areas regarding property tax and local authority funding — as the current Government is doing, and as we have all talked about over the years — then so be it. The most honest thing to do now would be to abolish residential property tax because it is not generating the amount of revenue which would justify keeping it. It is causing considerable inequities between taxpayers in different parts of the country. For all those reasons it should be abolished.
I strongly support what Deputy McCreevy has said. RPT is an unfair and unjust tax. Some 77 per cent of it is paid by Dubliners. Some 80 per cent of the Dublin yield figure is paid by people in my constituency and the neighbouring constituency.
50 per cent.
A lot of money comes from that area.
The constituencies of Dublin 4, 6, 18 and South County pay approximately 51 per cent of the entire tax bill.
Theoretically, it is completely unfair and unsound. It exempts the first £100,000 of value. That means that if you have a property which is worth £110,000 and if there is an upward movement in prices this year bringing it up to £120,000 your RPT bill suddenly doubles. That is grossly unfair.
It hits people in one part of the country who would not be hit if they were in other parts of the country. The Minister knows that recently a railway cottage off Serpentine Avenue in Ballsbridge was sold for £180,000.
£187,000. I lived in number 7, Railway Cottages for a while, and I paid £30,000 for it.
We are not talking about the palazzo of a grandee but about ordinary people's property, depending on where they live.
Chairman
Capital gains are about to be abolished.
I am glad of that too. Every home that is sold in this category carries a 6 per cent stamp duty. That is equivalent to a fairly hefty property tax in its own right. If they are sold once every ten or 15 years the State gets a fair take from that kind of property. If there is something wrong on equity grounds with people taking large profits away from houses then let some left wing ideologue propose changing the capital gains tax.
I strongly believe that RPT is unfair. For that reason I have started a leaflet campaign in Dublin explaining where the tax came from. I hope I am not in breach of the copyright law because the leaflet includes an extract from the memoirs of Dr. Garrett Fitzgerald which was cited with approval by Deputy McCreevy in the budget two years ago. It says that it is not a Labour Party tax but a joint view of his own and a Labour Party member. Claims by the Labour Party to hold on to it as their tax are unfair.
Dr. Bhamjee.
Yes. We are totally against it and, like Deputy McCreevy, are committed to its abolition after the next election, no matter what. The Government should face up to this issue sooner rather than later and get rid of it.
I support my colleagues. Anybody who saw the statistics shown on television recently would have been immediately struck by the unfairness of the residential property tax. At the end of the day a person's home is their only bulwark against the vicissitudes of life, be they domestic, social, industrial, commercial etc. In many cases people living in large homes have fallen on hard times and find they cannot maintain these homes, never mind pay RPT on top of that. The concept of this tax may have been founded on the first flush of ideological fervour. That has now abated and I ask the Minister to join us in our crusade against it.
The Government is considering this matter in the light of the study undertaken by the Department of the Environment as regards local authority funding. I accept fully that RPT has become a great bete noire and has now attracted an enormous amount of criticism and attention. However, like all such issues, some of the facts surrounding it have got lost because of the more extreme cases.
This year residential property tax will be paid by 20,000 households as against 38,000 households last year. This represents 2 per cent of the entire housing stock in the country, which is estimated to be about 900,000 houses. Furthermore, over half of the 20,000 taxpayers in the category referred to will be able to reduce their tax bills by claiming marginal relief up to an income of £40,000. The thresholds are £101,000 capital value of the property and a household income of £30,100. It is worth noting that 30 per cent of RPT taxpayers pay less than £100 and 70 per cent pay less than £500.
I have a typical example — chefs on television programmes would say that this is one they prepared earlier. In the case of a £120,000 house where the household income is £35,000 and there are two dependent children, the tax is £111.72 or £2 a week. I know all of that is falling on totally hearing but deaf ears.
Why is it there?
Ideological fervour, and it should have a basis.
Deputy O'Rourke is right in saying that the ideological fervour has abated. What is the rationale behind having such a nonsense of a tax?
This property tax was introduced in 1983.
We know that all right.
Deputy O'Rourke did not see it fit, when she sat around the Cabinet table from 1987-92, to diminish the fervour which brought it on to the Statute Book in the first place.
Chairman
I hold strong views on this matter. I am appalled by the opportunism on this issue. Nobody here is speaking up for the PAYE sector. There was a proposal earlier to reduce capital acquisitions tax and arguments were made about abolishing water charges, and undoubtedly there are good arguments for both. However, when we abolished rates in the past, they ended up being paid for by the PAYE sector.
One of the biggest reasons we are not getting a spin off in jobs from our current economic growth is because our tax system is so anti-labour. If we are honest, we must examine a widening of the tax base and finding other sources of income. Of course, there are anomalies and injustices in this form of property tax, but that is no reason to throw it out but rather to amend it. Moreover, we need to give local government the means of raising its own funds if we are to have local democracy and a form of property tax is the way to do it. The Progressive Democrats and Fianna Fáil were in Government at different times over the last seven years and they did not change it.
Why not change it now?
Chairman
That is the sort of hypocrisy that brings the whole political system into disrepute.
I am not being hypocritical. Listen to who is talking.
When the Progressive Democrats and Fianna Fáil went into Government, this was the first matter they put on the agenda. We went to Fine Gael and the Labour Party and asked them to discuss whether we could find a different way of financing local government. However, both your party and the Labour Party said no way.
The Labour Party was not given the opportunity to participate.
Fine Gael said no. I have offered unilaterally on behalf of my party at every budget since then to sit down without any preconditions to discuss the issue. However, Fine Gael was the only party which refused point blank to do so. These are the facts, Sir.
Chairman
That is a valid criticism.
There is no dispute about what the Chairman said in regard to widening the tax base because most of the tax burden is currently on the PAYE worker. However, the record will show that from the day this tax was introduced — I was a backbencher for a longer time than a Minister — I have consistently opposed this nonsense, at a time when none of my constituents were paying it, because it is neither a property nor an income tax and the Minister's figures proves this. It is a nonsense, it brings the whole process into disrepute and it should be removed.
I agree with the Chairman. We must discuss how we can widen the tax base. As Deputy O'Rourke rightly said, this tax was introduced in an ideological fervour in the mid-1980s which has long since dissipated among the Labour Party members.
Chairman
Is the amendment being pressed?
Yes.
Chairman
I am putting the question: "That the amendment be made".
Question put.
Chairman
I think the question is lost. Would the Members wishing to have their dissent from this decision recorded in the official report of the proceedings of the committee please raise their hands?
Deputies M. Ahern, Cullen, McCreevy, M. McDowell, O’Rourke and D. Wallace dissented.
Amendment declared lost.
Amendment No. 84 not moved.
Sitting suspended at 1.08 p.m. and resumed at 2.30 p.m.
NEW SECTION.
Chairman
Amendments Nos. 85, 86 and 87 form a composite proposal and may be discussed together. Is that agreed? Agreed.
I move amendment No. 85:
In page 110, before section 108, but in Part IV, to insert the following new section:
PART V
TAX RELIEFS FOR THE EMPLOYMENT OF THE LONG-TERM UNEMPLOYED
108.—In this part 'long-term unemployment' means an unbroken period of unemployment in excess of 12 months and cognate words shall be construed accordingly.".
As the Minister is aware, Deputy McCreevy and I issued a modest document after Christmas.
Nothing in the Deputy's life is modest.
One is either modest or not modest.
I meant it as a compliment; a natural assertiveness.
I will take it as it comes, but I will not be deflected. In the document we put forward ideas on long-term unemployment. The budget was then announced and the Minister and his colleague, the Minister for Enterprise and Employment, Deputy Bruton, outlined new measures they intended to introduce to reduce the level of long-term unemployment. I considered those proposals, but the number of people receiving the £80 a week subsidy has not reduced at all because the measures will not be put into effect until July.
These measures were heralded as instant action. Those words may not have been used, but the implication of the trumpeting the proposals received was that they would have a major effect on long-term unemployment and that 5,000 people would be taken off the register. In response to a parliamentary question to the Minister for Enterprise and Employment. I was told that it involved an ongoing, developmental process but it would not begin until July. However, the money to take 5,000 off the register was not included in the budget and the real number of people who will benefit will be hundreds and not thousands.
The amendments composed by Deputy McCreevy and I are much more focused on the real needs of the long-term unemployed and would have a direct effect in providing employment for 5,000 people. The amendments are explicit and I ask the Minister to consider them. They are worthwhile and would have a direct effect if implemented in conjunction with the Minister's proposals for July. Politicians appear phoney when they say they will address the problem of long-term unemployment. They say measures will be taken to help, but that is not done. Comments such as the rising tide will lift all boats have not helped the huge level of long-term unemployment and an increasing number of people are consigned in a cumulative fashion to never securing employment. The purpose of the amendments is to directly attack the problem. They are just a start but they are worthwhile and I ask the Minister to accept them.
I support Deputy O'Rourke's comments and we should be up front about this matter. Successive Governments over many years have tried a variety of measures to tackle the problem of long-term unemployment. They have not been totally unsuccessful and although various well meaning reports and recommendations have been produced by many bodies, they have not had the effect desired by all politicians. Much effort and time has put into this issue and a wide variety of experts have considered the problem.
In putting forward proposals, Deputy O'Rourke and I were not attempting to denigrate proposals from any other quarter. In the months prior to the budget it was signalled that the Government intended to bring forward measures relating to this area. The proposals put forward by myself and Deputy O'Rourke are based on two fundamental principles. The first is that efforts must be targeted directly at people who are long-term unemployed to give them an opportunity to jump from long-term unemployment to a job with low pay.
The other principle is that there should be positive discrimination for employers in the employment market. If an employer must choose between two applicants, one of whom is already employed and just moving from one job to another and the other is long-term unemployed, but they have the same qualifications, there should be a financial incentive to the employer to take on the person who is long-term unemployed. It is direct intervention in the employment market. It would put long-term unemployed people back in the employment area and say to employers that, all things being equal, it is in their interest to take on a person who is long-term unemployed because it is a positive economic decision in terms of the availability of a tax break.
The Government's proposals, which have not yet come into play, are not a good idea. As Deputy O'Rourke adamantly pointed out, probably on the basis of her experience as a Minister in various Governments, we do not want to create a subsidy for employers under which they could take on long-term unemployed people and recycle them over time. This would effectively give, as previous proposals have given, a subsidy to employers to keep down the cost of employment.
I remember saying clearly on a number of occasions that the Government's proposals would have no incentive for the employer to give that type of employee any more money. It would tap a person's wages. However, our proposals attempt to look at the matter from a different angle.
I know the Minister for Finance is an open minded person in a wide variety of areas but having studied the Government's and our proposals, I have no doubt that ours are better, more targeted, last for a particular period of time and involve direct intervention. On that basis, they should be supported.
I welcome the constructive spirit in which the two amendments were put forward. I have not had a chance to consider them in detail. Our measures were the product of many heads coming together trying to make constructive proposals. I particularly welcome the fact that Fianna Fáil has not attacked those proposals but has come up with additional ones.
There are costs associated with these amendments and we are not sure if they, no more than our own proposals, will necessarily work. I would like to consider them in greater detail and maybe come back to them on Report Stage. That is not in any way to suggest that I am disposed to granting them because their costs are substantial and I would hesitate to introduce a new and additional support mechanism for one that is already there.
The £80 a week subsidy, which is a variation on the same theme, is a financial discrimination on behalf of the long-term unemployed. They can present this to a willing employer who, if he is faced with a choice between a long-term or short-term unemployed person, will have an economic advantage in hiring the person who is long-term unemployed. It is a deliberate distortion/ discrimination in the labour market in favour of the long-term unemployed. That £80 per week is also tax free. We are coming at the same kind of recipe from a slightly different starting point.
The reason it is not starting in July is that our administrative system cannot get it up and running any sooner. If we could have started it sooner, we would have, as Deputy O'Rourke knows, but that is for another time. In the light of the overall budgetary arithmetic, I am not able to accept these amendments today but I am prepared to give a more considered response to them on Report Stage.
On that understanding, we can revisit them on Report Stage.
We will re-enter the amendments then.
I accept there is a cost involved. The people in the Department of Finance might also be favourably disposed to our proposals.
The Deputy should forget about the people in the Department of Finance; they are against this.
I would accept that straightaway. The Minister is an innocent abroad.
This idea can be capped to a certain extent. That would not be affected at all.
Can we bring it forward next week?
I would like more time to look at it.
Amendment, by leave, withdrawn.
Amendments Nos. 86 and 87 not moved.
Sections 108 and 109 agreed to.