Deputy McCreevy wondered about my attitude and that of my party and my responsibility as its deputy leader, spokesperson on finance and Minister. My concern about the capital taxation issue is that the PAYE tax-payer is being taxed to raise something of the order of £100 million per year to make grants available through Forbairt for many industries.
I am committed to an enterprise culture and to enabling people in business to retain the benefit of the wealth they create and further utilise it to develop society. I hold no brief for a person who cashes in their chips, buys a yacht and sails around Ireland. If that is what they wish to do, they should pay through the nose for it.
Capital gains tax was not introduced before 1973 when, probably for the first time in the history of the State, scandalous windfall gains were made through land speculation in Dublin City. One would have to refer to Grattan's time and consult with Cormac O'Grada, the only economic historian who could provide chapter and verse in this regard, to gain a full appreciation of this matter. The late city manager, Mr. Jimmy Molloy, who is remembered with much affection, stated that, at the time, elected members of Dublin County Council made more money on a property speculation deal in one afternoon than he made in his entire life. None of that money was subject to taxation and it was a scandal of outrageous proportions.
I am making a clear distinction between people who put money at risk and establish a business which creates net additional wealth through an enterprise culture being obliged to pay capital gains tax, and people who had the good fortune to be born on the right day, in the right bed, in the Rotunda Hospital whose grandfather happened to purchase a piece of land which had a drain, sewer or motorway built within a developable distance. There is a major difference between these categories of individuals. People who purchase houses beside motorways adjacent to land formerly owned by a property speculator are paying for a capital windfall gain through an additional cost on the price of their houses.
Given my architectural background and political activism during the 1960s, I can state that the scandal of property speculation ultimately led to the introduction of capital gains tax by the Fine Gael/Labour coalition in 1973. The tax was resolutely opposed by people who had become instantly wealthy through no creditable action of their own. I am making clear distinctions in my philosophical approach to capital gains tax. A person who invests capital in business and sees that business flourish due to his own enterprise should be encouraged, not penalised.
We must create a capital gains tax regime which differentiates between legitimate investment and speculation. The current system does not make that differentiation. If capital gains tax were reduced to the 27 per cent rate, much development land would be treated in the same way. I am opposed to such an eventuality. The Kenny report suggested various ways of dealing with the question of development land which is again beginning to fetch extraordinary prices in and around urban areas.
Deputy McCreevy opposed this section in order that we might focus upon it. Let me clarify my attitude to the matter. Money is being raised off the backs of ordinary people to give grants to others to develop businesses through Forbairt, the county enterprise boards, etc. If we had a better enterprise culture where people could invest their money and keep more of it in the event of their business being successful, I would encourage that kind of approach for that use of capital. However, a distinction must be made between that mechanism of taxation and that type of capital deployment as distinct from passive capital which is merely cashed in.
