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SELECT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE díospóireacht -
Wednesday, 10 Dec 2008

Finance (No. 2) Bill 2008: Committee Stage (Resumed).

The purpose of the meeting is to resume consideration of the Finance (No. 2) Bill 2008. Members should note that two additional lists of amendments have been circulated. I welcome the Minister for Finance, Deputy Brian Lenihan, and his officials. We will suspend the sitting for a few minutes.

Sitting suspended at 11.13 a.m. and resumed at 11.15 a.m.

I understand Deputy Chris Andrews wishes to make a brief statement.

I made some comments on Deputy Barrett's attendance at the select committee for which I wish to apologise. I should not have made them. His record as an elected representative is one to which I can only aspire to achieve.

Two issues have been brought to my attention in respect of sections we have not yet considered. I presume amendments will not be ruled out on Report Stage if we do not have an opportunity to discuss them on Committee Stage. Otherwise, we will be unable to respond because of the use of the guillotine.

I am unsure whether fresh amendments can be tabled on Report Stage regarding matters we have not considered on Committee Stage.

We will have the matter clarified but I believe there is a precedent.

If members could cull some of the amendments which have already been discussed, it would better focus our deliberations on Report Stage. I appreciate, however, that they would have to reserve their rights in respect of certain issues.

Indeed. Traditionally, Ministers have had to state their intention to introduce amendments on Report Stage but that facility is not generally open to Opposition Members.

SECTION 30.

I move amendment No. 44:

In page 64, subsection (1)(a), to delete lines 20 to 31 and substitute the following:

" " ‘Threshold amount' means a baseline of zero spending on research and development as and from the start of the tax year 2009;",".

With one great leap, we have moved on to the issue of research and development. The amendment simply acknowledges the increasing irrelevance of maintaining the fiction of 2003 as the base year against which research and development investment is assessed for tax purposes. If a company happened to spend large sums during that year, it would be penalised relative to other companies. I am aware that the original intention was to make the relief available only in respect of incremental research and development but as 2003 vanishes into the obscure past, it becomes increasingly arbitrary as the base year in deciding whether spending on research and development is taxable. We probably should base qualification on the amount spent rather than using a baseline which will increasingly discriminate against companies which happened to make a reasonable investment in 2003. Most would view as positive the Minister's decision not to roll forward 2003 as the base year but this gives rise to its own problems.

In substance, the Deputy seeks to introduce a volume-based tax credit scheme for research and development with effect from next year. Calls have been made during the years to introduce such a scheme in order that all research and development expenditure, not only incremental spending, would benefit from the tax credit. However, this would involve a substantial deadweight cost to the Exchequer in respect of research and development undertaken without the need for a fiscal stimulus and, therefore, represent poor value for public money. The incremental scheme has enabled us to provide a high rate of tax credit which I intend to increase from 20% to 25%. This represents a significant contribution to the efforts of companies in the area of research and development and will help our international competitiveness.

It is true that I am permanently setting 2003 as the base year under the scheme in this year's Bill and that expenditure on qualifying research and development in 2003 is the base against which increased expenditure in any subsequent year will be measured for the purposes of the tax credit. Expenditure on qualifying research and development in 2003 is the base against which increased expenditure on research and development in any subsequent year will be measured for the purposes of the tax credit. It can be nil, as appropriate. Under the existing arrangements, 2003 will remain the base year up to and including 2013. It will also be the base year for all future accounting periods beyond 2013. The scheme will then become volume based on a gradual basis, without the short run deadweight cost.

Will the Minister give figures if we went with a volume-based approach? I can see the argument he is making.

I appreciate that.

How much more expensive would the concession be with the volume-based approach as compared with the estimated cost using 2003 as the base year?

The cost under a volume-based research and development scheme would be in the region of €10 million to €15 million. The cost of our proposal is lower.

What is that against?

The estimates are the same. I may have to get the figures relating to Deputy Bruton's proposal. The estimate is €10 million to €15 million for the proposal introduced by the Government. I must have an exercise conducted to establish the figure the Deputy wants.

Perhaps on Report Stage we can consider if this would have merit. I can see why the Minister is doing what he is but I can equally see that if one happened to be unfortunate enough to have a reasonably high spend in 2003, one would be penalised for a long time.

That is correct.

It does not seem right.

A company which did not exist at the earlier date can presumably come in at nil. An established company could be disadvantaged. I will consider the issue and come back to it on Report Stage.

Amendment, by leave, withdrawn.
Section 30 agreed to.
SECTION 31.

Amendments Nos. 45 and 46 are related and will be discussed together.

I move amendment No. 45:

In page 68, line 30, after "for the purpose of" to insert the following:

"research and development activities or for the purpose of".

These are technical drafting amendments.

Amendment agreed to.

I move amendment No. 46:

In page 68, line 35, to delete "subsection (2), (4) or (4A), or" and substitute "subsections (2), (4) and (4A), and".

Amendment agreed to.

I move amendment No. 47:

In page 70, line 41, before "expenditure", to insert "use of the building or the".

This is a technical drafting amendment.

Amendment agreed to.
Question proposed: "That section 31, as amended, stand part of the Bill."

Will the Minister explain the extension of the research and development relief with regard to qualifying buildings?

The position on qualifying buildings is that in many modern companies crucial research and development operations occur in buildings or structures used for research. The requirement under the existing legislation that a building or structure must be used wholly and exclusively for research and development has been removed. A credit will now be available in respect of a proportion of new expenditure on construction, including refurbishment of a building or structure, where the research and development activities carried on by a company in that building or structure over a period of four years represent at least 35% of all the activities carried on in the building or structure. In other words, the credit is extended to the partial use of a building for research and development. This will allow companies intending to use the building or structure for both research and development as well as other activities such as manufacturing and processing to claim the credit which is calculated by reference only to the proportion of the expenditure or the portion of the building or structure to be used for research and development. This recognises the fact that research and development is often carried out in conjunction with activities such as manufacturing.

What is the cost of the change and was it lobbied for by a specific company which may have research and development and large-scale manufacturing facilities? How is this to be verified by the Revenue Commissioners?

The existing relief was not claimed by any company and we received some representations from manufacturers located in Ireland which indicated it would be an advantage to have this tax credit which would meet their needs relating to research and development.

What is the cost?

I do not have exact costs but will communicate them to the Deputy.

How will the Revenue Commissioners verify this? Everybody is agreed on the importance of research and development. It is important to ensure research and development activities benefit from this provision. We should be very clear that it is what we are supporting with fairly generous tax breaks. If there is confusion between it and assembly and manufacturing, for example, much of the attractiveness and value of high grade research and development can be lost. There is strong agreement that such research and development is the target in seeking growth in value and jobs.

Would it be more appropriate to provide relief on the property side on the basis of the lease cost rather than the capital cost? The building could arguably be devoted to another purpose over time. Would there be a more accurate linkage with the research and development spend if the the portion of the building used for research and development purposes was the subject of relief on the basis of the lease cost?

When I read it first, I very much welcomed the provision. I was of the view that it would allow small to medium enterprises, in particular, which may not have the wherewithal to commence research and development, to include a section for research and development if they were undertaking refurbishment or development for production purposes. I share the caution as regards how this will be monitored. However, I welcome it, subject to that qualification in respect of monitoring and verification.

What clearance does the European Commission have to give? Does it relate to the change in the tax credit rates? What is its role?

This provision, concerning partial use of a building, requires state aid clearance by the European Commission. The Department is pursuing this issue and the measure will take effect by way of a commencement order when clearance has been obtained. That is the element of the research and development change which requires Commission clearance.

It is very difficult to estimate the cost in advance, as there are so many variables, including the cost of buildings, the acquisition of lands and so forth. An exact prospective figure would be difficult to estimate.

Does the Minister expect any problems in achieving clearance? Is it a run of the mill issue?

We do not envisage any particular difficulty but the measure requires clearance.

What about monitoring?

On the monitoring of use of the relief, the corporation tax side of the Revenue Commissioners will be aware of the operation of the relief and claims made on foot of it. The basis used to determine the proportion of the building used must appear to the inspector to be just and reasonable. Nobody can indicate an area is used for research and development purposes; the Revenue Commissioners will have to undertake an audit.

Will the provision date from or will it be backdated to the baseline date?

No. The baseline date will be 1 January 2009.

Let me rephrase the question. If a building was already in existence and a manufacturer of research and development said it had already been using this facility, can it get a look-back or does it simply carry the 35% cost and the tax allowance forward from 1 January?

Can it go back?

No. There is no look-back for the buildings. It is from accounting periods that begin on 1 January.

Yes, but what happens if they have already built a building? Does it apply to existing buildings or new constructions?

No, it is for new expenditure. It could, of course, be new expenditure on an existing building in partial use, but there has to be fresh expenditure.

For research and development purposes?

This could dwarf the credit going to research and development in that one gets 20% of this, the same as one gets 25% on the actual research and development spend. The build could be the really big element.

It could be in the case of a new facility.

Is that the correct balance to strike between constructing a place in a building, which in time could be devoted to other uses, and the actual research and development which delivers, as one hopes, product development on the ground? If we are including buildings, should it be the lease element — the annual cost of having the building facility in place — rather than the build? We do not want to see the emphasis in the research and development tax credit shifted to putting up bricks and mortar, rather than science and product development. Maybe we should strike a balance by saying that the annual cost of putting in the building would be allowable for credit, rather than the build cost, which represents 20% over five years.

I will consider what Deputy Bruton has said. On the other hand, companies that are established in Ireland generally do not share the domestic propensity for building structures for the sake of it.

If a multinational is thinking of coming to Ireland to invest, is the Minister saying that if it has a significant research and development component, which hopefully it would have, then 35% of the building facilities of a general plant, if it is used for research and development, would be allowable? That is pretty generous.

It is substantial.

As regards the report on the cost of various tax breaks and incentives, the Minister's predecessor gave the committee a promise that we would get some costings. It would be useful to know if the Minister has a ballpark figure in mind. This could potentially be attractive and lucrative for some foreign direct investment and, hopefully, also for Irish investors.

In terms of existing manufacturing in Ireland, we see this as an important incentive to ensure their retention here. We do not have indicative costs as to the extent to which they will avail of it. It is a difficult one to call. Clearly, if it attracted additional investment it would be welcome.

I had some reservations about this generous change but I feel it is warranted, given that we need to kick-start research and development to such a major degree. People could use loopholes, for example, by extending a production line and describing part of a building as being for research and development just so they can get the generous concession. That is why I asked about monitoring. My own disposition is to give the measure a fair wind and then examine it in the coming years to see how it is rolling out.

Question put and agreed to.
Section 32 agreed to.
SECTION 33.

Amendments Nos. 48, 49 and 50 are related and may be discussed together.

I move amendment No. 48:

In page 72, line 32, after "vehicle" to insert the following:

"(being a vehicle to which subsection (1) of section 380K relates)".

Amendments Nos. 48, 49 and 50 are minor amendments to section 33, which extends the scheme of accelerated capital allowances for energy efficient equipment to include four additional categories of equipment. The amendments specifically relate to the category of electric and alternative fuel vehicles, which are being included in the scheme as part of the Government's strategy to promote greater usage of low-emission vehicles.

Amendment No. 48 ensures that in the case of electrical and fuel vehicles, the provision in the Bill which restricts accelerated allowances to the lower cost of the vehicle or the existing €24,000 limit for business cars, will apply only to cars and not to other vehicles.

Amendment No. 49 ensures that the emissions-based capital allowances scheme for cars introduced earlier this year will not apply where a company opts to avail of accelerated capital allowances for fuel-efficient cars under the scheme for energy-efficient equipment in section 285A of the Act. The converse also applies, so that a company can opt for one scheme or the other but not both in so far as business cars are concerned.

Amendment No. 50 reduces the minimum spend under the category "electrical and alternative fuel vehicles" from €1,500 to €1,000. This is to accommodate electric scooters which retail at €1,000.

How is information communications technology ring-fenced to energy uses in this relief? Is this a general relief that will apply to all ICT used by anyone?

In order to qualify for the allowance, the equipment must meet certain energy efficiency criteria specified on the list of approved products, which will be drawn up at the Department of Communications, Energy and Natural Resources. The list will contain the energy-efficient criteria to be met and the specified products qualifying under the four new categories of equipment. Does that reply deal with the Deputy's question?

Yes. The Schedule says it is specifically designed to achieve very high levels of energy efficiency, so it is tied in to that.

That is the qualifier or standard.

Yes, but under ICT that is tied into it.

Yes it is. They are all tied into it.

Does the Minister have any information on what the take-up was on the introduction of this scheme last year? It is quite a small scheme, but was there much take-up?

Last year's scheme only came into effect in October of this year, so we do not have any information on it.

Were there many inquiries? Does the Revenue have to certify or do people inquire after they have invested in the technology?

The inquiries generally come to the Department of Communications, Energy and Natural Resources, which has the list of inquiries. I do not have the information about the level of inquires to hand. It only began in October, however, so we are not yet able to make an assessment of take-up.

Amendment agreed to.

Amendment No. 49 has already been discussed with amendment No. 48.

I move amendment No. 49:

In page 72, subsection (1), lines 47 and 48, to delete paragraph (b) and substitute the following:

"(b) in section 380K(1) by inserting “, but this Part shall not apply where an allowance for a vehicle is increased under section 285A” after “so used”, and”.

Amendment agreed to.

Amendment No. 50 has already been discussed with amendment No. 48.

I move amendment No. 50:

In page 74, in line 18, to delete "€1,500" and substitute "€1,000".

Amendment agreed to.
Section 33, as amended, agreed to.
SECTION 34.

I move amendment No. 51:

In page 76, line 11, to delete "6" and substitute "11".

Business is under severe pressure to obtain credit. We have read reports from the Central Bank suggesting that, outside the financial and construction sectors, credit has effectively dried up. Companies find it difficult to get credit. This section and a companion section on capital gains tax bring forward the payment date for as much as €3 billion in taxes. This provision which brings forward the date by up to ten and a half months in one instance and five months in another is being made at a difficult time for those with relevant tax liabilities. Even if credit were costed at approximately 9%, a rate that not all businesses would receive, the earlier payment would amount to €250 million in perpetuity. What is the rationale? Is it to get money into the Exchequer? If so, it comes at a time when companies are uniquely exposed and finding it difficult to get credit. Is there another rationale for the early payment dates? We are leaning over backwards in one measure to get credit flowing in the banks because we want to allow sound businesses to keep trading, but another arm of government is targeting the businesses we are trying to protect and demanding that they raise an additional €3 billion to pay the Revenue Commissioners early. It seems contradictory and self-defeating. While the Exchequer is short of revenue and would consider any source, this is not a sensible tax measure in the current climate.

The preliminary tax changes only affect large companies with a tax liability in excess of €200,000, that is, with profits of more than €1.6 million. These companies are more profitable and in a much better position to meet the new requirements. The provision applies to approximately 5% of companies based in Ireland, some 2,500 in all, which provide 90% of our corporation tax yield. Small and medium-sized companies, approximately 95% of all companies, will not be affected, which is the fundamental point.

The amendment would make the first instalment of preliminary tax payable at the same time as the second instalment, whereas what was announced in the budget was a two-stage payment system for larger companies. The change made to the payment arrangements for preliminary tax means that the current single payment is split into two instalments, the first of which will be payable in the sixth month of the accounting period, for example, by 21 June for a company with calendar year accounts. The amount payable will be 50% of the corporation tax liability for the preceding accounting period or 45% of the corporation tax liability for the current accounting period. As before, the second instalment will be payable in the 11th month of the accounting period, for example, by 21 November in the case of a company with calendar year accounts. The amount payable will bring the total preliminary tax paid to 90% of the corporation tax liability for the current accounting period.

These revised arrangements apply to accounting periods commencing on or after 14 October this year. They will result in an estimated one-off cash flow gain to the Exchequer of approximately €350 million in 2009. Many other OECD countries apply instalment arrangements for the prepayment of corporation tax. For example, the United States, France, Germany, Austria and Belgium require advance quarterly payments of corporation tax from companies.

The Minister has not answered my question. The core issue is that we are asking this of companies strapped for cash. Of those making returns, I suspect that businesses with profits of more than €1.6 million employ 80% to 90% of workers. A high employment content underpins the system, although I do not know the figures. If we are to believe what we read in anecdotal reports and credit figures, these companies are facing a seizing up of credit. I take it that the Minister has calculated a cashflow of €350 million by considering the number of months, but the gross amount that must be paid early is more than this. They must bring their payment dates forward. I do not know what the corporation tax figures are, but they probably amount to €6 billion rather than €350 million. That the companies have profits does not mean that they will be able to shoulder the extra cost to be imposed upon them. Is it the worst time to present companies with a demand of this nature when cash is scarce and companies are under stress? The Minister has not addressed this question. If companies are facing credit difficulties, what understanding will be shown by Revenue when they are being asked to bring their payment dates forward? These are not trivial issues.

The Deputy should put the matter in perspective. If a company has a corporation tax bill of €5 million, the earlier payment date will carry an interest cost of less than €50,000, that is, 1% of its tax bill.

Is the Minister saying that, because the date is being brought forward——

Interest will be charged in the intervening period.

The date is being brought forward by five months.

What interest rate will be charged?

Approximately 1%.

Where will the company get a loan——

It is 1% of the company's tax bill.

It will pay——

The interest cost amounts to less than 1% of the tax bill of a company which has a——

No one could borrow for five months at a rate of 1%.

No, the rate is 5%.

Who will borrow at a rate of 5%? There will be an overdraft limit. It is not realistic to believe the cost to companies would be 5%.

It is highly realistic, given falling interest rates.

I do not see it. Going on the Central Bank's list of interest rates, one would only get a rate of 5% on secured loans. However, the amount in question will need to be funded from companies' overdraft limits, which will carry a higher rate.

The Deputy is making an assumption about the internal arrangements of a particular company. If it pays €5 million——

Companies are being asked to pay five months early at a time when it is difficult to get credit, something that has not been factored in in the framing of this provision.

We have an extraordinarily generous company tax regime. Companies make profits from which they pay certain sums in taxation. We are bringing forward the payment date.

Is the purpose to erode our generous corporation tax regime?

No, it is a one-off recognition of the fact that companies must play their part in repairing the country's finances.

It is being brought forward at a time when raising capital is proving difficult. That is my concern. While I do not want to delay the committee, the amendment should be made.

I have two questions for the Minister. Will the provision bring Ireland further into line with OECD norms in respect of corporation tax payments? In the context of the new American Presidency, will being closer to OECD norms assist the argument that American multinationals are not using Ireland as a tax haven on the same scale as some companies in the Caribbean and that we have competitive tax advantages which are necessary, given our economic and social history and island status?

From time to time I have met people from the United States who are quite concerned with regard to American companies and their activities abroad. Many such companies make large profits in Ireland and are extremely tax compliant. I do not know if they have objected strenuously to this provision, which will bring us in line with OECD norms. However, I understand that anything which makes them more visibly tax compliant and which satisfies the US authorities is to their satisfaction.

I agree with Deputy Burton in that our arrangements will be much more like those that apply in other OECD companies. As already stated, the United States, France, Germany, Austria and Belgium all require advance quarterly payments. We are simply opting for a biannual system. The provision will bring us closer to OECD norms. However, I accept that there will, as Deputy Bruton outlined, be an immediate cashflow issue for the Exchequer. However, there will be a long-term benefit in that we will average receipts over a longer period. There was a shortfall in corporation tax revenues this year. It is better to have a more averaged picture of receipts from corporation tax rather than having them bunched on an annual basis. A system of biannual payments offers significant long-term advantages.

On Deputy Burton's concerns regarding the US, the authorities in that country do not view Ireland as a tax haven. We have gone to considerable lengths to establish good relations with the new Administration there and I am satisfied that the existing, long-standing position will remain. However, I agree with Deputy Burton that it is important to ensure that our corporate tax arrangements are broadly in line with those that apply in countries with which we have double taxation arrangements and also countries that are not on the list of those which engage in rogue tax practices.

Have the Minister or the Revenue Commissioners given consideration to providing a telephone hotline advisory service for companies that are in difficulty? Certain companies — indigenous concerns rather than those to which we are referring in respect of this provision — are experiencing trading difficulties at present. Although postponing payments to Revenue incurs quite high interest charges, this may be one of the few avenues of recourse open to companies in the context of sustaining their cashflows. I accept that Revenue must collect the moneys for which it is responsible. However, there must be a trade-off in respect of companies that are experiencing particular cashflow difficulties. Will the Minister indicate if Revenue is developing any new practices in this regard? What should those whose companies are experiencing difficulties do?

There is an arrangement in place at the Office of the Collector General. However, in light of Deputy Burton's suggestion and the current challenging economic position, I will ask the Revenue Commissioners to examine whether that arrangement can be strengthened. I have already raised the issue to which the Deputy refers with the chairman of the Revenue Commissioners because many businesses are under substantial pressure.

Many Deputies are receiving representations about this matter.

There is a fine line to be drawn.

I accept that.

None of us wants that fine line to be crossed. We know that revenue is required. Like other Deputies, I have received a significant number of representations from SMEs that are of the view that Revenue is leaning on them at a time when it is extremely difficult to trade. These companies have cashflow difficulties but are otherwise viable. They are experiencing problems in collecting money from their customers. If the Revenue Commissioners could consult the accounts of these companies in order to establish that these companies are experiencing genuine difficulties, they would then, perhaps, be in a position to make allowances.

I was initially supportive of the change proposed by the Minister. However, like other members I am concerned with regard to the implications. We do not want to be seen to be punishing successful companies. On balance, however, I do not believe that to be the case. Companies of this size will be much further up the queue with regard to obtaining whatever credit will be available from lending institutions.

I must again examine my conscience because it appears that I will again be supporting the Minister. I am getting into dangerous territory. On balance, however, I support the amendment.

Has research been carried out in respect of this matter? People might have had tax liabilities of over €200,000 but their circumstances may have changed dramatically in the past 12 months. If companies continue to trade continually and successfully, it appears that the penalty will not be massive. However, we do not know whether the former continues to be the case. As Deputy Bruton stated, we do not want to impose on businesses a liability that might ultimately lead to the loss of jobs and a loss of PAYE and other revenue.

Provision has already been made in the €350 million estimate for the decline in receipts due to the economic downturn. The 2009 cashflow gain from the change in preliminary tax rules will arise from companies with accounting periods that end between February and June. These companies pay approximately €1 billion in corporation tax. For their accounting periods ending in 2010, they will now pay half their preliminary tax in 2009 rather than 2010. The estimate is reasonably conservative. Even if all of this was not forthcoming, the measure would provide a substantial yield for the Exchequer next year.

I echo the calls from other members that greater leniency be shown towards companies that are experiencing difficulties. The idea of establishing a telephone hotline should be examined further.

As already indicated, I will, at the request of the committee, ask the Revenue Commissioners to strengthen the arrangements in place at the Office of the Collector General. The commissioners are not bankers but they do permit instalment payments in appropriate cases.

It is somewhat disconcerting that the Minister is of the view that private companies can raise capital as cheaply as it is possible for the State to do. I am not convinced by his arguments.

I was anticipating how interest rates might perform next year rather than reflecting on current realities.

The Minister is breaking with the tradition established by his predecessors. Those individuals would have been reluctant to speculate in that regard.

In making estimates, we must have regard to possible or probable realities.

Amendment put and declared lost.

Amendments Nos. 52 and 53 are related and will be discussed together.

I move amendment No. 52:

In page 79, lines 22 and 23, to delete "and on or before the date by which".

These are technical amendments. They relate to the facility whereby companies are permitted to make top-up payments in respect of certain chargeable gains that arise after the due date for the payment of preliminary tax in an accounting period and thereby ensure that they have complied with their preliminary tax obligations. The amendments ensure that any gains made after the payment of the final instalment of preliminary tax are taken into account so that the section will operate as intended.

Amendment agreed to.

I move amendment No. 53:

In page 79, lines 35 to 39, to delete all words from and including "subsection (2BA)" in line 35 down to and including "with subsection (2BA)," in line 39 and substitute "subsection (2BA),".

Amendment agreed to.
Section 34, as amended, agreed to.
Section 35 agreed to.
SECTION 36.
Question proposed: "That section 36 stand part of the Bill."

On the Private Residential Tenacy Board and the Institute of Public Health, why is the exemption in this regard backdated to 2002 and 2004 respectively?

It relates to the relevant establishment dates.

Why are they included in this Finance Bill?

The relevant Departments only sought the exemption last year.

Question put and agreed to.
NEW SECTIONS.

I move amendment No. 54:

In page 86, before section 37, to insert the following new section:

37.—The Principal Act is hereby amended by inserting the following section after section 541B:

"541C.—(1) In this section—

‘carried interest', in relation to a relevant investment, means the share of profits (where the share ratio was agreed at the outset of the relevant investment) referred to in paragraph (b) of the definition of ’total profits of an investment’ that is received by a company or partnership in respect of the management of the relevant investment;

‘carried interest to which this section applies', in relation to a relevant investment, means an amount of carried interest which is not greater than 20 per cent of the total profits from the relevant investment;

‘innovation activities' means development of new technological, telecommunication, scientific or business processes;

‘investor', in relation to a relevant investment, means a person other than a person entitled to carried interest or a person connected with that person;

‘relevant investment' means an investment, which remains in place for at least 6 years, in unquoted shares or securities of a private trading company and that company is—

(a) carrying on a business set up and commenced on or after 1 January 2009, other than a business—

(i) which was previously carried on by another person and to which the company has succeeded,

(ii) the activities of which were previously carried on as part of another person's business, or

(iii) which is an excepted trade within the meaning of section 21A,

and

(b) carrying on a business of research, development or innovation activities;

‘research and development activities' has the same meaning as in section 766 (1);

‘total profits of an investment', in relation to a relevant investment, means the sum of—

(a) the profits which are attributable to investors in the relevant investment by reference to an agreed initial rate of return, and

(b) the balance of the profits of the relevant investment over and above those calculated by reference to the agreed initial rate of return.

(2) (a) Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, carried interest to which this section applies and which is received by a partnership shall be deemed to be an amount of chargeable gains to which section 28(1) applies. (b) Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, carried interest to which this section applies and which is received by a company shall be deemed to be an amount of chargeable gains to which section 28(1) applies.

(3) (a) Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, the rate of capital gains tax in respect of chargeable gains to which subsection (2)(a) apply shall be 15 per cent. (b) Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, the rate of corporation tax in respect of chargeable gains to which subsection (2)(b) apply shall be 12.5 per cent.”.”.

This amendment seeks to insert a new section into the Finance Bill. This is the section that clarifies treatment in this area of our tax code, which is currently fraught with confusion.

The new section applies a reduced rate of capital gains tax to the share of profits of an investment that a venture capital manager receives for managing an investment in a venture capital fund. These profits are known as carried interest and are separate to the profits made by the investors in a venture capital fund. A rate of 15% will apply to carried interest in respect of individuals and 12.5% in respect of companies. To qualify for the reduced rates of tax, investments must be made for a period of at least six years in private trading companies, carrying on a business set up or commenced after 1 January 2009, which are engaged in research, development and innovation activities. "Innovation activities" means new technological telecommunications, scientific or business processes.

The purpose of the amendment is to ensure that venture capital is available for such businesses. In the context of reviewing incentives for research, development and innovation we examined the current tax treatment of venture capital and found it unsatisfactory and conflicting. We have decided to clarify the law by providing a clear restatement in this regard.

We will adjourn until after the vote in the Dáil.

Sitting suspended at 12.35 p.m. and resumed at 12.45 p.m.

We are providing that carried interest be taxed at 15% in respect of individuals who are investing in venture funds. Is that a new concession or an existing practice that the Minister is formalising in legislation?

Currently capital gains tax is at 20% but the precise treatment is unclear depending on the type of interest involved. There are some lower interests and some lower charges and higher charges. Essentially we are clarifying that capital gains tax is at the rate of 15% for an individual and at the standard rate for a company.

Is it simply a clarification of existing practice?

There is no existing practice but we looked at the practice in the UK and the US and it is analogous to the treatment of these matters in the UK and the US where there is a discount on the capital gains tax rate for individuals and companies pay at the corporate rate.

What is the definition of a venture fund? I take it the nature of the venture is not just property, it must be genuine——

It does not include banking anyway.

Exactly, and the likes. What is the bona fide definition of "venture" under this measure?

Venture activities mean new technological, telecommunications, scientific or business processes.

Does that include Internet betting?

Are there areas of activity that the Minister wants to encourage? If it relates to research and development it is preferable to clarify that because it is a difficult technical area. How does the Minister ring-fence it if it is more to do with the financial markets, construction or speculative land development? It is good to have a fund for research and development because that is the way much research and development work is done. It would be especially appropriate if it became attractive to college campus companies. I am very much in favour of that because it has a good track record in this country and the area is perhaps not as big as we would like it to be.

It is very attractive to college campus companies and it is ring-fenced for research and development and innovation. In general, it enables the funding of start-up small and medium enterprises, which will complement existing work being done by Enterprise Ireland to develop indigenous industry in those areas. The fund will also enhance the significant improvements being made by Government in recent years in the area of research, development and innovation through mechanisms such as the national skills strategy, the strategy for science, technology and innovation and investments through Science Foundation Ireland.

In overall terms it is considered that facilitating the investment via venture capital funds and start-up small and medium businesses engaged in research, development and innovation will help maintain Ireland's international competitiveness by encouraging an open enterprise economy attracting high-value economic activities and developing high-skilled employment. It is also envisaged that leading third and fourth level researchers will be attracted to work in Ireland by the availability of funding, further enhancing our ability to develop the areas of research, development and innovation.

The European Venture Capital Association's 2008 benchmarking study ranked Ireland second in terms of a favourable tax and legal environment for private investment. The amendment will help to copperfasten that position in an overall European market in the context of this particular activity where the gap between the most and least favourable environments is widening considerably.

Would eco-research or environmental technology changes come within the terms outlined by the Minister? The British are now far ahead of us in supporting the development of offshore wind energy and those kinds of technologies. In that regard our environment lags far behind.

Innovation means the development of new technological, telecommunications, scientific or business processes. That would clearly encompass the area referred to by the Deputy.

Does that mean new in Ireland or new in general? Something could be established somewhere else but not exist in Ireland.

One could not confine the novelty factor to Ireland in a European Union context, so it would have to be new in the EU.

For example, wave power could be developed on the west coast. Would the fact that it may already be in operation in Portugal rule out funding for its development in Ireland?

Again, it would be a matter for the commissioners to assess in the context of a particular application. "New" seems to me to encompass the new wave, if I can use that phrase in this context.

That would be very important.

Yes, I accept it is important.

For the Minister's information, an estimated €16 billion investment is waiting to happen in this country in offshore wind and wave energy development.

If it is a new set up, we can consider it. This section follows on from an analysis carried out in the Department before the budget on how we could incentivise positive investment in the country. Deputy Burton and I crossed swords on the subject last night but that is the context in which many of the changes are being proposed. We received no representations on the issue. When we considered developments in the United States and the United Kingdom we saw that they had a consistent treatment of this type of investment that our tax code did not offer. We decided to rationalise it and present it as a definite inducement in terms of investment in the country.

Amendment agreed to.

Amendment No. 55 has been ruled out of order because it is declaratory in nature.

I have had amendments like this one approved by previous committee Chairmen. I do not understand why the Chairman has chosen to rule it out of order. It seeks to obtain information on tax avoidance by non-resident tax exiles. Amendment No. 56 was also ruled out of order.

Regarding amendment No. 55, why should we not get the information from the Minister and the Revenue Commissioners on the cost of tax forgone and the number of people involved who, to use the Minister's words are "high net worth individuals" who have the status of being non-resident tax exiles? I was promised by the previous Minister for Finance that he would ask Revenue to conduct a study and to examine the situation of people leaving. I acknowledged last night that the Minister has removed the Cinderella rule but when one is asking ordinary people to pay a lot of tax it is difficult to explain that there is a special class of person who enjoys a privileged existence in a republic.

If I might I explain the reason that I have been advised amendment No. 55 is out of order, it is because it seeks to require the Minister to prepare an annual report on non-resident tax exiles, stating the number of such persons and the amount of tax forgone as a result of their availing of tax exile status. The amendment is declaratory only. It seeks merely to obtain information which could more properly be obtained by other means and it must therefore be judged out of order. That is the reason for it.

With respect, I take issue with the Chairman's judgment.

With all due respect, the decision is that the amendment is out of order.

How does that reflect on the decision of previous Chairmen who have allowed such amendments to be discussed?

I am not aware of what previous Chairmen did.

They allowed them.

The advice I have been given is that the amendment is out of order and I have outlined the reason.

Amendment No. 55 not moved.

Amendment No. 56 is also ruled out of order because it involves a potential charge on Revenue.

Amendment No. 56 not moved.
SECTION 37.
Question proposed: "That section 37 stand part of the Bill."

With regard to tax incentives for private hospitals, I raised with the Minister yesterday the issue of the Minister for Health and Children's proposal to spend €74 million on changes to consultants' contracts. She is also proposing to spend substantial amounts of taxpayers' money on the private hospitals initiative. The fact is that consortia that are supporting private hospitals cannot raise finance at anything like the same rate as public bodies and the Government. The cost of finance for Government investment in hospitals is far lower than it is for private consortia, yet taxpayers are being asked to pay on the double. They are being asked to pay tax incentives to hospitals and then private hospitals will charge and pass on much higher interest rate charges where they can at present obtain the finance.

This is a stupid policy and it always was. It is particularly stupid now that the economy is in difficulty. It means the diversion of very scarce resources to a private hospital development that is simply creating a two-tier health system. My local hospital in Blanchardstown has been stopped from installing MRI imaging systems because the private hospital run by the Mount Carmel Medical Group, which has been given the indicative status of preferred bidder, said it wants the exclusive rights to high-level imaging. That hospital will not start life any time soon.

I must interrupt the Deputy. As it is after 1 p.m., I am required to put the following question in accordance with the order of the Dáil of 4 December 2008: "That the amendments set down by the Minister for Finance to sections 30 to 40 and not disposed of are hereby made to the Bill, and in respect of each of the said sections not disposed of, that the section or, as appropriate, the section, as amended, is hereby agreed to."

Question put and agreed to.
Sitting suspended at 1.05 p.m. and resumed at 4.25 p.m.
Section 41 agreed to.
SECTION 42.
Question proposed: "That section 42 stand part of the Bill."

Each year up until now the Minister has conducted a cross-Border survey of excisable products which has provided useful information which informs both the House and the wider public of what is happening. It shows the difference in pre-tax prices in the South. Not surprisingly, when one looks at beer prices last year, one sees we were charging 10 cent more in tax on a can, but we were also paying 16 cent more on the trade price. This is a concern to me. I know there is a substantial difference on beer products which is the source of considerable leakage. However, there is also evidence of a systematic problem, whereby falls in fuel price in other jurisdictions are not being replicated here. There is a concern that in some areas consumers are being victimised. The Minister will be well aware there is also a growing concern, as we have moved to a 21.5% VAT rate in Ireland, while the British have moved to a rate of 15%, that the gap which last year was 3.5 points has now increased very substantially to 6.5 points. I should like to hear the Minister talk about the gap in VAT rates, as well as the trend in pre-tax prices. Perhaps he might circulate to the committee the latest information on cross-Border surveys of the cost of products to inform our debate. I was in Cavan during the week and the Minister can imagine the state of concern in Border counties about the impact on trade, particularly excisable products, most of which are standard VAT rated. There is very serious concern about what, effectively, will be ghost towns. I am sure Deputy Morgan who represents one of the potential ghost towns is witnessing the same impact.

It would be worthwhile to hear the Minister's assessment of the extent to which VAT revenue is being hit by the current patterns and his surveys show that Irish consumers are being hit, as well as the extent to which profit-taking as an element of the cost structures affecting some products is a cause of concern. This has become an enormous issue. I was listening casually to the radio and heard about the volumes of traffic heading north over the weekend. Clearly, people are voting with their feet as regards where they make their purchases. Appeals to patriotism or anything else will not wash when people are under pressure and need to put product on the table. This is an issue that will not speedily go away. We need to have a mature debate about how we shall handle the issue. I can understand that the Minister would be concerned. Traditionally, Ireland has relied on indirect taxes as a source of revenue, as it has allowed us to have lower direct taxes, but clearly problems are emerging.

I have the relevant documentation, up to 3 December, taking account not alone of the budget but also British budgetary adjustments. It is important to note that the United Kingdom budgetary adjustments involved an increase in excise duty as well as a reduction in VAT. That is of relevance to many of the tax sensitive items in cross-Border purchases and it is relevant as regards the impact of differential taxation rates on cross-Border items. The crucial element in relation to price differentials between Northern Ireland and the South is the currency differential. This is at the heart of the disparity.

If it was just a matter of the value of sterling, an Irish trader could source his or her product using that currency. The sterling factor does not explain away the whole problem. Many of these are internationally traded products. They are commodities that do not come from Irish factories and have not been manufactured in Ireland.

I have arranged for the sample cross-Border survey to be copied and it will be provided to the Deputy in a few moments.

There are two clear issues, one of which is the need for harmonisation of revenue throughout the island, not just with regard to VAT which is more favourable for those north of the Border. Corporation tax is more favourable on this side of the Border. We need to strive to achieve harmony throughout the island in both areas. I agree with Deputy Bruton that currency is not the significant factor. Jameson Irish whiskey or Powers whiskey can be bought considerably cheaper in another jurisdiction, which is cause for significant concern.

I assure the Minister that not only traders in Border towns, but even those in towns south of Louth, like Drogheda, are having significant problems. In fairness to the local authorities involved, they are trying to help. For example, there has been only a minor increase in rates in those towns this year, as a result of which there will be a loss of revenue for local authorities raising other problems further down the line. Local authorities are also trying to do something about parking in the towns to facilitate trading, such as reducing the cost or providing free parking. They are trying to assist traders in any way they can. Will the Minister, even at this late stage, consider introducing a 2% reduction in VAT? Such a reduction would have almost as much of a psychological effect as a financial one. People see a significant reduction up the road in Newry and similar towns, but the VAT rate has increased on this side of the Border causing significant problems.

I can say with some authority that there is no pleasure in shopping in Newry. A family member told me she saw two fights take place in Newry, one among two women from the South who were involved in a punch-up over a shopping trolley, the contents of which somebody had just loaded into the boot of his or her car. The two women grabbed the trolley and a nasty row ensued to which the PSNI were called. It was called again for another incident about an hour later when two men were fighting, both with southern registered cars, over a parking space that had just become vacant.

There is no pleasure in shopping in Newry because of the queues. The people who commit themselves to going are determined to do their shopping when they get there, but not many of them will make a return trip. The volume of people and traffic is terrible and trying to get through some of the traffic at Newry to get to Belfast last Saturday week was bedlam. I would rather face the Dublin morning rush hour any time than face the traffic at Newry. However, the Newry shopping phenomenon is indicative of the mentality with which traders must contend. I accept the increase in the VAT rate was a minor increase, but it was a huge psychological blow to shoppers and the retail sector is taking a hammering as a consequence.

If one looks at the registration plates of vehicles in the car parks at these shopping areas, one sees Clare and Kerry registrations and so on. People travel overnight to them and one sees cars coming back that probably breach safety regulations because the back of the car almost drags along the road with the weight of the cargo, often groceries, but also alcohol. There is a serious issue and it must be addressed sooner rather than later.

I thank the Minister for circulating the survey report. However, it excludes beers and spirits, which, based on last year, were the products where a significant advantage existed. I suspect that advantage has increased. The products covered in the survey suggest that while we charge a higher tax on tobacco and wines, that is compensated for in the South in that the pre-tax price is not so expensive. Could the Minister give an indication of his estimate of the revenue lost as a result of the cross-Border traffic flow? What product areas are involved? Is the loss predominantly in beers and spirits or in large items where the VAT differential is significant? Has he conducted an analysis of the recent patterns that will give us some understanding of what is happening and help us discover a policy response appropriate to the Exchequer situation?

Deputy Morgan started with the cost of a bottle of whiskey and said it had nothing to do with the currency differential. However, if one examines the price differentials for a bottle of whiskey from the perspective of a resident of the State and valued in euro one sees a marked variation in price over a period. On 18 August 2007, the differential was €4.12. On 14 November 2007, it had risen to €4.75. On 12 February 2008, it had risen to €6.15. On 23 June 2008, it had risen to a maximum of €7.29, but then, by 3 October 2008, it stood at €6.70. That change in the differential for the price of a bottle of whiskey reflected currency changes and exchanges and that is incontrovertible.

I can understand why the rise in the VAT rate by 0.5% has been raised and why Deputy Bruton has raised it in broader terms and asked me to examine whether it would be possible to have a more general reduction of VAT to create some element of competitiveness between the State and Northern Ireland. However, the contribution that would make would be very small in contrast to the more general currency differential.

With regard to the sample cross-Border survey, it is worth noting that there were no changes in the recent budget to the tax on beer and spirits, although the VAT change has an implication for the cost of beer and spirits in the United Kingdom. The question of VAT and using VAT reductions as a stimulus package arose at the recent ECOFIN meeting. The strong view among many member states was that this was a most undesirable form of stimulus package, especially among smaller states. They expressed the view that a stimulus package of that type quickly leaked out of the state in question in the form of an increased purchase of imported goods and that there was a far stronger case for the kind of stimulus package we and other member states aspire to have or have, namely, a strong, public investment programme.

I have said before that the Minister was wrong to raise the VAT rate by 0.5%. If I recall correctly, the gain to the Exchequer from that is under €300 million. The problem is that the psychological damage done by the 0.5% increase is out of all proportion to the limited benefit accruing to the Exchequer. I forget the exact figure involved, but think it was approximately €227 million.

We are dealing with section 42, which concerns excise duties, not VAT increases.

This is part of the same argument. The problem for the Minister is that although technically, we do not live in an all-Ireland economy from an EU point of view, we do so from a psychological point of view. My husband and his family are from Dundalk and for generations, those who live on the Border have been shopping on either side, depending on where the advantage lay, and always have done so. The significant change has been that it is no longer simply those people in Dublin who traditionally made three or four shopping trips a year to the North who are so doing. At present, given the better roads, people from any part of the north side of Dublin can get to Newry in approximately one and a quarter hours before encountering the traffic jams. It certainly was an easy drive before it became so hectic. I refer to what the Minister must do in respect of the psychology of stimulus. While I understand that a further drop in rates would be highly problematic from the perspective of Exchequer funding, the psychology of the increase has been absolutely devastating.

Other issues arise regarding cross-Border trade. In the context of the benefits that have flowed from the Good Friday Agreement, it is important to try to have parallels between rates of excise and duty North and South. However, it is clear from my experience that as one drives south from Dublin, petrol prices rise by approximately 2 cent per 100 km. While that merely is a rough survey, it is quite easy to find garages in Dublin in which petrol costs approximately 100 cent per litre. However, as one moves further south from Dublin, it becomes quite usual, even at present, to charge 103 cent or 104 cent per litre. While the Chairman probably is more expert in this regard, as one gets closer to the Border, prices become more competitive. Something must be done because I do not doubt that some petrol retailers are making extraordinary gains in respect of the prices they are charging.

As with the banks, price decreases are not being passed on and people are taking massive advantage of sterling differentials. The issue of how to ensure the Government has an active policy in this regard has been raised previously in the Dáil. I refer to the mark-ups arising from currency differences both in respect of products that are subject to excise and across the board. People are being fleeced in the South in this manner on a huge range of products. Eventually, many retailers will be obliged to wise up because they will face a permanent loss of their trade otherwise.

I commend Deputy Burton on marrying well and her husband is a good Louth man. I wish to clarify a comment I made at the outset, when I stated the increase of 0.5% in the rate of VAT was not in itself a very substantial sum. I should clarify that it would represent more than €500 per annum to, for example, a family on welfare income and would constitute a hugely significant increase for those in or bordering on a poverty trap.

Second, I refer to the Minister's figures on whiskey. While I do not wish to be provocative, I do not know where that price was sourced. I could bring him to many other places, not far on the other side of the Border, where those figures do not stand up. The prices differ substantially.

I referred to excesses, rather than differences. The figures I provided have been calculated based on instances in which one pays more here in euro than one would in Northern Ireland. The reason I gave them was to show how they mirrored exactly the currency differential.

Deputy Burton raised the issue of excise duties on petrol and diesel. Those products are cheaper in the State than in Northern Ireland. In this regard, my Department estimates that approximately 7% of the petrol and 17% of the diesel sold in the State is purchased by persons resident outside the State. This is an area in which Northern Ireland shops in the Republic.

The difficulty is that the balance of trade in respect of purchases is in the other direction. I understand and it is legitimate for Deputies to raise the issue of how far tax contributed to this problem. However, when one examines the relevant factors, the most significant factor is the currency differential, followed by the fact that United Kingdom multiples based in Northern Ireland benefit from general United Kingdom price levels, irrespective of the cost of transporting products to Northern Ireland. For example, a leading British multiple firm will have a single price for a product in the United Kingdom, irrespective of whether it is sold in London, Birmingham, Liverpool, the Western Isles or Northern Ireland. This has a huge impact on retail margins in the Republic when compared with Northern Ireland, and Senator Feargal Quinn has written on this subject. As for the impact of indirect tax, while clearly it has some impact on all these matters, I maintain it is not decisive.

The petrol queues have gone since the budget. They are not the same as they were and the volume of traffic coming south is only a fraction of what it was.

People are fighting over the petrol pumps in Newry although it is dearer.

That is absurd. Petrol and diesel are approximately 5 cent and 20 cent cheaper, respectively, in the State.

It is important to point out that as the Minister noted, the advantage will swing from one jurisdiction to the other at different times, depending on exchange rate fluctuations. A Government cannot pursue a fiscal policy that in effect chases changes in the exchange rate. The Government must set out its fiscal policy based on fundamental factors and the exchange rate will take care of itself in its own manner. Deputy Burton made a point about petrol becoming more expensive as one moves south from the Border. This highlights what I consider to be the real problem, namely, there is capacity within the retail sector in general for further reductions. There is no other reason petrol should become more expensive the further one moves from the Border.

This is the nub of the issue. Patterns in the retail trade are changing as retailers respond to the recession and to the pattern of cross-Border trade. For example, retailers are holding more pre-Christmas sales than heretofore, which is a positive step. People have become more price sensitive and retailers with the margin and scope for reductions should pass them on. The figures outlined by the Minister in respect of the trade price differential highlights this point. Retailers should focus on the issues that are within their control and this will determine where people shop. Ultimately, it is within retailers' own control.

While I agree this is a serious dilemma, the Government must be more aggressive when highlighting this issue. The Minister has stated that single pricing is the problem. Were the Department more aggressive in highlighting cases where charging is out of the ordinary, the position would be much healthier. This probably is a matter for the Department of Enterprise, Trade and Employment, rather than for the Department of Finance. Clearly, in the retail petrol trade, a rip-off exists. People are not price conscious and much higher margins are being taken than are justifiable. I made a simple suggestion that effectively, the Minister should require all petrol stations to e-mail their pricing structures to the consumer authority and that the prices simply would be mapped. Consequently, it would be very easy for people to see who is being ripped off and who is not.

Similarly, in respect of the multiples, more information should be provided to the consumer about what is going on, to try to change the pricing patterns. People believe that in the good times, the British multiples have been content to take much higher margins in the South and now that times are not so good, people are under pressure and will travel to get value. More aggressive pressure should be put on the multiples to justify the huge differentials. We are talking about differentials of 30%. This figure is on the product, not 30% on the cost of Southern-based distribution. Even if there are higher costs of distribution in the South, and no doubt there are, it is certainly not 30% of the product price. There are problems in the distribution cost and Irish consumers got used to paying more. The Government must take a more active role in driving this down, showing customers what is going on and putting pressure on the retail stores. One can play a role of moral suasion on the suppliers rather than appealing to the patriotism of purchasers. This is where I would like to see a more aggressive policy.

Does the Minister have the page relating to beer and spirits? That has been excluded. Last year the differential was €5 but €4.60 of that was tax. Even last year, the tax was a large part of the differential. It will be interesting to see what has changed from the Minister's data.

The full version was published in October, which was pre-budget in its analysis. I understand that the equivalent of the October publication is prepared and published early in the new year and it will provide the data requested. Despite much discussion about patriotism, I have not appealed on those grounds in respect of shopping in Northern Ireland. I said that if one shops locally one assists the Exchequer locally. I have arranged with the Revenue Commissioners to conduct an analysis with the CSO on how much revenue is lost to the State through shopping in Northern Ireland. That is the core issue.

Question put and agreed to.
SECTION 43.

Amendment No. 58 has been ruled out of order.

Amendment No. 58 not moved.
Section 43 agreed to.
SECTION 44.
Question proposed: "That section 44 stand part of the Bill."

The Government has consistently stated that it would not impose some windfall tax on electricity generators. It is my understanding that electricity generators have been required, under EU rules, to charge an effective carbon tax even though there is no carbon tax prevailing generally in the economy. There is a carbon tax in respect of electricity products. The impact is that the generators are collecting the revenue, which is of the order of €300 million. I cannot see why we should allow electricity generators to collect a tax that they do not return to the Exchequer for the many purposes the Exchequer is crying out for money at the moment. Can the Minister explain why he has not opted to do as other jurisdictions have done? The Spanish have done it and the UK has done it or is doing it. It seems like a relatively painless source of revenue that we could use. It would avoid some of the other decisions in the budget that did not strike a chord with the public.

This was another magic bullet that Deputy Bruton discharged from his revolver at regular intervals throughout the autumn. Unfortunately the bullet is magic because the consequence of what he proposes would be a substantial increase in electricity prices.

That is not my understanding.

It is my understanding. The windfall of which the Deputy speaks has been substantially used to prevent our prices rising even further.

The Minister has allowed an effective tax to be collected and the ESB has been given the discretion over its use.

No one has been given any discretion over the use of anything. Were windfall receipts of that character available to me, I would have clawed them in by way of the budget.

Perhaps the Minister can provide documentation to show the fall in Irish electricity prices to which he refers. Most people see that we have become the most expensive country in this regard and that price increases in recent years were 70%, and far higher than any other jurisdiction. On top of that the levy was applied but, as members of the Minister's party have espoused, where there are carbon levies they should go back to general taxation rather than being appropriated by a company for its own purposes. I am not clear what principle the Minister is applying if the carbon levy is being appropriated by the electricity company. Why should that be the case?

A carbon levy is under review and I will bring forward proposals for such a levy in the next budget. Were such a levy imposed in this year's budget it would have had implications for electricity prices this year.

In other words, the ESB is using this tax to subsidise other high costs to protect the electricity consumer in the short term. The fundamental issue we must face up to is that our electricity generation has become increasingly uncompetitive. The Minister seems to favour a process whereby what is effectively a tax is pocketed by an electricity company to avoid it facing up to those cost issues.

No, I recognise a reality as a member of Government that we are in a serious position, that oil prices rose to record levels in the recent past and that this would have had further implications for price increases if a levy was imposed. I will take Deputy Bruton's suggestion into account in the changing——

This is not a new levy. It is in place.

No, I will take into account the possible clawback of the levy in the context of falling oil prices. This is not an appropriate time to do that. There is no magic hoard available to the taxpayer.

Not even in a time of falling oil prices?

We are now in a time of falling oil prices. We have not been in the past year, as the whole country is well aware. As Deputy Bruton is well aware, large amounts of oil and gas used to generate our electricity are purchased well in advance at high prices. It does not work through the power system as quickly as it works through the petrol pumps.

Is the Minister indicating that, as we are entering into a period of falling oil prices, he is considering clawing back this effective levy?

I am saying that I would consider Deputy Bruton's suggestion in the context of falling oil prices.

There is an added problem with the emissions trading scheme where a charge is made on the assumption that no credits were given to the energy generators. Under the trading scheme credits are given according to the level. What is happening is that they are forced to charge on the basis of no credits, and are charging for something they do not have to pay for. These are the moneys that have not been passed on.

That is all part of this equation.

Why should they be allowed to charge on the basis that they were supposed to be paying for the full emissions when they have large credits? The cost initially would be reduced to the consumer. We have spoken about Northern Ireland. In the Republic, our costs are getting too high and this is reflected on the shop floor. The situation will get worse. When the airlines come into the trading scheme they will jump on the bonanza. People throughout Europe have made billions out of this. Credits will be given but the charges will be made as if there were no credits. Everybody will pay so much per tonne of emissions generated. However, the fact that credits are provided for a large proportion of these emissions is ignored. This is where the real problem lies. One would not want to introduce a carbon tax on top of this.

Deputy Barrett is straying far into energy policy but I agree that the consideration of the carbon levy must take into account the factors to which he referred. In the United Kingdom it was suggested by a Member of Parliament that a windfall tax be applied. A windfall tax was not applied in the United Kingdom but one was applied in Spain and the local courts have questioned the validity of the tax.

Question put and agreed to.
Sections 45 to 47, inclusive, agreed to.
NEW SECTION.

I move amendment No. 59:

In page 94, before section 48, to insert the following new section:

48."(1) Section 67 of the Finance Act 2002 (as amended by section 90 of the Finance Act 2006) is amended—

(a) in subsection (1) by substituting “2 per cent” for “1 per cent”, and

(b) by inserting the following after subsection (1):

"(1A) For the avoidance of doubt, betting duty imposed by subsection (1) is chargeable on all bets placed by a person with a bookmaker at the bookmaker's registered premises, irrespective of the means by which a bet is placed.".

(2) Subsection (1)(a) comes into operation on 1 May 2009.”.

Amendment No. 59 relates to betting duty and is not a major amendment to the original proposal. It is a clarification of an anti-avoidance point and provides that for the avoidance of doubt, betting duty imposed is chargeable on all bets placed by a person with a bookmaker at the bookmaker's registered premises, irrespective of the means by which a bet is placed. It appeared that some bookmakers intended to install machines which would deem the mere placing of the bet to take place offshore. To deal with this abuse an anti-avoidance provision is proposed to section 48 and the section is restated.

The section still provides for an increase in the rate of betting duty with effect from 1 May 2009 as published in the Bill. In this regard, representatives of the betting industry have stressed to me that betting activity is falling, as are margins, due to more competition in the sector. The sector faces a challenging position in 2009.

Concerns have also been expressed that betting duty is applied to turnover and therefore takes no account of profitability. I have delayed the increase in the betting duty rate until 1 May 2009. In line with other business expenses, betting duty paid by a bookmaker will be allowed as a deduction in computing the amount of profits or losses of the bookmaking business for income tax or corporation tax purposes. This will allow time for discussions to commence as to how best betting duty might be applied in the context of the 2010 budget, including examining the UK's gross profit tax model and the issue of the taxability of the substantial volume of betting and gambling which takes place outside the traditional bookmaking setting.

I will provide in section 48 a provision which clarifies the tax treatment of self-service betting units in a bookmaker's premises. These allow a customer to place a bet with the bookmaker using a terminal, and are something akin to the self-service ticket machines at railway stations or self-service check-ins at airports. To pre-empt the possibility that the server to which a self-service terminal is linked might be offshore and lead to a claim that the bet was not subject to betting duty, it is proposed to clarify for the avoidance of doubt that betting duty applies to all bets placed with a bookmaker at the bookmaker's registered office, regardless of the means by which they are placed.

I understand that Deputy Bruton's amendment No. 60 has been ruled out of order.

It is out of order.

I would like to explain what it is.

Will I deal with it or would that be out of order? I want to help the Deputy.

What was presented to me——

The original section 48 will be deleted but Deputy Bruton may speak.

What appears to be the case is that in the marketplace the volume of business going through the traditional high street bookie's shop is diminishing relative to the volume of business going through telecentres and Internet betting. The scope of the industry to pass on the 2% levy to consumers is considerably restricted in this rapidly growing alternative sector where no levy is applied in practice. It seems that if this is not to be an indirect tax on bookies' margins but is paid by punters as a leisure tax then the Minister must find some way to ensure that Internet and telephone betting are brought within its scope.

I see the Minister will introduce an anti-avoidance mechanism but it seems that the much bigger avoidance is in telebetting and Internet betting. Providing a period of time to examine this is welcome. However, matters will not change dramatically. Perhaps telebetting can be addressed with an anti-avoidance scheme but Internet betting will be extremely difficult to address. An element of distortion of trade is created by the tax itself. This would become a problem and the industry would feel correctly that those who bet in the traditional method are being hit with a turnover tax that has long since been abandoned in any other trade. I remember years ago we had agricultural levies on turnover and there was such a hue and cry that eventually they were got rid of as a source of income tax. This is the dilemma. When I do have a bet I do not mind paying 2% into the Minister's pool but if a major evasion source exists it must be borne into the structure of tax created for the industry.

This has become an important issue. The horse and breeding industry accounts for one eighth of all jobs in agriculture, forestry and fisheries with 14,850 employees. We are unique in so far as 85% of Irish thoroughbreds are exported and we have the third largest breeding industry in the world. This industry is vital to the economy and ill-informed comments are made every day of the week on this matter.

The Minister is aware that in 2000 a direct link existed between the racing and breeding industry and the betting duty. At that stage, the bookmakers had no difficulty with a 2% levy. If this funding does not continue, the number of jobs will decrease, the prize money will reduce and the level of horses coming into the country and being exported will reduce. We need to tackle the issue of Internet betting. The only two countries in the world with offshore betting in bookmakers' offices are Ireland and Great Britain. In all of the other major countries, such as the United States, Australia and France, it is all tote betting and state-run and the money goes directly into the industry. We must make up our minds on what is most important. Is it the horse and breeding industry or bookmakers? I opt for the horse and breeding industry where there are 14,850 jobs.

This business of not being able to deal with Internet betting must be addressed. The United States has dealt with it; it has become illegal to use a credit card to bet on the Internet. It cuts out Internet betting. It is unfair to the industry that depends on the link between the levy and its prize funds that large sums of money are going abroad and those people contribute nothing to the industry.

It is as if I bought the Gaiety Theatre, put on the best show in town with the best artists and invited the public in for nothing. That is what is happening. Every day one can switch on one's television and see racing. The only people putting on the show are those who own, train and ride the horses. The Minister must find some way of providing money to keep that show on the road. If people are not prepared to contribute to the pool, this show will cease. If somebody puts a horse in training he or she needs decent prize money to make it a viable proposition. This is not just about the sport of horse racing but about the breeding industry. The same misinformation was given about the stallion tax. Only the small people will suffer as a result of the stallion tax because the large breeders can write off vast amounts of money because of the number of horses that never make it to the breeding stage.

I strongly urge that the Minister pay urgent attention to finding a way to deal with Internet betting. On the Internet one can lay as well as bet, and therefore one is in a similar position to a bookmaker. Why do we license bookmakers when the ordinary individual, with a credit card, can become a bookmaker on the Internet? No revenue comes into the State. If people are not prepared to co-operate, the Government should use the American solution to the problem. That is the only way to deal with this.

I strongly recommend we cease treating horse racing and breeding as a sport. It should never have been transferred to the Department of Arts, Sport and Tourism because it sticks out like a sore thumb that racing gets a grant when it is not getting a grant. The amount there should come in on the 2% duty imposed. The revenue is never shown. All that is shown is the sum given out, but one should match the other. That was the purpose of the system introduced in 2000 and the Minister is well aware of this.

I appreciate that this may be a temporary measure but we should revert to looking at this area as an industry. I am not dreaming this up; the facts are there for anybody to see. If one examines the whole enterprise, whether breeding or racing, a number of people are employed in trainers' yards, drive lorries, work at race tracks and manufacture the gear. This is a huge industry and it is important we see it as such. No grants are given to the racing industry either from Europe or nationally. The only income available to it is this 2% levy. Everybody who bets should be treated in the same manner.

Betting is a big subject. I very much welcome the contributions made by Deputies Bruton and Barrett. In 2002 it was decided that a bookmaker would have the option of not passing the duty on to the customer so that when one won a bet one could no longer appear to be taxed. In 2005 that arrangement was made compulsory for all bookmakers so that the punter sees no visible tax deduction from his or her winnings. That is why there is a tax based on turnover because there must be some formula for extracting the tax the State deems necessary and appropriate in the case of a luxury item of this type.

Deputy Bruton's point is correct; the major difficulty is that the tax base is not wide enough for the operation of this duty. The tax base is exclusively based on the on-street bookmakers' offices and does not capture bets placed by telephone and on the Internet. Neither does it capture the considerable private casino activity which has evolved in the State. Large areas of gambling in the State are not subject to the duty and that is the issue that must be addressed. That is why I deferred the implementation of the increase in the duty until 1 May and I propose to use the time available to me early in the new year to conduct a focused review on this area to see whether the arrangements can be improved and the tax base widened. I examined this before the budget and there are real difficulties which I would like to share with the committee.

Telephone bets constitute a very substantial amount of leakage because most of the large-scale operations that conduct telephone betting, which smaller bookmakers do not, have purchased servers in the Isle of Man or the Channel Islands which route calls made to their Irish operations through an offshore telephone device. That is one of the reasons the anti-avoidance mechanism is included. I contemplated widening that anti-avoidance mechanism to cover the offshore telephone facility. The difficulty is that some of the large, multiple bookmaker firms base their telephone arrangements outside the jurisdiction. Those who base it within the jurisdiction give employment within the jurisdiction. It was represented to me that they could remove themselves to Northern Ireland or elsewhere in the event that I applied an anti-avoidance measure to telephone betting. I was not prepared to take that risk in the short time in which I considered the preparation of the budget. The profitability for the bookmaker is much lower on telephone bets. All research suggests that people who place bets by telephone are much better punters than those who visit bookmakers' offices. I thought the committee would be interested in that item of information which I gleaned from my research.

As outlined by Deputy Barrett, Internet betting is a major problem and in the absence of a prohibition on such activity it is impossible to tax it because the server can be located in any part of the world. Casino gambling has developed in the State. As Minister for Justice, Equality and Law Reform I asked Deputy Barrett to chair a committee on this subject because there was great interest in it but we were unable to achieve all-party agreement on the matter. I will have to proceed in this area as Minister and take whatever decisions are necessary to widen the tax base. I propose to examine this question in some detail in the new year.

Gambling is a multibillion euro industry in this country. Gambling gives much pleasure to many people; it also brings a degree of ruination to a fair number of families. It is appropriate that the State should regulate it. The failure to tackle Internet and telephone gambling is having very severe social consequences in the number of people developing serious gambling addictions. Notwithstanding Deputy Barrett's remarks, the gambling industry is a nest of very strong vested interests which have major political influence. In my constituency, whenever a small district shopping centre is established, along with a take-away we get an off-licence and usually a bookmaker, or two or three. I do not believe the bookies are as badly off as is suggested. It is legitimate for the State to seek to tax gambling in an effective way and to seal the leakage of tax revenues from the State. Probably because of the Celtic tiger, it has taken off in an extraordinary way.

The Minister referred to his desire to have an all-party committee on casinos. The Labour Party has made its position clear: we are opposed to fixed-odds betting terminals. Wherever we have researched this in the world we have found that fixed-odds betting terminals are the gambling equivalent of crack cocaine for gambling addicts. They are lethal. They are particularly attractive to young men, the people who most use gambling shops. The notion that they could become freely available is similar to the proposal by Sonas to establish slot-machine casinos in the Phoenix Park nearly 20 years ago. In most countries that have developed such gaming facilities they are seen as a considerable social evil. Although they generate huge amounts of activity, the social consequences in terms of gambling addiction are very intense.

The bloodstock industry and the people involved in horse and dog racing will have to make up their minds. There is a great deal of sympathy for the bloodstock industry in terms of the traditional activities of horse racing and greyhound racing, but many people involved in this industry are trying to have an each-way bet. Some of these are also heavily involved, as far as I know, in offshore gambling arrangements. The Minister is trying to square circles in terms of political lobbying and influence, and these are very difficult to square. A decision ought to be made. We should have a strong bloodstock industry but we should also have a fair taxation regime. The suggestion that the bloodstock industry and the greyhound industry have received no State aid is similar to saying that schools in Ireland have never received State aid because the parents of children who attend schools pay their taxes. The bloodstock and greyhound industries have received quite an amount of State aid. It is for politicians to decide on a fair regime of taxation. We should take a leaf from the book of the United States, where attempts have been made to limit Internet gambling and to localise gambling to tracks or racecourses to ensure the state receives a fair amount raised by gambling taxation. As for the all-party committee, I am afraid that until the issues of fixed-odds betting terminals and slot-machine casino development are absolutely removed, the Labour Party will not be involved with any such committee.

My name was mentioned as being involved with this proposed committee. At no stage was I or anybody else asked to implement a regime that would allow fixed-odds betting terminals. In fact, the report presented by the interdepartmental committee strongly recommended against fixed-odds betting terminals. Anybody I have spoken to who has asked to serve on this committee was totally opposed to such terminals. Where this rumour has emanated from I do not know.

Phoenix magazine.

It was obviously planted by somebody who has a vested interest.

With regard to the breeding industry and the racing industry, I know of nobody involved in those industries who is also involved in large bookmaking operations. I would imagine that involvement in bookmaking is totally contrary to the rules of racing and to the possibility of holding a licence. It is contrary to the principles involved. It is important to deal with this issue in a cool, calm and collected manner and to find a solution that will ensure the continuation of a very important industry while providing a means to fund the operations that are necessary. It should be a self-funding exercise. Nobody is looking for any grants and the reality is that there are no Government grants available to the breeding industry. If anybody knows about such grants perhaps they would let me know. However, my understanding is that there are none available either from Europe or from Ireland.

What I hoped the committee would deal with was the area of offshore and Internet betting. Human beings will bet. Trying to prevent this is not a role for politicians. We cannot go around telling people to stop playing cards or betting on dogs or horses. All we can do is to ensure there is proper regulation. I fail to see how people who run these Internet betting operations and collect a percentage for themselves cannot pass some of this on to the Government. In other words, if a person lodges €1,000 with them and places a bet which he or she wins, they take 5%. I cannot see why they cannot take 7% and pass on 2% to the Government of the jurisdiction in which that bet was won. If the racing is in England the 2% should be passed on to the British Government; if the bet is placed on a race in Ireland the 2% should be passed on to the Irish authorities. I do not see any difficulty with this. It is a matter of people being forced into either agreeing to this voluntarily, or — I would strongly recommend to the Minister — we use the same powers they did in the United States and ban betting through the credit card system.

Lest what I have said about this matter cause any confusion, I will say that I have no interest in any horse or greyhound and I am not a punter. However, I see the importance of the horse and greyhound industry in Ireland. In strict financial practice, funding of the horse and greyhound industry is through the Estimates and through the Appropriation Act. There is no strict earmarking of receipts from the betting duty for the industry. However, Governments have attempted to maintain a general factual relationship between these two. Bookmakers would argue that the relationship is an invalid one since many of the bets they take do not relate to horse or greyhound races. We all know, as politicians, the volume of transactions that now take place on our own fortunes during general elections, for example. Betting on politicians has become quite a fashionable activity in recent years. The bookmakers would maintain that the bets no longer relate exclusively to the horse and greyhound industry but may relate to the colour of the ministerial tie on budget day, or whatever. That said, a factual relationship has existed.

I welcome the tenor of the debate this afternoon. One of the peculiar functions of the Minister for Finance is that he is responsible for betting legislation. It is one of the few operational areas in the Department. I have always had reservations about fixed-odds betting terminals because of the addiction they can cause among those who use them. That view is expressed in the casino committee report. The demarcation of responsibilities is that the Department of Justice, Equality and Law Reform is responsible for casinos and I am responsible for bookmakers. In light of what has been said today I will do my analysis early in the new year and consult again with the Opposition spokespersons on this committee and Deputy Barrett to see whether we can find a solution to this problem. From a State point of view it is desirable to broaden the gaming tax base. That is the core problem we must address. If that can be addressed the amount of revenue could be increased. However, the constitutional pitfalls or the difficulties in European Union law associated with such an approach should not be underestimated.

Amendment put and declared carried.
Section 48 deleted.
Amendment No. 60 not moved.
Section 49 agreed to.
SECTION 50.

Amendments Nos. 61 and 62 are related and may be discussed together.

I move amendment No. 61:

In page 96, subsection (2)(a), line 18, to delete “a passenger on”.

I put forward this amendment in respect of the air travel tax. As members know, it is to be levied at €10 per passenger in the general case, and at €2 per passenger in the case of a flight from an airport to a destination located not more than 300 km from Dublin Airport. I suggest it might be more appropriate to base the tax, not on the number of passengers, but on the aircraft. The levy might operate on the basis that an aircraft would be half-full. If it were more full the cost per passenger would be effectively less. There would also be some environmental benefit in that on a fully occupied flight energy use per passenger is lower. This would operate instead of a levy on the passenger. If the airline can get high loadings less tax per passenger is charged and if its flights have very low loadings there would be a high tax per passenger. If this is an environmental tax, it is the flight that consumes the fuel and creates the carbon footprint rather than the number of passengers carried. I put the amendment forward for consideration.

The issue I wish to raise under section 50 may seem insignificant in the context of the overall budget but it is important as far as my local airport is concerned.

Donegal Airport is the most peripheral airport in the country. To reach a national primary road from west Donegal one must travel for one hour. There is no rail service. The airport is extremely important to us. Thanks to Governments from 1987 onwards and to the public service obligation, PSO, designations, we have developed this airport which now has two flights a day to Dublin. We have three flights per week from Donegal to Prestwick. No PSO applies outside the jurisdiction, of course, but thanks to Ryanair we have that service. For many years, Glasgow was the capital of Donegal and there is a great ethnic connection. That flight is used extensively.

I commend the Minister for what he did for the rest of the country, namely, establishing the hub and the 300-mile distance requirement between Dublin and the west coast of the United Kingdom. That was very beneficial to the airports in the west. However, we almost lost out. On a map of Ireland and the UK, Donegal is quite close to Prestwick but is some distance from Dublin. We are just inside the 300 mile limit but that is not the issue now.

This is the problem. Through the ingenuity of the airport authorities and some locals, a flight has now been provided from Donegal to Rotterdam. I believe the figure is for ten flights per year. If Dublin is taken as the hub the distance is 475 miles but if Donegal is taken as the hub the distance is much more. The route carried 1,600 passengers last year. There is a cost to the airport because no airline is prepared to provide these services as they are not financially viable. Consequently, the airport authorities and North West Tourism provided marketing funds and a 50-seater aeroplane flies in on a Saturday morning and flies back on a Saturday evening. The passengers who travel are largely from continental Europe because of the back-to-back flight provision. For ten flights in the year the cost to the airport authorities will be €16,000. I said the case may seem insignificant but this cost could make the difference in the airport authorities being able to continue this flight.

I know the Minister must legislate for the whole country but this is an exceptional case. I ask the Minister to consider this matter between now and Report Stage. I know he is listening to me and he is anxious to be able to do something to help us. I felt I had to raise the matter. The Minister may not be able to do something today but I hope he may at a later stage. If he had exempted charter flights that would work but he cannot do that. These are ten flights a year, carrying fewer than 50 persons. It may not seem a lot to the Department but it is a considerable amount if Donegal Airport is to continue and be viable.

I heard what Deputy Gallagher said and I shall certainly take the matter into account and reflect on it.

In section 50 it is stated that an aircraft means an aircraft capable of carrying 20 or more passengers but does not mean an aircraft used for State or military purposes. Rather like the parking levy, this means that persons who travel on the Government jet are exempted from this travel tax. Reports from Green Party Ministers state that they pay carbon levies into a type of sin bin when they take flights. I do not know if this applies to other members of Government. It seems extraordinary that Ministers are exempt in what was intended not simply as a revenue but as an environmental measure.

I have another question that I raised on budget day. If a private aircraft has fewer than 20 seats is it exempt from this travel tax? That seems to be the tenor but I am still not clear on it. I thought the Minister had intended to capture some tax contribution from private aircraft.

Air travel tax will apply to passengers departing airports in the State on and from 30 March 2009. We are aware of the general rates. Aircraft with fewer than 20 passenger seats are exempt from the air travel tax. This is a practical operation towards the implementation of the tax. The cost of collecting the tax in respect of small aircraft would be high relative to the amounts of tax collected in respect of such aircraft. The measure also ensures that passengers travelling to and from the Irish islands are exempt from the tax as the aircraft used on those services have fewer than 20 passenger seats. They are the most regular such aircraft in the State. It is normal for practical purposes to have private aircraft exempt from air travel taxes. The United Kingdom, France and the Netherlands all have arrangements in place that result in their air travel taxes effectively not applying to private or small aircraft.

I listened carefully to what Deputy Burton said at the time of the budget and I examined whether it would be possible to introduce a form of excise duty on private aeroplanes. One difficulty with such an excise duty is that it is not easy to distinguish between very small private aircraft used for enjoyment, sporting and training purposes and small aircraft, helicopters or executive jets used for the conveyance of private persons. In addition, I established that in the case of executive jets, very few are resident in the State for excise purposes and in the event of the imposition of an excise duty it would be possible for these executive jets to go offshore along with their owners. I did not see any great merit in accepting Deputy Burton's suggestion, however attractive it seemed as an argument in the public domain. From a Revenue perspective there was very little, if anything, to be gained from such a taxation arrangement.

Regarding State matters, the Air Corps has a large fleet of aircraft used for different purposes and there is no question of a travel tax on it. There is a carbon protocol in existence for the usage of aircraft by the State for conveying persons.

Will the Minister elaborate on this? Green Party Ministers have suggested the State has purchased carbon credit or made a donation on their behalf to various carbon funds in the developing world when travelling to various places. Is this true? Is that protocol published anywhere?

There is a Government decision on this matter but I am not the Minister responsible for the operation of that decision. However, there is a decision in existence applicable to all Ministers.

If the Minister travelled to the International Monetary Fund in Washington, how much would the Department pay on the Minister's behalf?

I am not familiar with the arrangements of the operation of the protocol. As it happened I did not visit the World Bank this year, because the meeting took place in late September and the Minister of State at the Department of Finance, Deputy Martin Mansergh, represented the Department. However, there is an appropriate charge devised in respect of ministerial air journeys. A formula is applied and it is part of a system of calculation agreed by Government decision.

The people using private executive jets take these Cinderella flights and there is also a security issue. There is concern that many of the private airports operating private planes——

Deputy Burton is straying away from the section under discussion.

No, because yet another exemption is applied for a person who owns an executive jet. I realise it is only €10 and that is nothing to people who own an executive jet. However, €10 could be a significant amount to a pensioner going on a sun holiday. They must pay €10 but a person in the happy position of owning an executive jet is not under any obligation to do so. Our tax code is riddled with these differentials and the person with the executive jet always seems to be the winner.

Such a person will be the loser this year because of the EU energy tax directive which came into force on 1 November. The cost of aviation gasolene for private pleasure flying increased substantially for each 1,000 litres used. Jet kerosene used for private pleasure flying which was exempt is now taxed. I am sure many Deputies have received representations on this point. There are only a small number of jets subject to taxation. We believe there are three or four registered in the State, although we were unable to fix on the number exactly. For the purposes of excise duty these are the only jets subject to taxation. The alternative to excise duty is to impose a passenger tax on persons conveyed in such aeroplanes. In practice, the operation of the tax proposed by Deputy Burton is such that the amount of Revenue time and effort required to collect such a tax would be vastly in excess of the sum raised. That is why we decided against that option.

On a point of order, I tabled an amendment that has not been dealt with at all. The usual pattern is that the amendment is dealt with before we reach the section.

The Deputy has spoken to the amendment.

I got no answer.

I am very sorry, we got lost on an executive jet.

We were not out of the airspace.

The problem was that Deputy Burton went into airspace in the budget debate. I outlined the provisions of the text and I will take the amendment tabled.

The amendment refers to the half passenger seat capacity of the aircraft. The effect of Deputy Bruton's amendment would be to move away from a tax related to the actual number of passengers carried and to charge the tax instead by reference to half the passenger seat capacity of the aeroplane. The proposed amendment is likely to significantly reduce the potential yield, because airlines' normal load factors appear to be between 70% and 90% per aeroplane. This tax is revenue-raising and I could not contemplate the loss of revenue envisaged by Deputy Bruton's amendment. In addition, I believe it would be more equitable and transparent to relate the tax to the actual number of passengers carried, which is the case in other countries. Operating the tax in this way is not likely to cause significant administrative problems for airlines, because they already keep extensive records.

If the only objection is the principle that it is not generating enough revenue, then the Minister could set the threshold at 70% instead of 50%. I understood the thinking behind the measure was environmental rather than simply an instrument to raise tax.

I am very single minded and focused.

There would be no administrative burden, because airlines are aware of what amounts to 70% of the capacity of their fleet. The suggested measure seems to be capable of raising the same amount of revenue, but with a slightly different incentive structure, favouring those who can run aeroplanes efficiently.

I will examine the issue. The UK considered exactly the same measure as that contemplated by Deputy Bruton, namely, replacing the air passenger tax with a per aeroplane tax based on the maximum take off weight and other criteria. The United Kingdom recently announced that it decided not to proceed with a per aeroplane tax. Instead it is revising the air passenger tax by introducing more bands based on distance travelled. From 1 November 2009 it will increase the number of bands from two to four, structured around four equal distance bands set at intervals of 2,000 miles from London. I am rather proud of the fact that I devised a somewhat simpler formula. The fuel used by commercial passenger aircraft is tax exempt and the industry has benefited from sizable reductions in oil prices from the all-time highs reached earlier this year.

I would have thought one of the ways to deal with the issue of executive jets belonging to tax exiles would be to deal with tax exile issues. Then one would have addressed the problem.

How does the Deputy propose I deal with it? Is he suggesting I arrest them and bring them here?

Bring them to the Revenue Commissioners.

The Minister is the person giving them status as tax exiles, that much is recognised. I disagree with the current formula of the proposed tax. Deputy Bruton's proposal to blend revenue and environmental measures is more reasonable. We must recognise that the aviation industry is still in significant crisis, notwithstanding the fall in oil prices. Many regional airports are, at best, marginal in terms of viability and we still lack an all-island airport development strategy. Given all of that, the imposition of such taxation on passengers concerns me greatly.

I fundamentally disagree with this proposal. The measures are contrary to balanced regional development and will adversely affect the mid-west. Shannon Airport is the international airport for that region and it will suffer from this tax. I welcome the fact that the Minister increased the travel distance to 300 km from Dublin Airport, but it will still apply to all transatlantic flights. Will the Minister indicate if this is a temporary measure? Will he increase the rates in each subsequent year? It is a penal tax on regional airports, in particular on Shannon Airport. Is it a temporary measure? If it is not, can we take it that it will be a fixed rate in the future?

How much revenue will the levy generate? Why was 30 March selected as the date from which the levy applies?

It will generate €148 million in a full year. The date of 30 March was picked because it was the soonest time in which the administrative arrangements for the tax could be worked out.

Regarding Deputy O'Donnell's question, this is the Finance (No. 2) Bill 2008 and will apply to the collection of revenue for the calendar year of 2009. I, or my successor, will determine what the position should be in 2010. It is not introduced as a temporary tax. On the question of the alleged burden the levy places on particular airports, it applies to all aircraft in all airports in the State. It does not discriminate between particular airports.

In terms of Shannon Airport vis-à-vis Dublin Airport we are already at a comparative disadvantage and this levy adds an additional disadvantage. The point I raised was that it is not a temporary measure as the Minister’s reply confirmed; it is intended to be a permanent measure. Will there be no increase in the levy? Will there be a fixed charge of €10 and €2 in the future? The Minister did not answer that question.

The Deputy did not give the Minister time to answer.

What was the question?

With due respect, the Minister and I are indulging in a reasonable conversation. We did not need direction from the Chair.

What was the question I did not answer?

The question that he did not answer was: if this is not a temporary measure, will the charges of €10 and €2 be increased?

That is not a matter for determination this year. I note the rates in the United Kingdom are in excess of the Irish rate. In deciding the rate I decided to have regard to the kind of factors mentioned by Deputy O'Donnell, such as the importance of tourism to Ireland for all destinations and the vulnerability of airports outside Dublin in terms of their future competitiveness.

The Minister is unwilling to answer the question.

I will take those factors into account in deciding whether there should be an increase. A Minister for Finance cannot say there will never be an increase in tax.

I hope on this one the Minister might give the matter some consideration.

I will give it consideration. I hope this tax remains at the level set as that would be appropriate.

Amendment put and declared lost.

I move amendment No. 62:

In page 96, subsection (2) (a), line 19, after “March 2009” to insert the following:

"on the basis of air travel tax being paid for half of the passenger seat capacity of the aircraft".

That is an associated amendment, so I presume it is lost.

It was discussed with amendment No. 61. I must put the amendment.

Amendment put and declared lost.
Section 50 agreed to.
Sections 51 and 52 agreed to.
SECTION 53.

I move amendment No. 63:

In page 98, line 10, to delete "shall cease to have effect" and substitute "is repealed".

This is a technical amendment to the wording of the section.

The Deputy wants the expression "is repealed" instead of "shall cease to have effect". My officials discussed the proposal with the parliamentary draftsman, who confirmed that the expressions have the same meaning. In the context of liquor licensing the existing wording has greater clarity as to its meaning and is the form of wording normally used.

I withdraw my amendment.

I agree with the Deputy. I do not see the difference between the two formulae.

Amendment, by leave, withdrawn.
Section 53 agreed to.
Sections 54 to 57, inclusive, agreed to.
SECTION 58.

Amendments Nos. 64 and 65 are related and may be discussed together.

I move amendment No. 64:

In page 102, subsection (1), between lines 27 and 28, to insert the following:

"(a) in subsection (7) by inserting “For the avoidance of doubt, the business of hiring vehicles does not include and shall be deemed never to have included the hiring of vehicles that are a supply of the kind specified in paragraph (i)(e) of the First Schedule of the Value-Added Tax Act 1972, in respect of vehicles supplied pursuant to an agreement in accordance with section 3(1)(b) of that Act.” after “limitations.”.”.

The purpose of this amendment is to amend section 134(7) of the Finance Act 1992 to confirm that VRT repayment provisions set out in that subsection do not apply, and never applied, to the particular circumstances where financial service houses entered into hire-purchase agreements with persons purchasing a vehicle with a view to owning it after a fixed term.

The repayment provisions do not apply because VAT was not charged to the hire-purchase firm in the first instance. It is a condition of section 134(7) that to be eligible for repayment of VRT under the section, a payment must already have been entitled to VAT deductibility of the vehicle in question.

The argument has been made that this was a concession designed to promote the tourism sector and is now being removed with very little notice. There is no alternative to make car rental competitive as part of a tourism product. There is considerable feeling in the sector that the rug is being pulled out from under it; it is not a universal view but I would like to hear the Minister's response to that concern.

It is being phased out over three years to address the concerns raised by the Deputy. There was a danger of abuse with the existing arrangement and that is why I tabled the amendment. To take concerns about the suddenness of the change into account it will be introduced over a three-year period.

What was the abuse we are trying to root out? It was presented to me as a straightforward promotion and an attempt to keep costs down.

I shall take Deputy Bruton through its history. The Finance Act 1993 introduced a VRT repayment system for the short-term car hire sector, where cars are hired on contracts for 35 days or fewer. The purpose of the scheme was to address shortages in the supply of cars for hire in the tourism industry at the time. The effect of the repayment scheme is that a car is effectively free of VRT for the period of time it remains in the car hire fleet.

Arising from revenue audits, particularly in 2007 and 2008, there was strong evidence that the sector manipulated contracts to ensure that cars used for the provision of services not originally envisaged under the scheme nonetheless benefitted from the VRT relief available.

In addition, operators have applied the scheme to cars for use outside the tourism area, including enabling corporate clients to provide a pool of cars to visiting executives or their own staff. It also allows for VRT-free driving by Irish citizens who hire, rather than own, a car, while their neighbours who own cars must pay VRT. We decided to tighten it up for those reasons.

Perhaps given time constraints the Minister might circulate his notes on the matter so we can consider its merits before Report Stage.

Amendment agreed to.

I move amendment No. 65:

In page 102, line 42, to delete "33" and substitute "20".

I will withdraw amendment No. 65 pending consideration on Report Stage.

Amendment, by leave, withdrawn.
Amendment No. 66 not moved.
Section 58, as amended, agreed to.
Sections 59 to 63, inclusive, agreed to.

As it is now 6 p.m. I am required to put the following question in accordance with an Order of the Dáil of 4 December: "That the amendments set down by the Minister for Finance to Parts 2 and 3 of the Bill and not disposed of, are hereby made to the Bill and in respect of each of the sections not disposed of in the said Part, other than section 69, that the section or, as appropriate, the section, as amended, is hereby agreed to."

Question put and declared carried.
Sitting suspended at 6 p.m. and resumed at 6.30 p.m.
Section 72 agreed to.

Amendment No. 74 is ruled out of order as it involves a potential charge on the people.

Amendment No. 74 not moved.

Amendments Nos. 75 and 76 are ruled out of order as they are declaratory in nature.

Amendments Nos. 75 and 76 not moved.
SECTION 73.

I move amendment No. 77:

In page 111, to delete lines 26 to 28 and substitute the following:

"(c) in paragraph (f) (which inserts section 17A into the Principal Act)—

(i) in paragraph (d) of the said section 17A—

(I) by substituting "electronic return or a paper return" for "electronic return", and

(II) by deleting the word "otherwise",

and

(ii) in paragraph (f)(i) of the said section 17A—

(I) by substituting "interest and penalty" for "penalty", and

(II) by substituting "electronic return or paper return" for "electronic return".".

Before the Minister discusses the amendment, I wish to raise a question about the social levy fund. That was abolished by the previous Minister, Deputy Brian Cowen. It raised approximately €100 million per year through a bank levy. We have not received any detailed accounts of what the social fund has achieved in substitution for the levy.

The Deputy can speak about that when we are discussing the section.

My amendments were on section 72.

They were ruled out of order.

I can speak on the section. You did not propose the question on section 72.

I did. There are no amendments under section 72.

Are we now on section 73?

Yes, and your amendments have been ruled out of order. However, you can speak on them when we are discussing the section. In the meantime the Minister should discuss amendment No. 77.

This amendment amends section 73 of the Bill which makes necessary amendments to the stamp duty code in anticipation of the introduction of e-stamping in the second half of next year. In recent years, the Revenue Commissioners have developed the Revenue on-line service, ROS, to facilitate the submission of returns and payment of taxes on-line. The Revenue Commissioners are currently engaged in a major strategic development that will see the introduction of a self-service e-stamping system. This system will provide a 24-hour, seven day per week, self-service on-line process where the user can file, pay and receive an instant stamp for a deed without Revenue requiring to see the deed in up to 90% of all cases.

E-stamping will have many benefits for Revenue customers. It will reduce the time taken to stamp an instrument and avoid delays associated with bringing instruments to a particular location to have them stamped. Important instruments will no longer have to be sent by post or conveyed around the country for stamping purposes. The e-stamping facility will ensure greater transparency and integrity of the duty. Apart from the enhanced service to customers, the Revenue Commissioners will be able to redeploy staff to other functions, including better risk assessment and case management to ensure the accuracy of stamp duty payments. The on-line facility will be more cost-effective, bringing savings to both the customer and the Revenue Commissioners. It will ensure parallel development with other Government initiatives such as those at the Property Registration Authority and the advancement of e-conveyancing.

In the new system it is envisaged that authorised users will submit information electronically which will permit the calculation by the system of stamp duty payable. Once the stamp duty due has been paid electronically, the system will issue a stamp certificate electronically to the user confirming payment.

Section 111 of the Finance Act 2008 gave the Revenue Commissioners the power to make regulations concerning the implementation and operation of the e-stamping system. Draft regulations have now been prepared and are currently the subject of an in-depth consultation with interested parties. The changes being made by section 73 of the Bill are further technical, definition and other necessary amendments to the stamp duty code. The changes made by this amendment are similar technical changes required in advance of the implementation of the e-stamping system.

When the system goes into operation to what extent will there be a paper trail or an audit of the underlying transactions? One of the difficulties with the banking system has been that banks, in effect, abolished inspection of mortgage title deeds and so forth. While in a certain sense that abolition made business much easier, it was one of the reasons that in terms of financial derivative products there was very little sight of the inherent property underlying the bundles of transactions. What type of audit or other checks will there be to verify the transactions and the reality and valuation of the transactions?

Second, what types of transactions will this apply to initially within the stamp duties? Is this meant primarily to apply to stocks and shares or will it also apply to property transactions? Members will recall the difficulties with a number of solicitors over the past year whose practices have effectively collapsed and where there were serious questions over their exercise of multiple mortgages in respect of properties. Part of the fault in that lies in the abolition of the visual sight of documents and visual records of documents. It was all based on trust and because one link in the chain was done, the other links could be done as well.

The Deputy has raised a number of issues. When the document is presented for stamping under the e-stamping system, the computer records the instruments. Stamp duty is a duty on instruments, not transactions. The computer will record the instruments which have been subjected to e-stamping. On this basis the Revenue Commissioners will be empowered and in a position to do an audit trail of the instruments in question if they deem it necessary. With regard to its application, it applies to all stampable instruments, save those that are admitted for adjudication.

Will it start with all duty-liable instruments or will it start with one category of duty-liable instruments?

It will enter into force for all instruments at the same time.

What about the examples I mentioned? A number of those solicitors defaulted for very large amounts of money. How will the Revenue Commissioners prevent themselves being at risk from canny operators who always find a way around systems? Second, the Minister said last night he would address the issue of developers who avoided section 110 and had licences and so forth. How will the Revenue Commissioners, from an audit point of view, provide for a continuation of an audit trail to prevent distortions? The number of audits carried out by the Revenue Commissioners is very small. The process of stamping has been an important area for legal practitioners and for the verification of the trail of a transaction.

With regard to the audit trail, Revenue will receive information from the Property Registration Authority that will enable officials to engage in automatic matching. Clearly, they can conduct their own risk analysis and also study the patterns of submissions made by solicitors. One of the difficulties in certain cases referred to by the Deputy was that the underlying instruments were not executed. That is not a function of the stamp duty branch of Revenue. Stamp duty is not the same as other forms of taxation in that the penalty for not stamping an instrument is the non-production of the instrument in court.

That did not inhibit a number of solicitors in the recent examples.

No, but those examples raise issues for the land registration system and, ultimately, the disciplinary system operated by the Law Society. One cannot register an instrument without stamping. In some of the cases referred to by the Deputy no instruments were brought into existence, let alone presented to the Land Registry or the Registry of Deeds.

People who thought they were buying and selling property believed there were instruments. I do not disagree in principle with this development but there have been a number of examples of paperless trails both in Ireland and the United States which are so complicated that the assurances, when received by e-mail, are not the same as verifying the transaction, particularly in regard to purchasers and vendors as opposed to legal professionals.

I agree with the Deputy but it is not the primary responsibility of the stamp duty branch of Revenue to prevent paperless transactions. The function of a stamp duty is to apply a duty to an instrument. It is a duty on instruments, not transactions. If money was lent or a consideration advanced, for example, for the value of property in respect of which there is no instrument, it raises major questions about the nature of the inquiry carried out by the financial institution before it made the advance.

We are all living to regret that that happened.

Amendment agreed to.
Question proposed: "That section 73, as amended, stand part of the Bill."

I have two questions on the section. I refer to the application of stamp duty to shares. Will the Minister or Revenue, perhaps by way of a note, explain to what degree are other financial transactions which do not involve shares subject to stamp duty? Yesterday I raised the issue of contracts for difference but many other derivative products are not captured by Revenue. The Dublin Stock Exchange is dealing with exotic financial products because so few Irish stocks are listed. It is my understanding that very few of these are captured by Revenue in any form.

The Revenue Commissioners will prepare a note for the Deputy on these matters.

Question put and agreed to.
NEW SECTION.

I move amendment No. 78:

In page 111, before section 74, to insert the following new section:

74.—(1) Section 5 of the Principal Act is amended in subsection (3)—

(a) by substituting the following for paragraph (a):

"(a) (i) is issued during the period the agreement is in force, where the agreement is one that relates to the issue of such instrument, or

(ii) is processed during the period the agreement is in force, where the agreement is one that relates to the processing of such instrument,

and",

(b) by substituting “were issued or processed, as the case may be,” for “were issued”, and

(c) by inserting the following after subsection (3):

"(3A) For the purposes of subsection (3) 'processed', in relation to an instrument that is a bill of exchange, means a bill of exchange that has been presented for payment and has been paid.".

(2) This section applies as respects agreements (being agreements to which section 5 of the Principal Act relates) entered into on or after 1 January 2009.".

This section amends section 5 of the Stamp Duties Consolidation Act 1999 which allows the Revenue Commissioners to enter into composition agreements with financial institutions enabling stamp duty to be paid at intervals by way of delivery of an account to them. An amendment is being made to allow the Revenue Commissioners enter into a composition agreement with a financial institution where the institution pays the stamp duty either on the basis of cheques issued by the institution to customers or on the basis of cheques being presented for payment and paid by such institution. The change applies to composition agreements entered into on or after 1 January 2009. Currently, a cheque is stamped but, under this arrangement, it may be stamped on presentation at the clearing house rather than on issue by the bank. From an administrative point of view, this arrangement is more convenient.

Amendment agreed to.
Section 74 agreed to.
SECTION 75.

Amendment No. 79 is deemed to be out of order as it involves a potential charge on Revenue.

Amendment No. 79 not moved.
Question proposed: "That section 75 stand part of the Bill."

Does the section reinstate the charge in respect of contracts where people lease from the landowner to avoid stamp duty? Is the Minister replacing that scheme where deals were done which successfully avoided stamp duty? A similar amendment was passed in previous legislation but never initiated through a commencement order. Am I correct that the Minister is setting out the same provisions in this section? The issue arose as to why the order never applied. This was an anti-evasion mechanism which many felt was sensible, but it was discovered that the Minister for Finance had not implemented it.

This was the subject of a detailed report by Goodbodys which found that the State had lost €260 million in 2006 through the use of this avoidance device. I raised this issue over a two-year period. The most notorious application of the device involved the site of the Irish Glass Bottle Company where it was reliably believed the parties to the transaction had avoided stamp duty through various devices. In that case, given values at the time, the transaction was liable for approximately €42 million in stamp duty, a sizeable loss to the Exchequer.

Will the Minister explain to what extent the introduction of this provision is ring-fenced? What are the exemptions for PPPs and incentive schemes for capital allowances? Is the Minister providing that private developers involved in a PPP can avoid this mechanism? I am confused. The arrangement was to involve a long lease of the public hospital land with rent being paid but I am not sure if it was intended to have a stamp duty effect. What will happen with the other major public private partnership project, the Thornton Hall prison development, which apparently will still go ahead and in respect of which the State made very large payments for the land? There is a selected developer — McNamara — as part of a consortium of developers. What impact will this section have on such developments? Is it intended that the State as landowner will lease the land to the provider-developer of the prison? The developer had the good fortune to buy land leading to the site which was then sold at a favourable price to the State. The landowners were given watertight guarantees that there would be development on the land because of the provision of services. This is rather like the Irish Glass Bottle site, with a lot of potential for stamp duty avoidance.

It is correct that under subsection (3) a charge under subsection (2) shall not apply to transactions involving public partnership arrangements and incentive schemes for capital allowance purposes in respect of nursing homes, convalescent homes, private hospitals, mental health centres, palliative care units, the mid-Shannon corridor tourism scheme and child care facilities. The key point about the lands referred to by the Deputy is that they are within the ownership of the State. I do not have before me the detailed information on what the precise public private partnership might be but what I can say is that subsection (3) does not apply because the substantial charge to stamp duty would have arisen on the conveyance of the relevant lands to the State.

The suggestion is that if it is the subject of a public private partnership, it may be exempt. The Minister designated a road leading to the prison shortly before the last general election and the landowner, together with two others, bought sizeable parcels of land which are appropriate for development. I expect there will be development in due course.

The PPP project is being built on lands bought by the State.

No. Because the adjacent land is now to be used as a road——

The Deputy is now moving to the access road to the site.

I recall the Minister arranged this before the general election.

The then Minister for Justice, Equality and Law Reform indicated that an arrangement would be made and such an arrangement was approved by the Government. However, I cannot comment on a particular transaction and do not think it would be appropriate to do so in the context of the Finance Bill. The land in question which is being used for a PPP project is only used as the road. If the Deputy is talking about other lands, they are not part of the PPP project.

I ask the Minister to comment on other PPPs involving private hospitals on public land where the arrangement is as yet unclear. Is there an avoidance mechanism for PPPs and developments subject to the various schemes of tax avoidance which the Minister mentioned?

I will deal first with the specific issue raised by the Deputy of the proposed prison at Thornton Hall. It is clear that this section and particular exemption of PPP projects has no application to it.

On the wider question of the nature of the provision, it is my intention to commence the new reinstated section in the near future. On the reason there is a new section, section 75 repeals the 2007 Act provision which was never commenced and reinstates it with the same charging provisions but subject to certain exemptions being made, with some minor technical amendments. I have listed the exempted arrangements.

Deputy Burton will be aware that my predecessor commissioned a report on the potential effects of commencing the original provisions. The report in January this year recommended that, on balance, the section should not be commenced at that time. In particular, it indicated that section 110 would have led to a rise in land prices with a knock-on increase in house prices, especially for first-time buyers, and possibly risked exacerbating the downturn in the property market. In addition, it highlighted that section 110 would have raised the cost to the State of PPP projects because of increased land prices. This is the reason the section has been drafted in the light of the expert report which my predecessor commissioned.

I suggest this is ill-advised. As we know, speculative land prices have collapsed; they were always going to do so. The Goodbody report also contained the information that in 2006 the cost to the Exchequer of tax foregone was €260 million. If the Minister could now find a spare €260 million this year, he would be a much happier man. The report reflected in its final recommendations the special pleading by the construction sector which was of the view that there would never be a downturn in the industry or that it could at least be avoided. As it happened, it was wrong. Having reduced the top rate of stamp duty on commercial transactions from 9% to 7% which was a sensible decision given the downturn in the property market, why is it necessary now to offer a further exemption to particular transactions when there has been a reduction and when, as the Minister said, the State needs the money? It would be much better to get rid of this extraordinarily complex structure for tax avoidance which is only available to a select few and is largely inappropriate.

I will reflect on what the Deputy has said. In the current frozen state of the property market, this is a matter on which I could reflect for the next year. It is a misnomer to speak of stamp duty evasion because stamp duty is only applied to instruments, not transactions. It has always been the case that many transactions are designed deliberately to avoid the payment of stamp duty. That rests in a different category of avoidance than, for example, where there is a clear line between avoidance and evasion. In the case of stamp duty the policy of successive Governments has been to ensure instruments are identified. Many figures have been thrown out for the sums that might have arisen from these arrangements. It is clear that these sums are not available for payment. However, the Deputy raises a valid point. The State looks at a public private partnership in terms of the achievement of value for money. If the contract involves the provision of land by the PPP contractor, anything that keeps down the value of that land is to be welcomed. On the other hand, in a market where land values have become lower, there may be a case for examining the need and necessity for the exemptions outlined. As the Deputy will appreciate, the expert report commissioned on the matter recommended this but I will review the matter in the months ahead.

Is the Minister saying the exemption for PPPs which he proposes which allows them to continue with this contract arrangement makes land cheaper for the State? This will reduce the stamp duty tax take for him. It is not exactly a gain to the State. The Minister appears to be saying that the State is interested in best value for money. If one makes a project that is otherwise bad look good by saying that it will not pay taxes that everyone else would pay, that does not give one a warm glow that these projects are being assessed such that the benefits exceed the costs. The Minister is suggesting that we change the rules and exempt companies involved in these sorts of things from certain taxes, perhaps even exempting them from paying tax on anything, and lo and behold these are wonderfully successful projects. Is there not an element of circular argument going on here?

I do not want to be immortalised in the annals of this House as stating that stamp duty is not, in fact, a tax because there are many who would have paid it down the years who would have a profoundly different view. However, I could say that it has never been viewed as a tax by those who implement the revenue system because, of course, arrangements can be put in place to avoid its payment which are not necessarily illegal. However, I will review the point being raised because in a declining land market there is a case for reviewing all our rules to ensure that the practices that led to where we have arrived at are not repeated.

We saw shadow pricing in valuation. However, the Minister is creating a new kind of shadow.

I am prepared to review the matter.

There is a serious point. The very argument that in some way this makes a public project better value by simply taking money out of my other pocket is slightly circular.

I will review it. The context of a declining market in land prices is a good one in which to insert provisions to ensure we will have no repetition of what we have gone through.

Question put and agreed to.
Sections 76 to 81, inclusive, agreed to.
SECTION 82.

Amendments Nos. 80 and 81 are related and will be discussed together.

I move amendment No. 80:

In page 119, subsection (1), line 6, after "subsection (1)" to insert the following:

"and in the definition of "farmer" in that subsection".

Section 82 of the Bill amends section 89 of the Capital Acquisitions Tax Consolidation Act 2003, which grants relief at 90% in respect of the market value of agricultural property situated in the State, where such property is comprised in a gift or an inheritance. For the purposes of the section, agricultural property includes agricultural land situated in the State. In order to qualify for relief under section 89, at least 80% of an individual's assets, after taking the gift or inheritance into account, must consist of agricultural property situated in the State.

The European Court of Justice, in a decision delivered in January of this year, held that a provision in tax law that confines relief to land in one member state is a restriction on the free movement of capital and is, therefore, contrary to European Union law. The amendment relating to the definition of "farmer" in section 89(1) of the Act ensures that agricultural land situated in a member state of the European Union will qualify as agricultural property for the purposes of the 80% "farmer" test. This amendment is required because, while section 82 of the Bill ensures that 90% relief will apply to such assets, those assets could not qualify for relief if the property comprised in a gift or an inheritance was situated outside the State. This amendment corrects that anomaly.

The second amendment is a technical amendment.

Amendment agreed to.

I move amendment No. 81:

In page 119, subsection (1), line 7, before "a Member State", to insert "in".

Amendment agreed to.
Section 82, as amended, agreed to.
SECTION 83.
Question proposed: "That section 83 stand part of the Bill."

Why is there an increase from 20% to 22%?

As the levy was being introduced at 1% and 2%, and now 3%, I took the view that it was appropriate if we had a levy introduced on earned income that those elements of the tax code relating to gifts, inheritance and unearned income should also be captured. Hence there was an increase in the rate of capital acquisitions tax fixed at that percentage and likewise on unearned income an increase in the rate of capital gains tax and deposit interest retention tax.

Why did the Minister set deposit interest retention tax at a higher point? He has levied that at 23% and arguably much of the interest is not a real gain in some cases. When interest rates go very low, as they will, it will be a very small reward to people depending on interest income as a source.

The reward to me will also be much lower.

It will. However, the Minister has chosen 23% for DIRT. He is arguing that consistency across the board required 22%, but he has applied 23% to DIRT.

The additional 1% in the context of interest was reasonable given the great increase in the amount of depositing in recent months.

The logic of the Minister's earlier argument in response to Deputy Barrett's question seems to be crumbling.

It is still unearned income, which is the key point.

The Minister was arguing that he had decided that this remarkable balance needed to be struck with everyone being hit for 22%. Now the DIRT people appear to have——

There will be an additional 1% on deposit interest retention tax to encourage people to spend their money.

Is it related to the levy? Is it an attempt to capture the 1% levy? Does the 1% levy not apply to capital gains?

No, it does not because capital gains are not income in our system.

Is that the source of this?

Theoretically one could deem them to be income, but they are not deemed as such.

I am giving the Minister an answer to my own question.

The capital gains, acquisitions and interest were charged at a level that was found reasonable compared with work, because only work generates the income levy.

The one thing that has been proven in the past was that a reduction in capital taxes brought more revenue to the State because people became more honest and were prepared to pay a reasonable rate. If the Minister starts to increase the rate, people will start to look for loopholes and all sorts of carry on.

We spoke earlier about a betting tax. I remember betting taxes being at 20%. At a time of economic difficulties in the early 1980s we reduced it to 10% to the astonishment of everybody. However, as the Minister's officials will tell him after a year we were actually taking in more money.

Perhaps we can get back on course. We should move on to section 84.

There is a simple distinction. The DIRT is on the income side and the CGT and the CAT are on the capital side.

That is even better.

That will be of great comfort to those who must pay it. Now they have a clear understanding as to why they are paying more tax.

I now understand the point Deputy Burton often makes in the Dáil about the superiority of the accountancy profession, when compared to the legal profession.

I fully agree with Deputy Burton.

I am not sure economists are considered in the Deputy's pantheon. The committee will be glad to know that approximately two thirds of EU finance ministers are accountants. Approximately one third of them are lawyers and there are one or two economists.

Are there any ordinary Joes?

I suggest that we should move on section 84.

I would like to make a small point on section 83 before we move on.

I am making a special exception for the Deputy.

The Chairman is most gracious. Capital gains tax is being increased by 2%, in effect. Capital acquisitions tax is also being increased by 2%. In certain cases, when someone is giving a gift, he or she will have to pay an extra 4% — an extra 2% in capital gains tax and an extra 2% in capital acquisitions tax. It will not always apply. It will encourage people——

There is always a credit in such cases.

A credit arrangement is in place for transactions that make one liable to having to pay both taxes.

Is it in place in all cases?

Yes, as I understand it. Perhaps the Deputy can postulate a circumstance in which the arrangement would not be applicable.

No. I stand corrected.

Question put and agreed to.
Section 84 agreed to.
NEW SECTIONS.

I move amendment No. 82:

In page 119, before section 85, to insert the following new section:

"85.---The annual charge for the bank guarantee shall be brought within the scope of published exchequer accounts and budget forecasts and shall be earmarked as a contingency fund for 2010.".

The purpose of the amendment is to enhance the powers of the Revenue Commissioners in respect of landlords. It will ensure that the Private Residential Tenancies Board can make detailed information on landlords available to the Revenue Commissioners, thereby ensuring that landlords pay an appropriate level of tax. The Minister has put in place some extra measures to give the Revenue Commissioners more access to the accounts of landlords, in some instances. It remains the case that community welfare officers pay rent supplement to individuals, who then pass it on to landlords. While each landlord is under a legal obligation to register with the Private Residential Tenancies Board, a link between the board and a landlord may never be formed. It is reliably believed that a significant number of landlords do not pay tax on their rental income. When landlords let properties that have been the subject of tax breaks, they are anxious to register for tax purposes. However, it is believed that many landlords do not pay tax on properties to which construction tax breaks do not apply. Given that the State pays hundreds of millions of euro in rent supplement, it is appropriate that the State should get a fair return, in terms of tax, from those rents. Just as people who work have to pay tax on modest incomes, it is appropriate that people who let premises should have to pay the appropriate level of tax.

The amendment the Deputy has proposed, amendment No. 83, repeats the existing provisions that allow the Revenue Commissioners to access to the database of the Private Residential Tenancies Board. I refer to the provisions of section 910 of the Taxes Consolidation Act 1997. I agree with the Deputy's general point, which is well made. The wording of the amendment is not sufficient for this purpose, as it would not allow for greater levels of access by the Revenue Commissioners to the database of the Private Residential Tenancies Board than currently exists. It would not provide for automatic access by the Revenue Commissioners to the database, for example, or automatic reporting by the Private Residential Tenancies Board of new registrations to the Revenue Commissioners. While that is not captured by existing practice, it is not captured by the Deputy's well-intentioned amendment either.

The chairman of the Revenue Commissioners asked the Department of Finance to consider including the necessary legal provisions in the Finance (No. 2) Bill 2008 to provide for full and automatic access to the register of the Private Residential Tenancies Board. Following discussions between the Department of Finance, the Revenue Commissioners and the board, it was decided that access to the register will be provided for in the Housing (Miscellaneous Provisions) Bill 2008, which is to be introduced by my colleague, the Minister for the Environment, Heritage and Local Government. I understand that significant progress has been made in that regard. A draft text of the relevant provisions in that Bill has been circulated. There is ongoing contact between the Revenue Commissioners, the Department of Finance, the Department of the Environment, Heritage and Local Government and the Private Residential Tenancies Board in this regard. This matter will be addressed. If the Deputy had formulated amendment No. 83 in the correct way, I would have been tempted to accept it now.

If the Minister offers advice on how it might be more correctly formulated on Report Stage, I will be happy to accept it. We need to focus on the first part of the chain. When community welfare officers make rent supplement payments to tenants — those who take out private tenancies — it is not necessary for an exchange of information to take place. Some time ago, I raised with the Minister's predecessor a case in which rent was being paid to a landlord who was not from Ireland. The landlord had been working and living here — in the constituency the Minister and I share — but had returned to Pakistan or the United States. In that instance, there was no chain or connection. The health board stopped making payments at a certain stage. I presume the landlord in question was well off because he or she did not notice that the payments had stopped.

It depends on his or her occupation.

The tenant, who had stayed in the rented property, ended up with a significant liability through no fault of his or her own. The tenant did not know that the rent was not being paid. There was no link between the health board that was paying the rent and the foreign-domiciled landlord who had lived in Ireland and owned a considerable amount of property here. It is obvious that the tenancy was not registered for tax purposes because all parties seemed surprised when the situation arose. My understanding of tax law is that if one pays rent to a foreign landlord, one is obliged to deduct the rent. Therefore, the tenant and the health board may have been technically at fault for not deducting the rent. I know it sounds convoluted, but it is a true case. I can pass on the details of it to the Minister.

I believe it. This will be addressed in the parallel legislation I mentioned. The Bill in question is on Second Stage in the Seanad. It is envisaged that it will be considered on Committee Stage by the Dáil in early February. It is proposed to table the necessary amendment at that stage. The provision to be introduced is the result of an agreement between the Department of Finance, the Revenue Commissioners, the Private Residential Tenancies Board and the Department of the Environment, Heritage and Local Government. Having procured the agreement of all these bodies, I am reluctant to entertain an amendment to the Finance (No. 2) Bill. There is a moral certainty of enactment in the other way.

I accept what the Minister says.

I will comment on the merits of the issue in question. At the heart of the issue is the fact that the community welfare officers employed by the Department of Social and Family Affairs have always operated on the basis that the relationship between landlords and tenants is an entirely private arrangement, external to themselves.

The gap is considerable because levels of registration with the Private Residential Tenancies Board are modest. Incidentally, as the Minister will probably be aware, the board is completely overwhelmed. My experience of landlords is that they are anxious to be fully registered for tax purposes when in receipt of tax benefits arising from properties they own which are subject to tax breaks. Many landlords, however, are not registered for tax purposes. I do not know if departmental officials have done a scoping survey to examine the extent to which landlords are non-compliant for tax purposes.

The obvious solution is to require landlords of property rented to a person in receipt of rent supplement to be cleared for tax purposes and to make the possession of such a certificate a necessary prerequisite to the letting. I will arrange for my officials to examine whether it is possible to insist on a tax clearance certificate where a property is subject to rent supplement. That seems to be the obvious solution to these difficulties.

I thank the Minister for his undertaking, as it is important that landlords are brought into the tax net.

On the annual charge for the bank guarantee, the Minister has not been clear about how the guarantee will be treated in the national accounts. I understand the charge is being levied over ten years at a rate of——

To what section are we speaking?

I have returned to our earlier discussion. The charge is levied at €100 million per annum for ten years and is payable in two instalments of €500 million for each of the years of the bank guarantee. Will this funding be included in the Exchequer accounts or will the Minister hold it as a contingency sum which can be rolled out when a general election approaches? I do not accuse the Minister of ever thinking in these terms.

Paragraph 21 of the credit institutions (financial support) scheme 2008 provides that the charges collected from covered institutions under the scheme are credited to a designated account maintained by the Central Bank as a reserve for any payments to be made under the scheme. The same paragraph provides that any amount remaining in the account at the expiry of the scheme on 30 September 2010 will be paid to the Exchequer, at which stage it would be available to support general Exchequer expenditure. The scheme has been considered and approved by the Oireachtas.

While I am not certain if they are accurate, I read in newspaper reports that the Government was considering extending the bank guarantee beyond 30 September 2010 to try to attract long-term rather than short-term deposits. The criticism is made that the maximum period of 21 months left does not provide a long-term base for deposits. I understand, for example, that if five-year loans are secured, they will be regarded as second tier capital. Given that such options are under consideration, will the legislation be revisited? Will the charge which is the subject of this section rise and fall with the extent of new commitments which will carry a State guarantee? Will new sums need to be paid and, if so, how will they be calculated? I ask the Minister to comment on this issue, as it is becoming a focus of attention. Other countries have opted for guarantees which, while limited to a two-year period, may be used for loans extending beyond the 21 months left before the guarantee expires. Will the Minister comment?

There is a provision for variation of the charge under the scheme. The Deputy will appreciate, however, that I do not have the particular details of the scheme in that regard before me. On the more general issue of the duration of the scheme, there are no immediate proposals for change before me. Naturally, Ireland introduced one of the first schemes of this type in the world which we formulated in response to a particular set of circumstances. The scheme was wide in the scope of the guarantee but for that reason we prudently made a clear cut-off point for the termination of the guarantee. The extension of guarantees, capitalisation of banks and other support measures have become commonplace throughout the banking sector in other European countries. In that context, some countries have provided for guarantee arrangements for some forms of lending for periods in excess of the duration of our total guarantee. In that context, we need to determine whether there are particular forms of lending which would benefit from the guarantee through a more extensive duration. However, I have no current or immediate proposals in that regard. My Department is studying the position.

When the Minister refers to particular forms of lending, does he mean small business lending?

I mean small business lending or the more obvious one of house purchase. While the one that has arisen is in connection with house purchase, it could arise in connection with funding for small and medium-sized enterprises.

Nationalisation of a particular bank would involve the State guaranteeing the money. Would the Government not get into trouble in the sense that such a step would be contrary to EU regulations if other banks were not nationalised?

I am aware that we are, with the leave of the Chairman, trespassing. The problem to which the Deputy refers arose in the United Kingdom in the case of Northern Rock. This was one of the points we made in our submission to the European Commission when the original guarantee was formulated. As the Deputy will be aware, the United Kingdom authorities made certain informal complaints about the nature of our guarantee. We responded by pointing out that the nationalisation of a bank in the United Kingdom was, in itself, the most total form of guarantee that could be given, especially by a state which had a currency of its own.

I recall that the Minister stated several times that he had considered the decision to allow Lehman Brothers go under to be the greatest of mistakes.

He indicated strongly that he did not favour allowing banks to collapse.

I do not favour allowing banks to collapse. Bank failure is very dangerous for an economy. This has been the view of most European governments throughout the crisis. If we recall the most recent serious crisis which originated in the monetary and financial system, namely, the one triggered by the Wall Street collapse of 1929, the US authorities subsequently permitted a number of bank collapses to take place. This led to the great depression and an unemployment rate of 25%. If a state does not take an interventionist attitude in the context of bank failure, it has far-reaching consequences.

The banks and Central Bank indicate that they cannot raise money beyond the two-year period of the guarantee scheme.

We have strayed from the content of the Bill.

This issue is relevant to my amendment. The banks are saying — this appears to have been confirmed by the Central Bank — that banks covered by the guarantee cannot raise funding for any period beyond the date on which the guarantee expires, namely, 21 months from now. It means it is relatively short-term funding and is much more expensive. They still have the problem with——

Eighteen-month funding is long-term funding in the current international economic climate. It is, however, a valid issue that arises in the context of the guarantee and it is being studied by my Department.

What expenditure is permissible from the Central Bank fund that receives the revenue from the banks?

None. The sum is held in the Central Bank under the scheme. Any amount remaining in the account at the expiry of the scheme will be paid to the Exchequer, at which stage it will be available to support general expenditure.

Will it all be there?

It will remain in the Central Bank.

Until just before the next general election.

If a bank experienced difficulties, would the Central Bank request the Minister to dip into that fund, contrary to what was originally in the legislation in that there was no cross-guarantee?

There is no cross-guarantee and I do not want to anticipate difficulties at this stage.

Amendment put and declared lost.
Amendment No. 83 not moved.

I move amendment No. 84:

In page 119, before section 85, to insert the following new section:

85.—Section 847A of the Taxes Consolidation Act 1997 (as inserted by Finance Act 2002 s.41) is amended—

(i) in subsection (1) by amending the definition of "relevant donation" by inserting

"(in respect of capital projects) or subsection (5A) (in respect of non-capital projects)" after the reference to "subsection (5)";

(ii) by inserting a new subsection after subsection (5):

"(5A) A donation shall satisfy the requirements of this subsection if—

(a) it is made to the approved sports body for the sole purpose of funding non-capital expenditure which is directed at the advancement of sport,

(b) it is or will be applied by the approved sports body for that purpose,

(c) apart from this section, it is neither deductible in computing for the purposes of tax the profits or gains of a trade or profession nor an expense of management deductible in computing the total profits of a company,

(d) it is not a relevant donation to which section 848A applies,

(e) it is not subject to a condition as to repayment,

(f) neither the donor nor any person connected with the donor receives, either directly or indirectly, a benefit in consequence of making the donation, including, in particular, a right to membership of the approved sports body or a right to use the facilities of that body,

(g) it is not conditional on or associated with, or part of an arrangement involving, the acquisition of property by the approved sports body, otherwise than by way of gift, from the donor or a person connected with the donor, and

(h) in the case of a donation made by an individual, the individual—

(i) is resident in the State for the relevant year of assessment,

(ii) has (except in the case of an individual referred to in subsection (9)) given an appropriate certificate in relation to the donation to the approved sports body,

and

(iii) has (except in the case of an individual referred to in subsection (9)) paid the tax referred to in such appropriate certificate and is not entitled to claim a repayment of that tax or any part of that tax."".

This arose out of the Charities Bill. The amendment proposes that donations made in respect of non-capital projects can avail of the same tax relief as those paid for capital projects under the same forms of restriction. This was a proposal put forward by sports bodies. They feel it would allow them to develop their activities and expand participation in valuable sports activities. It deserves recognition under these donation arrangements.

I have a recollection that back in the 1980s there was a similar proposal which had been implemented. That proposal was designed to assist sporting clubs which were dealing with youth activities.

Those were covenants.

Yes, there was some provision because I was instrumental in bringing it about. It was designed to help sports clubs raise money for youth activities. There was a limit to donations but it was still an exceptionally good idea. Will the Minister consider it again in this amendment?

There was a previous provision but certain abuses were associated with it. It was replaced by the current provision.

This amendment proposes to change section 847A of the Taxes Consolidation Act 1997 to extend the scheme of tax relief for donations to approved sports bodies to include donations in respect of the non-capital projects of such bodies. While the amendment does not define the term non-capital projects, I assume, from the Committee Stage debate on a similar amendment to the Charities Bill in the Seanad last week, that it is intended to include the hiring of sports coaches, the day-to-day running and operational costs of such bodies.

Members of the committee will be aware that section 847A was introduced by the Finance Act 2002 and is a scheme of tax relief for donations to approved sports bodies, specifically for the funding of capital projects. It was introduced in the wake of the earlier scheme of relief for donations to charities and other approved bodies introduced in the 2001 Finance Act.

Eligibility for the relief at present hinges on two key criteria. First, the sports body concerned must be an approved sports body. It must be established and exist for the sole purpose of promoting an athletic or amateur game or sport. Its income must be applied solely for the purposes of promoting that game or sport and must be exempt from income or corporation tax under section 235 of the Taxes Consolidation Act 1997.

Second, the donation must be for the purposes of an approved project, that is a project of a capital nature as specified in the legislation and be approved by the Department of Arts, Sports and Tourism in that regard.

The minimum qualifying donation by a single donor in any year to an individual sports body is €250 and relief is given at the taxpayer's marginal tax rate. Where the donor is a PAYE taxpayer the relief is paid by Revenue to the sports body concerned. For a self-employed or corporate donor, the relief is claimed as a deduction from total income or profits. Under the scheme, no project will be approved which is estimated to cost in excess of €40 million.

While it is still early days for this scheme, it is clear that it is having a positive effect across a broad spectrum of sporting bodies and organisations ranging from GAA to cricket and basketball.

Sport is generally acknowledged as having a significant beneficial impact and it is appropriate that we recognise sporting organisations. While recognising that sports bodies do very worthwhile work, we must ensure the relief is used as intended. In that regard, the scheme of relief to sports bodies when introduced was confined to relief for donations in respect of capital projects specifically because of concerns that broadening it out to include donations generally ran the risk of abuse. The concern at that time was not imaginary. It was based on the fact that when an earlier tax relief, as Deputy Barrett pointed out, had been provided for donations in the sports area it was abused and used to pay, for example, membership fees. I have no reason to believe the concerns arising at that time are any less real now.

Even with the current scheme, there have been indications that some clubs were, for example, trying to replace annual subscriptions with donations. It would be extremely difficult to police a broadly based relief such as this to ensure that it was not being abused as before. Neither could we have the safeguard of a certification process as applies with the present scheme of relief for donations to capital projects.

In the current difficult budgetary circumstances, we do not have the flexibility or capacity to increase relief in this area as suggested. For these reasons, I am not prepared to accept this amendment.

The Minister referred to controls. Would he consider setting a limit on the amount that could be used to claim relief? Clubs are finding it costly to keep running. They are talking about €40 million for capital projects. If it could be put at a lower limit and have it certified as audited accounts per year, could a temporary measure introduced?

I will give it consideration but it would need to be specifically tailored to particular items.

I accept that but there is merit in the amendment. It could help those clubs facing high costs. It could be done by limiting the amount that would qualify so that it is not open to widespread abuse.

The term "non-capital" is far too wide.

I will examine a refined version of it

The proposal is well-intentioned but the application of it would be exceedingly difficult, particularly if one considers all of the fund-raising activities that sports clubs carry out on an annual basis. If someone puts a team into a golf classic, for example, these would all be captured under the proposed net. Even people subscribing to a weekly lottery for a local club for a year may spend €500. They would then fall under this tax relief scheme. If we start going down the road of all non-capital expenditure being included, one could argue for extending it to include community groups.

We all know about golf classics for clubs, but such golf classics are not adequate to the meet the costs of many of them. The clubs are running overdrafts and these are threatening their survival. The Minister might be willing to accept that this might be specifically directed to a particular area of revenue.

It would have to be at a much higher threshold, because €250 is too low.

I accept that, but the overall limit could be set at a certain level at which the club would qualify for the tax relief. That would be reasonable and could be practically examined.

I think that a scheme could be designed, but the difficulty could be that the major beneficiaries would be golf clubs. There would be nothing in the scope of this to include junior soccer or GAA teams, unless specific mention was made of the particular sport. People in the Dublin area can pay €1,000 per year to golf clubs as well as substantial joining fees.

This would apply to a GAA club or a soccer club——

I agree with that part of it, but it would have to be ring-fenced. What is a sporting club? A sporting club could be a casino, as the definition of sport is very wide. We would have to specify the organisations in the Bill.

The Deputy is releasing all of her demons simultaneously. Assuming there is a certification process at the Department of Arts, Sport and Tourism, that Department could be subject to judicial review if it did not give every organisation a fair crack of the whip. It might not be possible to exclude some of the bodies that are not on top of the list.

Anybody involved in sporting activities realises that there are grants available for capital projects through lottery funding and so on. The real problem with sports clubs nowadays is that volunteers are spending their time running functions to raise money. People are just getting fed up with it, and the number of them opting out is incredible. It is in the interests of the State that we have volunteerism and that people involve themselves in the running of sport.

The amendment proposed categorically states that the donation must be to an approved sports body, for the sole purpose of funding non-capital expenditure. To satisfy the concerns raised by Deputy Burton, the proposed section 85(ii) states:

Neither the donor nor any person connected with the donor receives, either directly or indirectly, a benefit in consequence of making the donation, including, in particular, a right to membership of the approved sports body or a right to use the facilities of that body,

That rules out any chance of somebody trying to get a golf fee construed as a donation. I am very disappointed to hear that there was an abuse of the system. I was involved in it in 1986 or 1987, when I was Minister of State for sport. I am horrified to think that people would abuse a genuine attempt to look after young people by attracting them into sport. This should be tightened up to such an extent that such abuses could never occur again.

This provision allows people to donate a couple of thousand euro to their local football club or youth club. It is an attractive scheme to encourage those with a few bob to help out their local club. I would agree with Deputy Burton that we do not want people using this scheme to pay their golf subscriptions. That was never the intention, and I am disappointed to hear that this was the case. This is a worthwhile exercise and I ask the Minister to consider it. He could introduce an amendment on Report Stage if he wants to tighten it up.

The Minister said that he would give it consideration. Is the Deputy pressing his amendment?

On Report Stage, I would suggest adding "categories which have been set in regulations by the Minister for Finance". The Minister could then allow for a gradual expansion in accordance with resources and under initiatives that would not be subject to abuse.

The fundamental distinction in tax law between capital and revenue comes into play here. It is much easier to police a capital investment. Capital does not just mean land — it could also mean goalposts, sports equipment and so on. There is such a wide category of assistance that can already be rendered to a sports club under this section. When the concept of a donation for income purposes is introduced into a club, we are immediately exposed to greater hazard in the policing of the operation.

Is the definition of capital as wide as that? Could it include goalposts or jerseys and so on?

Equipment is covered. We are talking about permanent sports equipment, so it does not cover jerseys.

Most of the overheads of a small youth football club are related to transport costs. It must ferry kids to and from various places. The club in which I am involved pays a large rates bill to Dublin City Council. We have to raise money to pay rates to the council for the clubhouse.

Why not make the criteria very strict? That would afford the club the opportunity to avail of the provision, but it would also mean there are controls in place. The Minister might come back to this on Report Stage.

I will think about it, but it could be a substantial drain on the Revenue.

Amendment put and declared lost.
Section 85 agreed to.
SECTION 86.

I move amendment No. 85:

In page 122, line 35, to delete "deliver to the authorised officer" and substitute the following:

"deliver to the appropriate inspector (within the meaning assigned by section 894 (1))".

This section amends section 86 of the Finance Bill as published in order to correct a drafting error. The term "'authorised officer" is to be replaced with the term "appropriate inspector" for the purposes of making it clear where the return required in the section is to be sent. The section requires the delivery of information by a third party who is concerned with the making of a settlement, where the trustees are not resident in the State.

Amendment agreed to.
Section 86, as amended, agreed to.
Sections 87 to 90, inclusive, agreed to.
SECTION 91.

I move amendment No. 86:

In page 124, line 6, after "stated," to insert "such amendment or repeal".

This is a technical amendment. I offer it to the Minister, as advised to me.

I am having difficulty comprehending the reply. The Deputy's amendment suggests that it is the enactments referred to in the Schedule that are to come into effect with the passing of the Act, and not the amendments or the repeals to those enactments. However, I do not accept this as the enactments are already in effect. The section as drafted provides for the enactments as amended or repealed by the Schedule to come into effect after the passing of this Act and not the enactments themselves. In the circumstances, I am not in a position to accept this amendment.

Amendment, by leave, withdrawn.

I move amendment No. 87:

In page 124, between lines 7 and 8, to insert the following subsection:

"(2) Notwithstanding subsection (1), as respects subparagraph (ar) of paragraph 2 of Schedule 5—

(a) clauses (i), (iv), (v) and (vi) of that subparagraph shall apply as respects penalties, as are referred to in paragraphs (a) and (b) of section 1086(2), which are imposed or determined by a court on or after the passing of this Act, and

(b) clauses (ii) and (iii) of that subparagraph shall apply as respects specified sums, as are referred to in paragraphs (c) and (d) of section 1086(2), which the Revenue Commissioners accepted, or undertook to accept, in settlement of a specified liability on or after the passing of this Act.”.

This is a technical amendment.

Amendment agreed to.

It is now after 8 p.m. Does the committee wish to continue until 8.30 p.m.?

It may be possible to complete the Bill.

We want to go and buy our Christmas trees.

Section 91, as amended, agreed to.
Sections 92 to 95, inclusive, agreed to.
Schedules 1 and 2 agreed to.
SCHEDULE 3.

I move amendment No 88:

In page 128, line 41, after "payment," to insert "made".

This is a purely technical amendment concerning an inadvertently omitted word.

Amendment agreed to.
Schedule 3, as amended, agreed to.
SCHEDULE 4.

I move amendment No. 89:

In page 138, line 54, after "then" to insert the following:

"unless otherwise agreed in writing by the Collector General".

This amendment relates to the new section 960K, which is being inserted into Part 42 of the Taxes Consolidation Act 1997 by Schedule 4 to the Bill. It contains measures to streamline and simplify the provisions contained in the various separate tax and duty legislative codes relating to the collection and recovery of taxes and duties, except customs.

The effect of the amendment tabled by Deputy Burton would be that the provisions of section 960K would not apply if the Collector-General agreed in writing that those provisions would not apply. This would allow the Collector-General not to collect tax which has been found by a court to be due and payable. The amendment does not seek to provide for the circumstances in which any such authority should be exercised by the Collector-General.

I cannot accept the Deputy's amendment.

Amendment, by leave, withdrawn.
Schedule 4 agreed to.
SCHEDULE 5.

Amendments Nos. 90, 95, 98 to 101, inclusive, 105, 106, 113, 114, 116, 140, 141 and 151 are related and may be discussed together.

I move amendment No. 90:

In page 153, to delete line 12 and substitute the following:

"(b) the Capital Gains Tax Acts,”.

These are all purely technical amendments.

Amendment agreed to.

Amendments Nos. 91 to 94, inclusive, are related and may be discussed together.

I move amendment No. 91:

In page 153, to delete lines 40 to 46 and substitute the following:

1077B.—(1) Where—

(a) in the absence of any agreement between a person and a Revenue officer that the person is liable to a penalty under the Acts, or

(b) following the failure by a person to pay a penalty the person has agreed a liability to,

a Revenue officer is of the opinion that the person is liable to a penalty under the Acts, then that officer shall give notice in writing to the person and such notice shall identify—".

An issue has been raised that the cost of going to the court to exercise one's rights under this Schedule could prove prohibitively expensive and, while it is presented as being something designed to comply with some convention on human rights and to provide an opportunity to have an independent examination of one's position, in practice it could prove to be a highly costly way of exercising one's rights. Will the Minister comment on this issue?

Under the European convention we are obliged to introduce these changes. We do not have any choice in regard to the introduction of these matters. As the Deputy is aware, the courts are the main arbitrators in matters of law. If one considers the existing regime and the new civil penalty regime, under the existing regime, where a taxpayer disagrees with Revenue on the issue of penalties, Revenue must sue by way of civil proceedings for the recovery of the penalty in a court of competent jurisdiction for the liquidated sum. Under the new regime, where a taxpayer disagrees with Revenue on the issue of penalties, Revenue must bring the matter to a relevant court for the court to determine whether or not the penalty is due.

There is a fundamental rebalancing of the current arrangement in favour of the taxpayer. This is a requirement of Article 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms. If we were to continue to operate the present system, the Revenue can unilaterally determine the appropriate penalty itself without any independent recourse on the part of the person against whom the penalty is levied. Under this system, the taxpayer has a right to an independent determination of whether the penalty is due. That is a fundamental difference. Sometimes under the present system, taxpayers go to court and seek to argue that the sum is not claimable but the Revenue can meet that argument.

Is the argument not that the appeal commissioners are an alternative?

I regret to inform the Deputy that the appeal commissioners do not meet all the requirements of the European Convention on Human Rights but I presume that is purely a technical designation issue. I know it does not reflect their capacities.

This is probably quite a positive development but people are unclear. Will the Revenue make a note available as to what the new arrangements will be and whether the existing procedures for people who are having a difficulty with regard to the various mechanisms that can be used——

The present informal arrangements for settlement in regard to audits all remain in place. The change relates to the statutory position.

——where matters get to court level.

The current statutory position in regard to an issue arising from an audit is that the Revenue can determine a penalty. Under this regime, the court must determine a penalty.

The current facilities that exist, which are very useful to people when there is a difficulty, will remain in place.

Yes. Of course, the informal procedures short of the strict statutory position will continue to operate. I will ask my officials to consider this matter. I have some sympathy for what Deputy Bruton has said because the appeal commissioners would strike me as being a more appropriate body to establish a consistent practice in regard to the application of penalties. When one has recourse to the courts, there is no certainty as to what the court will hear and not hear.

Even before one reaches the appeal commissioners level, one can go, as it were, for advice and quasi-adjudication. Will that remain?

Yes, that all remains in place. However, the issue I am raising, and at which I will take one last look, is whether we could substitute the commissioners. The point is that if it does go to court under the section as drafted, the court could be composed of any judge in any part of the country whereas the commissioners have a settled practice in regard to Revenue matters, and there would be a better chance of getting a consistent set of rulings on the legal aspects of penalties were the commissioners to have jurisdiction, as Deputy Bruton suggested. However, there appears to be a difficulty on that in the European system. I will have the matter examined.

Deputy Bruton's suggestion is a valid one. There are concerns that under section 91, Schedule 5 comes into being on the passing of the Act. In addition to the appeal commissioners, will the Minister consider putting a commencement order in place in respect of Schedule 5 to allow time for discussions with the relevant bodies which may have concerns about how this aspect of the legislation will work in practice?

The Revenue Commissioners have always closely engaged with the group which has concerns about the administrations of the tax code. That concern can certainly be raised in this context. It has just been drawn to my attention that were I to apply to give the appeals commissioners jurisdiction to entertain the appeal, there would still be a right of appeal to the Circuit Court.

I accept that. However, will the Minister consider my proposal to put in place a commencement order in respect of Schedule 5 to allow time for discussion?

The idea is to commence the legislation as soon as possible. The practical difficulties can be worked through with the relevant bodies.

Under section 91, the provisions of Schedule 5 become effective once the Bill is enacted.

Will the Minister consider changing this in order that the provisions will be made effective by a commencement order? This would allow for a short period of discussion.

We are satisfied that there has been a reasonable level of engagement with the profession. However, it will be intensified, if necessary.

Section 91 is very specific. It states: "The enactments specified in Schedule 5 are amended or repealed to the extent and manner specified in that Schedule and, unless the contrary is stated, shall come into effect after the passing of this Act”. Only a short period would be required for negotiation.

There is an informal procedure, as Deputy Burton pointed out, which is not changed in any way by these provisions. What is at issue is a situation where Revenue has reached the end of the line and there will be court proceedings. At present, the penalties are determined by the Revenue Commissioners. We are prepared to give up these powers with the passing of the Bill.

I will give the Minister an example of the point I am making. Currently, a person with a tax liability who presents voluntarily to the Revenue Commissioners will be subject to penalties and interest. These arrangements will generally arise as a consequence of discussions between Revenue and the taxpayer.

That will continue.

However, there is a concern, whether valid or otherwise, that under the new provisions, a situation could arise where the taxpayer and the Revenue Commissioners would not agree on the issue of liability and penalties, in which case Revenue would bring the matter to court in a public fashion.

That issue would be dealt with first through the informal system.

I am aware of that. I refer to cases where discussions have taken place as part of the informal process but agreement has not been reached.

Taxpayers cannot be forced into court under this arrangement. Moreover, the court proceedings would be public.

That is a concern. The inclusion of a commencement order would iron out any misunderstandings.

No, the insertion of a commencement order would lead to difficulties in that persons currently in negotiations would not be able to take their chances in court. There has to be a specified date for the commencement of the Schedule.

Will the Minister offer an assurance that this will not be given effect until the various consultations have taken place?

Yes, I can give an undertaking that reasonable consultations will take place with the profession. This will not come into operation for an individual taxpayer for several months because of current practices.

Amendment agreed to.

I move amendment No. 92:

In page 154, line 1, to delete line "(a)” and substitute “(i)”.

Amendment agreed to.

I move amendment No. 93:

In page 154, line3, to delete "(b)” and substitute “(ii)”.

Amendment agreed to.

I move amendment No. 94:

In page 154, line 5, to delete "(c)” and substitute “(iii)”.

Amendment agreed to.

I move amendment No. 95:

In page 156, lines 17 and 18, to delete "of the Taxes Consolidation Act 1997" and substitute "of this Act".

Amendment agreed to.

Amendments Nos. 96, 120, 122 to 127, inclusive, 129 to 133, inclusive, 143 and 144 are related and may be discussed together. Is that agreed? Agreed.

I move amendment No. 96:

In page 156, line 20, after "amount" to insert "of the difference".

These amendments are all technical in character.

Amendment agreed to.

Amendments Nos. 97, 121 and 142 are related and may be discussed together. Is that agreed? Agreed.

I move amendment No. 97:

In page 156, to delete lines 37 to 49 and in page 157, to delete lines 1 to 4 and substitute the following:

" ‘qualifying disclosure', in relation to a person, means—

(a) in relation to a penalty referred to in subsection (4), a disclosure that the Revenue Commissioners are satisfied is a disclosure of complete information in relation to, and full particulars of, all matters occasioning a liability to tax that gives rise to a penalty referred to in subsection (4), and full particulars of all matters occasioning any liability to tax or duty that gives rise to a penalty referred to in section 27A(4) of the Value-Added Tax Act 1972, section 134A(2) of the Stamp Duties Consolidation Act 1999 and the application of subsection (4) to the Capital Acquisitions Tax Consolidation Act 2003, and

(b) in relation to a penalty referred to in subsection (7), a disclosure that the Revenue Commissioners are satisfied is a disclosure of complete information in relation to, and full particulars of, all matters occasioning a liability to tax that gives rise to a penalty referred to in subsection (7) for the relevant period under whichever of the Acts the disclosure relates to,

made in writing to the Revenue Commissioners or to a Revenue officer and signed by or on behalf of that person and that is accompanied by—

(i) a declaration, to the best of that person's knowledge, information and belief, made in writing that all matters contained in the disclosure are correct and complete, and

(ii) a payment of either or both of the tax and duty payable in respect of any matter contained in the disclosure and the interest on late payment of that tax and duty.".

These amendments amend the definition of "qualifying disclosure" in the new tax-geared penalty sections applying to the various taxes and duties so as to give greater clarity on what exactly constitutes a qualifying disclosure.

Amendment agreed to.

I move amendment No. 98:

In page 157, line 8, to delete "and" and substitute "or".

Amendment agreed to.

Amendments Nos. 98a, 121a and 142a are related and may be discussed together. Is that agreed? Agreed.

I move amendment No. 98a:

In page 157, to delete lines 9 to 15 and substitute the following:

" ‘unprompted qualifying disclosure', in relation to a person, means a qualifying disclosure that the Revenue Commissioners are satisfied has been voluntarily furnished to them—

(a) before an investigation or inquiry had been started by them or by a Revenue officer into any matter occasioning a liability to tax of that person, or

(b) where the person is notified by a Revenue officer of the date on which an investigation or inquiry into any matter occasioning a liability to tax of that person will start, before that notification.”.

Amendment agreed to.

I move amendment No. 99:

In page 157, lines 33 to 35, to delete all words from and including "in" in line 33 down to and including "tax" in line 35.

Amendment agreed to.

I move amendment No. 100:

In page 158, lines 26 to 28, to delete all words from and including "in" in line 26 down to and including "tax" in line 28.

Amendment agreed to.

I move amendment No. 101:

In page 158, line 48, to delete "clause (I)" and substitute "subparagraph (I)".

Amendment agreed to.

Amendments Nos. 102 and 103 are related and may be discussed together. Is that agreed? Agreed.

I move amendment No. 102:

In page 159, to delete lines 22 to 25, and substitute the following:

"(A) 30 per cent of the difference referred to in subsection (11) or, as the case may be, subsection (12) (in clauses (B) and (C) referred to as 'that amount') where clause (B) or (C) does not apply,".

The intention behind these amendments is to put beyond doubt that the meaning attributable to "amount" in the Finance Bill is the amount of the difference between the amount of tax due according to the original, incorrect, tax return and the amount of tax which the person actually owes. In other words, it identifies the tax underpaid by the person concerned.

Amendment agreed to.

I move amendment No. 103:

In page 159, to delete lines 44 to 47 and substitute the following:

"(A) 15 per cent of the difference referred to in subsection (11) or, as the case may be, subsection (12) (in clauses (B) and (C) referred to as 'that amount') where clause (B) or (C) does not apply,".

Amendment agreed to.

Amendments Nos. 104 and 128 are related and may be discussed together. Is that agreed? Agreed.

I move amendment No. 104:

In page 160, to delete lines 36 to 48 and substitute the following:

"(a) the amount of tax that would have been payable for the relevant periods by the person concerned (including any amount deducted at source and not repayable) if that tax had been computed in accordance with the incorrect or false return, statement, declaration or accounts as actually made or submitted by or on behalf of that person for those periods, and

(b) the amount of tax that would have been payable for the relevant periods by the person concerned (including any amount deducted at source and not repayable) if that tax had been computed in accordance with the true and correct return, statement, declaration or accounts that should have been made or submitted by or on behalf of that person for those periods,

and for the purposes of this subsection and of subsection (12) references in those subsections to tax payable shall be construed without regard to the definition of ‘income tax payable' in section 3.".

These amendments aim to put beyond doubt the meaning of subsection (11) of the new section 1077E of the Taxes Consolidation Act 1997 providing for the new tax-geared penalties.

Amendment agreed to.

I move amendment No. 105:

In page 161, to delete lines 7 to 11 and substitute the following:

"Commissioners have, or a Revenue officer has, carried out an inquiry or investigation into any matter that would have".

Amendment agreed to.

I move amendment No. 106:

In page 161, line 18, to delete "period" and substitute "periods".

Amendment agreed to.

Amendments Nos. 107 to 112, inclusive, 134 to 139, inclusive, and 145 to 150, inclusive, are related and may be discussed together. Is that agreed? Agreed.

I move amendment No. 107:

In page 161, to delete lines 27 to 29.

All these amendments seek to ensure conformity between the new court-determined penalties and the current penalty levels as set out administratively by Revenue in the published code of practice for Revenue auditors.

Amendment agreed to.

I move amendment No. 108:

In page 161, line 30, to delete "(ii) subparagraph (ii)" and substitute "(i) paragraph (ii)"

Amendment agreed to.

I move amendment No. 109:

In page 161, line 33, to delete "(iii) subparagraph (iii)" and substitute "(ii) paragraph (iii)"

Amendment agreed to.

I move amendment No. 110:

In page 161, to delete lines 38 to 40.

Amendment agreed to.

I move amendment No. 111:

In page 161, line 41, to delete "(ii)" and substitute "(i)".

Amendment agreed to.

I move amendment No. 112:

In page 161, line 44, to delete "(iii)" and substitute "(ii)".

Amendment agreed to.

I move amendment No. 113:

In page 162, line 7, after "disclosure" to insert "in relation to a person".

Amendment agreed to.

I move amendment No. 114:

In page 162, lines 9 to 11, to delete all words from and including "a" in line 9 down to and including "investigation" in line 11 and substitute the following:

"a Revenue officer had started an inquiry or investigation".

Amendment agreed to.

I move amendment No. 115:

In page 168, between lines 40 and 41, to insert the following:

"(ag) in section 1060 by inserting the following after subsection (2):

"(3) This section shall cease to have effect after the passing of the Finance (No. 2) Act 2008.”,”.

This amendment is necessary to cease section 1060 of the Taxes Consolidation Act 1997 with the effect of the passing of this Bill. It is replaced by a new section 1077D to be inserted into the Taxes Consolidation Act 1997 by Schedule 5. It relates to the imposition of penalties in death cases and provides for penalties to be payable by executors and administrators of estates. Last March the Revenue Commissioners announced they would no longer be seeking penalties in death cases except where the deceased agreed to pay the penalties before death or a court imposed penalties before death. This places the Revenue practice on a statutory basis.

That means the inheritors would not be approached after a death unless it had been agreed.

Yes, unless there was prior agreement.

Amendment agreed to.

I move amendment No. 116:

In page 171, to delete lines 27 to 29 and substitute the following:

"(aq) in section 1078(9)—

(i) by inserting "subsections (9) and (17) of section 1077E," after "section 1053", and

(ii) by substituting ", and section 27A(16) of the Value-Added Tax Act 1972," for "and sections 26(6) and 27(7) of the Value-Added Tax Act, 1972,".

Amendment agreed to.

Amendments Nos. 117 and 118 are related and may be discussed together.

I move amendment No. 117:

In page 171, between lines 37 and 38, to insert the following:

"(ii) by substituting the following for subsection (2A):

"(2A) For the purposes of subsection (2), the reference to a specified sum in paragraphs (c) and (d) of that subsection includes a reference to a sum which is the full amount of the claim by the Revenue Commissioners in respect of the specified liability referred to in those paragraphs. Where the Revenue Commissioners accept or undertake to accept such a sum, being the full amount of their claim, then—

(a) they shall be deemed to have done so pursuant to an agreement, made with the person referred to in paragraph (c), whereby they refrained from initiating proceedings for the recovery of any fine or penalty of the kind mentioned in paragraphs (a) and (b) of subsection (2), and

(b) that agreement shall be deemed to have been made in the relevant period in which the Revenue Commissioners accepted or undertook to accept that full amount.”,”.

These amendments relate to section 1086 of the Taxes Consolidation Act 1997, which provides for the publication of names of tax defaulters. The amendment provides that settlements made in respect of the full liability of the defaulter where Revenue has not initiated proceedings shall be deemed to have been made on foot of an agreement.

The amendment is necessary to ensure publication in a case where a tax defaulter may pay the full settlement terms, that is, tax, interest and penalties, but argue that the payment is made without an agreement being reached with Revenue. The current wording of the provision requires an agreement to have been made between Revenue and the defaulter for Revenue to agree not to institute proceedings and for the defaulter to agree to pay the settlement for publication to arise.

Amendment agreed to.

I move amendment No. 118:

In page 171, line 45, to delete "of the person".

Amendment agreed to.

I wish to draw members' attention to the following typographical error in amendment No. 119. The amendment refers to the Stamp Duty Consolidation Act 1999. The correct name is the Stamp Duties Consolidation Act 1999.

I move amendment No. 119:

In page 172, between lines 2 and 3, to insert the following:

"(iii) by inserting the following after subsection (4A):

"(4B) Paragraphs (a) and (b) of subsection (2) shall not apply in relation to a person in whose case—

(a) the amount of a penalty determined by a court does not exceed 15 per cent of, as appropriate—

(i) the amount of the difference referred to in subsection (11) or (12), as the case may be, of section 1077E,

(ii) the amount of the difference referred to in subsection (11) or (12), as the case may be, of section 27A of the Value-Added Tax Act 1972, or

(iii) the amount of the difference referred to in subsection (7), (8) or (9), as the case may be, of section 134A of the Stamp Duty Consolidation Act 1999,

(b) the aggregate of the—

(i) the tax due in respect of which the penalty is computed,

(ii) except in the case of tax due by virtue of paragraphs (g) and (h) of the definition of ‘the Acts', interest on that tax, and

(iii) the penalty determined by a court, does not exceed €30,000, or

(c) there has been a qualifying disclosure.””.

Amendment agreed to.

I move amendment No. 120:

In page 173, line 6, after "amount" to insert "of the difference".

Amendment agreed to.

I move amendment No. 121:

In page 173, to delete lines 25 to 44 and substitute the following:

" ‘qualifying disclosure', in relation to a person, means—

(a) in relation to a penalty referred to in subsection (4), a disclosure that the Revenue Commissioners are satisfied is a disclosure of complete information in relation to, and full particulars of, all matters occasioning a liability to tax that gives rise to a penalty referred to in subsection (4), and full particulars of all matters occasioning any liability to tax or duty that gives rise to a penalty referred to in section 1077E(4) of the Taxes Consolidation Act 1997, section 134A(2) of the Stamp Duties Consolidation Act 1999 and the application of section 1077E(4) of the Taxes Consolidation Act 1997 to the Capital Acquisitions Tax Consolidation Act 2003, and

(b) in relation to a penalty referred to in subsection (7), a disclosure that the Revenue Commissioners are satisfied is a disclosure of complete information in relation to, and full particulars of, all matters occasioning a liability to tax that gives rise to a penalty referred to in subsection (7) for the relevant period, made in writing to the Revenue Commissioners or to a Revenue officer and signed by or on behalf of that person and that is accompanied by—

(i) a declaration, to the best of that person's knowledge, information and belief, made in writing that all matters contained in the disclosure are correct and complete, and

(ii) a payment of the tax and duty payable in respect of any matter contained in the disclosure and the interest on late payment of that tax and duty.".

Amendment agreed to.

I move amendment No. 121a:

In page 173, to delete lines 47 to 48 and in page 174, to delete lines 1 to 6, and substitute the following:

" ‘unprompted qualifying disclosure', in relation to a person, means a qualifying disclosure that the Revenue Commissioners are satisfied has been voluntarily furnished to them—

(a) before an investigation or inquiry had been started by them or by a Revenue officer into any matter occasioning a liability to tax of that person, or

(b) where the person is notified by a Revenue officer of the date on which an investigation or inquiry into any matter occasioning a liability to tax of that person will start, before that notification.”.

Amendment agreed to.

I move amendment No. 122:

In page 175, line 44, to delete "amount" and substitute "difference".

Amendment agreed to.

I move amendment No. 123:

In page 175, line 48, to delete "amount" and substitute "difference".

Amendment agreed to.

I move amendment No. 124:

In page 176, line 2, to delete "amount" and substitute "difference".

Amendment agreed to.

I move amendment No. 125:

In page 176, line 18, to delete "amount" and substitute "difference".

Amendment agreed to.

I move amendment No. 126:

In page 176, line 22, to delete "amount" and substitute "difference".

Amendment agreed to.

I move amendment No. 127:

In page 176, line 28, to delete "amount" and substitute "difference".

Amendment agreed to.

I move amendment No. 128:

In page 177, lines 21 to 26, to delete all words from and including "which" in line 21 down to and including "correct" in line 26 and substitute the following:

"properly payable by, or refundable to, that person for that period".

Amendment agreed to.

I move amendment No. 129:

In page 177, lines 31 and 32, to delete "or claimed".

Amendment agreed to.

I move amendment No. 130:

In page 177, lines 41 to 43, to delete all words from and including "the" in line 41 down to and including "has" in line 43 and substitute the following:

"the Revenue Commissioners have, or a Revenue officer has,".

Amendment agreed to.

I move amendment No. 131:

In page 177, lines 44 to 46, to delete "into any matter occasioning a liability to tax".

Amendment agreed to.

I move amendment No. 132:

In page 177, lines 48 and 49, to delete ", claim or declaration".

Amendment agreed to.

I move amendment No. 133:

In page 177, to delete lines 53 to 55, and in page 178, to delete lines 1 to 3 and substitute the following:

"(b) the amount of tax properly payable by that person for that period.”.

Amendment agreed to.

I move amendment No. 134:

In page 178, to delete lines 10 to 13.

Amendment agreed to.

I move amendment No. 135:

In page 178, line 14, to delete "(ii) subparagraph (ii)" and substitute "(i) paragraph (ii)".

Amendment agreed to.

I move amendment No. 136:

In page 178, line 18, to delete "(iii) subparagraph (iii)" and substitute "(ii) paragraph (iii)".

Amendment agreed to.

I move amendment No. 137:

In page 178, to delete lines 25 to 27.

Amendment agreed to.

I move amendment No. 138:

In page 178, line 28, to delete "(ii)" and substitute "(i)".

Amendment agreed to.

I move amendment No. 139:

In page 178, line 31, to delete "(iii)" and substitute "(ii)".

Amendment agreed to.

I move amendment No. 140:

In page 178, line 46, after "disclosure" to insert "in relation to a person".

Amendment agreed to.

I move amendment No. 141:

In page 178, lines 48 and 49, and in page 179, lines 1 and 2, to delete all words from and including "a" in line 48 of page 178 down to and including "investigation" in lines 1 and 2 of page 179 and substitute the following:

"a Revenue officer had started an inquiry or investigation".

Amendment agreed to.

I move amendment No. 142:

In page 185, to delete lines 44 to 49, and in page 186, to delete lines 1 to 13 and substitute the following:

" ‘qualifying disclosure', in relation to a person, means—

(a) in relation to a penalty referred to in subsection (3), a disclosure that the Commissioners are satisfied is a disclosure of complete information in relation to, and full particulars of, all matters occasioning a liability to duty that gives rise to a penalty referred to in subsection (3), and full particulars of all matters occasioning any liability to tax that gives rise to a penalty referred to in section 1077E(4) of the Taxes Consolidation Act 1997, section 27A(4) of the Value-Added Tax Act 1972 and the application of section 1077E(4) of the Taxes Consolidation Act 1997 to the Capital Acquisitions Tax Consolidation Act 2003, and

(b) in relation to a penalty referred to in subsection (5), a disclosure that the Commissioners are satisfied is a disclosure of complete information in relation to, and full particulars of, all matters occasioning a liability to duty that gives rise to a penalty referred to in subsection (5),

made in writing to the Commissioners or to a Revenue officer and signed by or on behalf of that person and that is accompanied by—

(i) a declaration, to the best of that person's knowledge, information and belief, made in writing that all matters contained in the disclosure are correct and complete, and

(ii) a payment of the tax and duty payable in respect of any matter contained in the disclosure and the interest on late payment of that tax and duty.".

Amendment agreed to.

I move amendment No. 142a:

In page 186, to delete lines 16 to 23 and substitute the following:

" ‘unprompted qualifying disclosure', in relation to a person, means a qualifying disclosure that the Revenue Commissioners are satisfied has been voluntarily furnished to them—

(a) before an investigation or inquiry had been started by them or by a Revenue officer into any matter occasioning a liability to duty of that person, or

(b) where the person is notified by a Revenue officer of the date on which an investigation or inquiry into any matter occasioning a liability to duty of that person will start, before that notification.”.

Amendment agreed to.

I move amendment No. 143:

In page 189, to delete line 24 and substitute the following:

"the amount of the difference (in clauses (B) and (C) referred to as ‘that amount')".

Amendment agreed to.

I move amendment No. 144:

In page 190, to delete line 2 and substitute the following:

"the amount of the difference (in clauses (B) and (C) referred to as ‘that amount')".

Amendment agreed to.

I move amendment No. 145:

In page 191, to delete lines 42 to 45.

Amendment agreed to.

I move amendment No. 146:

In page 191, line 46, to delete "(ii) subparagraph (ii)" and substitute "(i) paragraph (ii)".

Amendment agreed to.

I move amendment No. 147:

In page 191, line 50, to delete "(iii) subparagraph (iii)" and substitute "(ii) paragraph (iii)".

Amendment agreed to.

I move amendment No. 148:

In page 192, to delete lines 5 to 7.

Amendment agreed to.

I move amendment No. 149:

In page 192, in line 8, to delete "(ii)" and substitute "(i)" .

Amendment agreed to.

I move amendment No. 150:

In page 192, in line 11, to delete "(iii)" and substitute "(ii)".

Amendment agreed to.

I move amendment No. 151:

In page 192, lines 31 and 32, to delete "had made an inquiry or started" and substitute "had started an inquiry or".

Amendment agreed to.
Schedule 5, as amended, agreed to.
SCHEDULE 6.

I move amendment No. 152:

In page 198, between lines 25 and 26, to insert the following:

"(II) by inserting the following after paragraph 26:

"26A.The Double Taxation Relief (Taxes on Income) (Malta) Order 2008 (S. I. No. 502 of 2008).",

(III) by inserting the following after paragraph 41:

"41A.The Double Taxation Relief (Taxes on Income and Capital Gains) (Republic of Turkey) Order 2008 (S. I. No. 501 of 2008).",".

This amendment ensures the double taxation agreements with Turkey and Malta that have been concluded since the publication of the Bill can be included in its scope.

Amendment agreed to.

Amendments Nos. 153 to 156, inclusive, are related and will be discussed together.

I move amendment No. 153:

In page 199, line 35, to delete "and" where it secondly occurs.

These are technical amendments related to VAT.

Amendment agreed to.

I move amendment No. 154:

In page 199, between lines 37 and 38, to insert the following:

"(III) in paragraph (c)(ii)(II) by deleting “taxable”, and

(IV) in paragraph (e)(ii)(II) by deleting “taxable”,”.

Amendment agreed to.

I move amendment No. 155:

In page 202, in line 40, to delete "paragraph (b)” and substitute “paragraphs (b) and (c)”.

Amendment agreed to.

I move amendment No. 156:

In page 202, to delete line 45 and in page 203, to delete lines 1 to 6 and substitute the following:

"(II) in paragraph (b) by inserting “and subsection (1)(d)(iii)” after “Paragraph (a)(i)”,”.

Amendment agreed to.
Schedule 6, as amended, agreed to.
Title agreed to.

I thank the Minister and his officials for their presence here and for their cogent and enlightening replies to many of the queries put to them. I look forward to the Minister's visit this time next year.

I will be here before then.

A Deputy

The Minister might be back in March.

No chance. Not on foot of a finance Bill if that is any reassurance to the Deputies opposite.

Are October budgets here to stay?

They are a temporary measure.

Bill reported with amendments.
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