Priority Questions.
1 Mr. R. Bruton asked the Minister for Finance his estimate of the aggregate value of money which will be released from SSIA accounts when they mature; the period over which it will be released; if he has conducted an assessment of the impact on the economy of this release of funds; and if he has considered new arrangements to ensure orderly and beneficial use of these funds. [13033/04]
Amharc ar fhreagraThe SSIA scheme was opened on 1 May 2001 and entry to it closed on 30 April 2002. SSIA accounts must be held for five years from the date of the first subscription in order for the holders to get the full tax benefits. SSIA accounts are due to mature between 31 May 2006 and 30 April 2007.
It is not possible to give an estimate of the aggregate value of money which will be released from the SSIA accounts when they mature as the scheme has still two to three years to run and such aggregate value is also subject to a number of variables such as when participants die, withdraw from the scheme or vary their monthly contributions. In addition, the income or gains arising on the investment over the entire period will depend on whether the investment is in a fixed deposit account, variable deposit account or in equities and what returns these investments will provide over the entire five-year period.
My Department is keeping the economic impact under review in the context of the normal assessment of the future economic and budgetary position. Any assessment must take into account that there is a range of uncertainties in any assumptions to be made, in particular whether on SSIA maturity, account holders continue to save the amounts in whole or in part and, if not, the use to which these funds will be put.
The specific goal of the SSIA scheme was to encourage people to save over a period of at least five years. Its effect has been to stimulate such savings over varying income ranges which is evident in the extensive uptake by many low income earners. The scheme has been a success in those terms. The scheme has a specific duration. Any proposals for new schemes either to replace the SSIA scheme or other schemes to attract these funds will be considered as part of the normal annual budgetary process taking account of public policy objectives and Exchequer cost implications.
Does the Minister not agree that a wait and see attitude is not good enough? Every economic expert around the city estimates that approximately €17 billion will be released in a 12-month period, which has the potential to dramatically destabilise the economy if it is spent on imports of yachts and BMWs. The Minister needs to signal that money such as this should be invested in PRSAs to provide for future pensions, or used to support those who need to save to get houses of their own. Does the Minister not agree it is dangerous not to anticipate this and not to give clear policy signals?
Has the Government decided, as the Tánaiste indicated, the money no longer utilised at the end of the SSIA scheme should be devoted to providing for elderly people? Can we get assurances that we will not see a repeat of what happened in the lead up to the last general election when the Government had a huge spree followed by a massive hangover for which the ordinary person had to pay? We need assurances this will not result in another spending spree paid for afterwards by high inflation which undermines companies which trade in tough markets. It is not good enough to just wait and see. We need to anticipate and take action now to deal with this issue.
I will take account of the Deputy's views. Prior to establishing this scheme in April 2002 I received considerable advice from commentators and Opposition Members that it would not be a success and that people would not invest in it. I based my thinking on the fact that people make rational and sane decisions. When looking at the outcome of the scheme, I will base my thinking on the fact that people make sane and sensible decisions, as do the majority of people. That is the pragmatic approach I have taken to schemes such as SSIAs, pensions, etc.
I told the Minister that on Committee Stage of the Bill.
I remember Deputy McGrath agreeing with me and I exonerate him from criticism. Based on the debates at the time, Deputies will remember the primary purpose of this scheme was to encourage people back into the savings habit. It was anecdotally evident that while people were doing very well under the Celtic tiger, they had forgotten the good old habit of saving for a rainy day. In that regard the scheme has been spectacularly successful.
Despite the often repeated criticisms of the scheme before and since its introduction, the figures published in the Revenue Commissioners' annual report of 2002 show the spread of its 1.1 million customers across all income ranges. I will take into account what Deputy Bruton has said and the comments of bodies such as the Irish Insurance Federation on foot of a survey it commissioned.
The Government has had no discussion on the ideas proposed by the Tánaiste at the Progressive Democrats conference, nor will it until we reach the end of the SSIA schemes.
The Minister is ignoring the Tánaiste as usual.
Deputy Bruton again referred to the big spending spree before the general election. The increase in spending for 2002 over 2001 at the time of the budget and the REV was to be 14.7%. The outturn for 2002 came in under budget at 13.9%.
I would like an assurance from the Minister that we will not see a stream of Ministers like the Tánaiste, Deputy Harney, promising to spend this money on all sorts of different schemes and we will have some sensible approach to this. There is more to running an economy than creating an election feel good factor. I would like to correct the Minister. If he cares to look at his Department's own figures, in the 24 months up to May 2002, the month before the general election, public spending had grown by 48%. If that was not a wild spending spree, the Minister should tell me what is.
In the figures for 2001, both the budget and the Abridged Estimates Volume — the budget and the REV for 2001 — the spending for that year was to be in excess of 20% and it came in at close to budget. For 2002, we came in under budget. In the past seven years the differential between the amounts I estimated to be spent at budget time and the REV, and the outturn that came in, was less than 1%.
That was as a direct result of the cutbacks the Minister said were neither promised nor contemplated.
Many people will have good ideas and some that are not so good as to what to do with Exchequer moneys. I will take all these matters into consideration at the appropriate time.
Will the Minister still be there?
2 Ms Burton asked the Minister for Finance if he intends to introduce new procedures to ensure that Irish citizens claiming residency abroad for tax purposes comply with the requirement to be out of Ireland for a minimum of 183 days; if the large cases division of the Revenue Commissioners is putting together recommendations as to the best way in which to monitor those who claim residency abroad for tax purposes; and if he will make a statement on the matter. [13014/04]
Amharc ar fhreagraThe administration of the validation procedures for claims of non-residency is a matter for the Revenue Commissioners and I am informed by them that these procedures are kept under constant review.
Does the Minister understand the complete frustration and anger of compliant taxpayers at those who are getting away with paying little or in some cases no tax? As the Minister knows, getting away with paying little or no tax is done in three ways: by avoidance, for which he has introduced many schemes; by evasion, and we are catching up on those people who are being forced to pay back the money to such an extent that yesterday's Exchequer returns reflect the amount of money flowing in from those who had not paid their tax formerly; or by living offshore and using the device of non-residency. Would the Minister not agree we are exceptionally generous in allowing such people to return for 183 days per year? We also allow the Cinderella procedure whereby a day in which a non-resident's jet takes off before midnight does not count as a day in the country from a tax point of view.
What does the Minister really think of those people who attend every function and race meeting, many of which the Minister also enjoys as we all do, but are unwilling to contribute to the country in terms of paying their fair share of tax? Have the Revenue Commissioners any system to monitor private airports and the movements of private jets, considering the significant amount of time such people can spend here? Does the Minister agree that tax and residency should be linked to citizenship?
We were lectured this week by his colleague, the Minster for Justice, Equality and Law Reform, that citizenship involved loyalty and fidelity to the State. What greater form of loyalty and fidelity to the State can one demonstrate than to pay one's fair share of tax rather than run to some overseas tax haven to avoid paying any? I wish the people involved continued success in their business and financial affairs. We are all delighted to see Irish people doing well. However, asking people to pay tax is to require a small price in terms of fidelity to the State and citizenship, to use the lofty words of the Minister for Justice, Equality and Law Reform. There is one rule for some while the little people pay their taxes. While the little people in their old age wait on hospital trolleys for two and three days, some of the richest Irish citizens are able, with the connivance of the Government, to continually get away with paying no tax because of their non-residency status.
The Minister should not tell me about what happened ten years ago when Ireland was a different place. We have had seven or eight successive years of strong economic growth and there is no reason everybody should not be proud to make a contribution, particularly when it comes to taxes to pay for our health, education and welfare systems.
The residency rules were last updated by the Fianna Fáil-Labour Government in the Finance Act 1994 following a comprehensive review of the matter by the Revenue Commissioners and my Department. Prior to this update, the rules were based on a mixture of statutory provisions, old case law and Revenue administrative practice. That was unsatisfactory. The new residency rules set out in the 1994 Act simplified and clarified matters and were welcomed generally. All income earned in the State is normally taxable here. Therefore, if an individual is employed in the State, tax is paid here on his or her employment income. If an individual is resident in another state, that person is subject to tax there and receives credit for any tax paid on such Irish income.
Under the rules set out in the Finance Act 1994, a person is regarded as resident in the State for tax purposes in the tax year if he or she spends 183 days in the State in that year or 280 days on aggregate in that and the preceding tax year. An individual who is present in the State for 30 days or less in the tax year will not be treated as resident for that tax year unless he or she elects to be resident. Also, a day will only count if an individual is present in the State at its end.The Cinderella provision to which Deputy Burton referred was made on foot of a suggestion by the former Deputy, Ivan Yates. As Fine Gael spokesman, he pointed out the anomalies which would arise if the provision were not made. Residency rules are common in most jurisdictions. The key rule involving 183 days which contribute to the term of residence in the State is mirrored in several other countries, including Australia, Austria, Canada, the Czech Republic, Denmark, Finland, Germany, Italy, New Zealand, Norway, Portugal and Sweden. The only OECD country where tax status is not based on residency is the United States of America. Every other country of which we are aware has a residency rule.
I have no plans to review further the tax laws on residency status. The current comprehensive system was set out in the Finance Act 1994 after detailed consideration by Government of all relevant issues. Last April, the United Kingdom published a background paper, Reviewing the Residence and Domicile Rules as they Affect the Taxation of Individuals. It was acknowledged in this paper that the jurisdiction's current rules on the determination of residence and domicile, which had developed over the past 100 years, were complex, poorly understood and unreflective of the reality of today's integrated world. The UK rules are the rules we would be operating if the 1994 changes had not been made. In the United Kingdom, one is not deemed to be resident on the day one enters or leaves the jurisdiction. One could arrive on a Monday and leave on a Tuesday without being deemed to have used up any days.
I am sure there are many reasons people maintain their tax residency outside the State. Every OECD country, with the exception of the United States, has residency rules. Our rules are appropriate and I have no intention of changing them.
Does the Minister not agree that citizenship and fidelity to the State imply that an Irish citizen who spends a great deal of time here, as many of these very rich people do, should be proud to make a contribution by paying their fair share of tax? Will the Minister answer "yes" or "no" to that question?
I have considerably different views on the creation of wealth from the Deputy's party. I believe in incentivising people while the Deputy's party wishes to create circumstances in which we construct some kind of cocoon around the island and let nobody in our out while living in our own little world. That is not my philosophy and I have no intention of changing it.
3 Caoimhghín Ó Caoláin asked the Minister for Finance his views on the scope of the promised PEACE III programme; and if he will make a statement on the matter. [13098/04]
Amharc ar fhreagraThe existing EU programme for peace and reconciliation, PEACE II, is a unique EU-funded programme for Northern Ireland and the Border region of the Republic. The Border region consists of counties Cavan, Monaghan, Leitrim, Louth, Donegal and Sligo. PEACE II is intended to help Northern Ireland become a peaceful and stable society and to promote reconciliation there and in the Border region. The programme provides approximately €707 million for projects, of which €141 million will be spent in the Border region. The programme is due to close at the end of this year.
The Government is of the opinion that PEACE II and its predecessor, PEACE I, have been of great benefit in supporting the peace process in Ireland. The Government and its counterparts in Northern Ireland and Britain are exploring with the European Commission the possibility of securing an extension of the current PEACE programme to permit the consolidation of its valuable work. I emphasise that what is under discussion at this stage is an extension of the current programme for two years to the end of 2006 rather than the implementation of a new programme. A new programme will be considered in due course. The intention is to discover how best to focus the existing programme to meet its strategic priorities which are to reinforce progress towards a peaceful and stable society and promote reconciliation.
I thought the Minister would pull me up on my presumption in using in my question the phrasing "promised PEACE III programme". It is something which has not yet been committed to. I note the indication in the Minister's reply that while the Government is supportive of the extension of PEACE II to 2006, which we accept, it is also committed to the implementation of a PEACE III programme thereafter. Will the Minister expand a little on that?
It is important that the Minister acknowledges the great work which has been done through PEACE I and PEACE II since the introduction of the programmes and that this is something which should be continued and built upon. Does the Minister accept the principle that funding from this source must be additional to ordinary Government and, indeed, local authority funding rather than in substitution for it? It is important to make the point. Does the Minister acknowledge the excellent work of the various bodies which have been established and through which the current programme is operated? Is he familiar with the recent report, Building on PEACE: Supporting Peace and Reconciliation after 2006, produced by the consortium of cross-Border bodies based at European Union House in Monaghan town? An excellent case for a PEACE III programme is made in the report.
The Minister has indicated contact with the British Government on the 2004 to 2006 extension. Will he indicate whether the Government or his Department have yet initiated a joint approach to the European Union in terms of post-2006? If not, when might those initial and important steps be taken? The counties, and communities therein, listed by the Minister in his reply are anxious and concerned that this programme continue.
I join the Deputy in pointing to the great benefits of the PEACE I and PEACE II programmes to the Border communities, the exceptional work done and the great success, which they have been. The Deputy has given a fair summation of what is involved. I was involved in the last round of negotiations concluded in Berlin regarding EU Structural Funds and the peace programme. The current peace programme will run to end 2004. The other EU funded programmes run to end 2006. We are endeavouring, in conjunction with the UK Government and the Commission, to extend the current PEACE II programme from 2004 to 2006 to bring it into sync with other EU funded programmes.
The next round of EU funding is 2007-13. The EU Commission recently published the initial documentation in that regard. The negotiations on Structural and Cohesion Funds will be long, tedious and difficult and will not conclude this year. It is hoped they will be concluded in 2005. The Deputy will be aware that the current debate between the net contributor countries and the recipient countries is ongoing. As part of the negotiations on a broader financial prospective, we will discuss a peace programme. I agree with the Deputy that the Government should make a strong case to have a peace programme as part of the financial perspectives of 2007-13. I welcome the Deputy's support in that regard.
4 Mr. P. McGrath asked the Minister for Finance the aggregate amount of tax of all types raised from the activities associated with the construction, sale, rental and occupation of housing; and if he has plans to change the taxation or other aspects of Government policy towards the housing sector. [13034/04]
Amharc ar fhreagraI am informed by the Revenue Commissioners that the information furnished on tax returns does not generally require the yield from a particular sector or subsector of trade to be identified. Except for value added tax, VAT, and stamp duty, the amount of tax collected from the various activities specified in the question cannot be readily identified from the overall taxation yield. Accordingly, the specific information requested by the Deputy is not readily available in the form requested.
In the case of stamp duty, the total collected from residential property in 2003 was €528 million. However, data are not collected in a manner which would allow for a more detailed breakdown of this yield. Stamp duty is also chargeable on transfers of sites at the appropriate rates for non-residential property but it is not possible to determine what proportion of the total stamp duty yield on non-residential property relates to site transfers.
In the case of the sale of a new house or apartment to a purchaser, VAT applies at the reduced rate of 13.5% both on its construction and on the site where these are connected contracts and is included in the final price of the property to the purchaser. No VAT applies in respect of the purchase of a second-hand house. The relevant information available in respect of VAT is the estimated yield.
With regard to 2003, the VAT yield from the sale of new housing is estimated at approximately €1,250 million and the VAT yield from the maintenance and repair to all housing is estimated at approximately €320 million. With regard to inheritance tax, it is not possible to separately identify the yield relating to bequests of house property from within the overall tax yield. The net receipts associated with all inheritance tax was €131 million in 2003.
I remind the Deputy that under this Government house building has reached record levels, double the rate when his party was last in office. The best way to provide people with houses is to build them, and that is what we have done. Subsidising the purchase of houses without increasing their supply will only drive up prices. I also remind the Deputy that, as recently as budget 2003, I improved and enhanced mortgage interest relief and extended first-time buyer relief from five to seven years. It is my intention to continue with sensible fiscal policies in this area.
I wish first to correct the Minister on his statement that VAT is charged on buildings at a reduced rate of 13.5%. That is not a reduced rate, the Minister increased that rate from 12.5% to 13.5%.
It is the new reduced rate.
The Minister said he extended first-time buyer relief from five to seven years, but what he did not say is that at the same time he abolished the new house buyer's grant of €3,800. I am not surprised the Minister did not give us the amount collected from house building in terms of taxation. He would not want to state it. The Irish House Builders Association estimates that figure to be €5.6 billion arising out of VAT on houses, solicitors' fees, auctioneers' fees, architects' fees, engineers' fees, stamp duty on mortgages and second-hand buildings if not purchased by first-time buyers, tax on rent collected and, in more recent times, the newly imposed Government tax on houses by way of the development levy. In effect, Government levies account for an estimated 45% of the cost of a house in the Dublin area. The Government takes 45% of the purchase price of any house in the Dublin area and the figure nationwide is 42%.
Has the Minister no shame? He should be ashamed to levy such a tax on young people trying to get on the property ladder. I hope he will not tell the House the Government is contributing down the line. The number of affordable and council houses being built do not come anywhere near meeting demand. Will the Minister suggest how young people might get on the property ladder?
As regards the Deputy's question on whether I have no shame, I am sure he is aware I am a member of the Fianna Fáil Party and, as written and established by official Ireland many years ago, when one comes from that background one accepts that is how things are.
It is in the genes.
That is a joke though I know one can no longer make jokes in Irish life because they will be misinterpreted. I point that out for the benefit of those innocents abroad who might be watching.
I am not too sure from where the Irish House Builders Association got the figure of 45%. However, I presume it includes all taxes in that sector, including PAYE from employees pay cheques which are not specifically related to housing. The total general Government revenue in the State as a percentage of GNP is approximately 42%. In that regard, the figure of 45% is not out of line. As somebody who wants to spend 40% to 50% of GNP on public services, the Deputy should not be surprised if we have to take in the same amount in taxes, otherwise we would run up mountains of unsustainable debt.
Let us take the figure of 45% as representing the amount of money accruing to Government from the sale of a house, though no one can establish that figure with exactitude. That money is spent on a variety of services for which the Deputy pleads each week. It pays nurses, doctors, teachers, gardaí, public servants, including politicians, road maintenance, sewerage services, social welfare and so on. The Government has to collect taxes to pay for those services. We all differ about how one should collect taxes and I have over the years examined some of the ideas put forward by the Deputy's party and others inside and outside the House.
Earlier I gave the figures for stamp duty. There are suggestions that we should abolish stamp duty for different classes of the housing sector. Having tinkered with stamp duty in my time as Minister for Finance, I have learned a great deal about it. I would need considerable encouragement and objective facts to change my view on it. I firmly believe that any change to the stamp duty system is taken up in the developer's price or the market, as happened in the case of the first-time buyer's grant which should have been abolished long before I did so two years ago.
Lest the Minister be accused of misleading the House, social welfare is not paid for from such tax. The social welfare fund is in surplus, as I am sure the Minister is aware.
No, the Deputy is wrong. Social assistance is paid from the general Vote.
Social assistance is, but the social welfare fund is €1.4 billion in surplus.
The Minister likes to see a building bonanza because he gets €100,000 from every new house sold. He has no incentive to reform the housing industry as long as that flow of income into the coffers of the Revenue Commissioners continues. The Government has made no reforms to help young people get on the housing ladder. The Minister has not addressed that issue.
The Leas-Cheann Comhairle has informed me that this question has run over time.
That is not my fault.
Since I came in Deputy McGrath is the only Deputy who has continued to speak.
The Ceann Comhairle has not been here very long.
My answer to the Deputy's question is that I do not agree with him.
The Minister's genes are all wrong as well.
5 Ms Burton asked the Minister for Finance the outcome of the recent informal meeting of EU Finance and Economics Ministers held in Punchestown; and if he will make a statement on the matter. [13012/04]
Amharc ar fhreagraThe Council of Economics and Finance Ministers held an informal meeting on 3 April in Punchestown. Ministers were joined at the meeting by the central bank governors, Commission President Prodi, Commissioners Solbes, Bolkestein and Schreyer, President Trichet of the European Central Bank and President Maystadt of the European Investment Bank. As with all informal meetings, no formal decisions were taken at Punchestown.
With regard to EU financing in the period 2007 to 2013, President Prodi and Commissioner Schreyer elaborated on the Commission's recent communication on this subject. The meeting provided a valuable opportunity for a full exchange of views between Council members and with the Commission. Some member states believe the growth of the Union's budgetary spending should not exceed the growth of the Union's economy. Others could support a more rapid increase in the budget.
Ministers and governors discussed the current economic situation in the EU and the longer term strategies that will boost Europe's capacity to grow. They agreed that the economies of Europe should gather momentum over the course of 2004, helped by the global upturn and by the expected strengthening in domestic demand. Also discussed was the EU Presidency speech to be used at the IMF-World Bank spring meetings in Washington.
Ministers and governors considered financial market conditions and the progress made in relation to the integration of financial services in the EU. They noted that the financial services action plan had significantly enhanced the regulatory and supervisory framework for European financial markets.
Commissioner Bolkestein briefed Ministers and governors on the state of play on negotiations on the two outstanding international accounting standards, IAS 32 and IAS 39. Ministers also discussed the post of managing director of the International Monetary Fund. The Council had a productive meeting that made substantial progress on the important issues on its agenda.
As the Minister has reminded me, EU Ministers were discussing accounting and auditing standards. Did he have an opportunity to give the Ministers a copy of the Comptroller and Auditor General's report on the Punchestown pony club? That would have been a good point at which to begin a discussion of accounting and auditing standards. Did Ministers receive a special embossed copy of that report?
What does the Minister have to show for his stewardship during the Irish Presidency of the EU? When Deputy Quinn was Minister for Finance, at the end of the Irish Presidency the euro and other items on the EU agenda had been significantly reformed. What about the reform of the Stability and Growth Pact and what are the obstacles to such a reform? Is reform of the Stability and Growth Pact not in Ireland's direct interest, especially as we need so much capital spending on roads, public transport and other infrastructural projects? Why has the Minister not taken the opportunity to advance Ireland's interest in a reformed pact?
What has ECOFIN done under the Minister's stewardship to advance the Lisbon agenda? What did the Minister do with regard to the appointment to the IMF? A very conservative appointment was made. Is he not interested in a reform agenda in the Bretton Woods institutions, particularly with regard to the developing world?
What has the Minister got to show for the Presidency? We know about the pomp and circumstance — the Minister and Mrs. McCreevy looked very well in a magazine — but what does Ireland have to show as a consequence of the Presidency?
Several questions have been submitted today regarding the Stability and Growth Pact and the nomination of Rodrigo Rato as secretary general of the IMF. The ECOFIN meeting decided the matters to which I have just alluded. Progress was made during the Irish Presidency on a number of issues. We have progressed the agenda as best we could in a fair and effective manner and our colleagues in Europe will attest to that. I do not intend to introduce a new currency during my regime. The Deputy appears to imply that I should do so. In 1996 the rules of a pact were agreed which was the background to the introduction of the euro.
With regard to the reform of the Stability and Growth Pact, it is in Ireland's interest that there be rules. It is the smaller countries which will suffer if there are no rules regarding financial management as a background to the euro. For the past number of years Ireland has been spending 5% of gross national product on the multi-capital envelopes which were announced in the budget, and we will continue to do so. This is twice the EU average. We spent a long period leading up to the March 2003 meeting discussing the pact, and it was impossible to find unanimity among the member states. This was confirmed by the European Council meeting at that time. I am sure we will return to the question of the pact in the next year or so. Due to the outcome of the ECOFIN meeting of November 2003, the majority of members of the euro would prefer further reform of the pact to be discussed over the next year. That is where the matter now rests.
Is the Minister saying that the Finance Ministers had a jolly time in Punchestown? He cannot list one achievement of his period as chair of the Council of Ministers, whether reform of the IMF Bretton Woods agenda in favour of the developing world or reform of the Stability and Growth Pact to allow Ireland to make necessary capital investments in areas such as public transport. The Minister has nothing to show us. It is a pity.
It would not be in our interest if the Stability and Growth pact was reformed to allow Ministers for Finance to go off on ridiculous borrowing sprees. It would be to the detriment of this country if that were ever allowed.
No one suggested that.
