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 Header Item Financial Resolution No. 6: Income Tax (Continued)
 Header Item Financial Resolution No. 7: Universal Social Charge
 Header Item Financial Resolution No. 8: Income Tax
 Header Item Financial Resolution No. 9: Income Tax

Wednesday, 5 December 2012

Dáil Éireann Debate
Vol. 785 No. 2

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The Tánaiste: Information on Eamon Gilmore Zoom on Eamon Gilmore This measure is being introduced because it is unfair that people who receive a severance payment of more than €200,000 have had up to now a more favourable tax regime in respect of it. It is the case that the commitment in the programme for Government with regard to tax relief on pension contributions which will generate a pension of €60,000 or more was mentioned today by the Minister for Finance and will be proceeded with.

Deputy Róisín Shortall: Information on Róisín Shortall Zoom on Róisín Shortall Not this year.

The Tánaiste: Information on Eamon Gilmore Zoom on Eamon Gilmore It is not the only measure which deals with the issue of pensions because there is also the elimination of the 4% more favourable universal social charge regime which the previous Government introduced in respect of pensions of more than €60,000. These are just three of the 14 separate tax measures included in the budget which address the issue of wealth. These 14 measures will raise approximately €646 million in a full year. I have been here for 23 years and I seen 25 budgets because there was more than one in some years. I have never seen a budget which has introduced more measures or which will raise more money through taxes on wealth in the country than this one. The very least Members of the House should do is acquaint themselves with what is included in the budget proposals, rather than coming here to make daft assertions that it does not do what it has been said it does. The budget includes 14 separate measures taxing wealth in a range of areas, including eliminating the tax relief on pension contributions which generate pensions of more than €60,000.

Deputy Róisín Shortall: Information on Róisín Shortall Zoom on Róisín Shortall But not next year.

  Question, "That Financial Resolution No. 6 be agreed to," put and declared carried.

The Tánaiste: Information on Eamon Gilmore Zoom on Eamon Gilmore I move the following Financial Resolutions:

Financial Resolution No. 7: Universal Social Charge

    (1) THAT section 531AN of the Taxes Consolidation Act 1997 (No. 39 of 1997) be amended—
      (a) in subsection (1) by substituting the following for paragraphs (a) and (b):
        "(a) at the rate specified in column (2) of the Table to this section corresponding to the part of aggregate income specified in column (1) of that Table where the individual is–
          (i) aged under 70 years, or

          (ii) aged 70 years or over at any time during the tax year and has aggregate income that exceeds €60,000,

          or
        (b) at the rate specified in column (3) of the Table to this section corresponding to the part of aggregate income specified in column (1) of that Table where the individual is aged 70 years or over at any time during the tax year and has aggregate income that does not exceed €60,000.",
      (b) in subsection (3) by substituting "an individual is in receipt of aggregate income which does not exceed €60,000, is aged under 70 years" for "an individual is aged under 70 years", and

      (c) by substituting the following for the Table to that section:
      “TABLE
      Part of aggregate income

      (1)
      Rate of universal social charge

      (2)
      Rate of universal social charge

      (3)
      The first €10,036 2% 2%
      The next €5,980 4% 4%
      The remainder 7% 4%
       .”.
    (2) THAT this Resolution shall have effect as on and from 1 January 2013.

    (3) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act 1927 (No. 7 of 1927).

Financial Resolution No. 8: Income Tax

(1) THAT, as respects the year of assessment 2013 and subsequent years of assessment, section 122 of the Taxes Consolidation Act 1997 (No. 39 of 1997) be amended in subsection (1)(a) in the definition of "the specified rate"—
(a) by substituting "4 per cent" for "5 per cent" in each place, and

(b) by substituting "13.5 per cent" for "12.5 per cent".
(2) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act 1927 (No. 7 of 1927).

Financial Resolution No. 9: Income Tax

(1) THAT section 470 of the Taxes Consolidation Act 1997 (No. 39 of 1997), as it relates to relief for insurance against expenses of illness, be amended with effect from 1 January 2013 in subsection (1), in the definition of “relievable amount”, by inserting "and credit due (if any) under a risk equalisation scheme (within the meaning of the Health Insurance Act 1994)" after "section 470B(4)" in each place.

(2) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act 1927 (No. 7 of 1927).

The purpose of Financial Resolution No. 7 is to ensure individuals earning more than €60,000 per annum will be subject to the full rate of universal social charge. At present, individuals aged 70 years or over pay a maximum rate of 4%, regardless of their level of income. From 1 January 2013, any of these individuals who have income exceeding €60,000 will pay the full rate of universal social charge. Individuals aged 70 years or over who have income that does not exceed €60,000 will continue to pay a maximum rate of 4% on their income. Separately, individuals who have a medical card or an entitlement to a medical card under community regulations pay a maximum rate of 4%. In framing this provision it was generally accepted that it would only apply to low income taxpayers. It has since been established that a number of high income earners are able to avail of this provision as they have an entitlement to full eligibility for services under Part IV of the Health Act 1970 as a result of the community regulations. To address this anomaly, the capping of the universal social charge at a maximum rate of 4% for medical card holders will apply only where the individual's total income does not exceed €60,000. These changes will take effect from 1 January 2013. I commend this Resolution to the House.

Resolution No. 8 relates to the specified rate used to calculate the taxable benefit to employees. Where an employee receives a loan from his or her employer at a rate below the specified rate, the employee is chargeable to tax on the benefit-in-kind reflected by the difference. The specified rate which differentiates between home loans and other loans is reviewed annually in the light of the average market rates provided for the Department of Finance by the Central Bank. This resolution provides for a decrease from 5% to 4% in the specified rate used to calculate the taxable benefit to employees from home loans provided by their employers at preferential rates of interest. The resolution provides also for an increase from 12.5% to 13.5% in the specified rate used to calculate the taxable benefit to employees from other non-home loans provided by their employers at preferential rates of interest. The purpose of the resolution is to keep pace with the changes in interest rates in the market in the past 12 months. The overall yield of €1 million cited in the budget book is tentative. Revenue statistics do not provide a figure specifically for taxation yielded by this measure

Financial Resolution No. 9 confirms the level of health insurance premium that will qualify for tax relief under the tax relief at source scheme operated by the Revenue Commissioners will be the amount of the premium paid by an individual after deducting the amount of any age-related tax credit under section 470B(4) of the Taxes Consolidation Act 1997 under the current interim scheme or any credit to which the individual is entitled under the new risk equalisation scheme being provided for in section 15 of the Health Insurance (Amendment) Bill 2012. The permanent risk equalisation scheme is being introduced to replace the interim scheme under which an individual provided for by the age related tax credits in section 470B and, therefore, an individual should only have an entitlement to one or other credit at any time. Section 470B only applied in respect of policies with an authorised insurer that were renewed or entered into after 1 January 2009 but before 1 January 2013. Section 470B only applied in respect of policies with an authorised insurer which were renewed or entered into after 1 January 2009 but prior to 1 January 2013. The Health Insurance (Amendment) Bill 2012 was considered on Committee Stage on 27 November and Report Stage on 4 December. While it is likely to have passed all Stages by the time the Finance Bill is enacted, reference has been made to the risk equalisation scheme as it will be inserted into the Health Insurance Act 1994. This is not a budgetary matter but a consequential measure arising from the Government's decision to replace the interim risk equalisation scheme with a permanent risk equalisation scheme and the age related income tax credits with risk equalisation credits from 1 January 2013. The Finance Bill 2013 will give effect to the new rates of the health insurance levy under the new risk equalisation scheme.

Deputy Sean Fleming: Information on Seán Fleming Zoom on Seán Fleming Three Financial Resolutions are being discussed together. Fianna Fáil supports two of them but opposes one, which means we must vote against all three because the resolutions will be grouped in the vote.

Fianna Fáil opposes Financial Resolution No. 7 on changing the universal social charge for people over the age of 70 years on the basis that it is too timid and does not go far enough. Our budget proposal was to increase the universal social charge for those earning more than €70,000 and increase it even more for those earning more than €100,000. One of the biggest flaws of the budget is that it does not increase taxes for high earners. I know the Government did not want to touch tax rates, but it could have touched the universal social charge. It could have obtained extra revenue from those earning very high salaries and in receipt of very high pensions. It picked on one particular group of elderly persons. I agree that this should be done and support what has been proposed, but I must vote against it because I do not believe it is sufficient. The Government had an opportunity to further increase the universal social charge for persons on much higher incomes and on this basis it is too timid and does not go far enough. It lets high income earners off.

Deputy Robert Dowds: Information on Robert Dowds Zoom on Robert Dowds The Deputy would not have done it if he was in government.

Deputy Sean Fleming: Information on Seán Fleming Zoom on Seán Fleming Financial Resolution No. 8 changes the rules on interest rates on benefit-in-kind loans from employers to employees. I hope this is a reflection of the fact that the Minister for Finance expects a reduction in interest rates for other mortgage holders during the coming year. The specified interest rate will be increased from 12.5% to 13.5% for benefit-in-kind loans other than home loans. This will yield the token amount of €1 million. We would not oppose any change in taxation on benefit-in-kind measures.

With regard to Financial Resolution No. 9, last week the House dealt with the new risk equalisation scheme for private health insurance. We all know that the system has changed.


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