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Finance Bill 2014: Second Stage (Resumed) (Continued)

Thursday, 6 November 2014

Dáil Éireann Debate
Vol. 857 No. 1

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(Speaker Continuing)

[Deputy Michael Creed: Information on Michael Creed Zoom on Michael Creed]  With regard to capital tax reliefs in the agricultural sector, we must be extremely careful about what signal we give out, because these reliefs are valued by the farming community. We must be creative in finding the proper definition to ensure this sector can avail of the agricultural relief and ensure greater land mobility. Deputy Martin Heydon hit the nail on the head in terms of the reluctance in Ireland to sell land and the consequent lack of land mobility, notwithstanding previous incentives, be they installation aid or early retirement schemes, which never really succeeded in achieving their objective. The situation remained stagnant. This is a good proposal, but we need to ensure it is available to part-time farmers and those who facilitate the leasing of their land on to others. We also need to ensure there is relief in the area of stamp duty, because the definition as proposed in the legislation is equally restrictive in that area. We need to ensure the relief is available to part-time farmers and those who facilitate the availability of their land by way of long-term leases to others.

We tend to over-egg on all sides. It is damnation and perfidy from the Opposition benches and a bright new dawn from this side. We must consider the reality of the situation. We are giving back some €600 million, but we have taken multiples of that from people over the past number of years because of the financial situation. I admit that while we are giving back €600 million with one hand, we are taking much of it back through other indirect taxation. However, prudence is the order of the day. We must ensure we never have boom-and-bust cycles again. What is at play here also is a fundamental reorientation of our tax system. Taxes on work are regressive, and the more we can put into people's pockets to allow them discretionary spending the better. On the other hand, we will have indirect taxes, be they in the area of water or property taxes, but these allow individuals some degree of control over the outcome.

I welcome the opportunity I have had to say my few words. I hope this debate is not a dialogue of the deaf and I hope that some of the constructive suggestions from all sides will be taken on board.

Minister of State at the Department of Finance (Deputy Simon Harris): Information on Simon Harris Zoom on Simon Harris I would like to pick up on the point on which Deputy Michael Creed left off, in regard to the potential for a dialogue of the deaf. While it may seem like that, I have attended this debate over the past three days and I believe it has largely been a constructive engagement. It was unfair of Deputy Róisín Shortall to suggest that Government Deputies did not participate. The list of speakers indicates differently. We have had a constructive debate, and the comments made by Deputies Michael Creed and Paul J. Connaughton last night that there is no monopoly on wisdom are fair. Deputy Paul J. Connaughton suggested that people on this side of the House tend to think that everything is wonderful while people on the other side think everything is dreadful. Perhaps the truth lies somewhere in the middle.

Neither I nor the Government advocates that this Finance Bill or budget 2015 is a panacea for all the challenges faced by this country. As every Member and citizen knows, we have had several extremely harsh budgets over a number of years involving difficult decisions that have had a negative impact on the lives of all people living in this country. This budget was the first that allowed us to try to give something back. However, I hasten to add that what has been given back has been modest and limited. The budget and the Finance Bill need to be viewed in that light.

A wide range of issues have been raised in the past three days and it will not be possible to deal with all of them in the time available. While all of the issues raised do not relate directly to the Finance Bill, I understand and appreciate how these wider issues arise. It is unsurprising that the issue of water charges has featured strongly in contributions. A number of measures were announced on budget day in regard to the Finance Bill and what we are discussing now to approve the overall affordability of water charges. The objective of these supports is to assist households that pay their water bills. Following on from the announcement on budget day, officials from the Department of Finance are working closely with their colleagues in other relevant Departments and agencies on the development of processes that will be employed to deliver the relief. As the Minister for Finance stated on budget day and subsequently, we will design the measure as broadly and efficiently as possible to ensure the relief reaches all households that pay their charges. As Members know, the Government is expected to make an announcement on this and related matters in the near future.

On the issue of tax progressiveness and fairness, a number of Deputies have asserted that the income tax package was skewed towards higher earners. However, the maximum benefit from this tax package is achieved at incomes of €70,000. The new USC rates on incomes above that level act to cap the benefit in order that those with incomes greater than €70,000 achieve only the same benefit in monetary terms. People come into this House and make disingenuous comments about millionaires getting so much, but the benefit flatlines after €70,000. It may not sound as appealing to a millionaire to say the maximum benefit is achieved at €70,000. That point should not be lost if we are to have an honest debate. The highest proportionate benefit, as a percentage of net income, from the budget tax changes occurs at an income level of just over €12,000.

Since the Government came into office, some 410,000 people no longer pay the USC. Now, following this budget, a further 80,000 will be removed from the USC net. Some 33,000 people have been removed from the top rate tax band. These are people on incomes of approximately €32,800. The band has been increased by €1,000 to €33,800. These people are not millionaires or wealthy people. They are normal people who get up, go to work and earn a relatively modest income but who were paying the higher rate of tax. We have had debate in the media in the past few months about how people here start paying the higher rate of tax at a low income. The budget makes an honest attempt to begin to rectify this, because this entry point to the marginal rate of tax is a disincentive to people who choose to work harder and accept promotion or move from part-time to full-time work. I concede that we have raised the band by only €1,000 in this Bill, but some 33,000 workers who were paying the higher marginal rate of tax will benefit and will no longer pay that rate.

In the lifetime of the Government, we have restored the minimum wage. The availability of social housing is an issue in all our communities, certainly in mine, and we have had significant discussion on this. The budget represents a massive effort to invest in social housing. As a country, we stopped building social housing and moved to a model of private rental, a model that caused significant difficulties in terms of social cohesion. People ended up renting a house for a year, not knowing where they would be the following year or where their children would go to school. They could not become embedded in their communities. We must get back to a situation in which we are building local authority housing, and this budget will help us start on that. I have alluded to housing issues because of the concerns raised in this debate.

Concerns were also raised regarding access to front-line services. While this issue is not directly related to the Finance Bill, it should be noted that the Government announced through the budget the ending of the blanket moratorium on recruitment. This moratorium was a blunt instrument which was implemented absolutely. Sometimes it is necessary to use a blunt instrument when in the midst of a crisis. However, the moratorium led to a situation regarding access to front-line services. In all communities we see its effect. With the ending of the blanket moratorium, we will have a situation in which local managers, paid to manage, will have to act within their employment budget. They will make the decisions in regard to how they spend that budget. I believe this is a better and fairer way to deal with front-line services in terms of closeness to the community.

It is unfair for Deputies to suggest every new job created has been a low-paid job. I have responsibility for the international financial services sector and when I visit companies and meet people working there, the assertion is not borne out by the facts. It is also not borne out by our tax take. The Government has given a commitment to a low pay commission. In regard to getting people to move from social welfare to work and providing supports for people who are trying to move, the Tánaiste has announced that these people will be allowed to retain the qualified child payment when transitioning from lone parent allowance. These important measures are worth noting if our debate is to remain in context.

In response to some of the specific issues raised, Deputy Michael McGrath suggested the abolition of the weekly PRSI allowance two years ago affected all taxpayers equally.

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