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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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  3 o’clock

(Speaker Continuing)

[Deputy Simon Harris: Information on Simon Harris Zoom on Simon Harris] However, I must correct the record because that is simply not the case. Those who did not earn more than €18,304 were unaffected as they were not liable to PRSI.

As regards individualisation of the tax system, the position is that this issue was considered by the Commission on Taxation which, as Deputies will know, recommended no change be made to the current system. As regards the self-assessed and the fact they do not have access to PAYE tax credits, the reasons for this are historic. There have, of course, been changes during the years, with the result that the self-employed now pay tax on a current year basis, for example, and that the PAYE allowance has become a tax credit. However, the Government has signalled its intention to introduce a programme of tax reform. Budget 2015 is for the first year of that programme and I hope we can look at such tax reform issues in subsequent budgets.

With regard to progressivity, it is important to indicate that Ireland has one of the most progressive income tax systems of the EU members of the OECD and the second most progressive of all members of the OECD. The changes introduced in the budget will reinforce this progressivity such that the top 1% of income earners will pay 21% of all income tax and USC collected in 2015, up from 19%. In contrast, the bottom 76% of income earners will pay only 20% of all income tax and USC collected, down from 21% before the budget. I heard Deputy Róisín Shortall describe the Government statistics as contrived, but they cannot only be contrived when they are uttered from this side of the House. These are statistics and they are the facts. We can look at and debate the analysis, but let us also debate the facts.

A number of Deputies spoke about the SARP provisions in the Bill. While the take-up of the SARP to date has been very low, the Minister believes the enhancement of the SARP will help to improve our offering in attracting companies and mobile talent. Companies that avail of it are required to report to the Revenue Commissioners on the number of jobs created or retained that can be attributed to the existence of the scheme. This is a job creation measure. There has to be a linkage between jobs created or jobs retained by virtue of an individual being in this country and availing of the scheme. The Minister will be watching these reports closely in regard to the statistics for the uptake of the scheme.

There was a discussion about the so-called double Irish. I disagree with those who assert that the Minister's announcement on budget day on Ireland's rules on company residence and the so-called double Irish placed Ireland at a competitive disadvantage internationally. I argue the opposite is the case. Industry expects certainty and we are partaking in an OECD BEPS process. Why would anyone wait to arrive at a destination when he or she could have what I describe as a first-mover advantage? Let us get out there and let investors know where we intend to go with the tax code and various regimes we have in place. That is what we have done. This change is very important for the State. It is a small part of a much broader initiative which is set out in the new roadmap for Ireland's tax competitiveness which contains a comprehensive package of competitive tax measures to provide the foundations to maintain Ireland as a thriving hub for foreign direct investment.

Deputy Pearse Doherty asserted that the Minister had misled the Dáil on the issue of the so-called double Irish. That is, obviously, an assertion I reject. The Minister has always been very clear that the double Irish is not part of the Irish tax offering. It is just one example of the many international tax planning arrangements which have been designed and developed by tax and legal advisers to take advantage of mismatches between the rules in two or more countries. Obviously, it is something we are putting beyond doubt as a result of the budget announcement.

There has been a discussion about the amount of tax paid by multinationals. It is an important discussion to have; discussions on all tax issues are extremely appropriate to the Finance Bill and the budget. However, it is also important to have the discussion in the context of some of the documentation and reports published on budget day. I refer Deputies to the report issued on budget day on the effective tax rate paid by companies in Ireland and also the ESRI report on what would have happened, hypothetically, if the corporation tax rate in this country had been increased from 12.5%. A substantial body of work was done by the ESRI and its report has been published. It builds a good foundation for a debate on the matter in the House and I am sure it is an issue to which we can return.

The issue of tax competition was raised and there were questions about who benefited from this practice. Questions were also raised about evidence that supported a low corporation tax rate in Ireland. Again, it is important that these questions be considered in the context of the ESRI's report and the report on the effective tax rate published by the Department of Finance.

Reference was made to the provision of tax relief for crowd funding and loan capital. The Minister has no plans to introduce such tax relief, but investors can, of course, avail of tax relief for qualifying investments in SMEs through the employment and investment incentive.

Reference was made to increasing the tax-free thresholds that applied under CAT legislation to gifts and inheritances, depending on the relationship between the giver and the beneficiary on foot of the increase in property values. While asset values, including property prices, have been recovering in recent times, it is unlikely they have recovered to previous levels or uniformly in all areas of the country. This is a threshold the Minister will keep under review.

On the need to encourage domestic entrepreneurs, a point raised by Deputies Dara Calleary and Michael McGrath and others, section 45 of the Finance (No. 2) Act 2013 provided for capital gains tax relief for entrepreneurs who reinvested the proceeds from the disposal of assets made on or after 1 January 2010 in certain charitable business assets. Commencement of the legislative provisions had been made subject to EU state aid approval. A number of changes are being made to the capital gains tax entrepreneur relief provisions in this Finance Bill in order that the relief will satisfy new EU regulations introduced earlier this year, thus obviating the need for formal EU approval of a relief from a state aid perspective. I hope that in time this is something that can be of significant benefit to domestic entrepreneurs.

There was a significant discussion and, it is fair to say, concern on all sides of the House about the definition of "an active farmer". Concerns were expressed about the revisions to the definition in dealing with CAT relief on agricultural property. I am pleased to inform the House that the Minister will examine these concerns which have also been expressed by others and will see if further amendments are required on Committee Stage. This is clearly an issue that needs to be looked at and I am sure we will be returning to it on Committee Stage.

Quite a few Deputies referred to the abolition from next year of the windfall tax provisions. I would like to restate the rationale behind it. The Minister has done so because the tax is an impediment to the proper functioning of the property market at this time. Such profits or gains will in the future be taxed at normal rates of capital gains tax, corporation tax or income tax, as appropriate. The Minister will keep developments in the property market under very close review and, if it is found that transactions on the sale of land for development are leading to abuse or increased development costs, in particular in providing housing, he will not hesitate to introduce whatever measures are open to him to correct the situation.

It was extremely regrettable that Deputy Róisín Shortall referred to one representative body which the Minister had consulted, as outlined in the course of a reply running to a page and a half to a parliamentary question. The Minister consults widely; the budget process is open to pre-budget submissions and such submissions are received from far and wide and considered in the context of the budget. It is appropriate to do so. To suggest in a slur that some of the representative bodies named by the Deputy in this Chamber were responsible for the economic mess in which the country finds itself is not to recognise the reality that many of these organisations are responsible for significant economic and business activity. For example, Chambers Ireland was among the group of bodies listed. It is very appropriate for the Minister for Finance of the day, whoever he or she may be, or whoever is in government, to consult widely with all stakeholders and participate in an engagement process. We need to make sure that when we get to the stage of introducing a budget, we have engaged with as many stakeholders and heard as wide a variety of views as possible.

There were some queries about the first-time home buyers' issue. First-time home buyers will be entitled to a refund of DIRT paid on savings used to purchase a home, on up to 20% of the purchase price in the 48 months prior to purchase, up to the end of 2017.

Deputy Pearse Doherty referred to the proposal to amend the general anti-avoidance legislation. There are significant numbers of cases involving transactions which have already taken place and which Revenue is challenging. However, pursuing these cases through the courts is slow, the outcome can never be certain and the process ties up significant Revenue resources. That is the reason a settlement opportunity is being provided. Let me be clear: at an absolute minimum, the taxpayer has to pay the tax due and, where interest is relevant, 80% of it also has to be paid. The measure is strictly time-bound. Tax evasion is illegal; tax avoidance is not. Nonetheless, Revenue challenges aggressive tax avoidance schemes and the unintended use of legislation.

There was a discussion during the course of the debate of a proposed levy on alcohol sales in off-licence premises. As the Minister has previously pointed out, EU Directive 92/93 which governs the structure of alcohol taxation does not provide for differentiation in tax treatment based on the location in which an alcohol product is sold. As Deputies on all sides of the House will be aware, however, the broader issue is being looked at in terms of a whole-of-government approach.

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