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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 Olivia Mitchell: Information on Olivia Mitchell Zoom on Olivia Mitchell] As we know, when it comes to investment decisions, optics and perception are all-important. The bottom line is that the effective rate of tax for the self-employed is 44.3%, while for PAYE workers it is 42.3%. The marginal rate of tax for the self-employed is 55%, whereas for PAYE workers it is 52%. I know it will not happen in this budget, but I ask the Minister to examine as soon as possible a rebalancing of the mix of USC and taxes in a more transparently fair way, because, as I said, the optics are equally important.

The Minister should also reinstate the sunset clause by way of an amendment to this Bill. A sunset clause was included originally, which recognised the penal, onerous and, by implication, temporary nature of this tax. While that clause expired this year, it was reinstated for PAYE workers but was removed completely - and there is no mention of reinstating it - for the self-employed. I strongly urge the Minister to do so this year. It would send out the right signal that this is not going to be a permanent tax.

As regards pensions, I welcome the measure whereby the requirement to take 5% out of approved retirement funds, ARFs, annually is being reduced to 4%. I hope we will see a further decrease to 3%.

I want to make a case for the many people who are on defined benefit pension plans but are still working, and who now see almost all defined benefit pensions being wound up. Their funds are being used to purchase personal retirement bonds. On retirement, an employee whose bonds derive from a defined contribution scheme can either buy an annuity or transfer their money to an ARF. Those on defined benefit schemes, however, find that they must purchase an annuity on retirement. Therefore, the latter group does not have the same flexibility. Purchasing an annuity is an expensive option, particularly at the moment, because interest rates are so low that people must spend a huge amount of their fund just to get a meagre pension. I ask the Minister, therefore, to examine the possibility of giving the same flexibility to those on defined benefit pensions that those on defined contribution schemes have.

I welcome the reduction from 5% to 4% in the mandated withdrawal from ARFs each year. The fact that people have to take out 4% each year will ensure that there is no loss to the Exchequer, because the tax will be paid annually at 4%.

Notwithstanding what I said about the USC, the overall budgetary thrust is very much pro-business and pro-investor. It strengthens and extends the scope of many of the existing measures we took last year. Particularly welcome is the publication of the roadmap for tax competitiveness and the concrete commitment to a range of actions to give certainty to the business community, which is so important. Doubts about the 12.5% corporation tax rate, together with the reputational damage of the "double-Irish" tax arrangement, could, if they were allowed to persist, have been catastrophic for inward investment. Therefore the public commitment to maintain the 12.5% rate and introduce automatic tax residency for companies no matter where they come from - if they are incorporated here - is essential and timely.

On balance, this budget is proportionate and of benefit to everybody. Based on the certainty it provides, we can look forward to better budgets in the future.

Deputy John O'Mahony: Information on John O'Mahony Zoom on John O'Mahony I am glad to contribute to the debate on the Finance Bill, which is effectively the implementation of measures in the budget. It is interesting to see that none of the opposition parties is represented here now. Maybe that is an indication that they are conceding that the budget was an excellent one.

I welcome many of the measures, which, for the first time in five years, demonstrate that there is some light at the end of the tunnel for those people who have sacrificed so much on the back of difficult decisions that had to be taken by this Government after our economic sovereignty was surrendered in 2010 following the boom-bust cycle of the noughties.

Many of the measures, particularly the removal of another 80,000 people from the USC and the reduction of USC rates for those on lower incomes, are very much to be welcomed. I assume and hope that that will continue and that there will be greater measures in budget 2016.

In addition, child benefit measures and the partial restoration of the Christmas bonus provide a welcome signal to vulnerable people on low pay. The restoration of Garda recruitment and the replacement of Garda vehicles are also welcome budgetary steps. Garda recruitment ended in 2010, but it is now up and running again so that crime can be tackled with a consequent reduction in crime figures. New Garda vehicles are badly needed because the mobility of criminals and the types of crimes they commit must be combated.

In the education sector, the budget will provide for 900 extra classroom teachers, 480 resource teachers and 365 special needs assistants. These posts are necessary to maintain the pupil-teacher ratio at its present level. Education is a crucial pillar of our economy and is the reason we have been attracting so much inward investment in recent times. That needs to continue into the future.

Measured supports for home refurbishment, which were announced in last year's budget, have now been expanded. This is a boost for employment in the construction sector which is spread throughout the regions. It is important that construction is not confined to the major urban centres. The recovery is evident in the main cities, but not so in regional areas. These measures will help to achieve that spread, however, as well as supporting employment in the construction sector. In addition, they will help businesses that are tax-compliant while restricting the black economy.

The introduction of a 9% VAT rate a few years ago when the Government first took office has been one of the success stories and has created thousands of jobs. Such jobs in the tourism and hospitality sector are spread throughout the country. Improved and targeted marketing by Fáilte Ireland and Tourism Ireland has been very visible on the ground this year, particularly in the Mayo constituency that I represent, with the Wild Atlantic Way. Various targeted marketing concepts mean that employment is being spread throughout the country. That was badly needed and is thus very welcome.

One factor needs to be noted, however, given the return to growth in the tourism sector. The 9% VAT rate is there to support tourism, so that sector should not take advantage of increased visitor numbers - which are now back up to 2007 levels - by raising prices and thus becoming uncompetitive. The Government has done its part but the tourism sector must continue to take the opportunity without exploiting tourists.

In my region, Ireland West Airport Knock had its busiest ever year, with more than 700,000 passengers, including more than 100,000 in August alone. This emphasises the crucial importance of the facility.

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