Law of Capital Acquisitions Tax and Stamp Duty, Finance Act 2013


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One does not get the employment dividend from much of the export-related activity that one gets in the domestic economy from activity on the high street and in the retail sector and service industries. That is where we need to generate additional activity. There is no doubt that there are good measures in this Bill. The Minister has outlined a new ten-point plan for SMEs. I hope it does not suffer the same fate as the Fine Gael five-point plan in the election, which has not been seen for the past two years. Hopefully, this ten-point plan will last a little bit longer and will actually be implemented.

It is now two and half months since the Minister for Finance and his colleague, the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, introduced budget to this House. We are in a position to give it a more detailed analysis through the Finance Bill that has been presented. It is my contention that this Bill represents act two of a deeply unfair package - that is, budget It will be followed shortly by the social welfare Bill, which will copperfasten the most egregious elements of the budget.

To put the budget in context, we should look at last week's statistics from the CSO, which show that poverty is worsening. The latest analysis indicates that the number of people in poverty has now reached a record level of more than , The increase in the proportion of Ireland's population at risk of poverty, from In a disproportionate part of the budgetary adjustments fell on poor and vulnerable people.

It is important to examine the budgetary record of the Government during the past few years. The ESRI made it very clear that budget was regressive in nature. It stated: "Looking at the impact of the budget it is clear that the greatest reduction in income is for those on the lowest incomes - a fall of between 2 and 2.

That is its assessment taking into account the distributional effects of budget It outlines exactly what is included and what is excluded from that analysis and points out the likely impact of including the items that are excluded, and it does not change the overall conclusion. It is important that is put on the record. Families, once again, were in the firing line. The budget taxed maternity benefit from mid, cut child benefit once again despite the promises from the Labour Party, reduced financial support for back to school costs and hiked college costs again despite the promises that were made.

This is on top of the misery heaped on people from the abolition of the PRSI allowance, which they are now feeling in their pay packets, and the introduction of a residential property tax that takes no account of ability to pay in any meaningful way. Nothing in the Finance Bill undoes the damage inflicted on budget day by these and a number of other measures. The Taoiseach said that the package of tax measures directed at richer people had been the largest tax on wealth ever introduced in Ireland.

It would appear that many of those who made such points do not fully understand the difference between wealth and income. While some Labour Party Deputies have called this a wealth package, the only tax on wealth defined as an asset that is included in the list is the property tax. It must be acknowledged that that is aside from the change to the maximum allowable pension funds that will attract tax relief, which the Minister outlined on budget day, but those changes are not coming into effect until next year and it appears that not a huge amount of work has been done on that issue.

The Minister acknowledged on that day that the estimated full-year savings are provisional at this time, as further detailed analysis of the necessary changes and their impact will be required. I would be the first person to acknowledge that there are some welcome measures in this Bill with regard to the SME sector.

I welcome the focus the Government is putting on the SME sector. The Minister's declaration that "the SME sector will be the driver of the economic recovery across the country" is one with which few would argue. The Bill introduces measures such as improving research and development tax credits and the inclusion of hotels in the employment and investment incentive scheme.

I submit that the Minister could have been more radical in that regard. I ask him to give consideration to a new set of additional measures. Currently, the research and development credit is a function of increases in expenditure using as the base year for comparison. I welcome the limited changes in this area, but overall the incremental approach should be reviewed in light of the pressure on company budgets. In order to encourage investment in the sector, I suggest all research and development expenditure should, for a two year period, be eligible for a tax credit, subject to EU approval.

Second, the cap on outsourced research and development expenditure should be reviewed. I know some improvements were made in this area last year, but it still limits the degree to which enterprises can collaborate with universities and third level institutes in research and development activity and is inconsistent with other Government policies aimed at fostering linkages between these sectors.

Third, the Minister could extend and widen the key employee relief to include companies in loss-making positions. This could be of particular benefit to start-up enterprises. The Minister has reformed the corporation tax exemption for start-up companies, which I welcome. In order to encourage the widest possible uptake of the research and development tax credit, Revenue and Enterprise Ireland should actively target the SME sector with user-friendly information guides on how the relief works.

I welcome the extension of the employment and investment incentive scheme to the hotel sector. The tourism industry is vital to the economy. Good value hotel rooms in a viable industry sector are vital to our tourist offering. However, the hotel sector faces a massive debt overhang, with many other sectors of the economy, which, if not addressed, will lead to significant job losses.

We are already beginning to see this happen. An injection of new equity capital would be much more preferable to a debt write-down and the Minister's proposal is welcome in this regard. However, he could go further by setting up a hotel restructuring fund using funds from the National Pensions Reserve Fund, NPRF, to purchase assets that have a commercially sound prospect for profitability and growth.

Alternatively, he could look to setting up a qualifying investor fund for hotels that may be attractive to private investors, especially from abroad who would like to invest in Irish hotels but do not wish to own hotels directly. As a final point on the sector I note that NAMA and the banks control 10, hotel rooms, representing approximately one sixth of the market. It is important that NAMA and bank-controlled hotels are prevented from engaging in market manipulating practices. The Competition Authority needs to continue to monitor for such practices and take action, if needed.

However, as I said in another debate last week, without access to credit, the SME sector is going to remain in the doldrums. Tomorrow Mr. I draw the Minister's attention to another issue of concern, namely, the increase in vehicle registration tax, VRT which was announced in the budget and is provided for in the Finance Bill.

We know that in January, according to official figures from the CSO, sales of motor cars dropped by about one quarter when compared to the same month last year. I recognise that the change in the registration system, with cars having a registration in the first half of the year and a registration in the second half, may well have the effect of spreading car sales more evenly over the year.

Having said that, a drop of one quarter in January compared to January is a source of major concern. I met a major motor dealer recently and we sat down and went through the figures together. He is predicting that many of the major dealers in Ireland will end up closing and that we are going to witness very heavy job losses in the sector. The Minister must monitor what is happening in the motor trade very carefully because the early signs in are ominous.

He should not be unprepared to change his position if that trend continues in the next few months. The aspect of the Finance Bill I find most disappointing is the lack of significant measures to stimulate the domestic economy. We saw a worrying development last week regarding export figures. The trade data for the month of December showed a significant fall-off in the export of goods from Ireland. Unfortunately, this is likely to feed through to weaker than expected GDP figures for the fourth quarter of If we are to avoid seeing GDP slipping back to negative territory, we need to do something to get the other components of GDP moving in the right direction, specifically consumer spending and capital investment.

We all know that the economy is suffering from very weak overall levels of consumer spending and that there is significant growth in the black economy. Ideally, consumers would do this of their own accord, but sometimes one needs an intervention to nudge people in the right direction. This measure would provide a significant boost for local economies as contractors purchase goods and spend money in shops.

We all know that there is a huge amount of activity in the black economy, particularly small-scale building jobs, home improvement works, renovations and so forth, and there is a way, if we use the taxation code imaginatively, to bring more of this activity into the mainstream economy. It would have the added benefit of increasing VAT and income tax receipts.

We should, therefore, seriously consider this measure. In general, we should be prepared to try new things. If the Minister introduced a measure that did not cost much money but did not work, I would not criticise him for this. We must be open to considering new ways of doing things and introducing initiatives on a pilot basis to see if they would have an impact.

Irish Tax Institute - TaxFind: Section 66

This is one measure I encourage the Minister to consider because we all know that the major drop-off in employment levels since is mainly related to the construction sector. If we can give people a boost through a targeted tax incentive system, under which home owners would benefit, the idea has merit. I have made reference on a number of occasions recently to the fact that the Government is gutting the Exchequer capital programme.

Last year's stimulus programme was little more than a fig leaf to attempt to hide that reality. My party regards the pension levy imposed by the Government in as fundamentally unfair. Most defined benefit pension schemes are in deficit, often substantially so. Few employers can afford additional contributions to eliminate the deficit.

Many pension scheme members have already faced substantial increases in their pension contributions or reductions in benefits as a means of closing the gap in the fund. The introduction of the levy has made the already difficult situation for defined benefit schemes even worse.

Existing pensioners, for example, will probably see their pension increase by less than the cost of living, if at all, as will deferred pensioners. Active members of pension schemes are likely to see their pension reduced or their rate of contribution increased. At the time the levy was introduced we pointed to its unfairness as all pension assets are fully taxed when drawn down as income. To impose a levy on pension assets prior to draw-down represents double taxation and is likely to have a very negative impact on people's retirement income and the incentive to make additional voluntary contributions.

I remain very concerned that the levy will become a permanent fixture, despite the sunset clause in the legislation. One aspect of pension provisions that often discourages take-up is their perceived inflexible nature. Many in society face severe financial difficulties as a result of the economic crisis. In some cases, the individuals concerned have significant pension assets accumulated which they are prevented from accessing until retirement under the terms of the Pensions Act. An OECD report stated that while care is required to ensure that people do not unduly threaten their retirement incomes, early access to pension savings should be considered as a policy option by Government to reduce the effect of cyclicality in the economy.

I believe the proposals in the Finance Bill are limited in scope and unlikely to have much take-up. Employer paid contributions, regular employee contributions, self-employed personal pensions and normal personal retirement savings account, PRSA, contributions are excluded, as are AVCs that are being made for the purposes of purchasing notional added years.

I concur with the view that limiting early pension access to AVCs discriminates against other private pension fund holders. With credit so tight, the self-employed and other business owners have as good, if not better, reasons to want some access to money tied up in their pensions. However, they are effectively excluded. We will seek to amend this on Committee Stage. To put it at its simplest, Government policy on the health insurance levy is driving more and more people from the health insurance market.

Perhaps that is the Minister's intention. It is a system on the brink of collapse. Currently, 6, people are dropping their policies every month. This is resulting is ever-higher premiums for the remaining customers, increasing pressure on an already stretched public health system and additional delays. We know now that the Government has reneged on its commitment not to extend the increase in the levy to customers with lower levels of cover.

There is clearly an affordability crisis in health insurance. It would appear premiums are now going up twice a year and this is hitting hardest at young families with mortgages and high child care costs, the people who are least able to pay. According to the Department's own regulator, the Health Insurance Authority, the people leaving the market are those who are younger and healthier, and those with children.

The market has gone from being one where more and more new customers were joining, a phenomenon that supported the principle of community rating, to one where the market is declining and the very customers who are leaving are the young families who should be its lifeblood.

As noted by one industry source recently:. It seems entirely lost on the Department that the best way to provide protection for the older and sicker is to ensure that younger healthier people continue to find health insurance attractive in terms of benefits and costs. You can't get intergenerational support if you drive younger people out of the market. The Revenue job assist scheme allowed employers a double wages deduction if they employed a person who had been unemployed for 12 months or more.

I know the scheme has been criticised by industry for being too limited in scope, with most applicants not meeting the scheme's strict criteria. However, it is disappointing that no details of the replacement scheme, the jobs plus initiative, have been provided. I understand this will happen shortly, and the Minister indicated that again tonight. It is vital when it does happen that it is focused on the needs of the long-term unemployed. This is now an acute problem with nearly , people out of work for over a year.

Once someone reaches this unhappy milestone it becomes increasingly difficult to get back to full-time paid employment at a decent wage level and the replacement scheme, jobs plus, needs to be sufficiently flexible to reflect the many facets of long-term unemployment, which is now a deep seated economic and social problem.

I welcome the extension of the fuel rebate scheme to bus and coach operators. They have suffered from massive increases in the cost of their main input in recent years.


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I am concerned about the impact on firms that do not use licensed hauliers. A small supplier of goods, such as a catering supply firm or concrete manufacturer, that runs its own fleet will not benefit from the diesel rebate and will be at a disadvantage. I ask the Minister to look at this again on Committee Stage.

As announced in the budget, the carbon tax will be extended to solid fuels on a phased basis. In addition to the obvious fuel poverty implications, how will the Minister combat the smuggling and illegal sale of solid fuel products, particularly in the Border area? The proposal was a recognition that Ireland is currently seeing an increase in alcohol consumption within the home. One of the reasons often cited for this trend is the significant price differentiation of alcohol products between on-trade and off-trade establishments.

Not only has this discrepancy affected social behaviour by discouraging people from consuming at public houses, but it has also been cited as a contributing factor in the rise of binge drinking and under age drinking. He proposed that the proceeds of the measure be ring-fenced for sports and recreation. There were some suggestions that the proposal was considered to be in breach of EU competition law because it solely targeted off-sales. However, legal opinion commissioned by the industry from Arthur Cox solicitors suggests that it would be feasible if the proceeds were ring-fenced for specific purposes.

Assuming they are accurately reported, I welcome the Minister for Transport, Tourism and Sport's views and I think this is something that we should consider again. The Minister's references to bond options and the reduction in the cost of borrowing are welcome. That is something the agency is actively considering. I would encourage it to do so. It would send a strong and powerful signal to the markets that Ireland is on the brink of successfully exiting the programme and being able to fund itself on the international markets.

I hope we see such a move by the NTMA in the very near future. I thank the Minister for his Second Stage speech and I welcome the opportunity to respond to it. As he began his contribution, the Minister took the opportunity to reflect on recent developments. I agree with the previous speaker that we need more detail to see if this was the best type of investment, but the fact that we have not lost on it has bucked the trend of some of the financial institutions we have had to take on board in the past number of years. There are serious concerns about redundancies.

The statements are clear that voluntary redundancies are being sought. There are fears that these savings will necessitate compulsory redundancies. I hope there is agreement and that the Government has ensured there will be no compulsory redundancies. What will that mean for job prospects in the future? The Minister commented that the development illustrates that there is value in the State's holdings in Irish banks and that the Government will sell these assets when the price and time are right for the taxpayer.

That statement is factually correct. My party and I have never disputed the fact that there is value in the banks. The Minister says the Government will sell these assets when the price and time are right. There is a significant expectation that the retrospection of the deal, in terms of separating sovereign and banking debt, is what we will achieve and that the ESM will purchase these for historic prices.

I have concerns about the Minister's statement. Deputy Michael McGrath and other Deputies who are members of the Joint Committee on Finance, Public Expenditure and Reform have heard the banks say that if there is an investor, they will sell their assets. I worry about how that would play out in terms of trying to sell assets for more than their current market value. The investment was far superior to the current value. In saying that, this is the Minister's second Finance Bill, and it is one of three Bills that cement the budget for , the second austerity budget presided over by Fine Gael and the Labour Party.

When the Finance Bill was published, the Minister claimed he was making good progress in implementing the programme for Government. I am struck by the Minister's continuing references to the programme for Government. This programme, written by two parties that had received a huge mandate from the people, contains laudable sections, but I wonder if the Minister and I are in possession of the same document.

What happened last week, where the Government took on the debts of Anglo Irish Bank and Irish Nationwide Building Society in the form of a sovereign bond that writes the total on the cheque for once and for all and takes on the liabilities, making good the letters of comfort sent by the Minister to the Central Bank? The Minister continues to keep the coffers open for the banks and the bondholders.

The parties also promised in the programme for Government that there would be an end to asset transfers to NAMA because they were unlikely to improve market confidence in either banks or State. The programme for Government contained a promise that a strategic investment bank would be established - that was a major pillar of Labour Party policy - but the Minister and I have had more than one exchange on that and we all know it will not happen any time in the near future.

Its precursor has not even been brought forward in legislation despite it being announced over a year and a half ago. The programme outlined how all remuneration schemes for banks subject to State support would undergo a fundamental review to ensure an alignment of interests between banks, their staff and the taxpayer. I know that the Minister will say we have to await the Mercer report. We were told it would be here by the end of the year but now we are told the Minister has access to the report. While the Minister is toing and froing, one of the banks that was subject to that review no longer exists and, lo and behold, the Minister was able to confirm today that some of the senior executives, despite losing their jobs in the liquidation, are now back being employed by the liquidator.

These are the commitments on which the Government claims to be making progress. Another commitment in the programme for Government is that any site valuation tax must take into account the significant number of households in mortgage distress. I will come back to that promise in detail later. The question can genuinely be asked if I have the wrong document or if the Government still maintains its progress in some of these programme for Government commitments.

Turning to the Bill itself, a Finance Bill should do a number of things and I want to give my overall impression of what the Bill does and does not do. A Finance Bill should, in times of recession anyway, contribute to reducing the deficit.


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Does this Bill reduce the deficit? One could argue it does, even if it does not do so in a way that I would agree with or support. A Finance Bill should stimulate economic activity and support business. Does this Bill do that? It certainly attempts to support business and there are a range of business measures in it, some good and some bad. It definitely fails, however, to stimulate the economy and certainly fails to stimulate domestic demand. While there are some good measures for business in the Bill, they are no substitute for a real and meaningful stimulus, such as the one my party presented to the Minister last year in our jobs action plan "Create Jobs, Create Growth".

That plan required actual spending on infrastructure creation which would have assisted business and created jobs, as well as a series of measures, such as abolishing upward-only rent reviews, that would have saved many businesses from closure. The Finance Bill should also act to ensure redistribution. It should have at its heart a policy of fairness.

Clearly, the answer is "no" unless we believe redistribution should have some sort of reverse effect, from the bottom to the top. As it was last year, this Finance Bill is a disappointing missed opportunity. I live in the real world. In the budget the Minister had the chance to reduce the deficit fairly, to stimulate business and to ensure that middle and low-income families were protected from the worst of the necessary financial adjustment.

Because I live in the real world, I submitted a budget alternative to the Department of Finance. I know the Minister receives hundreds of these submissions each year and I know many of them are unrealistic, demanding as they do provisions for vested interests without any interest in how those provisions are funded. The budget I submitted, however, was tough but fair. It did this without targeting the vulnerable and while supporting families and mortgage distressed householders. To protect these groups, it sought tax increases from higher earners, a fairness in the tax code and an end to the gravy train for politicians and top grade civil and public servants, to name but a few measures.

All or any of these could have been done in this Finance Bill but the Minister and his colleagues in Government chose not to. I am reminded as we stand in this Chamber tonight that by the time we debated last year's Finance Bill, the Government had been forced into several U-turns because of measures announced in the preceding budget.

The attempted cuts to people on disability benefit and the cuts in funding for disadvantaged schools - both proposals from Labour Party Ministers - had to be shelved. That was a good thing. The cuts should never have made it on to the agenda but a U-turn was better than forging ahead with something so deeply unpopular as to be unsustainable. Unfortunately, no such wisdom has been shown in the two months that have passed since the announcement of the budget for For example, despite a collective and emotional campaign against the cut to the respite grant, the Government has stayed determined to implement that cut in its entirety.

The line has been that there is nowhere else that sum of money could be found, but here we have a detailed Finance Bill that has numerous additional new sections to those that were announced in the budget. Many of those new sections, if they come to fruition, will entail additional costs to the Exchequer.

There is no money to reverse really harmful cuts such as that to the respite care grant, but other measures have been inserted without any proper costing. That is simply not acceptable. The Minister argues that they are an essential cost in that they assist business or indirectly foster growth, and I am sure that is true in some but not all of the cases.

They are a cost none the less. How is it that the Minister can find money for these measures but not to reverse the respite grant cut? I am particularly concerned that the Department does not seem to be able to put a cost on these new measures, a trend that is apparent time and again. Last year I asked for the Finance Bill to be costed section by section and that could not be done. During a briefing on the Bill today, the officials, who otherwise did an excellent job answering questions as thoroughly as possible, could not tell me an estimated spend for a number of these sections. In some of the sections there will be an expansion of measures that were introduced last year even though there are no data that show the effectiveness or cost of those measures in the last 12 months.

The Minister cites our overall growth projections and deficit targets as justification and vindication of his second austerity budget. We are all agreed we need good economic indicators, but these figures mean nothing if they are having no tangible impact on people's real lives. They might mean a lot to people examining the economy who are trying to steer the ship in the right direction but mean nothing to those trying to get by day by day.

Does he honestly think that anybody adversely affected by budget cares if he is pleased that we are in line with the troika targets or that he has met the budget adjustments this year set by the troika? They do not care about any of that because numbers are meaningless to them. They are interested in impacts and results. If the result of the Finance Bill and the budget is to improve their lives, then they and I will believe the Minister has done a good job.

If the Minister announces a new measure in the Finance Bill which he considers absolutely necessary to improve the economic realities of those across the State and his measure works as he says, then he has done a good job. However, to date, the Minister has not done a good job. I will use the example of one of the new measures announced last year, the special assignee relief programme, SARP, because the Minister announced this with much fanfare last year and dedicated a large section of his speech to its introduction at budget time. This tax-free clause was to be the measure that attracted high-powered executives to Ireland to stimulate economic activity and create jobs - we all will be aware their children got free fees, or they got tax reliefs against their fees and flights to and from America or from wherever they came.

The Minister told us that SARP would place us up there with our tax competitors, who are becoming increasingly more clever than us in the race to the bottom to attract FDI at any tax cost. When I tabled a parliamentary question in October to provide an update on SARP given that it was such a central element in last year's Finance Bill, including the number of persons who have availed of the tax relief, the total amount of relief awarded and the number of jobs that have been directly created as a result of this relief, the Minister could not give an answer.

In fairness, I appreciate that many tax measures can only be viewed in their totality after being one year in effect and I tabled the question today to see if the Minister can give me an answer. There was much hubbub about this being tied to job creation, etc. The Minister also must be honest. He touted this scheme as an essential new additional spend to budget , for all the reasons that I have already outlined. With a scheme as important as he told us this would be, I am more than a little surprised that he has not monitored it more closely to see how successful it has been.

I am also more than a little curious to see how much it has cost and how many jobs it has created. The impact of SARP might not be clear, but there are some facts at our disposal. For instance, since the Government has come to power 20, jobs have been lost in the economy and long-term unemployment has increased. Also, in the same two years, , people have emigrated, 70, of whom are from within the year demographic. We also know that over the past year IDA created just over 6, net jobs.

Armed with facts like these, the Minister can understand why anyone would be sceptical about how effective this Finance Bill will be for the economy as a whole. There can be no denying that this Finance Bill is oriented towards a section of the business community. I am acutely aware that the economic strategic policy of the Government appears to rest, not merely on a hope and a prayer, but on an ever accommodating tax code for the international business community so that it will come flocking to Ireland's rescue.

Such a policy has its work cut out for it. The City of London, the Dutch and Singapore are all adapting their tax systems and attempting to outstrip Ireland as a tax-friendly location for business. It is most important that we continue to offer a competitive regime to attract foreign direct investment into this State but the attractions should include more than just the tax code. They should also include first-class infrastructure, world-class graduates and a society to which any high-flying executive would want to move his career and family.

That said, I am concerned that in the Bill, and in the Department in general, there does not seem to be a policy on an effective rate of taxation for business. There is much discussion about this and the failure of the Minister to deal with this in the Finance Bill is seriously questioned. I have asked parliamentary questions about this in reply to which the Minister has been less than forthcoming with his information, and yet across the world, from the OECD to the European Commission and economic forums of world leaders, this issue of Ireland's business tax rates, and the lack of an effective tax rate which allows major companies to pay a very small amount of taxation using schemes and loopholes, has been dominant.

Everyone wants business to succeed and be accommodated, but there is a growing consensus that this cannot be done at any price. It is not bad to use finance legislation to deal with the tax system to attract business, but it is limited in its applications.

It is clearly something on which the Department is lobbied quite intimately by certain vested interests. As I have stated, I do not object to this if the results of it are positive for all of the people of Ireland, but I question whether there is equality of opportunity to lobby the Department. When an auditing firm or a stockbroker sends the Government its list of tax incentives needed to facilitate business, does it receive the same level of attention or more than the submission from the respite carers' group that tells the Minister the cut to its grant will not only decimate its quality of life, but probably end up costing the Exchequer more?

That is merely an example of what the people will wonder when they see the contents of this Bill and the boxes it ticks and does not tick. There are many other examples. I use it as an example of the access to corridors. I understand that it comes from others but it is part and parcel of the budgetary proposal.

The Bill does tick some boxes. In the past, the Minister has presented me and my party as negative when we were attempting to constructively criticise legislation. We all will be aware that is a political ploy and it is par for the course. He will be aware that we have never shied away from welcoming measures for which we ourselves have campaigned. The increases in capital gains tax and acquisitions tax are positive moves.

I welcome them, even if they do not go as far as we would like them to go. I also welcome the further clamping down on some tax avoidance measures, such as the withdrawal of the foreign service relief for ex-gratia payments and the implementation of stamp duty anti-avoidance measures. I welcome the extension and improvement of start-up relief, as long as it continues to be tied to job creation. The changes to how employees' benefit trusts are treated for tax purposes are a positive move.

I am glad to see that the Bill contains excise duty relief for hauliers and transport providers. The relief for hauliers is something for which we called in our jobs action plan last year and I, too, believe it has the potential to be revenue neutral. Significantly, the tax treatment allowances for civil partnerships are necessary and good and welcome news.

There are other parts to the Bill that also would merit welcome. However, there are some features in the Bill over which there are question marks. The establishment of real estate investment trusts, REITs, has been widely welcomed by the property analysts and numerous economic commentators. I have some concerns and questions about these entities. I recognise that these are functioning in many jurisdictions and, in many cases, successfully so.

They have been established in the United States since the s and over the past decade a plethora of countries have started to introduce them. Essentially, these REITs are investment vehicles and the level at which the investment is set, and the cost in that regard, will be a determining factor. There are also questions regarding how the Minister has set these investment vehicles up. One of the concerns is that the REITs, as entities, thrive in low-rate environments. They have sprung up in distressed property markets worldwide to take advantage of collapsed property prices and while they may encourage some recovery in property prices, they also have many of the warning indicators associated with bubble investment vehicles.

I am concerned that this State may be hopping on a bandwagon that has already pulled out of the station. There also are questions regarding the mixed assets and that the legislation seems to lack any meaningful asset test to protect potential investors. These are some issues which we will be able to address in more detail on Committee Stage. In addition, the changes to research and development tax credits for employees give rise for concern. Why was this not spotted last year? What is the thinking behind it?

About Bohan and McCarthy: Capital Acquisitions Tax

There are no quantitative data on how the scheme introduced last year is playing out today. I question the living city initiative on which I have serious reservations. Regeneration of urban centres is absolutely crucial. This is regeneration of housing estates that have been crying out for help for many years and have been ignored by successive governments and finally we are seeing some movement.

The writing-off of tax over a period of years to renovate what is probably a small number of Georgian houses in two counties looks and smells very much like section 23, and does not make sense. There are serious concerns over why the State would provide such support for somebody who is developing the bottom of a Georgian house into a retail unit, thereby putting the next house, which is not Georgian, in the same street at a complete disadvantage.

It skews the market terribly and also allows for somebody to invest huge amounts of money. This means that the State is potentially giving hundreds of thousands of euro to people to fix the upper storeys of a Georgian house for living accommodation and the basement and ground floor for retail use. That is seriously questionable. However, if their tax liability is high enough that is basically it. While there is a minimum threshold there is no maximum. I do not live in Limerick and have not spent much time there but I have been around the city and seen the accommodation in Moyross.

Many people there would love the Minister to be announcing that if they carried out upgrades to their houses, the Government would write it off from their tax liability for the next ten years. This clause basically provides for a grant to repair a house by way of tax foregone. The people who own Georgian houses are able to avail of this provision but the people in social housing or normal houses are unable to avail of it.

Indeed the Government is asking them to pay a property tax, either through increased rent in social housing or directly via the property tax. This is seriously questionable and I do not understand the rationale behind identifying a select number of properties. Just selecting people in Georgian houses does not make sense.

If the Government wants an area-based scheme, it should specify an area-based scheme. Why restrict it to Georgian houses? Why put no upper limit on it? At a time when the Government is asking 1. It stinks to high heaven. These are some of the issues that we will also go through later.

The largest tax take this year is planned to come from family-home tax, and I will deal with this in a moment. The Bill contains several measures to increase indirect taxation, namely through excise duties and a change in certain tax treatments. One of the more notable changes is the taxing of maternity benefit for new mothers and the Minister has added to this by taxing adoptive benefit, and health and safety benefit - a payment paid to expectant mothers and breastfeeding mothers who cannot be accommodated in their workplace. These payments were traditionally left untaxed.

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Last year, I said the Government would probably do this and this is what it has done. They were left untaxed in recognition of the cost incurred by mothers and families when bringing a new baby into the household. It was interesting to hear the Constitutional Convention at the weekend discussing the clause on facilitating mothers to stay at home and its decision to bring that clause into the modern age. It was interesting because the Constitution has a specific clause to facilitate mothers in the home and yet, the Government has step-by-step tried to dismantle the financial support mothers and parents receive when having children, ranging from the measures we are discussing now to the constant attacks on child benefit in the Social Welfare Act and what has been reported in the media in the past week.

The Bill also legislates for the provisions in the budget to increase excise duty on alcohol and cigarettes, to increase VRT and to extend carbon tax to solid fuels. These tax hikes all tend to hit middle and lower-income consumers disproportionately. The Minister is aware of this, yet each year he goes back to the same pockets and tries to squeeze a little more.

I am particularly concerned at the changes to VRT. Motorists and the Irish motor industry have been really feeling the effects of the recession. Fuel hikes, motor tax hikes, the licence fee hike in this Bill and diminishing income have all hit car sales and employment in the industry. The Irish motor trade continues to be a key employer across the State but it has been seriously hit by the recession. The increase in VRT is devastating for a fragile industry and the biannual number plate will not negate the impact of increased VRT rates.

While it is not addressed in the Bill, the Minister missed an opportunity to bring fairness to the motor tax system. I support the sub-classification of the bands, but this should have been done in a way that reduced the tax for small and family cars and increased it substantially on expensive cars. The environmental goal of forcing the car industry into making its models carbon efficient has succeeded. Now the Government should address the disparity that exists in the motor tax system whereby someone who owns a Nissan Micra is paying the same motor tax as someone driving a Volvo V The Minister hopes to bring in a large portion of tax this year from the family home tax.

The programme for Government specifically stated that any property tax would take into account the significant numbers of people in mortgage distress. Our Private Members' motion tonight is about mortgage distress and removing the bank's veto. Some households fall into mortgage distress every day and the Minister plans to impose an additional burden on them. There is a different way to do it by introducing a proper property tax, which is a wealth tax. I produced the legislation which is open to be amended and shaped in whatever way the Government wants.

This is what governments in other countries are doing. The Spanish Government has recently reintroduced a wealth tax and the Liberal Democrats in Britain advocate one. The main opposition party in Germany, the SPD, is committed to introducing such a tax if it gets into government. This is what the Government should do instead of penalising householders across the State because they have a roof over their heads.

I could elaborate on other measures in the Bill. I believe it is a missed opportunity. As I mentioned earlier, the Bill has some positive aspects that will, hopefully, have some beneficial impact on the economy but they are too small and too far between and do not negate the seriously damaging policy of austerity. On the whole the Bill is a missed opportunity and underpins the austerity policy of the Minister's party and the Government. I have very little positive to say about the Bill, so I will say the one positive thing I can think of.

I wish to commend the Department of Finance officials on the obvious hard work they need to put into preparing what is clearly a very technically complex and mind-bending Bill. They do so every year and deserve great credit. They were very helpful in answering some of my questions this afternoon and this evening. The conclusion I have drawn from my reading of the Bill is that there is not an awful lot in it. To my mind, that is the biggest problem with this Bill. I do not want to reiterate the point I made earlier on the Order of Business in regard to the timing of the introduction of this Bill, except to say that its introduction late at night is connected to there being nothing much in it.

It smacks of manipulation of the debate around what is a critical issue about which every citizen of this State is concerned because of the severity of the crisis we are in, namely, the financial state of this country, and the measures and proposals being put forward by the Government in terms of offering relief, hope and a strategy for getting us out of that mess. This Bill is being introduced late at night precisely because it does not do that. I will be in London during the next three days on Government business. If I had not introduced the Bill tonight it would have had to be introduced by a Minister of State.

I wanted to introduce and speak on the Bill. I have heard that. However, I am unconvinced. I am not aware of the Minister's schedule or meetings in London. Perhaps he can tell me about them afterwards. Maybe he will convince me. This is the second time in two weeks that we have dealt with critical legislation dealing with the finances of the State at a time when they are in the worst state they have ever been in the history of the State.

To my mind, it is problematic that this should happen twice in two weeks into the early hours of the morning. I see a connection between what happened two weeks ago and what is provided for, or not, in this Bill. The Minister presented that repackaging as a great victory and implied that there was something in it for the citizens of this country and the economy when the real substance of what went on during that late night session was that the Minister confirmed the disastrous decision made by the previous Government, legally committing us to paying every cent of those gambling debts and guaranteeing we are facing into long-term economic stagnation.


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The quid pro quo of making that commitment is that the Government now has no room to manoeuvre. That is the point I am making. The reason there is nothing in this Finance Bill that will make any substantial difference is because the Minister has given away all of our room to manoeuvre. What he should and could have done, much as he protests it is impossible and so on to do so, was said that these are not our debts, that our economy cannot afford to take them on if it is to have any hope of economic recovery and if he, as Minister for Finance, is to have any room to manoeuvre to propose measures that could help stimulate the economy and economic growth, and that we will not pay them.

To put it simply, because of the guarantees given, this Bill can offer us nothing. Furthermore, as if committing to paying off Anglo's debts was not bad enough, it has emerged during the past two weeks that even the short-term savings, about which the Minister was crowing two weeks ago we would get in and , cannot be translated into any measures which make any substantial difference to the citizens of this State. It is somewhat debatable if these short-term savings even exist. It is clear that even if they do, and if the Minister's arithmetic is correct, they cannot be translated into any reversal of proposals to introduce a home tax, water tax or previous austerity measures such as the universal social charge imposed on low and middle income families, all of which not only ensure people suffer but are utterly destructive in terms of the domestic economy and its capacity to recover.

The Government claims that none of these savings can be used for public investment programmes or to prevent the troika demanded sale of State assets, which to my mind are sales which move us precisely in the opposite direction to that we need to go if we are to have any chance of economic recovery. I would like to comment on the sale of Irish Life. I do so not for the sake of it but because I believe somebody needs to puncture the consensus. It beggars belief. We propose to hold on to all of the institutions that are broke, insolvent and have bad debts and to sell off a State asset that is profitable, resulting in the loss of a couple of hundred jobs, it being asset stripped and all of the profits derived therefrom going to somebody else.

How on earth is this a good deal for us? I do not get it. Private financial institutions committed not to the interests of this State or its citizens but to profit caused the financial crisis. The Government now proposes to privatise a profitable financial institution owned by the State.

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It is beyond belief. The Minister's comments that this package is part of a general situation about which we should be optimistic and that things are slowly moving in the right direction are utterly unconvincing. The reality is that the key decision made by the Minister ensures there can be no development or growth in the domestic economy and no improvement in employment. What we are left with is a few gestures, which I welcome, which are marginally progressive but almost meaningless in terms of what they will gather for the Exchequer.

This is progressive, but so small as to be utterly insignificant. I do not agree with tax incentives because they are focused on the same premise which caused the crisis in the first place. This premise is that we need to incentivise parts of the private sector to deliver the investment and growth the State itself is not willing to provide. Even here, the measures are marginal. They are small tweaks in the research and development credit, the foreign earnings deduction and the living city initiative which, frankly, is a bit bizarre and the Minister will have to explain this one.

Why should people with Georgian houses get a particular tax break? The Bill also includes tax breaks for the aviation industry. Aside from the specifics of these measures, the problem is they are part of the same failed approach whereby in so far as we can do anything, it is about incentivising the private sector. These are small tweaks and extensions to the much more fundamental policy, which the Minister has refused to examine, of stating we must keep tax on the corporate sector low. This means if we must levy taxes they must be levied on low and middle income workers.

The most important dimension of this comprises the universal social charge, which is destroying people, the household charge and water charges. Whatever we do we must not look at corporate tax and think about increasing it or even forcing the corporate sector to pay the This is what the Bill should be examining and what we should be discussing. We need serious interrogation on this and we will deal with it on Committee Stage. The sacred cow that low corporate taxation was the key to our economic success could possibly stand up during the period of the Celtic tiger, but four years after the collapse of the Celtic tiger can we really say this sacred cow should not be questioned?

The Minister's red-line protection of low corporate tax rates has delivered nothing in the past four years in terms of economic growth or employment. The Minister claims a marginal increase in the export sector, but this is at the expense of the domestic economy.

There has been no net increase in employment.

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This is not a vista of hope for anybody. I propose the Minister examines whether we should do things the other way around and that we have a serious debate on this. This would be a combination of higher income taxes and increasing the effective tax rate paid by corporations. This would do more to stimulate the domestic economy by creating demand on the high street and by providing us with funds for a public investment programme which could stimulate growth.

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Law of Capital Acquisitions Tax and Stamp Duty, Finance Act 2013 Law of Capital Acquisitions Tax and Stamp Duty, Finance Act 2013
Law of Capital Acquisitions Tax and Stamp Duty, Finance Act 2013 Law of Capital Acquisitions Tax and Stamp Duty, Finance Act 2013
Law of Capital Acquisitions Tax and Stamp Duty, Finance Act 2013 Law of Capital Acquisitions Tax and Stamp Duty, Finance Act 2013
Law of Capital Acquisitions Tax and Stamp Duty, Finance Act 2013 Law of Capital Acquisitions Tax and Stamp Duty, Finance Act 2013
Law of Capital Acquisitions Tax and Stamp Duty, Finance Act 2013 Law of Capital Acquisitions Tax and Stamp Duty, Finance Act 2013

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