Tuesday, 6 May 1986
Dáil Eireann Debate
Minister for Finance (Mr. J. Bruton): I have not much more to add to what I already said. I would be happy to allow Deputy O'Kennedy to make any further remarks before bringing the matter to a conclusion.
Mr. O'Kennedy: I have argued this case at sufficient length. What I have endeavoured to demonstrate is that increasing the dependent relative allowance to £500 would be an incentive to children to look after their parents and grandparents at home. I think I have satisfied the House that not only is this the best form of care for old people, but it is also the cheapest form of care from the point of view of the Exchequer. I will press the Minister in those circumstances to ensure that we can achieve two ends at the same time, better domiciliary care and a cheaper burden on the Exchequer, instead of placing people in institutions which are overcrowded and totally inadequate. This is the right direction to move in both from a social and economic point of view.
Mr. J. Bruton: I have much sympathy with the point of view expressed by  Deputy O'Kennedy in regard to dependent relatives. It is highly desirable, as he has said, that people of advanced years should be cared for in their own homes to the greatest extent possible and that their relatives should be given a fiscal incentive to ensure that that is done. However, the problem is that, in any given year, the Finance Bill is relatively tightly drawn in so far as the amount of financial commitment one can make is concerned. I realise that Deputy O'Kennedy is not putting forward this amendment with a serious prospect of its being accepted but rather for the purpose of having a useful debate. I do not criticise Deputy O'Kennedy for that. The proposal he has put forward would cost £4.2 million in 1986 and £7 million in a full year.
Mr. J. Bruton: The Deputy has fullminated at considerable length about the problems which are caused by borrowing and by increasing commitments by the State in excess of what the State can afford. I am, therefore, somewhat surprised that he should be pressing this amendment. It is not wise that he should press an amendment which would involve very substantial additional commitments on the part of the State in this current year. It is notable that Deputy O'Kennedy has not put forward any proposals accompanying this amendment which would suggest how £4.2 million could be raised in 1986 to pay for this or how £7 million might be raised in a full year to pay for it. It is not permissible for any Deputy other than the Minister for Finance to put forward an amendment which would impose a charge on the Exchequer. If he had been serious in putting forward the amendment he might have suggested alternatives taxes or alternative expenditure cuts of sufficient size to enable the House to be satisfied that the proposal advocated by the Deputy would not result in an increase in the overall requirement to borrow money, bearing in mind that we are borrowing for one sixth of our  total expenditure and all our capital requirements, and that our national debt is the highest in Europe.
These are the primary considerations that must be borne in mind, and I regret to have to bring those points to the notice of the House. I have great sympathy with the Deputy's points, particularly those made last week about old people being cared for in their homes and that the neighbourhood in which they live should consist of a mixed generation community both from the social and the environmental points of view, rather than having all young married couples, without a mix of old and young people.
I do not oppose the Deputy's point in any sense of disagreement with his objectives, but regretfully the money is simply not available. It is fair to say that this allowance has remained fairly static, in my recollection, during many debates of this kind. It was introduced, or possibly increased, in 1948 and has remained at the same level, nearly, for many years. It is probable that there is a danger of a degree of abuse of an allowance of this kind, because all that is required is that dependence be indicated. This is somewhat difficult in a society which is not as computerised or controlled as it might be: it is possible that claims would be made on behalf of people who are not truly dependent at all but who could claim to be dependent and given the relatively modest allowance, and it would be rather difficult and cost expensive to prove to the contrary. Therefore, there is a possibility that the allowance might be abused.
Mr. J. Bruton: I remember it very well. I participated in Finance Bill debates even though I was not Finance spokesman, in the same way as Deputy Brennan is participating in this debate. One of  the suggestions then made to me by the Minister for Finance was that——
Mr. O'Kennedy: If the Chair would listen he might then be able to get a reasonable grasp of the point and make a ruling. We have agreed a very tight schedule and I am appealing to you to ensure that everything that is said is relevant to the Bill before us and not to debates in the House five years ago. I appeal to you to ensure that we confine ourselves to the issue in the amendment——
Mr. J. Bruton: I am somewhat surprised at the interruption because it appears Deputy O'Kennedy considers that a discussion on his amendment, which I have acknowledged as being of some social importance, is irrelevant and should be curtailed. Deputy O'Kennedy displays a certain lack of sincerity in putting forward amendments and then, having put them forward, seeking some advantage, not known to other Members of the House, by trying to curtail the debate by making spurious points of order. They could be more accurately described as points of disorder: indeed in this debate we have heard more points of disorder from him than points of order. Regretfully, one has to become used to that in matters of this kind.
A number of years ago relatives were dependent on this tax allowance for their subsistence, and in intervening years Governments of both parties or of major formations in coalition introduced many allowances and benefits specifically designed to deal with the type of person who would normally be claiming a dependent relative's allowance. We introduced the  free travel benefit, the free electricity allowance, the free television licence, the free telephone scheme, the free bottled gas scheme and various fuel schemes. They are all available to people who would normally be described as dependent relatives, in addition to which a tax allowance in respect of rented accommodation is available to those above 55 years of age —— it was originally 60 years.
If one looked at these allowances in isolation one could make the case that the allowances have not been increased very rapidly or substantially, but many other compensation measures have been introduced, designed to achieve similar effects. Deputy O'Kennedy sought to disparage some of the points I made earlier, which is not surprising but totally invalid and representing wishful thinking by him. It is my intention to review the level of the dependent relative's allowance between now and the Finance Bill following the 1987 budget to see if we can do anything more in this area. At the outset of this contribution I indicated a good deal of sympathy for the case made by Deputy O'Kennedy, which is very similar to one I made myself at another time. I hope to be able to do something about it next year but I cannot give any guarantee of that kind and would not wish to mislead the House by so doing.
Mr. O'Kennedy: The Minister asked me why I did not propose alternative means of fund raising. He knows it is not permissible for anyone but the Minister for Finance to make proposals to levy extra taxes and I treat that point with the contempt it deserves. Secondly, he has said that the total cost this year would be £4 million and he invited me to indicate where savings could be achieved for the Exchequer. If the gross cost this year would be £4 million —— £2.5 million net —— the saving to the Exchequer this year would be far in excess of that amount because people would not have to be cared for in institutions and geriatric homes. The Minister may not be prepared to accept that but perhaps his colleague, the Minister for Health, would accept it. A sum of £2.5 million goes  nowhere in the provision of geriatric services. I regret the Minister is not prepared to meet the case.
Mr. J. Bruton: It is fallacious for the Deputy to suggest that the bulk of the people in respect of whom dependent relative allowance might be claimed are people now in full time care and who in the event of the allowance being dramatically increased would be withdrawn from full time care or that they are people who would be put into full time care in the next year but who in the event of the amendment being accepted would not be put into full time care. It is only in those two eventualities that the saving mentioned by the Deputy would occur.
I admit I am working on the basis of a degree of subjective judgment based on work in my own constituency. The bulk of people in respect of whom dependent relative allowances are claimed are people who would not be in full time care, irrespective of whether the allowance was £100, £1,000 or zero. The majority of the people concerned live at home with their relatives and will continue to do so for a number of years. While the allowance is very welcome it is not something that influences their decision to stay at home or not. The only way the contention of Deputy O'Kennedy would be true would be if a substantial number who are not claiming the allowance would leave county homes or hospitals and return to their relatives or who, alternatively, would not go into such institutions if the allowance was increased. That is not the case. Deputies will agree that in most instances people go into county homes or hospitals not for financial reasons but because members of their families are physically incapable of looking after them. That is my experience from discussions I have had with people in my constituency. In most cases the family concerned will do everything possible to  keep their relative at home, irrespective of whether an allowance is payable. The increase the Deputy is proposing would be worth a relatively small amount per year to the average family. It would not be worth much more than about £150 to £200 per year and I do not think that increase would tip the balance one way or another with regard to a person staying in his own home.
The financial arguments made by the Deputy do not stand up. That is not to say that there is not a good deal of validity in the point he has made. From a social point of view it would be desirable to give a reward or a recognition in the form of a tax allowance to those adult children who look after their aged relatives. However, quite frankly it would be turning economics on its head to make the rather more extreme claim the Deputy has made, namely, that this would save a substantial amount so far as institutional care is concerned. While I would like to believe what the Deputy is saying is true, I have to say I do not believe it.
The case the Deputy has made must be based on social considerations rather than on financial considerations. That is not to disparage the social considerations. There are genuine considerations in favour of what the Deputy is suggesting from the social point of view. Quite regardless of the position the Deputy adopts on the amendment, I undertake quite freely that between now and the budget and the Finance Bill next year I will have an analysis undertaken, in consultation with the Department of Health of the claimants for the dependent relative allowance to see the extent to which an increase in the allowance would ultimately reduce the level of costs claimed by health boards in respect of institutional care. If the Deputy's case can be substantiated — I hope it can, although I doubt it — I will be encouraged to introduce an amendment next year on the lines he is suggesting.
Mr. J. Bruton: The Deputy's comment is based on a double hypotheses, neither of which is likely to occur. I will not say which is the first and which is the second but both are highly unlikely. I mean no disrespect to the Deputy. I think that the Minister for Sport might be a suitable shadow spokesmanship for the Deputy. I will leave it at that. I think that pretension is not to be encouraged. It is probably the eighth deadly sin and is to be avoided at all times. It is not a desirable characteristic to display.
I do not want to drag out the debate on these amendments. They are all related to the table in the Bill setting out personal reliefs. The personal relief for a married man, for instance, is increased in the Bill from £3,800 to £4,000. The amendments are designed to increase the existing  personal reliefs by 10 per cent. There is an opportunity to allow PAYE taxpayers to catch up in some way for the loss over the years of higher inflation when the burden on them increased. The allowances in those years did not increase appropriately in line with inflation. There is now an opportunity to redress that matter in respect of personal reliefs for PAYE taxpayers. Amendment No. 27 relates to the PAYE allowance and is similar to an amendment put down last year. Our proposal is that the employee allowance should be increased to £1,000. I am glad that the Minister is increasing it but only from £600 to £700. Our amendment is designed to give substantial PAYE allowance of £1,000. Everybody recognises the enormous burden of personal taxation and the need for a substantial increase in the personal reliefs. Inflation is reducing but simply keeping the increase in line with current inflation does not make up for the position which obtained over the past few years. Each of these amendments is designed to increase last year's allowances by 10 per cent. In relation to the PAYE allowance our proposal is not for a 10 per cent increase but to raise it to £1,000, as we proposed last year.
Mr. G. Mitchell: On amendment No. 27, I would ask the Minister to consider this section in its application since a very large number of people are excluded from claiming the PAYE allowance, despite the fact that they pay PAYE. Most of these are in the category of proprietary limited companies, many of them very small companies with £100 share capital. The director and his relatives working for him cannot claim the PAYE allowance. The Minister might consider extending the scope of this section to cover that category of person. I had a case recently which I brought to the attention of the Minister's predecessor and also to the attention of this Minister when he first held the Finance portfolio. The case related to a man who was working for his father in a small company. This man was not residing with his father and had a very big mortgage which he had to pay from a very small  income. He also paid PAYE. Despite the fact that he was quite independent of his father but happened to work for his father's two-man company he was not entitled to the PAYE allowance. I believe that is grossly unjust and unfair. I have raised the matter time and again and the reply from the Department is that it would be difficult to know who is or is not a real employee of such a company. Surely there are certain tests which the Revenue Commissioners could devise to allow very many employees who are genuinely involved in various small family businesses and paying PAYE to avail of the PAYE allowance. We are told time and again that this cannot be done but it is amazing what can be done when there is a will to do it. In justice and equity this allowance should be extended to this category of person. I would not object to any reasonable test being applied. I would ask the Minister to consider extending the scope of this section with a view to introducing an amendment on Report Stage.
Mr. J. Bruton: Deputy Mac Giolla's amendments Nos. 21 to 26 would between them cost £28.9 million in 1986 and £48.2 million in a full year. Deputy Mac Giolla's amendment No.27 would in addition cost the Exchequer £63 million in this current year and £105 million in a full year. I must regretfully ask the House to oppose these amendments because they are not consistent with any kind of prudent fiscal policy, particularly when they are put forward in the absence of any suggestion as to how the money would be raised and what public services would be cut if revenue were cut to this extent by these amendments. Amendments of this kind, while they are useful and interesting for debate, are not in the realms of reality.
Mr. J. Bruton: Deputies should restrain themselves from this playfulness. An amendment of the kind proposed by Deputy Mac Giolla would cost £63 million in this year and that is the overriding consideration. I must indicate that I cannot accept it. Any other amendments are not strictly relevant to this debate.
Tomás Mac Giolla: I am amazed at the cost of £63 million in the current year and £105 million in a full year. This PAYE allowance was brought in to give some compensation to the PAYE taxpayer for the benefit which the self-employed have and which the PAYE taxpayers had before the PAYE system was introduced, in other words, they paid this year for their last year's earnings. The self employed are still taxed by reference to their earnings in the previous tax year and if the increase that I refer to costs that enormous amount it must indicate that continuing to give benefit to the self-employed is costing the Exchequer somewhat similar proportionate amounts. The cost to the Exchequer is not always the appropriate measurement of whether an amendment is justified. The figure of £600 allowance was given in 1980. This is 1986 and if £600 was an appropriate allowance in 1980 I think £1,000 is an appropriate allowance now. The Minister can always attempt to justifiy everything on the cost to the Exchequer but if he wants to recoup that cost he could introduce a similar system for the self employed so that they would pay in the current year. That would obviously recoup losses to the Exchequer which they are suffering at the moment. Previous Governments have admitted that this would be the correct system. The Commission on Taxation recommended  it and it was supposed to be implemented but it still has not been implemented. What I am proposing here is that the allowance of £600 which was introduced in 1980 should be increased now by much more than the £100 the Minister is proposing. The PAYE taxpayer is still being discriminated against as against other taxpayers by the fact that the money is being deducted from him before he even gets it into his fist, whereas other taxpayers have a year in hand before they repay. Perhaps the Minister could indicate when he believes this discrimination will end and the self employed will be paying on the current year's earnings or, alternatively, that the appropriate increase will be given to the PAYE taxpayer. Perhaps the Minister could tell us what the present day equivalent of £600 in 1980 is?
Mr. S. Brennan: I am not asking the Minister to yield to these amendments. But it is important, under this amendment, to bear in mind the precise level of taxation that we are talking about. I have to raise a point here which I raised earlier in this debate, that is, the habit of the Government of pointing out that this would cost too much, would cost so many millions and could not be yielded. On the surface that appears to be a practical approach to it. But taken in the context of the massive increase in recent years a better way of putting it may be that the Government are not prepared to attempt to reverse the trend which has been evident here since 1983, not to spread it beyond that.
Mr. S. Brennan: Let us just talk about the Minister's stewardship for a moment. In that year 11 per cent of taxpayers were paying tax above the standard rate. The position now is that 40 per cent of taxpayers are paying tax at above the standard rate and that is in the Minister's own time. I want to make a second point on that because in these demands for some relaxation of the burden of taxation I  want to put the point clearly and crisply in the context of seeking a reversal of the difficult burden put on people's backs in the past couple of years, not so much a handout or a giveaway or a cost to the State or a magnanimous gesture. That is the way it has been portrayed in this debate up to now by putting out the cost of the amendment. That is not a broad enough approach to it considering what has happened in the past couple of years. The State has taken in £217 million extra this year on taxation over the pre budget figure. All that is being sought in a number of these amendments is some reversal or an easing of that situation.
In regard to this married allowance the Minister is proposing a £200 increase. He should be aware that this is no big deal. We are talking about perhaps £1 or £2 per week in extra take home pay for the average person. Indeed the Minister's own table supplied with the budget speech states that a person on £10,000 a year will have a reduction in taxation of £100, which is about £2 a week. If one looks at other sections of this Bill which has put additional VAT on petrol, cigarettes and beer, that £2 a week disappears quite rapidly. The point I am making is that we have a habit in these Bills of giving a very marginal relief and taking back marginal taxation which leaves the Bill right back where it started at the beginning. We have to do something a lot more fundamental with the tax system than just that. The marriage allowance figure in 1980-81 was £3,230. The Minister is proposing to make that £4,000. That is no big deal after four or five years of increasing the burden of taxation. It is worth pointing out that out of every £100 paid in income tax at the moment the PAYE sector pays £87. It is also worth pointing out that income tax as a percentage of total tax has risen, since the day the Minister came to office, from 36 per cent to today's figure of 40½ per cent. That is the evidence of the taxation drift in the past few short years. What we are seeking in a number of these amendments is some relaxation of that drift that has occurred in the past two or three years, not a handout or a reckless giveaway  because that is not the context in which we are putting these amendments.
Mr. J. Bruton: In respect of Deputy Mac Giolla's question the advantage of the previous year method of assessment for the self employed is obviously greatly diminished by the reduction in inflation. There is a greater case therefore for discrimination in favour of those who are paying on a current year basis when inflation was higher than it is now. With regard to Deputy Brennan's points I have to correct an inadequacy on his part. He stated that in 1982 11 per cent of taxpayers were on higher rates as compared with over 40 per cent now. In fact, in 1982-83 34.4 per cent, three times the figure quoted by Deputy Brennan, were on higher rates.
(ii) is permanently incapacitated by reason of mental or physical infirmity from maintaining himself and has become so permanently incapacitated before he had attained the age of 21 years or has become so permanently incapacitated after attaining the age of 21 years but while he has been in receipt of full time instruction as aforesaid, he shall be subject to the provisions of this section be entitled in respect of each such child to a deduction specified in the next succeeding subsection.
This amendment proposes to restore the child tax allowance. The Government's decision to terminate the child tax allowance is, in my view, the clearest example of their anti-family bias. At a time when the family is under attack from a variety of sources, the termination of the child allowance is particularly reprehensible. Families with children over 16 years of age still attending third level education are especially penalised since they are excluded from the provisions of the family income supplement. I hope the Minister will recognise that whatever arguments have been made in relation to the family income supplement do not apply to the category I am arguing for, those still at third level education and over 16 years of age.
Just when educational expenses are heaviest the Government add to the burden of these families by terminating the tax allowance which was hitherto available to all such families. What we need to do is to encourage maximum participation in third level education in this era of technology. We need to ensure that parents who are prepared to encourage their children with ability, will not be penalised because their children avail of third level education.
We believe we should provide every incentive to continuing education to third level to ensure that our management personnel will be equipped with the best possible qualifications in marketing, in which we are deplorably weak, in research and development, in financial services and in the various technological disciplines. The potential of this economy will not be realised unless we invest in knowledge and in knowledge based industries. Many other countries have demonstrated this effectively and it is time we decided to at least follow that path, if not move ahead of other countries.
I believe the Government's decision in  terminating this child allowance is unfair and particularly inappropriate at this stage. We welcome the fact that this allowance is not being terminated in respect of physically and mentally handicapped children because they have a very special claim to be maintained properly and they have a very special claim on all our citizens. While I welcome the fact that the Minister has not reduced the allowance in respect of physically or mentally handicapped children, it would be entirely appropriate that he restore the tax allowance to all children, but in particular to those between the ages of 16 and 21 years who will not qualify for family income supplement and who are going on to third level education. I believe our case is undeniable in the interests of justice and, more important, economic development.
Mr. J. Bruton: If I were in Deputy O'Kennedy's position I would not be inclined to make the case so largely on the basis of the position of those who are lucky enough to be able to participate in higher education in any event.
I believe the allowance is of relatively little significance in that regard. It is mainly of interest in respect of families at a younger age. As the Deputy is aware, the Government have significantly increased social welfare child benefit. He will also be aware that the main argument for this proposition relates to the fact that, like all tax allowances, it is of greater benefit higher up the tax ladder than it is at the lower end. I realise the same argument could be made against an increase in the personal allowances, or against personal allowances in themselves. It is hard to distinguish in some ways between making a case against child tax allowance and not making a similar case against personal allowances.
In this instance the Government decided to substitute child benefits, which would be in a form similar to what might be a tax credit for children, for the previous child tax allowance. At this transitional point, there is some difference in the treatment accorded to those with a number of children and a couple with no  children. The most appropriate way to look at this proposal is in the context of a transition towards tax credits in the long run. The House will be aware that there are many difficulties in the way of introducing tax credits and it cannot be done rapidly. This proposal should be seen as tax credits in respect of a particular category, namely, dependent children. The Government have made a reasonable effort to substitute for the child tax allowances child benefits which are of the same value to all families, whereas child tax allowances are of greater benefit to higher income taxpayers and of no benefit to those with children who have no tax to pay because their incomes are so low they are exempt from tax. That is the essential argument which needs to be made in respect of this amendment.
Mr. O'Kennedy: On a previous section we endeavoured to persuade the Minister to extend the number of those who were exempt from tax but we failed. We are now addressing ourselves only to those who have a tax liability. It is recognised by all that the burden of taxation has grown enormously under this Government. The burden of income taxation has increased two and a half times since this Government came into office. When there is an increase of that nature it bites each and every taxpayer. This is particularly true this year when income tax will account for more than £400 million above last year's figure. It is obvious that this will affect every income taxpayer.
My amendment is attempting to ensure that families with a very heavy tax burden will be given minimal relief. This in nothing new. It is merely retaining an allowance to which these people were always entitled. I am not trying to add anything to the relief they would otherwise enjoy but to ensure that in 1986 they will not be deprived of what they enjoyed until this Government decided to abolish the child allowance.
I am not saying it is a deliberate strategy of Government but many people are concerned about the anti-family trend in legislation, particularly tax legislation. I will not confine my proposal to those  between the ages of 16 and 21 years; I extend the application to all children. When the Minister advises me not to make a case in a certain way, sometimes I may be informed enough to listen to his advice, but from some of his earlier comments in respect of my qualifications, I do not believe I am ever likely to reach that stage; but we learn every day. The proposal I make is in respect of all children. I have stressed the significance of it in respect of those who cannot benefit from the family income supplement because they are over the age to qualify. That is the only reason I made the point in respect of those between the ages of 16 and 21. At that stage in the family children are most expensive; if they go on to third level education, assuming they are not working for themselves when they become taxpayers in their own right, they must be provided for. We should not be discouraging either the young people themselves from attending or their parents from having them attend third level where possible. Only by investing in knowledge at that stage, whether in technology, marketing, financial services and so on will we see, not this year but in five year's time, a much more effective input into the economic development of this nation. On that basis I press the Minister to accept the amendment. He does not seem disposed to do so but I have made my case.
Mr. J. Bruton: I draw the Deputy's attention to section 103 of the Bill which introduces, by means of the reduction in the age of majority to 18, the ability of parents in exactly the type of situation the Deputy is referring to to covenant up to 5 per cent of their income tax free to what would then be an adult dependant, being over 18, and that money can be used for payment of university fees. I do not mean this in an aggravating way, but probably Deputy O'Kennedy should not base his case so much on that category because they are being provided for in the Bill. I would be concerned if there were substance in what Deputy O'Kennedy said about an anti-family trend in  legislation but I do not think there is, and certainly there should not be.
I draw the attention of the House to the fact that the Government have committed themselves in the White Paper published and accompanying the present proposals in regard to the Constitution to a review of any provision in the law which could be construed as representing a disincentive to people to remain in what are said to be normal, traditional family circumstances. No fiscal disadvantages should be involved in such a decision on their part. That commitment has been given by the Government in the White Paper and it is very much in the spirit of the case that Deputy O'Kennedy is making on this occasion. Without disrespect to Deputy O'Kennedy, I think I can explain why the Government have taken this decision. It is essentially a move towards tax credits on an incremental basis by doing it in respect of children first.
Mr. J. Bruton: I realise that certain anomalous situations will arise because of that, but that is the best way to look at it rather than looking at it in terms of singling out situations where there are a large number of children. My desire is not to create a situation in which people are not given due recognition in respect of the cost involved in having children cared for in one's home.
Mr. S. Brennan: I would like to ask the Minister a few questions. The first is of a technical nature. The abolition of this allowance seems to affect two other areas. One is section 12 of the Finance Act, 1967 which gives relief for health expenses of dependent children and the Act refers back to those in receipt of this £100 allowance. Section 10(2) of the 1983 Finance Act provides for an abatement of residential property tax for residential children. Again it refers to those in receipt of this £100 allowance. I assume that those sections will be so amended as we  go on, otherwise what we are debating today would be a broader thing and would be interfering with the abatement of residential property tax and with the relief of health expenses for dependent children. I do not think that is the Minister's intention in this section and I would not like it to happen because of technical drafting.
I have another question to put to the Minister the answer to which he has hinted at already. Does he accept broadly that while the abolition of the £100 allowance and its replacement with the child benefit allowance, might level up for somebody in the 35 per cent rate of taxation, it is new taxation, a fresh eating into the living standards of anybody above 35 per cent? If that is the case I come back to the point I made earlier. I know that at this difficult time it is popular to speak up for the lower paid, the person on the average industrial wage of £7,000 or £8,000 as I have done on many an occasion in this House, but another group of people are to be spoken up for many of whom I represent. Those people are on £15,000, £16,000, £17,000, £19,000 a year and are not in receipt of any worthwhile State benefit and increasingly are becoming the new poor. The Minister corrected me earlier. I meant to apply that 11 per cent to the UK; there those paying over the standard rate are about 11 per cent of the tax paying public. Let me ask the Minister, with something like 40 per cent of Irish taxpayers paying above the stand rate, is abolishing this £100 allowance directly not putting a new burden on that group of taxpayers? We are not talking about a mythical higher income earner but about 40 per cent of the taxpayers. It is quite clear from the sums that the new child benefit allowance being brought in to replace the £100 tax allowance does not make up the difference to anybody above 35 per cent. The point is worth making strongly that 40 per cent, two-fifths, of all taxpayers, are in that league and will not benefit from the replacement of this.
Finally, the idea of tax credits is a reasonably progressive notion and I would have time for it. I want to start it  with the children. I am not sure that I want to start it with this £100 allowance. If you are going to introduce tax credits that should be done in a more uniform, planned way. You cannot do it in an ad hoc way by jumping on this allowance this year and on another allowance next year. When last I contributed on Committee Stage last week I called for some overall, coherent finance legislation which seeks to implement the report of the Commission on Taxation. We should tackle tax credits in this way, not as is happening in this Bill.
Mr. O'Malley: I support this amendment which is largely to the same effect as a previous amendment in my name which unfortunately I missed moving as I had to go out for a few minutes. I support the arguments made already particularly in respect of those who are in full time education between the ages of 16 and 21 where the costs are appalling and where severe difficulty is caused for a huge number of families. The abolition of this allowance is not substituted for in the great majority of those cases by the higher payment of children's allowance because the loss on the tax side is greater than the gain on the children's allowance.
Deputy Brennan referred to the fact that 40 per cent of taxpayers were in that category. I thought the percentage was slightly higher. In any case, 370,000 taxpayers pay above the standard rate and each one of those is worse off straight away. It is ridiculous to argue that these people are relatively well off when they constitute such a huge proportion of taxpayers and when someone on the average industrial wage is paying tax at his marginal rate well above the standard rate. At a time when the costs of third level education in particular are very high and causing tremendous difficulty to people who can ill afford them, it is wrong to withdraw the child allowance. In spite of what the Minister said, I find it difficult not to detect an anti-family bias in this matter because the higher payment of the social welfare allowance does not compensate the majority of people involved. They are worse off.
 I fully accept that if you are essentially trying to carry out a social welfare provision you should not do it through the tax code and that you should have less rather than more allowances. However, the way in which this is done and the extraordinary fact that children are singled out seems to display a bias of that kind which is very regrettable. The biggest expense in relation to children is not in respect of relatively young children for whom a higher social welfare allowance can be claimed but in respect of those over 16 years of age whose parents are now at a double disadvantage because the expenses in relation to those children are very much higher than those for younger children. For that reason, the amendment should be accepted and I hope the Minister will reconsider his attitude in relation to this matter.
Mr. G. Mitchell: Is section 141 of existing legislation being amended by this section to increase the income which a child may have and, if so, by how much? I understand the existing limit is £80. If it is being amended what is the present figure?
Mr. J. Bruton: I will take a raincheck on that while I answer some earlier questions which were raised. I should like to thank Deputy Brennan for raising the questions relating to health expenses and the residential property tax. It is proposed to produce an amendment in respect of health expenses to ensure that, if such expenses occur in respect of dependent children, they will be allowed. The residential property tax is levied, as far as the income ceiling is concerned on the basis of the previous year and it is not necessary to introduce an amendment until next year. However, I intend to introduce such an amendment because it should be allowable ——
Mr. J. Bruton: That quadrant of the House seem to have a particular interest in making fatuous remarks of that kind and it worries me that the infection and the vanity seem to be spreading to the backbenchers indicating a degree of derangement which is regrettable.
Mr. J. Bruton: It indicates a loss of balance and sense of reality. To come back to the points made by Deputy Brennan, I agree the withdrawal of the child tax allowance represents a loss to some families but, even ignoring the benefits of the increase in child benefits, the allowance to which Deputy Brennan referred constituted £150, which is about £58 per child when the maximum tax rate against which it could be set is taken into account, I do not think a sum of £58 will make all the difference as to whether you can pay fees for third level education ——
Mr. J. Bruton: In any event, the purpose of this essentially is to convert what were previously allowances into tax credits. I take Deputy Brennan's point that it would be more desirable to convert all the allowances into credits but, in practical terms, it is probably more sensible to  do it on a incremental basis as we are doing, which is not unreasonable when one bears in mind that changes introduced suddenly can engender a degree of opposition which is not necessarily reasonable, whereas a change which follows a pre-ordained pattern and introduced step by step is more likely to be acceptable to the taxpayers and digestible as far as the administrative system is concerned. In moving this allowance into a credit, the Government are adopting a reasonable course of action.
I must return to what Deputy O'Malley said because he tended to take a line from Deputy O'Kennedy in regard to an anti-family bias. There is no anti-family bias as far as I am concerned, if anything my bias would be in the opposite direction. I have already told Deputy O'Kennedy that the Government have given a commitment in the White Paper accompanying the current constitutional proposals to review existing legislation to remove any anti-family bias which might exist. I should like to assure Deputies O'Malley, O'Kennedy, Séamus, Brennan, Gay Mitchell and others that as far as the tax code is concerned I would be keen to ensure that the Department of Finance and the Revenue Commissioners take their part in this review quite seriously. It is important that the tax code should be seen to encourage families in every way in undertaking the very heavy responsibilities which are theirs in modern times.
The level of loss suffered by the removal of this allowance when compared with the increased child benefit is very small in practically every case. In most cases of families with children there is a large benefit. A very large number of children currently are not within the tax code at all because the income of their parents is so low. They do not benefit by one single penny from the child tax allowance whereas they will benefit very substantially from the increased child benefit. I should like to quote a document that is frequently quoted by the other side of the House, the 1916 Proclamation, which refers to cherishing all the children of the nation equally. That is precisely what an equal child benefit  does. It gives an equal benefit to all children whether they are the children of taxpayers or the children of non-taxpayers. If, on the other hand, one does not want to cherish all the children of the nation equally one goes for the tax allowance approach, which gives a greater benefit to the parents of some children than to the parents of others. It does not give any benefit to the parents who are paying no tax and it gives proportionately greater benefits to parents paying tax. I suggest to Deputy O'Kennedy, and others, that that is not in line with the spirit of the Proclamation of Easter 1916.
Mr. J. Bruton: To have observed everything in the explanatory memorandum one would want to have encyclopaedic and photographic capacities which, I am afraid, I do not have. Subsection (4) deals with that matter.
Birmingham, George Martin.
Conlon, John F.
Cosgrave, Liam T.
Cosgrave, Michael Joe.
Deasy, Martin Austin.
Dukes, Alan. Ryan, John.
Sheehan, Patrick Joseph.
|Durkan, Bernard J.
Enright, Thomas W.
Farrelly, John V.
Flanagan, Oliver J.
Harte, Patrick D.
Quinn, Ruairí. Taylor, Mervyn.
Burke, Raphael P.
Coughlan, Cathal Seán.
De Rossa, Proinsias.
Fitzgerald, Liam Joseph.
Gallagher, Pat Cope.
Haughey, Charles J.
Mac Giolla, Tomás.
Noonan, Michael J. (Limerick West).
O'Mally, Desmond J.
Wilson, John P.
Tellers: Tá, Deputies F. O'Brien and Taylor; Níl, Deputies V. Brady and Browne.
Question declared carried.
Amendment declared lost.
Section 4 agreed to.
Mr. J. Bruton: I move amendment No. 30:
In page 13, before section 5, to insert the following new section:
5.—Section 12 of the Finance Act, 1967, is hereby amended, as respects the year 1986-87 and subsequent years of assessment, by the insertion, in the definition of `dependant' in subsection (1), of the following after paragraph (b):
(c) a child who, for the year of assessment—
(i) (I) is under the age of 16 years, or
 (II) if over the age of 16 years at the commencement of the year of assessment, is receiving full time instruction at any university, college, school or other educational establishment, and
(ii) is a child of the individual or, not being such a child, is in the custody of the individual and is maintained by the individual at his own expense for the whole or part of the year of assessment:
Provided that the provisions of subsections (3), (4), (5) and (7) of section 141 (inserted by the Finance Act, 1986) shall, with any necessary modifications, apply for the purposes of determining whether relief is to be granted under this section as they apply in determining whether a deduction is to be allowed under that section, except that in a case where the child's income exceeds the amount specified in the said subsection (4) relief under this section shall not be allowed,'.”.
This amendment is of a technical nature, in that the purpose of the new section is to secure that children in respect of whom the normal income tax allowance has been withdrawn by section 4 of the Bill will continue to be regarded as dependants for the purpose of claims to relief in respect of health expenses under section 12 of the Finance Act, 1967, which is a point raised by Deputy Brennan a moment ago on the previous amendment. At present that section defines an individual's dependants as including any person in respect of whom he has been granted an income tax child allowance under section 141 of the Income Tax Act of 1967.
Section 4 of the Bill proposes to rewrite section 141 so that in future it will apply only to incapacitated children.
An Ceann Comhairle: We must have silence, Deputies, please.
Mr. J. Bruton: Hence the need for the present amendment so as to prevent a child who was excluded from a claim for  the normal income tax child allowance also being excluded from the ambit of relief in respect of health expenses.
The amendment also provides for an increase in the amount of income which a child is permitted to have in his own right before being excluded from the scope of the relief. This increase is in line with that proposed by section 4 of the Bill for incapacitated children in relation to the income tax child allowance and the income limit which applies in the case of qualifying children for the purpose of the single parent allowance. The proposed amendment will apply to some 282,400 taxpayers with dependent children who would otherwise lose their entitlement to claim tax relief in respect of any qualifying health expenses incurred in respect of those children. However, it will result in no additional cost to the Exchequer as its purpose is to maintain an existing entitlement. It was never the intention that the withdrawal of the income tax child allowance would also result in denial of relief in respect of health expenses, hence the introduction of this amendment.
Mr. O'Kennedy: We support the amendment, but I must say this is the clearest evidence of the failure of the Government to give effect to their own intentions. This Bill was already three weeks late when introduced into this House in its final form. The Minister for Finance comes in this afternoon to move an amendment to this already delayed legislation, to ensure that 282,400 people who would be entitled to claim under health expenses would not be deprived of that right which has been theirs. If this is not an example of the laziest possible approach of a Government to such legislation, I cannot imagine what is. This, in addition to amendments which the Minister has introduced this afternoon, underlines the fact that it is time this Government, in presenting the Finance Bill decided, first, to present it in time and, secondly, to enable us to look at the Bill as presented and then table our amendments to it. Here is one time  amongst many in this Bill when the Minister is proposing to amend his own proposals. We agree with that amended proposal but it is an example of their totally unsatisfactory and careless approach which does not give an opportunity for proper consideration of the legislation in this House.
Mr. S. Brennan: Briefly, I support this amendment. I am glad to see it. Is there any other amendment of a technical or similar nature required as a result of the loss of the £100 legislation?
Mr. J. Bruton: There are no more amendments. It is quite surprising that Deputy O'Kennedy should make the point which he has made. The whole purpose of a debate of this kind is to allow for the improvement of legislation.
Mr. O'Kennedy: That is correct.
Mr. J. Bruton: Any Government who expressed the view that they had said the last word and thought the last thought on a Finance Bill and were impervious to any improvement would be a very arrogant Government indeed. That certainly is not a characteristic that I believe would be appropriate to this Government. We obviously believe that our legislation can be improved. I make no apology whatsoever to the Deputy for having circulated amendments today——
Mr. O'Kennedy: At lunchtime.
Mr. J. Bruton: ——despite the fulminations which the Deputy attempted on the Order of Business today when that was completely out of order.
Mr. O'Kennedy: Shall we have some more tomorrow?
Mr. J. Bruton: I should like to make the point that those amendments are designed to improve this legislation. It is the purpose of any Government to consider any improvement that can be made to finance legislation, either to  stamp out evasion and raise revenue or to create better incentives within the tax code. I make no apology whatever to anybody for introducing any amendment that I can, up to the very last minute that it is possible for me to do so, if it either improves the incentives in the Finance Bill or stamps out evasion that should be stamped out.
Tomás Mac Giolla: The Minister should apologise to the Government.
Mr. J. Bruton: It is surprising, to say the least, and foolish to say more, for Deputy O'Kennedy to be criticising amendments on that basis.
Mr. O'Kennedy: That the Minister makes no apologies to me does not matter. However, I insist that this is an example of the Government's contempt for the Oireachtas. They have delayed the introduction of this Finance Bill by three weeks over and above the date on which the Taoiseach indicated it would be introduced in this House. In that they failed to honour their undertaking, they have forced this House, made up of the elected representatives of the people, to engage in a procedure which is totally and utterly unsatisfactory in relation to full and proper consideration of this most important annual legislation. The Minister makes no apology to me for introducing a very detailed amendment at 2 p.m. this afternoon. It is not to me that he should be apologising. He should be apologising to every Member of this House and to the people outside for not allowing the elected representatives adequate time — or, indeed, any time at all — to consider these amendments which he is introducing to his own legislation.
We all want to see the Finance Bill leave the House much improved on what it was when it came in, but that should be as a consequence of amendments, by and large but not exclusively, introduced by Members of the Oireachtas other than the Government. If the Government are not prepared, at the end of their three months of preparation, to present in final  form what they really want, that is another example of the totally inept manner in which they do their business. At least we should be allowed perhaps just one day to consider what they have spent three months in presenting. I object to the fact that we are not being allowed even one day. In respect of much of this legislation the House is being deprived of having even two minutes to discuss amendments. Much that will be now rushed through the Dáil will not even be touched upon during this debate. If that is the Minister's notion of parliamentary reform — the Minister who was going to have a better way of planning the nation's finances — let him not apologise to me, let him apologise to the public to whom he made a false undertaking.
An Ceann Comhairle: The Chair feels he should point out that all sections up to section 26 and all amendments thereto must be disposed of before 7 p.m.
Mr. G. Mitchell: There is no explanatory memorandum with this amendment.
An Ceann Comhairle: I should say this amendment appears to be agreed.
Mr. J. Bruton: That does not stop Deputy O'Kennedy wasting the time of the House.
Mr. G. Mitchell: I could not catch what the Minister said because of the din after the vote. Could the Minister say if a parent claiming VHI expenses for a family will be affected by this section? Does this section affect unreimbursed medical expenses which are claimed back on medical form 1 after the end of the tax year?
Mr. J. Bruton: It does not relate to the VHI. It relates to medical expenses. What is the Deputy's second point?
Mr. G. Mitchell: The second point is where a parent would claim for family expenses unreimbursed on medical form 1 at the end of a tax year.
Mr. J. Bruton: There is no need for an amendment to cater for that.
Mr. O'Malley: Could I ask the Minister whether the VHI position has changed?
Mr. J. Bruton: No.
Mr. O'Malley: One can still claim for children?
Mr. J. Bruton: Yes.
Amendment agreed to.
An Ceann Comhairle: Amendment No. 31 in the name of Deputy O'Malley. Amendments Nos. 32 and 33 are related. Amendments Nos. 31, 32 and 33 together by agreement. If amendment No. 31 is agreed, amendments Nos. 32 and 33 cannot be moved.
Mr. O'Malley: I move amendment No. 31:
In page 13, lines 30 to 32, to delete “and (b) `£286' were substituted for `£312', in each place where it occurs.
The purpose of the section is to reduce the PRSI allowance of £312 to £286. Bearing in mind that the PAYE section of taxpayers in general are by far the hardest hit it is quite inappropriate to make this change. It is probably as a result of some marginal change in a tax rate. If it is, it is simply taking back with one hand what is given with the other. It seems to be pointless and unfair to make a change of this kind. The figure for the allowance should be allowed to remain at £312 because of the burdens which are being carried by those taxpayers especially at present. I do not think there has been any reduction in PRSI and presumably this is supposed to balance some tax allowance. If it is, it is an example of an illusory change which has been made because whatever benefit there is in relation to that change is taken away by the amendment which is proposed to this section. That is why I think it should be left as it is.
Mr. O'Kennedy: I wish to move the amendment in my name which has precisely the same effect——
An Ceann Comhairle: The Deputy cannot move the amendment, he can only speak to it.
Mr. O'Kennedy: It has the same effect as Deputy O'Malley's amendment but it goes further than what Deputy O'Malley has addressed himself to in this sense. This is a consequence of the Government's decision in 1983 or if not, 1984, to reduce the level of the PRSI allowance from £312 to £286. This allowance was £312 in 1982 and the Government deliberately decided in 1983 to reduce it to £286. Accordingly, each successive year on the Finance Bill we have had the same provision to reduce the level of the PRSI tax allowance to £286. Logic supports Deputies Mac Giolla and De Rossa more than it supports Deputy O'Malley and I in that clearly what they are proposing is to update the allowance to take account of inflation and to provide an equivalent sum — I would not think that it is equivalent — in this year of 1986 to what £286 represented in 1982.
We are not proposing to go that far. We are proposing only that it be restored to a figure of £312. That is entirely reasonable on our part. This is not a case where the Minister can say we are being irresponsible and making extravagant claims or promises. We are proposing to put PRSI taxpayers in the same condition relative to what they were in 1982. I say relatively because if we were to go all the way we would have to adjust the figure for inflation. That we have not proposed to do. It is also desirable not just from the point of view of logic or equity but also because, as the Minister may be aware, the Commission on Taxation indicated in their first report that all of these deductions should be treated similarly and that what really is of importance for the wage earner is net income. It does not matter whether net income is reduced by what we call income tax. PRSI or the levies so beloved of this Government. In  reality they are all a tax on income. That is something this Government have not faced in any way consistent with reality or consistent with the recommendations of the Commission on Taxation.
Far from moving towards the recommendations of the Commission on Taxation the Government have consistently — you have to give them credit for this — moved the other way so that they have increased the burden of PRSI while not giving the appropriate tax allowance in respect of the payment. They have increased the levies or introduced levies which were not there when the commission first sat. One of these levies, fortunately, has been removed this year. The Government through all these actions far from showing themselves ready to move towards tax reform in the broadest sense as the commission have proposed, are doing the opposite. For these reasons the very minimum we could propose would be to restore the PRSI tax allowance to what it was in 1982. I would have to say that logic and inflation support Deputies Mac Giolla and De Rossa more than they do my case and that of Deputy O'Malley but maybe we are being restrained in this situation. For that reason the Minister should accept our proposals.
Tomás Mac Giolla: I support entirely the arguments made by Deputies O'Malley and O'Kennedy. There is a grave injustice being done in this. The whole purpose of the allowance is to make up for the injustice of the PRSI deduction on gross income. A wage earner on the relatively low figure of £10,000 would pay, at 8.5 per cent £850 in PRSI. If that were tax deductible, which it should be, he would save £420 on the 48 per cent rate which is the rate proposed in this Bill. That is on the lower figure. There is much more involved with the higher brackets. The figure of £10,000 is relatively low in current times. If the Minister does what he is purporting to do. he should raise the amount to £420. The amendment is to raise the figure to £400. The reduction from £312 to £286 is inexplicable and has no justification. A similar  position occurs each year and the Minister has never given in to it. It is an issue of great frustration and annoyance for people who have such major reductions from their wage packets. Tax and PRSI is taken from their wage packet and this leads to a miserable take home pay to feed and clothe their families.
There are increased allowances in this Finance Bill which are without justification. As the Minister would say they are incentives to do something which they may never do. Here we have a clear case of justice in the allowance for PRSI which should be tax deductible. We have based the figure of £400 on a very low income of £10,000. The Minister should yield to one or other of these three amendments. There is grave injustice being done which should be redressed. I hope the Minister will tell us how much it would cost and also give some other justification apart from the cost to the Exchequer.
Mr. J. Bruton: The other justification is that account must be taken of all the other measures in the Finance Bill to relieve taxpayers, against the very severe background in which almost the entire income tax revenue is absorbed in the service of the debt. There are limits to what can be afforded and therefore the cost is probably the most persuasive argument of all. In regard to the amendments put down by Deputy O'Malley and Deputy O'Kennedy the increase to £312 would cost £4.5 million in 1986 and £7.5 million in a full year. Deputy Mac Giolla's amendment would cost £19.8 million in 1986 and £33 million in a full year. Apropos the remarks made by Deputy O'Kennedy in criticism of amendments being introduced, I intend to introduce an amendment in respect of section 8 of the Bill concerning profit sharing, that employees of companies be granted a tax relief in respect of purchase of shares in the companies. This does not arise on this section but as I intend to introduce an amendment to that effect on Report Stage I am mentioning it now so that it will be in order.
Mr. O'Kennedy: The Minister indicated that the proposal made by Deputy O'Malley and myself would cost £4.5 million this year, which is a net cost of about £3 million. I wish to remind the Minister that his predecessor on one occasion indicated that he would propose as soon as possible to restore the tax-free allowance on PRSI to what it was. This was changed. Instead of getting back to where we were in 1982 when this was also an issue, what we have done is reduce the tax-free allowance. Four years later no attempt is being made to implement it. If that is the way the Minister proposes to act then it is not worth very much. The cost of this is minimal.
Tomás Mac Giolla: Recognising the enormous cost of my amendment and the minimal cost of the other two amendments, the Minister has not addressed himself to the injustice of the PRSI system which this allowance was intended to redress. The allowance goes a little more than half way to redressing it in some cases and not even half way in other cases. The fact that there is an allowance is an acceptance by the Minister that there is an injustice and this must be adjusted in some way. Why does the Minister adopt the position that PRSI payers should not be compensated or given relief in the same way as other reliefs are given, all of which are of considerable cost to the Exchequer? There is a justified case here for total relief on PRSI. PRSI payments should not in any case be subject to taxation and should have full relief. Does the Minister think that there is a good case here which he will look at and endeavour to adjust? He cannot just say, this is going to cost us £19 million and we are not going to do it. Could he say when he intends to give justice in this regard?
Mr. J. Bruton: I am not a great enthusiast for imposing a tax and then giving a tax allowance to offset its effect.
Tomás Mac Giolla: PRSI is not a tax.
Mr. J. Bruton: You can call it what  you like. Effectively it is the same as a tax. It is not like insurance in the sense that there is no no claim bonus. There is no actual basis for it. It is not related to risk. It is a contribution towards the cost which is levied in an indiscriminate way. The notion of giving a tax allowance to offset what is effectively a tax is not a very tidy way of doing business. My preference would be to rationalise the system and to remove the necessity for any allowance of this kind. My basic argument against the case which Deputy Mac Giolla is making is that when one takes into account all the other things that are being done in this Finance Bill, the people on whose behalf Deputy Mac Giolla is making the case are benefiting considerably against a background in which the State has relatively little means with which to give them benefit.
Let me illustrate this by pointing out that in respect of a single person on PAYE with a wage of £10,000 per annum, prior to the budget the tax he would be paying would be 30.59 per cent and as a result of the budget the tax take on his income will be reduced to 28.15 per cent. That is a significant improvement by any standard in a year in which the Government's means are still reduced and in which incomes are increasing by larger amounts than inflation. Taking all those things into account it is not an unreasonable concession.
Deputy Mac Giolla has been taking the same approach as Deputy O'Kennedy, taking one particular item and ignoring all the others and speaking in general terms. Make any case you like, almost, and people will be substantially better off as a result of the budget. If we were to take what Deputy Mac Giolla is proposing we would add almost £20 million to our current budget deficit or we would have to cut expenditure or increase taxes. Therefore, regretfully I cannot accept the amendment.
Mr. O'Kennedy: The Minister has invited us to take all the things into  account. In 1982, when this PRSI contribution was £312, total income tax revenue was £1,415 million. This year total income tax will yield £2,350 million, close to twice as much. That is taking everything into account. In 1982, from this point of view, there were no income levies. They are there now. We can take indirect taxation, which has jumped enormously since 1982. The State take on petrol is 67 per cent — it was 48 per cent. The case we have been making is unanswerable and the Minister cannot claim that an increase in income tax of £400 million over last year represents decrease in income tax. How could he make that case?
Mr. J. Bruton: The Deputy could accumulate unanswerable cases of that nature and we would end up having no tax at all. I ask Deputy O'Kennedy to contemplate all the Departments of State that would have to be abolished. We have to pay the interest on debt, much of which accumulated when Deputy O'Kennedy was Minister for Finance, or elsewhere. Deputy O'Kennedy spoke about lack of time to debate the Bill but the type of amendments he has put down and which we are debating are only rehashes of arguments he made outside at the crossroads.
Mr. O'Kennedy: I did not make that argument.
Mr. J. Bruton: We would be far better off, for instance, debating the detailed points raised by Deputy Brennan.
Amendment put and declared lost.
An Leas-Cheann Comhairle: Amendments Nos. 32 and 33 consequently fall.
Amendments Nos. 32 and 33 not moved.
Section 5, as amended, agreed to.
Section 6 agreed to.
 NEW SECTION.
Mr. J. Bruton: I move amendment No. 33a:
In page 14, before section 7, to insert the following new section:
“7.—(1) In this section—
`Cospóir' means the National Sports Council (an Chomhairle Náisiúnta Spóirt) which was established by the Minister of State at the Department of Education on the 10th day of February, 1978;
`tax' means income tax or corporation tax, as the case may be.
(2) (a) This section applies to a gift of money which, on or after the 6th day of April, 1986, is made to the Minister for Education for the benefit of Cospóir and is not deductible in computing for the purposes of tax the profits or gains of a trade or profession or is not income to which the provisions of section 439 of the Income Tax Act, 1967, apply.
(b) The Revenue Commissioners may consult with the Minister for Education in relation to any question which may arise in connection with paragraph (a).
(3) Where a person proves that he has made a gift to which this section applies and claims relief from tax by reference thereto, the provisions of subsection (4) or, as the case may be, subsection (5) shall apply:
Provided that, in determining the net amount of the gift for the purposes of those subsections, the amount or value of any consideration received by the said person as a result of making the gift, whether received directly or indirectly from Cospóir or any other person, shall be deducted from the amount of the gift.
(4) For the purposes of income tax for the year of assessment in which a person makes a gift to which this section applies, the net amount thereof  shall, subject to subsection (5), be deducted from or set off against any income of the person chargeable to income tax for that year and tax shall, where necessary, be discharged or repaid accordingly; and the total income of the person or, where the person is a wife whose husband is assessed to income tax in accordance with the provisions of section 194 (inserted by the Finance Act, 1980) of the Income Tax Act, 1967, the total income of the husband shall be calculated accordingly:
Provided that relief under this section shall not be given to a person for a year of assessment—
(a) if the net amount of the gift (or the aggregate of the net amounts of gifts) made by him in that year, being a gift or gifts, as the case may be, to which this section applies, does not exceed £100, or
(b) to the extent to which the net amount of the gift (or the aggregate of the net amounts of gifts) made by him in that year, being a gift or gifts, as the case may be, to which this section applies, exceeds £10,000.
(5) Where a gift to which this section applies is made by a company—
(a) the net amount thereof shall, for the purposes of corporation tax, be deemed to be a loss incurred by the company in a separate trade in the accounting period of the company in which the gift is made, and
(b) the references in the proviso to subsection (4) to a year of assessment shall be construed as references to an accounting period of the company.”.
This amendment is being introduced in response to a decision by the Government to provide a measure of tax relief to encourage persons to make monetary donations to bodies who are engaged in the various aspects of amateur sport. It is appropriate that such donations should be channelled through Cospóir, the  National Sports Council. Cospóir was established by the Minister of State at the Department of Education on 10 February 1978 with the following terms of reference.
(1) to act as adviser to the Minister of State at the Department of Education in relation to the implementation of the Government's policy on “Sport for All”, the policy for which derives from the Council of Europe Sport for All Charter.
(2) to promote initiatives and innovative measures in regard to—
(a) the development of sport and physical recreation as leisure pursuits, and
(b) the raising of standards of performance in competitive sport.
In the course of carrying out its objectives, Cospóir initiates its own schemes and programmes and recognises national governing bodies of sports which themselves run sporting activities of different kinds. Recognition is decided by reference to criteria laid down by Cospóir and the Department of Education. There are nearly 90 such recognised bodies at present. In general, the activities with which Cospóir is concerned are of amateur status but, in line with modern trends and because of the expenses involved in some particular sports, a certain element of professionalism is tolerated in special cases — for example, motor sports.
Cospóir operates in close liaison with the Department of Education, and its chief executive officer is a member of the staff of that Department. Its funds are in general supplied from the Department of Education Vote, but some small amount of funds is obtained from occasional sponsorship. The funds from sponsorship are paid into a separate bank account which Cospóir has been given authority to operate, but all funds disbursed by it are sanctioned by the Minister of State at the Department of Education.
Among the many costs which the  organisation incurs are, for example, special assistance to selected sports in need of assistance: allocation of sports scholarships to promising athletes; publication of the quarterly magazine Sport in Ireland.
Because of the great interest in sport throughout the State and because of the importance of sport to the health of the nation, the Government feel that the general public should be encouraged to contribute to the increasing costs involved in the propagation of sport and its allied activities. To this end the section provides tax relief to persons who make contributions to Cospóir via the Minister for Education. In order to qualify for relief the aggregate amount of contributions must not be less than £100 in any year of assessment or accounting period and relief will not be given for any excess over £10,000 contributed in a year or period.
It is not possible to estimate the cost of the proposed relief, which will depend on the extent to which money is donated and on the rate of tax of the donors. It is likely that donors will be mainly high rate taxpayers in which case it can be taken that the Exchequer will bear between 48 per cent and 58 per cent of the amounts donated by individuals and 50 per cent of the amounts donated by companies, because of the tax forgone.
This is one of the amendments being introduced on Committee Stage to provide something not contained in the original Bill. If we were to follow Deputy O'Kennedy's advice we would not be introducing amendments of this kind at this stage but, as I said earlier, when the Government find that they can encourage a useful activity they will use every opportunity open to them up to the last stage of the Bill to introduce improvements. I wish to pay tribute to the Minister of State at the Department of Education, Deputy Seán Barrett, who was very much associated with the suggestion that an amendment like this should be introduced. I had the honour, as had Deputy O'Kennedy, of being for four years the Minister responsible for sport. I recognise the importance of sport——
Mr. O'Kennedy: The Minister denigrated the office some time ago. He proposed that I should go back to that post——
Mr. J. Bruton: I also had responsibility for sport.
Mr. Barrett: (Dún Laoghaire): He was also Leader of the House. Anything can happen. I might end up as Minister for Finance.
Mr. J. Bruton: That is right. That is the difference between the positive thinking which occurs on this side of the House and the negative thinking which occurs on the other side. The Minister of State clearly indicates the sort of approach one should have to matters of this kind. I am very glad he is here to support the amendment. It is my hope that the provisions of this amendment will be used to promote the concept of sport for all. Sport has tended to be the preserve of the younger generation——
Mr. O'Kennedy: The Minister could do with a little exercise himself.
Mr. J. Bruton: When I was Minister responsible for sport I was very concerned that sport should be encouraged among all age groups. This amendment will give some positive benefit to corporations not only to gain a tax relief but also to enhance their corporate image and I hope it will give a significant financial and promotional benefit to individuals and companies to make contributions towards the development of sport. Ireland has earned and deserved a worldwide reputation as a country that has made a distinguished contribution, particularly to amateur sport, at world level. It must be recognised that amateur sport on the part of the distinguished athletes who win medals at the Olympics and other world contests would not be possible but for the training and coaching activities carried out in every parish and suburb in the country. Were it not for the activities of clubs at local level, it would not be possible for those who ultimately  make the great contribution of winning an Olympic medal to be identified in the first place.
Mr. O'Kennedy: Will the Minister grant them exemption from the DIRT tax?
Mr. J. Bruton: For many years the Irish Government have given benefits in the form of cash grants.
Mr. O'Kennedy: Listen to the great sportsman, the DIRT tax man.
Mr. J. Bruton: This is the first time any Government in Europe——
Mr. O'Kennedy: ——have imposed a tax on sportsmen.
Mr. J. Bruton: —— have introduced a tax incentive specifically for the encouragement of sport. I am pleased that in introducing this tax incentive the Government are giving an example that I hope will be followed by other Governments in the Council of Europe. I am happy that the Minister of State will take part in the work of the Council of Europe in the promotion of the concept of sport for all. This measure will give a considerable boost to sport in that it will encourage commercial organisations and individuals to make a contribution.
Mr. O'Kennedy: The Minister is making a nonsense of the debate. He is the great sportsman. The GAA, rugby clubs and soccer clubs will be interested to hear this.
An Leas-Cheann Comhairle: Will the Deputy please allow the Minister to continue.
Mr. O'Kennedy: He should get back to the Bill and not try to fool himself. Here we are debating the Finance Bill and we have to listen to this nonsense from that man.
An Leas-Cheann Comhairle: The Deputy has been interrupting non-stop.
Mr. O'Kennedy: I know, but when we get this kind of thing on a Finance Bill——
An Leas-Cheann Comhairle: The Deputy is not conducting himself in a proper manner.
Mr. O'Kennedy: On a point of order, there are important issues to be discussed in relation to tax. The least qualified man in the House to talk about sport is the person who is now talking. Will he please get on with the business of the House.
An Leas-Cheann Comhairle: I ask the Deputy to resume his seat.
Mr. O'Kennedy: At least the Minister of State is good at sport.
Mr. J. Bruton: It is important that individuals should have an opportunity to make a contribution to sport that would be tax deductible. I realise that individuals may wish to contribute to Cospóir perhaps for a specific activity of interest to them, without looking for any enhancement of their corporate image. When we were thinking of this matter originally it was our intention to confine the relief to individuals but, as a result of discussions with the Minister of State, Deputy Barrett, it was decided to extend the relief to corporations. As he pointed out, there are many corporations who would benefit from the opportunity, not just from a tax point of view but also from the point of view of making donations and therby gaining some public identification with sporting activities. This tax concession will be a significant new source of funds for the promotion of sports that would not have been available otherwise. In addition to money being allocated each year in the Estimates for sport and for Cospóir, it is desirable that there should be another source of funds from the commercial sector. The type of activity that sector might wish to get involved with could be different from that which the Government would get involved with in the normal course. The existence of different stimuli acting on Cospóir will  ensure that every possible source of funds will be identified.
The development of sport should be seen as having considerable potential for the development of our tourist industry. One of our attractions as a tourist destities on a scale and in an environment not available elsewhere in Europe. It is significant that in the White Paper on Tourism specific reference is devoted to the need for Bord Fáilte and Cospóir to get together to develop sports-related tourism. In that way the development of sport will not only be beneficial for our own people but also beneficial to our balance of payments. I commend the amendment to the House. I hope it will be possible for the Minister of State to speak further on this because I know he has many plans on how to promote this new incentive in the coming years.
Mr. O'Kennedy: I congratulate the Minister of State for this intiative and I wish to indicate that we support it. I know he has the interests of sport at heart. He proved himself a sportsman in every sense of the word. He knows how sportsmen tick. He is one of them and he can modestly claim to be almost professional, by contrast with the Minister for Finance. The Minister for Finance denigrated that office about two hours ago when he suggested that it might suit my capacity or level of intelligence.
Mr. J. Bruton: I did not.
Mr. O'Kennedy: The Minister did say so.
Mr. J. Bruton: The Deputy indicated that he would be Minister for Finance. I told him that his optimism and pretension did him no credit.
Mr. O'Kennedy: While I commend what the Minister of State has managed to achieve, it must have taken some time to make that great sportsman, the Minister for Finance, aware of the importance of it. We are supporting this amendment wholeheartedly but in the same Bill the  Minister, who has allowed himself to reach fever pitch, proposes to impose a DIRT tax. I imagine he would never reach such fever pitch at a match because his attendances would be few and far between.
An Leas-Cheann Comhairle: We will come to that section later. The Deputy should not anticipate.
Mr. O'Kennedy: It is time for the Minister for Finance to listen to the Minister of State. If he really wants to promote sport and healthy activities he should acknowledge that one does not do so by encouraging people to invest through Cospóir, a very worthwhile activity, while at the same time deducting 35 per cent of their income from all these organisations.
An Leas-Cheann Comhairle: You cannot discuss the DIRT tax on this section. It is dealt with in another section.
Mr. O'Kennedy: This dirt may stick somehow on some people's togs. The Minister, who is noted for his sporting prowess has been giving us a major peroration on the advantages of healthy activity.
An Leas-Cheann Comhairle: The Deputy must deal with the section. We will reach the other section tomorrow.
Mr. O'Kennedy: It is rather strange that the Chair could listen to that commentary from one who is not too well skilled in sporting commentary and not allow me to make this point, which is relevant.
An Leas-Cheann Comhairle: You are dealing with another section.
Mr. J. Bruton: I do not know what the Deputy is talking about.
Mr. O'Kennedy: In the same Bill the Minister of State is proposing to undo all that the Minister is proposing. The Minister of State will have our support,  not only because he deserves it but because the idea does. I hope he can persuade the Minister between now and tomorrow to take the same view in respect of the DIRT tax proposals.
Mr. G. Mitchell: I can vouch for the tennis prowess of the Minister for Finance. I know him to be a very good tennis sportsman.
Mr. O'Kennedy: I should like to see him in a scrum.
Mr. G. Mitchell: Regarding the funds coming into Cospóir, can the Minister of State with responsibility for sport, with or without the consent of the Minister for Finance, regulate those funds and designate how they will be spent? With regard to contributions by individuals or companies, can a company making a large contribution designate any sport, say, Gaelic football or squash or tennis, or any body who should be the beneficiary of such contribution to Cospóir? Is that possible under the Act or must it be a contribution to Cospóir without any ties attached? We have seen on television an increasing amount of advertising by football teams. I think the Kerry team advertise a particular company who make washing machines. Are we trying tax evasion into this section? Could a company sponsor a football team and then make a contribution to Cospóir which could be designated for that team, which in turn could make a refund? Is it possible to designate or must the contribution go into a common fund to be distributed by Cospóir without any strings attached, with the control of the Minister?
Mr. S. Brennan: I am disappointed the Minister has not an amendment to this section to do with the whole share option business. It was expected by the business community but I do not see any amendment from the Minister in regard to unravelling the share option business as laid out in section 7.
An Leas-Cheann Comhairle: We are on the amendment, not the section.
Mr. S. Brennan: I would point out that at 7 o'clock we are passing all the sections up to section 26. As of now there is no amendment from the Minister to unravel a major change in the basis of taxation for share option schemes. Perhaps this is actually a point of order. Is there any intention to find a means of debating the fact that this amendment has not been introduced? There is a major flaw in section 7 in regard to the absence of a proposal from the Minister. What arrangements have been made between now and 7 o'clock to get that amendment into this House? The share option business is being made subject to income tax and——
An Leas-Cheann Comhairle: We are dealing with amendment No. 33a.
Mr. S. Brennan: I appreciate that.
Mr. O'Kennedy: On a point of order, there is a risk of this being reduced to a sporting contribution. Deputy Brennan is referring to the amendments to section 7. The chair may not have seen the two different booklets of amendments from the Minister which have just arrived relating to this very important matter on section 7. This Minister is deliberately engaging in a lecture on sport instead of dealing with these amendments. It is quite disgraceful.
An Ceann Comhairle: Deputy O'Kennedy, please.
Mr. O'Kennedy: I want to address myself to the amendments which the Minister has just introduced.
An Leas-Cheann Comhairle: We are discussing amendment No. 33a.
Mr. Barrett: (Dún Laoghaire): Deputy O'Kennedy had concluded.
Mr. O'Kennedy: I am allowed to speak again. The Minister in what he is doing is giving a great example of how to promote sport or nonsense. The most complex amendments to this Bill were introduced  about two hours ago, dealing with the share option scheme.
Mr. O'Kennedy: This is some sport.
An Leas-Cheann Comhairle: We are dealing with amendment No. 33a and I am anxious to allow the Minister of State to speak.
Mr. O'Kennedy: In relation to this proposal for Cospóir which is supposed to enable us to engage in healthy recreational activity, one thing which would help us very much in this connection is running up and down to the General Office to pick up the latest lists of amendments produced by the Minister.
An Leas-Cheann Comhairle: Please stay with amendment No. 33a.
Mr. O'Kennedy: I am.
An Leas-Cheann Comhairle: The Deputy is talking about the General Office.
Mr. O'Kennedy: The Minister is engaging in sport and nothing more and the business community will treat him with the contempt he deserves for this performance.
An Leas-Cheann Comhairle: Is Deputy O'Kennedy concluding on amendment No. 33a?
Mr. O'Kennedy: This is agreed, as the Minister of State knows. If he wants to make a promotional statement, let him go and do it. We want to talk about tax but we have no time.
Mr. Barrett: (Dún Laoghaire): I have been trying to speak. As soon as one does anything in this country there will be  people to knock it. The only thing Deputy O'Kennedy is interested in is getting time to knock the Government. I regret that. This is not an unimportant amendment.
We are about five minutes on this amendment and it is every bit as important as any other amendment that has been before this House all afternoon.
Mr. O'Kennedy: Twenty pages have just come in now.
Mr. Barrett: (Dún Laoghaire): What is wrong here is the begrudging acceptance of a good idea. Let us take party politics out of sport. This is for the benefit of the community and if people want to come in here and criticise it——
Mr. O'Kennedy: If anyone is bringing party politics into sport, the Minister is. The Minister can have his amendment. We support it. We can argue some other time, but not here.
Mr. Barrett: (Dún Laoghaire): I was not wheeled in here to speak. The Deputy can do that to Deputy Haughey but not to me.
Mr. O'Kennedy: The Minister is embarrassed by this.
Mr. Barrett: (Dún Laoghaire): I am not the slightest bit embarrassed. We have here a real recognition of what the Government intend doing about sport. Anybody who says that this is not an important amendment is denigrating the value of sport. All I want to do, while Deputy O'Kennedy is briefing his Leader, is to avail of the opportunity to appeal to every Deputy in this House to use his indulgence in every parish in Ireland to encourage individuals and companies to avail of this tax incentive to develop sport and sporting facilities here. We should work together on this. What the Minister for Finance has conceded in this instance is welcomed, not alone by me, but by every sporting organisation in the country. I am not going to  delay the House. I am not here to pat myself or the Minister for Finance on the back. This is an opportunity for all of us to say “Here is a good idea, let us go out together and promote it”. That is really what I wanted to say. I did not want to make a long speech. All I wanted to do was seek the support of the Opposition in accepting the amendment.
Mr. J. Bruton: I wish to reply to Deputy Mitchell. He asked whether it would be possible for assistance to be given to an individual sporting body. Essentially that would be a matter to be determined by Cospóir in consultation with the Minister of State. He can decide either that the assistance can be given to, say, a coaching scheme that would be available to all sports or, if he wishes, to a particular sporting body in respect of the promotion of a particular sport. Of course, it will be confined to amateur sport. The scheme will effectively work very flexibly in order to encourage the best possible benefits to sport.
Amendment put and agreed to.
Mr. O'Kennedy: I move amendment No. 34:
In page 14, before section 7, to insert the following new section:
“7.—(1) In this section; save where the context otherwise requires—
`company' has the meaning assigned to it by section 1 of the Corporation Tax Act, 1976;
`director' and `employee' have the meaning respectively assigned to them by section 13 (1) of the Finance Act, 1972 and who are full-time directors or full-time employees of the company or its holding company;
`right' means the right to acquire ordinary shares in an employer company or its holding company in the case of a group of companies;
 `market value' shall be construed in accordance with section 49 of the Capital Gains Tax Act, 1975:
`ordinary shares' means shares forming part of the ordinary share capital of a company.
(2) Where a person realises a gain by the exercise of an option to acquire shares in an employer company or its holding company and where such person is a full-time director or full-time employee of a company then in computing the gain associated with the exercise of such option relief shall be granted for the purposes of the Tax Acts including Capital Gains Tax as if the person had paid valuable consideration at market value for the shares subject to the option subject.
(3) For the purposes of granting relief under subsection (2) of this section, relief shall not exceed half of annual salary as computed for the purposes of PAYE subject to maximum annual salary of £20,000.
(4) Provided this relief should only be taken once by any qualifying person during his lifetime and shall not apply to any individual who holds now or in the future more than 10% of the share capital by whatever name called of his employer company or an associated company.”.
This is an attempt to amend the section which the Minister himself is now proposing to amend. It is in relation to the share option scheme. I want to allow my colleague, Deputy Brennan, to speak to this amendment but before doing so I want to make the point that our amendment to this scheme has been in for four days. Just one hour ago we got, in the list of amendments the Minister circulated, a very complex amendment to his own proposal. That is outrageous. We had no chance to consider it. It was issued while we were here in the House. We have no chance at all to analyse it. I say again that the manner in which the Government are treating this House is outrageous. They are certainly not clear in their own minds  as to what they want to achieve. I do not have time now, in the time available, to discuss our own amendment. I would like to give way at this point to Deputy Brennan because clearly the first proposals in this Finance Bill were totally and utterly contrary to what the Minister wished to achieve. Our proposals are certainly much more effective.
Mr. G. Mitchell: I do not intend to speak out of turn and will give way to Deputy Brennan in a moment or two. Will this section have a more severe effect on the business community? The legislation will now apply to assets other than shares. Since the exercise of an option is the important term, will the Minister outline precisely what he and the Revenue Commissioners have in mind? What qualifies as an exercise of an option? This appears to be, in part, a follow up of section 186 of the UK Taxes Act, 1970, but it leaves out some of the more favourable sections of British legislation since that time. I am sorry we have not much more time to consider this section because it is an important section. I hope the Minister will reply to the points I have raised. Will it affect assets other that shares? What qualifies as an exercise of an option?
Mr. S. Brennan: This is one of the most important sections in the whole Finance Bill this year. I really have to object to the way in which the House is being treated this afternoon in regard to the Minister's amendments. I have been here since 3.30 p.m. engaged in this debate as have a number of other Deputies and I did not have an opportunity to get the Government amendment, nor was it handed to me. We have been following this legislation since 3.30 p.m. and I would have honestly thought that any amendment introduced by the Government within a few hours of the closing of the debate on the most important section of the Finance Bill would have been made available to the House. The reason I think it is the most important one, and I object to the way we have been treated here this evening, is that it radically  changes the basis of taxation of stock options. The Minister intended to do the right thing which was to make it more attractive particularly for foreign executives but also for our own executives to participate in Irish industry. That is a noble thought and one that I, and every Member of this House, subscribes to. But when the Minister wrote the legislation what was in it, at least up to 3.30 p.m., was making subject to income tax benefits and gains in regard to share options which heretofore were only subject to capital gains tax. In one example based on share options of about 20p there was an additional £2,000 or £3,000 taxation on the granting of the share options to executives in companies. Also, this income tax was being imposed at a time when the executive had to find the money to exercise the option and, at the same time, to pay the tax on the option. So the executive in question was being caught both ways. Perhaps the Minister's amendment has changed all that. In the one and a half or so minutes left to the House on this section of the Finance Bill, I would like the Minister to confirm to the House, which has not had an opportunity to study his technical amendment, whether the charge to income tax, which will be a massive disincentive to the whole share option scheme, actually reverses what is in this legislation? One thing is crucial and that is that we have got to encourage Irish industry; we have got to encourage Irish business. The intention behind this legislation was quite noble. Unfortunately, the drafting of it was extremely sloppy. It seems to have had the opposite to the desired effect and will act as a disincentive to people to get involved in share options.
Mr. J. Bruton: During the course of the opening statement on Second Stage I drew attention to the fact that in certain circumstances the new tax treatment, although it was an improvement in respect of the theory of the law as it previously applied, reduced the attractiveness of the existing practice of giving share options as a means of encouraging the attraction and maintenance of  high quality executives to this country. The purpose of the amendment which is now being introduced is to remove any such anomalies and to create a situation in which, where shares are being transferred at market value, the treatment will represent an improvement on previous practice. I understand that the bulk of shares are made available on an option basis at market value and this section therefore will improve the position of such employees.
I indicated at the time that I will be introducing an amendment to provide that where an employee or director obtains an option in respect of shares in a company by reason of his employment with that company or another company, and the option price is not less than the market value of the shares at the time the option is granted, the charge under section 7 will not be imposed.
Mr. O'Kennedy: May we introduce amendments on Report Stage?
An Ceann Comhairle: Yes, you can. In accordance with an Order of the House made today I am putting the following question: “That the amendments set down by the Minister for Finance to Chapters I, II and III of Part I of the Bill and not disposed of are hereby made to the Bill, and that in respect of each of the sections undisposed of in the said chapters, the section, or, as appropriate, the section as amended, is hereby agreed to.” Na Teachtaí atá in aghaidh abráidís “Tá”; Na Teachtaí atá in a thaobh abraidís “Níl”.
Mr. O'Kennedy: As a protest at the manner in which these amendment are being introduced, I am saying “níl”.
An Ceann Comhairle: Deputy O'Kennedy is being habitually disorderly. The Chair is putting the question and it is grossly disorderly to interrupt him.
Mr. O'Kennedy: We have not seen the amendment.
An Ceann Comhairle: Sílim go bhfuil an rún rite. I think the motion is carried.
Mr. O'Malley: Votaáil.
An Ceann Comhairle: Will those who are demanding a division please rise in their places?
Deputies O'Malley, Harney, Keating and Mac Giolla rose.
An Ceann Comhairle: As fewer than ten Duputies have risen, in accordance with Standing Orders I declare the motion carried. The names of those demanding a division will be entered in the Journal of the Proceedings of the Dáil.
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