Thursday, 18 June 1987
Dáil Eireann Debate
Mr. Noonan: (Limerick East): On a point of order, I want to draw the attention of the House to an article on the finance page of this morning's Irish Independent which says that the Minister for Finance is making major modifications to  the withholding provisions of the Finance Bill. It specifies four specific changes the Minister has announced. I have received no amendment whatsoever to this effect and I should like the Minister to clarify the position.
Finance Minister Ray MacSharry has modified the stringent conditions which must be met in order for professionals to obtain interim refunds of the new withholding tax on fees from certain State bodies.
The Minister has dropped the first three of the above conditions and now an interim refund may be obtained if the professional has complied with the fourth condition and produces certificates of the tax withheld.
This is a very authoritative article by Mr. Pat Newham of KMG Reynolds McCarron. He is a special correspondent for the finance page of the Irish Independent. Is the Minister doing something by regulation, or has he announced something quietly to the professions, or what is going on?
An Ceann Comhairle: I have allowed Deputy Noonan to raise this matter, but the business before the House is the Finance Bill, Report Stage, and various amendments. I have allowed the Deputy to raise the matter if the Minister wishes to intervene. I am facilitating the Deputy but I would not wish it to develop into a debate.
Mr. Noonan: (Limerick East): I am raising this matter now because I do not have any amendments which correspond with this announcement and I cannot take Report Stage if these changes are going to take place.
Mr. MacSharry: Perhaps I could help the Deputy. Presumably amendment No. 42 which I moved yesterday on Committee Stage is what is being referred to. Let me, with the permission of the Chair give the details which I did not get the opportunity to give yesterday. The amendment was:
The purpose of the amendment was to ease the conditions which will have to be complied with before an interim refund of tax deducted from professional fees will become due. This is an amendment which has been around for the past few days and perhaps there are interpretations as read out by the Deputy being put on it. I shall give the details.
Section 18 makes provision for interim refunds of appropriate tax in certain cases. In general a set off or refund of a tax under section 17 of the Bill will not be made until some time after the tax has been deducted. Section 18 of the Bill provides that an interim refund will be made in certain circumstances. The conditions set out in subsection (2) must be fulfilled before a refund under section 3 will be made. These conditions are that the major portion, at least 50 per cent of the specified person's business receipts, must be derived from relevant payments and the major portion, again 50 per cent, of the receipts must be expended for the purpose of the trade or profession concerned. In addition, the inspector must be satisfied that the absence of an interim refund would give rise to hardship. This is designed to cater for persons who must meet payroll and material costs in order to earn the receipts in question. Profits of the accounting period or base period immediately preceding that which is the subject of the claim must have been finalised and the tax thereon paid and the  claim must be supported by forms given under section 15.
After consideration of this matter it has been recognised that the conditions I have just read out might prove unduly onerous and these are now being removed. Interim refunds will now become due once the terms of paragraphs (b) and (c) are complied with. On Committee Stage I recommended that amendment and it is contained in the Bill before us this morning.
Mr. MacSharry: That is exactly the position. I have two amendments down for today and that is all. These are in relation to the regulations we agreed yesterday on the form of words which Fine Gael party members had put down themselves. I have now a suitable form of words that we all agreed yesterday. The second is in relation to the film industry. There is nothing else and there will not be anything else. Anybody is free, as I have said, to put interpretations on things but those are the facts as the Deputy fully understood them to be when we dealt with this matter.
“1. —As respects the year 1986-87 and subsequent years of assessment, the Finance Act, 1980, is hereby amended in subsection (2) of section  1, by the substitution of `£5,600' for `£5,300' (inserted by the Finance Act, 1985), and of `£2,800' for `£2,650' (inserted by the Finance Act, 1985), and the said subsection (2), as so amended, is set out in the Table to this section.
These are amendments which we had down on Committee Stage but which, because of the way in which business was ordered, could not be dealt with. Consequently we have submitted them on Report Stage. The basis of amendment No. 1 is to seek to raise the exemption limits in line with inflation since the last time they were increased, which was in 1985, In our estimation they should be increased by about 5 per cent. That is the figure we have provided for in the amendment. It is a fact which no one can deny that the PAYE tax take in the current year 1987-88 will be up by £300 million. That was stated in the Government's own back-up material in relation to the budget. It is also a fact that there have been fairly wide concessions in this Finance Bill for farmers, businessmen, traders, industrialists and so forth yet the PAYE sector pay over 90 per cent of all income tax. On average the PAYE taxpayer pays 50 per cent more than the self-employed person; he pays something like three times the amount which the large farmer may pay; at the same time we are asking the PAYE sector again to pay an increased amount in the current year. This is intolerable. The Taoiseach in his speeches in relation to the budget indicated that the Government recognise that the inequity in the tax system is causing more and more frustration among the PAYE taxpayers. It is for  that reason that we seek to have this amendment accepted by the Minister.
An example of the way that the gap between PAYE taxpayers and other taxpayers has widened is evident by the fact that the Government are taking an extra £300 million from the PAYE taxpayers and yet the amount which has been taken from the farming community in farm tax has actually fallen from £52 million in 1979 to £33 million in 1986. This is clearly intolerable. It cannot be argued that the farming sector is any worse off than the PAYE sector. Indeed, I would argue the reverse. While the take from the PAYE sector has increased at the same time business tax relief amounted to something like £800 million in 1986.
There are very grave inequities in the tax system. By no stretch of the imagination could our amendment eliminate those inequities but at the very least we should attempt to ensure that those who are least well off, the lowest paid workers in the community, should have their tax exemptions raised in line with inflation. That is the basis of the amendment before us.
Mr. Noonan: (Limerick East): One of the most extraordinary things in this Parliament is that the party that conceive of themselves as a Marxist party are the party who are putting down amendments to give relief on income tax. Colleague parties of the Deputy's party in Europe would see themselves as parties of high taxation and to use that high taxation for public services of a very high order. It is a reflection on how deep the tax burden bites here that a socialist party or a Marxist party are as concerned about the level of taxation as those parties who represent other sectors of the electorate.
It is very true that the bite is very deep. There are people in semi-skilled jobs and unskilled jobs paying the top rate of income tax. I appreciate that the Minister does not have very much scope for tax relief in this budget. It is modelled to a large extent on the budget on which we fought the election and we found ourselves in a position of not being able to give relief on income tax either. Apart  from one matter of equality between widows and widowers which would not cost the Exchequer very much, I have not sought to amend the income tax code in this Bill.
I appreciate the point made by Deputy De Rossa for tax relief but the scope is not there for it. It is a pity in the absence of having the scope to give relief the Minister has not taken the opportunity to put in the Bill a framework which would inspire a certain amount of confidence in the taxpayers that things will not always remain as they are and that there was hope of an equitable tax system and relief in the future. The Minister should have begun to legislate for a framework which would enable him to progressively move to self-assessment. A movement to self-assessment, signalled by a legislative measure in the Finance Bill, would be seen as a statement of intent and would help the Minister's economic policy even further. On Second Stage I made the point I do not believe that an economic policy which is based on one plank of declining interest rates, a matter over which we have limited control, is a sufficiently broad based plank on which to build an economic policy. We must move to a more equitable form of income tax where the incentive to work is restored.
I insisted yesterday afternoon on putting to a vote certain changes in the arrangements for rebates on VAT to farmers, not because of the intrinsic merits of the section but because the section was introduced to recover money lost by the abolition of the farm tax. It was a great mistake by the Minister to abolish the farm tax. There was a perception that at long last something was being done to take a realistic sum from the farming community and it had a high level of acceptance among farmers. It was a great pity that the Minister announced that he was proceeding to abolish the farm tax. It is a great pity also that the Minister discontinued the work of the land assessment office because it will be impossible to widen the scope of taxation if there is no basis for that taxation. At a minimum, the Minister should have proceeded to accumulate the data on  property so that he or his successors might be in a position to restore farm tax or bring in some other tax at a future date which would widen the scope of taxation and lessen the burden on the unfortunate people who seem to carry the whole burden now.
On the front page of this morning's Irish Independent there is a report on the national debt. It is clear to everybody there is very little scope to give income tax relief when all PAYE payments, except for £1 million, are swallowed up in servicing the national debt. When all PAYE is servicing the national debt and there is only £1 million left over, it is not a time for grand eloquent gestures and people demanding an enormous amount of relief. I know the constraints the Minister is under but as somebody who has been in the company of two previous Ministers for Finance down this road I think he has to give an indication of a legislative nature, and not just a statement in the House, that he is moving towards tax equity and that he intends to reduce the burden of taxation so that at least two-thirds of workers pay the standard rate and not a higher rate.
I appreciate the Minister does not have the scope we would like him to have, but levels of taxation are a major disincentive to wealth creation and work. There is a direct connection between our unemployment levels and our level of taxation. I hope the Minister will reaffirm what he said previously. I ask the Minister to explain also his position on self-assessment. He has not explained this since he became Minister. During the election campaign he gave the impression that he favoured the system of self-assessment. What is the Government's position on self-assessment?
Mr. Roche: Addressing the comments of the last two speakers, there is a fundamental dishonesty in the amendment at this time. Deputy Noonan has pointed out some of the problems. Would it that any Finance Minister were in a position to improve the lot of those on PAYE or in any other tax area. The facts are  otherwise. Deputy De Rossa in his contribution and in the amendment is touching on a favourite theme of his party — the divisions between the urban and rural communities, between PAYE workers and farmers. This is unhelpful. We have far too many divisions in a small society. To continue what is a divisive debate and one that does not have a great deal of meaning in the context of the tax take is unhelpful. As Deputy De Rossa knows, the funds are not available. It is incumbent on the proposers of an amendment such as this to say what cuts can be achieved to achieve the additional benefits suggested but there is no help in this. We would all like to be more generous but the funds are not there.
Referring to Deputy Noonan's point, the Government have indicated two important principles of tax equity and all Deputies and all thinking people and people who are even remotely in contact with what happens in public life are familiar with these two principles. The first concerns the very basis on which we are to tax people, that is the principle that we will have a tax on income.
Mr. Roche: That is indeed an issue. However, that is an important principle. Special tax systems such as the farm tax simply create hostages to fortune and in the long term they are not effective. They create a plethora of difficulties for the tax system and they have nothing to do with equity in taxation.
Mr. Roche: The second principle is to bring two-thirds of taxpayers back to the standard rate in the earliest possible time. Tragically, the bottom line in this is the point that Deputy Noonan made as he was about to resume his seat, and that is that we have a national debt which is eating every penny contributed to the  coffers of this State by the PAYE taxpayers. I should not have to remark that that national debt doubled while Deputy Noonan's party were in office. It took from 1973 to 1987 for that debt to accrue and in the majority of those years the Ministers in office were from Deputy Noonan's party.
Mr. Roche: Unfortunately, Deputy O'Malley is like the spoiled child who could not play football. He has left the pitch and he has tried to take the ball with him. The House is not any the poorer for this departure.
Mr. Roche: The point is well taken that some sort of relief for the PAYE sector is necessary. Certainly tax equity is something we should work towards, but there is no way in which we can achieve tax equity or justice or balanced public finances if we go along with piecemeal amendments which are put down by people who are not in power and who, thankfully, are unlikely ever to attain power. These amendments were put down because these people wished to have something to show to supporters. This amendment has nothing with which to commend it to the House.
Mr. MacSharry: Most people, particularly PAYE workers, would agree that we should give concessions to this sector but the arguments made by Deputy De Rossa in relation to this Bill suggesting that it conceded concessions to farmers, to businessmen and so on is not true. It is time we recognised that it does not do that. The reduction in the VAT refund will bring in more money than we would have got in land tax so the farmers will pay more. Deputy De Rossa referred to  the reduction in farm taxation but everybody, whether or not they are farmers, knows about the very bad seasons we have had over the past three years, that they had an enormous impact on farm output and, therefore, on farm income. The Bill before the House shows that the VAT refund will take £9 million back from the farmers. In so far as businessmen or professionals are concerned, we have the withholding tax. Any concessions given in this Bill are for investment to stimulate the economy and to create employment. This is the philosophy of our approach.
The cost of what the Deputy is asking for in this amendment would be £3 million in 1987 and £5 million in a full year. As has been said by Deputy Noonan and Deputy Roche, given the present budgetary difficulties the Government had to decide that there was no scope for increases in personal relief this year. It is no harm for us to recall that increases given in the 1986 budget were more than twice the level of indexation and will cost the Exchequer more than £200 million this year. For these reasons I am not disposed to accept the amendment.
The question of self-assessment was raised. I indicated in my closing speech on Second Stage that the Government favoured the principle of self-assessment for income tax and corporation tax. This will be given priority, but the implications of a change of this nature must be examined in the light of comments received from interested parties on the discussion document issued by the former Minister for Finance last January. A limited amount of comment has been received to date. In fact there were approximately six submissions, so there does not appear to be much interest in it. We will have to examine this in relation to the degree of support for or interest in a change. We cannot say anything further on self-assessment at this stage.
I agree with Deputy De Rossa that it would be nice to be in a position to do something to help the PAYE sector but at the moment it would just mean increased borrowing. We are committed, as soon as resources allow, to bring in two-thirds  of the PAYE taxpayers to the standard rate. I was disappointed in the context of the overall finances this year that I could not do so, but I will be working diligently to bring that situation about.
Proinsias De Rossa: A number of points have been made in relation to this amendment. Deputy Noonan made the point that he is surprised that The Workers' Party should propose tax relief. He went on to indicate why that should be so. It is because the PAYE sector is burdened with 90 per cent of income tax. PAYE people do not account for 90 per cent of the income earning population of this State. They account for approximately 60 per cent of the income earning population so why should they account for 90 per cent of income tax? They do not account for 90 per cent of the income earned in the State. I have not the figures available of the extent to which they account for income earned but perhaps the Minister has. That is why we are proposing what I regard as a very minor relief, and we go nowhere near establishing tax equity.
Deputy Noonan made the point that the tax burden is very heavy and that he believes there is in existence a strong link between the tax burden and unemployment. I admit I do not understand where he sees that link. If we assume it is the business community, the industrialists, traders and farmers, who have presumably the capacity — because we are told these are the people who must be given the incentives — to create jobs we cannot argue on the one hand that they are under-taxed and, at the same time, that the tax burden is preventing them from creating jobs. Such an argument is not logical. Presumably the Deputy is implying that because of the high PAYE tax rate there may be people out there who are not prepared to work and pay 45 or 50 per cent of their wages in income tax. There may be a minority of such people, but I have come across very few of them. Certainly no men or women with families I know of have opted out of the workforce because of  the high rate of tax, because they could not afford to live on social welfare. Bad as the tax system is and high as the tax take is, to try to exist on social welfare is a good deal worse. I do not see the link there. Perhaps Deputy Noonan and Deputy Bruton, the former Minister for Finance, who is now here will explain that to me.
Proinsias De Rossa: Deputy Roche seems to fear the day when The Workers' Party will come to power. He believes it will never happen. Perhaps he is right, perhaps he is wrong; we will not know for a while yet. He made a point in relation to divisions in society. The Workers' Party did not create these divisions. We have not created divisions between rich and poor or between urban and rural. The fact that the PAYE sector is over-burdened and that farmers, businessmen and industrialists are not over-burdened in no way creates a division between urban and rural. I am sure the Minister and other Deputies who represent so-called urban and rural constituencies are aware that significant numbers of PAYE workers work in so-called rural areas and constituencies. I am aware of PAYE workers working for quite large farmers: they are paying their PAYE every week but their bosses are paying no tax. It is not a question of a division between urban and  rural; it is a question of tax equity for those who are paying week in and week out and the burden they are carrying. This amendment is doing no more than attempting to redress that to some small extent.
The Deputy indicated that in proposing such an amendment we should say what cuts should arise as a result of the additional expenditure or loss of revenue. Again, I draw the Deputy's attention to the fact that we have in our Second Stage contribution to this debate indicated clearly where we felt additional income could be raised. We are not a party who favour cuts in the way the present Government have initiated cuts in the health services, for instance, in a totally ad hoc, arbitrary manner which is creating chaos in that area. In the first place it is not my responsibility, although I do not dodge the question, to indicate where cuts should be made, but I argue there is a different approach to the economy which could avoid the kind of disruptive cuts which are being made by the present Government.
For the life of me I cannot see why it is not possible for the Government to bring health service interests together to discuss the development of the health services. Let me beg the tolerance of the Chair for a moment on this point. There is no doubt there is substantial expenditure on health services and that we should get very much better health services for the money we are spending. However, to turn around and say, therefore, that we must cut the expenditure and sack porters, nurses, hospital doctors and a variety of other people working in the community as health co-ordinators, drug counsellors and so on as is happening in the Eastern Health Board area at the moment is not a rational approach to reorganising the health services. In no sense will I attempt to indicate where further irrational cuts should be applied, but there is a rational approach to this area to which the Government, had they sat down and thought about it, could have applied themselves.
The Minister said that the cost is too  much. I realised in proposing this amendment that that was prescisely what the Minister would say from the point of view of the totality of his Finance Bill. He has it worked out to the point where a certain amount must be taken from the PAYE sector. He argues that more is to be taken from the farming community this year. I withhold judgment on that until I see the outcome because I do not believe it. I do not believe that self-assessment, which I favour, will work unless there is a question of complete and full disclosure of assets, bank accounts, deposit accounts and other holdings. I am well aware of at least one farmer of my acquaintence who has three farms only one of which is in his own name and he pays no tax. There are many ways of skinning a cat. The various elements of the self-employed community will pay the best accountants and so forth to find their way around the Finance Act and all the tax Acts. I agree with self-assessment, but if we are going down that road there is a need to ensure full disclosure because it cannot work otherwise.
The Minister referred to the fall in the tax take from the farming community because of the bad years. In my contribution I did not argue that there was a crock of gold out there, but I am saying that they are not taxed at the same rate as the PAYE sector. That causes frustration and divisions which Deputy Roche referred to — not urban and rural divisions but divisions between the PAYE sector who are urban and rural and the farming community and the other self-employed elements in our community. Bad years do not account for the fall in the tax yield. The tax to which I am referring is, if you like, a total tax, including rates which were abolished by a previous Government and were not replaced by any kind of income tax or land tax.
The Minister contended that the withholding tax would also increase the tax yield. Unless I misunderstood the principle of that tax completely, it simply brings forward the payment of tax. It does not mean that there will be any  additional tax paid by the persons concerned.
Proinsias De Rossa: No, I did not describe withholding tax as a concession. I pointed out that there was a large number of concessions, such as that in relation to traders who are now treated for tax purposes in the same manner as industrialists. That is a significant concession. There is no parallel concession to the PAYE sector in this Bill. The abolition of the farm tax was a concession to the largest farmers in this State. There is no parallel concession being given in this Bill. If the Minister cares to check the record of what I have said so far he will find that I did not refer to the withholding tax as a concession. I was about to say that we have supported the withholding tax as a very blunt instrument but it does constitute some gesture, let us say, to the PAYE sector, some attempt to catch those who dodge paying tax left, right and centre. If we can devise some means by which they pay as they earn, then by all means do so. I do not see why it cannot be applied to those who collect fees in the private sector. Yesterday some Members almost had apoplexy here when it was suggested that it should be extended to the private sector as well as to those who collect fees from the State. That would constitute a significant move if the Minister would consider it.
I anticipated that the arguments advanced would be as they have been — that the cost would be too high, that we want tax equity but not now, that we must wait until everything is in order. I do not believe that is acceptable to the  vast majority of PAYE taxpayers who want to see equity now and not when the larger parties in this House see fit.
An Ceann Comhairle: A division has been challenged on amendment No. 1 in the names of Deputies Mac Giolla, De Rossa, Sherlock and McCartan. Will the Members who claim a division please rise in their places.
Amendment No. 2 is in the names of Deputies Mac Giolla, De Rossa, Sherlock and McCartan. Amendment No. 22 seems to be consequential and I am suggesting, therefore, that we take amendments Nos. 2 and 22 together, by agreement. Agreed.
1.——(1) Where a deduction falls to be made from the total income of an individual for the year 1987-88 or any subsequent year of assessment in respect of relief to which the individual is entitled under a provision mentioned in column (1) of the Table to this subsection and the amount of the deduction would, but  for this section, be an amount specified in column (2) of the said Table, the amount of the deduction shall, in lieu of being the amount specified  in the said column (2), be the amount specified in column (3) of the said Table opposite the mention of the amount in the said column (2).
|Statutory Provision||Amount to be deducted from total income for 1986-87||Amount to be deducted from total incomes for 1987-88 and subsequent years|
|Income Tax Act, 1967:|
|(widow bereaved in the year of assessment)||4,000||4,200|
|(additional allowance for widows and others in respect of children)|
|Finance Act, 1974:|
|(age allowance, single or widowed person)||200||210|
|(age allowance, married man)||400||420|
This is in line with the previous amendment. It seeks to give some assistance to those on PAYE in the absence of indexation to allow for inflation. It also proposes to increase personal allowance, employee allowance, married person's allowance, widowed person's allowance and an additional allowance for widows and others in respect of children. We have a similar point to make in regard to this amendment as we had in regard to amendment No. 1, namely the take from PAYE workers has increased this year by possibly up to £300 million and perhaps more — we will know that at the end of the year. There was no concession or reduction despite all the references by people on the Government and Opposition benches, both in this Government and the last one, to the need to widen the tax bands, the need for tax equity and so on. There have been calls on the Minister to allow for indexation to ensure that at least when a decision is made on tax it will be maintained at the original rate and will not increase annually. In this case we are seeking to add another 5 per cent to the allowances to give this slight concession to the PAYE sector.
Deputy De Rossa already made the argument about the advantages being gained constantly each year from each budget by other sectors and the same happened in this year's budget. They would be at a loss were it not for the PAYE sector because without the increases in that sector concessions could not be given in other areas. The arguments are so strong and so self-evident it is difficult to understand why the Minister for Finance last year and again this year  failed to allow in his budgets for indexation and inflation. The allowances for the PAYE workers have not kept pace with inflation and, therefore have been eroded year by year. In other words, their allowances are being reduced each year. They are less in 1987 than they were in 1986 and they were less in 1986 than they were in 1985. We all understood, after the Commission on Taxation reported, that such allowances would be increased or at least maintained by indexation. We are not putting forward any new arguments on this but the Government are not making any concessions to the PAYE sector although they, like the other parties in the elections, said they would do so. In that case one would expect that allowances would not be made to other sectors thereby increasing further inequity in the taxation system. It is inequity that is causing the great anger and upset in the PAYE sector and has done so in the last seven or eight years. People never said they wanted income tax abolished, like the farming sector.
The PAYE sector are prepared to pay their full share provided other sectors pay their share. Equity in the system and not a reduction in taxation is called for. We are calling for a spread in the tax system so that all sectors, farmers, professional people, the self employed and everybody with an income, pay their fair share. The amount of taxation levied on other sectors is not equitable in relation to the PAYE sector and they see that the money, even the small amounts of tax put on other sectors, is not collected. Furthermore, some of those other sectors are taking part of the PAYE money and not handing it over to the Exchequer. As a result when an employer takes money from employees and does not pay it over to the Exchequer the Exchequer is at a loss that year and the following year there must be an increased take from the PAYE sector to make up for the loss being robbed by other sectors. That is causing constant and increasing anger.
The reason the anger is not being expressed in the way people want to express it is the huge unemployment problem that is hanging over everybody's  head — it stands at 250,000 now and is expected to rise to 300,000 in the next few years. That threat of loss of jobs which is being handed down daily when workers attempt to get better conditions is making everybody afraid to express their anger by walk-outs or strikes In effect, people are being intimidated by unemployment and the threat of further unemployment. They are unable to express their anger as they did in 1979-80. It is dangerous to put that type of a cap on people's anger because it amounts to developing something that will cause a major explosion at some stage.
There is no evidence that the Government will be any different from the last Administration despite the promises made in order to get the votes of the working-class people. In our amendment we want the Government to retain the allowances at the rate established in 1985 at least. It is worth pointing out that 1985 was not an acceptable year for the PAYE sector any more than any year since 1979 was but the allowances should be retained at less than inflation. That is why we were asking for a 5 per cent allowance over two years. We hope the Minister will accept that there is a need for making an allowance for inflation or some system of indexation so that there will not be this constant erosion of allowances.
Mr. Noonan: (Limerick East): I do not intend to go back over the ground I covered when dealing with amendment No. 1 because the principle in both amendments is the same. My attitude to them is the same. I should like to draw the attention of Deputy Mac Giolla to a table included in his amendment in which he continues the discrimination which Deputy Bruton and I have pointed to in amendment No. 3. In that table he suggests that a widow bereaved in the year of assessment should have an allowance equivalent to the married allowance and seeks to have that raised from £4,000 to £4,200. What about a provision for a widower bereaved in the year of assessment? Deputy John Bruton will be dealing with our amendment, No. 3, but it is interesting to note that on the face of  the table in his amendment, Deputy Mac Giolla has continued inequality. Obviously, to lose one's spouse is a disaster in any family but we should get away rapidly from the tax code discriminating between the loss of a husband and the loss of a wife. We all sympathise with a widow and we want to maintain the married allowance at twice the single person's allowance in the year of the bereavement for her but we must bear in mind that the man who loses his wife is in equally difficult circumstances. We must remember that apart from the loss of a wife, and the tragedy for the family, that more women are working outside the home and contributing to the economy of the household, frequently on an equal basis with men. I accept that The Workers' Party do not intend to discriminate between men and women but I was anxious to draw attention to the fact that they continued the discrimination in the table they presented in amendment No. 2.
Mr. Roche: The principle involved here, and the arguments for and against it, are the same. The increase in personal reliefs will have a similar effect. All Deputies share a wish to increase personal allowances for the PAYE sector and that is a laudable aim. I will not deal with the artificial division between people as referred to by Deputy Mac Giolla. However, it is worth referring to one point he made and putting the record straight in regard to it. We have a good deal of distortion in the House from time to time and it is no harm to put things right. Deputy Mac Giolla referred to election promises in regard to the PAYE sector. He made many promises to that sector happy in the knowledge that he would be unlikely to be in Government and, therefore, would be unlikely to have to try to implement any of them. The Government party, as the Minister said, promised to reach the stage where two-thirds of PAYE workers would pay at the standard rate within the shortest practicable period. That is something we should all work towards rather than putting forward spurious arguments and objectives.
 The problem with the amendment is one of cost. We were told that the implementation of the last amendment would cost £6 million and my calculations suggest that the implementation of the amendment before us would cost many times that figure. However laudable amendments are, if the cloth is not there it cannot be cut any finer than it is being cut. The amendment may have some worthy aims to work for but it is not realistic. On that basis it does not have much to commend it to the House. Realism is what should be involved in amendments.
Mr. MacSharry: The major difference in my response to this amendment is that the cost in 1987 would be nearly £38 million, and in a full year, £63 million. Any Deputy who has been examining the public finances in the past few years will see that there is no scope for that kind of increased expenditure on increased reliefs.
I am delighted that Deputy Mac Giolla referred to unemployment. I was amazed at the sparse references to unemployment and the huge problems that it and emigration have been causing. To combat these twin problems we must try to get strict order and control of our public finances and then possibly we will make some impact on unemployment and emigration. Huge numbers of our young people are emigrating.
All people who have jobs must understand the difficulties. They pay taxes but at least they are more fortunate than those who have not got jobs and little or no prospect of getting jobs. All of us here must appreciate what needs to be done before we will be able to begin to correct one of our major problems in recent times. Unemployment and emigration have been with us always to some extent but they have become more pronounced in recent times.
For these reasons I must oppose this amendment. Deputy De Rossa made a similar case and he repeated a figure that has been bandied about, that the PAYE sector pay 90 per cent of the income tax collected. In fact, income tax on salaries  and wages does not constitute 90 per cent of the total tax. The figure is nearer to 75 per cent of all income collected.
Tomás Mac Giolla: I agree with Deputy Noonan in regard to widowed persons. Each year, we have had amendments to the Finance Bill seeking to have widowed persons with children treated in the same way as married couples with children for income tax purposes. There is no justification for not having similar tax allowances for widowed persons and married couples.
I did not expect the Minister to accept amendments because his aim is to increase the revenue irrespective of whom it hurts or how it hurts the PAYE sector from whom it is so easy to take money. When a new tax is demanded there is holy war from everybody else. The farmers breathe down your neck, and have been doing it during the past five or six years, and consequently every tax imposed was withdrawn within a year. Indeed in one case the tax they had paid was refunded by a Fianna Fáil Minister for Finance. The land tax has been abolished. The ease with which tax can be extracted from PAYE workers is such an attraction that Ministers continue to extract it every year despite the report of the Commission on Taxation and the general recognition that it is totally unjustified and immoral to be taking at such a rate from one sector and not taking anything from other sectors.
The Minister used the argument of unemployment to explain why he should not give equity to the PAYE sector. That is despicable. The last Government put up similar arguments. Taxes in respect of people who have the wealth and the property were abolished in the past few years. Here, we have the lowest taxation of wealth and property in Europe, much lower than the US, Britain and elsewhere. There is an incentive by way of a 10 per cent only corporation tax for manufacturing industry, a 10 per cent corporation tax for shopkeepers and wholesalers in the export trade.
The manner in which money is being  thrown around for other sectors is intolerable when we appreciate what is happening to the PAYE workers. We have been calling for subsidies instead of tax reliefs so that we can see exactly what is being handed out to whom. Money is being taken more and more from the PAYE sector. If they took a case to the Supreme Court on the constitutionality of a worker doing his week's work for a certain wage and never getting that wage for the work done — the only property which a worker owns is his weekly pay packet — the Government would be in a right pickle. The Government might find that it is totally unconstitutional to refuse to give a worker the wage for which he or she is hired. Farmers can find that rates are unconstitutional, others can find all sorts of taxes unconstitutional, but if the PAYE taxes were found to be unconstitutional, the Government would just collapse, end of story.
Therefore, the Government should take a much more serious view and all future Ministers for Finance should follow suit in regard to taxation. Each year it becomes more and more unjust: each year, more and more people are getting relief, many of them not paying any taxation, while the tax on the PAYE sector is increased year after year.
Therefore, it is specious for the Minister to argue that the PAYE sector have a responsibility for the unemployed. Many people say that the trade unions are the cause of all the trouble, that those at work looking for more money are the cause of the trouble. Those who are the cause of the trouble are Governments who do not face up to the people who have got to be faced up to, the owners of wealth and capital. Unless they are faced up to, unless they are trampled upon, neither the unemployment problem nor the tax equity problem will be resolved.
I gave the Minister notice some time back that with my colleague Deputy Michael Noonan, our spokesman on Finance, I would be raising this matter on Report Stage. As I understand it there is a special provision in the law whereby a widow qualifies for a special tax allowance in the year of bereavement and this allowance is not available to a widower in the same circumstances. I realise this dates from the 1967 Finance Act and was on the Statute Book long before recent developments in social thinking in regard to equality of the sexes and before the Murphy case in which the court decided that it was not acceptable to tax men and women on a different basis in a family situation.
It seems therefore to be inappropriate to have a provision where men and women in the same circumstances, that is where there is a bereavement, are treated differently and a widower does not qualify for the same tax treatment as a widow. It would be wrong to claim that a widower faces more problems than a widow in the year of a bereavement and I am not making such a claim. Frequently there will be particular problems for a widower but on the other hand there are also problems for widows. I am not suggesting better treatment for a widower than for a widow, merely that they be treated the same.
I believe this discrimination is unconstitutional and if challenged would be overturned. I also believe the cost involved in making the proposed change would be relatively minimal. I am not aware that this matter has been raised on the Committee Stage of Finance Bills in the past, and therefore I am not in a position to say what the cost of the change would be. While I appreciate that the  Minister has settled the overall outline of the Finance Bill this year, it is important that we should have a debate on this issue of social policy at this time. I would be very interested to hear the Minister's views on this amendment.
I stress that our amendment is not drafted with all the technial resources that are available to the Minister and I hope he will not deflect the basic case I am making by referring to drafting deficiencies. I am anxious to hear his comments on the general principle.
Proinsias De Rossa: I support this amendment. Over a long number of years we have tabled amendments to Finance Bills not specifically relating to this issue but to have all widowed persons with dependants treated in the same way as married couples. We argued that it is no less expensive for a widowed person, or a single parent, to raise a family than it is for a couple to do so. The mortgage is exactly the same, the cost of clothing, food and so on are exactly the same. We have argued that very strongly.
The matter to which Deputy Bruton is referring is discrimination between a widowed woman and widowed man. This is a matter of which I must honestly say I was not aware. I knew there were no widowers' pensions for men, but I was not specifically aware that men were discriminated against in this way. Therefore, I have no hesitation in supporting the amendment.
Mr. Noonan: (Limerick East): By and large women are the sex who are discriminated against. There is a lot of discrimination under law and in social practice against women in our society. This is a very small element of our tax code which discriminates against men. The fact that it exists will be used by some clever debaters as a reason we should discriminate against women in other areas. If there is sexual discrimination against men or women in law, we should seek to remove it.
We now have the discrimination against women Act. Discrimination is the sum of many little things and we have  come across discrimination in this Bill today which will cost the Minister very little to remove. I ask him to do it. We are not talking about a permanent allowance for widowed persons. We are not asking for a widowed allowance for widowed persons which would be twice the single allowance; we are simply talking about an allowance in the year of bereavement which would be the equivalent of twice the single allowance — the allowance to married persons. This applies to widows at the moment in the year of bereavement but nobody could make a case that this should not apply to widowers as well. I ask the Minister to accept this amendment.
This provision is obviously unconstitutional and case law makes it clear that if this were challenged the case would be successful. It is unlikely that a group of bereaved people will come together and incur the costs involved to bring a case like this to prove their point. I ask the Minister what the cost would be and if he would do something for these people. This would create a lot of goodwill.
Mr. MacSharry: The reason for this amendment appears to arise from misunderstandings by the Deputies — that in the year of bereavement widows are entitled to more favourable tax treatment than widowers. This is a complex issue as Deputies are aware and I will give all the details I have.
The cost of the amendment as proposed is negligible but it will not do what the Deputies want. In the more usual case, that is where a married man is assessed to tax in respect of his own and his wife's income, and his wife dies, the man continues to be entitled for that year to the tax entitlements of a married person. Where the husband dies, the wife is entitled to an allowance equivalent to the married personal allowance, that is the higher widowed allowance, single, not double, rate bands and widowed mortgage allowances against her income for the portion of the year in which she  became a widow. It can be seen, therefore, that the widower and the widow are entitled to personal allowances of the same amount in the year of bereavement. However, a married couple are treated more favourably overall in the year of bereavement where the husband dies as opposed to where the wife dies. This disparity of treatment arises primarily from the fundamental concept of the taxation of married couples and from the desire to give some additional assistance to a widow in the year in which her husband dies and when possibly her main source of support ceases.
If the Deputies are suggesting that in the year in which one of them dies, a married couple should be treated exactly the same for tax purposes, irrespective of which of them dies, the amendment will not achieve this. In a case where the husband was assessed in respect of their joint incomes and his wife dies, the husband would have to get the equivalent of an additional married allowance and additional single rate bands. In these circumstances, the widower would receive personal allowances twice those of a married man and rate bands one and a half times those of a married man. Clearly, this would be an unacceptable proposition. Section 138 (b) (1) of the Income Tax Act, 1967, which grants the equivalent of the married allowance to a widow in the year of bereavement was enacted following representations over a long number of years for special tax treatment for widowed persons in the years immediately following bereavement. Widowers were already entitled to the married allowance in the year of bereavement. Accordingly, in 1980, the equivalent of the married allowance was also extended to widows in the year of bereavement. For the years after the year of bereavement, widows and widowers are entitled to the same widowed person's allowance and, if there are dependent children, to the same single parent allowance.
In very unusual circumstances, under present taxation law, the widower might not be entitled to the higher personal allowance in the year of the death of  his spouse, where he has elected to be assessed for tax as a single person. He would continue to be taxed as a single person in such circumstances but he would benefit from the higher allowance granted to widowed persons which is £2,500. The fact that in such circumstances he does not get the married personal allowance in the year of bereavement might be considered anomalous. In the circumstances, I propose to have the matter examined with a view to changing the law next year.
Mr. J. Bruton: It appears from the Minister's remarks that there is an apparent contradiction because, at the outset of his remarks, he said there was no discrimination. Later on he seemed to be saying that widows were granted something extra. If that apparent contradiction in my hearing of what the Minister said — I would be very loath to criticise the brief with which the Minister is provided——
Mr. MacSharry: I am sorry to interrupt the Deputy but I will repeat what I said. In very unusual circumstances, under present taxation law, the widower might not be entitled to the higher personal allowance in the year of the death of his spouse.
Mr. J. Bruton: I accept that and I do not want to pursue the matter further. I expect that the Minister's review will be completed in time for next year's Finance  Bill and I am sure that the Minister, or someone else, will continue the good work.
Mr. Noonan: (Limerick East): I have been listening very carefully to the Minister's reply and he has only given a commitment to examine the situation where an anomaly arises when people opt for self assessment rather than joint assessment. That affects a very small number of people. Will he give a general commitment to look at the whole section and the treatment of widows and widowers before the next Finance Bill? The Minister seems to suggest — maybe I misheard — that a widow would revert to the single limits on mortgage interest allowances on home loans in the year of bereavement whereas the widower would continue at the £4,000 ceiling rather than at the £2,000 ceiling. That is discriminatory and, therefore, the Minister should look at the whole area of the treatment of widows and widowers.
No doubt the Minister will argue against this amendment also on the grounds of cost and I do not propose to delay the House unduly. This special PRSI allowance was introduced in 1982 in response to a massive outcry from the PAYE sector at the increases in their PRSI contributions. As a means of defusing the situation, where there was massive withholding of taxes in protest at the huge take from their pay, this allowance was introduced. Unfortunately, the allowance introduced at that time has been consistently reduced and we are seeking to have it restored to its original level in real terms. The arguments which Deputy Mac Giolla and I made in relation to tax equity and the unfair burden which the  PAYE taxpayer is carrying applies equally and strongly to this amendment and I ask the Minister to give it serious consideration.
Mr. Noonan: (Limerick East): I see nothing wrong with the intent of the amendment but our position is that in Government we examined matters such as this and were unable to give the increased relief which is very desirable. However, we did not have the scope to do so. We fought an election on these issues and we were fairly severely punished by the electorate. I will not turn my party into a bunch of hypocrites by taking a different line three months later because we happen to be in Opposition. We will not indulge in the natural handstands of Opposition parties and turn into a bunch of whingers looking for concessions in all directions as if we had never been in office. We are trying to establish a consistency of policy between our position in Government and in Opposition and we are succeeding. We are the only party in the House who have maintained consistency in Government and in Opposition.
I will not deal with the various changes of policy by the Minister's party, but another party in this House, who walked out this morning, since they went into Opposition and as late as the debate yesterday on the Finance Bill amendment in regard to the payment of advance corporation tax, propose to spend money like drunken sailors. Yet they claim they are the party who introduced the concept of a stringent attitude to public expenditure. They cannot have it both ways. If people fight an election on one basis and put policies before the people, in common decency they should maintain the logic of that position for at least a period of time until they can develop alternative policies in the light of changing circumstances. I resent the histrionics of a group who stood for one thing and now progressively are standing for what is diametrically opposed to it.
Mr. Roche: Deputy Noonan has made  some good points. The realism of his contribution is very welcome indeed and the comments he made just now about the bunch of strolling players who wandered off the stage not so long ago were equally well made. The concession being suggested for increased relief is something which, again, is desirable. There can be no doubt about that. Desirable though it may be — and desirability is not the only criterion by which we should judge actions or proposals which come before this House — we have to be realistic. This particularly desirable change would cost a fortune.
We have had a situation where over the past few minutes three amendments have been proposed here. Deputy De Rossa earlier on suggested that he had on Second Stage indicated where all the funds could come from. I submit that is not the case. This would be a very significant foregoing of revenue. While the general points the Deputy has made about the need to lift the burden from the PAYE payers are valid, correct and generally widely accepted, this proposal simply does not stand the test of logic. We in this House all know that the funds simply are not there. As Deputy Noonan has pointed out, the previous Government and the present Government have looked in this direction to find that the only thing that is missing is cash. There is no shortage of goodwill in this regard. At the end of the day it is funds that are missing.
I would make a general point in this regard, that ultimately, if realism prevails with regard to the national finances the first real benefits will start to accrue to the PAYE payers because the burden of unrealistic policies has fallen excessively and progressively on their shoulders. It really is not sufficient for any serious party to come before the House and suggest we should effectively double the relief, as is suggested in this amendment and make the invalid points about cuts which they have made earlier. Sadly, the two things do not stand together. The Secretary of the Department of Finance many years ago said that the problem  with this State is that we are republican with a republican purse and we cannot afford public officials, public servants or politicians who have imperial ideas. We cannot afford this type of change however welcome it would be at this time. Every Deputy in this House and everybody outside it knows that is the case.
Mr. MacSharry: I know every single Minister for Finance would love to do the same. I said reduce taxes. I was accused by Deputy Mac Giolla a few minutes ago of increasing revenue no matter whom it hurts.
Mr. MacSharry: This is not the case. Some of the points the Deputy has made already are not at all relevant. It is very easy on the one hand for the Deputy and his party to be concerned about unemployment, to be against cuts in expenditure, which increases borrowing — and for reducing taxes which also increases borrowing.
Mr. MacSharry: Those are the facts. Perhaps with the expert advice they have available to them in all quarters they might begin now to do out a profit and loss account of the proposals they make. Then we would see the picture in reality. It is reality within which I have to deal, or anyone who holds this office as Minister for Finance. The reality of this amendment is that it would cost the Exchequer in some form or another, either through increased taxation or increased borrowing, in 1987 alone £50  million and in a full year £85 million. I would remind the House that that is in addition to the cost of the concession of £286 which this year is £50 million and for the full year is £83 million to £84 million. Taking into account what I have said on many occasions and what Deputies opposite and on this side of the House have said, because of the serious state of the public finances there is absolutely no way that consideration can be given to concessions of this nature when the huge costs are involved.
Deputy Mac Giolla was not here when Deputy De Rossa moved the first amendment but I said then it was my commitment as Minister for Finance and that of my party in Government that as soon as possible — and, as I said earlier, I was disappointed we could not do something about it this year — we would move to a situation where 66 per cent of the people would be on the standard rate of income tax. That is still our commitment. In so far as this amendment is concerned I cannot accept it.
Proinsias De Rossa: I have a few brief points to make. It is unfortunate the Minister chooses to attempt to bluster his way through this issue, to distort what The Workers' Party have been saying in this House in relation to taxation. We have made it quite clear that we regard the burden on the PAYE sector as far too heavy. We have argued for tax equity. It will presumably not be possible for the Minister to respond on this amendment but perhaps he will respond in the course of the day on the other amendments which will be discussed on Report Stage.
Will the Minister indicate how much the various reliefs included in the Finance Bill for sectors other than the PAYE sector will amount to for the year 1987-88? I am talking about the new reliefs. Perhaps he would also indicate the magnitude of the reliefs already in existence for sectors other than the PAYE sector. I have said that 90 per cent of income tax  is payable by the PAYE sector — the actual figure is 90.3 per cent. The Minister said that it is 75 per cent. I would like that to be clarified at some stage during the day. I got my figure from official sources.
It is wrong of the Minister to attempt to imply that the Workers' Party are in any way irresponsible in this House. We have adopted a very responsible attitude to this question of taxation. We have attempted to articulate here the very grave discontent which exists among the PAYE sector at the massive burden they are carrying and what they and we see as the constant bowing to very powerful vested interested in our society.
One has only to recall the degree to which every Deputy was canvassed by the professional bodies in relation to the withholding tax. This was not an attempt to take any more tax from them but simply to get them to pay their tax earlier. Deputies are under pressure from very powerful vested interests. These are very small in numerical terms and in terms of the population and workforce of the State but it seems they are very powerful in the corridors of power of this House. It is necessary that the PAYE sector's case be made equally strongly in this House. This is what The Workers' Party are doing and will continue to do regardless of distortions and misrepresentations by the Minister or anybody else.
I put down this amendment on Committee Stage and I re-entered it so that I could talk about this section and get clarification from the Minister. From one reading of the lines which I wish to be deleted it looks as if a loophole in the scheme is being closed. If that is the intent of it, well and good. On another reading of the lines it seems that this  could put a spancel on the scheme which would make it inoperable and that there would be no uptake of it.
As Deputies will be aware this scheme was introduced by the last Government and it has worked very well. There are factories around the country where significant numbers of employees now have shareholdings through stock options, productivity has gone up, industrial relations are far better, absenteeism has gone down and the general atmosphere of the workplace has improved out of all proportion. One can see the effect the widespread practice of workers holding shares in the company in which they work would have on the country as a whole. The division between employer and employee would be drastically reduced. Everybody having a stake in the company in which they work would work much harder and productivity and competitiveness would increase enormously.
The primary reason this amendment is put down is to increase the ceiling on relief and I would be very upset if it had a sting in its tail which would reduce the possibility of workers participating in this scheme. The conditions laid down in the lines I have asked to be deleted are restrictive in so far as they refer to the proportions of ordinary share capital that have to be held other than by directors and workers. I want a full explanation from the Minister of lines 1 to 24 on page 8 of the Bill.
Mr. MacSharry: I think there is a complete misunderstanding in relation to this but I will explain it. The wording the Deputy proposes to delete is wording taken exactly from the 1982 Act which set up the profit sharing scheme.
The amendment proposes to delete part but not all of the provisions of the Bill designed to prevent the relief in respect of dividend income derived from manufacturing profits from being abused through the substitution of tax related dividends for employee remuneration. A similar abuse of export sales relief dividends took place in the past. Abuse would take the form of employees, most likely the executive directors and higher  paid employees, surrendering part or all of their salary in exchange for special shares of nominal value specially created by their employers for the purpose on which tax free dividends up to £9,000 could then be paid with a reduced tax liability in respect of the balance of the dividends.
While the Revenue Commissioners have as yet no evidence of abuse of the relief this is not surprising considering that it was introduced only last year. Tentative inquiries possibly leading in that direction have been received from one firm of accountants. In addition, following the publication of last year's Finance Bill it was suggested at various seminars held by accountancy firms on the provisions of the Bill that the relief was a method of giving tax free remuneration to employees. It was as a result of these suggestions that Deputy Bruton, the then Minister for Finance, decided to warn on Second Stage debate of the 1986 Bill in the Seanad when he said:
——by issuing tax-relieved dividends to them in substitution for normal forms of remuneration which would attract full rates of income tax, this will be regarded as an abuse of the relief. I wish to give fair warning now that, in the event of instances of such abuse being brought to my attention by the Revenue Commissioners, I shall not hesitate to take action against it by legislation which will have retrospective effect. The acid test in determining the occurrence of abuse will be whether all dividends paid are realistically related to genuine investments.
The proposal in the Bill to increase the relief from £7,000 to £9,000 in the case of dividends where the company concerned establish a profit sharing scheme for their employees will, of course, increase the attractiveness of a switch of this kind. In the circumstances it is considered prudent to avail of the opportunity afforded  by the increase in the relief to enact suitable provisions to forestall any attempt at abuse of the relief by the means mentioned above.
The method chosen is to provide that the relief will be available only in respect of dividends paid on bona fide ordinary share capital of a company. This category of share capital is defined in very similar terms in the ordinary share capital of a company which qualifies for relief under the approved profit sharing scheme for employees. The lines which Deputies Noonan and Bruton want deleted contain a wording which is identical with paragraph 8 of the Third Schedule of the Finance Act, 1982, except that clause (c) of that paragraph has been omitted. Section 5 has been so drafted as to ensure that the same qualifications will apply for the shares under both schemes.
Under the profit sharing scheme the definition is designed to ensure that employees will be given shares of value in their employing company with the same rights and privileges as other shareholders and not be fobbed off with shares of spurious worth. In the present case the conditions are similarly designed to prevent spurious shares being created for tax avoidance purposes particularly for the benefit of executive directors and higher paid employees.
I do not think I have to explain any more because that puts on the record the exact position. Deputy Bruton had some reports from a paper which I think he now accepts were a misunderstanding of what is being proposed here. I hope I have explained it to the Deputy's satisfaction.
Mr. Carey: I appreciate the Minister's explanation of this section but there is anxiety among people already involved in schemes about the application of this new section. The profit-sharing schemes already introduced by companies have been a signal success. In my constituency there are two companies who have issued shares, one in services and the other in manufacturing. One company has 280 employees and when this scheme was  introduced in 1984 they had approximately 80 applicants for shares. The effect of the share offer in this company came about because the management and employees sought to have savings in utilising raw material and also in the energy saving schemes the company needed to impose. Last year approximately 140 employees owned shares in the company. It was difficult for the company to sell this idea but it has resulted in great industrial relations in the company and it has enormously improved productivity. It has considerably reduced excessive waste. These people would be loath to hear that the Minister is now interfering with the scheme to which total commitment has been given.
I realise the Minister said that the former Minister for Finance, Deputy Bruton, raised this matter in the Seanad, but it is significant that he did not proceed with the amendments then. There is a belief that the terms of the section would compound the difficulties for ordinary employees in companies who hold shares on this profit-sharing basis. I know that officers from both the Department of Industry and Commerce and the Department of Finance have examined these schemes and that they are anxious to close off the loopholes but it would be wrong to stifle the scheme totally just to eliminate tax avoidance. Will the Minister in his reply say whether ordinary employees in public companies such as those of whom I have spoken will continue to enjoy the same conditions as when they joined the scheme?
I noticed, and it was welcomed last year, that the Minister reduced the number of years within which redeemable shares could be converted from seven to five years and that certainly was an improvement. It certainly compared favourably with conditions in the UK. From the advice I have given this section will hamstring the scheme altogether and I regret it.
Mr. MacSharry: I realise I am not supposed to reply now but if the House agrees I will do so. I welcome Deputy  Carey's contribution and I am glad to know that the scheme has worked. What is being done here does not affect the scheme. What we are doing is trying to improve and enhance the position and, at the same time, to avoid abuse of it.
This amendment is formulated to deal with what I consider to be one of the most disturbing aspects of the Finance Bill. A very serious attack is being made on the relief being awarded to people who have raised home loans. The Minister has decided that the home loan relief régime for income tax purposes will only apply at 90 per cent of its existing level. I intend to spend some time with this amendment and the next amendment discussing the implications of this.
When the Minister introduced his budget he almost used the lines which we had used in our advertising campaign in the general election. The Minister did not actually talk about breaking out of the vicious circle of over-spending leading to high interest rates, to high taxation and to unemployment. He waited until the debate on the Finance Bill to use the phrase “vicious circle”. The Minister took what we advocated as a major economic plan, the reduction of interest rates,  and sought to make it his own. We welcomed that in his budget speech, but then the Minister introduced at least two measures in this Bill which run counter to that stated policy.
The benefits of reduced interest rates are manifold. Obviously if one is in debt and interest rates are down that is good for the person who owes a lot of money. If somebody has a very large house and mortgage rates are down that is good for the householder. The benefits of reduced interest rates are passed on to the householder who, in turn, has more disposable income. The sum of all the increased disposable income from householders should give some little boost to consumer spending. Those are good reasons for reducing interest rates, but the primary reason for reducing interest rates is that rates will come to a level where people and companies with money will invest in risk-taking activity here and it will pay them to take risks rather than to invest in Government paper when interest rates are low. Even with the reductions, the incentive is not there for people or companies with spare cash to invest in risk-taking areas of this economy and, consequently, we have massive unemployment which is rising.
There is obviously a direct relationship between over-expenditure by a Government and unemployment. There is an even more direct relationship between the lack of investment in an economy and unemployment. If people and companies do not invest there will be fewer jobs. If people and companies do not invest in new activity there is no hope for the myriad of young people who will remain unemployed. If we look at what has happened over the past while, not alone do we see this massive purchase of Government paper rather than taking any risk in the job creating area, but we also see our major multinational successful companies investing outside the country. Many of our successful companies are going into North America and taking risks there because the opportunity to make money there is greater than at home. The Minister knows this and he can argue as effectively as I can. Within  that scheme of things, and if the name of the game is lower interest, rates, I cannot see why the benefits of lower interest rates cannot be passed on to the most harassed sector of our population.
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