I move: "That the Bill be now read a Second Time."
I am pleased to put before the House my seventh Finance Bill. Leaving to one side two specific special Finance Bills this is my fifth annual Finance Bill, all part of our budgetary policy designed to secure sustainable growth and increased living standards. This Bill implements the tax changes announced in the Budget and includes a range of other measures.
Deputies will be aware that the annual Finance Bill is a considerable piece of legislation. This year the Bill runs to 137 sections and 6 schedules. I propose to outline the main provisions in the time available to me. The Committee Stage will provide an opportunity to debate the Bill in detail. I look forward to hearing the views of Deputies in the House.
Personal Income Tax Changes
As the House will be aware, one of the Government’s central objectives in the area of personal taxation has been to move towards a position where most income earners pay tax at no more than the standard rate. Before the Government came to office, a single person with an income above €17,270 or £13,600 per annum became liable at the top tax rate. This was below the average industrial wage as it stood in the first half of 1997. We are now at a position, following Budget 2002, where the same person will not pay tax at the higher rate until his or her income exceeds €28,000 or £22,052 - comfortably above the average industrial wage today. The improvement has been brought about by the significant widening of the standard rate band over the last number of Budgets. Section 2 of the Bill will give effect to a further widening of the band. This will remove a further 57,000 taxpayers from the top rate of tax.
Section 3 gives effect to significant increases in basic tax credits resulting in further real progress towards our aim of exempting those on the minimum wage from the tax net. The increase of over 14% in the combined value of the personal and employee credits, which is provided for in the Bill, will mean that the entry point to the tax system for a single person will be over €209 or £165 per week that is 90 per cent of the current minimum wage as compared with €98 or £77 in 1997/98. A single income married couple in receipt of the home carer’s credit will be exempt from tax on the first €22,350 - equivalent to €430 per week.
Since 1997 the positive changes to the income tax system have taken 71,500 elderly people out of the tax net. The increases in income exemption limits for the over 65’s provided for in Section 4 will mean that the limits have almost doubled since 1997. They will now stand at €13,000 single and €26,000 married.
The increases in credits provided for in the Bill as well as the increased exemption limits for the elderly mean that over 79,000 people are being exempted from income tax altogether. Since the Government entered office the number of those brought outside the tax net has increased to a record 692,000 - equivalent to 37% of all income earners. This compares with a figure of 380,000 or 25% of income earners before the Government came to Office.
Medical Expenses Relief and Employment of a Carer
I am very concious of the costs involved in caring for family members who are ill and incapacitated and consider the tax system should support people in these efforts. I made significant changes in the tax reliefs in this area last year and am taking further measures this year. The cost of employing a carer to care for a family member who is incapacitated can be claimed at an individual’s marginal rate of tax subject to a ceiling. Section 5 increases the maximum allowed from €12,700 to €30,000 per annum.
Claims in respect of unreimbursed medical expenses can be made by an individual against tax at the marginal rate. Currently the relief is available for a person’s own unreimbursed medical expenses or where an individual pays the unreimbursed expenses of a spouse or dependent child or of a widowed father or mother or incapacitated relative of the individual or his or her spouse. In Section 9 this is now being extended to include a brother or sister, all parents whether widowed or not, grandparents and grandchildren. I also believe there is a case for allowing claims in respect of non-relatives where these are elderly individuals aged 65 or over or those who are permanently incapacitated. The Bill provides for this.
Section 6 amends the tax credit available in respect of local authority service charges. The maximum amount of service charges qualifying for the credit at present is €195. This section removes the ceiling for services provided by local authority and private operations, other than for refuse collection services based on a ‘tag’ system. This will allow a taxpayer claim a tax credit for the full charge for such services at the standard rate of tax.
The flat rate of tax charged on refunds of pension contributions has been 25% since 1992 when rates of tax were considerably higher. Section 10 reduces the rate for refunds made on or after 5 December 2001 to the standard income tax rate.
I might also mention at this point that, as I indicated last week on the publication of the Bill, I will be bringing forward at the Committee Stage of the Bill a number of changes in the pensions area to encourage employees to increase their level of pension cover.
Tax Relief for Sportspersons
Section 12 provides for the introduction of a new scheme of relief from income tax on their direct sports earnings for Irish resident sportspersons involved in certain sports. I am very concious of the contribution such sportspeople make to Ireland’s image and reputation as well as the short earnings career they have in many cases. I want to encourage world class Irish sportspeople to stay resident in Ireland and recognise the contribution they make. This relief will also benefit our semi-professional sportspeople whose efforts bring enjoyment to so many.
Qualifying sportspersons will be entitled to a deduction from earnings from direct participation in certain sports of the order of 40 per cent for up to 10 years of assessment back to and including the tax year 1990/91 provided the sportsperson was resident in the State in these years. Eligible income under the scheme will arise from direct participation in the sport and will not include income accruing from sponsorship, advertising or endorsements. The relief can be claimed in the year in which the sportsperson ceases to be permanently engaged in that sport, provided the individual is resident for tax in that year, and will be given by way of repayment of tax. The cost of this measure is not estimated to be very significant – it is unlikely to exceed €5m a year on average on an ongoing basis.
Section 13 amends the provisions governing Approved Profit Sharing Schemes and Employee Share Ownership Trusts to allow existing ESOTs or APSSs to continue to benefit where a takeover takes place and the takeover company involved has no share capital or insufficient share capital available to do a full ordinary share for share exchange. I am aware of the arguments for extending these type of arrangements to more general gain-sharing schemes where cash payments rather than shares are involved. I appreciate the benefits such schemes can bring-indeed a number of groups whom I met have made this case. However there are difficulties in designing a scheme of tax relief in a way that does not lead to a more generalised scheme of tax relieved remuneration. Accordingly I do not consider it feasible for the moment to extend these schemes in the ways suggested.
Section 14 limits the use by private investors of relief available for expenditure on significant buildings. In order to combat the unintended use of this relief by passive individual investors, there will be an annual limit of €31,750 on the amount of losses that such investors can offset against their other income. This brings this relief into line with what applies generally for industrial buildings. Since this was announced in the Budget I have been made aware of a number of projects where arrangements were already in place or at an advanced stage. Accordingly the Bill provides for certain transitional measures for such projects with a cut-off point of end 2003 for eligible expenditure.
Business Expansion Scheme and Seed Capital Scheme
Section 15 extends the Business Expansion Scheme and the Seed Capital Scheme for a further period of two years. The existing company limit for these schemes is being increased to €750,000. This initiative will further facilitate companies, particularly small and start-up companies, in raising funds.
Section 16 provides for the reintroduction of mortgage interest relief as a deductible expense in calculating tax on rental income from residential property with effect from 1 January 2002. While this Government has made a number of changes in the taxation of the residential property market over the last number of years, circumstances have now changed and the presence of investors is required to secure the future supply of housing to meet accommodation needs. This change, together with the stamp duty change in sections 109 and 110, has already had an effect in restoring confidence in the housing market with positive implications for employment and output in the construction sector.
Section 17 clarifies the situation in relation to the treatment for tax purposes of reverse premia and removes any doubts on the issue.
Withholding Tax and Deposit Interest Retention Tax
Sections 18 to 21 deal with Withholding Tax and Deposit Interest Retention Tax. Interest paid to banks and building societies is currently exempt from the withholding tax requirement and Section 18 extends this to interest paid to other financial services companies who make loans in the ordinary course of business.
Section 19 removes interest paid on financial instruments known as Euro Commercial Paper and Certificates of Deposit issued by certain financial institutions from the DIRT tax regime and the company withholding tax regime. This will allow domestic financial institutions to compete more effectively in such markets. It should be noted, however, that there will be strict conditions imposed on deposit takers and/or purchasers of the financial instruments concerned, including the provision or supply of tax reference numbers and return of this information to the Revenue Commissioners.
Section 20 removes the necessity for pension funds, charities and resident companies to complete a declaration form in order that the interest received on deposits by them is free of DIRT. Such authorities may obtain interest gross and I am satisfied that the various audit and inspection powers introduced in the Finance Act, 1999, are sufficient to monitor compliance. Section 21 clarifies the operation of DIRT, in so far as it relates to special term accounts held with financial institutions in particular with credit unions
Section 22 provides for certain amendments to the scheme of capital allowances for hotels to meet with European Commission approval under EU State aid rules. The House will recall that last year changes were made to this and other schemes to ensure that EU State aid ceilings were not breached, by providing in tax legislation that capital allowances could not be claimed for expenditure which had received grant aid. The Commission has since asked that this be extended to cover all possible forms of aid and not just grants. This is being provided for in this section and also in Section 26 in relation to the Urban, Town and Rural Renewal Schemes. The scheme is also being amended to add additional items to be certified by Bord Failte in relation to general EU rules when certifying hotel projects as eligible for allowances.
The House will note from what I’ve said on this and will mention on other later items that the European Commission has an active role in approving such reliefs under EU State-aid rules and in applying certain new requirements and conditions to these reliefs.
Urban/Rural Renewal Schemes, etc
Sections 23 and 24 deal with extensions to the deadlines for qualifying expenditure in relation to a number of tax incentive schemes for property. They extend the existing 31 December 2002 deadline for relief for multi-storey car parks and the Urban and Rural Renewal Schemes until 31 December 2004. The period for qualifying Student Accommodation will be extended to 30 September 2005 and that for the Park and Ride Scheme will be extended until 30 June 2004. The extensions to the deadlines in respect of the business elements of both the Urban and the Rural Renewal Schemes are subject to the signing of a Commencement order once the extension is approved by the European Commission. No such EU approval process will be necessary for the residential elements of both of these schemes and it is hoped that developers will take timely advantage of this extra time in order to proceed with the residential projects.
In addition to providing time extensions, Section 24 amends the various sections that provide for the reliefs for residential investors and owner occupiers under the various urban, town and rural renewal schemes. Since the original inception of these reliefs in the mid 1980s the legislation has become both cumbersome and complex and up to now these reliefs have been provided for under separate legislation governing each scheme, a total of 12 schemes in all. This section codifies and consolidates the legislation and where appropriate redundant or non activated sections have been deleted.
Section 25 makes a number of amendments to both the Urban Renewal Act 1998 and the Town Renewal Act 2000 so as to allow the Minister for the Environment and Local Government to extend the rented residential relief to certain areas which were originally designated under both the Town and Urban Renewal Schemes for owner occupier relief only. These measures will have the effect of extending the relief for rented residential investors to an overall total of 1,785 sites in the areas designated under both schemes. Of these, a total of 1,125 sites will be for new build development sites. It is hoped that, along with the restoration of relief for borrowings for residential investors, this measure will increase the level of the provision of rented residential accommodation in the areas designated under both schemes. While the provision applies generally as respects expenditure incurred on or after 5 December 2001, it is proposed for the sake of fairness that certain qualifying expenditure already incurred under the existing owner occupier scheme will also qualify for rented residential relief.
Car Running Expenses
Section 27 provides for the abolition of the restriction on the amount of deductible motor car running expenses for corporation tax or income tax purposes. These expenses include expenditure on fuel, insurance, tax and repairs. This restriction was introduced in 1976 and operates by disallowing a portion of the expense where the cost of the car exceeds a certain threshold. This threshold was increased in the Budget to €22,000 and it applies for both new- and second-hand cars. The expenses in question are those incurred in the course of a business or employment and the restriction is a somewhat artificial and cumbersome one that has outlived its usefulness. The abolition of the limit will take effect in relation to such expenses incurred in an accounting period or basis period ending on or after 1 January 2002.
Section 28 makes a number of amendments to the special profit deferral arrangement and 100 per cent stock relief that is available to farmers who receive compensation as a result of disease eradication measures. The 2 year period during which farmers can avail of this measure is to be extended to 4 years in respect of disposals which arise on or after 21 February, 2001. The section also makes two technical amendments in order to clarify the interaction of this relief with the short tax year. Section 29 extends the definition of qualifying quota that can qualify for relief under the scheme of capital allowances for the purchase of milk quota. This relief is to be available in respect of any purchase of milk quota by active producers purchased on or after 1 April 2000. However, as before, the amount of the relief available is capped at the price set for the milk quota year by the Minister for Agriculture, Food and Rural Development for the purposes of the purchase of milk quota under a Milk Quota Restructuring Scheme.
Section 30 simplifies the arrangements for the write-off period for wear and tear capital allowances for plant and machinery particularly in relation to capital expenditure incurred before the change in the write-off period introduced last year.
Private Hospitals and Sports Injury Clinics
Section 31 amends the legislation providing for a scheme of capital allowances in respect of expenditure incurred on the construction or refurbishment of buildings used as private hospitals so as to streamline the provisions and improve the potential take-up of the scheme. Section 32 provides for a scheme of capital allowances in respect of capital expenditure incurred on the construction or refurbishment of buildings used as private sports injury clinics. In order to qualify for the allowances, the sole or main business of the clinic must be the diagnosis, alleviation and treatment of sports-related injuries. The clinic must provide day-patient, in-patient, out-patient and surgical services and inpatient accommodation of at least 20 beds, and must contain an operating theatre or theatres and on-site diagnostic and therapeutic services. The scheme is subject to clearance by the European Commission from an EU State Aids perspective. In both cases the European Commission requires that the capital allowances not be available to anyone involved in the running of the hospital or clinic.
Section 33 extends the qualifying period of the scheme for capital allowances in respect of expenditure incurred on certain buildings used for third level education from 31 December 2002 to 31 December 2004. This scheme has made a useful contribution to the development of important educational infrastructure and its continuation should benefit the delivery of high quality third level education facilities.
Personal Portfolio Life Assurance policies
Section 38 relates to the taxation of personal portfolio life assurance policies and is an anti-avoidance measure. I announced on 26 September last my intention to include legislation in the Finance Bill to change the tax treatment of personal portfolio life assurance policies and the measure will apply from that date. The main change is the imposition of a 20% surcharge on the proceeds of such policies. The section also provides for some additional rules governing the application of the surcharge to certain life assurance policies issued after Budget day.
Tax relief for Donations to Sports Bodies
Section 39 provides for a scheme of tax relief for donations to certain sports bodies for the funding of capital projects. I undertook last year, when I amalgamated and expanded the tax provisions concerning donations to charitable organisations and educational establishments, to examine the possibility of allowing sports bodies receive tax relief on donations. Indeed this was an issue raised with me in the Dáil last year by some Deputies. I was pleased to announce this new scheme in the Budget. This relief is aimed at providing support to sports bodies around the country engaged in projects of a capital nature such as the construction or refurbishment of sports facilities. The estimated aggregate cost of the project must not be greater than €40 million.
Collective Funds and Life Assurance
Sections 41 to 43 and Section 45 contain a number of technical amendments to the new exit tax system of taxation for collective funds and life assurance to streamline the application of certain declaration procedures which disapply the exit tax. Provision is also made to apply the corporation tax trading rate (rather than the non-trading tax rate) to payments and gains arising from certain foreign funds where held by a financial company as trading stock.
The intention of Section 44 as confirmed in the Explanatory Memorandum to the Bill is to remove a possible double charge for certain Trusts to Capital Gains Tax only. Paragraph (1)(b) of the section goes further than intended and I will be bringing forward an amendment at Committee Stage to delete this.
Section 46 provides a number of technical amendments to the Special Savings Incentive Account Scheme which are required as a result of practical experience of the running of this scheme. Section 47 deals with Special Portfolio Investment Accounts (SPIA) which are being phased out. In order to encourage early closure of these accounts, this section allows investors who have unrelieved capital losses on their accounts to offset these against other capital gains when their account is closed.
Section 49 gives effect to my Budget announcement that a tonnage tax method for calculating the profits of shipping companies for the purposes of corporation tax would be introduced. Tonnage tax makes available an alternative method for shipping companies to calculate their profits for corporation tax purposes, though if a shipping company wishes to remain subject to the normal corporation tax rules for the calculation of its profits it may do so. Profits once calculated using the tonnage method are subject to the 12.5 per cent rate of corporation tax - the same as the profits of a shipping company calculated by reference to the normal rules. The tonnage tax profits are arrived at by reference to the tonnage of the ships used in the shipping trade. Subject to clearance by the European Commission from a State Aid perspective, the tonnage tax will come into operation by way of a Commencement Order. This provision is aimed at providing a level playing field for Irish shipping companies vis a vis those in other EU member states with similar rules.
Section 50 allows for some easing in the rules regarding the offset of losses on trading income activities against profits made on non-trading income activities. This is in response to requests made by tax practitioners in relation to the over strictness of the current rules.
Section 54 gives effect to the Budget measure that the payment date for preliminary tax is being brought forward to one month before the end of the accounting period - an advance of 7 months. This brings the provision for the payment of corporation tax more in line with the general practice in other EU and OECD countries and in line with the rules for the payment of income tax. The measure is being introduced over a transitional period and will be fully effective for accounting periods ending after 2005 when 90% of final liability will be payable one month before the end of the accounting period. Any balance of tax due (over and above preliminary tax) will, as at present, remain payable within one month of the issue of the tax assessment by the Revenue Commissioners. It may be more difficult for a small company to accurately assess its potential corporation tax liability for the year. Accordingly provision is being made to allow small companies to pay either 90% of the current year’s liability or 100% of the previous year’s tax liability. A company will be treated as a small company if the corporation tax liability for the previous corresponding period does not exceed €50,000. Corporation tax payable on any capital gains in the last month, which could be difficult to predict, does not have to be included in the 90% provided a top-up payment is made one month after the end of the period.
Capital Gains Tax
Capital Gains Tax retirement relief applies where a person aged 55 years or over disposes of business assets by way of sale or gift, subject to certain conditions. Section 55 provides that personally held business assets, that is, those held outside a family company, will also be eligible for retirement relief, subject to certain conditions, including the condition that these assets must be disposed of together with the family company to the same person or persons. This facility already applies in the case of Capital Acquisitions Tax business relief. Sections 57 and 58 deal with CGT Reliefs in the case of a Compulsory Purchase Order on farmland. The sections extend roll-over relief and early retirement relief to include land that was leased at the time of CPO provided it had been actively farmed and was leased for less than five years prior to the disposal.
Sections 60 to 79 relate to betting duty, including provisions to consolidate and modernise the betting duty legislation. The existing legislation in this area, some of which dates back to 1926, has been supplemented and amended over time to the extent that it has become very fragmented and disjointed. The opportunity is being taken to streamline existing provisions and to introduce a new collection system. Section 63 confirms the Budget Day decrease in the rate of excise duty on bets from 5% to 2% with effect from 1 May 2002. It also includes a change in the definition of the amount of the bet to clarify the taxation of spread betting on a unit basis. Section 64 provides for a new exemption for tote bets placed in registered bookmaking premises. Section 67 allows the bookmaker to absorb and pay the betting tax rather than charge it to the customer. Section 74 includes the imposition of a new charge of €2,000 where premises are re-registered following deregistration. These and the other changes in the Bill continue the process of up-dating excise law undertaken in recent Finance Acts.
Sections 80 and 81 provide that all applicants for a permit required to operate amusement machines in public places must produce a tax clearance certificate. There is also a provision for the imposition of an excise duty of €100 on the issue or renewal of such a permit. Section 82 provides that a tax clearance certificate is required when applying for various intoxicating liquor licences. Section 83 consolidates and standardises the Revenue officers’ powers of entry and search of premises for excise purposes by the inclusion of premises in which bets are accepted and by clarifying powers of detention. Sections 84 to 86 confirm the Budget Day increases in rates of excise duty on tobacco, petrol, auto diesel, cider and perry. Section 85 also confirms the Budget provision for a higher rate of duty, to apply from 1 March 2002, on auto diesel with a higher sulphur content. Sections 87 and 88 extend both the repayment period and time limit for claims for repayment of mineral oil tax on heavy oil and liquid petroleum gas used for various purposes.
Partial relief from mineral oil tax by way of repayment is provided for in certain road passenger services. The current criteria apply to a person who carries on a passenger road service or provides a school transport service. In recognition of the importance of tourism to the economy and the key role played by coach tourism in this area, Section 89 adds a new category of tour coaches used for extended group tours to the road passenger service section. The Bill provides that the extension of the relief, and the current relief, will be for those who can produce tax clearance certificates.
Sections 95 to 106 deal with VAT. There are some significant changes in the VAT treatment of property transactions in the Bill. Sections 95 and 96 are aimed at preventing the use of VAT property avoidance schemes. These have become a feature of the VAT system in recent years. I am anxious that such schemes are closed down when they are discovered and where there is a feasible way of doing so. Section 95 aims to prevent the use of low valuations to reduce the amount of VAT that should properly be paid on the surrender of possession of immovable goods in particular circumstances. Section 96 aims to prevent the use of the break-up of a VAT Group as a way of avoiding VAT on immovable property which had been brought into the Group and for which deductibility had already been claimed.
Section 97 introduces mechanisms to address the issue of payment of VAT by non-resident performers and mobile traders when they operate in the State. These replace existing mechanisms which had to be replaced by virtue of the adoption of an EU Directive on the treatment of Fiscal Representatives.
Section 99 provides for the increase in the standard rate of VAT from 20 to 21 per cent announced in the Budget. This increase from 1 March 2002 will provide necessary additional revenue for the Exchequer. Some changes in administrative arrangements necessary for the effective functioning of the VAT system are also being introduced.
Sections 109 and 110 give effect to the Budget re-alignment of the investor stamp duty rates for transfers of new and second-hand residential property with those for owner occupiers (other than first-time buyers) purchasing second-hand residential property. As I indicated earlier, this measure, together with others, was designed to encourage investment in the provision of rented residential accommodation
Capital Acquisitions Tax
Sections 112 to 118 deal with Capital Acquisitions Tax. Existing provisions provide that where a farmer has obtained 90% agricultural relief for CAT purposes on the gift or inheritance of certain farmlands and these lands are subsequently acquired from the farmer under a Compulsory Purchase Order within six years of the transfer, the CAT relief given will be clawed back unless the lands are replaced within four years by other agricultural property. Section 112 provides for the period for replacement to be extended to six years instead of the four years as at present where the farmlands are compulsorily acquired.
Section 117 brings the base date for aggregation for gifts or inheritances liable for CAT forward from 2 December 1988 to 5 December 1991. This measure takes effect for all gifts or inheritances taken on or after 5 December 2001, as announced in the Budget. Section 118 provides that the exemption from CAT for life policies issued by IFSC life companies to non-residents is to be extended to cover life policies issued to non-residents by domestic life assurance companies.
Certain tax liabilities can be discharged by way of a donation of an approved heritage item to the national collections. Section 120 increases the annual limit for all objects given in a year from €3.8m to €6m as well as providing other amendments to improve the operation of the section.
Revenue Powers, Penalties and Administration
Sections 122 to 131 deal with Revenue powers, penalties and administration. These measures implement recommendations of the Public Accounts Committee on DIRT and strengthen the penalties regime for failure to make a tax return. They also strengthen Revenue powers in a number of areas, including the publication of tax defaulters.
The provisions regarding publication of the names of tax defaulters where the settlement figure is greater than €12,700 is being extended to include Customs & Excise settlements. A similar provision is being made in the Social Welfare Bill in relation to PRSI. Provision is being made to clarify that Revenue can publish names of tax defaulters on their website. However, where an underpayment of tax arises from a relatively minor default on the part of the taxpayer, specifically where the penalty element is 15% or less, the case will not be published. Such cases will be confined to situations where the nature of the default is merely "insufficient care" on the part of the taxpayer. If there is gross carelessness or deliberate default the case will be published. Section 122 of the Bill contains these amendments.
Section 123 concerns tax clearance certificates in relation to certain licences and public sector contracts. The section extends tax clearance provisions to all liquor licences and permits for public places in which amusement machines are located. It also converts existing provisions into a generally applicable tax clearance procedure covering applications for tax clearance for whatever reason other than those already catered for. As a result of this section, it will be possible to apply for and obtain tax clearance certificates through electronic means, e.g. the Revenue ROS system. Revenue will also be permitted, subject to the applicant’s agreement, to publish the certificate, for example on a website where he/she may authorise persons to view it for verification purposes.
Section 124 provides that the penalty for fraudulently or negligently making an incorrect return in relation to Deposit Interest Retention Tax or Dividend Withholding Tax is tax-geared that is, a proportion of the tax undercharge, rather than being a fixed penalty.
Section 125 changes the basis for calculating the interest charged by Revenue on unpaid tax and paid by it on overpaid tax. At present this is done on a monthly basis but, with effect from 1 September 2002, interest will be expressed as a daily rate and calculated on a daily basis. Arising from this change over to a daily rate of interest, certain minimum interest charges are abolished.
At present, a tax-geared penalty is imposed where a person fraudulently or negligently makes an incorrect return - this includes an individual’s income tax return and certain other returns. Section 126 provides that a tax-geared penalty can be imposed where there is a tax undercharge and the person in question has not made the return concerned. It also equalises the penalties that can be imposed for failure to make a tax return, whether the failure referred to in that section is that of an individual or a company and amends the method of recovery of penalties. Section 127 provides for tax-geared penalties where a tax undercharge arises and no return has been made.
Revenue’s power to obtain a court order to obtain information from financial institutions is being extended to make it more easily available in Customs and Excise investigations – this is particularly targeted at cigarette smuggling. The range of records which can be accessed in a tax audit is being extended and Dividend Withholding Tax is being brought within Revenue’s power of audit. These changes are contained in section 128.
It is also proposed to make it easier to prove in court that a person failed to make a tax return. At present Revenue must show that the taxpayer "knowingly and wilfully" failed to make the return. Section 129 provides instead that a taxpayer can be prosecuted for failure to make a tax return unless he or she has a reasonable excuse. Furthermore, if a person is so prosecuted and the judge orders the taxpayer to make the return then failure to do so will also be a revenue offence.
Section 132 is concerned with repayable advances which were made to Shannon Free Development Ltd. out of the Central Fund to meet the expenditure incurred by that company in relation to the provision of houses and certain community services since the 1960s in Shannon Town. The purpose of this section is to enable the write-off of the repayable advances of around €11½m when responsibility for these public utilities transfers to Clare Co. Council.
As I mentioned in my Budget Speech, the introduction of euro coin has highlighted an anomaly in the way the economic benefit associated with the right to issue coin is brought to account in Ireland. The norm in other EU member States is for the State to receive this economic benefit. In Ireland, that benefit accrues to the currency reserve of the Central Bank even though the Bank merely acts as an agent of the State in the provision of coin. As proposed in the Budget, I have taken steps to rectify the position in this Bill and Section 133 empowers the Minister to direct the Central Bank to pay into the Exchequer the accrued net proceeds arising from the issue of coin. The Bank estimates that this will benefit the Exchequer to the extent of some €370m during 2002. I should also mention to the House that my Department has consulted the European Central Bank on this proposal and it has no objections to the measure. Indeed in its comments on the measure, it notes that the change in the balance sheet treatment of coins is consistent with the accounting treatment of euro coins issued by other participating Member States in accordance with Article 106 of the Treaty.
Section 135 clarifies the application of Budget Night Financial Resolutions to ensure that such financial resolutions will amend the tax and related law as it stands immediately before the financial resolution takes effect. Sections 136 and 137 contain the usual technical provisions.
To conclude I would like to say that in my time as Minister in my various Finance Bills I have made fundamental changes to the tax system. I have delivered reduced tax rates across the board – income tax, corporation tax, capital taxes. I have made the tax system fairer by introducing tax credits which ensure all taxpayers benefit equally from reliefs and by closing off tax avoidance opportunities and broadening the tax base. I have streamlined and reformed the tax system in a range of areas. I am happy to stand over this record.
I hope the House has benefited from the outline I gave of the provisions in the Bill. I look forward to the debate on the Bill and I commend the Bill to the House.
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