Finance Bill 2014 - Second stage speech

05.12.2014

The Finance Bill was debated in the Seanad on December 4th.  Senator Zappone spoke strongly in favor of increasing Ireland's investment in public services while also being fiscally prudent as we have not yet reached full recovery of our public finances.

Full text of the speech below.

I welcome the Minister of State, Deputy Harris, to the House. I commend the work of the Minister for Finance during the very challenging years for Ireland. I also commend the Minister of State's most recent work. It has been a difficult time for the Irish people and the Government. The fiscal discipline of the Minister, Deputy Noonan, has been a prime asset, as has been his ability to communicate clearly. The Minister of State also has the ability to communicate clearly.

The Irish economy is growing. We are financing our debt at a cheaper cost. I think all Senators will agree that we have by no means reached full recovery. We need to remember that. We should not raise unrealistic expectations before significant growth has been realised. I suggest we might be taking a false start to fiscal loosening by aiming for a deficit of 2.7% of GDP this year. I think that figure is too high. I hope I am proven wrong. We need to keep in mind that our public finances are still fragile, due to the debt dynamic on our national balance sheet. Our debt-to-GDP ratio is still extremely high.

The growth figures are positive, as the Minister of State has indicated. There are clear signals that the economy is recovering but we need to be prudent fiscally. We should use the resources that are available in a way that strengthens growth and contributes to economic recovery in a fair and effective way.

I do not think the Bill does this.

The main beneficiaries of the Finance Bill are the top 30% of people in employment, who have incomes of more than €33,800. They will receive the triple benefit of the universal social charge changes and the rate and band changes that are focussed on the higher rate of income tax. It is positive that the marginal rate was kept at 52% for income above €70,000, despite the aggressive lobbying to have this lowered. The use of higher 8% universal social charge rate to cap the benefit of the reduced higher income tax rate is also to be welcomed. In my view, this is fair. The overall universal social charge changes are to be welcomed because they will affect everyone, including the low income groups, in a positive way.

While I recognise the overall progressive nature of our income taxation system and the contribution to our tax intake made by the wealthiest 5% of the population, I believe that certain low income groups, such as lone parents, have suffered disproportionately during the last six budgets and should be considered as priorities now that we have some room for manoeuvre. Instead, the Finance Bill prioritises high income earners and big corporations. The tax breaks provided for them cost approximately €500 million in revenue to the State.

I agree with the economic argument that it is more effective to stimulate growth by providing spending power for the lower and middle income classes who will spend this money in the economy. The increased savings and mortgage payments to the banks that will be made by the higher income classes do not have the same positive effect.

Like Senator Darragh O'Brien, I am disappointed that no tax incentive has been provided for parents whose children are in early years education.

The high cost of child care in Ireland prevents many women from taking up employment. A tax relief would have alleviated this burden in the short term. If we do not have a sufficiently funded public early years education system, and we do not, women's contribution to and reward from Ireland's reach for recovery will be muted. This is not fair. It needs to change. When will this happen?

Some of the corporate taxation changes are too indulging for business and the wealthy. I do not agree with the changes to the special assignee relief programme. Does the Minister have evidence that this is a necessary and effective policy? Ireland is an attractive place for businesses. We have many incentives for international companies to do business. We have a well-educated and skilled workforce. I do not think that we need another incentive and one that is unproven.

While I heartily welcome the closure of the double Irish tax loophole for stateless companies, why is this not effective immediately? If it cannot be done immediately, why is it not being done in three years rather than six?

I contrast this change with the policy of relatively high taxation on the modest income of domestic entrepreneurs. It seems unfair that the modest incomes of the self-employed are taxed more than those of employees.

Senator Darragh O'Brien: Hear, hear.

Senator Katherine Zappone: Any irregularities, such as the unfair tax treatment of personal retirement savings account pension schemes with regard to the universal social charge liability of the employer's contribution, need to be amended. I will bring forward recommendations relating to this issue on Committee Stage.

We all want the end of austerity. We want to be able to provide for our families and lead the best lives we can. I do not agree with the Government's vision that this would be best achieved by cutting taxes. The modest amounts of cash being freed up, which will be reduced to a certain extent by water charges, will neither mark the end of austerity for Irish families nor provide them with the financial security they need.

Many families in Ireland are struggling under the soaring cost of basic necessary services such as housing, child care and health. They are paying disproportionately more for these services than their European peers. These costs will not be matched by the tax breaks. Rather than introducing modest tax breaks, the Government could have concentrated on increasing investment that would have benefited the entire population. Due to our low tax intake, we have one of the lowest levels of public investment in Europe.

The historically low cost of borrowing would have offered an opportunity to increase our capital spending, thereby providing a more effective way to inculcate growth. By adopting this strategy, the rate of return to the economy would have been well in excess of the cost of borrowing.

I organised a public forum in Tallaght prior to the budget announcement in October. I met people and listened to their concerns about the budget and what they wanted the Government to do. None of the people spoke about tax cuts. They wanted better and more affordable public services.

Many civil society groups submitted budget proposals, but the vast majority of these groups feel their inputs were not meaningfully reflected in the decisions made in the budget. I contrast that with the consultation on corporation tax that was mentioned earlier.

I also participated in a post-budget conference hosted by the Free Legal Advice Centre, which in an innovative way brought together the views of 39 non-governmental organisations that work in the area of human rights protection. The overwhelming conclusion from their commentary is that the progressive realisation of human rights should be taken into account in the budgetary process before choices are made and after they are implemented.

The recession and the accompanying austerity measures had a devastating impact on the public service infrastructure. It will take a long-term reinvestment to restore this to a standard that meets basic human rights requirements. If we were to apply a human rights analysis to budgetary decisions by pre-assessing how a measure might impact on people's basic rights, it would have a huge impact on people's lives.

I refer particularly to the most vulnerable people in our society.

I hope the Minister for Finance, in consultation with the Minister of State and his other colleagues, might consider including this approach for the commemorative budget 2016. It is in the interests of everyone that we play fair and play to win.

Financial Justice
Financial Justice
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