As I said yesterday in the debate on the Social Welfare Bill, when the Government took office in 2011, we were in a much different position. Then, the Finance Bill 2012 was about cutbacks and reductions in services. While there were positives at the time for the tourism sector, the potential and options for investment were much more limited than they are now. It is great to be in a position where we can start giving back and putting money back into people’s pockets. It is not by accident that this has happened. It has happened because of the decisions of the Government, including the Minister for Finance and the Taoiseach, and the sacrifices made by the people. There has been a clear strategy to turn the country around.
The Finance Bill 2015 contains significant measures which will improve the financial position of workers, pensioners and families across the country. Several sections of the Bill will ensure every worker in the country will see an increase in his or her take-home pay and pension from January. Section 2 gives effect to the budget announcements on the universal social charge, USC. The Bill will again reduce it, continuing the work started last year. It will exempt those on annual incomes of €13,000 or less. Income to €12,012 will incur a reduced rate of 1%, down from 1.5%. Income from €12,012 to €18,868 will incur a rate of 3%, down from 3.5%, while income from €18,669 to €70,044 will be charged at a rate of 5.5%, down from 7%. USC is very much a despised tax which was introduced in emergency times. While the emergency is not over, we are coming out of it. Workers and pensioners have clearly illustrated to backbenchers their desire to see a change. We brought this view to the Minister for Finance who, thankfully, is in a position to act on it. It is a positive change which people will see in their pay packets and pensions from January 2016.
With a general election approaching, it is important that the taxation plans of Opposition parties be scrutinised because they are the policies which Fianna Fáil, Sinn Féin and others will pursue if elected. Fine Gael’s measures to cut USC rates, as well as the increases in the thresholds for USC and inheritance tax, are in stark contrast to the Opposition’s plans. Sinn Féin wants to see a top rate of tax of 58%, an increase in employer’s PRSI, which would make job creation more difficult, and an increase in inheritance tax. With it, there would be no cut in USC for anyone earning more than €19,500. Fianna Fáil’s budget plans show that it is against the Government’s tax cuts, instead preferring a top rate of tax of 52%. Fianna Fáil introduced USC in budget 2011, hitting anyone who earned over €4,000. Its proposed changes to USC bands would not benefit anyone earning over €21,000.
Section 3 which proposes an earned income tax credit is progressive. During the difficult economic times many business owners worked without taking a wage for themselves. This was to help to ensure the survival of the business, but it was exceptionally tough on the owners of small and medium-sized enterprises, SMEs. It must be remembered that SMEs are responsible for two thirds of all the jobs created since 2012. The tax system has not treated PAYE workers and the self-employed equally. This disparity is unfair. Fine Gael and the Labour Party are taking steps to equalise the tax system. The €550 earned income tax credit will benefit self-employed persons such as local business owners and farmers. It is a first step towards equalisation and Fine Gael is committed to extending it in coming budgets, if returned to government.
The treatment of the self-employed and the social welfare and disability benefits they receive need to be examined. The Tánaiste and Minister for Social Protection, Deputy Joan Burton, has taken steps in that regard in terms of stamp A contributions. This is a welcome development which should be rolled out further.
Another welcome measure which will help local businesses and stimulate job retention and creation is section 33. It reduces the rate of capital gains tax from 33% to 20% up to a value of €1 million where a business owner sells the business. It is a practical measure which will incentivise the retention of a business as a going concern.
Section 28 will extend until December 2018 the three-year corporation tax relief for start-up companies which was due to expire in December this year. This measure exempts start-up companies from corporation tax for the first three years of trading. The early years in business are often the most challenging and this measure will continue to provide support for important start-up companies, boosting their chances of success.
The financial turbulence of recent years meant difficult choices had to be made which included revenue-raising measures, one of which was the raising of the threshold value for transferrals such as the inheritance of a home. The impact of this measure was mitigated by falling house prices.
However, house prices have risen. It was never the intention of the Government that an ordinary home being passed to a son or daughter would be subject to a higher rate. Therefore, section 64 and the decision to increase the threshold from €225,000 to €280,000 is very welcome. It is a measure which will benefit numerous families across my constituency and the country.
Another issue that has been brought to my attention although it probably affects only a small number of people are sections 77 to 80 dealing with the disabled driver’s fuel grant. I received a communication from individuals regarding this grant and its impact. A volunteer from the Galway Visually Impaired Activity Club who drives people who are visually impaired contacted me. The van is registered in the name of the chairperson of that club, who is visually impaired. Until now, it was taxed as a commercial van, with an annual road tax of €333. Recently he was told the van could no longer be taxed as a commercial vehicle as he did not have a business. The club is considered more akin to a charity. The lady in the tax office did her best to see if there was any way around this but the road tax bill increased to €1,080.
Revenue wrote to the club to say that the relevant legislation governing the scheme is contained in section 92 of the Finance Act 1992, as amended, and statutory instrument No. 353 of 1994, Disabled Drivers and Disabled Passengers (Tax Concessions) Regulations 1994. It said that a fundamental requirement is that the organisation must qualify for the scheme and that a qualifying organisation means a philanthropic organisation that is not funded primarily by the State and which is chiefly engaged in a voluntary capacity, which this is. Revenue said the legislation does not provide tax relief on vehicles used to transport persons with any disability other than those laid down in regulation No. 3. In general, these include persons who are without the use of their hands, arms or legs or have the medical condition of dwarfism. It does not include the visually impaired. This is something that could be examined with the possibility of helping the group in Galway reduce its road tax. The group is involved in transporting people and a reduction in the road tax would be of great benefit.
The news in this Finance Bill is more positive than it has been in the past as is the capital expenditure side of the Budget Statement of the Minister for Public Expenditure and Reform. We have seen choices made to invest, including investment in our public services. We saw teachers being recruited last year and again this year, which is welcome. The huge challenges of demographic pressures are evident, in particular in our health services. We have chosen to give something back to the hard-pressed taxpayer and pensioners as well as improving services. This is not by accident but as a result of the decisions made and the sacrifices of the people. I welcome the Bill and hope the Minister for Finance is around for future Finance Bills to ensure the progression of these measures and the continuity of the economic recovery of the past number of years. I welcome the specific measures in this Bill which have improved people’s situations.
I thank the Minister for Finance for the changes in respect of the commercial road tax. The issue has been highlighted for a number of years by people who have been under pressure. Companies were being registered in the North and the State was probably losing taxes but it was also driving business and jobs outside the country. I welcome the proactive and pro-business measures in respect of the commercial road tax changes.