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Finance Bill penalises working families – Morgan

26 November, 2008


Sinn Féin Economics Spokesperson Arthur Morgan TD has said the Finance Bill 2009 abandons the hundreds of thousands of working families who drove the economy through the Celtic Tiger years.

Speaking in the Dáil this afternoon Deputy Morgan criticised the Government's handling of the economic crisis and said they have failed to protect the vulnerable and are penalising rather than rewarding working families.

Deputy Morgan said, "The Finance Bill represents depressing evidence of a government continuing to sleep walk through a crisis that is threatening not just the banking system or the construction sector but is slowly bleeding the small businesses that employ most Irish workers and which is the heart of the Irish economy.

"Even worse is that the hundreds of thousands of working families, whose effort drove this economy through the Celtic Tiger years, have all but been abandoned in this bill, they have been condemned to endure higher taxes and more stealth charges, all to fund the policies of failure.

"The government have failed on income tax, on VAT, on the tax exile status, on reforming tax relief and tackling tax fraud. They have failed to protect the vulnerable and most importantly in terms of ensuring economic growth they are penalising rather than rewarding working families, and there is nothing in this bill to incentivise or stimulate enterprise.

"On income tax Sinn Féin had proposed increasing the PAYE tax credit by 5% so those on low incomes would get some respite from the higher energy costs, mortgages and food prices they have endured over the last year.

"This bill leaves the personal credits unchanged and only widens the 20% tax band marginally. It does nothing to help families deal with increased costs of living in an economy where inflation is over 4% with double digit increases in electricity and energy process already being levied on households this year.

"On top of this many families face new transport charges for school buses, higher hospital charges, a new VHI levy and increasing university registration fees. When you add up these charges along with the increases in taxes for low and middle income families, even at a conservative estimate hard working families will see their income reduced by up to €1,500 in 2009.

"Not only has the minister done nothing to restore the purchasing power of Irish families his proposal to increase VAT to 21.5% is another regressive step and will hit Irish families unfairly.

"The 1% income levy on workers who earn more than €18,305 is unwarranted and will damage low income families. The levy should apply only on incomes in excess of €38,000 and we believe that the 3% levy should apply on incomes in excess of €200,100. Our proposal to remove the PRSI ceiling would have had the double effect of raising much needed tax revenue while cushioning those on low and middle incomes from the worst effects of the increase.

"We welcomed the ending of the Cinderella clause for tax exiles, but wonder at the minister's claim that tougher restrictions could not be placed on Irish tax exiles because of double taxation agreements. Are we really to believe that the minister cannot act? He can raise taxes on a whim, he can write a blank cheque for banking, but he cannot act on a handful of supposed Irish citizens who do not want to pay tax here but demand to enjoy the benefits of Irish citizenship.

"The economy is in danger of a serious meltdown and this bill does not reflect the gravity of the situation. What will it take to get the coalition to wake up? For now we have a minister for finance asleep at the wheel." ENDS

Full text of Deputy Morgan's speech follows:

The Finance Bill 2009

This Finance Bill represents depressing evidence of a government continuing to sleep walk through a crisis that is threatening not just the banking system or the construction sector but is slowly bleeding the small businesses that employ most Irish workers and which is the heart of the Irish economy.

Even worse is that the hundreds of thousands of working families, whose efforts drove this economy through the Celtic Tiger years, have all but been abandoned in this bill, they have been condemned to endure higher taxes and more stealth charges, all to fund the policies of failure.

The government have failed on income tax, on VAT, on the tax exile status, on reforming tax relief and tackling tax fraud. They have failed to protect the vulnerable and most importantly in terms of ensuring economic growth they are penalising rather than rewarding working families, and there is nothing in this bill to incentivise or stimulate enterprise.

Don't just take my word for it - listen to the words of others outside this house on the government's strategy. The Finance Bill has been described as "a cobbled together package" that "has done nothing to show that the Government knows what it its doing", or "the initiatives were not of a scale reflective of the serious of the economic situation", and were that will "practically do nothing positive for Irish business".

Being from one of the few parties in this house who were regularly castigated in years past for pointing up the structural flaws in the Irish economy there was a brief moment in September to October when it seemed that the minister for Finance finally grasped the seriousness of the economic crisis threatening the Irish economy by the early scheduling of Budget 2009. But ten weeks on it is clear that was simply a PR stunt devoid of any substance and lacking any direction to drive the economy forward over the next three years

On income tax Sinn Fein had proposed increasing the PAYE tax credit by 5% so those on low incomes would get some respite from the higher energy costs, mortgages and food prices they have endured over the last year.

This bill leaves the personal credits unchanged and only widens the 20% tax band marginally. It does nothing to help families deal with increased costs of living in an economy where inflation is over 4% with double digit increases in electricity and energy process already being levied on households this year.

On top of this many families face new transport charges for school buses, higher hospital charges, a new VHI levy and increasing university registration fees. When you add up these charges along with the increases in taxes for low and middle income families, even at a conservative estimate hard working families will see their income reduced by up to €1,500 in 2009.

Not only has the minister done nothing to restore the purchasing power of Irish families his proposal to increase VAT to 21.5% is another regressive step and will hit Irish families unfairly.

Now with border towns in the 26 Counties being emptied of shoppers the 2.5% cut in VAT announced yesterday by the British Chancellor of the Exchequer will exacerbate an already gaping imbalance between the two economies. The Minister for Finance is actively encouraging shoppers to leave his tax jurisdiction. It is more the economics of Fianna Fawlty Towers than the financial stability he promises us.

The 1% income levy on workers who earn more than €18,305 is unwarranted and will damage low income families. The levy should apply only on incomes in excess of €38,000 and we believe that the 3% levy should apply on incomes in excess of €200,100. Our proposal to remove the PRSI ceiling would have had the double effect of raising much needed tax revenue while cushioning those on low and middle incomes from the worst effects of the increase.

We welcomed the ending of the Cinderella clause for tax exiles, but wonder at the minister's claim that tougher restrictions could not be placed on Irish tax exiles because of double taxation agreements.

Are we really to believe that the minister cannot act? He can raise taxes on a whim, he can write a blank cheque for banking, but he cannot act on a handful of supposed Irish citizens who do not want to pay tax here but demand to enjoy the benefits of Irish citizenship.

Maybe we shouldn't be surprised, its is now more than ten years since the first revelations of illegal private banks and offshore tax defrauding accounts held by hundreds of Irish citizens was uncovered by the McCracken Tribunal and published in the Ansbacher Report.

Then we were told we couldn't get full access to the details of illegal accounts held by Irish citizens in the Cayman Islands. Now in this bill following yet another unsuccessful High Court challenge by a Fianna Fail government to uncover tax fraud we are getting more changes in the tax code to empower the Revenue Commissioners' investigations that have thankfully brought hundreds of millions into state coffers, but why is it taking so long to deal with offshore tax fraud.

The government stood by in recent years as billions of Euro poured out of the Irish economy into property investments in Britain and Europe. Forfas estimated in 2006 that the Irish economy had become a net investor outside of Ireland since 2004 when Irish citizens invested €12.7 billion outside the economy. In 2006 Irish investors spent almost €8 billion on commercial property in Europe. Now after the horse has bolted yet again the government arrives with half hearted measures.

Another suspect measure are the proposals on changes to R&D tax credits. Ibec described the changes as "quite disappointing" and there are questions about the whole R& D strategy being adopted by the Government. It has to make sense in the board room and on the workplace floor. What is being proposed now clearly doesn't and much more serious action needs to be taken. The minister either believes in empowering the knowledge economy or he doesn't. There can be no halfway house here.

When the 2009 budget was unveiled I said that, "We can rebuild the economy but that means taking bold decisions", there is no evidence of that in this bill. So once again I ask, 'where is the investment in infrastructure that will create jobs and build competitiveness. How will we help those who have lost their jobs get back into the workforce as quickly as possible and ensure that they are supported properly while that happens? When will we end the era of tax breaks for the rich while PAYE workers struggle to survive?'

Time and time again we see this government getting the small things wrong such as the failure to tackle the flooding of the Irish market with cheap imports. It hasn't dealt with contentious issues like sell-by-dates, and incorrect 'guaranteed Irish' labelling.

Small businesses are being starved of capital, with overdrafts cut. New businesses cannot get seed capital or start up loans, but this bill gives even more tax breaks to the private health service but cannot find a tax incentive or funding initiative for small business or retraining redundant workers. How is that possible?

Now in this bill the minister proposes that struggling business declare their corporation tax earlier, and what was a four year process of claiming R&D tax credits has been telescoped into four weeks. It seems that the minister is more concerned with short term cash flow than he is with long term company strength.

The economy is in danger of a serious meltdown and this bill does not reflect the gravity of the situation. What will it take to get the coalition to wake up? For now we have a minister for finance asleep at the wheel.

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