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Introduction of VAT to bin charges particularly cruel – Morgan

9 February, 2010


Speaking in the Dail this evening on the Finance Bill 2010 Sinn Féin Finance Spokesperson Arthur Morgan described the Bill as a lightweight Finance Bill designed to follow an ineffectual budget. Deputy Morgan said the addition of VAT to bin charges is particularly cruel, considering that tax relief for these charges are also set to be eradicated.

Deputy Morgan said:

“This Bill is ultimately a lightweight Finance Bill that is designed to follow an ineffectual budget. The government may be receiving plaudits from vested interests who want to see a policy direction of cuts, but what is constricting the economy doing for us? It is putting more people on the dole, the live register is growing. It is putting more people in poverty. It hasn’t helped our competitiveness. It is driving the country deeper into recession, regardless of how the government tries to massage the numbers. The only Bill that had a real effect on the economy since the budget, and it was a negative effect, was the social welfare bill. This Finance Bill merely tickers at the edges and in some instances has the potential to again, damage the economy.

“For instance, the application of VAT to public bodies which provide bin collections, recycling, off-street parking and so on, will see charges for ordinary people rise – pushing up again the cost of living. This will not help our competitiveness. Has the government actively sought to change the EU VAT regulations? It would seem that once again we are suffering from a one-rule fits all direction from Brussels. The addition of VAT to bin charges seems particularly cruel, considering in the same bill you are eradicating the tax relief for these charges. As we said when the charges were introduced, they are being used to increase the return from stealth taxation so the government can keep up the pretence of a low tax regime, when for ordinary working people, we are anything but.

“The introduction of the domicile levy – while better than nothing, which is exactly what we are receiving now from tax exiles – is a poor cop-out from dealing with exile status. There are 6,000 registered tax exiles with the revenue currently. The Minister could today decide to change the assessment rules under which tax exile status is established to include passports, principal residence and so on. Why should these people declare themselves Irish but refuse to engage in the Irish taxation system? A levy on these people is not enough and I have little faith in this government to fully pursue it. Every loophole available to them must be closed.” ENDS

Full text of Deputy Morgan’s speech follows:

Ceann Comhairle I welcome the opportunity to contribute to the debate on the 2010 Finance Bill. I fear that this Bill is lacking in the provisions we need to lift this state out of recession. It is lacking because it is following almost exactly in the direction and policies that got us into this mess in the first place.

For years Minister, your government has pursued a route of right-wing taxation policies that have relied on indirect taxes like stamp duty and VAT. This indirect and unreliable taxation system created the bubble, and when it burst, had absolutely no capacity to lift us out of the crisis.

Every decision the government has made over the last two years has compounded the damage – the September 08 guarantee which came with terms and conditions well short of what was required to deal with the banks’ problems; the nationalising of the corrupt Anglo-Irish bank; the NAMA decision; the recapitalisation of the main banks without nationalising them, and the decision to pursue a deflationary cutting approach to public finances, as opposed to a stimulus. Each of these decisions was ill-thought out and the government couldn’t even develop on them when it saw the error it had made. For instance, it could have looked at converting Anglo into a state bank, a badly needed entity that the government could have directed it to start lending to SMEs and homebuyers.

The government should have focused on the real economy. It should have focused on creating jobs. That would have had a trickle-down effect to the banks and the public finances. Throwing money into banks without any decision making power with regard to the operation of those banks has not worked and will not work.

The government should have also taken the opportunity to overhaul the taxation system. Last year the government received two major reports that it had commissioned. One was based on the cuts that the government is now implementing. The other was an extensive research and recommendation piece on the tax system. While it had its gaps and while I would not agree with all of its proposals, it highlighted many of the problems with the current system. The government has actively ignored most of the taxation commission’s recommendations. Even in terms of this bill, we can only see a limited influence. The Commission listed hundreds of tax reliefs, many of which have no positive return to the Exchequer. This Bill includes barely a handful of tax relief abolitions. One of these is the abolition of service charges relief. This costs the state a few million a year. Compare that to the tax relief on mortgage interest for landlords – that cost the state €300 million a year.

The Bill does not deal with the legacy issue of the many property tax reliefs that were introduced by the Ministers predecessors Charlie McCreevy and Brian Cowen. While many of these have no new entrants, most are still paying out to developers and speculators – the very same people who are now being bailed out by NAMA. A double whammy for the taxpayer, Minister. All of this is a reflection of how badly skewed this Fianna Fáil/Green government is in favour of bankers, developers and those at the top end of the earnings scale.

This Bill is ultimately a lightweight Finance Bill that is designed to follow an ineffectual budget. The government may be receiving plaudits from vested interests who want to see a policy direction of cuts, but what is constricting the economy doing for us? It is putting more people on the dole, the live register is growing. It is putting more people in poverty. It hasn’t helped our competitiveness. It is driving the country deeper into recession, regardless of how the government tries to massage the numbers. The only Bill that had a real effect on the economy since the budget, and it was a negative effect, was the social welfare bill. This Finance Bill merely tickers at the edges and in some instances has the potential to again, damage the economy.

For instance, the application of VAT to public bodies which provide bin collections, recycling, off-street parking and so on, will see charges for ordinary people rise – pushing up again the cost of living. This will not help our competitiveness. Has the government actively sought to change the EU VAT regulations? It would seem that once again we are suffering from a one-rule fits all direction from Brussels. The addition of VAT to bin charges seems particularly cruel, considering in the same bill you are eradicating the tax relief for these charges. As we said when the charges were introduced, they are being used to increase the return from stealth taxation so the government can keep up the pretence of a low tax regime, when for ordinary working people, we are anything but.

The introduction of the domicile levy – while better than nothing, which is exactly what we are receiving now from tax exiles – is a poor cop-out from dealing with exile status. There are 6,000 registered tax exiles with the revenue currently. The Minister could today decide to change the assessment rules under which tax exile status is established to include passports, principal residence and so on. Why should these people declare themselves Irish but refuse to engage in the Irish taxation system? A levy on these people is not enough and I have little faith in this government to fully pursue it. Every loophole available to them must be closed.

The bill accepts that there are flaws in the property stamp duty regime. It attempts to deal with the issue of companies artificially saddling themselves with debt, but does not explain how the revenue will do this. Nor does it acknowledge that there are many private homeowners who partake of on-the-books sale devaluations to allow buyers to avoid excessive stamp duty rates. Many of the stamp duty anomalies could have been dealt with by addressing the system. The stamp duty system is not reflective of the crash in property trading.

At the very least the tax free sum before the duty should be increased to reflect the national average house and premises prices.

In general this bill appears to skirt the edges of dealing with tax avoidance. It is proof that the department is neither inclined nor willing to deal with what has been and is becoming increasingly a huge issue for a state so lacking in revenue.

Minister I will avail of the debate available to us at committee stage and further to deal with the sections of this Bill in more detail, but I believe this Bill will not set up the structures to lift us out of recession. There are few positive additions to the tax structure, several negative ones but for the most part, it is lacking in substance and it is not reflective of the crisis we are in. We have a finance system that needs a complete overhaul and this Bill does not even start to do that.

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