27 February 2001
Finance Bill 2001
Second Stage Speech by Minister for Finance to Dail Eireann
Download Microsoft Word version of this speech. Check Against Delivery I move that the Bill be now read a second time. I am pleased to put before the House my latest Finance Bill. This builds on and develops measures taken since I became Minister to ensure that we have a tax system that facilitates growth in employment and prosperity. Budget 2001 The Budget and Finance Bill deliver Government commitments on personal taxation and contain various measures to tackle inflation. This Bill will introduce innovative new measures to promote savings and encourage donations as well as providing for significant structural changes arising from the move to tax credits, the change to a calendar tax year and the conversion to the euro. The income tax and capital gains tax year will, from January 2002, correspond with the calendar year. This change is long overdue. The 6th April start to the income tax year is a leftover from the 18th century. From January 2002 we will also be operating in euro. The change to the calendar year, the “short” tax year this year and the conversion to euro require extensive revisions throughout the tax code and these are contained in this year’s rather larger than usual Bill. I will now outline the main contents of the Bill. The Committee Stage, will, of course, provide the opportunity to debate the detail of the Bill. I will listen with interest to the contributions on the Bill from Deputies in the House. Personal Tax Changes Sections 2 to 4 set out the main personal tax changes announced at Budget time. The increases in basic personal allowances or tax credits as they now become are set out in Section 2. Section 3 provides for the reductions in the standard rate of tax from 22 per cent to 20 per cent and in the higher rate from 44 per cent to 42 per cent as well as for an increase in the standard rate band. Section 4 increases the income tax exemption limits for persons aged 65 years or over. Section 2 and Schedule 1 also reflect the move to a tax credit system. This is the final step in the move to convert standard-rated allowances into tax credits. As part of the simplification process, permanent health contributions will be given on a “net pay” basis similar to superannuation contributions. Section 2 and Schedule 1 also reflect the transition to the calendar year and the euro in relation to personal tax credits. Medical Expenses/Employment of a Carer Section 7 increases the allowance for family members who employ a carer to look after an incapacitated relative from £8,500 per annum to £10,000 per annum. Section 8 changes the rules for claiming medical expenses in respect of a dependent relative. Currently medical expenses relief can only be claimed in respect of a relative where the claimant qualifies for a dependent relative allowance for which there is an income limit. Alternatively relatives had to use covenants to achieve a similar result. In future taxpayers will be able to claim medical expenses relief directly for designated relatives. The restriction on relief for routine maternity care is also being removed. I also intend to introduce an amendment at Committee Stage to bring expenditure on educational psychologists and speech therapists for children within the relief. I indicated in my Budget that I favoured providing tax relief for insurance products geared at providing for future care needs. I will be introducing an amendment at Committee Stage to provide for this. Section 11 is new and recognises the role of trade unions by providing a flat rate allowance of £100 at the standard rate of tax in respect of trade union subscriptions. This provision will have effect from 6 April 2001 but the Bill provides that the amount for the 2001 year will be added to the amount for the 2002 tax year and the total allowed in 2002 to facilitate the administration of the credit in the introductory period. Section 13 amends the ESOT (Employee Share Option Trust) legislation to allow an ESOT trust to give either shares, or cash if the shares are encumbered or the holding period has not expired, tax free to the estate of the deceased beneficiaries. Until now such a payment or transfer would have given rise to a tax charge. Share Options The appropriate tax treatment of share options has been the subject of significant discussion over the last few years with arguments made for and against giving tax relief. I have weighed the issues carefully and I consider that the arrangements put forward in Section 15 provide a good balance between the objectives of facilitating the participation by all employees in the fortunes of the company they work for and of helping companies retain staff vital to their success in a difficult international and national labour market. This section will change the tax treatment of share options where they are granted under an approved scheme so that the benefit is taxed at the CGT rate of tax rather than at the taxpayers marginal rate of income tax. For a share options scheme to qualify for this tax treatment, it will, as with other employee share schemes, have to be approved by the Revenue Commissioners. Schemes must be open to all employees on similar terms. However, schemes may incorporate a key employee element which does not meet the similar terms conditions provided at least 70 per cent of the total amount of share options is made available to all employees. There will be a requirement for a retention period of at least three years between the time the option is granted and the time the shares are actually sold by the individual. There will be no limit on the amount of shares that can avail of the tax treatment. The Bill as published provides that the new scheme will apply to share options granted on or after 15 February 2001 provided the scheme is subsequently approved by the Revenue Commissioners and would have met all the conditions applying at the time of grant and exercise. It has been put to me by various industry representative groups and individual companies that it would facilitate staff retention if those employees who had share options granted before 15 February 2001 but had not yet exercised them were eligible for the new tax treatment provided, of course, that the scheme under which the options were granted met all the other conditions. I can see the benefit of this approach and I intend to bring forward a suitable amendment at Committee Stage to provide for this. Section 16 amends certain provisions relating to Retirement Annuity Contracts. For ease of administration and to prevent any tax leakage, the Bill provides that annuity payments will be subject to deduction under PAYE from 1 January 2002. Where a person contributes to a contract for dependants or for life assurance, there is, within the overall limit of relief, a limit of 5 per cent of net relevant earnings on the tax relief for these contributions. The Bill provides that the splitting of the overall tax relief in this way will be abolished. Individuals will still be free to contribute to a RAC for their dependants. Contributions to the contract for the dependants and contributions to the main RAC will now be simply be aggregated and subject to the overall tax relieved limit for contributions to retirement annuity contracts. Tax Relief at Source Sections 17 to 21 deal with arrangements for introduction for tax relief at source for medical insurance relief and mortgage interest relief . Section 17 also extends the coverage of medical relief to cover premia for primary health care. My recent initiatives in moving certain reliefs to a tax relief at source system are aimed at relieving some of the pressure on the tax administration system and at the same time making life a little easier for taxpayers claiming those reliefs: under relief at source the correct relief will be given up front; there is no annual paperchase; and generally no need to contact the tax office in order to get the proper relief due. From April 2001, medical insurance relief will be given at source. From January 2002 mortgage interest relief will also be dealt with in the same way. I believe this is a simple and efficient method of channelling these tax reliefs to the persons who wish to avail of them and will help to ease the burden on an over stretched tax administration system. Childcare BIK With the aim of increasing the supply of childcare, the 1999 Finance Act introduced an exemption from benefit-in-kind tax to employees in respect of employer-provided childcare. Section 22 amends this to allow the exemption for schemes where employers are involved in financing but not managing the facility. In such circumstances the exemption will be restricted to cases where the employer provides financial support for items of capital expenditure and equipment but not other costs. Where the employer is involved in the management of the facility, the current financing conditions will continue to apply. Third-Level Fees Section 26 provides for the amalgamation of the existing tax relief for third level education fees and for standardising the conditions that apply. Various restrictions which currently apply to the reliefs will be removed and the relief will be extended for postgraduate fees paid in the US and other countries not covered by the existing scheme. This is something I undertook to look at for this year following requests at the Committee Stage last year. A special allowance of £5,000 per annum is currently available for seafarers. Section 27 reduces, from 169 to 161, the number of days a seafarer is required to be on voyages to or from a foreign port in an EU flagged ship for the purposes of claiming the allowance. Section 28 closes an existing loophole in the foreign earnings deduction relief by amending the definition of a day for the purposes of this relief. The section also inserts an expiry date for the scheme of 31 December 2003, allowing for a review of the scheme before any extension is agreed. Housing Sections 29 and 30 deal with measures to help ease our current housing pressures. There are many homes where the possibility exists of spare accommodation being rented out. A barrier is often the fact that such rental income is taxable. Section 29 introduces a new “Rent a Room” scheme. Where a room (or rooms) in a person’s principal private residence is let as residential accommodation and the gross annual rental income is less than £6,000, the rental income will be exempt from tax. This will not affect full entitlement to CGT relief on one’s principal private residence (in the event of a subsequent disposal of the property) or full entitlement to mortgage interest relief. Section 191 later in the Bill provides that room rental coming within the scope of this scheme will not trigger a stamp duty clawback. The Government’s objectives are to increase housing supply to meet the hugely increased need for housing, to tackle house price inflation and to give the first-time buyer a chance in the market. The Government has taken a range of measures over the last number of years to ensure this and I don’t need to enumerate these. The Government is also concerned to ensure there is a supply of good standard accommodation in the private rented sector. The Bill provides for various tax incentives announced by Government arising out of the recommendations of the Report of the Commission on the Private Rented Residential Sector. Section 30 restores the relief for interest on borrowings to purchase, improve or repair certain rented properties converted into multiple residential units before 1 October 1964 under certain conditions. The tax relief will apply to the tax liability on rental income only. Section 77 later in the Bill provides for CGT rollover relief to be made available to landlords where the proceeds of a sale of rented residential property are reinvested in new accommodation. It will be a condition that the reinvestment property must contain at least as many residential units as the one disposed of, with a minimum of three units to apply in any event. An amendment will be proposed at Committee Stage for a general 100 per cent capital allowance over 7 years against rental income in respect of capital expenditure on the refurbishment of rented residential properties. Taken together these measures should help to improve the standard of accommodation in the private rented sector and provide an incentive for investment in this sector. In introducing a stamp duty rate of 9 per cent and the 2% anti-speculative property tax for investors last summer the Government undertook to keep the matter under review. We have now decided to reduce the rate of stamp duty for investors in new property from a flat 9 per cent. The new rate will be 3 per cent for properties up to £100,000 and the same rate as for non-first time owner occupiers for properties above that. The investor rate for second hand properties will remain at 9 per cent. I can provide a table of the new rates. The Government considers that this reduction will provide an incentive for increasing supply in the new built rented sector while leaving the relative position of owner occupiers and investors in the second hand market unaffected. In this context it should be noted that approximately two thirds of first time buyers buy second-hand houses. This stamp duty change will also increase the attractiveness of tax incentives for student accommodation which are new-build. This change will apply to conveyances made on and from today. The Government has also decided not to proceed with the anti-speculative property tax due to come into effect next April. In the light of developments in the housing market since last Summer the Government does not consider it necessary to go ahead with this measure, which would, in any event, have applied in practice to a very limited category of investors. These changes will be implemented by amendments to the Bill at Committee Stage. Given these changes the Government does not now propose to introduce Section 23 relief for targeted groups. Corporation Tax Sections 34 to 37 make changes to the capital gains tax code and double taxation relief provisions following the decision of the European Court of Justice in the St Gobain case. As a result an Irish branch of an EU resident company will be given the same credit against Irish tax for foreign tax suffered on the same income as would be given if the branch were an Irish resident company. Section 38 is an anti-avoidance provision which amends the rules for the valuation of stock for tax purposes at the discontinuance of a trade where the stock is transferred from the trader to another trader, with whom the first trader is connected. Section 39 provides for the extension of exemption from Dividend Withholding Tax (DWT) to a number of new categories of shareholders such as incapacitated individuals who are exempt from income tax in respect of the investment income from personal injury compensation payments. In addition, Irish resident subsidiary companies will be able to pay dividends free of DWT to their Irish resident parent companies, without the necessity of the parent company making a formal declaration to the subsidiary. Donations Section 41 of the Bill introduces a new uniform tax relief scheme for donations. This will involve merging almost all existing reliefs. The new relief will be available at a taxpayer’s marginal rate of tax for both personal and corporate donations. The minimum donation which can attract relief will be £250. There will be no upper limit on the total amount of relief afforded to individuals or companies. The relief will be available for donations to all beneficiaries under the existing schemes which are being merged including those for third world charities. It will apply to donations to all charities which have tax exempt status for three years and to first and second level schools and third level institutions. This represents a major expansion in the relief, for example, for personal donations to domestic charities and educational establishments. I am very aware of the enormous sound contribution made by charitable donations in the United States, triggered by their tax relief arrangements. We have a tradition of voluntary effort and charitable donations in Ireland and this should be encouraged. For ease of administration it is envisaged that the tax relief for most taxpayers will be paid by Revenue to the body receiving the donations rather than paid to the donor. Individuals on self-assessment will claim the relief and companies will make the deductions as if the donation were a trading expense. Sections 42 to 44 provide for an extension of the existing general 25 per cent general stock relief for farmers and the special stock relief of 100 per cent for certain young trained farmers from 6 April 2001 until 31 December 2002 subject to this being in conformity with EU State Aid rules. Section 45 amends existing legislation so as to provide for standard capital allowances to be available for non-domestic users who make capital contributions towards water supply infrastructural capacity provided by local authorities. Taxi-Licences As part of the Government’s policy in introducing the new regime for taxi licences, it was announced that the existing taxi licence owners would be able to write off the actual cost to them of these licences as a capital allowances. Section 46 provides for: I did indicate that I would look at specific cases of hardship where some modification of this scheme would help and I intend to bring forward some amendments at Committee Stage. Section 47 provides for the write-off period for the annual wear and tear capital allowances for plant and machinery to be shortened from 7 years to 5 years. Up to now the allowances operated on a straight line basis over a seven year period, i.e. 15 per cent in the first 6 years and 10 per cent in year 7. This measure takes effect for expenditure incurred on or after 1 January 2001 and applies both to the general plant and machinery capital allowances as well as to capital allowances for business motor vehicles excluding taxi and short-term hire vehicles which retain their 40 per cent reducing balance arrangement. Section 50 provides for the measures on taxation of credit unions which I detailed in the Budget. Credit Unions will, of course, also be able to operate the new Savings Scheme which I will be introducing at Committee Stage. Living over the Shop Scheme and Other Reliefs Sections 51 and 52 deal with changes to the relief for park and ride facilities, multi-storey car parks, and the rural renewal scheme. Relief for qualifying commercial premises located at park and ride facilities is being restricted to facilities that provide local services only. This is to conform with requirements arising under EU State aid rules. Eligibility dates for qualifying expenditure are being extended under the multi-storey car park arrangements. Upper limits in the total floor area for qualifying houses under the rural renewal scheme are also being increased in the Bill. Section 53 provides for a scheme of tax relief aimed at providing residential accommodation in the vacant space over commercial premises in the five cities, Dublin, Cork, Waterford, Limerick and Galway. The framework for the scheme provides for a range of tax incentives similar to those currently available under the Urban Renewal Scheme. These are 100 per cent relief in respect of refurbishment and necessary construction expenditure for owner occupiers and lessors of residential property. There is also relief for expenditure incurred on refurbishment and construction of the associated commercial property. To comply with EU State Aid rules, qualifying commercial services must be involved only in local services. The reliefs will be applied to specific lengths of streetscape which are to be recommended by the Minister of the Environment and Local Government in the five cities covered, following recommendations by the relevant Local Authority concerned and approval by a special panel of experts. Life Assurance and Collective Funds Sections 56 to 65 make various changes to the taxation of life assurance and collective investment funds mainly following on the arrangements introduced last year. Section 58 provides that the same tax rate will apply to investment in both Irish and certain foreign life assurance companies and investment funds. The foreign countries involved are all EU and European Economic Area countries and OECD countries with which Ireland has a Double-Taxation Treaty. Where an Irish resident receives the proceeds of such foreign investment products on or after 1 January 2001, the same tax rate will apply to such proceeds as will apply where an Irish resident invests in an Irish life assurance company or Irish investment fund, provided certain conditions are met. Section 63 mirrors these arrangements in the case of persons who hold an interest in certain offshore funds. The other changes largely reflect discussions with the industry and clarify issues that have arisen under the new tax regime as well as making certain changes to Special Investment Schemes and Special Investment Policies following on the fact that the tax rate applying to these is now the same as the standard rate of tax. Capital allowances are available for expenditure on certain buildings used for the purposes of third level education. Section 66 contains an amendment so that capital expenditure on certain sports facilities associated with third level educational institutions can also benefit from these capital allowances. Calendar Year As mentioned earlier the income tax and capital gains tax year is being aligned with the calendar year from 1 January 2002. This will involve a transitional tax period or “short tax year” running from 6 April to 31 December 2001. Section 67 and Schedule 2 provides for the necessary changes to the various areas of the tax code consequent on the changeover to a calendar year of assessment. The short year involves allowances, credits, reliefs, thresholds, qualifying days etc. being reduced in that year to 74 per cent of their full year equivalent. To coincide with the move to the calendar year, Section 68 also provides for a common return filing and payment date of 31 October for those on the self assessment system. This means that, by that date, taxpayers will be required to have filed their tax return for the preceding tax year and paid any balance of income tax and capital gains tax for that year, having taken credit for preliminary tax already paid. They will also be required to have paid their preliminary tax for the current year. Given these new arrangements, it is proposed to allow a margin of error in relation to computational errors. Provided the taxpayer has otherwise made a correct tax return and pays any shortfall by 31 December in that year, no interest or penalties will apply. There will also be a number of consequential changes to the rules on payment of preliminary tax and, in addition, the terms for payment of preliminary tax by the direct debit method are being made more attractive. Corporation Tax Profits from shipping which are currently charged to tax at the 10 per cent rate would in the absence of change be charged to Corporation Tax from 1 January 2001 at the prevailing standard rate of corporation tax - i.e. 20 per cent in 2001, 16 per cent in 2002 and 12½ per cent in 2003. Section 69 provides for the 12½ per cent corporation tax rate to apply from 1 January 2001 for shipping activities. Section 73 abolishes the exemption for dividends remitted to an Irish company from its foreign subsidiaries under section 222 of the Taxes Consolidation Act, 1997, unless the dividends were certified by the Minister for Finance before publication of the Bill. Section 76 abolishes the exemption for foreign branch income and gains from tax under section 847 of that Act but only in the case of new applications for this relief. These reliefs are seen as no longer necessary for new investment in current economic conditions. Section 78 provides Capital Gains Tax relief when a parent transfers a site to a child to enable the child to build a principal private residence. The related stamp duty relief is provided in section 189 later in the Bill. Section 79 removes the capital gains tax rate of 60 per cent, which was introduced in 1998 for disposals of certain residential development land on or after April 2002. CGT rollover relief is available on farmland which is the subject of a CPO for road-building or road-widening where the proceeds of the CPO are reinvested in trading assets within a specified time period. Section 80 extends the time period for such reinvestments. Excise Part 2, Sections 81-138 contain provisions to consolidate and modernise general excise legislation. This continues the process of up-dating excise law undertaken in the last few Finance Acts. Sections 139 to 141 confirm the Budget day decreases in rates of excise duty in unleaded petrol and auto-diesel and the increase in duty on tobacco products to compensate for the VAT reduction. Sections 142 to 147, 151 and 162 increase the maximum penalty level for conviction for summary offences from £1,000 to £1,500, the tariff now regarded as standard. Section 216 later applies this new limit to all summary tax offences. Section 152 does away with the special advance payment of excise duty in December and provides in future that all payments in respect of December must be made by the end of the subsequent month. This is the practice for all other months during the year. Section 153 provides, as announced in the Budget, for a 50 per cent repayment of vehicle registration tax in respect of hybrid electric vehicles. The scheme is intended to encourage the purchase of new technology vehicles that have the capacity to significantly reduce harmful emissions. The scheme is to operate for a two year period from 1 January 2001 to 31 December 2002. Section 154 amends the rules governing the classification for VRT purposes of certain vehicles, mainly jeep-derived and car-derived vans, to ensure greater evenness of treatment of such vans classified under category B of VRT, taxable at 13.3 per cent of the open market selling price. The rules for classification will now be much clearer and less easy to manipulate. Sections 155 to 164 deal with definitional and other procedural matters in relation to excise duties and licences. VAT Sections 165 to 170 and 174 to 177 are largely technical changes. However the transfer of business provisions included in these sections allow for the VAT free transfer of milk quotas between farmers. Sections 171 and 173 confirm the Budget VAT changes. These are the reduction in the rate of VAT from 21 per cent to 20 per cent and an increase in the farmer’s flat rate VAT from 4.2 per cent to 4.3 per cent. Section 172 makes a technical change to the VAT rules on foot of the recognition of the Department of Agriculture, Food and Rural Development as a taxable person for the purposes of the Cattle Testing or Purchase for Destruction Scheme. Sections 178 to 180 are part of a package of measures to improve the tax collection system especially VAT direct debit. The new provisions will develop and enhance arrangements governing payment of VAT through direct debit including the imposition of interest in certain cases of underpayment. Section 181 imposes a penalty for use of a registration number after it has been cancelled. Section 183 contains three significant provisions. Firstly, it clarifies that the supply of research activities is not an exempt educational activity. Arising from an approach from the European Commission, the Bill applies VAT at the standard rate to research provided for a fee by educational institutions. This will help to ensure a level playing field in tendering for research services. This amendment will also enable Irish third-level bodies to reclaim VAT on taxable services provided under EU and other research programmes. Secondly, this section gives effect to the European Court of Justice ruling that existing tolled facilities (tolled roads and bridges) operated by the private sector in Ireland are subject to VAT. Such tolls will be subject to the standard rate of VAT from 1 July 2001. Thirdly, the services supplied by insurance companies and related services by insurance agents are outside the scope of VAT. The section also provides for this exemption to apply to loss adjusters and to claims handling services, when they are acting as an insurance agent on behalf of an insurance company. The VAT Directive on fiscal representatives will come into force on 1 January 2002 and is being transposed into Irish law by section 182. The Directive abolishes the right of a Member State to impose a requirement for a VAT fiscal representative on a non-established person. This will require revocation of section 37 of the VAT Act, 1972 from that date. Stamp Duties Sections 186 and 195 provide for an increase in the stamp duty exemption threshold for mortgages from £20,000 to £200,000 to have effect for mortgage instruments executed on or after 26 January 2001. While mortgages represent almost half of all documents stamped each year by Revenue, they account for a very small proportion of the tax revenue yield from all stamped deeds. The increase in the threshold will reduce the administration burden in Revenue and ease the compliance requirements for solicitors. The Finance (No. 2) Act 2000 provided for particular reliefs from stamp duty on first-time house purchase on certain conditions, where the second home is acquired following a marriage break-up under a decree of divorce or a judicial separation. Section 191 extends these provisions to circumstances where there is a deed of separation or a decree of nullity of a marriage. I agreed to consider an extension to such cases when the Finance (No. 2) Bill, 2000 was being passed by the Dáil. A stamp duty exemption is being provided in Section 192 for approved voluntary and co-operative housing bodies for land acquisition coming within the ambit of the Housing Acts. Those voluntary bodies which are not registered charities are at present liable to pay stamp duty at 9 per cent. Section 193 provides for a stamp duty exemption for the National Building Agency for land acquired for social and affordable housing. Section 194 abolishes the £1 per policy stamp duty on Permanent Health Insurance Policies and Critical Illness Policies. Section 195 also abolishes the 0.1 per cent stamp duty on life assurance policies announced in the Budget. Under the Finance (No. 2) Act, 2000, investors who have a contract evidenced in writing before 15 June 2000 can avail of the previous stamp duty rates in existence prior to 15 June where the conveyance or lease is executed before 31 January 2001. This deadline is being extended to 31 July 2001 in Section 196. Capital Acquisitions Tax Where an individual has obtained relief from Capital Acquisitions Tax on certain farmlands and these lands are subsequently acquired from the individual under Compulsory Purchase Order (CPO) within six years of the transfer, the CAT relief given will be clawed back unless the lands involved are replaced within a specified time period. Section 199 extends the period allowed for such replacement investment. At present, works of art which are lent to cultural institutions in the State by non-Irish resident individuals may be liable to CAT should the lender die during the period of the loan, as the asset would be situated in the State at the date of death. Section 200 provides for an exemption for CAT purposes in such cases. Irish Government securities are exempt from CAT where the disponer and beneficiary are neither domiciled nor ordinarily resident in the State. If the disponer is domiciled and ordinarily resident in Ireland, the securities must be held for 3 years prior to the gift or inheritance in order to obtain the CAT exemption. Section 201 extends this 3 year time period to 6 years to reduce the opportunity for tax planning in this area. Section 203 provides that, as and from 6 December 2000, foster children will be treated the same way as other children for the purpose of CAT. In order to qualify for this equality of treatment, a fostered individual must have been cared for and maintained from a young age up to the age of eighteen for a successive period of 5 years. This change responds to representations made to me on this issue by many Deputies. At present, where an amount exceeding £5,000 stands in a joint deposit account in the names of a deceased person and another person, the Bank concerned cannot release the account into the name of the survivor without a clearance from the Revenue Commissioners. Section 204 increases this clearance threshold to £25,000. Section 206 abolishes Probate Tax, which I consider to be an invidious tax Section 205 extends the CAT exemption which currently applies to IFSC/Shannon certified collective funds to funds established under the Finance Act, 2000, provided both the disponer and the donee or successor are not domiciled or ordinarily resident in the State. Section 209 amends CAT business relief to allow the relief to apply in the case of businesses which are carried on either within or outside the State. The change acknowledges the increased overseas diversification of Irish businesses since the relief was introduced in 1994. E Filing Section 215 abolishes the requirement in direct tax law that electronic record-keeping systems be approved on a case-by-case basis by Revenue. Instead, Revenue will set out standards for such systems and the taxpayer will ensure that the system used complies with the published standards. This measure will reduce the burden of compliance on taxpayers and make electronic record-keeping a more accessible option. The section also places obligations on intermediaries in relation to the acquisition by another person of an interest in an offshore fund or foreign life assurance policy. As a central part of the e-Government initiative, legislation to permit electronic filing of tax returns was put in place in the Finance Act, 1999. The legislation was enacted before the Revenue Online System (ROS) was developed. Section 218 provides a number of technical changes to the legislation to ensure that the law corresponds with the practical operation of ROS, which is now being phased in. The section also extends these provisions to enable documentation other than tax returns to be provided under this system, for example, claims for medical expenses relief. Section 219 streamlines the arrangements for Revenue providing certificates of tax outstanding in court proceedings to make prosecutions easier to mount. Section 220 strengthens the PAYE collection provisions to combat certain practices by employers in delaying payment of PAYE. The Finance Act 2000 included a provision to allow the Revenue Commissioners to offset a claim for a repayment of tax against outstanding liabilities where a taxpayer had failed to comply with his or her statutory obligations regarding the submission of returns and the payment of tax due. Section 222 contains a provision to allow Revenue to refuse to repay a claim until any outstanding return has been submitted. The Bill also includes a technical amendment to put beyond doubt that a repayment may be offset against interest on overdue tax. Amounts in tax legislation are converted in Section 223 and Schedule 5 into convenient amounts in euro. This will generally involve smoothing amounts in favour of the taxpayer. Some few amounts are left in tax legislation expressed in Irish pounds because they apply to periods prior to 2002. If payments arise in relation to earlier periods by references to these amounts the euro liability will be calculated by the standard conversion. Savings As I announced already I will be bringing forward proposals at Committee Stage for a new savings incentive. There has been a lot of focus in recent press coverage on my proposal for a savings incentive as a means of taking demand out of the economy. This is, of course, an important aspect. I have, however, another goal, which is to encourage individuals to provide for the future by a regular pattern of savings. This is consistent with my approach in earlier Finance Bills of encouraging pension provision by tax reform. I consider it essential that the savings scheme be as broadly focussed as possible. It is for this reason that I propose a straightforward scheme, involving a tax credit mechanism. The proposed scheme has attracted a lot of interest and positive comments. I made it clear in the Budget that I would be taking an initiative in the savings area and the scheme has been carefully developed. It is consistent with the approach I set out in the Budget of countering inflation through a series of measures including the promotion of savings. Concluding Remarks The discussion of our Budget in an EU context has highlighted for us all the role of national budgetary policy in developing a strong and flourishing economy. It is important that we retain the say in this process. This is the essential issue in the recent exchanges with the Commission on this subject. Keeping control of fiscal policy is a core value of all Ministers for Finance around the Ecofin table and we should not forget that. My Budgets and Finance Acts over the last four years, including this Bill, have made and will make significant changes to the structure of our tax system, not just in lower rates of income and corporation tax but also to the structure of the tax system itself. I would like to acknowledge the role of the Revenue Commissioners in implementing these wide-ranging changes and my appreciation of their work. I hope that the House has benefited from the detailed outline I gave of the provisions in the Bill. The Bill is a substantial piece of legislation both in terms of content and in size. I look forward to the debate on its passage and I commend the Bill to the House. Ends
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