Amendments Nos. 1 and 2 are related and may be discussed together by agreement. Is that agreed? Agreed. We might pause for a moment to see if the Deputies who tabled amendment No. 1 arrive.
Finance (No. 2) Bill 2023: Report and Final Stages
Amendment No. 1 not moved.
I move amendment No. 2:
In page 8, between lines 5 and 6, to insert the following:
“Universal Social Charge
3. Within 3 months of the passing of this Act, the Minister shall lay a report before Dáil Éireann on the current position regarding the Universal Social Charge, the number of taxpayers paying Universal Social Charge at each band and options to further reduce the Universal Social Charge burden for middle income earners in the years ahead.”.
This amendment is about getting a report on the current position in relation to the universal social charge and the number of taxpayers paying it on each of the different bands. It also seeks to look at further opportunities to reduce the USC burden, especially on middle income earners.
I want to acknowledge the tax changes and improvements, particularly the USC changes in the budget. A change in the band for the first time in five years is a significant milestone. It was introduced in a very different economic climate and it is a big issue for many people. The reduction from 4.5% to 4% is important, not just for the scale of it but also because it is the first time in five years this has happened.
I want to focus on the national minimum wage increase of €1.40 next year. This will bring it to a rate of €12.70 per hour. It is not just about the people on the minimum wage but it is also about other low-income workers in many businesses who are on wages just a little bit above the minimum. There might be someone getting one or two euro over the minimum wage. They will also see an improvement in their incomes next year when the increase comes into effect.
The key thing is that these people on low incomes will be able to remain outside the higher rates of USC. It is essential that the threshold on the 4% rate threshold be raised. I understand from the figures that it would be worth €2,300 annually to somebody on the minimum wage and a little bit more for people who are on related incomes.
I want to try to get an understanding of the numbers of people in that position because many thousands of middle-income and low-income earners might have felt that previous budgets did not benefit them as they would have hoped. I want to get a clearer picture of how they benefit from this USC change and to map and look ahead at possible changes that could be made to improve their situation.
Tá an leasú seo dírithe ar thuarascáil ar an líon daoine atá ag íoc an USC ag na rátaí éagsúla agus ar dheiseanna chun an cháin sin a laghdú do dhaoine. Tugadh isteach an cháin ag am ina raibh cúrsaí eacnamaíochta an-difriúil. Tá sé tábhachtach go mbeadh gach iarracht á déanamh chun deireadh a chur léi nó chun í a laghdú. Is maith an rud é go bhfuil laghdú tosaithe anois don chéad uair le cúig bliana. Is rud suntasach é ní hamháin go bhfuil an leibhéal ag athrú ó 4.5% go 4% ach go bhfuil iarracht déanta anois don chéad uair le cúig bliana chun í a laghdú.
Díreoidh mé orthu siúd ar an bpá is ísle, daoine ar an minimum wage. Tá sé sin le hardú ag tús na bliana seo chugainn. Cabhróidh sé sin go mór le hioncam a lán daoine agus fáiltím roimhe. Caithfear a chinntiú nach mbeidh siad ag íoc níos mó USC de bharr an ardaithe sin. Tá sé tábhachtach go leanfaí ag cur feabhas air. Mar sin, táim ag lorg na tuairisce seo chun féachaint ar an líon daoine atá i gceist agus ar aon slite inar féidir feabhas a chur ar an USC chun an t-ualach sin a laghdú.
I also want welcome the USC concession that is being extended for medical card holders. I acknowledge the significance of this. I ask the Minister to give an outline of the report and the opportunities for further reducing the USC
I thank Deputy Moynihan for his contribution. In amendment No. 2, he is seeking a report on the current position regarding USC, the number of taxpayers paying USC at each band and options to reduce the USC burden for middle-income earners in the years ahead. By way of background, as the House will be aware, the USC was designed and incorporated into the Irish taxation system in 2011 to replace two other charges, namely, the health levy and the income levy. The primary purpose of the USC was to widen the tax base and to provide a steady income to the Exchequer to provide funding for public services.
In relation to Deputy Moynihan’s proposals, my Department recently carried out a review of the personal tax system, which was published on budget day. The report examined Ireland’s personal tax system, including USC, and set out a detailed overview of the evolution of USC since its introduction, as well as recent trends in income tax and USC receipts. As part of Revenue’s regular statistical publications, data on income earners by USC rate is published. The latest available information is for 2021 and shows that approximately 1.05 million taxpayer units, that is, 36%, were exempt from USC; 483,000 taxpayer units, that is,16%, paid a top rate of USC of 2%; 1.08 million taxpayer units, that is, 37%, paid a top USC rate of 4.5%; 320,000 taxpayer units, that is, 11%, paid a top rate of USC of 8% and 15,000 taxpayer units, that is, 0.5%, paid the 3% USC surcharge on non-PAYE income in excess of €100,000 per annum. Further details for previous years are available on the Revenue’s website.
With regard to the options to reduce the USC burden on middle-income earners in the years ahead, the Deputy will appreciate that it is premature to make any commitments at this stage as such decisions will depend on the prevailing circumstances and fiscal resources available for future budgets. However, I am pleased to note the significant progress made to date in delivering on the programme for Government commitment to index tax credits and bands, specifically the substantial income tax package that I announced as part of budget 2024.
The budget tax package is built around three key pillars; changes to tax credits, the standard rate band and USC. I sought to use each of these levers to spread the benefit of the available package as effectively as possible. I am aware that the USC is a particular point of concern for many people, which is why I introduced the largest USC package since 2016 and why I made two significant changes to the USC in this budget. These are a reduction in the 4.5% rate of USC to 4% - the first reduction in USC rates in five years - and an increase of €2,840 to the entry threshold to the 4% rate to ensure that full-time workers on the national minimum wage remain outside the higher rates of USC.
In relation to the minimum wage change and the interaction with the USC, currently a single individual employed on the current minimum wage of €22,916 per annum who works 39 hours per week pays income tax of €19.87 per week, USC of €5.35 per week and PRSI of €17.63 per week. Their effective tax rate is therefore 9.7%. As a result of the increase of the national minimum wage to €12.70 per hour from 1 January 2024, a minimum wage worker will see an increase in their gross income of €2,839 to €25,750.
This increase will see commensurate increases in income tax, USC and PRSI. However, a full-time minimum wage worker will see their weekly net income rise from €397.85 to €442.10, which equates to a €44.25 or 11.1% increase in their weekly net income from 1 January 2024. This amounts to an annual increase in their net income of approximately €2,300. In addition, it does not take account of cost-of-living one-off measures introduced as part of budget 2024. It is estimated that 14,100 individuals will benefit from the increase in the national minimum wage.
In regard to the impact on individual income earners arising from the changes in the budget, I draw the Deputy's attention to the publication on the tax policy changes as part of budget 2024, where we set out in tabular form information on people in different circumstances and different household types, for example, one-income and two-income, PAYE and otherwise, and what the impact on net income was arising from the changes to the tax credits, the standard rate cut-off point and the USC. All of that information is there in the tables published on budget day.
All in all, I do not believe the report being sought by the Deputy is necessary and we have already published a lot of material. However, I welcome the opportunity to set out the impact of some of the changes that we announced in the recent budget.
I thank the Minister for the overview. There is a considerable volume of information already available on this and I am conscious of duplicating that. The amendment also seeks to get some kind of overview or plan on the possibility of further changes in the years ahead, particularly for middle-income earners. I want to maintain the focus on that, particularly as there is extra momentum given a change was made for the first time in five years. Perhaps further visibility into the future could be addressed in such a report.
As the Minister said, all of the data on distributional impact and the number of people paying are available on the website, and the options to reduce the burden are well known. Nonetheless, it is good that Deputy Moynihan has put down this amendment because it allows us to discuss the issue.
I was looking forward to hearing the Minister's contribution in opposing the amendment from the Rural Independent Group, which I would have opposed myself. I would be interested in hearing the Minister's comments because the Rural Independent Group argued that we should exempt the first €70,000 in earnings from USC, which was very similar to Deputy McGrath’s own proposal when he argued and campaigned for the first €80,000 to be exempt from USC. It would be interesting to see how he found his way in regard to that one. It was very much a populist move by Fine Gael to abolish it, whereas Fianna Fáil said it would abolish it up to €80,000. In fairness to the parties on the left, they argued that we have to retain the USC but take those on low incomes out of its clutch.
Deputy McGrath is now the Minister for Finance. The problems arise for people on average incomes in the State. Let us be clear about this and put the CSO data on the record. The median is the best way to average this, given the high wages in some sectors. The median wage in the State is €33,516. When we talk about average incomes, we are talking about that area. If we look only at those in full-time employment, which is very unfair, the average wage would be just €41,000. This is very important because that shapes the narrative in terms of Deputy Moynihan’s point on the impact on low- and middle-income workers. With regard to the USC proposal, a middle-income worker benefited by €92 compared to somebody who earned twice that, who benefited by €292. If we look at the total tax package, that difference of €200 increases to €400.
That is the problem with this Government’s proposals in that those who need it most are the people who did not get it in this budget. Most people welcome a tax cut, particularly during a cost-of-living crisis, and we recognise that. However, the elected representatives in this Chamber did not need a USC tax cut whereas many of our constituents did. The problem is that we got the higher end while many of our constituents got €92; in fact, half of the population who are working got €92. That is a problem in terms of the fairness that underpins this proposal.
When the previous version of the Minister, Deputy McGrath, was arguing about getting rid of the USC tax on incomes up to €80,000, in fairness, he made the point that Fianna Fáil would start by abolishing the lower rate and slashing the second rate, and he said that would be his priority. Now, in government, he has done the opposite. He had made the point that that approach would benefit those on low incomes and that, over five years, he would get rid of it altogether for incomes below €80,000. That was reckless but at least that starting point recognised that those who needed it most would get it. That is not what has happened in the tax package that has been proposed or in how the Minister dealt with USC in this budget. There was a much fairer way to deal with that, which Sinn Féin put forward, and that was abolishing the lower rate and cutting the second rate in half, which is what the Minister proposed back in the day, before he was in ministerial office.
I make that point because there has been abuse of figures in the past. We heard the Taoiseach, Deputy Leo Varadkar, at his event at the weekend say that average earners were €6,000 better off due to the tax changes proposed in this budget. Average earners are on €33,000. The increase in the bands does not affect them whatsoever because they earn too little to benefit from the increase in the bands. Those who are full-time employees did benefit from the increase in the bands but half of the population does not get the full benefit of it. That is the problem. Again, it is about how the Minister's tax measures are targeted, who they are targeted at and who gets the most benefit. It is important when talking about average income earners not to exclude people who are working part-time, which is unfair. We should not talk about full-time workers as if we do not value those working part-time, who perhaps cannot find a full-time job or are providing care for someone at home and out doing 20 hours of work with a business.
The figures are the figures and we should not suggest they are not. It is important to understand that the impact of these figures is that lower and middle income earners, for whom the median is the best calculation, actually benefited by €92 in regard to USC, while higher income earners benefited by €292. That is not fair in my book or in anybody's book.
To correct one point, it is estimated that 148,100 individuals will benefit from the increase in the national minimum wage whereas I think I inadvertently gave the wrong figure.
In response to some of the points that have been made, with regard to my party, in our campaign for the last election, from which we all draw a mandate to be in this House, we made proposals in regard to the income tax system, the entry point and changes to credits. We negotiated with our colleagues in government a programme for Government which provides for the indexation of credits and bands as incomes have begun to rise again following Covid-19.
We have made very good progress on implementing the agreed programme for Government commitment signed up to by the three parties.
It is worth making the overall point that we have a highly progressive income tax system in Ireland. It is one of the most progressive in the developed world. That has been acknowledged by the OECD and others on many occasions. If we look at the post-budget 2024 situation on a salary band basis, we estimate the top 1% of taxpayer units will pay 24.4% of total income tax and USC, the top 5% of taxpayer units will pay 48% of total income tax and USC, the top 20% will pay 79% of total income tax and USC and the bottom 80% will pay 21% of total income tax and USC. We, therefore, have a highly progressive income tax system. Deputy Doherty is suggesting we increase that progressivity even further. It is already highly progressive and, therefore, when we make changes to the tax system, it will inevitably be the case that the spread of the benefit will depend on the income profile concerned.
I thank the Minister for the overview. Reducing the 4.5% USC rate to 4% is a positive move. That it is the first move in five years is significant as well and I very much welcome that. I take the point on duplication of information. I am very much conscious of that and want to avoid any such duplication. I want to ensure we are in the most informed position to be able to make a decision to minimise the burden on middle-income earners. Glacaim leis an bpointe a bhfuil á dhéanamh ansin, go bhfuil an t-eolas céanna ann cheana féin. Ní theastaíonn uaim a bheith ag meilt ama nó ag cur airgid amú leis sin ach tá sé tábhachtach go dhíreoimis isteach ar laghdú ar an ualach dóibh siúd ar meánioncaim, an méid in aon chor agus is féidir. I accept the Minister's point on the duplication and withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment No. 3 in the name of Deputy Nash is out of order. I am told it is a potential charge on the people.
Amendment No. 3 not moved.
The proposer of amendment No. 4 is not here so I will move on.
Amendment No. 4 not moved.
Amendments Nos. 5 and 6 are related and may be discussed together. They are in the name of Deputy Christopher O'Sullivan, but again the Member is not here, so we will move on.
Amendment Nos. 5 and 6 not moved.
Amendments Nos. 7, 8 and 11 and may be discussed together.
I move amendment No. 7:
In page 15, between lines 6 and 7, to insert the following:
“Report on third rate of income tax
10. The Minister shall, within six months of the passing of this Act, produce a report on the potential for the introduction of a 43 per cent income tax rate on all individuals with incomes in excess of €100,000, with appropriate uplifts for married couples, as a means of maintaining progressivity in the income tax system, and the estimated annual revenue which such a rate would generate.
I express concern about the charade of people coming in and taking time to make points for whatever reason and then withdrawing amendments or, indeed, not turning up for the amendments. It makes a bit of a mockery out of the whole process and this is a long enough process anyway. It is not good practice. It is a recent development and a regrettable one.
I am speaking to my amendments Nos. 7 and 8 on taxation generally. We heard talk a moment ago about the progressive nature of our tax system. We have a progressive tax system, but it is becoming less progressive and that is especially as a result of the next year's budget and this year's budget. What has happened is those at the higher end of the income spectrum are getting greater tax breaks and tax relief relative to those at the lower end. I do not see how that can possibly be anything but a widening of the gap. If the rich are getting richer and the poor are getting poorer, even relatively, that is widening the gap and means our taxation system is becoming less progressive. That is a very backward way to be going about things and it does not make for fair politics, a fair taxation system or a fair society. The principle underpinning a fair society is people pay tax according to their means and, in return, they should have access to good quality public services. That is how we create a cohesive, fair and progressive society.
I am surprised Fianna Fáil is going along with widening the gap between rich and poor and undermining the progressive nature of the tax system. It is the kind of thing we expect from Fine Gael. We hear it much of the time from various Fine Gael backbenchers and, indeed, frontbenchers as well. The Taoiseach does a lot of that dog-whistling by talking about people who get up early in the morning and all that kind of thing, without appreciating the scale of the issue of low incomes in the country. We have a very serious problem with that whereby people get up very early in the morning, work very hard and come home to take-home pay that is very poor. They are the people who need to be lifted by the tax system, not the people at the higher end. There are umpteen examples within the recent budget of changes made to the tax code as well as other measures that mean the higher a person’s earnings, the more they get out of the budget. That is the wrong way for it to be and it should not be like that.
Last year and a number of times this year, I have referred to the fact that in this House we are very well paid. All TDs are well paid. Obviously, junior and senior Ministers are exceptionally well paid and fair enough, as this is not a personal thing, but is there any justification for a Minister to get substantial money back from tax changes and on top of that get cash payments by way, for example, of the energy payments? It is quite outrageous, to be honest. No Members of this House should be getting any kind of breaks from the budget. Whatever about equal breaks right across the income spectrum, while we are getting huge breaks and large amounts of additional money back into our pockets our constituents on middle and lower incomes are only getting a fraction of what we are. What is the rationale for that? What is the defence of it? It makes for a less equal and less fair country and that is not the direction we should be going in.
The point I am making here is on the need for a report. If there is an increase in the point at which people pay the higher rate of tax and also improvements to the two main tax credits, why should people earning in excess of €100,000 get a benefit from that? I accept it can be difficult to target tax breaks, but one key way of doing that is a proposal the Social Democrats made. We believe it is the only fair way of raising the point at which people pay the higher rate of tax and increasing the tax credits, namely, at a higher level where individual incomes are over €100,000, there should be a clawback mechanism. If the Minister can tell me why any Member of this House should be getting money back into their pocket from tax changes in the budget and indeed the energy credits, I would like to hear it because I do not know what the justification for it is. Will he tell us what the thinking is in Government about people in our category of income getting that kind of relief? We in the Social Democrats strongly believe there must be a clawback for higher earners.
In our view, the best way of getting that clawback is through the introduction of a third rate of income tax. Nobody should be penalised on income below €100,000 but there should certainly be a clawback in respect of income over €100,000. People should not continue to get tax benefits when they do not need them. That is the key point. Government decisions are resulting in people who do not need extra money or support from Government getting it. That is wrong and it should not be happening. That is why I am asking for a clawback in respect of income over €100,000. Next time around, I will talk about the importance of refundable tax credits.
I support Deputy Shortall's proposition. We have a progressive tax system, which has been defended under successive Administrations even in the toughest of times. That is something that we, as a country, should be very proud of. However, the reality is that the kinds of changes introduced by the Minister in this Bill see that progressivity fraying at the edges. Looking at the direction of travel and at some of the arguments made by his party colleagues with regard to the diminution and narrowing of the tax base, I question his commitment to a progressive tax system and whether such a commitment exists at all under Fianna Fáil. Is it just a fiction? We understand the direction of travel and where the Minister wants to position himself ahead of the next general election. From a public policy point of view, it is not a good place.
Day in, day out, we hear about the concerns of the Minister and his colleagues regarding our excessive reliance on corporation tax revenue, which are correct. We also understand the excessive reliance on the great amount of revenue coming into the Exchequer's coffers through VAT and know about our reliance on income tax from employees in a very small and concentrated number of multinational corporations. Despite this, budget after budget, we see that tax base narrowing. The Commission on Taxation and Welfare has called for a broadening of the tax base given those vulnerabilities but, time and time again, we see that tax base being eroded and becoming narrower by the year.
Deputy Shortall has mentioned, as Deputy Doherty did earlier, the way in which the operation of the tax changes the Minister proposed in the budget and which have found their way into this Bill will disproportionately affect the very highest income earners in this country. There is a way to ensure the progressivity of the system is protected and that is by introducing the kinds of clawbacks Deputy Shortall is proposing. It has been done in the past. For example, the top rate of tax was adjusted with the benefits being limited to people who earn under €65,000 or €70,000 through an increase in the USC as it applied to the portion of income over €65,000 or €70,000. That is one way to do it. That was done back in 2015. The changes can be targeted, if the Minister was minded to do so, to give a break - I use that term advisedly - to middle earners. He has not done that, however. I am concerned about the narrowing of the tax base and, on a practical level, he should be more concerned about it. As I said earlier, we have heard him emoting in the media about the vulnerabilities of the tax base, yet he is chipping away at it all of the time. That should be of concern to all of us.
A number of amendments covering a range of income tax issues have been grouped together in this discussion. Regarding the potential for the introduction of a 43% income tax rate on all individuals with incomes in excess of €100,000, I am advised by Revenue that this proposal would yield approximately €495 million in the first year of introduction and €615 million in subsequent years. Approximately 185,000 taxpayer units would be impacted.
As I have stated many times in this House, Ireland has one of the most progressive personal income tax systems in the developed world. By way of example, the top 10% of income earners are expected to contribute approximately 63% of the total income tax and USC collected in 2024. To place this in context, as I said earlier on, the bottom 80% of income earners will pay approximately 21% of the total income tax and USC collected next year.
Introducing a 43% income tax rate on income over €100,000 would increase the top income tax rate by three percentage points and would increase the top marginal rates of tax to 55% for employees and 58% for the self-employed. High marginal tax rates are a clear disincentive to work and could also cause harm to our international competitiveness.
I appreciate that Deputy Shortall is seeking a report on the potential for the introduction of a 43% rate of income tax on all individuals with incomes in excess of €100,000. However, to commission such a report has the potential to introduce an element of uncertainty as regards the future direction of the Government’s income tax policy and could be damaging to job creation and the promotion of foreign direct investment.
With regard to a report evaluating the impact of introducing a system of refundable tax credits as one means of improving the living standards of low-income workers, the Deputy may be interested to note that the matter of refundable tax credits was examined as part of this year’s tax strategy group process in advance of budget 2024. The analysis and findings of the review were published in the income tax TSG paper. The review explored the concept of refundable tax credits, provided an overview of previous relevant studies and of refundable tax credits in other countries and provided an economic analysis of refundable tax credits. Overall, the review identified a number of issues concerning refundable tax credits. Introducing such credits would represent a fundamental change to the personal tax system in Ireland. On the one hand, refundable tax credits could help tackle in-work poverty and increase vertical equity. However, there are already a wide range of existing policies tackling poverty and direct supports are a simpler and more effective means of providing assistance to low-income households.
Additionally, the introduction of refundable tax credits could prove to be very costly and provide relatively little benefit to the majority of individuals, including those working full time and earning at least the national minimum wage because such workers generally fully utilise their tax credits. Tentative estimates provided by Revenue suggest a cost of €1 billion associated with making personal tax credits refundable. Refundable tax credits could also have behavioural impacts on labour supply and reduce the incentive to work or to take on additional work. Implementing a system of refundable tax credits would result in operational and administrative complexities as well as potentially reducing eligibility for some existing supports for low-income households.
Moving on to the matter of increasing the two main tax credits by a further €225 each, I assume that Deputy Shortall is referring to the personal tax credit and the employee tax credit for PAYE workers or earned income credit for self-employed persons. I have been advised by Revenue that this would cost almost €1.1 billion in the first year and €1.27 billion in subsequent years.
Deputy Aindrias Moynihan has not spoken to his amendment at this point. I can address it in a moment if he wishes. However, for the reasons I have outlined, I am not in a position to accept the Deputies' amendments. We have an appropriately progressive income tax system in Ireland. That progressivity has been maintained in budget 2024. The overall assessment of this budget using the ESRI's SWITCH model to look at the distribution impact concluded that the budget was progressive and that those on the lowest incomes gained the most from it. That is the way it should be. That is the combined impact of all of the measures in the budget. I appreciate that, in discussing the Bill, we are discussing the specific taxation changes made in the budget.
Deputies are free to make whatever points they wish in that regard but we got the balance right in the income tax changes in the budget and I do not propose to accept the amendments.
I note the Minister did not answer my question. I asked him to explain to us the rationale for giving tax breaks to, for example, people in this House. Does he think it is fair and why did he do that? I am still waiting to hear his answer to that question.
The Minister talks about the SWITCH model, which looked at the impact of the budget across the board in various measures within it. I know the Taoiseach quoted this and made various claims on it. In particular he quoted the Budget 2024: Beyond GDP - Quality of Life Assessment. Unfortunately, my amendment on that was ruled out of order for some reason but on page 12, which the Taoiseach was talking about, he talked about how people in the lowest decile benefit by 4.7% and people in the highest decile benefit by 1.5%. Those are percentage wins or benefits but if you are talking about a 4.7% increase in the minimum wage, which is a low income, or in income that is even lower than the minimum wage, that is an awful lot less than 1.5% off the top decile. It is probably a fourfold difference. Would the Minister not accept that this is a far more honest and true way of assessing the impact of the budget? It is not about the percentage increase but the cash increase. You cannot pay your bills or buy stuff from shops with percentages. It is actual cash. The impact of the budget is that, in cash and real money terms, those who earned least got least and those who earned most got most. In my book and in the books of most people, that is a regressive move.
I am sorry about the mix-up. There were two amendments in my name and one of them has been ruled out of order.
This amendment is aimed at a report on indexing and the opportunity to ensure that people who are on those lower and middle incomes would get the maximum benefit from any budget move. On the indexing of credits and bands, it is always unclear what it would be indexed to. I want to get an understanding of what the options might be as people will see modest increases in their incomes to cover the likes of the cost of living. It is hugely important that this would not tip them into higher tax rates and that they would be able to enjoy the maximum benefit from those increases. It would also give people more visibility on how much they would have in hand next year to allow them to plan ahead.
I refer to the point on the progressive taxation and welfare system, where those who have more would be able to contribute more, whereas those who are on lower incomes would carry a lower burden and be supported. I want to establish how progressive the Minister feels the system is and if any changes are needed in that as a result of the budget. There were significant tax credits in this budget that would have provided support for more middle-income earners. What has the influence of that been? We must ensure we maintain a progressive system and add to it, without eroding it in any way.
Tá an leasú seo dírithe ar tuarascáil mar gheall ar an gcóras cánach agus ar an tslí gur féidir an t-ualach a scaipeadh chomh leathan in aon chor agus is féidir ionas go mbeadh ualach níos lú ar dhaoine le tuarastail níos ísle. Tá an leasú ag iarraidh a chinntiú chomh maith, nuair a bheadh aon arduithe san ioncam, nach gcuirfeadh sé sin isteach ró-mhór agus go mbeadh ardú ar na liúntais chomh maith chun an t-ualach sin a laghdú. I want to get a handle on the possibility of getting those reports to ensure that we maintain a progressive system of taxation and that any moves would make it more progressive, and not erode anything that is in the system.
I repeat the point that we have one of the most progressive systems of taxes and social transfers of any EU or OECD country. These systems contribute to the redistribution of income and the reduction of income inequality in Ireland. On indexation, it should be pointed out that the personal tax review included a detailed analysis of indexation of the personal tax system in chapter 6 of the report. The report set out the background information on indexation, the position in other jurisdictions and options for indexation, such as indexation in line with wage growth, headline inflation and core inflation. It is also worth pointing out that significant progress has been made to date in delivering on the programme for Government to index credits and bands. Budget 2024 was the third consecutive year with a substantial tax package that indexed tax credits and bands within the fiscal resources available. In cumulative terms, the main personal tax credits have been increased by €225 from €1,650 to €1,875, a 13.6% increase. The standard rate cut-off point has been increased by €6,700 from €35,300 to €42,000, a 19% increase for single persons, with commensurate increases for married couples and civil partners. The case has been made that we should identify a cut-off point beyond which there would be no benefit from any changes in the income tax system that we brought forward in the budget. That would serve to increase further the progressivity of our income tax system but that has to be weighed against the competitive factor that is Ireland's income tax system when it comes to deciding on investment decisions. I know at first-hand, from the discussions I have had on investment decisions, that it is a factor. To do as Deputy Shortall has proposed would result in us becoming less competitive and attractive when it comes to those investment decisions.
The Minister has not answered my question yet. I asked why anybody in this House should get money back from the tax system and why there should be cash energy payments. Maybe the Minister will answer that question after my third time asking. Competitiveness is impacted. The top three issues, according to IBEC, are a lack of affordable housing, childcare and healthcare. Those are the things that make us uncompetitive and that should be addressed.
On refundable tax credits, 6% of the working population are living in poverty. We refer to them as the working poor. Their incomes are so low that they cannot keep their heads above water. We in this House and most people earning over €20,000 got the benefit of the two increases in the tax credits in the budget. People earning the lowest incomes did not get the benefit of that. Again I ask why it is that the people on the lowest incomes get the least from the budget. Surely at a minimum what the Government should be aiming to do is ensure that people on the lowest incomes, who are working and living in poverty, should get the full benefit of the tax credits. The only way to do that is to make those tax credits refundable. In doing that, our system is made fairer and the poorest people are helped to survive and cope with the high cost of living. Such action would also introduce a tool which enables this and future Governments to target funding and money where they are most needed.
For all of those reasons, we need to examine this and we need to be honest about the winners and the losers from the budget. We need to stop talking about percentage benefits and talk about who gets what money in the budget and yet again, the more you earn, the more you get. That seems to be the hallmark of the budgetary approach of this Government and it is a disgrace in a situation where we have unacceptable levels of poverty in this country.
Briefly, I want to keep the focus on those on middle incomes, the middle four deciles of people on average incomes, because for many years they felt they were not getting the benefit of various budgets. I am anxious that any taxation measures or changes are of benefit to them. This is especially important if there are changes to their income. We do not want to see small cost-of-living related improvements moving them into a higher tax bracket. I want to keep the focus on them and ask the Minister to make every effort to ensure that indexing benefits them.
Deputy Shortall seems determined for me to personalise the impact of the budget to Members of this House but I am not going to do that. There are many people in society, from all sections, who have good incomes, far beyond what Members in this House have and I do not think it serves public debate very well to try to do what Deputy Shortall is doing, but that is her choice.
What I am trying to do is to get the Minister to justify why anyone earning over €100,000 should get a benefit from the budget-----
I can justify and defend the budget.
------while people earning €20,000 get little or nothing.
Deputy Shortall wants to personalise the impact of the budget on individuals in this House and-----
Clearly the Minister does not want to answer the question.
-----I do not see what purpose that serves. It does not serve any useful purpose, except political point scoring, which is a matter for the Deputy.
It is up to the Minister to justify his actions and he is clearly refusing to do that.
Even with the changes we have made in this budget, people in Ireland enter the marginal rate of income tax of 48% when they earn €42,000. In international terms, that is a relatively low level of income at which people hit a marginal rate of tax of 48%. That is the reality and what Deputy Shortall is proposing, in effect, is to make the system even more progressive. I can tell her, as somebody who engages extensively with employers, with people who currently invest in Ireland and who are looking to invest in Ireland, that our income tax system is a factor. It is not the only consideration but it is definitely a consideration in the decisions they make.
In response to Deputy Moynihan, I will give the example of somebody on a middle-income figure of €45,000, for whom the gain in the budget is €767. That is the combined gain from the changes in income tax and USC. What that means is that his or her effective tax rate before the budget was 21.2% and after the budget it is reduced to 19.5%.
What about people earning the minimum wage? What is their percentage?
Amendment put and declared lost.
I move amendment No. 8:
In page 15, between lines 6 and 7, to insert the following:
Report on tax credit changes
11. The Minister shall, within six months of the passing of this Act, produce a report which evaluates the impact of introducing a system of refundable tax credits, as one means of improving the living standards of low income workers, and increasing the two main tax credits by €225 each.
Amendment put:
The Dáil divided: Tá, 52; Níl, 79; Staon, 0.
Tá
- Andrews, Chris.
- Bacik, Ivana.
- Barry, Mick.
- Brady, John.
- Browne, Martin.
- Buckley, Pat.
- Cairns, Holly.
- Canney, Seán.
- Carthy, Matt.
- Clarke, Sorca.
- Collins, Joan.
- Collins, Michael.
- Conway-Walsh, Rose.
- Cronin, Réada.
- Crowe, Seán.
- Cullinane, David.
- Donnelly, Paul.
- Ellis, Dessie.
- Farrell, Mairéad.
- Funchion, Kathleen.
- Guirke, Johnny.
- Healy-Rae, Danny.
- Howlin, Brendan.
- Kenny, Martin.
- Kerrane, Claire.
- Mac Lochlainn, Pádraig.
- McGrath, Mattie.
- Mitchell, Denise.
- Munster, Imelda.
- Mythen, Johnny.
- Nash, Ged.
- Naughten, Denis.
- O'Callaghan, Cian.
- O'Donoghue, Richard.
- O'Reilly, Louise.
- O'Rourke, Darren.
- Ó Broin, Eoin.
- Ó Laoghaire, Donnchadh.
- Ó Murchú, Ruairí.
- Ó Ríordáin, Aodhán.
- Pringle, Thomas.
- Quinlivan, Maurice.
- Ryan, Patricia.
- Shanahan, Matt.
- Sherlock, Sean.
- Shortall, Róisín.
- Stanley, Brian.
- Tóibín, Peadar.
- Tully, Pauline.
- Ward, Mark.
- Whitmore, Jennifer.
- Wynne, Violet-Anne.
Níl
- Berry, Cathal.
- Brophy, Colm.
- Browne, James.
- Bruton, Richard.
- Burke, Colm.
- Burke, Peter.
- Butler, Mary.
- Byrne, Thomas.
- Cahill, Jackie.
- Calleary, Dara.
- Cannon, Ciarán.
- Carroll MacNeill, Jennifer.
- Chambers, Jack.
- Collins, Niall.
- Costello, Patrick.
- Coveney, Simon.
- Creed, Michael.
- Crowe, Cathal.
- Devlin, Cormac.
- Dillon, Alan.
- Donnelly, Stephen.
- Donohoe, Paschal.
- Duffy, Francis Noel.
- Durkan, Bernard J.
- English, Damien.
- Farrell, Alan.
- Feighan, Frankie.
- Fitzpatrick, Peter.
- Flaherty, Joe.
- Flanagan, Charles.
- Fleming, Sean.
- Foley, Norma.
- Grealish, Noel.
- Griffin, Brendan.
- Harris, Simon.
- Haughey, Seán.
- Heydon, Martin.
- Higgins, Emer.
- Kehoe, Paul.
- Lawless, James.
- Leddin, Brian.
- Lowry, Michael.
- Madigan, Josepha.
- Martin, Catherine.
- Martin, Micheál.
- Matthews, Steven.
- McAuliffe, Paul.
- McConalogue, Charlie.
- McEntee, Helen.
- McGrath, Michael.
- McGuinness, John.
- McHugh, Joe.
- Moynihan, Aindrias.
- Moynihan, Michael.
- Murnane O'Connor, Jennifer.
- Naughton, Hildegarde.
- Noonan, Malcolm.
- O'Brien, Darragh.
- O'Brien, Joe.
- O'Callaghan, Jim.
- O'Connor, James.
- O'Dea, Willie.
- O'Donnell, Kieran.
- O'Donovan, Patrick.
- O'Dowd, Fergus.
- O'Sullivan, Christopher.
- O'Sullivan, Pádraig.
- Ó Cathasaigh, Marc.
- Ó Cuív, Éamon.
- Phelan, John Paul.
- Rabbitte, Anne.
- Richmond, Neale.
- Ring, Michael.
- Ryan, Eamon.
- Smith, Brendan.
- Smyth, Niamh.
- Smyth, Ossian.
- Stanton, David.
- Varadkar, Leo.
Staon
Tellers: Tá, Deputies Róisín Shortall and Cian O'Callaghan; Níl, Deputies Hildegarde Naughton and Cormac Devlin.
Amendment declared lost.
I ask Members to resume their conversations outside.
Amendments Nos. 9 and 10, in the names of Deputies Róisín Shortall and Aindrias Moynihan, are out of order.
Amendments Nos. 9 and 10 not moved.
Amendment No. 11 has already been discussed but as there is nobody here to move that amendment, it cannot be pushed.
Amendment No. 11 not moved.
Amendments Nos. 12 and 13, arise out of Committee proceedings, are related and will be discussed together.
I move amendment No. 12:
In page 16, between lines 9 and 10, to insert the following:
“Report on Relief for Renters
12. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the introduction of a refundable tax credit payable to private rental tenants not already in receipt of any State subsidy, equivalent to 8.3 per cent of annual rent payable, at a minimum value of €750 and maximum value of €2,000, accompanied with the introduction of a ban on rent increases in the private rental sector for a period of 3 years.”.
I am taking this on behalf of my colleague, Deputy Pearse Doherty. This amendment calls for the report on the introduction of a refundable tax credit payable to renters equivalent to one month's rent, set at a minimum value of €750 and a maximum value of €2,000, coupled with a ban on rent increases for a period of three years.
Since this Government took office, rents have increased by 27%. This, in any market, is a staggering increase. According to Daft's reports, the average rent has increased by €405 per month under this Government. That is nearly €5,000 per year. Renters are facing crippling housing costs under the Government and its housing crisis. For years, Sinn Féin has called for the introduction of a refundable tax credit to put one month's rent back in renters' pockets, together with a ban on rent increases for a period of three years. For years, the Government rejected this proposal, claiming it would be, in the words of the Minister, Deputy Donohoe, a direct transfer of public money to landlords. The Tánaiste said it would push rents up. Of course, this is what could happen in the absence of a ban on rent increases and that is precisely what the Government has done here without capping rents. The rent tax credit, as introduced, will go straight into the pockets of landlords, providing ample reason for them to increase the rent on their tenants.
The rent tax credit is not refundable and moreover, a fraction of those eligible to claim the rent tax credit have done so. It is also clear that the credit is insufficient to adequately support renters who are under severe financial pressure as a result of the Government's housing crisis. This amendment, therefore, calls for a report on the introduction of a refundable tax credit equivalent to 8.3% of renters' annual rent, in other words, one month's rent, with a minimum credit available of €750 and a maximum credit available of €2,000. Crucially, this report would also analyse this proposal, together with a three-year ban on rent increases.
Even since the budget, what has happened is that landlords are increasing rents hand over fist. I have lone parents who are struggling, often with children who have disabilities that include intellectual disabilities, and who are trying to find hundreds of euro each week to pay the rent increases that have been foisted upon them. The message that is coming from landlords, where there are no-fault evictions, is that they can just increase the rent howsoever they want to increase it. People are being absolutely crippled by these rents as it is, and they have nowhere to turn to. This is why were are putting the amendment to the Bill, and I ask the Minister to accept it.
My amendment also deals with the issue of the rent tax credit and it calls on the Minister and the Department to lay a report on the impact of that rent tax credit, particularly the distributional impact, and where and what parts of the rental market it is having an impact on. First, I think the renters tax credit is a really important short-term measure - and I use that term, "short-term" - to address the pressure renters are under at this time. Ultimately, the solution to the high rates of rent that exist in the city and other parts, particularly urban areas, is the Government's plan in Housing for All, particularly measures such as the cost-rental scheme and some of the other measures we have put in place. The long-term addition of supply will have an impact on the prevailing rents and the new model of cost rental will have an impact on the prevailing rents because it sets a rate 25% below the market value. That will have a contributing effect and impact as supply increases.
We do want to find out where this rent tax credit is having an impact. I want to start by welcoming the Minister's decision to extend the renters tax credit to parents who pay for student rental accommodation, or "digs" as it is often called. I know this will apply for the assessment years 2024 and 2025, and retrospectively for 2022 and 2023. That is a really important decision because it was an element of renters that was not dealt with and I welcome that decision. I also welcome the decision to increase the rent tax credit from €500 to €750. It is important that renters know that this is on a per tenant basis. Depending on the number of people in a home, or if it is a shared home between three workers or a couple, it could be between €1,500 or €2,250 in any given year. One of the other crucial elements is that it is an in-year credit, and that will mean that renters can get their credit from 1 January 2024.
I hear criticism from the Opposition with regard to their alternative proposals. First, it was said here on the floor that we have not capped rents. We have actually capped rents, and we have capped them below the rate of inflation. That is important because there is often an attempt to say that we are taking no measures or that we are somehow in league with landlords to try to screw tenants. Nothing could be further from the truth. In fact, we have had lots of criticism from landlords because we have capped rents in those rent pressure zones. The phrase that was used in the previous contribution was that rents were being increased "hand over fist". However, we know that when that is lower than the rate of inflation, those two sentiments cannot be correct.
I would like to see more detailed analysis of who is claiming the credit. I often think that, like any of these credits, sometimes there is not the widespread take-up by the public that there should be. Sometimes that is about the confidence of the people and the insecurity of their relationship with their landlord. I do not think any tenant should be afraid of claiming this, and I know we have sought to simplify the amount of details that are required for tenants to reduce it in order that they do not feel they are being put in a vulnerable position with their landlord. It is a credit that is designed to reduce the burden that high rents currently have on people, and it is very welcome.
One other point that I am a little bit lost on is how the one month's rent that the Opposition has proposed would be calculated. Obviously, it would be different for every different person. I have some concerns about what the validation process for that would be, how that would be applied within Revenue, and how it might be audited. I accept that €750 is a blunt figure but I imagine it is done on the basis of trying to have the maximum amount of impact without increasing the burden of administration.
Regarding the rate of 8.16%, I have a whole plethora of questions about it.
I am asking that a report be laid before the House principally because the rent credit is a new measure. When we implement new measures, we should ensure they have the maximum possible benefit. Whatever resources we put into this provision, it is a short-term, interim measure. The billions of euro we are putting into the implementation of Housing for All and increasing supply ultimately will provide the real solution to the housing crisis. The rent credit is an interim measure to demonstrate that the Government understands and acknowledges that rents are unacceptably high and is taking measures to reduce them. Increased supply and new models of delivery will do that. I urge the Minister to prepare a report in order to provide more detailed analysis of the measure and enable us to see who is impacted by it.
I welcome Deputy McAuliffe's amendment. I can say from experience in my constituency that the rent credit has offered a very welcome breathing space to many families, couples and individuals in the midst of cost-of-living challenges. We do not acknowledge that often enough. Many of those availing of it are over the income threshold for social housing and may just not be there yet in terms of saving a deposit or being in a position to apply for a mortgage for homeownership. The tax credit and the recent announcement on increases offer them a buffer and a breathing space in which to save for a deposit.
There was a ramped-up information campaign around the availability of the tax credit. However, I still have constituents coming into my office who are not aware of it, despite social media and print media campaigns. Clearly, we are not reaching certain sectors of society in advertising the availability of the credit. There is a job to do in this regard and the onus is on us, especially those of us in government, to ensure there is awareness around it.
The bigger job for the Government is to tackle rent prices. Rents are incredibly expensive in this country compared with costs internationally. We cannot shy away from or deny that. We just have to deal with it. The way to do so, of course, is via increased housing supply. In recent weeks, we have seen the publication of housing targets that reflect how we are drastically increasing the number of houses coming onto the market. That is how we will tackle rent prices. The more houses there are for rent, the better we can tackle that issue.
I see at first hand in my constituency the difference Housing for All is making to delivery. I will go through the numbers town by town. In Kinsale, in the region of 100 social houses have been delivered and well over 100 private sector homes. People have the keys to those houses and are living in them. In Bandon, approximately 50 social houses and 100 privately built homes have been delivered. In Skibbereen, 50 more social houses have been built, all of which are allocated and occupied, as well as additional private sector houses. It is the same in Bantry and Dunmanway. In my home town of Clonakilty, 120 social houses have been delivered in the past 18 months, with up to 200 built in the private sector. This has made an unbelievable difference to the availability of housing, including access to homeownership, social housing and affordable rental accommodation for those on social housing waiting lists. In essence, people have access to a house for life, payable at an affordable rate based on their income. I am seeing the difference that is making every day in my locality.
These changes are down to the delivery of Housing for All and the implementation of Government measures. We are tackling the issues but things are not perfect, that is for sure. In Clonakilty, I assumed that many of the homes in which people who had been on the social housing waiting lists were living would, on becoming vacant, go straight into the private rental market, thereby making more private rental homes available and reducing rental prices. That has not happened, which is something the Government needs to examine. More than 120 people are now in social homes, most of whom came from the general Clonakilty area and were in private accommodation, perhaps in receipt of HAP. The homes that they vacated, instead of going into the private market, were sold privately. It is clear that many of the landlords, who might have had one or two other properties, did not want to be landlords any more. They wanted to get out of the market and, therefore, they sold up. We need to look at that because of all those homes that should have gone into the private rental market or become available for homeownership, many might now be owned as holiday homes and may not be available for permanent long-term accommodation. That is something we have to tackle.
The rent credit is making a difference. It is giving people breathing space. I look forward to a report in time on how it is making a difference to people.
Our amendment relates to rent relief. My colleague, Deputy Conway-Walsh, has addressed many of the issues. It is interesting to listen to members of Fianna Fáil, a party of government, talking about how well the rent credit is working. We argued with the Government for years, until we were blue in the face, to do something for renters, only to be repeatedly told "No". We were told very clearly that any such relief would just go into the pockets of landlords, which, unfortunately, is what is happening. The point is that we did not just ask the Government to introduce rent relief; we also asked for a ban on rent increases. The problem right now is there is no ban on rent increases and, therefore, as the rent relief is paid out, it is going into people's pockets and immediately out of them and into the pockets of landlords. That is the reality for a lot of people. I acknowledge that without this measure, the situation would be worse for them. However, the problem requires a two-pronged strategy. When the Government fought tooth and nail against introducing any relief, saying it would end up in the pockets of landlords, they were right because without also introducing a ban on rent increases, that is exactly what was bound to happen.
Deputy McAuliffe wants to find out the impact of the rent credit on people who are paying rent. I suggest he look at the legislation that was passed in this House in previous years. We did not think up a rent relief proposal all by ourselves. Rent relief used to exist in this State right up until 2018, at which time it was phased out completely. The previous rent relief provision was not a one-size-fits-all measure. It was based, in some cases, on age, with particular caps according to age, and the relief applied to the rent that was actually paid. What we have proposed is not something new. If Deputies opposite want to know how it worked, they should ask anybody who was renting during the 2000s, the 1990s or, indeed, the 1980s, when they received rent relief on the basis of what rent they paid, at a rate of 20% and up to a cap. We recognise that the Government has done a major U-turn this year in introducing a rent relief. We have argued that it should be based on one month's rent, up to maximum of €2,000, with a minimum support for all renters. Crucially, it needs to go alongside a ban on rent increases.
Deputies, particularly backbenchers, understand what is happening in their constituencies. In my constituency of Donegal, rents have gone up since the Minister came into office. New rents in Donegal have gone up by more than €5,000. Donegal has the lowest incomes in the State. Just to pay the additional increase on new rents in Donegal since the Government took office three and a half years ago, an average worker in Donegal would have to work full time for ten full weeks.
That is ten full weeks of work just to pay for what has happened with rents over the past three and a half years in Donegal. That is how bad things are. Can you imagine that? Imagine somebody who has to work: they start off in January, they work all the way through January, they do not pay a penny, they do not buy a loaf of bread or a carton of milk. They must keep all that money and work right through February and right up until St. Patrick's Day. That is the portion of rent that has increased since this Government took office. Then the person needs to keep on working to pay the remainder of the rent. What is happening is scandalous but the penny seems not to drop.
The Government is doing a half-arsed job in accepting Sinn Féin's proposals, for which we argued over many years, and says "Actually this is having a wee bit of an impact and is really good for our constituents". Why not just take on our proposals, do not allow landlords to increase rent for the next three years and give people that proper relief? Alongside that, make the type of capital investment we need to increase the type of supply that is required for cost-rental, affordable and social homes. Many people in the rental market do not want to be in the rental market. They should be in a social home but there are not enough social houses or they should own their own property but cannot due to lack of supply and increased prices of properties. Prices have increased by some €70,000 since this Government took office. What is happening out there is criminal. We hear all the time of young people just giving up because it just does not end. But it will end. It will end when Fianna Fáil and Fine Gael are put out of office. That is my view. I have been of that view for quite a while because the reality is the longer they stay in power, the worse things get. Rents are going up, prices are going up and house prices are going up, as is homelessness. It is absolutely ridiculous. It seems that the Government is simply out of ideas. It comes with a new press release or a new initiative but the facts speak for themselves: all the indicators are going in the wrong direction. I boil it back down to that person in Donegal who now has to work ten full weeks just to pay the increase in rents in that county since the Government took office. We cannot afford the Government to remain any longer. The people cannot afford this Government to remain any longer. This amendment would at least give some comfort to people who are really under the cosh as a result of Government policies. Again, I am sure the Minister will come to his feet and reject it again.
I thank Deputies for their contributions. In my budget 2024 address, I acknowledged the challenges that we face in relation to housing and noted that it remains a top priority for Government. As part of the response to assist renters, I announced an increase of the rent tax credit to €750. This is to assist renters in the private rental sector with the affordability of their rent. The credit will continue to be available until the end of December 2025.
Eligibility for the credit is also being extended to parents who pay for their student children’s rental accommodation in the case of rent-a-room accommodation or so-called "digs”. This change will apply retrospectively to the years 2022 and 2023. Previously, parents could only claim the credit in respect of their qualifying student children in the case of accommodation registered with the Residential Tenancies Board.
The rent tax credit is intended to provide assistance to those in the private rented residential sector pending further progress on the Government's Housing for All strategy. That strategy aims to deliver more homes of all types for people with different housing needs, including those who wish to rent at an affordable price.
The most recent Housing for All action plan update and quarter three progress report published last week by the Department of the Taoiseach demonstrates that housing supply is increasing and notes that the Government fully expects to meet its 2023 delivery target of 29,000 homes. Additional supply will help to moderate housing costs in the purchase and rental sectors.
In relation to making the tax credit refundable, as I noted earlier, the matter of refundable tax credits was examined as part of this year’s tax strategy group, TSG, process in advance of budget 2024. The analysis and findings of the review were published in the income tax TSG paper, which is available on my Department's website. In summary, the review noted that making tax credits refundable could lead to unintended consequences for labour supply, would be operationally and administratively complex and would come at a significant cost. The Government does acknowledge the current challenges it faces in relation to housing. It has acknowledged that too many people are paying too much of their income in rent and this is why, as part of the response, we did increase the rent tax credit to €750 for an individual and €1,500 for a jointly assessed couple in the budget. We are giving effect to that decision in this Finance (No. 2) Bill.
According to the Residential Tenancies Board rent index, rental inflation was at 8.9% as of the first quarter in 2023 but it is important to acknowledge that this figure covers new tenancies only. As such, this increase of €250 was deemed necessary and appropriate to further help renters against the cost of renting and rental inflation. The credit is to assist renters and specifically those who do not receive other housing supports from the State. The increase will apply for 2024 and beyond.
I acknowledge the increasing number of claims that are being made. As of 15 November 2023, almost 312,000 rent tax credit claims have been made by more than 268,000 taxpayer units. That consists of 203,405 taxpayer units that made claims for 2022 only, more than 43,600 taxpayer units that made claims for both 2022 and the current year, and almost 21,300 taxpayer units that made claims for 2023 only.
Reference was made earlier around the need for more information to raise awareness for those who are not claiming the credit. It will feature as part of the awareness campaign that Revenue is finalising, which will be launched shortly to help all taxpayers with the information they need to make sure they are claiming the credits to release the exemptions they are entitled to within our statutory taxation code. I expect the Revenue will complete that work very shortly and we will be in a position to launch that particular campaign.
I know the Minister is quoting from a report on the refundable tax credits but the refundable tax credit in relation to rent relief will have no impact on the labour market and the Minister should acknowledge that. The report references refundable tax credits in relation to other matters. A refundable tax credit is doable and is possible but that is not at the core of this. There is an increase in those claiming the credit and that is to be welcomed. We would encourage everybody to claim not only this credit but all of the credits and allowances they have. As we approach the end of the year, a lot of people do not claim for expenses that are subject to reliefs. We encourage people to do that.
The numbers the Minister outlined are still dramatically low. This is two years of claims. The Government expected there would be 400,000 in the first year and 400,000 in the second year, so it is still dramatically low. It speaks to the fact that a lot of people are afraid to go to their landlord and ask for the detail around what is required here. They are afraid the landlord will push up their rents again. The Minister has not spoken to the fact. What is the Government strategy on rents? When will the Minister acknowledge that it has gone too bad? On average, new rents have gone up €5,000 since he took office. Is it when it goes up to €6,000 that the penny will drop? Is it €7,000 or is it €8,000? When will the Fianna Fáil Parliamentary Party actually say "Oh God we have done something terrible"?
Maybe that is the plan. Is it the case that it just wants to support landlords? It is a fact that this budget provides more support to landlords than it does to tenants. That is the reality. They are the priorities and that is the issue. When will the Government measure this and actually say that its policies are not working overall as regards rent prices?
I cannot understand how Government TDs, including those who represent my county, are allowing this to happen. They have to be seeing the same families and talking to the same people about how much their rent has increased, how they cannot afford it and how families are absolutely crippled with the rises in rents they are being asked to pay. It is atrocious. I welcome the fact that there is rent relief for student accommodation but the refundable tax credits cannot be claimed for students who are forced to go abroad. They have to get accommodation. The money for the accommodation is coming out of the same basket - out of the household - for really hard working families who pay their tax in this State. Their son or daughter is forced to go abroad because we cannot provide an education place for them to do courses that we desperately need them to do in our health workforce and our workforce in other areas. We push them away to get trained and then we tell them they cannot avail of this tax credit because, although the money is coming from the same purse, they are living abroad. Similarly, we are trying to encourage student mobility across this island, but students who are studying in the North are not eligible for it either. This is wholly wrong and it is against what was done in the higher education Bill earlier this year. It completely contravenes its efforts to encourage student mobility. It is against the recommendations in the report the ESRI did recently on student mobility as well. We are telling people to do this, but we will discriminate against them when it comes to being able to avail of the refundable tax credit. It is wholly and totally wrong and it is putting families into poverty.
We have strayed a little beyond the renters' credit into the general housing issue. The Opposition continuously tries to promote this idea that the Government is out of ideas. This week I met approved housing bodies and local authorities and both reported that they cannot keep up with the ideas that are emanating from the Department and the Minister. I will not bore the House by listing all the initiatives. Why are they there? It is because we accept that rents and house prices are too high, that after a decade of under-supply, we want to change it and take steps to ensure that prices are more affordable. How can we do that? It is with long-term supply and short-term measures.
I will tackle a number of things that were said. This is why we need the report. The Opposition stated that this money will go straight into the landlords' pockets. Let us look at the numbers. On a rent of €1,500 for a couple, the maximum possible rent increase at 2% is €360 for a year - I hope I have my figures correct - yet, the renter's credit for that couple is €1,500, which is multiples of the amount they can possibly be charged in an increase. This tax credit will have a direct benefit for those people's households. It will ensure they have more money this year than they did last year, even with a rent increase that is below the rate of inflation. That is exactly why we need the report so that tropes being thrown out by the Opposition can be countered and we can say exactly where this money is going.
I ask people to look at all the new schemes that are available because, despite Sinn Féin saying it is impossible, this week a couple who came to my clinic were able to avail of the local authority home loan and identify a home in the area to purchase using that scheme. It was transformative for them. It is having an impact.
It was nice to hear the Opposition welcome the Government's rent credit, begrudgingly and a little indirectly.
We proposed it months ago.
They went about it in a roundabout way but they got there. I would love to see-----
The Government got there four years later.
I love to see that spirit of collaboration. We would be much better off with a bit more collaboration like that in the Dáil.
The Opposition calls a lot of these things U-turns. I prefer to call it adaptability or flexibility. We saw the increase in the renter's credit in the budget and we also saw adaptability around mortgage interest relief. We saw an increase in the Croí Cónaithe scheme, which Sinn Féin would scrap.
That is not true
Croí Cónaithe is an amazing initiative. I have seen it make a difference already on the ground for constituents of mine. Deputy Conway-Walsh said we are not listening to constituents. I have seen constituents avail of schemes like Croí Cónaithe and turn vacant derelict houses into beautiful family homes. It is an incredible initiative-----
Get rid of that.
-----and the recent increase has been welcomed. Furthermore, the grant is bigger again for people who live on islands and there are a lot of habitable islands off west Cork. It is making a difference and we are seeing it in the constituencies.
We have also recently seen the change in the rules around the local authority home loan, which will mean more people can access it and avail of it. We are certainly not running out of ideas. As I said at the start, the renter's credit has offered breathing space for a lot of people and allowed them to save, perhaps for a mortgage. I look forward to seeing the report and I welcome the Minister's comments about a campaign to make people more aware of the fact that it is there.
I sympathise with the Opposition. There comes an occasion when Opposition gets desperate in the face of a response from the Government to a pressing issue. There have been many pressing issues and many of them were attended to in the course of the recent budget in a progressive way and consciously on the basis that people needed a little assistance. It did not all come in one go. It came in a series of responses. It was well meant.
What is disingenuous though is when speakers on the Opposition side of the House - I like them by the way; they are very entertaining -
The Deputy will deal with the amendment.
I assure the Leas-Cheann Comhairle that this is part the amendment.
Around the House and mind the dresser.
The point I will make is that it is disingenuous to pretend that all these things happened because the Government came into office. That is what the Opposition have said. It has suggested to the public that it is because of the Government that rents went up. Covid-19 came and it was not because the Government was in power. It had nothing to do with it. These things happen in the normal course of events and we have to do what we can to address the issues. That is what the Government is doing.
While I am a critic of a lack of supply of housing - I still am and that is the main issue - everything else has to be a temporary incentive to try to get around the problem of the impact it can have on people who are renting. The supply is the issue. The demand is greater than the supply and it will continue that way for quite a while. We are getting to it, albeit more slowly than we would like, but at least it is beginning to tell.
Some counties have been better than others in producing a response to the housing shortage or housing crisis and making more houses available at this critical time. Others have been less than inventive, but different circumstances prevail in different constituencies. I was at a conference recently where an evaluation was presented of the number houses provided in the entire country, including local authority houses and houses that were not of local authority origin, but were directly available to people on local authority housing lists. I am glad to say that my county did extraordinarily well - not so well in direct build but certainly in the acquisition of houses that were readily available through the various provisions that were made in the Act, which have been very successful. That is a good thing. We need to be more positive in the way we look at the resolution of the situation, which boils down to supply and demand. I did not agree with it in the beginning.
I thought it was way too slow. I am still not convinced that we are accelerating quickly enough in order to deal with the magnitude of the problem but there is evidence that the Government is getting there, slowly but surely, and without causing any other kind of a crisis, which can often happen in responding to a crisis situation. I acknowledge what the Minister and the Government have done and congratulate them on the work they have done so far. It is like a teacher's report. We could say it is not necessarily enough and we must try harder. That is true. We must try harder, and that will continue. I sympathise with the Opposition and the situation that they are in at the moment. They cannot see anything positive at all. You can get treatment for that. On the whole attitude of people-----
An election.
-----when looking at a situation, some people see things as they are and ask "Why?", and others see things as they could be and ask "Why not?".
I am looking at the next two amendments and both are to do with preparing reports, albeit different types of reports. I remind the Members that we are discussing the amendments.
That was very profound and inspired.
I was responding to the comments.
It is very hard to follow my Government colleague from Kildare.
Please do not.
I will try to stick reasonably to the point. Like the Deputy from Mayo, we have a lot of those people coming into our constituency offices. They are starting to see change in relation to property and getting their first home. Specifically in rural Ireland, we have seen that with the Croí Cónaithe scheme. I am sure the Deputy is getting as many inquiries as we are. We have also seen that with the help-to-buy scheme, which the Deputy did not agree with either. There has been an important amendment to the first home scheme, which now covers first builds as well. It is probably fair to say that there is no other European country that has the suite of supports that we have introduced in this country to aid first-time home buyers.
In relation to the amendment on rent, it is an important first step. Certainly, I would agree with some aspects in terms of overseas students. I know our colleague, Deputy Brendan Smith, has been very vocal on the issue. It is something that we need to look at into the future. As Deputy Durkan said, it is an important first step and we will build on in it in subsequent budgets.
I have to go back to the agriculture committee but before I leave, I will make one point on the Bill, which relates to the cost of business support scheme. I know that the Minister's officials are looking at it but I am concerned that a large number of employers are going to miss out on the scheme. There is a collection of issues that are going to affect these small business in the new year. There is the increase in the minimum wage and statutory sick pay. These are all laudable interventions and important parts of our programme for Government but they are going to add significantly to the cost base for an awful lot of small rural businesses. Some of them, because of the €20,000 threshold on the cost of business scheme, will be outside the remit of the scheme. One of the ideas that they have put forward, and one I would like the Minister to look at, is the abolition of PRSI for low-paid workers over a short-term three-year period. Hopefully, that is something the Minister can look at.
I, too, want to speak to the amendment. I have listened to Deputies across the House saying that there are so many initiatives coming from the Department that we cannot keep up with them. I am not saying it is devoid of ideas but it certainly needs to do an impact assessment on many of the schemes it has brought out. I welcome many of the schemes, but the councils do not have the staff to deal with them. The flow of information back and forward is too slow and untimely.
On the proposal for renters, the cost of rent is outrageous. If we listened to the Minister's colleagues, we would think everything was hunky-dory. My own daughter, Councillor Máirín McGrath, raised the issue at a meeting in the county council. All her friends, who are 25 years of age, are emigrating because they cannot even rent a house, let alone aspire to ever own a house. While the scheme in the budget is welcome, we are only ticking at the edges. The basic cost of rent is outrageous. We are educating people with the college schemes that the Minister, Deputy Harris, has introduced, which I welcome. When they are all educated, they are getting on planes and are gone- imithe. That is a pity. Is mór an trua é sin. It is sad, because we need all those young people, their hands on deck and their expertise, enthusiasm and initiative to build our country, rebuild it and keep it going. As I said, there are many schemes and it is so hard to interpret them. Even the Croí Cónaithe scheme, which I welcome, is so slow. First, it was totally unfit for purpose. Now it has been amended, thankfully, and it is better but there are so many regulations and hoops to go through to get on to many of these schemes that it is just unfair.
The Department is churning out schemes. It is the same with the voluntary sector, which I am a very proud member of myself. It is not being enabled and allowed to do the work it could do. It could more. I know there are issues with a charitable housing association and that is a pity. There are so many good small voluntary housing groups out there. My own, Caisleán Nua, is a voluntary housing association and that name is being tarnished. There is also the Irish Council for Social Housing, ICSH, which I was a member of for probably seven or eight years. It was a national body that was gobbled up and taken over by the bigger housing authorities. It killed the spirit of the parish and the late, great Canon Hayes to light one candle, rather than curse the dark. It has killed all those voluntary groups. Whether they provided six, ten or 20 houses, they all helped hugely. They will do even more now but the bigger ones came in and got bigger and bigger and it became like the Construction Industry Federation. That was not good. I want to pay tribute to Donal McManus and his team in the ICSH. They have worked over the years and have tried to hold the line and keep the balance between the small associations, of which there are hundreds, and the bigger ones. There is a role for all of them but they need to be measured and they need to respect the situation and the funding. It is not all rosy and lots of tweaking needs to be done. I find that the councils do not have the staff and the numbers. I am not saying they are experts. They need more staff to deal with all these schemes
I will finish on the issue of voids, of which there are many. The councils are too slow in bringing them back into use. Some of them have been there for years. Three single rural cottages came back into use in County Tipperary in the past 18 months, thankfully, but there are dozens of them out there. It looks awful when you see council estates with houses boarded-up. That is an issue of funding. It is so hard to get the funding from the Department. There are too many logjams and delays and they cannot get enough. I understand that in Northern Ireland, when a house is empty it has to be re-let within three months. Why are we leaving them void here for 12 months, 15 months and two years?
I thank all the Deputies who contributed there. I will make a few points on the numbers first of all, because that was raised. It is the case that when the tax credit was introduced in the budget last year, budget 2023, it was estimated that 400,000 individual persons would be eligible to claim the rent tax credit for 2022, and that the same figure was estimated for 2024, namely, 400,000 eligible individuals. However, rent tax credit claims are made on a taxpayer unit basis, so the numbers are not directly comparable. A taxpayer unit is either an individual with any personal status who is singly assessed, or a couple in a marriage or civil partnership who have elected for joint assessment. Using that metric, I would not expect to see 400,000 taxpayer units claim the rent tax credit at any point.
It is important to say that people have four years to make the claim. In respect of 2022, people have until the end of 2026 and should be reminded of that. Also, the numbers do not yet take account of self-assessed taxpayers for 2022, as that information is not available yet, as we have returns that would have just come in there in the past number of weeks. I remind people who may be eligible that for claims relating to the current year, PAYE taxpayers who are eligible for the rent tax credit have the option of claiming the rent tax credit due to them either throughout the year, as the rent is incurred, or at the end of the year, through their income tax return. As such, while taxpayers can claim for the credit during the year, many may wish to wait until the end of the year to do so. It is relatively straightforward to make the claim. It can be done through the online myAccount system. Every single week, people are logging on and making the claim. I would expect the numbers to continue to increase. Certainly, as the awareness campaign is rolled out, we will see more and more people make their claim.
No matter what way you dice or splice those numbers there is significant under-claiming for this, which I hope will change. There are 800,000 renters in total. I am sure the Minister has the numbers on how many renters have actually applied for this because every unit has to state whether it is for an individual or a couple. The reality is that even if all the 800,000 renters were couples there would be 400,000 claims and we have not got to that point. That is a problem. That is not the main point, though. I will say to Deputy McAuliffe that he is right. The Government has plenty of ideas. What I meant to say was ideas that work. That is what I meant. You have plenty of ideas. You have legislated for them and brought them in. You have heard outside experts saying they will push up house prices and you batter on anyway. Lo and behold, since this Government came into office an average house costs €70,000 more than it did three and half years ago. There is €5,500 extra on an average rent compared to before. Fianna Fáil and Fine Gael are not out of ideas. There are plenty of ideas. This is why you are making the situation worse. You are bringing forward proposals that actually make things worse. The first thing should be to do no more harm. Many of the issues we discussed previously during the Finance Bill, and we might repeat some of them today, are initiatives that actually increase house prices. This is not just being said by Sinn Féin; the Department has said it. Outside experts have said it. This is the fact but you batter on. We have to question the motivation. Is it that the priority here is for developers and landlords? This legislation here provides more for landlords than it does for renters. One of the biggest reasons for child homelessness is that rents are going through the roof and families cannot afford them. That is why more children will spend Christmas this year in emergency accommodation. Deputies opposite can take to their feet and tell the Minister how great things are and how it is working. I live in the real world. It is not working for ordinary people. It might be working for landlords and developers but it is not working for ordinary people.
How stands amendment No. 12?
I will press it.
Amendment put:
The Dáil divided: Tá, 52; Níl, 81; Staon, 0.
Tá
- Andrews, Chris.
- Bacik, Ivana.
- Barry, Mick.
- Brady, John.
- Browne, Martin.
- Buckley, Pat.
- Cairns, Holly.
- Carthy, Matt.
- Clarke, Sorca.
- Collins, Joan.
- Collins, Michael.
- Conway-Walsh, Rose.
- Cronin, Réada.
- Crowe, Seán.
- Cullinane, David.
- Doherty, Pearse.
- Donnelly, Paul.
- Ellis, Dessie.
- Farrell, Mairéad.
- Funchion, Kathleen.
- Gannon, Gary.
- Guirke, Johnny.
- Healy-Rae, Danny.
- Howlin, Brendan.
- Kenny, Martin.
- Kerrane, Claire.
- Mac Lochlainn, Pádraig.
- McGrath, Mattie.
- Mitchell, Denise.
- Munster, Imelda.
- Mythen, Johnny.
- Nash, Ged.
- O'Callaghan, Cian.
- O'Donoghue, Richard.
- O'Reilly, Louise.
- O'Rourke, Darren.
- Ó Broin, Eoin.
- Ó Laoghaire, Donnchadh.
- Ó Murchú, Ruairí.
- Ó Ríordáin, Aodhán.
- Ó Snodaigh, Aengus.
- Pringle, Thomas.
- Quinlivan, Maurice.
- Ryan, Patricia.
- Sherlock, Sean.
- Shortall, Róisín.
- Stanley, Brian.
- Tóibín, Peadar.
- Tully, Pauline.
- Ward, Mark.
- Whitmore, Jennifer.
- Wynne, Violet-Anne.
Níl
- Berry, Cathal.
- Brophy, Colm.
- Browne, James.
- Burke, Colm.
- Burke, Peter.
- Butler, Mary.
- Byrne, Thomas.
- Cahill, Jackie.
- Calleary, Dara.
- Canney, Seán.
- Cannon, Ciarán.
- Carroll MacNeill, Jennifer.
- Chambers, Jack.
- Collins, Niall.
- Costello, Patrick.
- Coveney, Simon.
- Cowen, Barry.
- Creed, Michael.
- Crowe, Cathal.
- Devlin, Cormac.
- Dillon, Alan.
- Donnelly, Stephen.
- Donohoe, Paschal.
- Duffy, Francis Noel.
- Durkan, Bernard J.
- English, Damien.
- Farrell, Alan.
- Feighan, Frankie.
- Fitzpatrick, Peter.
- Flaherty, Joe.
- Flanagan, Charles.
- Fleming, Sean.
- Foley, Norma.
- Grealish, Noel.
- Griffin, Brendan.
- Harris, Simon.
- Haughey, Seán.
- Heydon, Martin.
- Higgins, Emer.
- Kehoe, Paul.
- Lawless, James.
- Leddin, Brian.
- Lowry, Michael.
- Madigan, Josepha.
- Martin, Catherine.
- Martin, Micheál.
- Matthews, Steven.
- McAuliffe, Paul.
- McConalogue, Charlie.
- McEntee, Helen.
- McGrath, Michael.
- McGuinness, John.
- McHugh, Joe.
- Moynihan, Aindrias.
- Moynihan, Michael.
- Murnane O'Connor, Jennifer.
- Naughten, Denis.
- Naughton, Hildegarde.
- Noonan, Malcolm.
- O'Brien, Darragh.
- O'Brien, Joe.
- O'Callaghan, Jim.
- O'Connor, James.
- O'Dea, Willie.
- O'Donnell, Kieran.
- O'Donovan, Patrick.
- O'Dowd, Fergus.
- O'Sullivan, Christopher.
- O'Sullivan, Pádraig.
- Ó Cathasaigh, Marc.
- Ó Cuív, Éamon.
- Phelan, John Paul.
- Rabbitte, Anne.
- Richmond, Neale.
- Ring, Michael.
- Ryan, Eamon.
- Smith, Brendan.
- Smyth, Niamh.
- Smyth, Ossian.
- Stanton, David.
- Varadkar, Leo.
Staon
Tellers: Tá, Deputies Pádraig Mac Lochlainn and Denise Mitchell; Níl, Deputies Hildegarde Naughton and Cormac Devlin.
Amendment declared lost.
How stands amendment No. 13?
Following the Minister's contribution, I will withdraw amendment No. 13.
Amendment No. 13 not moved.
Amendments Nos. 14 and 16 to 34, inclusive, are related and may be discussed together. Is that agreed. Agreed.
I move amendment No. 14:
In page 18, line 29, to delete " "qualifying loan" " and substitute " 'qualifying loan' ".
This section of the Bill provides for the temporary one-year, mortgage interest tax relief that I announced on budget day. As indicated on Committee Stage, I am introducing amendments to this section to ensure the relief operates as intended.
First, relief is available in respect of the increased interest paid in 2023 relative to 2022. The maximum amount of relievable interest is €6,250 which equates to a maximum tax credit of €1,250, applying on a per property basis. Pro-rating of the relief applies in circumstances where the interest paid in 2022 or 2023 related to a period of less than 12 months - for example, for mortgages drawn down during 2022 or for mortgages paid off during 2023.
While the Finance (No. 2) Bill 2023 currently provides for pro-rating of the maximum relievable interest, it does not provide for pro-rating of the maximum tax credit of €1,250 where the interest paid is in respect of a period of less than 12 months. On the grounds of equity and fairness, I believe it is appropriate that the maximum tax credit is also pro-rated in a similar manner. These amendments provide for this adjustment and consequential drafting amendments.
Second, this section of the Bill correctly includes certain compliance and anti-avoidance provisions in subsection (7) - for example, to ensure compliance with LPT and planning provision requirements. However, the draft legislation in its current form inadvertently excludes properties transferred between spouses and civil partners from availing of the relief. Therefore, I propose an amendment to delete subsection (7)(c) to ensure that relief can be claimed where the property is transferred between spouses and civil partners.
Finally, a very minor drafting tidy up in the definitions section is required to ensure consistency.
Amendment agreed to.
Amendment No. 15 is ruled out of order because of a potential charge on Revenue.
Amendment No. 15 not moved.
I move amendment No. 16:
In page 19, to delete line 25 and substitute the following:
“(b) (i) the upper limit, or
(ii) where subsection (9) applies, the amount determined in accordance with paragraph (b) of that subsection;”.
Amendment agreed to.
I move amendment No. 17:
In page 19, between lines 25 and 26, to insert the following:
“‘upper limit’ means €6,250 or, where subsection (5) applies, the amount determined in accordance with paragraph (a)(i), (a)(ii) or (b), as the case may be, of that subsection.”.
Amendment agreed to.
I move amendment No. 18:
In page 20, between lines 27 and 28, to insert the following:
“(5) Where, for a year of assessment, qualifying interest referred to in subsection (4) is for a period of less than 365 days, then—
(a) where—
(i) the number of days in the year of assessment to which ‘A’ in the formula in subsection (4) relates is less than 365 and the number of days in the year of assessment to which ‘B’ in the formula in subsection (4) relates is equal to 365, or
(ii) the number of days in the year of assessment to which ‘B’ in the formula in subsection (4) relates is less than 365 and the number of days in the year of assessment to which ‘A’ in the formula in subsection (4) relates is equal to 365, the upper limit shall be determined by the formula—
F x G/H
or
(b) where the number of days in the year of assessment to which ‘A’ in the formula in subsection (4) relates is less than 365 and the number of days in the year of assessment to which ‘B’ in the formula in subsection (4) relates is less than 365, then, the upper limit shall be determined by the formula—
F x I/J
where—
F is €6,250,
G is the number of days in the year of assessment with the lesser number of days,
H is the number of days in the year of assessment with the greater number of days,
I is the number of days in the year of assessment with the lesser number of days, and
J is 365 days.”.
Amendment agreed to.
I move amendment No. 19:
In page 20, line 28, to delete “(5) Where” and substitute “(6) Where”.
Amendment agreed to.
I move amendment No. 20:
In page 20, line 33, to delete “(6) Where” and substitute “(7) Where”.
Amendment agreed to.
I move amendment No. 21:
In page 21, line 8, to delete “(7) A residential” and substitute “(8) A residential”.
Amendment agreed to.
I move amendment No. 22:
In page 21, line 17, after “exist,” to insert “or”.
Amendment agreed to.
I move amendment No. 23:
In page 21, to delete lines 18 to 25.
Amendment agreed to.
I move amendment No. 24:
In page 21, line 26, to delete “(d) any interest” and substitute “(c) any interest”.
Amendment agreed to.
I move amendment No. 25:
In page 21, line 31, to delete “(8) Notwithstanding” and substitute “(9) Notwithstanding”.
Amendment agreed to.
I move amendment No. 26:
In page 21, to delete lines 37 to 40 and substitute the following:
“(b) the upper limit shall be apportioned in respect of each of the individuals concerned in accordance with the formula—
K x L/M
where—
K is the upper limit,
L is the relievable interest in respect of the individual, and M is the relievable interest as determined by the formula in subsection
(4) in respect of all of the individuals concerned in respect of the same qualifying property.”.
Amendment agreed to.
I move amendment No. 27:
In page 21, to delete lines 41 and 42, and in page 22, to delete lines 1 to 3.
Amendment agreed to.
I move amendment No. 28:
In page 22, line 4, to delete “(9) Notwithstanding” and substitute “(10) Notwithstanding”.
Amendment agreed to.
I move amendment No. 29:
In page 22, line 13, to delete “(10) In making” and substitute “(11) In making”.
Amendment agreed to.
I move amendment No. 30:
In page 22, line 36, to delete “subsection (8)(c)” and substitute “subsection (9)(b)”.
Amendment agreed to.
I move amendment No. 31:
In page 23, line 5, to delete “(11) A qualifying” and substitute “(12) A qualifying”.
Amendment agreed to.
I move amendment No. 32:
In page 23, line 8, to delete “subsection (10)(f)” and substitute “subsection (11)(f)”.
Amendment agreed to.
I move amendment No. 33:
In page 23, line 9, to delete “(12) Failure” and substitute “(13) Failure”.
Amendment agreed to.
I move amendment No. 34:
In page 23, line 9, to delete “subsection (10)” and substitute “subsection (11)”.
Amendment agreed to.
I move amendment No. 35.
In page 23, between lines 12 and 13, to insert the following:
“Report on Mortgage Interest Relief
14. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the introduction of temporary mortgage interest relief, available in respect of mortgages on principal private residences, applied at source on a monthly basis and equivalent to 30 per cent of the difference in interest paid in the relevant month relative to interest paid in the relevant month under the interest rate charged to the relevant mortgage in June 2022, capped at a maximum benefit of €1,500 per relevant household, for a period of 12 months.”.
This is another example of where Sinn Féin is again setting the agenda and leading the charge. For quite a while now Government has resisted the idea of mortgage interest relief, just as it did in terms of support for renters. Finally, it has introduced mortgage interest relief. This is quite late in the day. It should have been introduced much earlier, particularly when people were getting those increases month on month. There have been ten increases for people on tracker mortgages and many of those with vulture funds and there is no support for them until 2024 when this will be operational.
In the past, mortgage interest relief was deducted at source. This could and should have been done earlier. However, there is never a wrong time to do the right thing and Government has finally accepted Sinn Féin's wisdom in relation to putting this forward. As I said in relation to the rent tax credit, again the Government adopted a Sinn Fein proposal, but made a hames of it by not banning rent increases. The Minister seems to be consistent because he is doing the same for mortgage interest relief.
There are a number of issues. First, it is at 20% when it should be up 30%. Second, the maximum benefit should be €1,500 as opposed to €1,250, but crucially up to 137,000 homeowners should not have been excluded from this relief. It is appalling and disgraceful that the Minister has done this and there is no justification for it. I have given examples of people who will now not get a penny of mortgage interest relief because of the threshold the Minister has introduced. Many of them will have seen their mortgage increase by up to €2,000. They will get no support whatsoever from this measure. They could be low income individuals or families suffering under other burdens, such as energy costs. There is nothing in these measures for them.
This is cruel because despite a campaign we had going since this time last year to get Government to introduce mortgage interest relief, those homeowners finally saw Government see sense and accept what Sinn Féin was saying and bring forward mortgage interest relief only then to find out in the detail of it that they were among the 137,000 people who could be excluded from the scheme simply because the balance of their mortgage was less than €80,000 at the end of last year. This is a number which makes no sense whatsoever because these individuals still have payments to make. They have seen their payments increase as a result of the ECB increases and, therefore, there should be a cost of living support for them. This is what this is. It is a direct cost of living support for this purpose.
There will be individuals who will get this relief and who will have seen their interest increase less than the 137,000 people were locked out of the scheme. Because they had a balance of greater than €80,000 on their mortgage this time last year, they will be eligible for it. People who have had a €1,000 increase in their interest will get benefit and those who had a €2,000 increase will not because the Minister has adopted this arbitrary figure, which makes no sense.
I do not know if this is just being petty. Perhaps it is a case of people in Fianna Fáil saying, "We are not going to give it to the Shinners who pushed us into this over the last year because we do not want to acknowledge they were right" and asking, "How do we try to change it to make it look as if it is not a Sinn Féin proposal?" Instead of giving 30%, they will give 20% and instead of giving €1,500, they will give €1,250. Instead of giving it to all those who need it, they will actually exclude 137,000 people because they have a balance of less than €80,000.
It is petty, cruel and vindictive and it should have been changed in the finance Bill. The resources are there to support these families. This is not a recurring scheme but a one-off scheme, yet the Minister has decided that restrictions are needed.
I spoke about energy credits. The Government has brought forward energy credits in the past which went to 60,000 holiday homes and there was no concern about making sure this money did not go to people who are not living in their homes permanently. As a result of the policies introduced, there are many accounts that have a positive balance in regard to energy because it was not targeted. That scheme should have been targeted. These are people who have actually seen an increase. Nobody will get support through mortgage interest relief unless the mortgage interest has increased, and that should have been the target, in my view. This is a Government that is seeing the light of day late in the day on this issue. I know the Minister will get to his feet and say that he was always going to consider it in the finance Bill. I have taken part in numerous debates, including with the Minister of State at the Department of Finance, where this was ruled out. It was said that it cannot be done due to house prices and all the arguments we had heard before in regard to rent relief until the Government saw the light on this as well. I could give other examples.
The core part of this amendment is that this measure is wrong. It is wrong to lock out 137,800 mortgage accounts. There are actually more than that locked out as a result of this measure but the Department estimates that some 137,000 have seen an interest increase in their bills. The Minister will say that some of them have top-up loans and they are already covered, but they will be few and far between. Many of these people are those whose loans were sold to the vultures because the Minister’s party ensured that is what happened. Fianna Fáil and Fine Gael grouped together to make sure the pathway was cleared for banks to sell the loans to the vultures and they are now in the hands of the vultures. Because they have a balance of €80,000, the message from the Government, Fianna Fáil and Fine Gael is paddle your own canoe because we are not supporting you in relation to mortgage interest relief. As I said, it is cruel, vindictive and petty and it should be changed.
On 14 September, as the Deputy will be aware, the ECB increased the main lending rate by 0.25%. It was the tenth increase in official rates since the summer of 2022, bringing the ECB's main lending rate to 4.5%. I have consistently said over the past months that the appropriate time to make a decision on whether it was appropriate to provide support to mortgage holders because of the additional burden imposed by interest rate increases would be at budget time, and that is exactly what I did. We are acutely conscious of the impact of rising interest rates. I am a constituency TD. As well as being the Minister for Finance, I have a lot of contact with individual constituents who have been impacted by interest rate increases. Monetary policy decisions are made independently, as we know, and we also know the purpose of those decisions, which is to bring down inflation and, ultimately, to put all of us on a more sustainable pathway over time.
It is undoubtedly the case that some mortgage holders will be in a stronger position than others and will have the capacity to absorb the impact of the recent increases in mortgage rates. That is the main reason that I and the Government took the view that an element of targeting was appropriate in regard to the mortgage interest relief measure we brought forward. The Deputy will acknowledge that it is not possible or desirable for the Government to fully alleviate the impact of increased interest rates for all mortgage holders. It is the case that people who have relatively low mortgages have low loan-to-value ratios and they should, in many instances, be in a better position to switch their mortgage. While that is not an option for everybody, it is an option for some. Not having a lower limit would have resulted in a less targeted scheme and, in this case, an element of targeting was warranted.
When I look at the overall numbers, as the Deputy has acknowledged, some of the relatively low mortgage balances will qualify because they will be combined with other mortgage accounts. However, when I look at the overall spread of the data that is being provided to the Department of Finance by the Central Bank, it is estimated there are approximately 253,400 private dwelling homes with mortgage balances below €80,000, of which an estimated 137,800 accounts are projected to have a higher interest bill in 2023 than in 2022. When we look at the breakdown of the 253,400 homes that have mortgage balances of less than €80,000, we see that many of them are of very low value in terms of the balance of the mortgage at the end of 2022. Over 40,000 mortgages had a balance of not greater than €10,000, another 40,000 mortgages were between €10,000 and €20,000, another 34,000 mortgages were between €20,000 and €30,000, and so on. When we look at the data, we can see that many of the mortgages in question, which are in the statistics the Deputy has outlined, are of a relatively low value.
It raises the question that when we are using public money, we have to make a decision about targeting the resources and on what basis we are going to do it. The Deputy has accepted the principle of targeting because he broadly accepted on Committee Stage that mortgage balances above €500,000 should not benefit from the mortgage interest tax relief that we have brought forward, although we differ in regard to the lower level.
This is a balanced package. It is targeted. It provides badly needed relief for the broad section of people who are in the middle group, from €80,000 to €500,000. It encompasses the vast majority of mortgage holders who need help and they will get help. My focus now, once the Finance (No. 2) Bill is enacted and signed into law, is to ensure that we have the system up and running as quickly as possible. The Revenue Commissioners are actively working on that to make sure that, early in the new year, those who have been impacted by the interest rate increases will be in a position to avail of the tax relief provided for in this Bill.
The Minister acknowledges that many people cannot switch so there is an issue of fairness. Even if somebody can switch, and the Minister says he is introducing the €80,000 limits because such people have a lower loan-to-value ratio and can switch, that does not mean they are going to get a lower interest rate. That is not the case. They have already absorbed this increase in the first instance. Even if they are switching to a fixed rate, they would switch to a fixed rate that is higher than it would have been a number of years ago.
There is no logic whatsoever for doing what the Minister is doing. I think it is an attempt by the Minister to try to present himself as being different. We have had Private Members’ business where the Minister argued against this and his Government argued against this. The Minister used to say that introducing mortgage interest relief would cost X amount, which was based on the old mortgage interest relief that used to be there. That is not what Sinn Féin argued for and it is unlike what the Minister, Deputy McGrath, used to campaign for. Instead of mortgage interest relief that did not have a limit of €1,500 but multiples of that, and did not have 30% as a portion, the Minister was arguing for 100% back in 2016. He argued for that at a time when the ECB rate was zero. Now, he is in the driving seat. He is the Minister for Finance and not only is he bringing forward a less limited proposal, but he is actually going to exclude 137,000 families.
The Minister knows this because I am sure he, like any Deputy, is getting the same letters from the same people who, as he puts it, fall on the wrong side of this relief. These are people the Minister has abandoned and whom the Deputies who will come into the Chamber in a minute will decide to abandon. They will vote to abandon them. They will vote to tell 137,000 people who have seen their mortgage interest go up last year that they are not going to support them. That is the vote those Deputies are going to do in the next few minutes and there is no reason for it. The resources are there, it is once-off and it is targeted on the basis that the other 70,000 who are in that category with a balance of less than €80,000 did not see their interest increase so therefore they should not get any support. That is what this is about. It is not a matter of falling on the wrong side, as if people tripped and had an accident. There is no accident here. The Minister is consciously making a decision that he is going to do nothing for these individuals. He is saying to the Dáil the Government is not going to do anything for these 137,000 people in the middle of a cost-of-living crisis. The Government is going to tell them they are on their own.
Go raibh míle maith agat a Theachta.
That is what all Government Deputies are going to vote for including, I am certain, the Acting Chair, in the next few minutes.
As the Deputy well knows, there are a whole range of measures in budget 2024 designed to help people with the cost of living. We are focusing here on one particular measure. There are changes to our income tax system, changes to our social welfare system, energy credits, exceptional lump sum payments and measures to reduce the cost of accessing public services. The budget must be considered in the round and there are a wide array of measures the households in question will benefit from in the context of budget 2024.
The Deputy consistently misrepresents my position and the position of Fianna Fáil. He knows well that in the period 2016 to 2020 when we were in opposition we entered into a confidence and supply agreement and negotiated for an extension of mortgage interest relief at that time, and we achieved that. Mortgage interest relief lasted for longer than it otherwise would have. There was an extension and the Deputy knows that well, but it does not stop him from consistently misrepresenting the position to make political points.
On the measure itself, an element of targeting is warranted. The Deputy would have a situation where somebody with a €5,000, €10,000 or €20,000 mortgage balance with repayments that are very low would benefit from tax relief the State is going to provide. We decided the relief would be at the standard rate and that is at 20%. We do not have a 30% rate of income tax in our system. This is a standard-rated relief at 20%, so it is targeted, but the vast majority of mortgage holders who are feeling the pressure from the consistent interest rate increases we have experienced will get a benefit from this measure. Many of them will welcome it, have already welcomed it and look forward to drawing it down once it is available.
There is no misrepresentation here. It is without doubt that the Minister negotiated an extension of the relief with the previous Administration. I have put quotes from the Minister on record. This is on the record of the Dáil. The Minister made the point that this was the best he could negotiate, although he wanted 100%. That is fact. It is not a misrepresentation. It might be difficult and embarrassing for him to have those comments relayed to him now, but I make the point because at that time when he was negotiating and calling for the measure, interest rates at the ECB were at a historical low. They were at 0%. Today they are at a historical high and the Minister has decided to lock 137,000 people out. The Minister shakes his head, but he cannot dispute rates are at a historical high. ECB rates are the highest they have ever been. The Minister is deciding to lock 137,000 people out of this scheme because their balance is less than €80,000, which makes no sense.
We are in here dealing in numbers, percentages and all that, but imagine a single mother is sitting over there. She is dealing with all the challenges she has with prices going up for fuel, electricity and food. Then she shows us her mortgage interest has gone up by €2,000 in the last year, but her balance is €75,000. All Government Deputies are saying to that single mother that she is on her own because they are about to abandon her, abandon her family and they are not going to support her. It is a very conscious decision that makes no sense whatsoever. As a one-off cost-of-living expense this is warranted, merited and should have been amended in this Bill.
Amendment put:
The Dáil divided: Tá, 50; Níl, 76; Staon, 0.
Tá
- Andrews, Chris.
- Bacik, Ivana.
- Boyd Barrett, Richard.
- Brady, John.
- Browne, Martin.
- Buckley, Pat.
- Cairns, Holly.
- Carthy, Matt.
- Clarke, Sorca.
- Collins, Joan.
- Conway-Walsh, Rose.
- Cronin, Réada.
- Crowe, Seán.
- Cullinane, David.
- Doherty, Pearse.
- Donnelly, Paul.
- Ellis, Dessie.
- Farrell, Mairéad.
- Funchion, Kathleen.
- Gannon, Gary.
- Guirke, Johnny.
- Howlin, Brendan.
- Kenny, Martin.
- Kerrane, Claire.
- Mac Lochlainn, Pádraig.
- Mitchell, Denise.
- Munster, Imelda.
- Mythen, Johnny.
- Nash, Ged.
- Naughten, Denis.
- O'Callaghan, Cian.
- O'Reilly, Louise.
- O'Rourke, Darren.
- Ó Broin, Eoin.
- Ó Laoghaire, Donnchadh.
- Ó Murchú, Ruairí.
- Ó Ríordáin, Aodhán.
- Ó Snodaigh, Aengus.
- Pringle, Thomas.
- Quinlivan, Maurice.
- Ryan, Patricia.
- Sherlock, Sean.
- Shortall, Róisín.
- Smith, Bríd.
- Stanley, Brian.
- Tóibín, Peadar.
- Tully, Pauline.
- Ward, Mark.
- Whitmore, Jennifer.
- Wynne, Violet-Anne.
Níl
- Berry, Cathal.
- Brophy, Colm.
- Browne, James.
- Bruton, Richard.
- Burke, Colm.
- Butler, Mary.
- Byrne, Thomas.
- Cahill, Jackie.
- Calleary, Dara.
- Canney, Seán.
- Cannon, Ciarán.
- Carroll MacNeill, Jennifer.
- Chambers, Jack.
- Collins, Niall.
- Costello, Patrick.
- Coveney, Simon.
- Cowen, Barry.
- Creed, Michael.
- Crowe, Cathal.
- Devlin, Cormac.
- Dillon, Alan.
- Donnelly, Stephen.
- Donohoe, Paschal.
- Duffy, Francis Noel.
- Durkan, Bernard J.
- English, Damien.
- Farrell, Alan.
- Feighan, Frankie.
- Fitzpatrick, Peter.
- Flaherty, Joe.
- Flanagan, Charles.
- Fleming, Sean.
- Grealish, Noel.
- Griffin, Brendan.
- Harris, Simon.
- Haughey, Seán.
- Heydon, Martin.
- Higgins, Emer.
- Kehoe, Paul.
- Lawless, James.
- Leddin, Brian.
- Lowry, Michael.
- Madigan, Josepha.
- Martin, Catherine.
- Matthews, Steven.
- McAuliffe, Paul.
- McConalogue, Charlie.
- McEntee, Helen.
- McGrath, Michael.
- McHugh, Joe.
- Moynihan, Aindrias.
- Moynihan, Michael.
- Murnane O'Connor, Jennifer.
- Naughton, Hildegarde.
- Noonan, Malcolm.
- O'Brien, Darragh.
- O'Brien, Joe.
- O'Callaghan, Jim.
- O'Connor, James.
- O'Dea, Willie.
- O'Donnell, Kieran.
- O'Donovan, Patrick.
- O'Dowd, Fergus.
- O'Sullivan, Christopher.
- O'Sullivan, Pádraig.
- Ó Cathasaigh, Marc.
- Ó Cuív, Éamon.
- Phelan, John Paul.
- Rabbitte, Anne.
- Richmond, Neale.
- Ring, Michael.
- Ryan, Eamon.
- Smith, Brendan.
- Smyth, Niamh.
- Smyth, Ossian.
- Stanton, David.
Staon
Tellers: Tá, Deputies Pádraig Mac Lochlainn and Denise Mitchell; Níl, Deputies Hildegarde Naughton and Cormac Devlin.
Amendment declared lost.
I move amendment No. 36:
In page 25, after line 37, to insert the following:
“Report on Anti-Tax Planning Measures with respect to PRSA Products
20. The Minister shall, within six month of the passing of this Act, prepare and lay before Dáil Éireann a report on the removal of the 75-year age restriction which applied to payments from new and existing Personal Retirement Savings Account Products and its impact on the ability of individuals to avail of tax planning opportunities which the 75 year age restriction had previously sought to address.”.
I withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment No. 37 is out of order.
Amendment No. 37 not moved.
I move amendment No. 38:
In page 30, between lines 25 and 26, to insert the following:
“Report on Landlords’ Tax Relief
22. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the introduction of the new personal income tax allowance introduced with respect to individual landlords in the private rental sector, assessing its distributional impact, deadweight loss of the relief and implications for social equity within the personal taxation system.”.
This is an issue we have debated at length on Committee Stage. This is the first Fianna Fáil budget in many years and the priority is clear. Whether it is renters or mortgage holders, the big winners are landlords. We spend more of taxpayer's money providing support to landlords. This is a tax break that will not work. That is not just my view but the view of many others. It is a tax break that does not make any sense. It provides a tax break of €600 next year for landlords, €800 the following year, €1,000 the following year and €1,000 beyond that. It is clear it has massive deadweight. Most landlords are not thinking of selling, but despite this they will get this tax relief. For those who are considering selling, this tax relief is less than the inflation we are seeing in house prices. House prices are increasing way beyond this relief. Therefore it will not be a significant factor in that issue.
As I said, the Minister's officials were clear on this. The Department's officials said in a note this year "taxation of rental income is often cited as a push factor for Buy-to-Let investors". The way in which rental income is taxed for tax purposes has not changed. Personal rates of income tax have always applied to rental income. Landlords have benefited from the changes to the personal taxation system every year. The effective rate of tax a landlord pays is less now than it was ten years ago. The officials from the Department further said, "Any favourable treatment of passive personal income such as rent would raise legitimate questions around social equity", something the Minister seems not to care about. That is at the core of this.
The Minister will argue that landlords are fleeing the market and therefore we need to bring this tax relief to them, despite the fact the vast majority of them have no intention of going. I would make the point that there are nurses all over the world who have fled because of what the Government has done to the health service. It is worse now because even the ones who want to come back will not be allowed to do so because a recruitment embargo is in place. There is no special provision for them. There is no reduction in their income tax, even though we need more nurses in our health system. There are many other similar areas. The Government has decided to tax a nurse, teacher or carer more than a landlord, which is appalling.
The Department officials went further when they assessed the option of a separate method of taxing rental income, such as a flat rate, a separate rate of tax and other tax reliefs. The Department noted:
The breadth and depth of argument necessary to support such a fundamental shift of policy has not been provided to the extent necessary to support such a significant change. More specifically, [they said] the rationale as to why passive income from property rental should enjoy a lower or preferential rate of tax as compared with the example of earned income has not been set out.
That does not matter because Fianna Fáil has made the decision it is supporting landlords, it is on the side of landlords and it is bringing forward tax reliefs for landlords. That is what we have before us. The Government did not heed the advice and we have this situation before us.
On the policy rationale, a survey by the Society of Chartered Surveyors Ireland found that the top three reasons for landlords leaving the rental market were the complex and restrictive nature of rent regulations, landlords finding compliance with rented houses too onerous, and net rental returns being too low. Furthermore, the Department of Finance, the Minister's officials, whom he is ignoring, said:
In the case of accidental landlords, it is difficult to envisage any reasonable policy intervention that could dissuade such people from selling their property. People in this situation are keen to sell once they have escaped negative equity and public policy options to prevent such actions are extremely limited.
They go on and on and make the point. They say the consequence of the policy changes is that the amateur landlords who may not have had the time, money or risk appetite to continue with their property in such an environment, namely, an environment of high house prices, is that they are selling up. That is the reality.
Professor Barra Roantree, formerly of the ESRI, said the following of this tax break, which would cost between €100 and €150 million, and we know now it is at the higher end of that. He said that the vast majority of the tax relief is going to landlords who never even thought of leaving the market. It is, in his words "maybe the stupidest tax relief of recent times". That is the reality. The Minister decided to ignore all of that, put it by the wayside and bring forward a tax relief of up to €1,000 in future years for landlords at a cost of hundreds of millions. The problem is it will not work. Landlords are leaving because the Minister's policies have ensured the average house price that landlords can get is €70,000 more than when this Government took office. They are cashing in and €1,000 will not make a difference to them. I do not know what the Government is doing here. What it is doing makes no sense.
This is public money and it could go into disability services, for example. Twice as much money is going to landlords as is going to those services. The Government's priorities are all wrong in this. If this was in any way going to encourage landlords to stay and so on, then at least we could have a proper debate about it but it is not. The Minister's officials were clear to him on this. I mention Fianna Fáil, Fine Gael and the Minister for housing, who is drowning on this issue. Everything is going wrong for him and he cannot even meet his targets for social housing, affordable housing or cost-rental housing. He is missing every single target year after year. This is another initiative which is wasting taxpayers' money instead of using it. The following is a novel idea.
Why not use that money to build houses on public land? That is what the Government should be doing with the money instead of putting it into the pockets of landlords.
The purpose of the residential premises rental income relief is to provide for a new tax incentive for small-scale landlords. This measure is specifically targeted at attracting and retaining small-scale landlords in the private sector. The purpose of this relief is to support the continued participation of small-scale landlords in the rental market, an objective being progressed through Housing for All, the Government’s housing plan to 2030.
Landlords are an essential feature of a functioning housing market. Rising rents are driven by a shortage of supply, so stabilising and increasing the supply of rental properties should ease upward pressure on rental prices and make it easier for prospective tenants to find affordable homes. The Government is acutely aware of the challenges in the housing market. As I have said on many occasions, the key problem is a lack of supply. This is why the Government is committed to increasing the supply of all types of homes, including social, affordable, rental and owner-occupier.
In my budget 2024 address, I acknowledged that housing is undoubtedly the biggest domestic challenge we face today and remains a top priority for Government. I also acknowledged that in recent years we have seen a decline in the number of small investors in the market owning one or two properties. A full 86% of landlords in the market own just one or two properties, and they have a vital role to play. However, we are seeing the departure of a significant number of small-scale landlords. I believe taxation is a factor in that regard.
The evidence demonstrates a change in our rental market. There has been a significant reduction in the number of small-scale landlords owning one or two properties. That evidence is clear. The most recent data from the RTB on notices of termination show that from quarter 3 of 2022 to quarter 3 of this year, more than 24,000 notices of termination were received by the RTB. The number of such notices where the reason given was because a landlord was selling the property is 60%. In 2017, the number of registered tenancies with the RTB was 313,000, falling in consecutive years. For 2022, the latest figure from the RTB, which now has a system of annual registration, was 246,000, down from 313,000 in 2017. That is a significant reduction over the period. The evidence is clear that small-scale landlords are leaving the market.
This proposal seeks to encourage investment that is already in the market to stay in the market. In that respect, relief is provided where the property remains in the rental market. It will also try to address that dramatic imbalance between the exodus from the market and the very low level of entry into the market in respect of the provision of private rental accommodation. It is important that there is a recognition of the importance of the private rental sector. The State is already providing over €5 billion of capital through the Exchequer, the Land Development Agency and the Housing Finance Agency to build the homes that we know we need, including affordable and cost-rental homes and public housing. We are providing over €5 billion but there will always be role for the private rental sector. There seems to be an unwillingness to acknowledge that among many in this House. In order to have a private rental sector, we have to have property owners, or landlords, who are willing to provide that property to tenants, to provide homes. It is necessary to have a rental sector where there is a continued supply of private rental accommodation in the market and this measure can make a contribution towards achieving that goal.
The point was made by the Deputy this evening, and was also made on Committee Stage, about the alleged unfairness of the income tax treatment here versus that of ordinary PAYE workers, for example, but we have already made decisions for public policy reasons to treat income from different sources in a different way because we are trying to achieve a certain outcome. I give the example of land leasing in the agricultural community. We want to encourage the retention of the family farm and, ultimately, succession. Another example is the rent-a-room relief, where a person can earn €14,000 entirely tax free. That income is free from income tax, USC and PRSI because we want empty bedrooms in homes to be made available for people who need accommodation. That is a public policy choice we made to increase the supply of rooms in the rental market. We have also made decisions around the treatment of certain income in relation to the provision of some childcare services, for example and it is important that we put all of that on the record.
Earlier this year, as Deputies will be aware, Focus Ireland, the homeless charity, made a submission to the Government. It partnered with Chartered Accountants Ireland and called for specific measures to help to retain investment in the rental sector by small-scale landlords. It set out a whole series of measures that the Government is not in a position to do. What we are doing here, I acknowledge, is a modest measure. It will only cost in respect of the properties that remain within the market over the full period of this particular relief being available and that is important. There is no doubt that we are seeing and continue to see a reduction in the number of small-scale landlords in the market providing accommodation for our people. On the other side, we are seeing very little inward activity. There is very little investment by small-scale landlords and we have to remember that we must have accommodation available in towns and villages throughout the country, with one or two units here and there. Institutional investors have a role in providing large blocks of rental accommodation, but in villages and communities around Ireland, we need rental accommodation available in small numbers in different pockets around the place. When we look at the data from the Central Bank on investment mortgages, we are not seeing any significant level of activity in terms of buy-to-let mortgages. Small-scale landlords are leaving and there is very little inward activity in the market. That means an ever tightening supply of rental accommodation. Ultimately, the people who lose out in that scenario are the people who are trying to find a home. This is a measure designed to help to retain investment and retain rental accommodation in the market at a time when, we all acknowledge, it is badly needed.
Amendment put:
The Dáil divided: Tá, 51; Níl, 78; Staon, 0.
Tá
- Andrews, Chris.
- Bacik, Ivana.
- Barry, Mick.
- Boyd Barrett, Richard.
- Brady, John.
- Browne, Martin.
- Buckley, Pat.
- Cairns, Holly.
- Carthy, Matt.
- Clarke, Sorca.
- Collins, Joan.
- Conway-Walsh, Rose.
- Cronin, Réada.
- Crowe, Seán.
- Cullinane, David.
- Doherty, Pearse.
- Donnelly, Paul.
- Ellis, Dessie.
- Farrell, Mairéad.
- Funchion, Kathleen.
- Gannon, Gary.
- Guirke, Johnny.
- Howlin, Brendan.
- Kenny, Gino.
- Kenny, Martin.
- Kerrane, Claire.
- Mac Lochlainn, Pádraig.
- Mitchell, Denise.
- Munster, Imelda.
- Mythen, Johnny.
- Nash, Ged.
- O'Callaghan, Cian.
- O'Reilly, Louise.
- O'Rourke, Darren.
- Ó Broin, Eoin.
- Ó Laoghaire, Donnchadh.
- Ó Murchú, Ruairí.
- Ó Ríordáin, Aodhán.
- Ó Snodaigh, Aengus.
- Pringle, Thomas.
- Quinlivan, Maurice.
- Ryan, Patricia.
- Sherlock, Sean.
- Shortall, Róisín.
- Smith, Bríd.
- Stanley, Brian.
- Tóibín, Peadar.
- Tully, Pauline.
- Ward, Mark.
- Whitmore, Jennifer.
- Wynne, Violet-Anne.
Níl
- Berry, Cathal.
- Brophy, Colm.
- Browne, James.
- Bruton, Richard.
- Burke, Colm.
- Butler, Mary.
- Byrne, Thomas.
- Cahill, Jackie.
- Calleary, Dara.
- Canney, Seán.
- Cannon, Ciarán.
- Carroll MacNeill, Jennifer.
- Chambers, Jack.
- Collins, Niall.
- Costello, Patrick.
- Coveney, Simon.
- Cowen, Barry.
- Creed, Michael.
- Crowe, Cathal.
- Devlin, Cormac.
- Dillon, Alan.
- Donnelly, Stephen.
- Donohoe, Paschal.
- Duffy, Francis Noel.
- Durkan, Bernard J.
- English, Damien.
- Farrell, Alan.
- Feighan, Frankie.
- Fitzpatrick, Peter.
- Flaherty, Joe.
- Flanagan, Charles.
- Fleming, Sean.
- Foley, Norma.
- Grealish, Noel.
- Griffin, Brendan.
- Harris, Simon.
- Haughey, Seán.
- Heydon, Martin.
- Higgins, Emer.
- Kehoe, Paul.
- Lawless, James.
- Leddin, Brian.
- Lowry, Michael.
- Madigan, Josepha.
- Martin, Catherine.
- Matthews, Steven.
- McAuliffe, Paul.
- McConalogue, Charlie.
- McEntee, Helen.
- McGrath, Michael.
- McHugh, Joe.
- Moynihan, Aindrias.
- Moynihan, Michael.
- Murnane O'Connor, Jennifer.
- Naughten, Denis.
- Naughton, Hildegarde.
- Noonan, Malcolm.
- O'Brien, Darragh.
- O'Brien, Joe.
- O'Callaghan, Jim.
- O'Connor, James.
- O'Dea, Willie.
- O'Donnell, Kieran.
- O'Donovan, Patrick.
- O'Dowd, Fergus.
- O'Sullivan, Christopher.
- O'Sullivan, Pádraig.
- Ó Cathasaigh, Marc.
- Ó Cuív, Éamon.
- Phelan, John Paul.
- Rabbitte, Anne.
- Richmond, Neale.
- Ring, Michael.
- Ryan, Eamon.
- Smith, Brendan.
- Smyth, Niamh.
- Smyth, Ossian.
- Stanton, David.
Staon
Tellers: Tá, Deputies Pádraig Mac Lochlainn and Denise Mitchell; Níl, Deputies Hildegarde Naughton and Cormac Devlin.
Amendment declared lost.
Amendments Nos. 39 to 41, inclusive, are related and will be discussed together.
I move amendment No. 39:
In page 36, line 12, to delete “and”.
Part 16 of the Taxes Consolidation Act 1997 provides reliefs for investment in corporate trades. These reliefs are the employment investment incentive, EII; the start-up relief for entrepreneurs, SURE; and the start-up capital incentive, SCI. These measures are key incentives which seek to provide SMEs and start-ups with an alternative risk-based source of funding, which helps to support the creation and retention of employment in SMEs across the economy. The latest statistics provided by Revenue show that in 2022 there were 2,995 EII investors with €125 million invested in EII-eligible companies.
These reliefs are State aid that come under the terms of Regulation (EU) No. 651/2014, known as the state aid general block exemption regulation, GBER, which allows certain categories of state aid to be granted without prior notification by member states. The revised GBER was adopted by the European Commission on 1 July 2023, and member states were granted a six-month transition period to implement necessary changes to domestic legislation to ensure relevant schemes continue to be compatible with the revised GBER. The purpose of the revised GBER is to further facilitate, simplify and speed up support for the EU's green and digital transitions and to ensure the GBER complements a set of state aid guidelines that have recently been revised.
Section 31 of the Bill amends Part 16 of the 1997 Act in order to reflect the revision of the GBER. In addition, as announced in my speech on budget day, I am making a number of changes to enhance the EII which have already been set out in the context of the budget.
The new relief for investment in innovative enterprises under Chapter 6A of Part 19, known as angel investor relief, which was introduced on Committee Stage, falls under Article 21a of the revised GBER. Accordingly, the limit of €16.5 million on the amount of risk finance investment that may be raised by an eligible undertaking under the revised GBER includes any amount that is raised under either or both Part 16 or the angel investor relief under Chapter 6A of Part 19.
The proposed Report Stage amendment of section 31, which relates to Part 16 relief for investments in corporate trades, is to provide that the €16.5 million limit on the amount of risk finance investment that may be raised by an eligible undertaking under the revised GBER applies to the cumulative amount of risk finance investment that may be raised under both Part 16 and the new angel investor relief under Chapter 6A of Part 19.
Amendment agreed to.
I move amendment No. 40:
In page 36, line 13, after “ “€15,000,000”,” to insert “and”.
Amendment agreed to.
I move amendment No. 41:
In page 36, between lines 13 and 14, to insert the following:
“(iv) by the insertion of the following subsections after subsection (5):
“(6) (a) Where a qualifying company has issued shares in respect of which—
(i) relief under this Part applies, and
(ii) an entitlement to claim relief under section 600M may apply on the disposal of those shares—
then, this section shall apply subject to the following modifications:
(I) subsection (1) shall apply with the modifications set out in subsection (7),
(II) subsection (2) shall apply with the modification set out in subsection (8),
(III) subsection (4) shall apply with the modifications set out in subsection (9), and
(IV) subsection (5) shall apply with the modifications set out in subsection (10).
(b) For the purposes of subsections (7), (8) and (9), ‘relief group’ shall have the meaning assigned to it by section 600B.
(7) The modifications to subsection (1) referred to in subsection (6)(a)(I) are—
(a) the reference to ‘an individual who qualifies for relief’ shall be read as a reference to an individual who qualifies for relief under this Part in respect of those shares and an individual who may be entitled to claim relief under section 600M on the disposal of those shares,
(b) the reference to shares ‘in respect of which relief was available under this Part’ shall be read as a reference to shares in respect of which relief was available under this Part and shares in respect of which an entitlement to claim relief under section 600M may apply on the disposal of those shares, and
(c) references to ‘RICT group’ shall be read as references to either or both RICT group and relief group, as the case may be.
(8) The modification to subsection (2) referred to in subsection (6)(a)(II) is that the reference to a ‘RICT group’ as it pertains to subsection (2)(b) shall be read as a reference to the relief group and RICT group of which a qualifying company within the meaning of this Part and within the meaning of Chapter 6A of Part 19 is a member.
(9) The modifications to subsection (4) referred to in subsection (6)(a)(III) are—
(a) references to the ‘RICT group’ shall be read as references to the relief group and the RICT group of which a qualifying company within the meaning of this Part and within the meaning of Chapter 6A of Part 19 is a member, and
(b) the reference to a ‘qualifying investment’ shall be read as a reference to qualifying investment within the meaning of this Part and within the meaning of Chapter 6A of Part 19.
(10) The modifications to subsection (5) referred to in subsection (6)(a)(IV) are—
(a) the reference to ‘the giving of relief’ shall be read as a reference to the giving of relief under this Part or the entitlement to claim relief under section 600M,
(b) the reference to ‘the available relief’ shall be read as a reference to the available relief under this Part and the entitlement to claim relief under section 600M,
(c) the reference to ‘to which their claims relate’ shall be read as a reference to claims under this Part and claims in respect of which an entitlement may arise under section 600M, and
(d) the reference to ‘would be eligible for relief’ shall be read as a reference to being eligible for relief under this Part or being entitled to claim relief under section 600M.”.”.
Amendment agreed to.
I move amendment No. 42:
In page 49, lines 36 and 37, to delete “in the current accounting period or any subsequent accounting period” and substitute “in any accounting period”.
Section 36 of the Bill inserts a new Chapter 5 into Part 33 of the Taxes Consolidation Act 1997 to apply new measures to outbound payments of interest, royalties and distributions, including dividends, aimed at the prevention of double non-taxation. This is achieved by way of withholding taxes on outbound payments of interest, royalties and distributions made by Irish companies, and Irish branches of foreign companies, to an associated entity that is resident, or situated in territories included in Annex I of the EU list of non-co-operative jurisdictions for tax purposes, or no-tax and zero-tax territories, together referred to as specified territories.
As Deputies will already be aware of the key features of this provision, I will not repeat them here. I am sure colleagues want to get to other amendments. It is important to note, however, that the defensive measures should be proportionate and tailored to the objective of tackling aggressive tax planning, while not damaging Irish businesses' competitiveness. In order to achieve this goal of a proportionate defensive measure, care has been taken in the drafting of the legislation to ensure legitimate commercial operations are not affected by the measure. Its drafting has been informed by a public consultation process conducted in quarter 4 of 2021 and a detailed feedback statement process launched in July of this year.
I am bringing forward an amendment to section 36. I propose to delete the wording "in the current accounting period or any subsequent accounting period" and substitute "in any accounting period". The amendment is a minor technical amendment to the definition of "relevant payment" to ensure the legislation operates as intended.
Amendment agreed to.
Amendments Nos. 43 to 45, inclusive, are related and will be discussed together.
I move amendment No. 43:
In page 57, to delete lines 6 to 8 and substitute the following:
"(3) Section 172C of the Principal Act is amended—
(a) in subsection (2), by the insertion of the following paragraph after paragraph (bc):
"(bd) subject to subsection (4), a scheme which—".
As part of this year's Finance Bill, amendments are being made to provisions of this section relating to the taxation of company distributions to ensure they operate in line with European law. One such amendment is to section 172C of the Taxes Consolidation Act 1997 in respect of withholding tax exemptions. Section 37 introduces a new withholding tax exemption to resolve an issue whereby pension schemes based outside the EU but in jurisdictions with which Ireland has a tax information exchange agreement and which are comparable with an Irish pension scheme but which are not currently treated comparably with an Irish pension scheme. Separately, new withholding tax protections that will apply on certain outbound payments are also being introduced in section 36 of the Bill. It has been determined that the two provisions do not properly interact. Therefore, I have brought forward amendment No. 43 to ensure that the new measures to apply to outbound payments of interest, royalties and distributions operate in priority to the new exemption provided in section 172C.
Amendment agreed to.
I move amendment No. 44:
In page 57, to delete line 19 and substitute "Schedule 2A,",".
Amendment agreed to.
I move amendment No. 45:
In page 57, between lines 19 and 20, to insert the following:
"and
(b) by the insertion of the following subsection after subsection (3):
"(4) A person shall not be an excluded person under subsection (2)(bd) in relation to a distribution which is a relevant distribution to which section 817X applies.".".
Amendment agreed to.
I move amendment No. 46:
In page 58, between lines 8 and 9, to insert the following:
"Medical practitioners operating in partnership
38. The Principal Act is amended, in Part 43, by the insertion of the following section after section 1008:
"1008A. (1) In this section—
‘enactment’ means a statute or an instrument made under a power conferred by statute;
‘medical partnership’ means a partnership—
(a) all of the partners of which are individuals who are medical practitioners, and
(b) that is governed by a partnership agreement;
‘medical practitioner’ has the same meaning as in the Medical Practitioners Act 2007;
‘partnership agreement’ means any valid written agreement of the partners governed by the law of the State and subject to the exclusive jurisdiction of the courts of the State as to the affairs of a partnership and the conduct of its business as may be amended, supplemented or restated from time to time;
‘relevant income’ means all amounts, in respect of relevant medical services, paid to, or for the benefit of, a relevant medical services provider, by the Health Service Executive;
‘relevant medical services’ means services provided by a medical practitioner pursuant to—
(a) regulations made under sections 5 and 29 of the Health Act 1947,
(b) section 58 of the Health Act 1970,
(c) sections 62 and 63 of the Health Act 1970,
(d) section 62A of the Health Act 1970,
(e) section 67E of the Health Act 1970,
(f) section 70 of the Health Act 1970,
(g) orders made under section 75A of the Health Act 1970,
(h) regulations made under section 75B of the Health Act 1970,
(i) the Health (Amendment) Act 1996,
(j) the Mental Health Act 2001,
(k) the Redress for Women in Certain Institutions Act 2015,
(l) the Misuse of Drugs Acts 1977 to 2017,
(m) the Mother and Baby Institutions Payment Scheme Act 2023,
(n) Regulation (EC) No. 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems,
(o) the Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part, done at Brussels and London on 30 December 2020, and
(p) such other provisions of any other enactment as the Minister for Finance may by order prescribe;
‘relevant medical services provider’ means a medical practitioner with whom the Health Service Executive has entered into a contract to provide relevant medical services;
‘relevant payment’ has the same meaning as in section 520(1).
(2) (a) Where services are provided by medical practitioners which the Minister for Finance, following consultation with the Minister for Health, determines it would be appropriate to treat as relevant medical services for the purposes of this section, then, for those purposes, the Minister for Finance may, by order, prescribe the provisions of the enactment pursuant to which those services are provided.
(b) Every order made by the Minister for Finance under paragraph (a) shall be laid before Dáil Éireann as soon as may be after it is made and, if a resolution annulling the order is passed by Dáil Éireann within the next 21 days on which Dáil Éireann has sat after the order is laid before it, the order shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.
(3) This section shall apply to a medical partnership where—
(a) one, or more than one, partner in the medical partnership is a relevant medical services provider, and
(b) relevant medical services in respect of which one, or more than one, partner in the medical partnership is a relevant medical services provider are ordinarily provided by any medical practitioner who is a partner in, or employed by, that medical partnership.
(4) (a) A medical partnership to which this section applies and a relevant medical services provider who is a partner in the medical partnership may jointly elect to treat such proportion of the relevant income of that relevant medical services provider for the year of assessment as relates to relevant medical services that are, or may be, provided by any medical practitioner who is a partner in, or employed by, that medical partnership as income of that medical partnership for income tax purposes.
(b) The election made under paragraph (a) shall be in such form and manner as may be specified by the Revenue Commissioners.
(5) Where an election is made under subsection (4)—
(a) for the purpose of section 1008, in calculating the amount of the profits or gains of the medical partnership concerned for a year of assessment, relevant income of a relevant medical services provider to whom the election relates, and any expenses laid out or expended for the purpose of earning that relevant income shall, subject to the provisions of the Tax Acts, be treated as if that relevant income was earned and those expenses were laid out or expended by that medical partnership in the course of its partnership trade,
(b) for the purposes of section 529A, each payment by the Health Service Executive to a relevant medical services provider to whom the election relates, in respect of relevant medical services, which is comprised within relevant income to which the election relates, shall be treated as—
(i) a relevant payment to the medical partnership concerned, and
(ii) a payment in respect of a professional service that is provided in the conduct of the trade or profession of that medical partnership,
(c) the relevant medical services provider to whom the election relates shall furnish the tax number (within the meaning of section 524(2)) of the medical partnership concerned to the Health Service Executive and section 524 shall apply as if, in relation to each relevant payment by the Health Service Executive to that relevant medical services provider, in respect of relevant medical services, which is comprised within relevant income to which the election relates, that medical partnership is the specified person (within the meaning of section 520),
(d) the precedent partner of the medical partnership concerned shall include details of the relevant income to which the election relates in the return required to be delivered by that partner under section 880 for the relevant year of assessment, and
(e) the relevant medical services provider to whom the election relates shall, in the return required to be delivered by him or her under section 959I for a year of assessment—
(i) confirm that an election under this section has been made in respect of the year of assessment, and
(ii) provide the name of the medical partnership to which the election relates.".".
My Department and Revenue have for some time been aware of issues arising from contractual arrangements within the general practitioner community whereby some GPs treat income received under their General Medical Services, GMS, contract as income of a GP practice in which they are a partner or an employee rather than income of that individual GP. However, under existing tax legislation, there is no legal basis for Revenue to treat income arising under a GMS contract entered into between an individual GP and the HSE as if it were income arising under a contract between the HSE and the medical practice in which the GP is a partner or an employee. A GP who holds a GMS contract is a chargeable person as regards income arising under the GMS contract and should report that income under the self-assessment system. The GP is also the specified person for the purposes of professional services withholding tax, which means he or she is entitled to claim a credit for such tax deducted by the HSE on GMS payments.
This amendment to introduces a new provision, section 1008A, into Part 43 of the Taxes Consolidation Act 1997. It provides that where individual GPs enter into contracts with the HSE to provide certain medical services and provide those services in the conduct of a partnership profession with other individual GPs, the income from those services can be treated for income tax purposes as that of the partnership. The amendment also provides that any professional services withholding tax credit may be claimed by the partnership under such instances. The partner who has the contract with the HSE, and not the precedent partner of the medical partnership, will provide the tax number of the medical partnership concerned to the HSE for the purposes of professional services withholding tax. This new provision will ensure that all amounts paid to, or for the benefit of, a GP by the HSE in respect of GMS and ancillary public services can be treated as income of the partnership. A joint election to treat the GMS and ancillary public services as income of the partnership must be made by the GP contracted by the HSE to provide the relevant medical services and the medical partnership concerned.
It should be noted that this proposed amendment is expected to resolve some, but not all, of the issues arising. This is because there are a number of business arrangements and models in the GP sector, including partnerships, companies, employees and employers. The core issue concerns the contractual arrangements involving GPs. The Minister for Health has confirmed that the strategic review of general practice, which is now under way, will examine the relevant HSE contracts and propose measures necessary to modernise them.
I welcome this amendment. The Minister will recall that I tabled an amendment on Committee Stage which sought to deal with some of the issues he has highlighted. In particular, I had been contacted, as I know other Deputies were, by medical practitioners who were concerned the Revenue Commissioners were going to alter their policy and introduce a new policy as and from January next that would have the effect, as the Minister has said, that income received under the GMS scheme by medical practitioners working in a partnership would no longer be assessed as income of the partnership. I welcome that the Minister has introduced this amendment, which gives effect to part of what I sought to achieve in the amendment I put forward. As he has indicated, there are issues that remain outstanding but this is a worthwhile amendment. I am glad to support it and I thank the Minister for bringing it before the House.
I welcome this amendment. I tabled questions to the Minister some weeks ago, in the reply to which he indicated there would not be any change at all in this area. I welcome that he has now brought forward this amendment. As he said, it addresses only part of the problem, namely, those situations involving partners in a practice. There are many other situations, however, in which the intention is that GPs would be employees of the company or corporate body and certainly in the case of not-for-profit organisations that are attempting to provide GP services in severely disadvantaged urban areas. It makes absolute sense to order such arrangements on this kind of model. Unfortunately, because the issue of employees is not being addressed, there will be big challenges for practices like these at least until the strategic review is completed. We do not know when that will be. More than likely, it will be towards the end of next year, after which the necessary follow-on legislation will have to be enacted. It would have been better if the entire problem had been dealt with, but, insofar as it goes, I welcome the amendment.
I welcome the amendment. I thank all the GP practices throughout the country that contacted us. I look forward to the strategic review of general practice. I accept the Minister's acknowledgement that there are outstanding issues that remain to be dealt with. There is a huge shortage of GPs, particularly in rural Ireland, and we cannot afford for mistakes like this to be left standing or issues to be left outstanding. This issue is a priority for all areas and particularly for rural areas.
I thank the Deputies for their comments. The Department of Health has advised that the majority of GPs deliver services as part of a practice, either as partners or practice employees. In its view, the proposed amendment would address a substantial part of the issue, as it understands there are more GPs who are partners than there are those who are employees. Obviously, in the case of an employer-employee relationship, in the same way as in all other such relationships, income tax applies in the normal way.
The resolution of the other unresolved issues lies in the context of the strategic review of general practice. We can only go so far in the taxation legislation. That is what we are dealing with here. The wider issues are going to have to be dealt with as part of that strategic review because tax law is quite black and white. Where a person is an employee, income tax applies in the normal way as it does in the case of every other employee.
Amendment put and declared carried.
Amendment No. 47 not moved.
Amendments Nos. 48 to 51, inclusive, are related and may be discussed together. Is that agreed? Agreed.
I move amendment No. 48:
In page 59, line 4, to delete “lease” and substitute “finance lease”.
These amendments relate to section 38, as amended by the select committee. Section 38 included a number of amendments to the taxation of leased assets in Ireland. Following the publication of the Bill as initiated, a number of issues were raised by stakeholders.
The amendments in section 37 of the Bill, as initiated, were aimed at clarifying the rules for calculating taxable income for all lessors and lessees. Stakeholders raised concerns that aspects of the amendments may create uncertainty around how operating lessors are taxable in Ireland. Officials have considered the issues raised and concluded it is appropriate to remove operating lessors from this section at this time pending further review of those issues. Therefore, operating lessors will continue to be taxed in line with the existing rules.
I am also proposing a technical amendment to ensure the section operates as intended where lease payments may be subject to various changes throughout the lease.
Under this section, leases that bear the hallmarks of a financing transaction are to be taxed as if they were financing transactions, subject to certain criteria being met, the primary one being that the burden of wear and tear for the asset passes to the lessee.
Companies that are considered trading and taxable under case 1 of schedule D are entitled to deductions in the normal course of calculating their taxable profits. Following the publication of the Bill, as initiated, officials were made aware that there are many Irish leasing companies which are not considered to be trading, including those who, due to the amendment to this section in the Bill, as initiated, will have leasing transactions taxed as financing transactions. As such, I am bringing forward two Report Stage amendments to provide for similar treatment for these non-trading leasing companies. The effect of these amendments is that non-trading lessors will be entitled to a deduction for their interest expense, and under section 299, similar to case 1 lessors, non-trading lessors will be taxed on their net annual financing profit arising from the lease rather than their rental profit.
Amendment agreed to.
I move amendment No. 49:
In page 59, to delete lines 30 to 38 and substitute the following:
“(4) (a) Subject to paragraph (b), where, during the lease term, there is a change to the lease term or the amount of the lease payments, then in the accounting period in which the change occurs -
(i) the amount of income under subsection (2), or
(ii) the amount to be deducted under subsection (3), shall be recalculated.
(b) Where the amount of the lease payments is dependent upon any change in facts or matters arising, after the commencement of the lease, the recalculation referred to in paragraph (a) shall—
(i) where the change in facts or matters arising relates to the accounting period in which the change occurs, cause the lease payments in respect of that accounting period to be increased or decreased, as the case may be, and
(ii) where the change in facts or matters arising relates to more than one accounting period, cause the lease payments in respect of the accounting periods to which that fact or matter arising relates to be recalculated such that the increase or decrease, as the case may be, is spread evenly over those accounting periods.”.
Amendment agreed to.
I move amendment No. 50:
In page 60, between lines 4 and 5, to insert the following:
“(b) in section 77, by the insertion of the following subsection after subsection (3):
“(3A) In respect of a company that carries on a leasing activity in respect of which the company is within the charge to corporation tax under Case IV of Schedule D, in computing the income from such leasing activity so chargeable, section 76(5)(b) shall not prevent the deduction of yearly interest.”,”.
Amendment agreed to.
I move amendment No. 51:
In page 62, to delete lines 15 to 28 and substitute the following:
“ “(4) Where this section applies and the lessor is a company, the amount to be included in the income of the lessor in respect of a relevant lease shall be -
(a) where the relevant lease is a finance lease, the amount of income from such a lease computed in accordance with generally accepted accounting practice, or
(b) where the relevant lease is an operating lease, the amount of income from such a lease as would be computed in accordance with generally accepted accounting practice if the relevant lease was a finance lease.”.
Amendment agreed to.
Amendments Nos. 52 to 68, inclusive, are related and may be discussed together. Is that agreed? Agreed.
I move amendment No. 52:
In page 71, line 1, after “ ‘arrangements’ ” to insert “, other than in paragraph (b)(ii) of the definition in this subsection of ‘qualifying subsidiary’,”.
Amendments Nos. 52 to 68, inclusive, relate to section 39 which introduced a new section 76E into the Taxes Consolidation Act 1997. The section allows a qualifying financing company, or QFC, to obtain a deduction for interest paid once certain criteria are met.
Following publication of the Bill as initiated, stakeholders identified a number of intra-group lending structures unable to avail of the new relieving provisions. Officials have reviewed these structures and concluded that the amendment of section 76E to allow for relief in the following additional scenarios are unlikely to pose a risk to the Exchequer, that is, allowing a QFC to issue relevant loans to qualifying indirectly held subsidiaries in addition to qualifying directly held subsidiaries, and allowing a QFC to issue loans to subsidiaries resident in countries with which Ireland has a double taxation agreement in addition to EU and EEA states. As the relief is now being extended to scenarios where the QFC on-lends to an indirect subsidiary, additional anti-avoidance rules are also required.
A minor technical amendment is being made to fix an incorrect cross-reference where section 70(2) of the TCA was referred to instead of section 70(3).
Amendment agreed to.
I move amendment No. 53:
In page 71, between lines 20 and 21, to insert the following:
“ ‘indirect qualifying subsidiary’ means, in respect of a qualifying financing company, a company that would be a qualifying subsidiary but for the fact that 75 per cent or more of its ordinary share capital is held directly by an intermediate holding company;
‘intermediate holding company’ means a company 75 per cent or more of the ordinary share capital of which is held directly by a qualifying financing company and whose business consists wholly of the holding of ordinary share capital in one or more than one indirect qualifying subsidiary of that qualifying financing company;”.
Amendment agreed to.
I move amendment No. 54:
In page 71, line 23, after “subsidiary” to insert “or intermediate holding company, as the case may be”.
Amendment agreed to.
I move amendment No. 55:
In page 71, line 26, after “subsidiary'” to insert “or indirect qualifying subsidiary, as the case may be”.
Amendment agreed to.
I move amendment No. 56:
In page 71, line 29, after “subsidiary’ ” to insert “, in respect of a qualifying financing company,”.
Amendment agreed to.
I move amendment No. 57:
In page 71, to delete line 32 and substitute the following:
“(b) that is -
(i) tax resident in a Member State or an EEA State, or
(ii) regarded as resident in a territory under arrangements having force of law by virtue of section 826(1) made with the government of that territory,
and”.
Amendment agreed to.
I move amendment No. 58:
In page 71, to delete lines 37 to 39 and substitute the following:
“(b)advanced by a qualifying financing company to -
(i) a qualifying subsidiary, or
(ii) an indirect qualifying subsidiary, where the company referred to in subparagraph (i) or (ii) is a 75 per cent subsidiary of the qualifying financing company concerned, and”.
Amendment agreed to.
I move amendment No. 59:
In page 72, line 2, after “subsidiary” to insert “or indirect qualifying subsidiary, as the case may be,”.
Amendment agreed to.
I move amendment No. 60:
In page 72, to delete lines 20 to 24 and substitute the following:
“(d) the disposal of any shares in a company such that the disposal causes a company to which a relevant loan was made to no longer be a qualifying subsidiary or an indirect qualifying subsidiary, as the case may be, of the qualifying financing company that advanced the relevant loan and references in subsection (5)(a) to the repayment of the principal amount advanced shall be to the higher of-”.
Amendment agreed to.
I move amendment No. 61:
In page 72, line 26, to delete “disposed of.” and substitute “disposed of;”.
Amendment agreed to.
I move amendment No. 62:
In page 72, between lines 26 and 27, to insert the following:
“(e) the repayment, redemption or purchase by -
(i) a company to whom a relevant loan was made, or
(ii) in a case where a relevant loan was made to an indirect qualifying subsidiary, the intermediate holding company that directly holds 75 per cent or more of the ordinary share capital of the indirect qualifying subsidiary,
of any of its own share capital and references in subsection (5)(a) to the repayment of the principal amount advanced shall be construed as the amount paid for the repayment, redemption or purchase of the share capital of the company or the intermediate holding company, as the case may be.”.
Amendment agreed to.
I move amendment No. 63:
In page 72, line 36, to delete “section 70(2) and section 76(5)(b)” and substitute “sections 70(3) and 76(5)(b)”.
Amendment agreed to.
I move amendment No. 64:
In page 74, line 2, after “subsidiary” to insert “or indirect qualifying subsidiary, as the case may be,”.
Amendment agreed to.
I move amendment No. 65:
In page 74, line 4, after “subsidiary” to insert “or indirect qualifying subsidiary, as the case may be,”.
Amendment agreed to.
I move amendment No. 66:
In page 74, line 6, after “subsidiary” to insert “or indirect qualifying subsidiary, as the case may be,”.
Amendment agreed to.
I move amendment No. 67:
In page 75, line 20, to delete “Part 41A.”,” and substitute “Part 41A.”.
Amendment agreed to.
I move amendment No. 68:
In page 75, between lines 20 and 21, to insert the following:
“(13) (a) Where a relevant loan is deemed to be repaid, in whole or in part, under paragraph (b), then no deduction shall be available under subsection (4) in respect of any external interest arising after the deemed repayment on the portion of the external loan, represented by the amount that has been paid to the qualifying financing company, which is, or was, matched to the relevant loan.
(b) For the purposes of paragraph (a), a relevant loan shall be deemed to be repaid, in whole or in part, where it is reasonable to consider that a payment has been made to the qualifying financing company by the indirect qualifying subsidiary, whether directly or indirectly, and the amount has not been applied by the qualifying financing company in repaying the external loan.”,
Amendment agreed to.
Amendments Nos. 69 to 71, inclusive, are related and may be discussed together. Is that agreed? Agreed.
I move amendment No. 69:
In page 75, after line 41, to insert the following:
“(3) Section 481 of the Principal Act is amended in subsection (2)(b), by the insertion of the following subparagraphs after subparagraph (iv):
“(v) a condition that the qualifying company shall, in respect of the qualifying film concerned, comply fully with the Copyright and Related Rights Act 2000 and the Directive (EU) 2019/790 of the European Parliament and of the Council of 17 April 2019,
(vi) a condition that the qualifying company shall make every effort to ensure that performers, writers, composers, artists and other film workers resident within the jurisdiction will not be subject to lesser terms and conditions regarding their intellectual property rights than persons resident outside the jurisdiction engaged in similar roles when employed on the same qualifying film, and
(vii) a condition that the qualifying company shall not require performers, writers, composers, artists or other film workers to sign away their rights to future residual payments for their work on a qualifying film, or to agree to a so-called ‘buy-out’ contract, as a pre-condition of working on the qualifying film.”.”.
We have two minutes. A number of us have brought up these particular issues relating to the power differential that exists in the film industry. We all welcome section 481 as a means of ensuring a sustainable film industry but there are huge issues. All the power lies with the producers and we need to rectify that. We have all spoken about the need for a stakeholders' forum, but our amendment is about complying with the law, specifically the Copyright and Related Rights Act and the EU copyright directive, treating Irish performers, writers and film workers at least no worse than their counterparts from overseas working on the same film, and not forcing buyout contracts on performers whereby they must sign away rights to future residual payments before being given work on a film. There are a number of other issues relating to this but I believe we just need to bring it to a vote.
Let us just press it to a vote.
I will be responding to the amendment, so Deputies might as well make their contribution if they have one.
I will speak to the grouping. The Minister is aware of the views from this side of the House. They were well ventilated on Committee Stage. Fundamentally, the point is one made at committee just two weeks ago that there should not be any cash without conditions. We all welcome the move with the increase of the cap. We want to see an industry that is vibrant, vital and dynamic but which also respects the rights of everybody who works in the sector and makes sure everybody is properly remunerated.
Ultimately of course, we want the message to emerge from here that there is a degree of unity in this House that this ought to be the case. There may be differences of opinion around how we get there, but ultimately we would like to see a collective agreement that works for everybody and works in the interests of those who work in the sector and make the sector what it is. We could send a strong message out this evening from this House agreeing in principle with the motivation behind these amendments from the Labour Party, Sinn Féin and People Before Profit. We all want to see the same thing.
We have had the discussion at length but the Minister is giving an extra €50 million on top of the €100 million that goes to the film industry. Other money is going in as well. We want the film industry to thrive. We want more money to go into it but we do not believe it is right that, despite the perception of the film industry as terribly glamorous, for the vast majority of writers, actors, directors and performers, life is not too glamorous at all.
It is precarious. People suffer a lot of hardship and it is just not on that the right to their residuals are taken from them because of buy-out contracts. The Government should crack the whip on producers and tell them to stop using buy-out contracts and insist that film crew are not simply on fixed-term contracts for their entire career and never have any recognition of their service in the industry. They are simple demands and the Government should do something about them.
With the time permitted for this debate having expired, I am required to put the following question in accordance with an Order of the Dáil of 21 November 2023: "That the amendments set down by the Minister for Finance and not disposed of are hereby made to the Bill, Fourth Stage is hereby completed and the Bill is hereby passed."
Question put:
The Dáil divided: Tá, 80; Níl, 53; Staon, 1.
Tá
- Berry, Cathal.
- Brophy, Colm.
- Browne, James.
- Bruton, Richard.
- Burke, Colm.
- Burke, Peter.
- Butler, Mary.
- Byrne, Thomas.
- Cahill, Jackie.
- Calleary, Dara.
- Canney, Seán.
- Cannon, Ciarán.
- Carroll MacNeill, Jennifer.
- Chambers, Jack.
- Collins, Niall.
- Costello, Patrick.
- Coveney, Simon.
- Cowen, Barry.
- Creed, Michael.
- Crowe, Cathal.
- Devlin, Cormac.
- Dillon, Alan.
- Donnelly, Stephen.
- Donohoe, Paschal.
- Duffy, Francis Noel.
- Durkan, Bernard J.
- English, Damien.
- Farrell, Alan.
- Feighan, Frankie.
- Fitzpatrick, Peter.
- Flaherty, Joe.
- Flanagan, Charles.
- Fleming, Sean.
- Foley, Norma.
- Grealish, Noel.
- Griffin, Brendan.
- Harris, Simon.
- Haughey, Seán.
- Heydon, Martin.
- Higgins, Emer.
- Kehoe, Paul.
- Lawless, James.
- Leddin, Brian.
- Lowry, Michael.
- Madigan, Josepha.
- Martin, Catherine.
- Martin, Micheál.
- Matthews, Steven.
- McAuliffe, Paul.
- McConalogue, Charlie.
- McEntee, Helen.
- McGrath, Michael.
- McHugh, Joe.
- Moynihan, Aindrias.
- Moynihan, Michael.
- Murnane O'Connor, Jennifer.
- Naughten, Denis.
- Naughton, Hildegarde.
- Noonan, Malcolm.
- O'Brien, Darragh.
- O'Brien, Joe.
- O'Callaghan, Jim.
- O'Connor, James.
- O'Dea, Willie.
- O'Donnell, Kieran.
- O'Donovan, Patrick.
- O'Dowd, Fergus.
- O'Sullivan, Christopher.
- O'Sullivan, Pádraig.
- Ó Cathasaigh, Marc.
- Ó Cuív, Éamon.
- Phelan, John Paul.
- Rabbitte, Anne.
- Richmond, Neale.
- Ring, Michael.
- Ryan, Eamon.
- Smith, Brendan.
- Smyth, Niamh.
- Smyth, Ossian.
- Stanton, David.
Níl
- Andrews, Chris.
- Bacik, Ivana.
- Barry, Mick.
- Boyd Barrett, Richard.
- Brady, John.
- Browne, Martin.
- Buckley, Pat.
- Cairns, Holly.
- Carthy, Matt.
- Clarke, Sorca.
- Collins, Joan.
- Collins, Michael.
- Conway-Walsh, Rose.
- Cronin, Réada.
- Crowe, Seán.
- Cullinane, David.
- Donnelly, Paul.
- Ellis, Dessie.
- Farrell, Mairéad.
- Funchion, Kathleen.
- Gannon, Gary.
- Guirke, Johnny.
- Howlin, Brendan.
- Kenny, Gino.
- Kenny, Martin.
- Kerrane, Claire.
- Mac Lochlainn, Pádraig.
- McGrath, Mattie.
- Mitchell, Denise.
- Munster, Imelda.
- Murphy, Paul.
- Mythen, Johnny.
- Nash, Ged.
- O'Callaghan, Cian.
- O'Donoghue, Richard.
- O'Reilly, Louise.
- O'Rourke, Darren.
- Ó Broin, Eoin.
- Ó Laoghaire, Donnchadh.
- Ó Murchú, Ruairí.
- Ó Ríordáin, Aodhán.
- Ó Snodaigh, Aengus.
- Quinlivan, Maurice.
- Ryan, Patricia.
- Sherlock, Sean.
- Shortall, Róisín.
- Smith, Bríd.
- Stanley, Brian.
- Tóibín, Peadar.
- Tully, Pauline.
- Ward, Mark.
- Whitmore, Jennifer.
- Wynne, Violet-Anne.
Staon
- Shanahan, Matt.
Tellers: Tá, Deputies Hildegarde Naughton and Cormac Devlin; Níl, Deputies Pádraig Mac Lochlainn and Denise Mitchell.
Question declared carried.
This Bill, which is certified to be a money Bill in accordance with Article 22.2.1° of the Constitution, will be sent to the Seanad.